Elder's local biz may fetch Rs 2,000 cr

Debt ridden company may fetch 4 times more than its valuation as the India business is dependent on few nutraeutical products

Debt-ridden pharma major Elder Pharma is likely to fetch a valuation of Rs 2,000 crore for its domestic business, which is up for sale. According to people in the know, the domestic business with revenue of Rs 500 crore, might get a multiple of four times as the entire India business is dependent on a few nutraceutical products such as Shelcal.

Selling its domestic drug business would help the company clear its debt worth Rs 1,300 crore accumulated after multiple acquisitions abroad.

European pharma giant Sanofi and US major Novartis are learnt to be the front runners for the asset. Mails sent to Sanofi and Novartis did not elicit any response. Alok Saxena, joint managing director, Elder Pharma, could not be reached even after repeated attempts. “Contrary to the Abbott - Piramal deal, which saw nine times revenue as the valuation, Elder could fetch a maximum of four times the revenue for the local business, as the basket is not too big and has strong presence only in a few segments such as nutraceuticals,” a banker, who was involved in a recent pharma outbound deal, said. Piramal had sold its domestic formulation business to Abbott for Rs 17,000 crore in 2010.

“For Sanofi, which is strengthening its position in India with adding more over-the-counter and other generic brands, this is a good opportunity as the buyout would give a strong sales team which has presence across the country. Novartis might not pitch in with a high valuation, as its nutraceutical products such as calcium Sandoz would overlap with Elder’s similar range of products,” said another expert.

In 2011, Aventis Pharma, a unit of Sanofi, had bought the OTC business of Universal Medicare for Rs 500 crore.

The products which contribute most revenues in Elder Pharma’s domestic business include brand Shelcal - the leading calcium supplement drug with variants such as Shelcal CT, Shelcal HD and Shelcal K. Shelcal brands contributed a revenue of Rs 160 crore last year. Shelcal brands provide 32 per cent of domestic revenue.

Elder has a revenue of Rs 1,454 crore for the year ended March 31. The other products which compete with Shelcal include Calcium Sandoz from Novartis and Os-Cal from GSK.

On Thursday, Elder Pharmaceuticals’ Board of Directors approved the proposal for carrying out restructuring of the company’s business involving either raising of capital, hiving off of assets or other strategic options in order to reduce its debt. On Friday, shares of Elder went up by 6.7 per cent in morning trade to touch the day’s high of Rs 377.9 on BSE. In the nutraceuticals space, Elder has leading products such as Eldervit range and I-Vit.

In the wounds & pain management segment, Elder sells the Chyromal brand, which is a market leader with 80 per cent market share.

At present, Elder has six manufacturing plants across India - three in Maharashtra, one in Himachal Pradesh and two in Uttarakhand.