What Nirma Gets From Buying Glenmark Lifesciences

Nirma Ltd. announced the acquisition of Glenmark Pharmaceuticals Ltd.'s active pharmaceutical ingredient and contract development and manufacturing unit, Glenmark Lifesciences Ltd., for Rs 5,652 crore last week.

It agreed to buy a 75% stake in the Mumbai-based drugmaker from parent Glenmark Pharmaceuticals Ltd. at Rs 615 per share. That compares to the Glenmark Lifesciences IPO price of Rs 720 and the market debut price of Rs 750 apiece. The company is currently valued at around Rs 7,500 crore.

Nirma, an unlisted consumer goods and cement maker based in Ahmedabad, is foraying into the manufacturing of generics and complex active pharmaceutical ingredients and contract development and manufacturing operations. This is in addition to Nirma's existing consumer goods portfolio of detergents, soaps, cement, cosmetics, salt, soda ash, linear alkyl benzene, and injectables.

Manufacturing Facilities

The company would get Glenmark Life Sciences' four multi-purpose manufacturing facilities in India at Ankleshwar and Dahej, Gujarat; and Mohol and Kurkumbh, Maharastra, as well as three research and development facilities at Mahape in Maharashtra and Ankleshwar and Dahej.

As per Glenmark Lifesciences' FY23 annual report, the company is undergoing a capacity expansion.

• Brownfield expansion for the generic API products at the Dahej facility

• Brownfield expansion at Dahej for the oncology plant is complete. Out of the two independent modules, one is 100% commissioned.

• 192 KL out of the 400 KL intermediate manufacturing block at Ankleshwar were commissioned.

• Environmental clearance and consent to establish were received for the installation of 1,000 MT of capacity at the planned greenfield site at Chincholi Industrial Area, Solapur.

• Construction of the greenfield manufacturing facility at Chincholi is to commence in FY24.

The new API facility in Solapur is being planned to manufacture both APIs and intermediates and is expected to provide a platform for the growth of the CDMO business and add capacity for their generic API business, the company said in its report.

However, along with the facilities, regulatory risks and uncertainties will also be part of the parcel, as their facilities are subject to 41 inspections and audits by regulators, including the US Food and Drug Administration, the Pharmaceuticals and Medical Devices Agency, the Federal Commission for the Protection against Sanitary Risk (Mexico), Health Canada, the Ministry of Food and Drug Safety (Korea), the European Directorate for the Quality of Medicines and HealthCare, ANVISA (Brazil), the World Health Organisation, and the Central Drugs Standard Control Organisation, conducted on a periodic basis.

Business

In FY23, the generic business contributed to 93% of the sales, while the remaining 7% came from the CDMO business.

The lifescience company currently has 139 API molecules in its product portfolio, which are sold in India and exported to multiple countries. It also has 468 drug master files and a Certification of Suitability filed across various major markets

Financials

The company earned revenues of Rs 578 crore in Q1 FY24, which was up 18%, while its net profit rose 25% to Rs 135 crore. Ebidta was up 32% at Rs 193 crore, and it earned margins of 33.4% in Q1 FY24.

The company's revenues were Rs 2,161.2 crore for the year ended FY23, and its margins were around 31%, while its net profit stood at Rs 467 crore.

As of March 31, the company had a net cash balance of Rs 313 crore, and its return on equity was 22.3%.

Shares of Glenmark Lifesciences closed 2.49% down at Rs 629.50 apiece on Monday, compared to an almost unchanged benchmark Sensex.