The pharmaceuticals and healthcare sector has become the showstopper yet again, with as much as 130 deals worth $6.8 billion since January this year as companies look to expand product base and diversify into newer markets. However, the deals (both pending and completed) were lower compared with the year-ago period.
Temasek Holdings’ acquisition of an additional 41% stake in Manipal Health Enterprises valuing the hospital chain at ₹40,000 crore topped the charts, while PE firm BPEA EQT’s buy of 60% in Indira IVF Hospital at a valuation of about $1.1 billion was another large deal. Deals in the pipeline include Nirma’s bid for Glenmark Pharmaceuticals’ 82% stake in unit Glenmark Life Sciences and Torrent Pharmaceuticals’ plans to takeover Hamied family’s stake in Cipla, among others.
“The pharma industry continues to be the cynosure of all eyes given its scale and growth. The domestic pharma industry has now scaled upto $50 billion and exports are at $25 billion. The healthcare needs are on the rise globally and there is growth in the sector, which is attracting the investors,” Bhavesh A Shah, managing director & head (Investment Banking) at Equirus, told FE.
“The M&A activities are on the back of companies wanting to expand or diversify their products, markets or clients strategically or secure their supply chains with acquisition of API companies. The influx of capital through the PE funds is another large driver,” Shah added.
According to Navneet Bali, Group CEO of ClearMedi: “Over the past couple of years, along with pharma, the healthcare sector has also witnessed a remarkable boom in M&A activities. Today’s patients, empowered by globalisation and increasing economic prowess, demand nothing less than excellence in healthcare services and outcomes. To create a healthcare ecosystem that caters to these needs, substantial investments are required, encompassing specialised professionals, operational excellence, and improved outcomes”.
“Moreover, the growing global and domestic demand for high-quality, cost-effective healthcare services positions the healthcare sector as a potential powerhouse in terms of revenue generation and employment opportunities in the country,” Bali added.
In July, Morgan Stanley PE Asia acquired a controlling stake in Delhi-headquartered ClearMedi Healthcare for $35 million (Rs 285 crore).
However, compared with the 141 deals worth $10.14 billion recorded for the same period of last year, M&A activities were on the lower side.
“The last few months have seen valuations of the listed pharma companies have risen to near consumer sector levels. This run-up has changed the expectations of the sellers in the market and slowed down M&A activities as neither operators nor PE funds would be able to derive their desired internal rate of returns at such prices. A time correction in the pharma sector will result in reviving M&A activity as the long-term structural trend remains intact,” Sheetal Malpani, Chief Investment Officer and Head of Equity at Tamohara Investments said.
According to a Crisil report, the Indian pharmaceuticals sector is expected to log revenue growth of 8-10% in FY24, much similar to the last fiscal.
“Similar to last fiscal, domestic growth in fiscal 2024, will be led by 5-6% increase in realisations, supported partly by high price hikes (linked to the Wholesale Price Index of previous year) allowed by the National Pharmaceutical Pricing Authority for drugs under price regulation. In addition, sale of existing pharma drugs and new launches will drive 3-4% volume growth,” Aniket Dani, director at Crisil Research said.
