MUMBAI : Nirma Ltd has submitted the sole binding bid for Glenmark Pharmaceuticals Ltd’s 82% stake in listed life sciences subsidiary Glenmark Life Sciences Ltd, three people aware of the matter said. ChrysCapital and Sekhmet Pharmaventures Pvt. Ltd, the other potential bidders, chose to stay away due to differences over valuation.
The bid came in late last week after the company extended the deadline a second time, the people cited above said on condition of anonymity. Mint was the first to report the Nirma group’s plan to spin off its life sciences division on 11 April.
“The bid has been placed at a lower valuation than the current market cap of the company,” the first person of the three people said.
“Nirma seems to be the sole bidder. Other interested parties have informally communicated that they would be willing to do the deal at a particular price as the stock has moved up significantly in the recent past,” the second person said.
Nirma, which entered the pharmaceuticals industry with the acquisition of Stericon, may finance the acquisition by raising debt from a syndicate of lenders, The Economic Times had reported earlier.
Kotak Mahindra Capital Co. Ltd, the investment banking arm of Kotak Mahindra Bank, is managing the sale process.
Glenmark Pharmaceuticals, which holds around 82% stake in Glenmark Life Sciences, is required to bring it down to 75% by August 2024, that is, within three years of listing. Furthermore, a stake sale of 25% will trigger a requirement for an open offer of another 26% from public shareholders, which would not be possible as the public float is at 18%.
While a spokesperson for Glenmark Pharmaceuticals declined to comment, spokespeople for Nirma, Sekhmet, ChrysCapital and Kotak did not respond to queries seeking comment.
This is Glenmark Pharmaceuticals’ second attempt to sell its active pharmaceutical ingredient or API business after an earlier attempt in 2019. Subsequently, it listed the firm on exchanges in 2021.
Shares of Glenmark Life Sciences closed at ₹644.20 on Monday, up from ₹408.2 in April when the news first came out. The firm’s market capitalization stood at ₹7,893.20 crore on Monday on BSE.
Glenmark has been selling non-core assets to generate cash. In December, it sold the cardiac brand Razel in India and Nepal for ₹313.7 crore and said it was in line with its “strategy of focusing on other sub-categories of the cardiovascular segment”. The company will focus on cardio-metabolic, respiratory, dermatology and oncology segments, Mint had reported earlier.
In a June 2023, global ratings agency Fitch Ratings ascribed a stable outlook to Glenmark Pharmaceuticals. “The Stable Outlook reflects our expectation that Glenmark will maintain comfortable leverage headroom, despite the working-capital driven increase in debt in the fiscal year ended March 2023 (FY23) and large drug litigation settlement payments. We expect that the limited immediate impact of adverse regulatory actions in its US business and a measured R&D approach will help to support profitability. Glenmark’s stable dividend and capex will enable moderately positive free cash generation before considering drug litigation settlement payments.”
The rating outlook has proportionally consolidated the API business held under Glenmark Life Sciences in Glenmark’s consolidated financials, it said.
In June, Glenmark Life Sciences reported a revenue of ₹578.45 crore for the June quarter, up 18% from a year ago. Net profit rose 24% to ₹135.45 crore. It saw a 14.1% rise in the cost of raw materials to ₹298 crore in the current fiscal year. The company reported an Ebitda (earnings before interest, taxes, depreciation, and amortization) of ₹195 crore, up 24.8%.
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Updated: 14 Aug 2023, 11:49 PM IST