Torrent Pharma And JB Chemicals ₹25,689 Crore Deal
This post is for academic and informational purposes only. It is not financial advice or a recommendation of any kind.
Deal Details:
Parties Involved:
Torrent Pharmaceuticals: This company is acquiring JB Chemicals from the private equity investment company KKR. Torrent Pharma is described as India's seventh-largest pharmaceutical company by revenue, with over 65 years of experience in the Indian markets. In Financial Year (FY) 2025, Torrent Pharma generated a revenue of ₹1,516 crore, with approximately 56% of this revenue coming from India. The company's international business spans more than 50 countries, with Brazil, Germany, and the US being its major international markets.
JB Chemicals: Although smaller than Torrent Pharmaceuticals, JB Chemicals recorded a revenue of ₹3918 crore in FY25 and possesses considerable growth potential. Six of its brands are included in India's top 300 pharmaceuticals, and three of its drugs are among the top 25 in the cardiology segment. Just five years prior, JB Chemicals was struggling to survive in the market, but its valuation has now exceeded ₹25,000 crore.
Acquisition Structure and Financials:
Torrent Pharmaceuticals will initially acquire a 46.39% stake in JB Chemicals.
Torrent also has an option to acquire an additional 2.8% stake, potentially increasing its shareholding to 49.19%.
Following these purchases, Torrent Pharmaceuticals will be required to make a mandatory open offer for an additional 26% shares.
The 46.39% stake is being acquired for ₹1,917 crore, implying a share price of ₹1600 per share for JB Chemicals in this part of the deal.
Torrent Pharmaceuticals will acquire the remaining 26% shares at ₹1639 per share.
Post-acquisition, JB Chemicals shareholders will receive 51 shares of Torrent Pharmaceuticals for every 100 shares of JB Chemicals they hold.
To finance this acquisition, Torrent Pharmaceuticals has arranged a ₹2000 crore credit line from major players like Barclays and HSBC.
Approval Process and Timeline:
The entire acquisition process is expected to take 15 to 18 months to complete.
This timeline is subject to approvals from various regulatory bodies, including the Competition Commission of India, SEBI, stock exchanges, and the National Company Law Tribunal.
Impact on the Combined Entity:
After the acquisition, the combined entity of Torrent Pharmaceuticals and JB Chemicals is projected to become India's fifth-largest pharmaceutical company based on secondary sales.
It is also expected to become India's fourth-largest pharmaceutical company based on prescriptions.
The combined entity's revenue is expected to reach ₹1,000 crore, and its EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) could reach ₹4,800 crore. Please note: While the source explicitly states the combined revenue could reach ₹1,000 crore, this appears to be a transcription error or an inconsistency, as Torrent's FY25 revenue was ₹1,516 crore and JB Chemicals' was ₹3918 crore, which would imply a combined revenue significantly higher than ₹1,000 crore (approximately ₹5,434 crore).
Strategic Context of the Deal:
The timing of this acquisition is highlighted as potentially beneficial for Torrent Pharmaceuticals.
The deal is part of a broader trend of rapid consolidation within the Indian pharmaceutical industry, described as an "eat or be eaten" situation.
Acquisitions serve as a "feasible option" for pharmaceutical companies seeking expansion, as developing new segments through research and development and obtaining approvals can incur very high costs.
Through this acquisition, Torrent Pharmaceuticals gains entry into new business verticals, specifically the chronic therapy and Contract Development and Manufacturing Organization (CDMO) segments, which are expected to strengthen the company.
For smaller companies like JB Chemicals, operating in the pharmaceutical sector can be challenging due to regulatory compliance costs and competitive pricing, necessitating massive resource pools for survival. This acquisition allows JB Chemicals to unlock value and leverage Torrent's resources to scale up, making it an attractive target.
JB Chemicals Chronic Therapy Segment:
Definition and Scope of Chronic Therapy:
The chronic therapy segment focuses on managing long-term conditions such as hypertension, heart disease, and diabetes. This is in contrast to the acute therapy segment, which addresses immediate illnesses or injuries.
JB Chemicals has established a dominant presence in the three largest conditions within the chronic therapy segment: cardiac, neuro-CNS (neurological and central nervous system), and anti-diabetics.
Growth Potential of the Segment:
The sources indicate that the chronic therapy segment outperforms the acute therapy segment.
Due to deteriorating lifestyles, stress, and pollution, chronic diseases are increasing. As a result, the chronic therapy segment is projected to grow at an 8.1% CAGR until 2029, which is significantly higher than the acute therapy segment's projected growth of only 5.6% CAGR until 2030.
◦Specifically, the Indian cardiovascular disease therapeutics market, a key area within chronic therapy, was valued at $2.95 billion in 2022 and is expected to reach $6.44 billion by 2030, growing at a 10.22% CAGR.
JB Chemicals' Performance and Contribution:
JB Chemicals' strong performance in the chronic therapy segment was one of the two major reasons for its improved financial standing.
This segment contributes a significant 47% to JB Chemicals' domestic sales.
The growth rate of JB Chemicals' chronic therapy segment is exceptionally high, growing 2.6 times faster than India's overall pharmaceutical industry.
Specific hypertension drugs like Cilačar saw a 23% increase in revenue, generating ₹785 crore, while Razel and Almada demonstrated over 20% year-on-year growth.
JB Chemicals CDMO Segment:
JB Chemicals' Specialisation and Contribution:
JB Chemicals operates in the CDMO segment in addition to its formulations business.
Within CDMO, the company specialises in lozenges, producing medicines similar to Vicks, Strepsils, and Cofils.
The CDMO segment is identified as the second major reason for JB Chemicals' improved financial performance, alongside its strong position in chronic therapy.
In Financial Year 2025 (FY25), JB Chemicals' CDMO business generated ₹446 crore in revenue. Every quarter, the revenue was between ₹100 to ₹120 crore.
Management anticipates an increase in this segment's performance, expecting a quarterly run rate of ₹150 crore from FY26. Despite seemingly being a niche segment, it holds substantial growth potential.
Growth Potential and Advantages of the Indian CDMO Segment:
The sources highlight the significant potential of the Indian CDMO segment within the global market.
According to a report by Boston Consulting Group (BCG) in February 2025, the Indian CDMO segment has the capacity to capture 4% to 5% of the global CDMO market share, positioning India as a superior outsourcing option for pharmaceutical manufacturing and development.
India's CDMO segment offers distinct advantages due to cost-effective manufacturing and a skilled workforce. Indian pharmaceutical services are approximately 20% cheaper than their Chinese counterparts.
The Indian CDMO market size, currently valued at $3 billion, is projected to almost double to $6 billion by 2028.
Indian Pharmaceutical Industry:
Robust Growth Potential and Driving Factors:
The Indian pharmaceutical market is projected for massive expansion, with expectations to reach $450 billion by 2047. This long-term growth forecast positions India as an attractive hub for pharmaceutical activity.
A primary driver of this growth is the increasing burden of chronic diseases such as hypertension, heart disease, and diabetes, which are on the rise due to deteriorating lifestyles, stress, and pollution.
This has led to the chronic therapy segment outperforming the acute therapy segment, with a projected Compound Annual Growth Rate (CAGR) of 8.1% until 2029, compared to the acute therapy segment's 5.6% CAGR until 2030. The Indian cardiovascular disease therapeutics market, a core component of chronic therapy, is specifically expected to grow from $2.95 billion in 2022 to $6.44 billion by 2030, at a 10.22% CAGR.
Another high-growth area is the Contract Development and Manufacturing Organization (CDMO) segment. India is emerging as a "better outsourcing option" due to its cost-effective manufacturing (approximately 20% cheaper than Chinese services) and a skilled workforce. The Indian CDMO market, currently valued at $3 billion, is anticipated to almost double to $6 billion by 2028. This growth is further bolstered by a global trend of drug companies shifting manufacturing away from China, leading to a 50% increase in Requests for Proposals (RFPs) for some Indian companies.
Rapid Consolidation and the "Eat or Be Eaten" Scenario:
The Indian pharmaceutical industry is undergoing rapid consolidation, described as an "eat or be eaten situation". This implies a competitive environment where companies must expand or risk being overtaken.
In this landscape, acquisitions are presented as a "feasible option" for expansion. This is largely due to the high costs associated with research and development (R&D) and obtaining regulatory approvals for new market segments.
The sources also highlight the difficulties faced by smaller companies, which require a "massive resource pool" to survive due to regulatory compliance costs and competitive pricing. Acquisitions, therefore, provide a mechanism for these smaller entities to "unlock value" and scale up.