Torrent Pharma acquires cosmetic derma player Curatio for Rs 2,000 cr

First major acquisition by Aman Mehta after taking charge at Torrent Pharma in August

Ahmedabad-headquartered Torrent Pharmaceuticals has signed a definitive agreement to acquire cosmetic dermatology player Curatio Healthcare for Rs 2,000 crore. Curatio has operations in India, Nepal, Srilanka and the Philippines. The deal catapults Torrent from the 21st spot in dermatology in the domestic market to the tenth spot.

This is the first major deal spearheaded by Aman Mehta, who was recently appointed as a director on the board of the pharmaceutical firm, after the Group charted out succession planning at its power and pharma arms. “The acquisition offers Torrent the opportunity to enhance its presence in dermatology with a differentiated portfolio and is a strong strategic fit. Curatio has built a commendable set of high market share brands in cosmetic and pediatric dermatology that we look forward to adding to our product offerings,” Mehta said. He added that Torrent Pharma has been focussing more on the India market, and its capital allocation is decided accordingly. 

The deal consideration also includes Rs 115 crore of cash and cash equivalents in the acquired business indicating an enterprise value of Rs 1,885 crore, the company said. The deal will be funded through a mix of debt-equity (75-85 percent being debt). Torrent Pharma hopes to reduce its net debt position to Rs 1000-1100 crore by the end of FY25 as it starts repayment. 

Apart from Torrent Pharma, Zydus Lifesciences, Dr Reddy’s and JB Chemicals were also said to be in the race to buy Curatio, which has a strong presence in cosmetic dermatology, with a portfolio of over 50 brands. The 17-year old firm draws 95 per cent of its revenues from dermatology sales and has 13 brand leaders in the market it covers.

Sequoia- and ChrysCapital-backed Curatio posted revenues of Rs 224 crore in FY22, and Torrent Pharma said that the estimated revenues for FY23 are Rs 275 crore. The company’s sales are up 25 per cent year till date (August). Curatio has posted an Ebitda of over Rs 60 crore in FY22, and thus analysts felt that the deal is expensive.

Explaining their rationale behind the deal, Mehta said that there is significant headroom for growth, and to achieve margin expansion going forward. 

Torrent Pharma also said that several of Curatio's brands like Tedibar soap are priced competitively (Rs 165 per unit as against Rs 200-250 for other brands), and thus there is significant headroom to raise prices. Also, most brands have an OTC potential, the company said, adding that non-pharma channels too can be explored.

What makes Curatio lucrative is its presence in the cosmetic dermatology space which is growing at 18 per cent CAGR, and is out of the price regulated market. Curatio’s product range covers hair, body, face and baby products

The Rs 11,500 crore dermatology market is clocking a 13 per cent CAGR, while the Rs 3,600 crore cosmetic dermatology market is growing at 18 per cent CAGR between 2010 and 2022. The Indian Pharmaceutical Market (IPM) is growing at 10 per cent overall.

The top ten brands of Curatio account for about 75 per cent of its sales. The firm has a field force of 600 medical representatives and 900 stockists.

A Torrent Pharma spokesperson said, “This is a strategic therapy area given relatively low per capita spends in India and expected to grow as disposable incomes increase.” The company would use its field force and doctor-connect to market the paediatric dermatology brands. He added that Torrent planned to add medical dermatology products to Curatio’s basket.

The leading brands of Curatio include Tedibar (kids bathing soap), Atogla (lotion), Spoo (shampoo), B4 Nappi (cream), and Permite (cream). Tedibar, which posted sales of Rs 76 crore in FY22, is growing at 15 per cent. Torrent Pharma said in its investor presentation that it has an addressable market of 67 million children under the age of 15 years, while right now the covered market is about 2.5 million only.

The transaction is subject to conditions precedent and is expected to close within one month.

India is Torrent’s key market, accounting for 74 per cent of its revenues. The company has been aggressive in making acquisitions in India--the domestic business of Unichem (Rs 3,600 crore), Elder Pharma’s local formulations business (Rs 2,004 crore), and Zyg Pharma (derma player).

It has also bought a portfolio of brands from Novartis and recently from Dr Reddy’s Laboratories.

“Torrent’s strength lies in its ability to cross-sell. It has a field force from its acquisitions, and cross-sells products across segments. It recently added to its field force, taking the total to 4,200 after the first quarter, and launched two divisions,” said an analyst who tracks the company.

He, however, said dermatology was a growing area for the company, and it would need a strong field force to compete with players like Glenmark, Ajanta Pharma, Sun Pharma, and GSK.

Curatio story in numbers

1. Turnover: Rs 224 cr for FY22
2. Estimated turnover: Rs 275 cr for FY23
3. 84% of its portfolio is cosmetic derma products
4. Rs 11,500 crore derma market is clocking 13% CAGR
5. Rs 3,600 crore cosmetic derma market is clocking 18% CAGR
6. Key brands: Tedibar (kids bathing soap), Atogla (lotion), Spoo (shampoo), B4 Nappi (cream), and Permite (cream)
7. Field force: 600 medical representatives covering 900 stockists