Morgan Stanley PE invests in ZCL Chemicals

Morgan Stanley Private Equity Asia has invested Rs 170 crore ($25 million) in Mumbai-based pharmaceutical company ZCL Chemicals Ltd, a press statement said.

“This capital will give us additional resources to expand in the established as well as emerging markets,” Nihar Parikh, executive director, ZCL Chemicals said in the statement.

The PE firm is understood to have picked up a minority stake through the deal.

The company said it plans to expand its capacity in advanced intermediates and bulk drugs, and strengthen its product portfolio in therapy areas including anti-diabetic and anti-coagulants.

Parikh said the firm’s revenue has grown at a compound annual pace of 30% in the past five years.

Data from VCCEdge, the research platform of News Corp VCCircle, show ZCL Chemicals reported revenue of Rs 272.5 crore in the year ended March 2016 compared with Rs 130.5 crore in 2011-12. Net profit grew to Rs 48.8 crore from Rs 8.8 crore.

The firm was founded in 1991 by the Parikh family and was initially known as Zandu Chemicals. It focuses on niche therapeutic areas of central nervous system, anti-retroviral and controlled substances. It has a manufacturing facility and an R&D center in Gujarat.   

This is Morgan Stanley PE Asia’s first investment in the life sciences sector in India. The firm established its PE business in India in 2008. Its earliest investment the same year in Biotor Industries went under water after the founders were booked for fraudulent activities.

“Life sciences and healthcare is one of our core focus sectors in India, and ZCL is a company which has put in place the building blocks for its future,” Nirav Mehta, co-head of Morgan Stanley Private Equity Asia, said in the statement.

In June 2014, the firm’s then managing director Aluri Srinivasa Rao had told VCCircle that the fund had made a soft commitment of around $250-$300 million for India.

Since then, Morgan Stanley PE has invested in Janalakshmi Financial Services, most recently in 2016 along with other investors such as TPG. Its initial investments in Janalakshmi were in 2014 and 2013. In June 2016, Morgan Stanley PE also invested in Five Star Business Finance.

Rao left the firm earlier this year, according to a Mint report.

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