Torrent Pharmaceuticals share price slipped 5.5 per cent to Rs 1449.25 and 1448.8 per share on the BSE and NSE intraday, respectively, during Wednesday’s trading session. The slump in the stock of mid-cap pharma company was mainly attributed to the expensive deal with Curatio Healthcare.
Torrent Pharma on Tuesday through a regulatory filing said that it will acquire Curatio Healthcare for Rs 2,000 crore to strengthen its presence in the dermatology segment. The company, in this regard, has entered into definitive agreements to acquire 100 per cent of Curatio, the filing said.
Chennai-headquartered Curatio has a portfolio of over 50 brands, including Tedibar, Atogla, Spoo, B4 Nappi, and Permite, in the cosmetic dermatology segment in India. Its top ten brands account for around 75 per cent of total revenue.
Despite Curatio’s healthy growth outlook, improving margin profile, and Torrent Pharma’s robust track record of accruing synergies, the deal is pricey and is 5-9 per cent EPS dilutive over FY2023-25E, a domestic brokerage firm Kotak Institutional Equities said in its report on the pharma company.
Torrent Pharma is trading at an elevated valuation of ~30X FY2024E EPS, and the brokerage awaits a better entry point, downgrading the stock to REDUCE from ADD.
While Curatio’s EBITDA margin in FY22 stood at 26.8%, Torrent Pharma is guiding for ~29% EBITDA margin for Curatio in FY23 with a further uptick over the medium term, it said, and build in 20% sales CAGR over FY2023-25E for Curatio, with 31 and 33% EBITDA margins in FY24 and FY25, respectively.
Similarly, Credit Suisse pointed out that the cost of Curatio’s acquisition is high at 23x FY23e EV/EBITDA and further said that Curatio acquisition provides scale in the fast-growing dermatology segment. The global brokerage gives an Outperform rating with a target price of Rs 1,750 per share.
The stock at around 9:50 was trading 3.5 per cent lower to Rs 1480 per share on the BSE against a 0.5 per cent fall in the S&P BSE Sensex. Torrent Pharma is an Indian multinational pharmaceutical company, owned by Torrent Group and headquartered in Ahmedabad.
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