Nirma Ltd has agreed to buy 75% of Glenmark Life Sciences Ltd for ₹5,651.5 crore in a deal that values the latter at ₹7,535.4 crore.
Mint reported first on 15 August that the cement-to-detergent maker was the sole bidder for the stake put on the block by parent Glenmark Pharmaceuticals Ltd, which is selling shares to Nirma at ₹615 apiece.
Glenmark Pharma will continue to own 7.84% of Glenmark Life Sciences. Nirma will make a mandatory open offer to all public shareholders of Glenmark Life Sciences for an additional 17.15% stake at ₹631 a share. The life sciences company listed on the bourses in August 2021 at ₹720 a share. The sale will be subject to various conditions, including receipt of regulatory and shareholder approvals.
“Glenmark Pharma has decided to move up the value chain. Over the years, the generic environment has changed, and it has become very competitive. We are focusing more on complex generics and branded drugs. Both the companies had divergent paths, and hence the management decided to divest stake and deleverage the balance sheet,” said Glenn Saldanha, chairman and managing director of Glenmark Pharmaceuticals Ltd.
Glenmark Pharma will use the money from the sale to repay debt.
“We currently have around ₹3,000 crore of net debt. Net of tax, the proceeds will be around ₹5,000 crore. Glenmark will be a net cash-positive company in FY24,” Saldanha told reporters after the announcement.
Saldanha said the two Glenmark companies have few synergies now, and less than 15% of Glenmark Pharma’s APIs are sourced from Glenmark Life Sciences. Around 65% of Glenmark Pharma’s business now comes from branded generics. The US generics contribute around 25%, and a small percentage comes from Europe.
Glenmark will focus on core therapeutic areas of dermatology, respiratory and oncology. “It also presents an opportunity for us to strengthen shareholder value through deleveraging and enhancing our overall return profile,” Saldanha said.
The company has been selling non-core assets to generate cash. In December, it sold cardiac brand Razel in India and Nepal for ₹313.7 crore. At the time, the company said it was in line with “Glenmark’s strategy of focusing on other sub-categories of the cardiovascular segment”. The company had then decided to focus on cardio-metabolic, respiratory, dermatology, and oncology segments.
Glenmark Pharma said it will continue to focus on consistent growth across its key markets while having a strong emphasis on return ratios with a net cash-positive balance sheet.
Kotak Investment Banking acted as the exclusive financial advisor to Glenmark Pharma and Glenmark Life on this transaction. S&R Associates acted as legal adviser to Glenmark Pharma, and Trilegal acted as legal adviser to Glenmark Life.
Glenmark Life Sciences reported revenue of ₹578.45 crore for the June quarter (Q1 FY24), up 18% year-on-year (y-o-y). Net profit during the period stood at ₹135.45 crore, up 24%. It saw a 14.1% increase in cost of raw materials to ₹298.21 crore. The company reported an Ebitda (earnings before interest, taxes, depreciation, and amortization) of ₹195 crore, a 24.8% rise y-o-y.
During the quarter, Glenmark Life Sciences recorded strong free cash generation of ₹98.2 crore, leading to cash and cash equivalents of ₹382 crore as on 30 June.
Kotak Investment Banking acted as the exclusive financial advisor to Glenmark Pharma and Glenmark Life on this transaction. S&R Associates acted as legal advisor to Glenmark Pharma and Trilegal acted as legal advisor to Glenmark Life.
