Torrent Pharma share pops 4% on ₹25,689-cr JB Chem deal; analysts cautious

Torrent Pharma share price today: Pharmaceutical company Torrent Pharmaceuticals shares were in focus on Monday, June 30, after the company announced a massive ₹25,689-crore deal to acquire JB Chemicals & Pharmaceuticals (JBCP). 

 

The Torrent Pharmaceuticals share surged as much as 3.89 per cent intraday to ₹3,474.60 apiece before paring gains. At last count, shares were trading 0.72 per cent higher at ₹3,368.35, even as the BSE Sensex remained flat around 84,003.81.

 

The deal

 

Torrent Pharmaceuticals has signed a definitive agreement to acquire a controlling stake in JB Chemicals and Pharmaceuticals (JBCP) at a fully diluted equity valuation of ₹25,689 crore. 

 

The transaction, structured in two phases, begins with Torrent Pharmaceuticals acquiring 46.39 per cent stake via a share purchase agreement (SPA) at ₹1,600 per share, amounting to ₹11,917 crore. This will be followed by an open offer to buy up to 26 per cent from public shareholders at ₹1,639 per share. 

 

Additionally, Torrent Pharmaceuticals said that it aims to acquire 2.8 per cent of JB Chemicals and Pharmaceuticals’ equity from certain employees at the same price offered to KKR.

 

As part of the transaction, Torrent Pharmaceuticals and JB Chemicals and Pharmaceuticals will merge—JB Chemicals shareholders will receive 51 Torrent Pharmaceuticals’ shares for every 100 JB Chemicals and Pharmaceuticals shares held. 

 

The deal is now pending shareholder and Competition COmmission of India (CCI) approvals and is expected to close in six months.

 

Brokerages’ view

 

Brokerages broadly see the deal as strategically major, though the near-term impact remains mixed. According to domestic brokerage firm Motilal Oswal, the acquisition provides Torrent Pharmaceuticals with a diversified branded portfolio that includes several potential mega brands, a pan-India reach supported by a 2,800-strong medical representative field force, robust manufacturing infrastructure for multiple dosage forms, and access to a growing Contract Development and Manufacturing Organisation (CDMO) business driven by lozenges. 

 

The brokerage believes this acquisition is value accretive over the medium to long-term. 

 

Excluding the impact of JB Chemicals and Pharmaceuticals, Torrent Pharmaceuticals is expected to post a 12 per cent revenue, 14 per cent Ebitda, and 23 per cent PAT CAGR over FY25–27. The brokerage values the stock at 38x 12-month forward earnings, arriving at a target price of ₹3,430. 

 

However, it maintained a ‘Neutral’ rating, citing limited upside from current levels despite the deal’s long-term merits.

 

Those at Japan-based foreign brokerage firm Nomura noted that the move aligns with Torrent Pharmaceuticals’ history of inorganic growth, particularly in India. The acquisition offers near-term cost synergies and potential long-term revenue synergies, especially as both firms have a dominant presence in the Cardiac and Gastro segments.

 

However, it flagged concerns around execution risks given the unprecedented size of this deal for Torrent. Unlike past acquisitions, valuation premiums are higher, and there’s limited headroom for operational improvement as JBCP is already a well-run business with strong market share in key products.

 

In the near-term, the acquisition could be earnings dilutive, especially when factoring in higher interest and amortisation costs. Excluding amortisation, the deal may be marginally EPS accretive—if merged using Torrent stock.

 

Thus, Nomura maintained a ‘Neutral’ rating on Torrent Pharmaceuticals with a target price of ₹3,580, based on 25x FY27 Ebitda of ₹4,850 crore. The stock currently trades at 26.1x one-year forward Ebitda. 

Meanwhile, JM Financial analysts view Torrent Pharmaceuticals' proposed acquisition of KKR’s stake in JB Chemicals and the potential merger as strategically positive. However, the brokerage has maintined its 'Hold' rating on the stock. 

 

The deal, analsyts at JM Financial said, would elevate Torrent Pharmaceuticals to the fifth-largest pharma player in India and boost its international footprint in markets like Russia, South Africa, and RoW. It also strengthens its branded generics and CDMO capabilities. 

 

Analysts expect operational synergies, especially in cardiology and gastroenterology, and cost efficiencies to unlock further value. 

 

Financially, the merger could be PAT neutral by FY28 and net debt-free by FY29, though shareholder dilution of 6–10 per cent is likely. They estimate a 7 per cent near-term upside for Torrent shares, valuing the merged entity at ₹3,625–3,635. Further insights are expected after the company’s investor call, the brokerage said.   While analysts are mixed on the immediate financial impact, the Street appears optimistic about Torrent Pharmaceuticals’ long-term strategic play in scaling up its domestic and international presence through this acquisition.