Glenmark Pharma is engaged in discussions with private equity fund PremjiInvest to sell 25-30% stake in Glenmark Life Sciences (GLS), the newly hived off subsidiary of active pharmaceutical ingredient (API) products. Talks with PE funds have taken place in the backdrop of its ongoing discussions with home grown PE fund True North getting stuck over a valuation mismatch.
Glenmark plans to sell a minority stake for $150 million (about Rs 1,100 crore), valuing the business at $600-700 million (about Rs 5,000 crore). Glenmark was also in discussions with other global funds such as Carlyle and Goldman Sachs for the stake sale, which also did not progress further, said one of the persons cited above.
“Glenmark’s discussion with True North is not taking pace and it has begun talks with other PE funds simultaneously,” said one of the persons cited above. However, the valuation has gone for a toss and it is not sure whether a deal will be signed soon, he added.
Avendus Capital is advising Glenmark to find a buyer.
Shares of Glenmark Pharma slumped as much as 7% last week to eight-year low levels. The stock has lost 45% in the last nine months and fell up to Rs 360, the lowest level since August 2012. Glenmark has lost Rs 8,200 crore in its market cap, which fell to Rs 10,145 crore as on August 22 from Rs 18,383 crore a year ago.
Glenmark Life Sciences is primarily engaged in manufacturing and marketing of API products across all major markets globally. It also includes captive sales (use of API by GPL for its own formulations). It has four dedicated API manufacturing facilities, of which three are approved by the US FDA.
As part of unlocking value, Glenmark transferred its API business to a wholly-owned subsidiary, which became operational on January 1, 2019. Over 75% of GLS revenue comes from regulated markets of Europe, the US and Japan. The top 10 molecules contribute 60% of the overall revenues of GLS.
As part of reducing its piled up debt, Glenmark had hived off noncore businesses into new subsidiaries with stake dilution plans.
The company plans to reduce debt by Rs 700-800 crore in FY20. As on March 31, Glenmark had a debt of Rs 3,877 crore, down from Rs 4,639 crore in FY18. Besides API business, it had spun off its innovation business into a new a wholly-owned subsidiary headquartered in the US.
