Torrent Pharma walks away with Unichem’s domestic business for Rs 3,600 crore

MUMBAI: Torrent Pharma is acquiring the domestic business of Unichem Laboratories for Rs 3,600 crore in a deal that will make the Ahmedabad-based company among the country’s top five drugmakers.
The deal will also give Torrent access to 120 brands of Unichem in India and Nepal besides a manufacturing unit in Sikkim.

For Sudhir and Samir Mehta, the promoter brothers of the Rs 18,000-crore Torrent Group, the acquisition is a sign of the company’s ambitious plans to become a premier domestic conglomerate.

Torrent, which also has interests in power, has been on an aggressive shopping spree in the Indian pharma market and Unichem is its fifth acquisition in the past three years. In 2014, Torrent acquired the brands of Elder Pharma for Rs 2,000 crore. It followed up this deal by picking up select brands of Novartis, and manufacturing plants of Zyg Pharma and Glochem Industries in 2015 for an undisclosed amount.

Torrent’s own growth comes from segments such as cardiovascular, diabetes and central nervous system (CNS) formulations. The Unichem deal will give it access to leading brands such as Losar, Unienzyme, Ampoxin, Telsar and Vizylac. In its existing key therapies, Torrent’s market share in cardiology, CNS and gastrointestinal therapies will increase by 2% each.

Torrent said the deal will add 3,000-odd employees and 2,000 stockists. It will also allow the company an entry into the over-the-counter (OTC) segment with the Unienzyme brand. Torrent will become among the top three players in anti-hypertensives, anti-depressants and tranquilisers.

The deal is expected to add one brand of Rs 200 crore and three brands of more than Rs 50 crore to Torrent’s portfolio. “The transaction is a strategic fit for Torrent and will strengthen its position in key segments of cardiology, diabetology, gastrointestinal and CNS therapies. It is also expected to realise cost and revenue synergies in Torrent’s branded business in India,” Torrent Pharma chairman Samir Mehta said in a statement on Friday. Torrent will fund the acquisition through its own funds and bank loans.

SUCCESSION ISSUE
Unichem, promoted by pharma industry veteran Prakash Amrut Mody, recorded domestic sales of Rs 976 crore in the past 10 months — a 5% growth.

The sales turnover of the acquired business for the year ended March 31, 2017, was Rs 841 crore, which is 59% of the total revenue of the company. Mody and his wife Anita Prakash jointly own 80% stake. The market cap of the company on Friday was Rs 1,415 crore.

Sources told ET that a succession issue, coupled with slowing growth due to price cuts led to the company’s decision to sell the domestic business.

Unichem said it plans to use the funds to invest in its international business by focussing on research & development in biosimilars, new chemical entity and complex generics. “The deal will enable the organisation to deliver superior results in areas of innovative research, new chemical and biological entities and move into next the orbit of growth. Torrent, we believe, is the right company as they have the expertise and right presence in the key therapies to take forward these established brands to newer heights,” said Mody.

The transaction is a trendsetter, said DG Shah, secretary-general of Indian Pharmaceutical Alliance (IPA), the lobby group of leading Indian drug companies. “We will see that going forward it would be domestic companies who would be acquiring their peers,” Shah told ET.

GUJARAT CONNECT
India’s domestic pharma market is no longer an attractive acquisition target for multinational drugmakers who want to expand their generic foothold. A strict approach on drug pricing by regulators, quality concerns about domestic manufacturing sites and demanding valuations by promoters have kept away MNC drugmakers from India in the past few years. “One can say this is the deal that has been stuck between two friends,” said one pharma industry veteran who did not wish to be quoted.