Eight Roads gets nod to invest in Cipla’s consumer healthcare unit

Cipla Ltd has received regulatory nod to raise private equity funding from Eight Roads Ventures (formerly Fidelity Growth Partners India) for its consumer healthcare unit.

The Mumbai-based drugmaker had originally announced the deal last July and it was awaiting an approval from Foreign Investment Promotion Board (FIPB), the nodal government body monitoring foreign investment into India. FIPB had previously deferred the proposal delaying the transaction.

"The investment is still subject to other conditions precedent and the transfer of company’s consumer healthcare business to Cipla Health," Cipla said in a stock market disclosure on Tuesday.

The firm did not disclose the deal value, but the transaction value has risen.

The deal that will allow the pharma company to unlock value for the unit was originally worth Rs 121.66 crore. As per a previous note by FIPB, Eight Roads was to invest Rs 106 crore through a mix of issue of fresh equity shares and compulsorily convertible preference shares in the yet to be incorporated firm Cipla Health. The PE firm was to pick 26.11 per cent stake in the process, valuing the proposed company at Rs 406 crore. Eight Roads Ventures had also committed to invest Rs 15.66 crore more in the unit.

In the revised plan, that was approved by FIPB, the PE firm will initially shell out Rs 128.96 crore for the same stake valuing it at Rs 494 crore. It will also invest Rs 16.26 crore subsequently.

Emails sent to Cipla and Eight Roads Ventures to clarify on the valuation change did not elicit any response till the time of the publishing this article.

FIPB had cleared the proposal in its last meeting in January itself but this was made public this week. Last month, Competition Commission of India had also given its approval for the delayed deal.

The proposed deal would help the pharma company unlock value for the unit while raising capital to separately rebuild its over-the-counter (OTC) products business.

Cipla had virtually exited the OTC drugs market by selling its emergency contraceptive brand i-pill to Piramal Healthcare Ltd (now Piramal Enterprises Ltd) for Rs 95 crore. i-pill was launched in 2007 and was the largest selling emergency contraceptive for women in the domestic market.

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