Unlocking new vertical through BSV acquisition
Aim to be EPS-accretive from second year after deal closure
Mankind Pharma has agreed to acquire Bharat Serum Vaccines (BSV) for EV of INR136b, implying EV/EBITDA of 28x/22-23x on FY24/FY25 basis.
This acquisition not only expands Mankind’s niche portfolio, but also provides a specialty R&D tech platform, in-house complex manufacturing capabilities and strong institutional reach.
Considering access to a high-entry barrier business, a healthy mix of domestic international segments and potential for sustainable EBITDA growth (27% EBITDA YoY growth in FY25), we believe the deal valuation is fair.
We await clarity on the deal structure in terms of debt/equity fund raise to fund the deal from the concall scheduled for 26th Jul’24 at 5pm. Having said this, considering current cash of INR42b from internal accruals, we assume debt/equity of INR60b/INR32b to complete the transaction. Free cash generated from the base business would subsequently lower debt for Mankind. Maintain BUY. BSV – well placed to deliver high EBITDA growth in medium term
BSV has posted sales CAGR of 21% over FY21-24 to INR17b. Adjusting for acquisition/exit-related costs, EBITDA margin was 28.4% for FY24.
Management comment about 22-23x FY25 EBITDA implies potential to garner INR6b EBITDA in FY25 from INR4.8b in FY24.
The top 10 brands form 60% of domestic sales (54% of total sales). International sales witnessed a 25% CAGR over FY21-24. Multiple moats in BSV business BSV has a high-entry barrier specialty portfolio across India/EMs. It has not only shown commercial success but also has a product pipeline in segments like women’s health, fertility and critical care.
It has differentiated technology platforms like Recombinant tech, complex deliver system, and immunoglobulins.
BSV has a wide coverage of doctors as well as institutional reach.
It has presence in international markets with marketing/regulatory teams.
BSV also has complex manufacturing capabilities at Ambernath/Germany.
Mankind gains access to an exhaustive fertility drugs portfolio.
