Torrent's Unichem deal to add to earnings only after 2-3 years

For Unichem investors, immediate rewards may come in the form of dividend or buyback, but larger gains will accrue if international business grows fast

Torrent Pharmaceuticals’ deal to acquire Unichem’s domestic and Nepal-based branded formulation businesses is a step in the right direction, but immediate gains on the earnings front are unlikely.

Torrent is acquiring over 120 brands — which contributed to Unichem’s India and Nepal revenues of Rs 842 core in FY17 — for Rs 3,600 crore, a deal it expects to complete by end of 2017. While factors such as slow growth of Unichem’s portfolio, investments and time required to prop up its growth, increase in leverage (to fund acquisition) and timeframe for the deal to turn earnings accretive may be disheartening,