Plethico Pharma may acquire minority stake in CIS co

Apr 05, 2007
Ashish Rukhaiyar and Noemie Bisserbe
MUMBAI

HERBAL drugs domestic company Plethico Pharma is close to acquiring a minority equity stake in a leading retail pharmacy entity in the CIS region. According to sources close to the development, the entity has already been identified and Singhi & Associates have started the due diligence. The acquisition, which is expected to cost around Rs 70 crore, should be completed within the next four to five months.

Plethico Pharmaceuticals is also in the process of pruning its equity holding in six subsidiary companies in CIS countries. It will divest 30% of the paid up capital in TOO Rezlov Ltd, Kazakhstan, ICS Rezlov-Mo SRL, Moldova, and OOO Rezlov, Kyrghyzstan, and 6% of the paid up capital in CJSC Rezlov, Russia, SC Rezlov, Ukraine, and Rezlov LLS, Azerbeijan, and this at a 40% premium.

“The company will offload a minor part of its holding in the six subsidiaries that will accrue around Rs 60 crore”, said a source. “Around Rs 10 crore from internal accruals will also be utilised for the overseas acquisition,” he added. Plethico may dilute its share in favour of Azedar Global.

According to sources, the main reason behind the proposed deal is that retail pharmacy is a more lucrative business than branded generic drugs marketing in the CIS region. “While the company already has a presence in the CIS countries, it is only through its marketing and distribution subsidiaries.” Company officials declined comment. A few days ago, the board of directors of Plethico also approved to use about Rs 35 crore out of the Rs 110 crore IPO proceeds to finance acquisitions.

Plethico is also looking at manufacturing facilities and retail chains in US and Europe. It is believed to be close to acquiring a nutraceutical manufacturing company in Germany for around Rs 150 crore. Herbals and nutraceuticals already represent over 50% of Plethico’s revenues, while allopathic disposables and contract manufacturing account for the remaining 21% and 29%, respectively.

Plethico is also in the process of establishing a presence in the retail pharmacy sector in the US that will require a total investment of Rs 400 crore. Plethico will use the remaining portion (Rs 35 crore) of the IPO proceeds for the same.

Plethico Pharma has a strong thrust on exports, representing 68.1% of its turnover. It exports products to 45 countries across Africa, South East Asia, the Confederate Independent States, the Gulf Corporation Council, Latin America and CIS countries. Herbal and nutraceutical products represent 69% of the company’s exports while allopathic drugs and disposables such as gloves, syringes and condoms account for 31% of exports revenues.