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| Piramal Healthcare: Booster dose |
| Puneet Wadhwa & Jitendra Kumar Gupta / Mumbai Mar 30, 2010, 00:36 IST |
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Though expensive, the acquisition of i-pill fits well into its OTC basket.
 Piramal Healthcare bought Cipla’s oral contraceptive brand, i-pill, for Rs 95 crore last week in an all-cash deal. The deal, valued at 3x sales, is in line with Piramal’s strategy of acquiring local brands to strengthen its domestic franchise and triple its over-the-counter (OTC) drug business in India in three years from around Rs 100 crore at present.
i-pill is an emergency contraceptive brand, which recorded sales of around Rs 31 crore last year, and competes with Mankind Pharma’s Unwanted 72. The OTC market in India is estimated at around $1.8 billion and is growing at 18 per cent annually.
“The acquisition, though a bit expensive, augurs well for Piramal, as it has a good OTC product basket and a strong network, especially in Tier-II and Tier-III cities. It will not have to spend much in developing the product as i-pill is already a recognised brand,” said Rabindra Basu, analyst, Unicon Wealth Management.
Edelweiss Research views the deal as marginally positive for Piramal with small accretion to FY11 sales. While operating margins in i-pill are likely to be little lower in the near term due to current sourcing from Cipla, the management expects the acquisition to be earnings neutral in FY11.
“Piramal’s contract research and manufacturing services (CRAMs) business is expected to turn around in FY11-12 with 6-10 per cent growth. Further, acquisition of US-based Minrad provides visibility to its Gulf Cooperation Council business and potential for growth after the launch of Sevoflurane in Europe and, more significantly, after the Deslflurane launch, expected in FY12,” says an Edelweiss report.
The stock moved up 4 per cent to Rs 427on March 23 after the announcement of acquisition. “At the current price of Rs 416, the stock is fairly valued and there is not much headroom left, though it remains a good long-term bet,” Basu added.
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