Curatio acquisition bolsters Torrent Pharma's domestic portfolioTORNTPHARM - 2053 Change: -47.10 (-2.24 %)
Torrent Pharma is set to acquire 100% of Curatio Healthcare for Rs 2000 crore, consideration includes Rs 115 crore of cash and cash equivalents in the acquired business indicating an enterprise value of Rs 1,885 crore. Curatio has a strong presence in the cosmetic dermatology segment with a portfolio of over 50 brands, marketed in India. Top 10 brands of Curatio account for 75% of total revenue. With this deal, Torrent Pharma will enter the league of top 10 players in the dermatology segment and will be the leader in the cosmetic dermatology space. Curatio’s revenues has grown at a CAGR of 13% in FY20-22 and is expected to grow 23% in FY23 to Rs 275 crore.
Curatio’s reported revenue of Rs 224 crore in FY22 and is expected to post Rs 275 crore revenue in FY23, thus valuing the deal at 8.4x and 6.9x FY22 and FY23E EV/sales respectively. Despite the steep valuation of this deal, it offers Torrent an enhanced presence in dermatology with differentiated portfolio in cosmetic dermatology being more specialist focus, matching with Torrent's current DNA. EBITDA margins of ~ 27% in FY22 for Curatio are slightly lower than Torrent’s domestic margin but is likely to inch up due to better operating leverage post this acquisition. We are positive on Torrent’s ability of faster integration and turnaround of acquired assets in the domestic space and expect the near term margin dilution in H2FY23 due to this deal to be largely offset by dwindling inflationary environment and change in revenue mix towards branded generics.