Quadria Capital, a healthcare-focussed private equity (PE) fund, is set to invest Rs.500 crore for a 20% stake in drug maker Concord Biotech Ltd, after valuing the company at nearly Rs.2,500 crore, said three people familiar with the development.
“The deal closure is expected before the end of this month; (the) final contours are being worked out right now,” said the first person mentioned above requesting anonymity as the discussions are confidential.
Ahmedabad-based Concord is a research and development-driven biotech firm that makes bulk drugs. In 2005, Hyderabad-based drug maker Matrix Lab bought 58% stake in Concord. But when it was acquired by generic drug maker Mylan NV in 2006, Matrix sold its stake in Concord back to the promoters and Rakesh Jhunjhunwala-owned asset management firm Rare Enterprises.
Jhunjhunwala, who held a minority stake in Concord, increased his stake to 25% when Matrix sold back its stake. He now holds about 30% in Concord; the rest is held by the promoters and employees.
“Rakesh Jhunjhunwala will continue to remain the single largest shareholder even after the transaction. The transaction is a secondary sale where he is expected to offload nearly 5% stake and the rest would be done by promoters and some employees,” said the second person cited above, who did not wish to be identified as he is not authorized to speak to the media.
Dr. Amit Verma, managing partner at Quadria, declined to comment on the deal. Emails sent to Jhunjhunwala and Sudhir Vaid, chairman and managing director of Concord, on Friday did not elicit any response.
The third person quoted above said the deal has been in the works for the past few months. A number of global funds, including London-based PE firm Actis Capital, has done due diligence on the firm in the early stages. “All others investors have now moved out of the transaction and it is being sealed with Quadria,” the person said.
Actis Capital declined to comment on the story.
Set up in 2000 by Vaid, a former director of Ranbaxy Laboratories Ltd, Concord has commercialized bio-pharmaceutical products across therapeutic segments such as oncology, anti-fungal, anti-bacterial, anthelmintic therapies and biosimilars. It has a presence in more than 50 countries in North America, Europe, Central and Latin America, Africa and the Asia-Pacific.
For Quadria, this is one of the first deals from its third fund—Quadria Capital Fund LP with a corpus of $304 million, raised in June 2015. The Singapore- and India-based fund invests in mid-sized healthcare companies in South and South-East Asia and focuses on sub-sectors like healthcare delivery, life sciences, medical technology and associate healthcare services.
According to an August 2015 report by Mumbai-based investment bank o3 Capital Global Advisory Pvt. Ltd, the market for companies operating in the four key segments in the Indian pharma sector—formulations, active pharmaceutical ingredients (API), CRAMS (contract research and manufacturing services) and biosimilars—is pegged at $44.6 billion.
“Fermentation-based APIs is a very niche category and comes under the realm of biotechnology. Thus, it starts getting valued in a different way and moves up the curve in terms of valuations,” said Shiraz Bugwadia, managing director at o3 Capital. “These businesses are highly scalable and sizeable, which makes them attractive for investments.”
Highly profitable exits for PE funds have made the healthcare sector one of the most sought after for such investments. In November 2014, ChrysCapital sold 10.16% in Intas Pharmaceuticals Ltd to Temasek for Rs.880 crore. In May 2015, ChrysCapital sold its investment in Mankind Pharma to Capital International Private Equity Funds at nearly 10 times its original investment.