Advent buys majority stake in India's ZCL, MSPEA exits
Advent International has agreed to acquire Indian pharmaceuticals supplier ZCL Chemicals, setting up a minority exit for Morgan Stanley Private Equity Asia (MSPEA).
Financial details were not disclosed, although the deal was said to contemplate an enterprise value of INR17 billion ($233 million), according to The Economic Times. MSPEA acquired a 20% stake in ZCL for INR1.7 billion in 2016.
This is Advent’s third commitment in the Indian pharmaceuticals space in the past 15 months and its second in the fast-growing rudimentary chemicals subcategory known as active pharmaceutical ingredients (API).
Advent acquired API supplier RA Chem Pharma last year for an estimated INR10 billion and women’s health specialist Bharat Serums and Vaccines in late 2019 at a reported valuation of $500 million. The latter transaction facilitated full exits for OrbiMed and Kotak Private Equity.
“We are impressed with ZCL’s differentiated product portfolio, strong pipeline and its high focus on quality and compliance,” Pankaj Patwari, a director at Advent India, said in a statement. “The acquisition of ZCL helps us get closer to our goal of creating a top-five merchant API platform in India.”
ZCL, previously known as Zandu Chemicals, describes itself as one of the leading pure-play API companies in India. Operations include a US regulator-approved factory with a focus on niche areas such as the central nervous system, antiretroviral treatments. and controlled substances. Production capacity is 214 kiloliters a year. The complex features an R&D center with a team of 40 scientists.
APIs currently represent only about 25% of India’s INR3.7 trillion pharmaceuticals market but have proven the most attractive investment area in the booming local pharma industry in recent years due to perceptions of stronger upside versus generic drugs.
The opening has been largely driven by reduced output from China, a traditionally dominant API exporter that has curbed its production levels in response to tougher domestic pollution control regulations. More recently, this effect has been amplified by supply chain diversification agendas among global drugmakers seeking to ease dependence on Chinese supply.
Advent has invested $1.7 billion in India since 2007, $600 million of which has been committed in the past 12 months. The private equity firm is entering the local pharma space with significant global experience, having invested or committed more than $9.6 billion across 48 companies in the sector. This includes more than 20 businesses involved in R&D, production, and distribution.
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