Exclusive | PE firm ChrysCapital to buy out Capital International's stake in Intas Pharmaceuticals

Capital International wanted to exit the firm because its parent Capital Group is looking to shift focus away from the private equity vertical.

Homegrown private equity firm ChrysCapital has moved to increase its exposure in Ahmedabad-based Intas Pharmaceuticals, one of India's most valuable unlisted pharma firms and one of its oldest portfolio companies.

"ChrysCapital has struck a deal with Capital International Private Equity to buy out the latter's 3 percent stake in Intas Pharma," a person  familiar with ongoing negotiations told Moneycontrol. A second individual confirmed the same.

Capital International wanted to exit the firm because its parent Capital Group is looking to shift focus away from the private equity vertical and concentrate more on public markets and pension/retirement funds, said the first person quoted above.

"This seems like a logical move for Capital International as a reverse trade with a familiar existing investor like ChrysCapital can be executed swiftly.  ChrysCapital was a keen buyer and also has the additional gunpowder for this transaction," said a third individual.

No official announcement on the deal has been made as yet by either Intas Pharma or both the PE funds. After this transaction, ChrysCapital's stake would rise to 6 percent from the existing 3 percent.

Capital International invested in Intas Pharmaceuticals in 2017 when it purchased the 3 percent stake from Chrys Capital for around $106 million, valuing the drugmaker at roughly $3.5 billion. ChrysCapital was left with a 3 percent stake post this transaction.

"Intas Pharma has grown at a fast pace and has a good product portfolio," added a fourth individual.  It is one of the few Indian firms along with Aurobindo Pharma which has not focused solely on the US market and has also developed strong operations in Europe, he added.

All the four individuals spoke to Moneycontrol on the condition of anonymity.

In response to an email query from Moneycontrol, Capital Group said: "We have a longstanding policy not to comment on market rumours, stocks or individual holdings, even on background."

Moneycontrol is awaiting responses from ChrysCapital and Intas Pharma and has sent multiple reminders. This article  will be  updated as soon as we hear from them.

ChrysCapital made its foray in the pharma space 14 years ago, when it picked up a 12.5 percent stake in Intas Pharma from ICICI Securities. It later raised its stake in the firm and in 2014, made a bumper profit by selling around 10 percent stake to Singapore investment firm Temasek.

This is not the first attempt by ChrysCapital to make a comeback of sorts in its pharma portfolio post a partial or complete exit.  In 2015, ChrysCapital exited Mankind Pharma by selling its 11 percent stake to Capital International for $214 million. But  in April 2018, it staged a sensational return to the Manforce condoms maker when it pipped global private equity giants to pick up a 10 percent stake in the firm for  $350 million. At the time, it was the largest private equity deal in the Indian pharma space.

Considering Capital Group's plans to move away from private equity bets, it would be interesting to see if Capital International also decides to sell its 11 percent stake in Mankind Pharma. The fact that ChrysCapital is a fellow investor in Mankind Pharma as well makes the plot thicker.

"Despite having lost some of its sheen due to regulatory headwinds over the last few years, the pharma sector has regained some of its lustre in the last couple of months, given the strong resilience being demonstrated from a demand-side perspective. It’s not surprising then, that pharma is reclaiming ground as one of the more sought after sectors by private equity these days," said Krishnakumar, Partner, Lifesciences Investment Banking at EY.

Other ongoing discussions involving private equity suitors in the sector include the sale of a minority stake in the pharma business of Piramal  Enterprises and a majority stake sale in JB Chemicals & Pharmaceuticals.

Capital Group is one of the world's largest investment management companies with over $1.7 trillion in assets under management. Its global team has managed six emerging markets private equity funds on behalf of the world’s leading institutional investors, investing over $5 billion in more than 80 investments.

According to its website, ChrysCapital's existing portfolio in healthcare and lifesciences segment includes Chennai-based skincare products firm Curatio Healthcare & Hyderabad-based research firm GVK Bio.

Intas Pharma has explored the IPO route earlier but put the listing plans on hold due to market conditions. It is a vertically integrated global pharmaceutical formulation development, manufacturing, and marketing company. It has set up a network of subsidiaries, under the umbrella name of Accord Healthcare to operate in global markets.

Over the years, the firm has grown both organically and via acquisition, expanding its product portfolio and operations year on year. In 2016, it acquired Teva's UK and Ireland assets for $764 million post a  bidding war which was keenly tracked within the industry.

Intas is currently present in more than 85 countries worldwide with sales, marketing and distribution infrastructure in markets like North America, Europe, Central & Latin America, Asia-Pacific as well as CIS , Middle East and North Africa.

Currently, Intas has over 10,000 product registrations worldwide. In India, it has established leadership in key therapeutic segments like CNS, cardiovascular, diabetology, gastroenterology, urology and oncology.  In terms of revenues, it registered a CAGR ( compounded annual growth rate) of 25.5 percent between 2012 and 2019 and clocked $1.88 billion in revenues as of March 2019, according to its website.

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