Cipla in $14 mn deal with Sri Lankan distributor firm

Drugmaker Cipla on Tuesday announced that it has acquired around 60% stake in a Sri Lankan company for $14 million through its wholly-owned subsidiary to market its products in that country.

Cipla has informed BSE that its wholly owned subsidiary Cipla (Mauritius) has signed a definitive agreement with the company's existing Sri Lankan distributor of 60% stake in new company which will market Cipla's products in Sri Lanka.

"The consideration payable for the transaction is $14 million. However, the proposed acquisition is subject to regulatory approvals," the company said in a filing on BSE.

According to a pharma analyst, going by Cipla's earlier acquisitions, it seems the company is looking at emerging economies to fuel its growth. However, the current acquisition is not a large deal compared to its earlier acquisition made in South Africa,

The company has completed the acquisition of South African pharma company Cipla Medpro last year for about Rs 2,707 crore. It also acquired one of its products-distributor Croatia-based Celeris last December. South Africa business currently contributes for 13.5% to overall sales on a consolidated basis, the company said during the March quarter result filings on the BSE.

Ranjit Kapadia, senior VP - pharma, Centrum Broking, said, "By acquiring majority stake of its distributor in Sri Lanka, the company is looking at taking management control of the firm. With this it will gain marketing control of the marketing function of the distributor. This will provide Cipla with a sharper penetration in the Sri Lankan market and will also help in reduction of costs and working capital. However, since the valuation of the deal is not so big, it is to understand what kind of a desired benefit Cipla is looking from the Sri Lankan market."

As on March 31, the company has cash and cash equivalents of Rs 175 crore.