Blackstone, Baring in Race to Acquire up to 20% Cipla

Recently, the pharmaceutical major Cipla posted its Q1FY23 numbers and the shares rose close to 10% intraday on July 27, 2023. After posting robust Q1FY23 numbers, the D-Street was awaiting confirmation about the buzz that was created when news about potential stake sale by the company promoters started flowing in . However, the company has not come out with this confirmation yet but here is what we understood about Cipla promoters Stake Sale Buzz.

Cipla’s promoter Hamied family is in the news recently due to the potential stake sale buzz. If this turns out to be true, the Hamied Family which currently owns around 33.5% stake in Cipla may become a minority share-holder. 

Real Matter

Succession Planning has always been a tough task for Cipla. However according to various media reports, sources known to the development opine that to sort this problem out Cipla is evaluating to welcome aboard a strategic investor to revamp future strategy, enhance capital allocation, operational efficiency to improve return metrics.

If reports are to be believed, the company has appointed bankers to seek bids from potential investors and private equity firms. Blackstone and Baring PE are said to be the top contenders and are looking to take up to 20% stake in Cipla.

However, when asked about the confirmation, both Blackstone and Baring have declined to comment and Cipla has also denied this news stating that it will make appropriate disclosures whenever required in compliance with the listing and regulations.

If the deal turns out to be true, it will be one of the largest transactions in FY23-24. 

With Cipla reporting robust numbers, let’s see of promoter stake sale buzz turns out to be true and whether Blackstone and Baring PE becomes Cipla’s Cherry on the top.

Business Overview

Drug major Cipla posted a 45.1% rise in its consolidated net profit in Q1FY24 at ₹995.7 crore as compared to ₹696.4 crore in the corresponding quarter of the last year.

The company’s revenue during the quarter ended June 2023 increased 17.7% to ₹6,328.9 crore from ₹5,375.2 crore, YoY, driven by performance in India, US and South Africa.

The company’s US business reported the highest-ever revenue of $222 million, registering a growth of 43% YoY growth driven by robust momentum in differentiated portfolios.

Cipla raised its EBITDA margin guidance for FY24 to 23% from 22% earlier. The management raised its North America (NA) base business quarterly run-rate guidance to $210-215 million from $195 million earlier.

Strong US sales growth and sustained momentum in the domestic market helped Cipla Q1 performance beat estimates. This led analysts to give bullish outlook on Cipla shares with most brokerage houses raising target price on the stock.

Past deals in pharma sector

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Disclaimer: Wherever required insights and information have been sourced from various media reports by moneycontrol, Business Standard, Economic Times, etc and should be used for information and education only.