The transaction values the pharma business at an enterprise value (EV) of $2,775 million.
Piramal Enterprises (PEL) on Saturday (27 May 2020) announced that The Carlyle Group has agreed to invest fresh equity capital for a 20% stake in Piramal Pharma, the company's wholly owned subsidiary.
The Carlyle Group is a global investment firm that deploys private capital across four business segments: corporate private equity, real assets, global credit and investment solutions. The group has assets worth $217 billion under its management as of March 31, 2020.
The transaction values the company's pharma business at an enterprise value (EV) of $2,775 million with an upside component of up to $360 million depending on the company's FY21 performance. Based on the EV (excluding the upside component), exchange rate and pharma net debt as on 31 March 2020, the estimated equity capital investment for Carlyle's 20% stake in Piramal Pharma would amount to approximately $490 million.
"The final amount of equity investment will depend on the net debt, exchange rate and performance against the pre-agreed conditions at the time of closing of the deal," the company said.
PEL's pharma revenue since the company sold its main formulation business to Abbott India has grown 3.5 times at a CAGR of 15% from Rs 1,537 crore in FY11 to Rs 5,419Cr in FY20. In this period, the pharma business EBITDA has gone up 13 times at a CAGR of 33% from Rs 110 crore in FY11 to Rs 1,436 crore in FY20 (excluding financials of Allergan and CCPL JV), resulting in a significant improvement in the EBITDA Margin from 7% in FY11 to 26% in FY20.
The transaction is one of the largest private equity deals in the Indian pharmaceutical sector, and is expected to close in 2020, subject to customary closing conditions and regulatory approvals.
Ajay Piramal, chairman, Piramal Enterprises, said, "We are pleased to announce the strategic growth investment by Carlyle, a marquee global investor, in Piramal Pharma. This is an affirmation of the strength of our ability to build new, attractive and scalable businesses with a significant runway for continued organic growth and opportunities for consolidation. This infusion of funds will further strengthen our balance sheet and provide us with a war chest for the next phase of our strategy."
Shares of PEL fell 2.19% to Rs 1313.15 amid profit booking. The stock added 29.16% in six sessions to end at Rs 1,343.10 on Friday (26 June 2020) from its recent closing low of Rs 1,039.85 on 18 June 2020. The Nifty Pharma index had risen 1.6% during the same period.
PEL is one of India's large diversified companies, with presence in financial services and pharmaceuticals.
On a consolidated basis, PEL reported net loss of Rs 1,702.59 crore in Q4 March 2020 as compared with a net profit of Rs 454.63 crore in Q4 March 2019. Net sales fell 2% to Rs 3,341 crore in Q4 March 2020 over Q4 March 2019.
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