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Motilal Oswal Report
Mankind Pharma Ltd. has agreed to acquire Bharat Serum Vaccines for enterprise value of Rs 136 billion, implying EV/Ebitda of 28 times/22-23 times on FY24/FY25 basis.
This acquisition not only expands Mankind's niche portfolio, but also provides a specialty research and development tech platform, in-house complex manufacturing capabilities and strong institutional reach.
Considering access to a high-entry barrier business, a healthy mix of domestic international segments and potential for sustainable Ebitda growth (27% Ebitda YoY growth in FY25), we believe the deal valuation is fair.
We await clarity on the deal structure in terms of debt/equity fund raise to fund the deal from the concall scheduled today at 5 pm. Having said this, considering current cash of Rs 42 billion from internal accruals, we assume debt/equity of Rs 60 billion/Rs 32 billion to complete the transaction. Free cash generated from the base business would subsequently lower debt for Mankind. Maintain Buy.
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