Dec. 13, 2010 (The Hindu Business Line) --
Srividhya Sivakumar
BL Research Bureau
The scramble for bagging a slice of India's fast-growing healthcare market continues, with OTC products maker, Paras Pharmaceuticals, being bought for a whopping $724 million (Rs 3,260 crore) by British consumer goods firm Reckitt Benckiser.
The deal will see Actis LLP, Sequoia Capital and the remaining Paras shareholders sell their shares to Reckitt. The deal has been sewn at a very attractive price for Paras, with the deal value of Rs 3,270 crore amounting to over eight times Paras' reported annual sales.
The company is said to have ended the March 2010 year with a net sales of about Rs 402 crore and an operating EBITDA (earnings before interest, taxes, depreciation and amortisation) of about Rs 108.3 crore.
The privately-held Paras Pharma boasts of a portfolio of many leading over-the-counter healthcare brands such as Moov, D'Cold, Dermicool, Krack, Itch Guard and Ring Guard. It also has a fairly well-known line-up of personal care products such as Set Wet, Livon, Borosoft and Recova, besides a GMP-compliant manufacturing plant located at Baddi in Himachal Pradesh.
Deal drivers
So why should Reckitt which already has a reasonable presence in the Indian market through its brands such as Dettol, Disprin, Clearasil, Veet and Durex pay such high multiples to clinch this deal? For one, the deal expands its product and brand portfolio and gives it ownership of some of the leading brands in their categories, which may be quite costly to build from scratch.
Second, it gives Reckitt a good slice of the growing Indian OTC market, a strategy that many global firms have taken to on facing low growth in the US and European markets. Industry estimates peg the Indian OTC market size at about $1.9 billion and tout it to be among the fastest growing market globally.
But most importantly, acquirers in the pharma and FMCG space in India have inevitably paid stiff multiples for their buyouts just because there are not too many brands out there that are up for sale. With many cash-rich multinationals as well as Indian pharma and FMCG firms ‘on the prowl' for brands to buy, the suitors for brands far outnumber the ‘brides'.
That's why Paras Pharma itself has had such a formidable array of suitors chasing, with reports citing global firms such as Johnson & Johnson (NYSE:JNJ) , Sanofi-Aventis (NYSE:SNY) and Reckitt as well as Indian companies such as Piramal Healthcare, Emami, Marico and Dabur to be in the running for Paras.
Growing price tags
The deal also highlights the growing trend of acquisitions and partnerships between Indian and foreign companies being forged at attractive valuations. Be it deals between Abbott-Piramal and Sanofi-Aventis and Shantha Biotech (over 8 times sales) or the sell out by erstwhile Ranbaxy promoters to Daiichi Sankyo (over 5 times) or Orchid Chemicals' sale of its antibiotic injectables business to Hospira (1.5 times consolidates sales and 4 times segment sales), high valuation multiples have been a common underlying. Even domestic deals in this space – iPill acquisition by Piramal Healthcare (3 times) or the Emami-Zandu (3 to 3.5 times) –attracted high multiples.
http://www.blonnet.com/2009/08/12/stories/2009081250720300.htm http://www.blonnet.com/2006/09/07/stories/2006090704240200.htm
