Aurobindo Pharma's board to consider demerger of its Injectables business soon

Hyderabad-based Aurobindo Pharma is looking to demerge its injectables business, two sources close to the development told CNBC Awaaz. The company will seek a board approval for the same "shortly", they said.

The demerger process is expected to be completed in FY22.

One of the sources said, "The management has held initial talks with investment bankers to explore demerger of its injectables business and a few presentations have been made."

Aurobindo Pharma has not responded to queries sent by CNBC Awaaz.

The main objective of this demerger is to unlock shareholder value as nearly one-fifth of its total sales come from the injectables business driven by the US.

In a recent analyst conference call, the company said it is targeting revenues of between $650 and $700 million over the next three years from the injectables business as against current run-rate of around $380 million.
In order to boost the injectables business, Aurobindo is also planning to set up new plants in USA and Vizag in India.

According to Haitong Research, injectable peers globally trade at price to earnings (PE) ratio of 25-30 times,  whereas Aurobindo trades at a low PE ratio of 14 times based on FY22-23 estimates.

"Post the demerger of injectables business, Aurobindo will also focus on its Biosimilar business which is a high growth opportunity segment for the pharma major" added the second source.