Pharma Sector Update : Torrent, JB and the dynamics of the merger by Kotak Institutional Equities
Torrent Pharma (TRP) has announced the acquisition of a controlling stake in JB at an equity valuation of Rs256.9 bn. The acquisition of KKR’s ~46% stake in JB will be followed by a mandatory open offer and then a merger of the two entities (ratio of 0.51:1). In the first phase, TRP will acquire a 46.39% stake for Rs119.2 bn (Rs1,600 per share) from KKR, followed by a mandatory open offer to acquire up to 26% of JB shares at an open offer price of Rs1,639.18 per share. As per IQVIA data, the overlap between TRP’s and JB’s portfolios is minimal, with only ~2% of the combined entity’s domestic sales needing to be potentially discontinued. We are prohibited from commenting on the deal valuations, considering the involvement of our affiliate entity as a financial advisor to KKR on this transaction. Accordingly, our ratings and FVs on both TRP and JB stand suspended.
TRP to acquire KKR’s stake in JB, followed by the mandatory open offer
TRP has announced that it will acquire JB from KKR in two phases at an equity valuation of Rs256.9 bn. In the first phase, TRP will acquire a 46.39% stake for Rs119.2 bn (Rs1,600 per share) from KKR, followed by a mandatory open offer to acquire up to 26% of JB shares from public shareholders at an open offer price of Rs1,639.18 per share. In addition to the above, TRP has also expressed its intent to acquire up to 2.8% of equity shares from certain employees of JB at the same price of Rs1,600 per share. In the second phase, TRP and JB will merge through a scheme of arrangement, where JB shareholders will get 51 shares of TRP for every 100 shares held.
Limited overlap in the domestic portfolios as per IQVIA data
As of MAT May 2025, JB ranked 22nd in the IPM, while TRP ranked 7th. If JB merges with TRP, the combined entity would be ranked 5th in the IPM. As per IQVIA, although there is overlap in the therapies of cardiac, gastro-intestinal and gynecology, at a molecule level, most of their domestic brands are complementary to each other. As per IQVIA, ~36% of JB’s domestic sales are derived from molecules wherein TRP has a meaningful presence (sales of ~Rs50+ mn). However, as per IQVIA, for overlapping molecules in JB’s top 55 molecules, sales of the smaller brands account for just ~2% of the combined entity’s domestic sales (Exhibits 1-2). Importantly, TRP has a minimal presence in JB’s leading molecules, such as Cilnidipine, Nifedipine, Ranitidine and Metronidazole. In addition, there is barely any overlap in the export markets between the two companies.
With Elder, Unichem and Curatio, TRP has a robust M&A execution track record
For TRP, M&A has been a core part of its domestic growth strategy in the past decade. In all its three major acquisitions so far in the domestic market (Elder, Unichem and Curatio), the company has been able to successfully scale up brands, trim costs and extract synergies.
TRP to acquire KKR’s stake in JB at Rs1,600 per share followed by the mandatory open offer
TRP has announced that it will be acquiring JB from KKR in two phases at an equity valuation of Rs256.9 bn. The transaction will be executed in two phases. In the first phase, TRP will acquire a 46.39% stake for Rs119.2 bn (Rs1,600 per share) from KKR, followed by a mandatory open offer to acquire up to 26% of JB shares from public shareholders at an open offer price of Rs1,639.18 per share. In addition to the above, TRP has also expressed its intent to acquire up to 2.8% of equity shares from certain employees of JB at the same price of Rs1,600 per share.
In the second phase, TRP and JB will merge through a scheme of arrangement, where JB shareholders will get 51 shares of TRP for every 100 shares held.
Strategic rationale for acquisition as provided by the companies:
* Acquisition provides access to a fast-growing India franchise, with leading brands in the chronic segment, and entry into untapped therapeutic areas like ophthalmology
* Strengthens market share in the IPM for TRP
* Operational synergies across multiple business functions
* Platform diversification: entry into the CDMO segment with long-term potential
* Consolidation in key international markets and greater ability to scale up
The proposed transaction is subject to: (1) the approval of the Competition Commission of India (‘CCI Approval’); and (2) the approval of the shareholders of the company for increase in the borrowing and investment limits under applicable provisions of Companies Act, 2013 (‘Shareholder Approval’) for share acquisition and potential acquisition.
The share acquisition is subject to completion of certain customary closing conditions, including receipt of the CCI Approval and the shareholder approval, and is expected to be completed within six months. The open offer will be completed in accordance with the Takeover Regulations.
Limited overlap in the domestic portfolios as per IQVIA data
As of MAT May 2025, JB ranked 22nd in the Indian pharma market (IPM), while TRP ranked 7th . If JB merges with TRP, the combined entity would be ranked 5 th in the IPM. JB’s top 5 therapies are cardiac, gastro-intestinal, ophthals, anti-parasitic and gynecology. On the other hand, TRP’s leading therapies are cardiac, gastro-intestinal, neuro, VMN and anti-diabetic. While JB and TRP’s top two therapies are the same, there is limited overlap of JB with TRP in other therapies. In addition, although there is an overlap in cardiac, gastro-intestinal and gynecology, at a molecule level, most of their domestic portfolios are complementary to each other. Post-acquisition, as per IQVIA data, the combined entity will be a leader in cardiac, while it will be the third largest company in gastro-intestinal in the IPM. As per IQVIA data, ~36% of JB’s domestic sales come from molecules wherein TRP has meaningful presence (sales of ~Rs50+ mn). However, as per IQVIA, for overlapping molecules in JB’s top 55 molecules, sales of the smaller molecules account for ~2% of combined domestic sales. Importantly, TRP has a minimal presence in JB’s leading molecules like Cilnidipine, Nifedipine, Ranitidine and Metronidazole.
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