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SUNP Builds USD-12 Bn Global Pharma Powerhouse

We see SUNP’s acquisition of OGN as a transformational deal, doubling revenue to USD 12 Bn with ~30% EBITDA margin. It will not only enhance portfolio quality via biosimilars entry but also strengthen leadership in the women’s health segment and raise innovative products’ contribution to revenue to ~26% (from ~20%). It will also further also mark SUNP’s expansion in China (worlds second-largest market) and reduce US dependence to ~27% (from ~31%). While the USD-9.5 Bn debt raise and USD-4 Bn cash outlay is a key concern, we believe it reflects a deliberate, debt-deployed strategy rather than a risk-averse stance, underscoring SUNP’s willingness to leverage its balance sheet for a transformational opportunity. Supported by the company’s proven record of strong cash flows, we remain confident in gradual deleveraging over time. While interest expense may remain elevated in the medium term, strategic benefits are expected to outweigh near-term drag. We expect full integration from FY27E onwards and we value SUNP on FY28E EPS at 25x, revising TP to INR 2,300 (from INR 1,825) and upgrade our rating to BUY.

Transaction Overview

* SUNP has entered into a definitive agreement to acquire 100% of Organon & Co. in an all-cash transaction of USD 14 per share, implying an enterprise value of ~USD 11.75 Bn.

* The acquisition provides SUNP with an immediate and scaled entry into the biosimilars segment, positioning the combined entity as the seventhlargest global biosimilars player.

* It expands reach across 150+ countries with a 24,000+ sales force and 18 markets generating over USD 100 Mn each in revenue.

* The acquisition will be funded via USD 2.0-2.5bn cash and USD 9.25- 9.75bn debt, with closure expected in 6–9 months.

* Sun Pharma's established branded generics playbook is expected to be applied to Organon's 50+ established brand portfolio.

Acquisition to Double Revenue to USD 12 Bn with Biosimilars Entry and Expansion in Innovation and Women’s Health Segment

The acquisition of OGN by SUNP marks the largest transaction in the India’s pharma sector and represents a step-change in scale for SUNP. Postacquisition, revenue is expected to nearly double to ~USD 12 Bn, with an EBITDA margin of ~30%, alongside a meaningful improvement in portfolio mix. Strategically, the deal enables entry into the fast-growing biosimilars segment, positioning SUNP among the top 7 global players, with an estimated ~6% revenue contribution over time. The share of the innovative portfolio is also expected to increase to ~26% (from ~20%). Additionally, the acquisition strengthens SUNP’s presence in women’s health, making it the third-largest player globally in the segment. We believe SUNP’s established track record of successfully integrating and scaling up acquisitions, including Ranbaxy Laboratories and Taro Pharmaceutical Industries, lends confidence in its ability to unlock value for OGN’s underutilised assets and drive superior growth in the medium term.

Measured Balance Sheet Stretch with Clear Deleveraging Visibility

While the transaction, which involves a ~USD-4 Bn cash outlay and ~USD9.5 Bn debt raise, remains a key concern, we view this as a measured balance sheet stretch rather than a shift in risk appetite. Post-acquisition, we forecast net debt/EBITDA at ~2.3x, which remains manageable for a business of this scale and profitability. Deleveraging remains a key priority for the company and, while interest costs are likely to stay elevated in the near to medium term, these should moderate as debt repays gradually. Given the company’s consistent cash conversion and disciplined capital allocation, we see clear visibility on leverage reduction over time. Overall, we remain comfortable with the balance sheet despite the near-term drag, as the longterm strategic benefits outweigh the temporary increase in leverage

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