Global private equity giant Carlyle Group will invest fresh equity capital of around $490 million to pick up a 20 percent stake in Piramal Pharma Limited, a wholly owned subsidiary of Piramal Enterprises Limited.

The transaction values the Pharma Business at an enterprise value (EV) of $2.77 billion with an upside component of up to $360 million depending on the company’s FY21 performance. Based on the EV, exchange rate and pharma net debt as on 31st March 2020, the estimated equity capital investment for Carlyle’s 20 percent stake in Piramal Pharma would amount to roughly $490 million.

On January 28 2020, Moneycontrol reported that Piramal Enterprises was looking to sell 20 percent minority stake in its pharma business and raise around $500 million to strengthen  the group’s balance sheet which had come under pressure due to the cash guzzling NBFC business.

According to the official announcement by Piramal Enterprises, the final amount of equity investment will depend on the net debt, exchange rate and performance against the pre-agreed conditions at the time of closing of the deal.

Piramal Pharma will include (a) Piramal Pharma Solutions, an end-to-end contract development and manufacturing (CDMO) business; (b) Piramal Critical Care, a complex hospital generics business selling specialized products across over 100 countries; (c) Consumer Products Division, a consumer healthcare business selling over-the-counter products in India; and (d) PEL’s investment in the joint venture with Allergan India, a leader in ophthalmology in the domestic market and Convergence Chemicals Private Limited.

Ajay Piramal, Chairman, Piramal Enterprises Limited, said, “This infusion of funds will further strengthen our balance sheet and provide us with a war chest for the next phase of our strategy. We are pleased to have an investor of this calibre join the Piramal family and continue our stellar track record of partnerships.”

Neeraj Bharadwaj, Managing Director, Carlyle Asia Partners advisory team, said, “ We are excited to work with the company’s experienced management team, and will leverage our global network, extensive knowledge of the healthcare sector, and operating experience to seek to expand its platform, develop strategic opportunities and facilitate broader market access.”

The transaction is one of the largest private equity deals in the Indian pharmaceutical sector, and is expected to close in 2020, subject to customary closing conditions and regulatory approvals, according to an announcement by the diversified conglomerate.

Rothschild & Co served as financial advisor; Cyril Amarchand Mangaldas and Covington & Burling LLP served as legal advisors to Piramal Enterprises on this transaction. J.P. Morgan served as financial advisor and AZB & Partners and White & Case served as legal advisors to Carlyle.

Last month, Carlyle had announced its majority stake investment in SeQuent Scientific, the largest Indian pure-play animal healthcare company, which is expected to close in the third quarter of 2020. Its other investments in the Indian healthcare sector include Medanta Medicity Hospital, a leading hospital in the National Capital Region of Delhi, and Metropolis Healthcare, a chain of diagnostic centers and laboratories.

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