Nirma Acquires 75% Stake in Glenmark Life Sciences For ₹5,652 Crore

On Friday, September 22, Glenmark Pharmaceuticals witnessed a sharp decline of over 6% in its share price on the Bombay Stock Exchange (BSE). This drop was prompted by the news of Nirma's acquisition of a substantial 75% stake in Glenmark's subsidiary, Glenmark Life Sciences. The stock opened at ₹815.95, down from the previous day's closing price of ₹828.05, and eventually fell to ₹775.85 during the day's trading session.

Acquisition Details

Glenmark Pharmaceuticals made an official announcement on Thursday, September 21, regarding the sale of a significant 75% stake in Glenmark Life Sciences to Nirma. This deal was struck at a price of ₹615 per share, amounting to a total consideration of ₹5,651.75 crore. Despite the substantial divestment, Glenmark Pharma will retain a 7.84% stake in Glenmark Life Sciences.

Open Offer and Valuation

Nirma Ltd has committed to making a mandatory open offer to all public shareholders of Glenmark Life Sciences, aiming to acquire an additional 17.15% stake at ₹631 per share. It's important to note that Glenmark Life Sciences had initially listed on the stock exchanges in August 2021 at ₹720 per share. The entire sale process is contingent on securing regulatory and shareholder approvals.

This acquisition represents Nirma's venture into the active pharmaceutical ingredient (API) segment, marking a significant shift in the conglomerate's business portfolio.

Market Performance

Both Glenmark Pharmaceuticals and Glenmark Life Sciences witnessed a decline in their share prices during the morning trading session, while the Sensex remained relatively flat. However, it's worth noting that both Glenmark Pharma and Glenmark Life Sciences have experienced substantial gains over the past year. Glenmark Pharma's share price had surged by over 103%, while Glenmark Life Sciences had seen a jump of more than 50%. In contrast, the equity benchmark Sensex had recorded a comparatively modest gain of about 12% over the same period.

Financial Performance

Glenmark Pharmaceuticals reported robust financial performance, with a 22% growth in revenue from the sale of finished dosage formulations in North America for the quarter ended June 30, 2023. This growth was substantial, amounting to ₹808.5 crore compared to ₹662.8 crore in the corresponding period of the previous year.

Strategic Rationale

Glenn Saldanha, Chairman and Managing Director of Glenmark Pharma, expressed enthusiasm about the deal, highlighting its significance in shaping an independent growth trajectory for Glenmark Life Sciences. He emphasized Glenmark's strategic intent to move up the value chain and become an innovative and brand-led organization. Furthermore, he pointed out that the transaction would strengthen shareholder value through deleveraging and enhance overall returns.

Saldanha underscored the appeal of a strategic investor like Nirma, known for its long-term growth orientation and employee-friendly approach, compared to private equity firms.

Nirma's Expansion into Pharma

This acquisition marks a pivotal moment for the Nirma Group, a diversified conglomerate with an annual turnover exceeding $2.5 billion. Founded by Dr. Karsanbhai Patel, the group has been exploring opportunities in the pharmaceutical sector. Earlier in the year, Nirma acquired a 100% stake in Stericon Pharma Private Limited, a contract development manufacturing organization (CDMO) specializing in sterile contact lens cleaning solutions and eye drops.

Future Prospects

Hiren Patel, Managing Director of Nirma, highlighted the strategic importance of this acquisition in propelling their pharmaceutical business into its next phase of growth. The move aligns with Nirma's mission to provide high-quality healthcare products at affordable prices and contribute to the "Make in India" initiative through indigenous research and development.

Conclusion

The acquisition of a 75% stake in Glenmark Life Sciences by Nirma signifies a significant development in the pharmaceutical industry. Glenmark Pharmaceuticals' strategic shift towards core therapeutic areas and the financial benefits of the transaction are noteworthy. This acquisition underscores Nirma's commitment to expanding its presence in the pharmaceutical sector and contributing to the "Make in India" initiative.