Noida-based Jubilant Life Sciences Ltd is looking to hive off its pharmaceutical business and drug discovery business as two separate subsidiaries of the company as part of the first phase of a restructuring to list and raise fresh capital for the pharma business, according to a stock exchange announcement.
The pharmaceutical vertical will include divisions of active pharmaceutical ingredients, solid dosage form, radio pharmaceuticals, allergic extracts, sterile injectables and ointment, cream and liquid businesses.
According to the statement, the company will list its pharma business for growth and reduction of overall debt of the company. Earlier this month, Jubilant announced it was planning to raise debt of up to $250 million to pre-pay existing debt and also for general corporate businesses.
Jubilant’s drug discovery business is housed under three subsidiaries – Jubilant Biosys (drug discovery services), Jubilant Chemsys (chemistry services) and Jubilant Clinsys (clinical trial services). It employs more than 1,200 people in Bangalore and Noida in India, besides Europe and the US. It mainly focuses on oncology, metabolic disorders, CNS and pain & inflammation segments.
The strategy to separate pharma and drug discovery businesses is in line with similar derisking moves by other Indian drug-makers in the past. Companies such as Sun Pharma, Dr Reddy’s and Piramal Healthcare (now Piramal Enterprises) had spun off their research units into separate firms, some of which are listed or have attracted fresh capital from private equity firms.
However, Jubilant says that it plans to list the pharma unit separately, which means the drug discovery unit will remain a part of the current listed firm.
This is not the first time that the firm is looking at such demerger. In December 2010, the company, then known as Jubilant Organosys, demerged its agri & performance polymers business into an independent, listed company called Jubilant Industries Ltd. The demerged entity had a mirror shareholding pattern to begin with, but the promoters’ stake went up pursuant to a group restructuring that involved some privately held firms of the promoters.
That demerger left Jubilant Life Sciences as an integrated pharma and life sciences company. The firm is now one of the top custom research and manufacturing services (CRAMS) company with Rs 5,161 crore and but low profit margin, having ended FY13 with net profit of Rs 152.7 crore. The company had debt of Rs 3,400 crore as of March 31, 2013.
Listing of the pharma business will make it the fifth firm of the Jubilant Bhartia Group to be listed on a stock exchange. Besides Jubilant Life Sciences, the group has Jubilant Foodworks (Indian franchisee of Domino’s), Jubilant Industries and Jubilant Energy (listed on London’s AIM exchange). However, this list does not include the listed firms controlled by Shobhana Bhartia (wife of co-promoter Shyam Bhartia) who also happens to be part of the KK Birla Group, which has firms such as HT Media under its control.
(Edited by Sanghamitra Mandal)