Torrent may announce Unichem’s domest...
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Nov
3
Sandeep Singh Dhillon
Torrent may announce Unichem’s domestic business buy today – Economic Times India
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MUMBAI: India’s oldest drug maker Unichem has finally found a suitable buyer for its domestic formulations business in Torrent Pharma, ending more than a decade of speculation over the company’s future.

Torrent is likely to announce the acquisition on Friday for a total consideration of Rs 3,250 crore, making the Ahmedabad-based drug maker among the top five drug firms in the domestic market, said multiple sources aware of the matter. Both companies have their board meetings scheduled in Mumbai for Friday. The deal includes some of the manufacturing units and employees.

The domestic portfolio, especially its Losar brand of cardiovascular drugs, is believed to be of great interest to the acquirers. Market share of the Losar brand of drugs, used in the treatment of high blood pressure, improved by 4.8% in FY17 and maintained its top rank, Unichem had said in its investor presentation on May 30.

Torrent and Unichem did not respond to an email query sent by ET. In a recent conference call on July 31, Sanjay Gupta, executive director (international business) of Torrent Pharma, had said that the company continues to explore acquisition opportunities in India.

Unichem promoted by pharma industry veteran Prakash Amrut Mody recorded domestic sales worth Rs 976 crore in the past ten months, with a 5% growth. Mody and his wife Anita Prakash jointly own 80% stake in the company that has a market cap of Rs 1,415 crore as on Thursday’s market closing.

Sources told ET that succession issues, coupled with a slowing growth due to price cuts had impacted Unichem, leading to its decision to sell its domestic business. Unichem has been in play for years with global players such as Abbott India and Mylan Laboratories. More recently, PE firm Advent was in advance negotiations with the Unichem management to buy them out, but the deal fell through after Torrent entered the fray. ET had reported about Unichem’s plans to sell its domestic business in 2015.

The Unichem stock has rallied 24% in the past one month in anticipation of the deal. The shares of the company ended the day on Thursday at Rs 311.45, down 1.8%, on the BSE.

RENEWED FOCUS
During FY2012-FY2015, Unichem restructured its domestic business and added five new divisions to maintain a product and therapy-specific approach. Unichem’s key focus is on brand building, with four of its products finding a place in the top 300 brands in the Indian Pharmaceuticals Market (IPM).

The company maintains a balance between the chronic segment (59% of December 2016 sales in India) and the acute segment (41% of December 2016 sales in India). It has also sharpened its focus on chronic therapies, resulting in high profitability and rapid growth. To overcome the price cuts suffered from NLEM, Unichem has added new products in its portfolio and also been investing in the antidiabetic segment — a regular and highly profitable business segment — with a sharper focus.

During Q2FY2017, Unichem also entered the OTC segment by launching Unienzyme for the treatment of gastritis. That alone is a strong Rs 50-60 crore brand with no direct competition. But, it has a limited market presence. The company also planned to tie up with innovator companies for the upcoming molecules in the anti-diabetic segment. It could launch some other gastro products through the OTC route in the next 2-3 years.

“We are positive about Unichem’s long-term business prospects, and expect 15% and 29% revenue and adjusted PAT CAGRs respectively, over FY17-19. We expect the company’s domestic formulations to recover gradually and expect traction in its export formulations,” said Rashmi Sancheti, analyst with Anand Rathi, in a report earlier this June.

For Sudhir and Sameer Mehta, the promoter brothers of Torrent group, this acquisition is a sign of the company’s plans to be a domestic conglomerate. Besides interest in power, Torrent has been on an aggressive shopping spree in India.

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