TTK Healthcare (TTKH) has announced selling 100% of it’s human pharma division to Miransa Limited, an affiliate of Advent International (a major private equity investor).
Key points to note –
- Division is being sold off to BSV Pharma Private Limited – a new entity in which 74% will be held by Miransa and balance 26% by TTKH.
- Total consideration is Rs 805 crore. Of this TTKH will get 74% i.e., 603.75 crore as cash and balance 26% as equity in BSV.
- Human pharma division reported revenues of Rs 160 cr in FY 21, which was 25% of TTKH’s total revenues and 67% of it’s pharma division’s revenues.
- Pharma division contributed 37.5% of TTKH’s total revenues in FY 21 that included both human and animal formulations and balance 62.5% was contributed by consumer products, personal products, foods and medical devices.
- However, pharma business contributed almost 68% of TTKH’s profits in FY 21 that further increased to 77% in 9 months ended December 31, 2021.
Rational for selling –
TTKH says that human pharma is not its core competence and hence divestment is targeted towards the consolidation.
To me, more than consolidation it seems like a cash out. TTK gets a cash equivalent to almost 50% of it’s current market cap and also keeps to retain 26% interest in the divested business.
The Company already had cash equivalents of Rs 250 crore and this divestment will further add Rs 603 crore taking total to > Rs 850 crore. Given that, the promoters own almost 75%, I would not be surprised if TTKH decides to give a significant one time special dividend once the transaction concludes (targeted within 120 days).
However, what would be the potential of TTKH’s retained businesses – would wait couple of quarter to gauge that !