Piramal Pharma in talks for $225m offshore loans
At least three major lenders – Axis Bank, HSBC and State Bank of India (SBI) – are likely to extend the loan, which could be raised in Gujarat GIFT City. Talks for this round of funding, with repayment expected in five years, are at an advanced stage and could be finalized within the next two weeks, the people quoted above said.
“While SBI may continue to hold the loan on its books, the other two banks are likely to sell lower once the deal is signed,” one of the people quoted above told ET.
Bond Preferred Loans
Piramal Pharma did not respond to questions sent by ET. Individual banks also did not comment on the matter.
The loan is expected to be priced after adding 195 basis points above the Overnight Collateral Funding Rate, a global rate indicator that has replaced LIBOR as its benchmark. One basis point is 0.01 percentage point.
“Piramal’s U.S. unit will raise the loan, the proceeds of which will be used for both refinancing and other expansions/business purposes,” an executive said. Indian companies are increasingly looking to raise loans rather than bonds, with benchmark US Treasury yields jumping around 180 basis points this calendar year. Yields are now at 3.33% from 1.51% at the end of 2021. Bonds are expensive now, especially once the cost of currency hedging is priced in.
Piramal Pharma is likely to have a natural hedge for the loan, as the company could use proceeds from its offshore operations.
Piramal said earlier that it expects to complete the spin-off and listing of its pharmaceutical unit by the third quarter of this year. The spun off unit generated revenue of approximately ₹6,700 crore in FY22. In October 2020, US private equity firm Carlyle Group invested $360 million in Piramal Pharma for a 20 %.
Piramal Pharma has embarked on a massive capital investment plan, in which it expects to spend around $200 million a year this year and next on expanding antibody-drug conjugate capabilities at Grangemouth, United Kingdom. It is also looking to increase API capabilities at Riverview in the United States, in addition to increasing capacities at its API facilities in India and powerful injectables at Lexington in the United States.
Piramal Pharma includes the contract development and manufacturing organization, called Piramal Pharma Solutions (PPS), which contributes three-fifths of revenue. A complex hospital generics business, Piramal Critical Care (PCC), contributes 30% of revenue, while the rest comes from India’s consumer healthcare business of selling over-the-counter products.
The Lacto Calamine skin care brand and the i-oral contraceptive pill are two of Piramal Pharma’s best products. In addition, Piramal Pharma has a joint venture with Allergan, for the manufacture of ophthalmic formulations.