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Informist, Monday, Jun. 30, 2025

 

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--Torrent Pharma: JB Chem valuation attractive now versus last year
--CONTEXT: Torrent Pharma mgmt in analyst call post JB Chem stake buy news
--Torrent Pharma: JB Chem to support co's growth in nephrology segment
--Torrent Pharma: Hope to get control, integrate JB Chem ops from 2026
--Torrent Pharma: May need 12 mos to complete JB Chem merger post open offer
--Torrent Pharma: Hope to get CCI approval for JB Chem stake buy mid-Dec
--Torrent Pharma: Hope to announce, complete open offer for JB Chem by Feb

 

AHMEDABAD – Torrent Pharmaceuticals Ltd. hopes to receive a go-ahead from the Competition Commission of India, or CCI, for its proposal to buy a majority stake and merge J.B. Chemicals and Pharmaceuticals Ltd. with itself by mid December, the company management told analysts and investors in a telephonic conference call Monday. Torrent Pharma management also hopes to begin the integration process of J.B.Chemicals with itself from early 2026, soon after winding up the mandatory open offer.

 

"I think, frankly, what's important in this entire process is when you get the CCI approval and then you start your integration processes," Aman Mehta, managing director, Torrent Pharmaceuticals Ltd. told analysts and investors. "...once the CCI approval is there, then the effort is to see the merger happens in the shortest possible time."

 

Once Torrent Pharma is able to get approval from CCI, it hopes to complete the process for open offer and then consummate the transaction within a month's time or by February next. Post that they seek to start the merger process, which they said would typically "take around 12 months' time". Torrent management expressed the view that there would be acceleration in these synergies after full integration of J.B.Chemicals into Torrent Pharma. The management said that while it may take them longer time to complete the entire statutory process, they would be able to begin taking control and begin integration of JB Chemicals with itself from 2026.

 

Torrent Pharmaceuticals late Sunday announced it had signed a definitive agreement to acquire a controlling stake in J.B.Chemicals and Pharmaceuticals Ltd. at an equity valuation of INR 256.89 billion on a fully diluted basis. The company signed an agreement with global investment firm KKR to buy this stake. As per the agreement, Torrent Pharmaceuticals would acquire a 46.39% equity stake through a share purchase agreement from KKR for INR 119.17 billion, at INR 1,600 per share. Torrent Pharma has also expressed intent to buy a 2.8% stake held by employees of J.B.Chem at INR 1,600 per share, same price as offered to KKR. The purchase of equity from KKR and employees would amount to having a 49.19% stake in J.B.Chemicals. This would also trigger a need to make an open offer. Accordingly, it would be followed by a mandatory open offer at a price of INR 1,639.18 per share.

 

Talking about the valuation of the deal, the management said that at the outset, the leverage required for this transaction looks quite comfortable from a servicing point of view. "...assuming that we take control of the company in, let's say between January to March, 2026, and the merger playing out in 2027-28, the first year of control by us will be in financial year 2026-27. And therefore, on a consolidated basis, if I look without the mandatory tender offer number, then my leverage would be roughly 1.8x. And if I take a worse scenario that all 26% of MTO (mandatory tender offer) get subscribed, then I would be at 2.8x end of FY27. So I think overall the leverage ratios look quite comfortable for me," Chief Financial Officer Sudhir Menon said, adding that in two years, this debt burden versus earnings before interest taxation, depreciation and amortization would be below 0.5x. "So that's looking quite comfortable for me."

 

On why Torrent Pharma moved in to acquire J.B.Chemicals now, especially when the talks were going on for over a year, the company management said that there is a lot of difference in the valuations last year versus this year, adding that JB was valued at much higher multiple.

 

As for the rationale of acquiring J.B.Chemicals, the Torrent Pharma management said while J.B.Chemicals complements it in cardiology, gastroenterology and paediatric segments, it provides entry for Torrent Pharma into ophthalmology, intravenous fertility and nephrology segments. The combined entity would also jump from 10th position to fourth position in terms of absolute prescriptions as per Strategic Marketing Solutions & Research Centre prescription dataset for April 2024 to February 2025.

 

Shares of Torrent Pharma ended at INR 3408.20 per share on the National Stock Exchange, up 2%, and those of J.B.Chemicals ended at INR 1,679.30 per share, down 6.8%.  End

 

Reported by Sunil Raghu

Edited by Akul Nishant Akhoury

 

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