ChrysCapital, along with lirtnmited paers GIC of Singapore and CPPIB of Canada, is set to write the largest private equity cheque in the Indian pharmaceutical space as it finalises a $350-million investment in Mankind Pharmaceuticals for a 10% stake, said people directly aware of the matter. If it goes ahead, this will value India’s fifth-largest drug maker at about $3.5 billion, they said.
The investment marks a return for ChrysCapital to Delhi-based Mankind after selling an 11% stake in 2015 to Capital International for $214 million for a tenfold return in seven years.
ChrysCapital’s late entry into the process even after binding bids were made by global buyout funds Advent and Carlyle for a 15% stake surprised many, but in the end the Indian fund trumped both. The final agreements are expected to be signed this week.
Investment bank Moelis & Co has been running a keenly contested formal process that had also seen interest from Warburg Pincus, General Atlantic and Apax Partners.
The Junejas, who started the company 25 years ago, favoured ChrysCapital over Advent, the other strong contender in the fray, due to its long association with the company and the sector, said people close to the family. ChrysCapital partner and former Ranbaxy executive Sanjiv Kaul is arguably the most successful pharma investor in the country, having backed companies as diverse as Glenmark, Zydus, Intas, Torrent Pharma, GVK Bio, Eris Lifesciences and Ipca Labs.
The transaction is likely to include a secondary sale of shares by some of the promoter family members and even Capital, which may look at a partial exit, said the people cited above. The promoters own 89% of the company, which is poised to go public in the next financial year.
“This is a work in progress,” said Rajeev Juneja, Mankind Pharma’s chief executive officer, in response to ET’s queries. ChrysCapital’s Kaul declined to comment.
With domestic sales of about ?5,000 crore and FY18 EBITDA (earnings before interest, taxes, depreciation, and amortisation) expected at ?1,000 crore, Mankind has been one of the fastest-growing drug companies in the past two decades. The owner of price-competitive, overthe-counter (OTC) brands like Kalori 1 sweetners or Manforce condoms, Unwanted 72 and Prega News, Mankind has also gone deep into smaller towns and villages with its prescription drugs. From the former CIS countries, Uzbekistan and Tajikistan its global operations are now spread across 22 locations in Asia, Africa, Southeast Asia and the Arabian Gulf. Mankind Pharma, which has 18 manufacturing units at Paonta Sahib in Himachal Pradesh, commissioned a new plant in Sikkim last year.
“Every year we are seeing at least a couple of pharma companies list in the public market successfully,” said Navneet Munot, who oversees the management of $30 billion in assets as chief investment officer of SBI Mutual Fund. “This is creating appetite for PE funds to back companies with strong product pipeline and healthy domestic market presence even at high valuations.”
Currently, 88% of Mankind’s revenue comes from its OTC portfolio and fastmoving consumer goods (FMCG) divisions, while the rest comes from the prescription and veterinary units. Even as India remains the priority market, the company has been exploring an entry into the US by filing its first set of documents this year with the Food and Drug Administration to sell generic products. In India, it’s aiming to expand chronic therapies that already contribute around 20% of the top line.
Mankind is the only company that stands to gain whichever way the new pharma policies move with respect to price controls or the push towards pure generics. They are unique in that sense,” said a PE investor focussed on the pharmaceutical and healthcare space.
Established in 1999, ChrysCapital has assets worth close to $3 billion under management across seven funds--and is set to launch its eighth—in more than 75 companies. It has already returned $4 billion to investors through more than 60 exits. It was among the founding investors of Yes Bank and one of the earliest spotters of tech and tech-enabled services such as Spectramind or non-banking finance companies such as Shriram Transport.