October 2009
« Sep   Nov »

Contact us

PE funds eye stake in Strides' injectables biz

Private equity funds Carlyle Group and 3i, are among those holding preliminary discussions to take a substantial minority stake in pharmaceutical company Strides Arcolab’s injectables business, banking sources familiar with the development told ET.

Strides had recently inducted New York-based financial advisory firm Lazard to bring investors on board for its injectables business, with an asking valuation of around $170-$200 million.

The Bangalore-based firm manufactures sterile injectables and oral dosage formulations including tablets and soft gel capsules. Injectables that are prepared in a sterile environment where the ingredients are protected against cross contamination are referred to as sterile injectables. The Rs 1,300-crore company had earlier this year announced a corporate restructuring. Besides the parent pharmaceutical business, it had said that it would hive off its R&D into a separate unit and its sterile injectables business into a speciality pharma subsidiary called Strides Specialities.

The promoters currently hold a 25.8% stake in Strides Arcolab with institutional investors controlling a 45.51% stake in the company.

An email query sent to the company remained unanswered but a company spokesperson said that Strides was unwilling to offer any comment on the development. Though the company had sounded off investment bankers for a share offering across its three units 3-4 months back, sectoral observers felt that investor appetite was likely to be higher for its speciality pharma unit. This division had also completed a capital infusion of Rs 350 crore in the recent past.

Besides Strides, Claris Lifesciences and Orchid Chemicals & Pharmaceuticals have a strong focus in the sterile injectables space. The Carlyle Group, which has a minority stake in Ahmedabad-based Claris Lifesciences, is believed to have evinced interest in Strides’ injectable business. Sources said that talks with the two PE firms are in the initial stages and hinge on valuations.

“Carlyle is likely to look at an independent investment in Strides and this will not translate into a synergistic integration between the two pharma companies,” an official at Carlyle said on conditions of anonymity.
The absolute revenue of this division is uncertain, but sources said that it is possibly the largest contributor to the company’s turnover. “Clearly, Strides wants its injectables business to grow. While it looked at bringing more focus into its three units, it has chosen one segment where there is an immediate potential of unlocking value,” an industry source said.

The company has a significant play in markets, such as Latin America, Africa, the US, Australia and Southeast Asia, in addition to several manufacturing facilities overseas.

“Sterile injectables is a very stable-margin business. There is likely to be a demand for companies with focused capabilities in manufacturing sterile injectables as a few Indian companies have been able to develop levels of quality that is acceptable in regulated markets, such as the US and western Europe,” Sanjay Singh, associate director-corporate finance at KPMG, said.

Strides’ speciality pharma business is the fastest-growing segment for the group, delivering revenues of Rs 300 crore in the calendar year 2008. The subsidiary’s operating profit margin was 5% higher than its pharmaceutical business.

Source: Economic Times

Comments are closed.