Claris Life locked in UC

BSE-listed Claris Lifesciences’ shares are frozen in 20% upper circuit at Rs. 248.20 with current market cap standing at Rs. 1,584 crore. Total traded quantity of 7.36 lakh shares, in first hour of trade, are over 5 times the 2week average of 1.44 lakh shares on BSE.

Big pharma firms such as Cipla, Lupin and US’s Amneal are reportedly in a race to acquire the company’s generic sterile injectables business, housed in a wholly owned subsidiary Claris Injectibles, for a consideration of Rs. 2,500-3000 crore. The injectibles business runs 3 plants in Ahmedabad, all having regulated market approvals, including US. This business reported revenue and EBITDA of Rs. 286 crore and Rs. 102 crore respectively for 9 months ended 30th September 2014.  Thus, its annual revenue run rate is Rs. 380 crore with EBITDA margin of 36%. Going as per the estimated deal value, the sales and EBITDA multiple stand at 7 times and 20 times respectively, which is not cheap.

In November last year, company had completed the transfer of injectibles business to the wholly owned subsidiary, probably with the objective to divest it.

Claris Lifesciences is a debt free company.  Hence, even a Rs. 2,500 crore valuation for the injectibles business leaves a lot of room for the company’s current market cap of less than Rs. 1,600 crore to expand further. Besides injectbles, Claris owns 20% minority stake in 3 year old infusions business JV with Japan’s Otsuka and Mitsui and has an investments and cash management arm.