InvestorQ : What is the latest update on the sale of stake in Suven Pharma by the promoters?
vaishnavi mhatre made post

What is the latest update on the sale of stake in Suven Pharma by the promoters?

vidhya Laxmi answered.
3 weeks ago

The talk has been going on for some time now, but now it looks like the Hyderabad based Suven Pharma may find a new buyer from among the private equity investors. Incidentally, PE investors have been extremely positive on the Indian pharma space, especially those focused on biologics, contract research, CDMO etc. Blackstone and Advent International are in two PE funds in advanced talks currently with the promoters of Suven Pharma for the stake. Both are independent bids for a stake in Suven Pharma and the final decision is expected to be announced over the next few weeks.

The promoter of Suven Pharma, Venkatesh Jasti, is planning to sell part of his stake. Incidentally, Suven Pharma is the CDMO business of Suven Life Sciences, which was hived off into a separate listed company in 2020. The promoters currently hold around 60% stake in Suven Pharmaceuticals and are open to selling half the stake or about 30% of the company. Obviously, being a substantial change of ownership, this will call for an open offer to minority shareholders by the eventual buyers to take another 26% in Suven Pharma. This is mandatory under SEBI Takeover regulations. Overall, it may hike the stake of the buyer to the range of 55% to 60% in Suven Pharma.

How does this translate into numbers. For instance, the market cap of Suven Pharma currently stands at around Rs10,630 crore. That would approximately value the promoter stake of 60% in Suven Pharma at a market cap of Rs6,378 crore. Since Jasti plans to sell half the stake, that would be valued at around Rs3,189 crore. It is very likely that the promoter would expect a control premium for a major chunk so the actual price paid could be much higher in this case. Subsequently, if the open offer amount is also added then the total pay-out by the buyer may be in excess of Rs5,000 crore. That is what the PE fund will pay.

In 2019, Suven Life Sciences demerged contract manufacturing business into Suven Pharmaceuticals to unlock value and the demerged Suven Pharma went public in March 2020. Advent is an old hand in the pharma space, but for Blackstone this would be the first deal in pharma as it has focused more on the real estate and REITs space in India in the last few years. It is not just the two PE firms. Apparently, other PE firms like PAG and KKR are also in the fray and these have also been active in this space for the last few years. It promises to surely be an interesting deal in the final analysis.