Piramal Pharma in talks for $225 million offshore loans

Synopsis

At least three top lenders – Axis Bank, HSBC and State Bank of India (SBI) – are likely to extend the loan, which could be raised in the Gujarat GIFT City.

Piramal Pharma, the recently spun-off unit of Piramal Enterprises, is set to raise $225 million in offshore loans as the drugmaker looks to improve its financial metrics ahead of its impending listing as an independent company, people familiar with the matter told ET.

At least three top lenders – Axis Bank, HSBC and State Bank of India (SBI) – are likely to extend the loan, which could be raised in the Gujarat GIFT City. Talks for this round of financing, with scheduled repayment in five years, are at an advanced stage and could be finalised in the next two weeks, people cited above said.

“While SBI may continue to hold the loan on its books, the other two banks are likely to downsell once the agreement is signed,” one of the persons cited above told ET.

Loans Preferred to Bonds


Piramal Pharma did not respond to ET’s mailed queries. Individual banks, too, didn’t comment on the matter.

The loan is expected to be priced after adding 195 basis points over and above the Secured Overnight Financing Rate, a global rate gauge that has replaced LIBOR as a reference benchmark. A basis point is 0.01 percentage point.

“Piramal’s US-based unit would be raising the loan, proceeds from which will be used both for refinancing and other business expansions/purposes,” said an executive. Indian companies are increasingly looking to raise loans instead of bonds, with the benchmark US Treasury yields surging about 180 basis points this calendar year. Yields are now at 3.33% versus 1.51% at the end of 2021. Bonds are expensive now, especially once the cost of covering currency risks is priced in.

Capex Plans

Piramal Pharma is likely to avail a natural hedge for the loan as the company could use the proceeds for its offshore operations.

Piramal earlier said it expects to complete the demerger and the listing of its pharma unit by the third quarter of this year. The demerged unit had about ₹6,700 crore revenue in FY22. In October 2020, US private equity firm Carlyle Group invested $360 million in Piramal Pharma for a 20% stake.

Piramal Pharma has embarked on a huge capex plan, where it plans to spend about $200 million annually over this year and the next on expansion of antibody drug conjugate capacities at Grangemouth, the UK. It is also seeking to raise API capacities at Riverview in the US, besides boosting capacities of its API facilities in India and potent injectables at Lexington in the US.

Piramal Pharma includes the contract development and manufacturing organisation, called the Piramal Pharma Solutions (PPS), which contributes three-fifths of the revenue. A complex hospital generics business, Piramal Critical Care (PCC), contributes 30% of the revenues, while the rest comes from the India consumer healthcare business that involves selling over-the-counter products.

Skincare brand Lacto Calamine and oral contraceptive i-pill are two top Piramal Pharma products. In addition, Piramal Pharma has a joint venture with Allergan, for making ophthalmology formulations.

Tuesday, 13 Sep, 2022

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