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PE funds eye Elder Pharma sale

Debt-ridden Elder Pharma announced plans to restructure business to clear its debt worth Rs 1,300 crore

Reghu Balakrishnan  |  Mumbai 

The battle for acquiring the domestic business of Mumbai-based Elder Pharma is getting fierce as buyout funds have entered the fray.

According to sources in the know, private equity (PE) giants TPG, Kohlberg Kravis Robert & Co (KKR) and Carlyle have shown interest in Elder Pharma's local formulation business and engaged in talks.

Last week, the debt-ridden Elder announced plans to restructure business to clear debt worth Rs 1,300 crore, accumulated after multiple acquisitions abroad. The board approved plans involving either raising of capital, hiving of assets or other strategic options. Sources in the know believe Elder is likely to fetch a valuation of Rs 2,000-2,500 crore for its Rs 500-crore domestic business, a multiple of four to five times. A majority of its revenue in India comes from the sale of a nutraceutical range of products under the Shelcal brand.European pharma giant Sanofi and US major Novartis are also engaged in discussions with the Elder Pharma management for an acquisition. Elder had revenue of Rs 1,454 crore for the year ended March 31. Investment bankers in the know believe the chances are more for strategic buyers such as multinational corporations. “Normally, PE firms are interested in a whole company buyout than acquiring such hived-off businesses. But it might vary, depending on valuation,” a banker said.

It is learnt Carlyle is looking keenly at the deal due to the interest from its new country head, Neeraj Bharadwaj, who was with Apax Partners India as country head earlier and spearheaded their $170-million investment in Apollo Hospitals. This year, Apax offloaded its entire 19 per cent stake in Apollo for Rs 2,240 crore, a three-time gain on its investment. When asked, a Carlyle spokesperson said, “As a company policy, Carlyle does not comment on market speculation.”

TPG Capital, which runs a healthcare fund, TPG Biotech, was engaged in discussions to acquire Pune-based pharma packaging company Bilcare, called off recently. TPG was also in discussion for investments in Kingfisher Airlines and Reliance Communications’ tower business, which did not materialise.

The buyout firm KKR has plans to focus on larger investment deals in India with raising its second $6-billion Asia fund, the biggest pan-Asia PE fund till date. Though KKR has made large investments in India such as $600-million buyout of Alliance Tire Group, deals with Bharti Infratel, Dalmia Cement Bharat Ltd, the firm which handles $78 billion across the globe couldnt make any significant deals in Indian pharma & healthcare space till date.

When contacted, Sanjay Nayyar, MD and country head - KKR India refused to comment.

Though a number of large deals have taken place across healthcare sectors such as hospitals and pathology labs, pure pharmaceutical had failed to attract PE funding in recent past. PE investors remain concerned over the regulatory hurdles - put on by global regulators such as US FDA and UK MHRA which keep them away from investments in drug manufacturing firms.

In 2006, Carlyle Group had made a $20-million investment in Claris Lifesciences Limited, which was exited in December last year by selling off stake to Japanese In same year, Blackstone had purchased about 13% stake in Pune-based Emcure by investing 225 crore.

Another PE major, ChrysCapital invested about Rs 350 crore in Ahmedabad-based Intas Pharma and holds about 15% stake in it.

* Calcium supplement brand Shelcal shells out Rs 160 crore /annum

* Shelcal brands provide 32 per cent of domestic revenue

* Pain management brand- Chyromal holds 80 per cent market share

* Has six manufacturing plants - three in Maharashtra, one in HP and two in Uttarakhand

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First Published: Thu, July 25 2013. 00:48 IST