CA Clover Intermediate II Investments, an affiliated entity of CAP V Mauritius Ltd., an investment fund managed and advised by affiliated entities of The Carlyle Group Inc. has agreed to pick up a 20% stake in Piramal Pharma Ltd., a wholly owned subsidiary of Piramal Enterprises Ltd. (PEL) for $490 million (₹3700 crore).

Based on milestone achievement, the Piramal Pharma will be paid an additional $70 million. The deal is expected to close in 2020.

The transaction values the PEL’s Pharma Business at an enterprise value of $2,775 million with an upside component of up to $360 million depending on the company’s FY21 performance.

Piramal Pharma will include Piramal Pharma Solutions, an end-to-end contract development and manufacturing (CDMO) business; Piramal Critical Care, a complex hospital generics business selling specialized products across over 100 countries; Consumer Products Division, a consumer healthcare business selling over-the-counter products in India; and PEL’s investment in two joint ventures.

The Pharma business will be hived off as a separate company and will be listed subsequently. Post the deal the Carlyle entity will have one representative on Piramal Pharma’s board.

This transaction is one of the largest private equity deals in the Indian pharmaceutical sector, PEL said.

Ajay Piramal, Chairman, PEL, said, “The strategic growth investment by Carlyle in Piramal Pharma is an affirmation of the strength of our ability to build new, attractive and scalable businesses with a significant runway for continued organic growth and opportunities for consolidation.”

“This infusion of funds will further strengthen our balance sheet and provide us with a war chest for the next phase of our strategy,” he said in a video conference.

Neeraj Bharadwaj, MD, Carlyle Asia Partners advisory team, said, “Piramal Pharma has built a strong, diversified pharma business with a solid market position and scale in each of its core business segments of Pharma Solutions, Critical Care and Consumer Products. Given global pharma industry trends, we see attractive opportunities for organic as well as inorganic growth in each of these businesses.”

Nandini Piramal, executive director, PEL, said, “This fresh growth investment into our pharma business will be used as growth capital for the pharma businesses to expand capacity across our sites as well as to tap attractive acquisition opportunities within and outside India.”

“In the interim, the proceeds from this capital raise may also enable us to further strengthen our balance sheet through deleveraging in the near term,” she said adding the debt of the Pharma business which was ₹4200 crore in FY20 will be reduced to ₹2500 crore in FY21.

Following the sale of its domestic pharma business to Abbott in 2010 for $3.8 billion, PEL has substantially scaled up its pharma business in the last 10 years.

PEL’s pharma revenue since the Abbott deal has grown 3.5 times at a CAGR of 15% from ₹1,537 crore in FY11 to ₹5,419 crore in FY20.

In this period, the pharma business EBITDA has gone up 13 times at a CAGR of 33% from ₹110 crore in FY11 to ₹1,436 crore in FY20 (excluding financials of Allergan and CCPL JV).

In the post-Covid era the company is looking for bigger opportunities in the pharma business.

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