The company has approved acquisition of 46.39 per cent shareholding in JB Chemicals & Pharmaceuticals from its promoter, KKR
Torrent Pharma which has built a strong reputation for acquisitions has announced a sizeable acquisition on Sunday.
The company has approved acquisition of 46.39 per cent shareholding in JB Chemicals & Pharmaceuticals from its promoter, KKR and assume control. This will be a cash transaction of ₹11,917 crore valuing each share at ₹1,600 per share which is a 11 per cent discount to Friday’s closing price of ₹1,792 per share and declined by 7 per cent today trading at ₹1,677 per share. On a PE basis, the acquisition price values the firm at 33 times one year forward earnings.
In addition, ESOPs will also be acquired at at ₹1,600 per share. And in accordance with takeover regulations, the company will make an open offer for 26 per cent of shareholding at ₹1,639 per share. Overall, including the promoter shares, employee stock and open offer (assuming 26 per cent is submitted in the offer), the cash outgo is close to ₹19,000 crore.
This is in the first phase of the acquisition post which the target will be merged with Torrent Pharma where every shareholder holding 100 shares in JB Pharma shall receive 51 shares of Torrent Pharma. The acquisition should be completed in 6-8 months considering the CCI approval, and the merger will take one more year after that.
The rationale
JB Chemical is fast growing company in domestic formulations from where it derived 58 per cent of FY25 revenues. International business, CDMO and API accounting for 29 per cent, 11 per cent and 2 per cent respectively. Chronic prescription share in domestic revenues stands at 47 per cent which is a good indicator of persistency in sales.
In the domestic space, JB Chemicals has outgrown IPM (Indian Pharmaceutical Market) by a factor of 2 times in the last five years. This is reflected in the strong 18 per cent consolidated revenue CAGR in the period FY21-25 compared to 8 per cent revenue CAGR for Torrent Pharma in the same period. JB Chemicals reported revenue of ₹3,900 crore in FY25 with a strong EBITDA Margin of 27 per cent.
Torrent Pharma, which is strongly placed in IPM will be propelled to rank 5 from the current rank 7 in India.
Among therapy areas the acquisition will add ophthalmic and IVF categories incrementally and strengthen nephrology. The company will also add CDMO sales to its portfolio with JB Chemicals whose facilities are leading on lozenges (slow dissolving tablets taken orally).
Similar to Torrent Pharma international presence in US, Brazil, Germany and Europe, JB Chemicals will add, US, Russia and South Africa expanding the portfolio.
Synergy benefits
Torrent Pharma acquired Curatio in 2022, (₹2,000 crore), Unichem’s domestic pharmaceutical business in 2017 (₹3,600 crore) and Elder Pharma’s domestic business in 2013 (₹2,000 crore). The company has been able to integrate the business well and improved the sales of their blockbuster products significantly, by leveraging the combined sales force of the acquired companies.
Considering the size of the current acquisition, the premium and dilution involved, and the strong performance of the target company, incremental synergies to justify the purchase will not be a low-lying target for Torrent Pharma as with other acquisitions of the past. The company though will be able to target purchases, manufacturing and overheads to achieve initial synergies and expects to be cash accretive in the first of year of control, in FY27 end and EPS accretive by FY27-28.
Torrent Pharma has a net debt of ₹2,400 crore as on March 31, 2025 or net debt to EBITDA of 0.7 times. Post acquisition the leverage could increase to 1.8-2.8 times depending on the subscription to the open offer.
Torrent Pharma gained 2 per cent in the day on the news and is now trading at 47 times one year forward earnings.
Published on June 30, 2025
