Lupin, Piramal Healthcare in race for stake in JB Chemicals

Mumbai: Mumbai-based Lupin Pharma and the healthcare arm of Piramal Enterprises are among potential acquirers in early stages of talks to buy into 75-year-old drug maker JB Chemicals, people familiar with the development told ET.

One of the oldest active pharmaceutical ingredient (API) makers in India, JB Chemicals last month had appointed investment bank Avendus to find a buyer for the 55 per cent stake the Mody family owns in the company.

JB Chemicals had told stock exchanges late last month that it was not aware of any stake sale negotiations, but people closely involved with the development said the investment banker has been asked to seek potential buyers. It ranks number 36 in the Indian pharma market, logging sales worth Rs 611 crore at 16 per cent growth, according to pharma consultancy firm AWACS. In FY19, the company reported net profit of Rs 42 crore.

Piramal said it does not comment on market speculation. Lupin did not respond to ET’s query.

JB Chemicals has been an acquisition target for several pharma companies for some years now as the succession issue, coupled with the slowdown in the Indian API industry, have led some promoters to exit.

In 2017, Unichem sold its domestic business to Torrent Pharma for Rs 3,600 crore, making Torrent the fifth-largest drug-maker and giving it an option to leverage some legacy brands of Unichem.

Analysts say that JB Chemicals offers similar options to its buyer. At companies such as Lupin that had expanded its presence in regulated markets, pricing pressures and regulatory hurdles have dented growth. After the GST implementation, the Indian pharma market has retraced its double-digit growth trajectory, making the home market a better growth bet. A Jefferies report noted that Lupin continues to outrun peers on growth, led by its top 10 products that expanded at 21 per cent and contributed 23 per cent to revenues.

The healthcare business at Piramal, the other contender, has been on the lookout for mid-sized companies and brands to re-enter the pharma business. The company's non-compete agreement ended with Abbott last year and its OTC business ranks among the top five in the country.

Shares of JB Chemicals closed Thursday at Rs 372, down 2 per cent. Shares of Lupin and Piramal closed, respectively, at Rs 714, up 1 per cent, and Rs 1,880, up 7 per cent.