Exclusive | Jubilant Life Sciences looking to tap PE funds for pharma business, raise $500 million

Jubilant Life Sciences Ltd.

More than a year after announcing the restructuring of the firm into two separate divisions to unlock shareholder value, Jubilant Life Sciences is now looking to raise funds for its pharma business on the back of strong demand recovery and new business tie-ups,  sources with knowledge of the matter told Moneycontrol.

“They have mandated investment bank Rothschild for the proposed fund raise and are open to selling a minority stake to private equity funds in the pharma business following the completion of the demerger process,” said one of the two individuals cited above.

“The company is looking to raise around $500 million via this transaction. Early feelers have been sent to the large private equity funds,” said a second individual. A third individual confirmed the fund raising plans of Jubilant Lifesciences saying the company could address its growth plans and debt with the deal proceeds.

All the three individuals spoke to Moneycontrol on the condition of anonymity.

Both Jubilant Lifesciences and Rothschild declined to comment in response to an email query from Moneycontrol. At the end of day’s trade on December 18, the Noida-based pharma firm had a market cap of Rs 12,311 crore. The promoters held 50.68 percent stake as of September 20, 2020.

On October 25, 2019 , the board of Jubilant Life Sciences Ltd announced a restructuring of the company into two separate entities--one handling pharmaceuticals operations and the other its life science ingredient business.

“We believe that the proposed demerger will ensure depth and focus to adopt strategies necessary for growth, unlock shareholder value with direct ownership and attract focused investors in each of the business entities," Jubilant Life chairman Shyam S. Bhartia and co-chairman and managing director Hari S Bhartia had said as part of the official statement.

After the demerger, the listed entity Jubilant Life will house the pharmaceutical business under Jubilant Pharma Ltd Singapore, the company’s drug discovery services operations as well as the entity that handles proprietary drug discovery business, Jubilant Therapeutics, the firm said in its October announcement.

“Jubilant Life plans to also list the life science ingredients entity on the National Stock Exchange and the BSE,” the firm added. The niche segment manufactures specialty intermediates, which are used to make bulk drugs, as well as nutritional products and life science chemicals at five manufacturing plants in India.

A brokerage report dated November 4, 2020, by ICICI Securities on Jubilant Life Sciences said, “Company has launched Remdesivir, a potential treatment for COVID-19, in India and several other countries as part of licensing agreement with Gilead Life Sciences; this should help growth in the coming quarters. Demand in most businesses has normalised to pre-COVID levels with visible growth Q3FY20 onwards.”

“Company continues to focus on reducing debt by repaying Rs190 cr in H1FY21 on constant currency basis. Current gross and net debt stand at Rs 4,150 crore and Rs 2,980 crore respectively,” the report said, adding that the approval from the NCLT (National Company Law Tribunal) for the demerger was awaited. The firm had earlier disclosed that the COVID-19- related lockdown had led to a delay in the NCLT hearings.

In FY 2020, the company reported record profits with improvement in margins led by growth witnessed in the pharmaceuticals and drug discovery and development solutions segments, according to its 2020 annual report.

“Pharmaceuticals sector, in this backdrop, has performed relatively well mainly due to its ability to continue to operate during the lockdowns, given the status of essential goods,” the annual report said.

The firm is the third

-largest player in the nuclear medicine industry and the leading player in the US based on market share of certain products namely, MAA and DTPA.

The firm’s pharma business has three verticals –

(i) Specialty pharmaceuticals, comprising Radiopharma (including Radiopharmaceuticals and Radiopharmacies) and Allergy Therapy Products.

(ii) Contract Development and Manufacturing (CDMO) comprising Contract Manufacturing of Sterile Injectables and Non-Sterile Products (CMO) and Active Pharmaceutical Ingredients (APIs).

(iii) Generics comprising solid dosage formulations and India branded formulations.

According to the annual report, the firm is the third-largest player in the nuclear medicine industry and the leading player in the US based on market share of certain products namely, MAA and DTPA. It develops and produces APIs in the therapeutic areas of the cardiovascular system (CVS), central nervous system (CNS), gastrointestinal (GI), anti-infectives and anti-depressants.

The combined FY 19-20 revenues of Jubilant Lifesciences from all businesses was around Rs 3,140 crore. The pharma vertical contributes 62 percent, the life sciences ingredient segment contributes 35 percent and the drug discovery segment contributes 3 percent, according to the 2020 annual report.  The pharma division, with six US FDA-approved facilities in the US, Canada and India, saw sales in over 80 countries as on March 31, 2020 with revenues from North America contributing over 80 percent of the segment’s total revenues.

The pharma and healthcare segment has seen a flurry of deals in 2020, including buyouts and minority stake sales, with private equity funds taking the lead and edging out strategic suitors. Some of these transactions include KKR’s buyout of JB Chemicals, Carlyle acquiring animal healthcare firm Sequent Scientific and picking up a 20 percent stake in Piramal group’s pharma business, Advent buying a controlling stake in Hyderabad based RA Chem Pharma and Goldman Sachs pumping in $150 million in Biocon arm Biocon Biologics.

There are a couple of other deals in the sector that are yet to fructify. On February 12, 2020, Moneycontrol had reported that Suven Life Sciences had put its demerged contract research and manufacturing arm ( Suven Pharma) on the block.

Later, on September 10, 2020, Moneycontrol reported that the promoters of Hyderabad based Granules Pharma had revived their exit plans.