Glenmark solves its 'decade-long' debt problem with $681M sale of API unit to Nirma

By divesting 75% of its active pharmaceutical ingredient (API) business, Glenmark Pharmaceuticals has finally resolved its debt problem, described by an Indian news outlet as a “decade-long troubled affair.”

The buyer is Nirma Limited, which will pay 615 Indian rupees per share, which comes to Rs 5,651 crore ($681 million) in total. Based in Ahmedabad, Nirma specializes in cosmetics, detergents, salt and injectables.

In a press conference, Glenmark’s chairman and managing director Glenn Saldanha said the company was facing a gross debut of approximately Rs 4,600 crore ($555 million).

“The total debt gets extinguished after the deal,” he added.

In revealing (PDF) the sale, Glenmark said the deal allows it to become an innovative and brand-led company, focusing on its core therapeutic areas of dermatology, respiratory and oncology.

The sale leaves the company with a 7.8% share in the API subsidiary, named Glenmark Life Sciences, which will continue to operate as an independent firm under the ownership of Nirma, according to GLS CEO Yasir Rawjee, Ph.D.

“I see this as an opportunity to further strengthen our position in the API industry and continue the growth trajectory,” Rawjee said.

In 2019, Glenmark nearly sold off the unit to address its debt issues but opted for a spinoff. In April of this year, as the debt had become more protracted, Glenmark said that it had contacted potential buyers and hired Kotak Mahindra Capital to oversee a sale. With an 82% ownership stake in the API subsidiary, the company was already required by Indian regulators to sell a portion of it to reach a 75% ownership threshold.

While the sale gets Glenmark out of debt, the share price was below the current market rate, according to investor news outlet, which pointed out that while the API unit’s contribution to Glenmark’s overall revenue was 11%, it accounted for 20% of its operating earnings thanks to “higher profit margins.”

In January of this year, in another move to address its debt, Glenmark sold nine dermatological brands to Eric Lifesciences for 3.4 billion rupees ($41.4 million).

Last month, Glenmark reported a revenue increase of 22.5%, with the API unit accounting for year-over-year growth of 18%.