Granules India hits fresh 52-wk high on reports of PE firms eyeing stake

The Blackstone Group, KKR & Co, Apax Partners, Advent International and Bain Capital are among the leading global PE companies in early-stage discussions to acquire Granules India, as per reports

Shares of Granules India climbed 6 per cent in Thursday's early morning trade to hit a fresh 52-week high of Rs 135.85 on the BSE on report that private equities (PE) are eyeing controlling stake in the pharmaceutical company.

The stock of one of the largest contract research & manufacturing companies in the country surpassed its previous high of Rs 134 touched on November 20.

“The Blackstone Group, KKR & Co, Apax Partners, Advent International and Bain Capital are among the leading global PE companies engaged in early-stage discussions to acquire Granules India,” a report by The Economic Times said.

The Chigurupati family -- the founding promoter family which holds 43 per cent stake in Granules -- has roped in Kotak Mahindra Capital for the sale, the report said, quoting "top industry sources".

In March 2019, the promoters of Granules India had sold 50 lakh shares to a group of reputed investors in a block deal on the stock exchanges, to mobilize about Rs 50 crore.

“The funds raised through transaction will be used to reduce promoter leverage and which will subsequently bring down the promoters pledged position to around 30 per cent from current level of 54 per cent,” Granules India said on March 8, 2019.

As on September 2019, the promoter’s pledged position stood at around 37 per cent, the company's shareholding pattern data shows.

At the bourses, Granules India has outperformed the market by surging 40 per cent from its recent low of Rs 97 touched on October 15, 2019 on strong earnings. In comparison, the S&P BSE Sensex was up 6.5 per cent during the same period.

In July-September quarter (Q2FY20), the company's net profit jumped 59 per cent year on year (YoY) to Rs 96 crore on the back of healthy operational performance. While operational income grew 20 per cent YoY at Rs 700 crore, Ebitda (earnings before interest, tax, depreciation and amortization) margin expanded 322 bps at 20.5 per cent from 17.3 per cent.

The management attributed the result to "operational excellence and a vigilant watch over its margins via optimal product mix, capacity utilization and minimization of their expenses".

Meanwhile, the board of directors of the company, at their meeting held on October 22, had approved the divestment of the company’s stake in Granules Omnichem, a joint venture (JV) company located in India and an approval to divestment of its stake in Granules Biocause Pharmaceutical, a JV located in China.

The management said that both the actions will allow them to focus on core strengths and to enhance free cash flow and reduce net debt.