Global interest expected with more than one buyer likely.
It was one of the earliest cases of a private equity (PE) buyout in India. But after five years of buying out Ranbaxy’s allied business — Ranbaxy Fine Chemicals — India’s oldest PE fund, ICICI Venture, is now looking at a complete exit. The privately held company is currently called just RFCL Ltd.
In June of 2009, it part-sold the business, selling the animal healthcare vertical of the company, Vetnex, to global giant Pfizer for about Rs 350 crore. The remaining businesses include diagnostics and fine chemicals.
Fine chemicals are pure, single-chemical substances that are commercially produced with chemical reactions into highly specialised applications and are commonly used in pharmaceutical, inks, performance-enhancing additives, special coatings and photographic chemicals.
Investment bank NM Rothchild, who also was the advisor in the earlier transaction with Pfizer, is helping ICICI Venture to look for buyers this time around, according to two people involved in the transaction. An open auction process is expected soon to finalise the potential suitor.
ICICI Venture, said sources, will be looking at about Rs 400 crore from the assets. ICICI Venture is a subsidiary of ICICI Bank, the largest private sector financial services group in India.
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Global leaders may bid
Sources said interested suitors for fine chemicals and in-vitro diagnostics businesses of RFCL may include such leading global players as Siemens, Bio-Rad, Abbott, PerkinElmer, Philips, Arkray, Thermo-Fisher, Merck KGaA, Sigma-Aldrich and Honeywell. It will be interesting to see if RFCL will be finally sold as one piece, or will different takers slice up the divisions.
Senior executives of ICICI Venture declined to comment.
“As per our management policy, RFCL will not comment on future business strategies,” said Managing Director Sushil Mehta.
RFCL has a turnover of about Rs 240 crore and is the domestic market leader in analytical lab chemicals and reagents. It is also among the top five players in in-vitro diagnostics (IVD) products (testing kits required to detect diseases). RFCL focuses on in-vitro diagnostics and laboratory solutions through its two main strategic business units, namely Diagnova and Rankem.
The global IVD market is expected to grow at a compounded annual growth rate (CAGR) of around nine per cent during 2010-2012, and the Indian market is expected to grow above this rate, said industry sources.
The company also has a Rs 40-45 crore turnover animal healthcare business from Bremer Pharma GmbH of Germany, which it acquired in 2008. This subsidiary has manufacturing plants located at Warburg in Germany. But this business was not sold to Pfizer last year, which picked up only the Indian business.
RFCL also has manufacturing facilities for diagnostics products at Dehradun and for lab chemicals and reagents at Panoli in Gujarat.
“We have invested about Rs 10 crore at the 20-acre facility in Panoli and will invest another Rs 30 crore for expansion in the first phase,” said Sushil Mehta.
The history
RFCL, then known as Ranbaxy Fine Chemicals, was part of Ranbaxy Laboratories. It was acquired by ICICI Ventures in 2005 for about Rs 125 crore through a leverage buyout, following Ranbaxy’s decision to exit allied businesses and to concentrate on its main pharmaceutical business. At that time, the company had revenues of Rs 150 crore.
In 2006, Ranbaxy Fine Chemicals was re-named RFCL Ltd with three divisions — Vetnex (animal healthcare), Diagnova (diagnostics) and Rankem (fine chemicals).
In the last three years, RFCL went on a shopping spree and bought such small companies as Bremer Pharma GmbH of Germany and Chennai-based Alved Pharma and Foods in the animal health business, and Wipro Biomed and Godrej Medical Diagnostics in the diagnostics space.
ICICI Venture has invested in such life sciences companies as Arch Pharmalabs, Malladi Drugs, Bharat Biotech, I-Ven Pharma of Dr Reddy’s Labs, RFCL, Metropolis, Avesthagen, Biocon, Medicorp, Intas Pharma and Swiss Biosciences.
ICICI Venture IAF Series 1 fund had invested in RFCL.