Nirma, a manufacturer of soap and detergent products is looking to secure funding of, up to Rs 7,000 crore. This capital infusion will be utilized for expanding its manufacturing facilities and exploring acquisition opportunities. Glenmark Life Sciences has been identified as one of the companies being considered for bids. The objective, behind this move, is to broaden Nirma’s business portfolio by venturing into the healthcare sector. This decision is supported by Nirma’s performance and strong cash flow generation.
Nirma, the prominent soap and detergent maker, is currently exploring avenues to secure funds amounting to Rs 7,000 crore. This financial push aims to facilitate both the acquisition of new ventures and the expansion of its existing plants. According to a recent report, Nirma, an unlisted company, achieved an impressive revenue of Rs 11,403 crore during the fiscal year ending on March 31, 2023 (FY23).
As part of its diversification plan, Nirma intends to carry out significant acquisitions in either the domestic or overseas market, with a projected investment ranging from Rs 5,000 to 7,000 crore. Glenmark Life Sciences has been included in the shortlist of potential candidates for these financial bids, as per media reports on July 28, as cited by investment banking sources.
In the event that the acquisition deals do not materialize, Nirma has a Plan B in place. The company will rapidly expand its existing business and allocate a substantial capital expenditure amount, equivalent to the proposed acquisition budget. However, Nirma has not disclosed the specific target for these potential acquisitions.
A noteworthy aspect of this endeavor is that Indian banks are currently not authorized to finance acquisitions. Consequently, Nirma may explore alternative options, such as raising funds from the private credit market, which is currently dominated by global private equity companies. Recent news reports indicated that Sekhmet Pharmaventures was also shortlisted as a potential bidder for a controlling stake in Glenmark Life Sciences, alongside Nirma.
Glenmark Pharmaceuticals, headquartered in Mumbai, presently holds an 83-percent stake in Glenmark Life Sciences. The decision to divest this stake is part of Glenmark Pharmaceuticals’ strategy to reduce its net debt of Rs 2,904 crore as of March of this year.
According to an anonymous source mentioned in a financial daily, Nirma achieved a profit of Rs 909 crore in the fiscal year 2023 and is projected to generate annual cash accruals exceeding Rs 1,700 crore. These cash accruals are expected to help repay debts amounting to Rs 650-750 crore in fiscal year 2024.
An informed banker revealed that Nirma is keen on making an aggressive bid for Glenmark Life Sciences, signaling healthcare as their next major focus area.
It is worth noting that Nirma’s previous acquisition of Sterikon Pharma, an eye drops and contact lens maker, amounted to around Rs 350 crore in April. The potential acquisition of Glenmark Life Sciences aligns with the group’s aspirations to venture into the healthcare sector, in addition to their existing sales of medical devices under Nirlife Healthcare.
