Cipla promoter family in talks with private equity majors for stake sale

MUMBAI: Drug major Cipla‘s promoters are in talks with private equity (PE) biggies, including Blackstone, Advent and KKR, to sell a part of their holding in the company. The promoters are believed to have mandated Kotak for the exercise, which could involve the sale of their entire 33.47% holding, sources told TOI.

After the valuation exercise, the promoter family is expected to take a decision on whether a part or the entire stake would be offloaded. “The deal is estimated to be a multi-billion one. Hence, a consortium of investors could be roped in if the promoters exit the company entirely,” an industry expert said.
Reacting to the news, the company’s scrip jumped nearly 10% to close at Rs 1,172 on the BSE Thursday. Cipla said in a statement to the exchange that it is not aware of any event that requires disclosure under listing regulations. It “will make appropriate disclosure in compliance with the regulations as and when any such requirement arises”, the statement added.

A clear succession plan has largely eluded the company after promoters, YK and MK Hamied, chairman and vice-chairman, respectively, passed on the baton to the next generation a decade back. YK Hamied’s nephew Kaamil and niece Samina – children of M K Hamied – were groomed for the role and joined the company’s board. In 2016, after a leadership flux, Samina Vaziralli was elevated as its MD from the executive director role. Over the same time, the company also witnessed multiple changes with top-level managerial exits, including two CEOs, which impacted its business.
In an interview with TOI in 2016 when Samina took over the company’s helm as its executive vice-chairman, she said: “My elevation signals the family’s decision towards this (succession planning), while the setting up of the bench (management council ) is a step in the direction that Cipla will be led by professional management, with the promoters moving away from day to day management.” The company’s COO Umang Vohra was elevated as the CEO the same year.
Last year, the promoter family had offloaded around 2% through block deals for about Rs 1,830 crore. In the past, the promoter family had denied speculation of any stake sale, saying it was fully committed to the business.
On July 26, the company reported strong results buoyed by its US and India business. Net profit jumped 45% to Rs 996 crore on a higher turnover of Rs 6,329 crore for the June quarter.
“In Q1 FY24, we recorded growth of 18% over last year with ebitda (earnings before interest, taxes, depreciation, and amortization) of Rs 1,494 crore driven by mix and other operational efficiencies. Our continued focus on differentiated portfolio has strengthened our US business which once again posted highest ever quarterly revenue at $222 million,” Vohra said. Strong traction in chronic therapies and presence in high-growth areas of trade generics and consumer health should aid growth going forward, analysts said.