Mumbai: Private equity (PE) firm ChrysCapital is looking to exit its investment in pharmaceutical firm Eris Lifesciences through an initial public offering (IPO) and has initiated talks for the same, said three people aware of the development.
The move comes after ChrysCapital’s talks to exit through a secondary stake sale to other private equity firms.
In December, Mint reported that ChrysCapital was planning to exit its five-year-old investment in Eris for aroundRs.600-650 crore.
In 2011, the PE fund had acquired an around 16% stake in Eris for about Rs.160 crore.
In June, The Economic Times reported that ChrysCapital had initiated talks with private equity funds Apax Parters, Advent International, Multiples Alternatives, Barings Asia and Carlyle to sell its 16% stake in Eris.
Founded in 2007, Eris is engaged in manufacturing, marketing, and selling of branded generics across the country.
The company has a presence in cardiovascular, diabetes, gynecology, pediatrics and gastrointestinal segments. Eris’s sales grew 25% to about Rs.600 crore in the year to March 2015.
“ChrysCapital has started discussions with several investment banks for an IPO of Eris Lifesciences. Several banks, both foreign and domestic, are expected to pitch for the mandates. The pitches will be happening over the next few weeks,” said one of the people cited above, requesting anonymity as the talks are private.
According to a second person mentioned above, the size of the IPO could be around to Rs.600-800 crore. “The IPO will be majorly an offer for sale of shares by ChrysCapital, which wants to exit its investment,” he said.
Emails sent on Monday to Amit Bakshi, founder and managing director of Eris Lifesciences, and Kunal Shroff, managing director at ChrysCapital, did not elicit any response.
The stake sale in Eris Lifesciences, if concluded, will be yet another major exit for ChrysCap, which has a wide portfolio of pharmaceutical and healthcare investments.
In May, ChrysCapital sold its entire 11% stake in Mankind Pharma Ltd to Capital International Private Equity Fund at close to 10 times the value of its original investment.
The deal was closed at $215 million. ChrysCapital had invested $24 million in 2007 for the stake.
In November 2014, ChrysCapital sold a 10.2% stake in Intas Pharmaceuticals Ltd to Temasek at close to 10 times its original investment. While the fund did not disclose the details of the transaction at the time, Mint had reported that the stake was sold for Rs.880 crore.
In 2010, the fund sold its holding in Zydus Wellness Ltd at 4.7 times its original investment, Reuters reported on 11 March 2010.
In October 2015, ChrysCapital had raised Rs.200 crore by selling about 1% in Torrent Pharmaceuticals Ltd through open market transactions at three times the price of its original investment. ChrysCap’s investment arm Lavender Investments Ltd currently holds about 1.8% stake in Torrent Pharmaceuticals.
ChrysCapital’s plan to exit Eris Lifesciences through an IPO comes at a time when public markets have shown a strong appetite for IPOs of pharma and healthcare firms.
In December, generic drug maker Alkem Laboratories Ltd raised Rs.1,350 crore through its IPO. The share sale of the company was subscribed 44 times, with the high-net-worth individual category subscribed nearly 130 times. On its listing on 23 December, shares of Alkem Labs touched a high of Rs.1,401.40, 33% higher than its listing price.
On 23 August, shares of Alkem closed at Rs.1,505 per share, 43.3% higher than the issue price of Rs.1,050.
In recent times, investors have lapped up the share sales of healthcare services firms such as Dr. Lal Pathlabs Ltd, Narayana Hrudayalaya Ltd, and Thyrocare Ltd. Their IPOs were subscribed 33, 8 and 74 times, respectively.
PE exits from pharmaceuticals and healthcare sector jumped 25% in 2015 to $428 million as against $343 million in 2014, according to data from VCCEdge. The amount of fresh investments in the sector remained flat at $1.3 billion in 2015, the data show.
