Suven Pharma soars 6% as cabinet committee greenlights Rs 9,589 crore FDI deal
On September 14, Suven Pharma‘s stock witnessed a remarkable surge of over 6 percent during early trading hours. This significant increase in share value was attributed to the Cabinet Committee on Economic Affairs (CCEA) granting approval for a substantial foreign investment. Berhyanda Ltd, a Cyprus-based entity, was given the green light to invest up to Rs 9,589 crore in Suven Pharma, with the intention of acquiring a significant stake of up to 76.1 percent in the company.
Notably, Berhyanda Ltd is a subsidiary under the jurisdiction of Advent Funds, an entity managed by the US-based Advent International Corporation. The approval of this substantial foreign investment signifies a major development for Suven Pharma, as it not only brings a significant infusion of capital but also reflects confidence from global investors, particularly Advent International.
This investment can potentially have far-reaching implications for Suven Pharma’s growth, expansion, and strategic direction. It aligns with the company’s aspirations to bolster its position in the pharmaceutical and life sciences sectors, enhance its capabilities, and explore potential mergers and acquisitions. Furthermore, it underscores the attractiveness of the Indian pharmaceutical industry to foreign investors and their willingness to contribute to its development and progress.
With this approval, the potential total foreign investment in Suven Pharma could reach as high as 90.1 percent, which exceeds the allowed Foreign Direct Investment (FDI) limit of 74 percent in brownfield pharmaceutical projects according to the current policy. This approval signals a significant development in Suven Pharma’s ownership structure and could have implications for its future operations and growth.
The official statement released after the Cabinet Committee on Economic Affairs (CCEA) meeting highlighted that the approval for the foreign investment in Suven Pharma was granted following a comprehensive evaluation of the proposal. The evaluation process involved relevant government departments, the Reserve Bank of India (RBI), and the Securities and Exchange Board of India (SEBI). This meticulous review underscores the importance of ensuring compliance with regulatory and financial standards in such investment transactions.
As of 09.21 am on that day, Suven Pharma’s shares were trading with a substantial gain of nearly 4.71 percent on the National Stock Exchange, reaching a trading price of Rs 542.75. This surge in the stock’s value reflects the positive market sentiment and investor confidence in response to the news of the foreign investment approval. Such developments often lead to increased trading activity and investor interest in the company’s shares.
The approval from the Cabinet Committee on Economic Affairs (CCEA) came after a span of slightly more than eight months since the initial agreement between Suven Pharma’s promoters, the Jasti family, and their associated entities, and Advent International. This agreement involved the sale of the promoters’ 50.1 percent stake in the pharmaceutical company to Advent International for a total of Rs 6,300 crore, at a floor price of Rs 495 per share.
Based on the shareholding data from June, the Jasti family held a 60 percent stake in Suven Pharma. In addition to the deal with Advent, which secures a 50.1 percent stake from the promoters, the company has plans to acquire an additional 26 percent of shares from public shareholders through an open offer. As a result of these transactions, Advent’s total ownership in Suven Pharma is set to increase to 76.1 percent, with the potential to further raise its stake to 90.1 percent.
These transactions represent significant changes in Suven Pharma’s ownership structure and are likely to have implications for the company’s strategic direction and future operations, given the substantial shift in ownership and control.
Advent International had previously expressed its intention to explore the possibility of merging its portfolio company, Cohance Lifesciences, with Suven Pharma. This strategic move aligns with their overarching objective of establishing a prominent end-to-end Contract Development and Manufacturing Organization (CDMO) and a major player in merchant Active Pharmaceutical Ingredient (API) production. Such a combined entity would serve both the pharmaceutical and specialty chemical markets.
This merger would likely create synergies and enhance the capabilities of the two companies in the pharmaceutical and life sciences sectors. It can lead to increased operational efficiency, a broader range of services, and strengthened market presence, ultimately benefiting customers and stakeholders. Furthermore, by positioning itself as a comprehensive CDMO and API provider, the merged entity aims to play a pivotal role in supporting the pharmaceutical industry’s research, development, and manufacturing needs.
This strategic alignment underscores Advent International’s commitment to expanding its presence in the pharmaceutical and life sciences space and its recognition of the value of combining resources and expertise to achieve a competitive edge in the market. It will be interesting to observe how this merger unfolds and the impact it has on both Cohance Lifesciences and Suven Pharma’s future roles in the industry.
