Strides Arcolab to beef up its generic branded business

Acquires majority stake in Bafna Pharma's generic arm

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Strides Arcolab, the Bangalore-based publicly held mid-market pharmaceutical company, on Monday entered into an agreement with Chennai-based publicly held pharmaceutical company Bafna Pharmaceuticals to acquire majority stake of their India Branded Generics Business for a cash consideration of Rs. 48 crore.

The transaction is expected to close by end of September 2014 and is subject to customary closing conditions and statutory approvals. With this acquisition, Strides Arcolab gets the rights to Raricap, the flagship brand of Bafna, which has presence in the oral Haematinic segment in India with 8 SKU's in oral and liquid forms with an annual revenue of Rs. 20 crore. Raricap was acquired by Bafna from Johnson & Johnson in the year 2011 and has grown at CAGR of approximately 64% in last 3 years.

According to a statement from Strides Arcolab, the India Branded Generics Business of Bafna is valued at Rs. 65 crore and the business in its entirety will be transferred to an SPV, in which Strides will hold 74% stake. Strides will pay a consideration of Rs. 48 crore in cash to Bafna and balance as 26% equity participation in the SPV will be held by Bafna. The IPs and manpower will be transferred to the SPV as part of the business transfer and Bafna will continue to manufacture these products for the SPV for a period of five years, and the SPV will have global rights for Raricap brand.

The India Branded Generics Business of Bafna is engaged in sales and marketing of branded pharmaceuticals products in niche theraupetic segments i.e., Haematinic, Women healthcare, Pediatric care in India with presence in 17 states in India with a field force of about 400 people. It had revenue of close to Rs 25 crore for the financial year ended March 31, 2014.

Commenting on the development, Arun Kumar, Founder and Group CEO of Strides Arcolab said, "This acquisition provides necessary impetus to our domestic branded generics business and the transaction is in line with our strategy to grow the company's branded business. The transaction will strengthen our reach to newer markets with a wider portfolio of products". Strides added that this acquisition will strengthen its Women & Child care portfolio and Bafna's pan India reach will aid Strides' biggest brand Renerve's entry in new market segments.

Strides' shares gained 2.2% on NSE to close at Rs 668.20 per share on Monday.