Mumbai: InvAscent, a pharma, and healthcare-focused private equity firm, is in talks to exit its stake in Neuland Group, a contract research and manufacturing services (CRAMS) entity, said two people aware of the development, requesting anonymity as the talks are private.
InvAscent, which holds 33% stake in the group, has hired the investment banking arm of IDFC Bank Ltd to advise it on the stake sale, said one of the two people cited above.
“The PE fund manager is exiting all the remaining investments from its first fund, and the efforts to exit Neuland are part of that process. They have received a couple of term sheets from interested PE funds and the talks are at an advanced stage,” he said.
InvAscent holds the stake in Neuland Health Sciences Pvt. Ltd, which is the holding company of Neuland Laboratories Ltd, which is listed on stock exchanges.
InvAscent is the investment adviser to Evolvence India Life Sciences Fund and India Life Sciences Fund II, providing private equity growth capital to companies in the Indian pharmaceutical, healthcare and Medtech industries.
Evolvence made eight investments during 2007-12. These include Gland Pharma, an injectables pharma firm; HealthCare Global, a cancer-focused hospital chain; Sutures India, a manufacturer of sutures, surgical mesh and gloves; and Dr. Agarwal’s Healthcare, a chain of eye care hospitals.
In 2014, The Economic Times reported that the firm had raised Rs865 crore for its India Life Sciences Fund II, against a target of Rs750 crore.
“The transaction is expected to fetch the PE firm around Rs150-200 crore, the person cited above said. The PE firm had invested a little over $8 million in Neuland in 2012.
Emails and calls to Hari Buggana, managing director at InvAscent, went unanswered. Emails sent to Neuland Group and IDFC Bank too went unanswered.
Neuland, over 30 years old, is involved in the CRAMS business with a focus on regulated markets. The group has two US Food and Drug Administration-approved plants.
The company is a manufacturer of active pharmaceutical ingredients (APIs) and an end-to-end solutions provider for the pharmaceutical industry for chemistry-related services.
Neuland has an employee base of over 1,000 people and has over 700 customers across various geographies.
The company develops products in 10 different therapeutic categories such as cardiovascular, central nervous system, anti-asthmatic, anti-fungal and anti-ulcerant.
Neuland Laboratories Ltd, the listed business of the group, generated a revenue of Rs509.7 crore in 2015-16, against a revenue of Rs469.1 crore in the previous year.
The firm reported a profit of Rs26.4 crore in 2015-16, against Rs15.7 crore in the previous year.
The talks come at a time when PE firms have shown renewed interest in the CRAMS space.
On 8 August, Mint reported that Rubicon Research Pvt. Ltd, a Mumbai-based CRAMS firm, is raising up to Rs240 crore from home-grown private equity firm Everstone Capital and a clutch of high-net-worth individuals.
Earlier in July, Mint reported that another Mumbai-based company Encube Ethicals Pvt. Ltd was raising around Rs275 crore from Renuka Ramnath-led PE firm Multiples Alternate Asset Management Pvt. Ltd.
Encube Ethicals is a contract development and manufacturing firm for topical semi-solid formulations such as gels and ointments. The company serves pharma and cosmetic companies in the US, Europe and India.
The growth of contract research and manufacturing firms is closely linked to the growth in global pharmaceutical research and development (R&D) spending.
According to a February 2015 report by Frost & Sullivan, the global R&D expenditure for the pharmaceutical industry in 2014 was approximate $139 billion, of which $105 billion could have potentially been outsourced.
The global contract research and development market, in terms of value, was approximate $28.8 billion in size in 2014 and is expected to reach $44.6 billion in 2018, reflecting a growth rate of 11.6%, according to the report.
