Glenmark Pharmaceuticals has recently entered into a share purchase agreement with Nirma Limited. The acquisition is occurring to divest a 75% stake in Glenmark Lifesciences worth Rs 7,500 crore. The deal has been finalized at Rs 615 per share. Glenmark Pharmaceuticals is one of the world’s fastest-growing healthcare and pharmaceutical industries.
The profit earned from this sale will be used by Glenmark Pharmaceuticals to pay off its Rs 4,340 crore of outstanding debt as of FY23. Before the final decisions are taken regarding the transaction, the board of directors might declare an interim dividend of Rs 2,250 crore.
After obtaining the shareholder approvals and necessary regulatory approvals, the deal will be closed in FY24. Glenmark Pharma will end up with a 7.84 percent share in Glenmark Lifesciences post-transaction.
Glenmark Lifesciences is worth approximately Rs 6,700 crore as per this transaction. This is equivalent to the current public market capitalization of Glenmark Lifesciences. The current P/E ratio or Price-to-Earnings ratio stood at 15.26.
As per the analysts, Nirma’s investment in Glenmark will offer a 14% Return on Invested Capital in 7 years. This Return on Invested Capital or ROIC expected is 200 basis points higher than the 12 percent return of SENSEX over the past decade.
Nirma Group’s advisory team includes DAM Capital, Eaishman, BCG, KPMG, and Khaitan & Co. In the future, Nirma needs to follow a mandatory open offer as per SEBI Regulations.
Cracker of a deal for Nirma
With this deal, Nirma Group has set its foot in the Active Pharmaceutical Ingredient (API) sector. In this healthcare portfolio, currently, Nirma is holding two entities, Stericon Pharma Pvt Ltd and Aculife Healthcare Pvt Ltd.
The Managing Direction, Hiren Patel of Nirma Limited said, “The acquisition of Glenmark Life Sciences aligns with our company’s strategic goals and positions Nirma as one of the top five independent API companies in India. This strategic move also enables us to capitalize on indigenous research and development, making a substantial contribution to the ‘Make in India’ initiative launched by the Government of India.”
For Glenmark Pharma’s management, the significant priority step is to reduce debt. Hence, this disinvestment was done so that they could achieve their financial objectives faster.
