Will Torrent Pharmaceuticals Acquire Cipla? Is the Indian Pharma Giant in Financial Trouble?

Torrent Pharmaceuticals is in talks with private equity firms CVC Capital Partners and Bain Capital to raise $1.5 billion to bid for Cipla, India’s third-biggest drugmaker by sales. This could be the largest pharma deal in India ever, with a potential value of $6.75 to $7 billion.

Torrent is also in talks with Apollo Global Management to secure a loan of up to $1 billion to help fund the bid. Any bid will also trigger an open offer for another 26% stake, as per Indian regulations.

Cipla: The Indian Pharma Giant

Cipla is one of the leading pharmaceutical companies in India, with a global presence in over 80 countries. The company was founded in 1935 by Dr. Khwaja Abdul Hamied, a visionary chemist and nationalist who wanted to make healthcare accessible and affordable. CIPLA stands for Chemical, Industrial, and Pharmaceutical Laboratories, reflecting its diverse portfolio of products and services.

It has been at the forefront of innovation and social responsibility in the Indian pharma industry, with several milestones and achievements over the years.

CIPLA’s Ownership and Management

The company is a public limited company listed on the Bombay Stock Exchange (BSE) and India’s National Stock Exchange (NSE). The company has a market capitalization of about $12 billion as of September 2023. The company is owned by various shareholders, including institutional investors, mutual funds, foreign portfolio investors, and individual investors. The founding family of Dr. Khwaja Abdul Hamied holds a 33.4% stake in the company.

The company is managed by a board of directors comprising eminent professionals from various fields. The current chairperson of the board is Dr. Y.K. Hamied, the son of the founder and a renowned scientist and entrepreneur. The current managing director and global chief executive officer is Mr. Umang Vohra, who has over two decades of experience in the pharma industry.

Cipla’s Financial Performance

The brand has reported a strong financial performance for the fiscal year 2023 despite the challenges posed by the COVID-19 pandemic. The company’s consolidated revenue from operations grew by 11% year-on-year to Rs. 22,753 crore ($2.8 billion), driven by steady growth in India and US markets. Its core profitability (EBITDA) expanded by 100 basis points to 20.5%, reflecting operational efficiency and cost optimization. Its net profit increased by 14.2% year-on-year to Rs. 2,802 crore ($350 million), adjusted for one-time impairment due to divestment of certain non-core assets in Africa and the Middle East.

The company’s revenue from Indian business was Rs. 9,642 crore ($1.2 billion), accounting for 42.4% of the total revenue. The company’s revenue from US business was Rs. 6,263 crore ($780 million), accounting for 27.5% of the total revenue. New product launches and market share gains in key products such as the Albuterol inhaler drove the growth. The company’s revenue from other international markets grew 8% year-on-year to Rs. 6,845 crore ($850 million), accounting for 30% of the total revenue. The growth was driven by recovery in South Africa and emerging markets.

The company’s research and development (R&D) expenditure stood at Rs. 1,058 crore ($130 million), accounting for 4.7% of the total revenue. The company filed 25 abbreviated new drug applications (ANDAs) in the US market and received approval for 14 ANDAs during the fiscal year. The company filed seven new drug applications (NDAs) in India and received approval for four NDAs during the fiscal year.

Cipla’s Potential Takeover by Torrent Pharma

According to recent media reports, Ahmedabad-based Torrent Pharmaceuticals is in talks with various private equity funds and banks to raise funds for a potential takeover bid for Cipla. Torrent is reportedly in talks with Apollo Global Management for a loan of up to $1 billion and with CVC Capital Partners and Bain Capital for an equity contribution of up to $1.5 billion. Torrent Pharma is looking to raise $5 billion in financing for the bid, which could value Cipla at about $8 billion.

The reports also suggest that the brand’s founding family is keen to sell their 33.47% stake in the company, and a bid for that amount would also trigger an open offer for another 26% as per Indian regulations. The deal could be worth as much as $7 billion, making it India’s largest pharma deal.

However, the deal is not yet confirmed, and other interested parties could also be. Blackstone is also reportedly interested in bidding for Cipla.

Both the companies have not commented on the reports so far.

Cipla’s Successes and Failures

The company has been a pioneer in the Indian pharma industry, with several successes and failures. Some of them are:

• It is a pharmaceutical company specializing in respiratory, anti-infective, anti-cancer, anti-HIV, and anti-diabetic therapies.
• The company strongly emphasizes quality, ethics, and innovation.
• It has experienced regulatory hurdles, pricing pressures, competition, litigation, patent disputes, and growth strategy issues.

Cipla is one of the leading pharma companies in India and the world, with a rich history of innovation and social impact. The company has reported a strong financial performance for the fiscal year 2023 despite the challenges posed by the COVID-19 pandemic. The company is also facing a potential takeover bid by Torrent Pharma, which could be India’s largest pharma deal. The company has been a pioneer in the Indian pharma industry, with several successes and failures. The company aims to continue its journey of caring for life and creating value for all its stakeholders.

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