Glenmark Agrees To Sell 75% In Life Sciences Unit To Nirma For Rs 5,652 Crore

Glenmark Pharmaceuticals Ltd. agreed to sell 75% stake in its life sciences subsidiary to Nirma Ltd. for Rs 5,651.5 crore as it focuses on core therapies and seeks to unlock value for repaying debt.

The pharma company will sell shares of Glenmark Life Sciences Ltd. at Rs 615 apiece, according to an exchange filing. Glenmark Pharma will own 7.84% after the transaction. The deal, subject to customary approvals, is expected to close in FY24.

Nirma will make the mandatory open offer to all public shareholders of Glenmark Life Sciences at Rs 631.20 apiece for an additional 17.33%. That's close to the Thursday's closing price of Rs 627.10 apiece.

Glenmark, its subsidiary and Nirma have agreed to "certain non-compete and non-solicit arrangements for a specified period".

Glenmark Life Sciences reported a revenue of Rs 2,161 crore and a net profit of Rs 467 crore in FY23, according to disclosures to exchanges. The company is valued at Rs 7,684 crore, as of Thursday's closing price.

Kotak Investment Banking acted as the exclusive financial adviser to Glenmark Pharma and its subsidiary, while S&R Associates and Trilegal acted as legal advisers. Khaitan & Co., KPMG, BCG, Eaishman and DAM Capital advised Nirma Group on the deal.

The deal aligns with Glenmark’s strategic intent of moving up the value chain to "become an innovative/brand-led organization, with continuous focus on our core therapeutic areas of dermatology, respiratory and oncology", Glenn Saldanha, chairman and managing director at Glenmark Pharma, said in the statement. "It also presents an opportunity for us to strengthen shareholder value through deleveraging and enhancing our overall return profile.”

There is no plan to deploy capital and the goal is to stay net cash positive, Saldanha said in a virtual press conference after the announcement. "The company's total debt will get extinguished after the deal."

Glenmark Pharma had a gross debt of Rs 4,600 crore, Saldanha said, against net proceeds of Rs 5,000 crore from the sale.

According to Saldanha, Glenmark buys less than 15% of its APIs from the life sciences subsidiary and plans to become a major API manufacturer itself. The sale will, however, affect revenue in the short-term, but "we expect double-digit growth within four to six quarters", he said.

Nirma said in a separate statment that with the deal, it forays into active pharmaceutical ingredient, expanding its existing portfolio of injectables, parentals and ophthalmic products. The transactions follows the soap-to-cement conglomerate's acquisition of Stericon Pharma Pvt. in March.

It is an ideal platform to propel "our pharmaceutical business into its next phase of growth", Hiren Patel, managing director at Nirma, said. The deal, he said, aligns with Nirma's goal of becoming one of the five top API makers in India.

Yasir Rawjee, managing director and chief executive officer at Glenmark Life Sciences, said in the statement that the firm will continue to operate as an independent API company under the new ownership of Nirma. "I see this as an opportunity to further strengthen our position in the API industry and continue the growth trajectory.”

Shares of Glenmark Life Sciences ended 1.25% lower, while Glenmark Pharma shares ended 3.32% lower as compared to a 0.8% decline in the Nifty 50.