Four years after entering Bharat Serums and Vaccines, private equity major Advent International is in exit mode and has initiated preliminary steps to explore a big-bang sale of the top biopharmaceutical firm, multiple industry sources with knowledge of the matter told Moneycontrol.
"Advent has kickstarted the process of evaluating a divestment of portfolio company Bharat Serums and Vaccines and has held discussions with a clutch of foreign and domestic investment banks to select a sell side advisor," said one of the persons above.
In November 2019, Advent announced the buyout of a controlling stake in the company, providing a complete exit to the erstwhile investors, Orbimed Asia and Kotak PE. A partial exit was given to the founders, the Daftary family. Back then, the deal valued the firm around $500 million.
Reports had named Cipla, Zydus Cadila, Dr Reddy's, Carlyle, BPEA EQT and Mylan as other potential suitors for Bharat Serums and Vaccines. Later, following a green signal from the Department of Pharmaceuticals (DoP), Advent acquired the balance stake from the Daftary family.
With Bharat Serums and Vaccines having an established market position in its product segments and strong R&D capabilities, a second person told Moneycontrol that Advent is seeking a rich premium in terms of valuation for the proposed transaction.
"Based on the firm's expected EBIDTA of around Rs 650 crore in FY25, the seller is expecting as much as a 25x multiple for the asset and that would imply a cheque size of Rs 16,250 crore or nearly $2 billion. A 20x multiple would mean Rs 13,000 crore or $1.5 billion," the second person elaborated.
The FY24 EBIDTA is likely to be around Rs 500 crore, a third person added.
In terms of FY25 EBIDTA multiples, some of the larger listed players like Sun Pharma, Cipla, Mankind Pharma, Lupin and JB Chemicals are trading at 18.7x, 13.4x, 25.8x, 14.5x and 20.09x, respectively. In terms of FY24 EBIDTA multiples, these firms trade at 21.4x, 14.9x, 30.6x, 16.9x and 24.4x, respectively.
A fourth person also confirmed the sale plans and told Moneycontrol that pitches by investment banks were on.
According to a fifth person, the proposed divestment is expected to elicit strong interest from strategic players as well as private equity funds as Bharat Serums and Vaccines has a very unique and niche set of complex products in the women's healthcare and critical care segment and a presence in the emerging markets.
All the five persons above spoke to Moneycontrol on the condition of anonymity.
An email query sent to Advent International and Bharat Serums and Vaccines was left unanswered at the time of publishing this article. This article will be updated as soon as we hear from the firms.
All about Bharat Serums and Vaccines
Mumbai-based Bharat Serums and Vaccines Limited was set up in 1971 and is engaged in the development, manufacturing and marketing of biological, biotech and pharmaceutical formulations.
According to a note by ICRA Ratings dated September 11, 2023, its product profile comprises plasma derivatives, monoclonal, fertility hormones, antitoxins, antifungals, anaesthetics, cardiovascular drugs, diagnostic products and more. The firm has a key manufacturing facility at Ambernath and another smaller facility at Thane. It also has a horse farm in Hyderabad, an R&D unit at Navi Mumbai and four wholly-owned subsidiaries in the US, Germany, the Philippines and India.
While the Philippines subsidiary acts as a marketing arm, the German facility has API manufacturing capabilities (EUGMP and USFDA approved) and the US-based subsidiary is mainly focused on R&D and clinical trials. The Indian entity does not have significant operations and was incorporated recently to house the human pharma division acquired from TTK.
The ICRA note said further, "The revenues grew by 15.3 percent in FY2023 to Rs 1,435.4 crore from Rs 1,245.3 crore in FY2022. However, the margins moderated to 17.9 percent in FY2023 from 20.8 per cent in FY2022, due to decline in high margin Ampho products, which had received a boost during Covid-19 sales and certain one-time expenses related to acquisition of the human pharma division from TTK Healthcare Limited (TTK) and ESOP expenses. Going forward, the margins are expected to improve, supported by cost efficiencies, and focus on high margin export portfolio."
A closer look at Advent
Founded in 1984, Advent International is one of the largest and most experienced global private equity investors. The firm has invested in over 410 private equity investments across 42 countries, and as of March 31, 2023, had $95 billion in assets under management.
The firm focuses on investments in five core sectors, including business and financial services; health care; industrial; retail, consumer and leisure; and technology.
The India portfolio of Advent includes Suven Pharma, Cohance, KreditBee, Yes Bank, Tredence, Eureka Forbes, Aditya Birla Capital, Bharat Serums and Vaccines, DFM Foods, Modenik and Ask Investment Managers.
Earlier in the week, Moneycontrol had reported that Advent is exploring strategic options to unlock value in India's largest rigid plastic packaging firm Manjushree Technopak. A sale process is in the works though Advent also wants to keep the IPO option handy, the report added.
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