Eris Lifesciences (ERIS) has agreed to acquire the India branded formulation business of Biocon Biologics for INR12.4b.The acquisition will expand the company’s presence in the domestic injectable market in diabetes and oncology areas. The deal is valued at 12x 1-year forward EV/EBITDA, implying 25% YoY growth in EBITDA after the acquisition. ERIS has also proposed to buy a 19% stake in Swiss Parenterals from ERIS promoters for INR2.4b. Both deals would increase the company’s net debt to INR24b in FY24 from INR8.9b as of 3QFY24. We change our earnings estimates by (-6%)/4% for FY25/FY26 to account for the acquisition and the increase in interest outgo in FY25. We assume reduction in net debt in FY26 on the back of free cash flow generation.
OutlookWe value ERIS at 22x 12- month forward earnings to arrive at a TP of INR930. ERIS has been aggressively expanding its product portfolio/therapy presence through M&A for the past 12-15 months. With total investments of INR35b till date, ERIS has diversified into dermatology, nephrology, and women’s healthcare.
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