How Mankind Pharma’s Bharat Serums Acquisition Could Impact Revenues

Mankind Pharma Ltd. has announced a landmark deal to acquire a 100% stake in Bharat Serums and Vaccines Ltd. for an enterprise value of Rs 13,630 crore. This strategic acquisition could help the company expand its footprint in the specialty pharma sector. It also brings a whopping Rs 17,000-crore revenue potential for Mankind, if the transaction is completed by next year.

The acquisition's valuation reveals an enterprise value/sales multiple of 7.9 times for FY24 and 6.6 times for FY25. On an EV/EBITDA basis, the acquisition multiple is 22-24 times for FY25. The deal will be financed through internal accruals, a mix of debt and equity. Shareholders of the company have approved an equity raise of up to Rs 7,500 crore via qualified institutional placement.

Mankind has increased its debt raise limit by Rs 2,000 crore to Rs 12,500 crore. Currently, the company's long-term borrowings stand at Rs 1,711 crore, with cash reserves of Rs 1,230 crore.

Mankind anticipates that this acquisition will drive double-digit growth in both topline and Ebitda, according to a press statement. The acquisition is expected to be EPS accretive from the second full year onwards, with synergy benefits further accelerating EPS accretion. It is expected to close within the next three-four months, it said.

BSV is a leading branded specialty pharma platform with a strong focus on women's health. The company has presence in 12 out of the top 15 infertility drugs, and its top 10 brands accounted for 60% of domestic revenue in FY24. BSV operates within a high entry barrier portfolio, ensuring a competitive edge and sustained profitability.

The company boasted an Ebitda margin of 23% in FY24, while adjusted Ebitda margin stood at 28%. Sales CAGR was at 21% from FY21-24. BSV's net debt/EBITDA ratio is projected to be less than 2 times by FY26. The company's revenue distribution includes 54% from India, with the remaining from branded international markets.

Following the acquisition, Mankind's revenue could stand at Rs 17,000 crore in FY26 based on a compunded annal growth rate of 18-20%, as per NDTV Profit calculations. While, its Ebitda could reach Rs 4,258 crore.

In FY24, Mankind Pharma reported an interest expense of Rs 33.5 crore and a profit of Rs 1,941.7 crore. To finance the BSV acquisition, the company will use its internal accruals of Rs 2,000 crore from FY24-25's cash flow from operations. However, this leaves Rs 11,630 crore still needed to complete the deal.

Mankind has already received shareholder approval to raise Rs 7,500 crore through equity. It will seek bridge financing initially to complete the transaction and thereafter it will replace the debt by equity it will raise. At the end of the transaction, post equity raise, Mankind could be sitting on a gross debt level of around Rs 6,000 crore.

• Deal value: Rs 13,630 crore.

• Internal accruals: Rs 2,000 crore.

• Amount to raise: Rs 11,630 crore.

• Approved equity raise: Rs 7,500 crore.

• Working capital requirement: Rs 2,000 crore.

• Existing net debt: Rs 500 crore.

• Gross debt post acquisition: Rs 6,000 crore.

With an estimated interest rate of 10%, Mankind will incur an additional Rs 600 crore in interest costs for FY26.

Here is a look at what Mankind's financials could stand as after the acquisition, if it is completed by next year.