A day after Ipca Laboratories agreed to pick up 33-odd per cent in Unichem Laboratories for about ₹1,034 crore, its stock price fell over 10 per cent, reflecting the analyst community’s concern with the deal.

In fact, the top management of Ipca had to field several combative queries from the investor and analyst community, at an interaction called by the company to explain the deal that was being perceived as an expensive acquisition.

Adversity, opportunity

“It was better than most deals that came to our table in recent years,” Pranay Godha, MD & CEO of Ipca, said, responding to an analyst’s query on whether the company could not have executed its strategy any differently. “Where there is adversity, there is opportunity,” Godha said, responding to another query on looking to re-enter the US market that is fraught with pricing challenges. Three of Ipca’s manufacturing facilities are facing US regulatory action and the Unichem-buy (that included its USFDA-approved facilities) would provide it a vehicle to re-enter this market. 

Once the deal is sealed and regulatory approvals are in, the management control of Unichem would be with Ipca, Godha said. Besides the access to the US that Unichem provided, he said, Ipca could take Unichem products to markets including Australia, New Zealand and Europe, among others.

Multiple analysts “placed on record” their concern that spending ₹1,800 odd crore (including ₹800 crore for the open offer to mop-up another 26 per cent) was too expensive. The company’s top brass said if open offer targets were not met, they could pick up the remaining equity from Unichem’s promoter-family.

Also read: IPCA-Unichem deal: Here are the key takeaways

Good track record

The Ipca management also explained that Unichem brought with it a good compliance track record, spare capacities and an integrated business. Unichem has a fantastic track record in the US, said AK Jain, MD & CFO, pointing to the 76 ANDAs (Abbreviated New Drug Applications).

Jain said Unichem’s formulation (finished drugs) facilities were “excellent” and the API facilties were smaller in scale, but its output could be improved with some modification and investment. He expected Unichem to clock about ₹1,800 crore revenue in two years’ time.

Ipca shares closed at ₹741.20 on the BSE, down 10 per cent on Tuesday.

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