Torrent Pharma shares fall post Curatio Healthcare acquisition. Should you buy the stock?
Premium- Torrent Pharmaceuticals shares plunged over 3% to ₹1,483 apiece on the BSE
Shares of Torrent Pharmaceuticals plunged over 3% to ₹1,483 apiece on the BSE in Wednesday's early deals after the company said it will acquire Curatio Healthcare for ₹2,000 crore to strengthen its presence in the dermatology segment, entering into definitive agreements to acquire 100% of Curatio Healthcare.
The consideration includes ₹115 crore (on the date of signing) of cash and cash equivalents in the acquired business indicating an enterprise value of ₹1,885 crore. The transaction is subject to conditions precedent and is expected to close within one month.
“Acquisition of Curatio Healthcare makes Torrent Pharma a top-10 player in the high-growth dermatology market in India. The asset appears attractive given portfolio skewed towards cosmetic dermatology. However, quality of the asset and Torrent’s M&A track record provide comfort on value accretion over medium term. Torrent’s optimum mix of high chronic share in India revenue and rising salience of India in overall revenue along with self-help initiatives driving margin recovery make it a top pharma pick," said Ambit in a note with Buy rating and target price of ₹1,740.
The acquisition will catapult Torrent Pharma into the league of top 10 players in the dermatology segment and make it a leader in the cosmetic dermatology space, the company said. With this acquisition, Torrent Pharma will add a field force of 600 medical representatives and a distribution network of 900 stockists.
"Torrent Pharma has ₹70 bn worth of highly profitable branded formulation sales spread across India, Brazil and RoW markets. In the near term, Curatio acquisition will increase TRP’s net debt and we see this acquisition as EPS dilutive. The deal is a strategic fit for TRP, given that it gives presence in high growing cosmetic derma segment and can enhance profitability of Curatio portfolio with cost synergies, geographical expansion and price hike as well as accelerate the topline growth," said analysts at brokerage Prabhudas Lilladher while maintaining ‘Buy’ rating on Torrent Pharma shares with revised target price of ₹1,850 apiece ( ₹1,750 earlier).
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