KKR, Bain Capital and Blackstone in race for majority stake in Granules India

Three global private equity heavyweights, namely KKR, Bain Capital and Blackstone have expressed preliminary interest in acquiring a controlling stake in pharmaceutical manufacturing company Granules India,  people familiar with the matter said. 

Sources told that Granules India had revived plans for a potential exit from the company and was evaluating the sale of a majority stake at a premium valuation.

“Blackstone, KKR and Bain Capital have submitted non-binding bids for the proposed transaction,” said one of the individuals cited above.

Investment bank Kotak Mahindra Capital has been engaged by the promoters of Granules India to scout for buyers, the person added.

If these leading private equity funds proceed further, the stage seems set for a potential three-way bidding war to take over the Hyderabad-based firm, which is one of the world’s top makers of the popular pain reliever paracetamol.

In response to an email query from Moneycontrol, Priyanka Chigurupati, Executive- Director- US Generics, Granules USA said, “We do not comment on such speculation by the media. We communicate with many investors and evaluate many opportunities daily but we will not confirm or deny any speculation. As a public company, we will continue to comply with all disclosures as needed by the Securities Exchange Board of India.” KKR, Blackstone and Bain Capital declined to comment. An email query to Kotak Mahindra Capital went unanswered.

At the end of day’s trade on September 24, the market cap of Granules India stood at Rs 8,935 crore. The promoters held 42.13 percent stake as of June 2020.

Peer firm Motilal Oswal was bullish on the firm in its recent report. “Granules has multiple growth levers, such as (a) the ANDA ( abbreviated new drug application) pipeline for US generics (with some products having limited competition opportunity), which should drive an increase in the share of formulations for developed markets, (b) enhanced reach for core molecules, and (c) reduced opex through backward integration.” The brokerage expects earnings CAGR of 31% over FY20-22E.

In July 2020, KKR agreed to buy 54 percent stake in Mumbai-based drug maker JB Chemicals for Rs 3,100 crore. Bain Capital backs Pune-based Emcure Pharma which has deferred its IPO plans. On the other hand, Blackstone is the largest owner of commercial real estate in India.

Recent deals like Advent-Ra Chem Pharma, Carlyle–Sequent Scientific and Carlyle –Piramal Enterprises are examples of rising interest from private equity funds in the domestic API (active pharmaceutical ingredients) segment.

Source: Money Control 

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