Aurobindo Pharma Rallies on Sale of Injectables Unit to Subsidiary

Shares of Aurobindo Pharma gained over 4% on the BSE in intra-day trade today.

The pharmaceutical firm said it would sell its generic injectables and ophthalmics manufacturing unit to Eugia Pharma Specialities, a wholly-owned subsidiary of the company.

The transfer of the business undertaking will be done for a lump-sum consideration of Rs 8.8 bn.

The proposed transaction is subject to regulatory approvals in the US and Europe. It's estimated to be completed by September 2022.

Consolidation of injectables business on cards

As per analysts, Aurobindo has US$ 400 m of generic injectables and US$ 95 m of oncology branded injectables that together account for 14% of the company's revenue.

The company has been looking to consolidate its injectable business under one roof as evident from the transfer of other injectable units such as Auronext (November 2020), Unit-16 (May 2021), and AuroCure (May 2021).

Thus, the transfer of the business unit to Eugia is on expected lines and brings Aurobindo one step closer to potentially carve out an injectable entity.

The independent entity, with all the injectable assets consolidated under it, would enable the pursuit of growth opportunities with a self-sustaining capital structure.

It would also provide flexibility for value creation opportunities including exploration of alliances with focused partners in the injectables business.

In an exchange filing, Aurobindo Pharma said,

• Due to the specialisation of this business and to bring greater focus and attention, the company is carving out the unit to Eugia Pharma Specialities.
  
  The proposed slump sale will improve operational efficiency by creating a lean, competitive organisation with a focus on faster decision making for expedited growth, with a dedicated management team.

Eugia is engaged in research and manufacturing in the oncology and hormone segment.

The generic injectables and ophthalmics unit reported a revenue of Rs 9.3 bn in the financial year 2021, contributing 5.9% of the standalone revenue of Aurobindo Pharma.

Formulations unit deal value raised

Aurobindo Pharma also increased the amount it will receive for transferring its oral formulations manufacturing business to another fully owned subsidiary.

In its meeting on 27 February, the board proposed to transfer the business to APL Healthcare on a slump-sale basis at Rs 10.9 bn based on financial statements as of December 2020.

On 1 July, it raised the deal value to Rs 13.2 bn after adjusting for differences from 1 January to the closing date of the transaction.

How the stock markets reacted to the news

Shares of Aurobindo Pharma opened at Rs 979.8 on the NSE and Rs 984.9 on the BSE today and rallied over 4%.

The stock has gained over 9% year-to-date compared to the 12% rise in benchmark indices.

The scrip touched its 52-week high of Rs 1063.8 on 11 May 2021. It had touched its 52-week low of Rs 737.9 on 24 September 2020.

At its current price, it is trading at a P/E ratio of 18.1.

About Aurobindo Pharma

Aurobindo Pharma is a pharmaceutical manufacturing company headquartered in HITEC City, Hyderabad, India.

The company manufactures generic pharmaceuticals and active pharmaceutical ingredients.

The company's area of activity includes six major therapeutic/product areas - antibiotics, anti-retrovirals, cardiovascular products, central nervous system products, gastroenterological, and anti-allergics.

Aurobindo Pharma features among the top 10 companies in India in terms of consolidated revenues.

The company exports to over 125 countries with more than 70% of its revenues derived out of international operations. Its marketing partners include AstraZeneca and Pfizer.

For more details about the company, you can have a look at Aurobindo Pharma's factsheet and Aurobindo Pharma's quarterly results on our website.

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