 "Glenmark Pharmaceuticals")
Mumbai-based Glenmark Pharmaceuticals said on Thursday that its board had approved the divestment of a 75 per cent stake in its subsidiary Glenmark Life Sciences (GLS) to Nirma at Rs 615 a share, implying a valuation of Rs 7,535 crore. The deal size is estimated to be Rs 5,651 crore.
Glenmark Pharma will continue to own a 7.84 per cent stake in GLS, and pursuant to the transaction, Nirma will make a mandatory open offer to all public shareholders of GLS.
Glenmark Pharma holds 82.85 per cent in GLS. The firm was required to bring it down to at least 75 per cent by August 2024, within three years of listing. GLS, spun off from Glenmark Pharma in 2019 to focus on the active pharmaceutical ingredient (API) business, was listed on the bourses in 2021.
According to reports, other suitors like ChrysCapital and Sekhmet Pharmaventures chose to stay away from the deal due to differences over valuation.
The stake sale to Nirma has been placed at a lower valuation than the current market value of the company, which stood at Rs 7,683 crore as of September 21.
“The generic environment has changed, and become competitive over the years. Glenmark has been focusing more on branded products. GLS was built to ensure Glenmark was vertically integrated as a generic drug maker,” Glenn Saldanha, chairman and managing director, Glenmark Pharma, told reporters.
He added that they would continue to focus on dermatology, respiratory, and oncology space. “We draw 65 per cent of our overall revenues from the branded business. The goal is to continue our presence in the branded space, both in India and other emerging markets as well as Europe,” Saldanha said. “The US generics business, which needs a vertical integration for cost benefits, we don’t want to play in that space much,” he said.
The move will help Glenmark Pharma in deleveraging its balance sheet. Glenmark will be net cash positive after the deal. “The proceeds from this transaction will go into repaying debt. The net debt of Glenmark is around Rs 3,000 crore or so, and gross debt is around Rs 4,600 crore. We will hold this cash in the balance sheet, and our goal is to be net cash positive for the next two years. The total debt gets extinguished after the deal,” Saldanha said.
Currently, Glenmark buys less than 15 per cent of its APIs from GLS. As for GLS, it sells less than 35 per cent of its APIs to Glenmark. “Therefore, the synergies are less, and it made sense to sell a controlling stake in GLS. We will continue to procure APIs at the same price as earlier,” Saldanha said.
In April this year, the Nirma group, a detergent maker, acquired Stericon Pharma, an eye drop and contact lens maker, for around Rs 350 crore. This acquisition will further strengthen its plans in the healthcare and pharmaceuticals space.
Glenmark has been selling non-core assets to generate cash. It sold the cardiac brand Razel for Rs 313 crore last December.
GLS posted revenues of Rs 578.45 crore in the first quarter of the financial year 2023-24, up 18 per cent year-on-year, with a net profit of Rs 135.45 crore, up 24 per cent. In FY23, it had posted revenues of Rs 2,161 crore, up 1.8 per cent year-on-year, and a profit of Rs 467 crore.
GLS has built a portfolio of 139 molecules serving chronic therapeutic segments like cardiovascular (CVS) disease, central nervous system (CNS) disorders, pain management, and anti-diabetics. With an addressable frontend market size of approximately $180 billion, these molecules are filed in major markets to cater to its global pharmaceutical customers. It commercialises these APIs to over 700 customers in over 75 countries.
