TORNTPHARM

Torrent Pharma (TRP) is set to acquire a controlling stake in JB Chemicals and Pharmaceuticals (JBCP). The deal is at an equity valuation of INR256b (on a fully diluted basis). With this acquisition, TRP would have access to a fast-growing domestic formulation (DF) business with a healthy share of the chronic portfolio. In addition, TRP would garner the international CDMO business of JBCP. The valuation of JBCP would be 30.7x FY26E earnings and 27x FY27E earnings, assuming an 18% earnings CAGR over FY25-27. On an EV/EBITDA basis, it would be at 22x FY26E EBITDA and 19x FY27E EBITDA. Considering the strong brand franchise of JBCP with an established 2,800+ field force and lower valuation of JBCP compared to that of TRP (47x FY26 earnings/38x FY27 earnings), we believe the acquisition to be value accretive for TRP over the medium to long term. We await clarity on the debt/equity composition to pay cash consideration of INR126b to acquire a 46.4% stake in KKR and 2.8% of equity shares from certain JBCP employees. Outlook Ex-JBCP, we expect TRP to deliver 12%/14%/23% revenue/EBITDA/PAT CAGR over FY25-27. We value TRP at 38x 12M forward earnings to arrive at a price target of INR3,430. While the deal is positive, we reiterate our Neutral rating on the stock due to limited upside from the current levels.