JB Chemicals shares tank 7% as Torrent Pharma acquires controlling stake worth Rs 25,689 crore

JB Chemicals' stock price is down 9 percent since the beginning of the year.

Shares of JB Chemicals and Pharmaceuticals nosedived as much as 7 percent to Rs 1,673 on June 30 after Torrent Pharmaceuticals acquired a controlling stake in the company from global private equity firm KKR at an equity valuation of Rs 25,689 crore (fully diluted basis).

This marks the second-largest deal in India’s pharma sector, behind Sun Pharma’s 2015 acquisition of Ranbaxy. Moneycontrol was the first to report that KKR was in early talks to sell its stake in JB Pharma to Torrent.

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The deal gives Torrent access to JB Pharma’s strong chronic portfolio and opens up new therapeutic areas such as ophthalmology. It also marks Torrent’s entry into the high-potential contract development and manufacturing (CDMO) space, while enhancing its presence in key global markets.

Following the development, Torrent Pharma shares rose 4 percent before quickly paring all gains to trade marginally higher.

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Nomura maintained a ‘Neutral’ rating on Torrent Pharma with a target price of Rs 3,580, implying a 7 percent upside from the last close. The brokerage said investors are likely to take comfort in Torrent’s successful track record with past acquisitions and its established M&A framework. Nomura, however, flagged the size of the transaction as notably larger than Torrent’s previous buyouts.

HSBC has maintained a ‘Buy’ rating as it believes the deal will strengthen Torrent’s position in chronic therapies in India and expand its capabilities in the international contract development and manufacturing (CDMO) space. HSBC flagged a likely near-term earnings impact due to higher interest costs and amortisation, but sees the acquisition as the next leg of growth for the company, pending deal closure.

At about 10 am, shares of JB were trading at Rs 1,685, lower by 6.5 percent from the last close on the NSE. Meanwhile, Torrent Pharma shares were up 0.5 percent. JB Chemicals' stock price is down 9 percent since the beginning of the year.

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