Widely read:
Nirma , a major player in the commercial and industrial cleaning product industry, has recently inked an agreement with Glenmark Pharmaceuticals to acquire a 75 per cent stake in its subsidiary, Glenmark Life Sciences (GLS) .
The valuation of GLS stands at Rs 7,535 crore, with each share priced at Rs 615. Nirma is set to invest Rs 5,652 crore for its 75 per cent ownership stake in the company. It is worth noting that GLS is currently valued at 1.9 per cent less than its closing price as of September 21, 2023, and 14.6 per cent below its issue price. Its IPO came out in 2021.
Even after the transaction, Glenmark Pharma will retain a 7.8 per cent stake in GLS. To comply with SEBI regulations, an open offer to shareholders has been launched at Rs 631 per share, encompassing 17.3 per cent of GLS's voting share capital, with an estimated total value of around Rs 1,343 crore.
The rationale behind the acquisition
Glenmark Pharma's decision to divest its ownership in GLS stems from its ambition to eliminate its debt by FY26. This sale is expected to alleviate a substantial portion of the company's Rs 3,000 crore debt burden. Although the precise allocation of the remaining funds remains undisclosed, Glenmark Pharma envisions having approximately Rs 2,000 crore available for strategic investments.
Meanwhile, Nirma has been actively seeking an opportunity to enter the flourishing pharmaceutical sector for quite some time, and this acquisition serves as an ideal entry point.
A closer look at Glenmark Life Sciences
GLS, a subsidiary of Glenmark Pharma, stands as a leading manufacturer of active pharmaceutical ingredients (APIs), which are the raw materials used in drug production. Generics and complex APIs contribute 91 per cent of the company's revenue, with contract development and manufacturing operations (CDMO) accounting for 8 per cent in FY23.
Furthermore, GLS derives 32 per cent of its revenue from its parent company, Glenmark Pharma. The company's primary growth driver is its cardiovascular (CVS) segment, followed by central nervous system (CNS) and pain management products.
Performance of Glenmark Life Sciences over the years
The company has witnessed tremendous growth in the last five years
| Particulars | FY23 | FY22 | FY21 | FY20 | 3Y growth (% pa) |
|---|---|---|---|---|---|
| Revenue (Rs cr) | 2161.22 | 2123.21 | 1885.17 | 1537.31 | 12 |
| Operating profit (Rs cr) | 600.2 | 578.18 | 557.68 | 442.59 | 10.7 |
| Operating profit margin (%) | 27.8 | 27.2 | 29.6 | 28.8 | - |
| Net profit (Rs cr) | 466.96 | 418.72 | 351.58 | 313.1 | 14.3 |
| ROCE (%) | 30.01 | 42.24 | 96.75 | 185.6 | - |
| ROCE is return on capital employed | |||||
Also read: SJVN initiates offer for sale
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