Alkem promoter stake sale aimed at JB Chemicals bid

Currently, promoters hold a 56.38 percent stake in Alkem.

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The proposed stake sale by the promoters of Alkem Laboratories is aimed at getting on board a private equity investor to back the firm’s bid for KKR-owned JB Chemicals and Pharmaceuticals Ltd, people familiar with the matter said.

Alkem Labs is India’s fifth-largest pharma company, with a dominant position in anti-infectives and gastrointestinal and pain management drugs along with supplements.

It also has a growing portfolio of products for the treatment of diabetes and chronic neurological, cardiological and dermatological illnesses, among others.

Moneycontrol reported on September 12 that the Alkem promoters, the Singh family, are willing to cede a substantial, even a controlling, stake to PE funds. Promoters hold a 56.38 percent stake in the company.

Sources told Moneycontrol that the stake sale by the promoters is linked to an acquisition bid that Alkem wants to mount for a controlling stake in JB Chemicals along with a private equity partner.

The Economic Times was the first to report that Alkem had joined the race for JB Chemicals.

At the current market price, KKR’s 53.77 percent stake in JB Chemicals is worth almost $1.8 billion, or Rs 15,500 crore. The acquisition of the KKR’s holding will also trigger a mandatory open offer for another 26 percent stake held by the public, taking the deal size to $2.6 billion.

Alkem is the latest entrant in the race to acquire JB Chemicals, competing against the likes of Gujrat-based Torrent group, which has also been in talks with KKR for the last few months. 

The promoter stake sale and the JB Chemicals bid are not necessarily dependent on each other, sources said.

The promoters may still go ahead with the sale of a substantial stake even if they are not able to make a successful bid for JB Chemicals along with a PE partner, they added.

Torrent Pharma is still interested in acquiring KKR’s stake in JB Chemicals, the sources said.

An email sent to Alkem Laboratories did not elicit a response.

Alkem's business

Alkem operates 19 manufacturing facilities and research and development centres across India and the US to develop and manufacture generic formulations, active pharmaceutical ingredients (APIs) and biosimilars.

Apart from India and the US, the company also has a presence in Latin America, Australia and several Asian countries.

In India, it has manufacturing units in Gujarat, Pune, Daman, Baddi, Indore and Sikkim. These facilities have approvals from drug regulators such as the United States Food and Drug Administration (FDA) and the UK’s Medicine and Healthcare Products Regulatory Agency.

These FDA-certified facilities give companies like Alkem an advantage as the United States implements the Biosecure Act. It law bars US pharma companies from sourcing raw materials such as APIs from countries that pose a “national security risk”, with China being the primary target.

The shift opens up a significant opportunity for Indian companies, particularly those with FDA-approved facilities.

Alkem has one API manufacturing plant in the US in California and two in India.

Also Read: Alkem Lab Consolidated June 2024 Net Sales at Rs 3,031.82 crore, up 2.16% Y-o-Y

For the June quarter, Alkem reported a revenue of Rs 3,031.8 crore, up 2.2 percent from the year-ago period.

The India business contributed Rs 2,022.3 crore to the topline, while the international business clocked a revenue of Rs 967.7 crore with a 6.4 percent YoY growth.

The pharma company’s net profit jumped 90.1 percent to Rs 535.2 crore.

Its earnings before interest, taxes, depreciation and amortisation (Ebitda) were up 56.4 percent at Rs 608.6 crore. The Ebitda margin improved to 20.1 percent in the June quarter from 13.1 percent in the same period of the previous year.

At 2.03 pm on September 25, the Alkem Lab stock was trading at Rs 6,183.55 on the National Stock Exchange (NSE), up 2.26 percent from the previous close. JB Chemicals was down almost 2 percent at Rs 1,906.55.