February 2008
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Dabur Pharma weighing PE partner, outright sale

The Dabur Group is learnt to be evaluating a range of options for determining the future direction of Dabur Pharma, the anti-cancer drug company, including a sellout. The options being considered include inducting a private equity investor or a strategic investor, as well as a strategic alliance with a foreign company.

It is understood that Dabur Pharma has held discussions with a German pharma company for a partnership, where the possibility of an outright sale has also figured.
While Dabur Pharma chairman Mohit Burman was unavailable for comment, CEO Ajay Vij said, “There is no move to induct any partner.” Asked if the company was in touch with any German company for a strategic alliance, he said, “We are in touch with many companies across the globe for hundreds of things, but this (induct a partner or selloff) is pure speculation.”

However, a reliable industry source told ET that at present several options are being considered, though no final decision has been taken. A source close to the German company said discussions were at a somewhat advanced stage and the possibility of a total sellout was being actively considered.

Dabur Pharma is India’s only focused oncology (anti-cancer) company. With patent expiries worth $8-10 billion estimated in the next two years, the global oncology generics business is expected to grow significantly.
Last year, the company sold its non-oncology formulations business to Alembic for Rs 159 crore.

With this, Dabur Pharma’s plan was to focus on the core oncology business and exit other non-core businesses. This acquisition gave Alembic entry into cardiovascular, diabetic and gastrointestinal — all lifestyle products with high growth potential.

In 2003, Dabur India demerged its pharmaceutical business from the FMCG business following recommendations from consultancy firm Accenture. The decision to demerge was taken as it was felt that Dabur’s pharma and FMCG businesses need to be separated to provide greater focus and growth to each business under separate business heads.

If Dabur opts for the divestment option, it will make it a pure-play FMCG group. Last year, Anand Burman, the man behind Dabur Pharma, stepped down as chairman of the company and took over as the chairman of Dabur India, the group’s FMCG flagship, though he is still a director on the pharma company’s board.

Dabur Pharma has a market cap of around Rs 1,000 crore. The promoters of the company — the Burman family — hold a 65% stake in the company and at present their market capitalisation, the value of shares held by them, is estimated to be Rs 650 crore. On Wednesday, its share price closed at Rs 63.85 on BSE while the 52 week high on January 3 was Rs 92.4.

For the third quarter ended December, the company recorded net sales of Rs 65 crore, down from Rs 76.62 crore in the previous year quarter. Net profit at Rs 8.26 crore improved marginally from Rs 8.9 crore. For the fiscal year ended 2006-07, it made Rs 322 crore in net sales and Rs 19.7 crore in net profit.
Source: Economic Times

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