Torrent Pharmaceuticals Ltd.’s speculated interest in acquiring a holding in Cipla Limited marks its most ambitious M&A manoeuvre so far in its long history. The group’s founder, the late UN Mehta had, way back in 1959, initiated the pharma operations as Trinity Laboratories later rechristened as Torrent.
Cipla Deal: ‘Once in a lifetime opportunity’
Experts provided varying views on whether other Indian players may consider joining the suitor line- up for a stake in Cipla.
Investment banking sources told Scrip that Cipla could be a strategic fit for several Indian companies including Dr. Reddy's Laboratories Ltd. and Zydus Lifesciences Limited thanks to the scale of its operations as well as its dominant India presence.
“For either Dr Reddy’s or Torrent, Cipla's acquisition would give it a clear domestic number position, an aspect which most M&A won't achieve due to sub-scale India presence of several companies (from a market share perspective),” these sources explained.(Also see "Deals, Divestitures In Store As Dr Reddy’s Stays Course To Top 5 India League" - Scrip, 7 February, 2023.)
An investment banker also underscored that it is unlikely for several years that "one would have a business of this scale and size which is available"; thus for most buyers “in many ways this could be a once in a lifetime opportunity”.
These investment banking sources though believe that India’s top-ranked drug maker Sun Pharmaceutical Industries Ltd. isn’t a likely contender. They explained that all deals done by Sun so far have been value or discount deals.
“Cipla currently trades at 29-30 (x) FY 2024 earnings and at those valuations it's unlikely a buyer like Sun would see value, besides having potential [portfolio] conflicts in the domestic market. This is not a Sun Pharma deal at all,” they declared.
An industry expert tracking the goings on said that given the growing interest of Dr Reddy’s in the Indian domestic market (it aspires to move to the top five position), this would appear to be an ideal opportunity for them.(Also see "Dr Reddy’s Wants To Break Into Top Five In India" - Scrip, 18 January, 2021.)
The expert, though, doesn’t expect Dr Reddy’s to actually bid given “the deal size and the enormous effort involved in consolidation”. Sun Pharma, on the other hand, is already well positioned in the Indian domestic market and is now focused on increasing its global presence, the executive added.
Ex-GSK executive Kallianpur said that Torrent has shown an ability to manage large acquisitions and turn them around, referring to its previous Elder, Curatio and Unichem transactions.
“This deal however is of a different magnitude and it remains to be seen how Torrent will manage this. If done well, it will put the likes of Lupin Limited and Dr Reddy’s under pressure to scale up. Consolidation in the Indian industry was long expected and times ahead will be truly interesting,” Kallianpur signed off.
Ranked number seven on the Indian pharma market (IPM) as per IQVIA July data, the Ahmedabad-based Torrent is said to...
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