Laurus Labs gains 5% on acquisition of Richcore Lifesciences

Shares of Laurus Labs rose 5 per cent to Rs 298.80 on the BSE on Thursday after the company said it has signed a definitive agreement to acquire a majority stake in Richcore Lifesciences Pvt Ltd (Richcore).

“Laurus Labs has signed a definitive agreement to acquire 72.55 per cent of Richcore’s shares from Eight Roads Ventures and VenturEast for a value of Rs. 246.7 crore,” the company said in a press release.

This acquisition marks Laurus Labs’ entry into the broader biologics and biotechnology segments, providing the company access to its high growth areas, globally and in India. Laurus Labs will help and drive Richcore to achieve scale and improve product offerings. With this acquisition, Laurus adds a fourth revenue stream to its three existing divisions - API, Formulations and Synthesis. Following the successful closure of the transaction, Richcore will be renamed to Laurus Bio Pvt Ltd, it said.

Richcore, a biotech company based in Bengaluru, has large scale fermentation capabilities and manufactures animal origin free (AOF) recombinant products. Richcore's Apri-September 2020 period (H1FY21) sales were at Rs 29.1 crore and 38.8 per cent of EBITDA (earnings before interest, taxes, depreciation, and amortisation) margins. Laurus will fund the acquisition from its internal accruals. This acquisition will be revenue and profit after tax accretive.

Prima facie, the valuation looks reasonable on the EV/EBITDA front. On the financial front, the acquisition would contribute marginally to Laurus' financials. However, it gives Laurus entry into the high barrier biotechnology segment, ICICI Securities said in a note.

Richcore brings significant expertise in enzyme development for pharmaceutical and other industrial applications. Laurus will bring scale to Richcore’s operations to become a major player in the biotech CDMO space. That said, in the backdrop of significant capex already announced, together with volatile financials of the target company, we remain cautious and await management comments, it said.

At 09:24 am, Laurus Labs was trading 2.5 per cent higher at Rs 292 on the BSE, as compared to 0.06 per cent rise in the S&P BSE Sensex. A combined 1.2 million equity shares changed hands on the counter on the NSE and BSE.