Warburg Pincus picks stake worth $92M in Laurus Labs, Fidelity PE part exits

Vishakhapatnam-based drug ingredients maker Laurus Labs has said global private equity firm Warburg Pincus has acquired a minority stake in the company by investing approximately Rs 550 crore ($ 92 million).

Although it did not share details of stake acquired, as per the Competition Commission of India (CCI) approval note for the transaction, the PE firm is picking 32.29 per cent effective stake. This means the deal values the company at Rs 1,700 crore ($280 million).

The transaction involves a mix of primary issue of compulsory convertible preference shares and secondary purchase of shares from existing private equity investor. Fidelity Growth Partners India (FGPI) and Boston-based Fidelity Biosciences had invested in the company in 2012 and have part exited in the latest transaction, it is learnt.

Laurus is a manufacturer of APIs for antiretroviral (ARV), oncology, cardio-vascular, anti-diabetic therapeutic segments. The company also has a presence in nutraceuticals and several other products, with a customer base that spans top-tier generic pharmaceutical companies in India and abroad. In addition to the API business, the company has a fast-growing contract manufacturing business that caters to several generic and innovation-driven, global pharmaceutical companies.

It is led by its founder and CEO Satyanarayana Chava. The company has grown rapidly since its first full year of commercial operations in 2008, recording revenues of around Rs 1,200 crore in FY14.

Over 90 per cent of the turnover of Laurus is from the sales of APIs that are exported to formulators in other countries or sold to formulators within India who in turn export the products to other countries.

Company chief Chava said, “Laurus is at an important juncture in its evolution, having built a strong reputation in product development and manufacturing, delivering high-quality products to its customers and establishing a track-record of strong financial performance. We are glad to partner with Warburg Pincus in this phase of our growth where we will seek to continue the thrust on innovation and manufacturing excellence in offering cost-effective products and services and foraying into new business segments.”

Commenting on the transaction, Niten Malhan, managing director and co-head of Warburg Pincus India Pvt Ltd said, “This investment reflects Warburg Pincus’ core philosophy of partnering with distinctive management teams to create durable businesses of scale with sustainable value.” He added that Laurus has emerged as a global leader in the generic ARV API segment and well positioned to benefit from its initiatives to enter other attractive segments of the global pharmaceutical industry.

For Warburg Pincus, this is the third ever healthcare sector deal in the country and the first in the pharma space. It had earlier invested and later exited hospital operator Max Healthcare and counts diagnostics chain Metropolis as a portfolio firm.

This is also the third addition to its India portfolio this year after buying a stake in Kalyan Jewellers and besides putting in more money in some existing investees such as AU Financiers and Quikr.

Raj Dugar, senior managing director at FIL Capital Advisors (India) Private Limited, the private equity advisory arm for FGPI, said “Through a positive combination of technical depth, relentless execution and highest level of corporate governance, the team at Laurus Labs has built a market-leading pharmaceutical company in a short span of time.”

Jefferies acted as the sole financial advisor in this transaction.

(Edited by Joby Puthuparampil Johnson)

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