KKR taps Torrent Pharmaceuticals for JB Pharma stake sale

KKR taps Torrent Pharma for JB Pharma stake sale

Global private equity major KKR is in early discussions with Torrent Pharmaceuticals Ltd for selling its majority stake in its portfolio company JB Chemicals & Pharmaceuticals Ltd (JB Pharma), sources aware of the development told Moneycontrol.

In July 2020, KKR acquired a 54 percent stake in JB Pharma from its promoters for approximately Rs 3,100 crore. KKR acquired the stake from JB Pharma’s founders, the Mody family, at a price of Rs 745 per share.

The talks with Torrent Pharma are at a preliminary stage and the company is also seeing strong interest from buyout funds, the sources cited said. Even if talks with Torrent Pharma progress, KKR will likely run a competitive bidding process for better price discovery, the sources said.

The KKR stake is worth Rs 13,767 crore as of JB Pharma closing price of Rs 1,649.45 per share, last week. JB Pharma’s market capitalisation stood at Rs 25,598.61 crore.

The stake sale will result in an open offer for up to 26 percent of the company’s stake held by public shareholders.

Last year, the company announced a 1:2 split of its stock, which became effective on September 18, 2023. Since the stock split, JB Pharma scrip has risen over 11 percent, as of last week’s closing price. The stock hit a 52-week record high of Rs 1,935 on February 7.

Torrent’s interest in KKR’s 54 percent stake in JB Pharma comes close on the heels of its reported interest in acquiring the 33 percent stake of the Hameid family in Cipla Ltd.

Last year, Torrent was engaged in intense negotiations to secure an acquisition financing package of as much as $5 billion to fund the acquisition of the Cipla promoter family stake. The talks eventually fell through over a valuation mismatch.

Torrent, which has a presence in therapeutic segments like cardiovascular, central nervous system, gastro-intestinal and women’s healthcare, has grown over the years through several inorganic initiatives.

It acquired Elder Pharma's Indian branded business in 2013. Other acquisitions include the buyout of the dermaceutical business of Zyg Pharma in 2015, an API plant of Glochem Industries in 2016, the women healthcare brands from Novartis and Unichem's Indian branded business along with its Sikkim Plant in 2017. Its last major acquisition was a Rs 2,000 crore acquisition of skincare products maker Curatio Healthcare in 2022.

KKR declined to comment on the development. “As a policy, we do not comment on any market rumours and speculations,” said a JB Pharma spokesperson.

Emails sent to Torrent Pharma did not elicit a response.

JB Pharma financials

Established in 1976, JB Pharma produces a range of pharmaceuticals in areas such as gastroenterology, hypertension, dermatology and diabetes. Its portfolio includes flagship brands such as Cilacar, Metrogyl, Nicardia and Rantac. It exports its tablets, capsules, creams and other formulations to more than 40 countries, including the US. JB Pharma also has a major presence in medicated lozenges. The company ranks amongst the top five manufacturers globally in medicated and herbal lozenges.

For the nine months ending December 31, 2023, JB Pharma recorded a revenue of Rs 2,622 crore, a growth of 10 percent, compared to the revenue of Rs 2,387 crore in the same period last year.

“In Q3 FY24, JB Pharma grew at 13 percent vs IPM (Indian pharmaceutical market) growth of 8 percent (IQVIA Q3 FY24 data),” the company said in its earnings release.

JB Pharma continues to be the fastest growing company amongst Top 25 in IPM, it added.

Its EBITDA (Earnings Before Interest Depreciation and Taxes) increased by 25 percent to Rs 729 crore as compared to Rs 584 crore in the previous period.

“Increasing share of chronic mix has enabled better margins for the domestic business,” the company said.

Profit grew 32 percent to Rs 426 crore in the first nine months of FY24, as against a profit of Rs 322 crore in 9M FY23.

KKR India bets

A successful exit from JB Pharma will mark another major profitable bet for KKR in the Indian healthcare sector.

In August 2022, KKR sold its entire 27.5 percent stake in hospital chain Max Healthcare Institute Ltd for around Rs 9,400 crore, marking the private equity giant’s largest exit from an Indian firm.

Shares were sold to institutional investors at a price of Rs 353 per share. In 2018, KKR acquired shares in Max Healthcare for Rs 80 each.

KKR, which first invested in India in 2006, has so far pumped in over $10 billion in the country. Some of its biggest bets in India include Reliance Jio, Reliance Retail and Vini Cosmetics, among others.