A clutch of global private equity funds such as Apax Partners, Carlyle and Advent International are exploring options to acquire 10-15 per cent stake in Emcure Pharma, a Pune-based drug manufacturer. Emcure plans to raise about $200 million as the plans for listing is getting delayed indefinitely, said two people aware of the development.
Promoters of Emcure expect a valuation of $2 billion in this fundraising round. Besides promoters, existing investor Bain Capital is also likely to sell part of their stake. Bain holds about 13 per cent stake while the rest of the stake is held by Satish Mehta and family.
JM Financial is advising the company for the stake sale.
The money raised through the proposed stake sale will be used to pare its mounting debt, said one of the persons. The company has a debt of Rs 1,224 crore, which has doubled in the last five years from Rs 677 crore in FY14. Emcure posted a revenue of Rs 2,453 crore for FY19.
Namita Thapar, executive director of Emcure Pharmaceuticals, declined to comment. Spokespersons for Bain Capital, Apax Partners, Advent International and Carlyle declined to comment.
In 2013, Emcure had filed draft offer documents with the Securities and Exchange Board of India (Sebi) for the proposed Rs 500-crore IPO, which had been withdrawn later in June 2014.
The US-based PE fund Blackstone had invested Rs 230 crore in Emcure for the minority stake in 2006. The stake was sold to Bain in 2014 for Rs 700 crore.
Emcure, founded by first generation entrepreneur Satish Mehta in 1981, is one of the top 15 pharmaceutical companies in India.
The group, which is into manufacturing APIs and formulations, has presence in the high value chronic therapy as well as in acute segments. Under chronic segment, the company’s products are diversified across cardiology, oncology, nephrology and anti-HIV, while acute products are diversified across anti-infective, pain management, anemia, gynaecology and pediatrics, etc.
The US business of Emcure has been facing challenges following price-fixing allegations raised by a US Department of Justice probe.
Heritage Pharmaceuticals, the US subsidiary of Emcure, was accused of working with other generic drug makers to fix prices for diabetes medicines like glyburide.
Heritage has agreed to pay more than $7 million to settle allegations that it fixed the prices of several medicines, including a key diabetes drug, the Justice Department said, according to a Reuters report last year. The company also settled allegations that it paid kickbacks for drugs that were funded by federal healthcare programmes, the Justice Department said, as per the report.
The operating performance of the company in FY20 is expected to remain weak vis-à-vis FY19, owing mainly to declining sales in US markets with continued ‘import alert’ by the US Food and Drugs Administration (USFDA) on Emcure’s Hinjewadi facility coupled with significant decline in the profitability margins from US market on account of company facing stiff competition from new entrants, said a January 2020 Care Ratings report.
Emcure has five manufacturing facilities in India, of which four are located in Pune and one in Jammu. Heritage Pharma Labs has a manufacturing facility along with an R&D centre in New Jersey, US.
Source: Economic Times