A few large private equity funds that considered the deal have been discouraged by the high valuation, they said, adding that the first round of bids is expected in a few weeks. Kotak Mahindra Bank is running the sale mandate.
KKR’s investment arm, TAU Investment, owns 53.78% in JB Chemicals, worth Rs 14,020 crore based on market capitalisation of Rs 26,070 crore at close of trade on Thursday. KKR acquired the stake for about Rs 3,100 crore, or Rs 745 per share, from the founding Mody family in July 2020.
JB closed at Rs 1,683 apiece on the BSE on Thursday, down 1.1%. The stake sale will result in an open offer for up to 26% of shares held by the public. KKR and JB declined to comment.
“As a policy, we do not comment on any market rumours and speculations,” said a Dr Reddy’s spokesperson. Mankind and Torrent Pharma didn’t respond to queries. Under KKR’s ownership, JB Chemicals’ revenue doubled to Rs 3,484 crore in FY24, from RS 1,606 crore in FY20.
KKR hired Cipla veteran Nikhil Chopra in October 2020 as JB chief executive. He put the Mumbai-based drugmaker on an accelerated growth path, with a fresh goto-market strategy involving therapy diversification, raising the productivity of medical representatives, optimising costs, making big brands even larger, chronic therapies and the acquisition of brands and portfolios.JB has made four acquisitions, investing $200 million, in the last four years — Sanzyme to enter the probiotic segment, heart failure drug Azmarda from Novartis, four paediatric brands from Dr Reddy’s and a cholesterol-lowering portfolio from Glenmark. The company signed an agreement in December last year with Swiss multinational giant Novartis to acquire a portfolio of 15 ophthalmology drugs for `964 crore. The acquisition is with effect from January 2027.Though the Indian pharmaceuticals sector remains a hot investment destination for global PE funds, they are not pushing for JB Chemicals citing high valuations. According to them, a valuation of 25-30 times Ebitda for a pure generic drugmaker isn’t justified. “Froma private equity perspective, an overvalued cost of acquisition for a fiveto seven-year tenure is not viable. However, strategics can reduce fixed overheads significantly, by removing the senior leadership of the acquired asset,” said one of the PE fund managers who decided to back out of a possible deal.
VOCAL LOCALS
Indian pharmaceutical companies are aggressively seeking to acquire domestic manufacturers to strengthen their local presence. “Inorganic is the way to overcome growth challenges that companies face in the domestic pharmaceutical industry,” said Charu Sehgal, partner, India
life sciences and healthcare leader at consulting firm Deloitte. Besides bidding for JB Chemicals, Mankind is also one of the contenders for Mumbai-based biopharma firm Bharat Serums and Vaccines from private equity Advent at a valuation of about $2 billion. It earlier joined hands with PE fund ChrysCapital to bid for medical devices company Healthium Medtech.
