Torrent to acquire Unichem’s business in India for Rs3,600 crore

Torrent Pharmaceuticals Limited and Unichem Laboratories Limited announced the signing of a definitive agreement on Friday under which Torrent will acquire Unichem's branded business in India and Nepal in a Rs3,600-crore deal.

The boards of directors of the two companies approved the deal on Friday.

Unichem's India business comprises a portfolio of more than 120 brands in India and Nepal, manufacturing plant at Sikkim catering to these markets and all the employees engaged in the said business.

The transaction is ongoing concern basis by way of slump sale.

Torrent proposes to fund the acquisition through a mix of internal accruals and bank borrowings.

Post acquisition, Unichem will continue to have greater focus on international business comprising manufacturing, selling and marketing of fixed dosage formulation and API. It will also continue to build a sustainable revenue stream by investing in R&D to develop its future product pipeline, as per the agreement.

This will be Torrent's fifth acquisition in India after acquiring the selected brands of Elder and Novartis, as well as manufacturing plants from ZygPharma and Glochem Industries Ltd in the last four years.

In 2014 Torrent acquired a set of Elder brands, which have since been successfully integrated. Over a period of three years, the acquired Elder brands have clocked a CAGR of 23 per cent against the representative market growth of 11 per cent. Shelcal and Chymoral, the flagship brands acquired, have grown, crossing the Rs300-crore and Rs100-crore marks, respectively, and have been increasing their market shares consistently.

With the Unichem deal, Torrent expects to break into the list of top pharma firms in the Indian Pharma market (IPM) ranking No5 in the IMS. The acquisition helps Torrent to consolidate its market share in terms of sales, which will increase from current 2.4 per cent to 3.4 per cent in the IPM.

As per the SMSRC prescription audit database, Torrent's rank in terms of overall prescription in the Indian Pharma market will move from 14 to 7. Torrent will now be amongst the top 10 players in 15 out of the 20 specialties and amongst the top 5 in 7 key specialties respectively, further consolidating and improving its specialist focus.

The acquisition will add a brand of Rs200 crore and three brands of more than Rs50 crore, to its existing portfolio. The top brands include Losar, Unienzyme, Ampoxin, Telsar and Vizylac. In its existing key therapies, the market share in cardiology, central nervous system, gastro-intestinal therapies will increase from 5.6 per cent to 8.6 per cent; 6.4 per cent to 8.4 per cent and 3.1 per cent to 3.9 per cent, respectively.

The acquisition will also add 3,000 plus employees to Torrent's existing employee pool. Also, the distribution reach will expand with the addition of 2,000 stockists in the country.

This transaction will open doors for Torrent to enter into the OTC segment with the brand 'Unienzyme' and the company will be a dominant player in the digestive enzyme market and will be amongst the top three players in the segments of anti-hypertensive, anti-depressants and tranquilisers.

''The transaction is a strategic fit for Torrent and will strengthen its position in the key segments of cardiology, diabetology, gastro-intestinals and CNS therapies. It is also expected to realise cost and revenue synergies in Torrent's branded business in India'' said Samir Mehta, chairman Torrent Pharmaceuticals Limited.

''The deal will enable the organization to deliver superior results in areas of innovative research, new chemical and biological entities and move into next the orbit of growth. Torrent, we believe is the right company as they have the expertise and right presence in the key therapies to take forward these established brands to newer heights,'' said Dr Prakash Modi, chairman of Unichem Laboratories Limited.

The transaction is subject to customary conditions precedent, applicable regulatory approvals including Unichem's shareholders approval. The transaction is expected to close by end of the year 2017.