Indian billionaire Cyrus Poonawalla is in talks with private equity firms and sovereign funds about selling as much as a 10 percent stake in Asia’s largest vaccine maker, Serum Institute of India Ltd.
Serum is seeking a valuation of as much as 800 billion rupees (US$12.2 billion), CEO Adar Poonawalla said.
The company is in discussions with funds from Singapore and the US about the sale of a 5 percent to 10 percent stake, he said on Wednesday in an interview at Serum’s headquarters in the western Indian city of Pune.
Selling a 10 percent stake at that valuation would be the largest private-equity investment in India, according to data compiled by Bloomberg. Private-equity transactions in the country more than doubled this year to US$11.2 billion, up from US$4.6 billion in the same period last year, the data show.
“This would be just capturing the crazy valuations right now that information technology companies and pharmaceutical companies are getting,” Adar Poonawalla, 34, said. “Looking at all this, we decided: why not unlock some value if the valuations are good.”
Acquirers of Indian drugmakers over the past five years paid a median 35.6 times earnings, compared with 21.9 times for such deals globally, according to the Bloomberg-compiled data.
Listed Indian pharmaceutical and biotechnology companies trade at a median 31.6 times earnings, up from 22.7 times earnings a year ago, the data show.
The incoming investor would get one board seat, according to Adar Poonawalla. Serum could provide an exit for the investor in about seven years, either through a merger with a listed company or an initial public offering, he said.
The family’s closely held Poonawalla Group is to use the proceeds from the stake sale to fund philanthropic programs. The group’s activities include setting up a new hospital, as well as education and sanitation work in the city of Pune, Adar Poonawalla said.
Serum is to decide on whether to sell a stake in the next one or two months, Adar Poonawalla said.
“We’re just waiting to hear back from the funds on their conditions and their valuations and what they would expect,” he said. “Then we’ll go from there.”
The vaccine maker is fully owned by the Poonawalla family. The elder Poonawalla has a net worth of US$8.5 billion, according to the Bloomberg Billionaires Index. An 800 billion rupee valuation would value Serum at about 30 times earnings, plus an additional 200 billion rupees for its product pipeline, Adar Poonawalla said.
Serum had sales of about 40 billion rupees in the 12-month period that ended in March and net income of 20 billion rupees, Adar Poonawalla said.
It plans to triple revenue to 120 billion rupees over the next seven to eight years, as the company begins offering new products, including a rotavirus vaccine that protects against five strains of the pathogen, he added.
The company also plans to start selling its main products in Europe in two years through a partnership with Cipla Ltd, Adar Poonawalla said.
Serum in November last year signed a Europe distribution agreement for affordable pediatric vaccines with the Mumbai-based generic drugmaker, which is to equally share the profits from the partnership.
Cipla, which was founded in 1935 and made its name selling generic HIV therapies in Africa, has a market value of US$8 billion.
Serum is not discussing a merger with Cipla and is focused on its commercial partnership with the company, according to Adar Poonawalla.
“Both companies are growing very well on their own. We really have to evaluate if it makes any sense” to pursue a merger, Adar Poonawalla said. “Anything is possible in the future.”
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