Hyderabad-based Dr Reddy’s Laboratories Ltd is acquiring non-banking financial company Imperial Credit Pvt. Ltd, as per a note by the Foreign Investment Promotion Board (FIPB).
The official note said that the FIPB on 27 October approved total investment of Rs 36 crore ($5.2 million) by Dr Reddy's in Kolkata-based Imperial Credit. It didn’t disclose the actual acquisition amount.
Spokesmen for Dr Reddy’s and Imperial Credit declined to reveal the value of the acquisition. The spokesman for Imperial Credit, however, said Dr Reddy’s may invest the approved amount in the NBFC after the acquisition is complete.
Imperial Credit has been non-operational and it is not unusual for established firms to buy entities with an NBFC licence and put fresh money later.
FIPB is the nodal body to monitor foreign investment in India. Dr Reddy's is controlled by Indian promoters but majority-owned by foreign shareholders. It sought FIPB approval since it is investing in a regulated financial services business.
While it is intriguing that a drugmaker is buying an NBFC, a person familiar with the pharmaceutical company’s strategy said this was not a foray into the NBFC business and was more to do with operational flexibility.
The drugmaker’s spokesman said the company was acquiring the NBFC for its internal financial requirements. “This is for the group’s captive financial activities,” he said, declining to provide details.
The deal is small compared with what Dr Reddy’s has paid for core pharmaceutical companies in the past.
In June, DRL acquired some of Teva Pharmaceutical’s brands in the US for $350 million. In May, it lapped up six over-the-counter brands from American drugmaker Ducere Pharma to enter the branded consumer health business in the US.
Last year, the company had acquired a portfolio of established brands of Belgium-based pharmaceutical firm UCB in India, Nepal, Sri Lanka and Maldives for Rs 800 crore (about $128 million then).
Dr Reddy’s Labs reported a net profit of Rs 1,354 crore on revenue of Rs 10,207 crore in 2015-16.
Meanwhile, the deal comes at a time when an easing of foreign investment rules for NBFCs earlier this year and higher growth at these lenders compared with banks have attracted several investors to the sector.
In February, IIFL Holdings Ltd's wealth management unit acquired non-banking finance company Chephis Capital Markets Ltd. The same month, private equity firm Kedaara Capital and Swiss investment firm Partners Group bought the housing finance arm of Au Financiers.
A month later, AION Capital Partners backed Pramod Bhasin and Anil Chawla to acquire GE’s commercial finance business in India. And in July, UK government-owned CDC Group bought a 15.5% stake in Indian Infoline Finance Ltd for around $150 million.
Note:-This article has been updated to incorporate information shared by one of the parties.
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