PI Industries – Superior Business Model

PI Industries call on Pharma Acquisition

TRM: 3.57x EV/EBITDA of Mar-22 on base consideration

Archimica: 5.3x EV/EBITDA Dec-22

1. Acquisitions are made through the wholly owned subsidiary of PI Industries, the purchase consideration will be paid in cash from QIP funds. Both acquisitions are expected to be earnings accretive with immediate effect

2. TRM’s R&D team works closely with marquee publicly listed US biotech companies and big pharma companies based in Asia-Pacific in developing their product pipeline. It had consolidated revenue of USD 33 Mn & EBITDA of $14 Mn in FY22.

3. Archimica is an Italy-based, highly reputable small molecule API manufacturer and a CDMO servicing over 60 customers in more than 30 countries. It is certified by USFDA and AIFA among others. Archimica had revenue of $45 Mn with EBITDA of $7 Mn for the year ended 31st December 2022.

4. Acquisition of Archimica is completed on 22-Apr-23; Expect to close the acquisition of TRM by end of May 2023.

5. Archimica has 24 DMF out of which 12 products are currently active; currently 50% capacity is utilised for niche API and 50% is idle on which PI can work on. PI might do some strategic capex based on their understanding of business. In Archimica PI will retain the leadership and team and they will work them to grow the organization.

6. Archimica has more than 60 clients and TRM has 10 clients; TRM is currently working on under patent products only, there are no generic products in TRM. In Archimica they are working on niche API and they are all generic.

7. PI has planned for $10 to 15 Mn capex per annum over next 2 years for the pharma division.

8. During FY22 there was commercialisation of molecules for TRM and hence its revenue grew by more than 2x over the previous year; there are also some fixed term contracts (1 to 3 years) with certain customers.

9. These 2 companies have 3 R&D centers in different countries, so 1 is in the US , another is in Europe and one in India. They have clients for each center as some customers want the development in the US, some want in India and some in Europe; along with that Hyderabad center will be complimentary for all those 3 centers.

10. TRM is working with the customers who are dealing with the biologics, TRM is supplying the building blocks to them.

11. TRM is currently working at 40 to 50% capacity utilisation; so capacity is not a constraint for growth currently.

12. The current focus for these acquisitions is scaling up the revenue rather than focusing on margins. Expecting to more than double the current revenue of these companies in the next 3 to 4 years.

13. Revenue split between CDMO and API – for Archimica it is 20:80; and for TRM 100% is CDMO.