Sanofi India To Demerge Its Consumer Health Business From Pharma Business

Sanofi India Ltd. is looking to demerge its consumer healthcare business into a new wholly owned subsidiary.

The company said on Wednesday that the board has approved an arrangement to demerge its consumer healthcare business into its wholly owned subsidiary, Sanofi Consumer Healthcare India Ltd., subject to receipt of necessary approvals, according to an exchange filing.

The consumer healthcare business will include all assets and liabilities pertaining to the business, including brands like Allegra, Combiflam, DePURA, and Avil.

The filing said that the decision is expected to open new gates for the India business and employees in a value-driven move to accelerate growth for both the pharmaceuticals business (Sanofi India) and consumer healthcare business (Sanofi Consumer Healthcare India) in India.

The turnover of the healthcare business for the year ended December 2022 was around Rs 728 crore, amounting to 28% of the total turnover.

The shareholders of Sanofi India will be issued equity shares of Sanofi Consumer Healthcare India at a ratio of 1:1. No other cash consideration will be paid on demerger.

Sanofi Consumer Healthcare India is expected to be listed on both the BSE and NSE.

Sanofi India will continue to own a 60.4% stake in both entities post-merger.

Sanofi India’s pharma portfolio of products includes general medicine brands, including the recently approved Soliqua. The manufacturing site in Goa will continue to be part of Sanofi India.

Proposed Rationale For Demerger

• To have independent and focused management and independently pursue different opportunities and strategies for the growth of each business.

• Enable a different operating model for the consumer healthcare business that is fit for purpose for a fast-moving consumer healthcare company.

• The general medicine business will focus on its long-term success factors, expanding its life-changing treatment portfolio, and expanding the reach of its brands.

• Stakeholders will have greater visibility into both pharmaceutical and consumer healthcare businesses.

• De-risk both businesses and unlock value for the shareholders of Sanofi India.

The opportunity "will allow Sanofi to unlock and maximise its business potential in both pharmaceuticals and consumer healthcare with the right assets, structure, and strategy", said Managing Director Rodolfo Hrosz in the filing.

The pharmaceutical business will focus on its long-term success factors, such as expanding its portfolio of life-changing treatments available in India, driving world-class scientific healthcare personnel engagement, and accelerating its digital transformation to improve the lives of patients in India, he said. "The proposed consumer healthcare entity will be a fast-moving consumer healthcare business that enables consumer-centric strategies, shapes the over-the-counter environment, and focuses on best-in-class digital and ecommerce capabilities."

The proposed demerger would help both entities build a sustainable growth model, according to Chairman Aditya Narayan. "Today, Sanofi is in a strengthened position in India, allowing us to deliver better value to our shareholders and other stakeholders," he said.

Sanofi India also announced its first-quarter results on Wednesday under a single "Pharmaceuticals" segment:

• After-tax profits declined 20% to Rs 190 crore. (Bloomberg estimate: Rs 129 crore)

• Revenues rose 4% to Rs 737 crore. (Bloomberg estimate: Rs 690 crore)

• Ebidta increased 19% to Rs 230 crore. (Bloomberg estimate: Rs 164 crore)

• Ebidta margins stood at 31.3% versus 27.5%. (Bloomberg estimate: 23.8%)

Shares of Sanofi India closed 1.86% higher on May 10 after the results, compared to a 0.29% rise in the benchmark BSE Sensex.