US-based private equity firm Carlyle Group has agreed to acquire a 20% stake in Piramal Pharma, the pharmaceutical business of India-based Piramal Enterprises, in a deal worth up to $490m.

The transaction values the Pharma Business at an enterprise value (EV) of $2.7bn with an upside component of up to $360m depending on the company’s FY21 performance

Piramal Enterprises chairman Ajay Piramal said: “We are pleased to announce the strategic growth investment by Carlyle, a marquee global investor, in Piramal Pharma.

“This is an affirmation of the strength of our ability to build new, attractive and scalable businesses with a significant runway for continued organic growth and opportunities for consolidation.

“This infusion of funds will further strengthen our balance sheet and provide us with a war chest for the next phase of our strategy. We are pleased to have an investor of this calibre join the Piramal family and continue our stellar track record of partnerships.”

Carlyle is expected to make approximately $490m equity capital investment in Piramal Pharma

Carlyle is expected to make an equity capital investment of approximately $490m, for 20% stake in Piramal Pharma, based on the EV, exchange rate and pharma net debt as of March 2020.

The company said that the final amount of equity investment will be decided-based on the net debt, exchange rate and performance, compared to the pre-agreed conditions during the closing of the transaction.

Piramal Pharma includes Piramal Pharma Solutions, an end-to-end contract development and manufacturing (CDMO) business, Piramal Critical Care, a complex hospital generics business, Consumer Products Division, a consumer healthcare business selling over-the-counter products.

Also, the company includes PEL’s investment in the joint venture with Allergan India, focused on ophthalmology in the domestic market and Convergence Chemicals.

The transaction, which marks one of the large private equity deals in the Indian pharmaceutical sector, is expected to be completed in 2020, subject to customary closing conditions and regulatory approvals.

Carlyle Asia Partners advisory team managing director Neeraj Bharadwaj said: “Piramal Pharma has built a strong, diversified pharma business with a solid market position and scale in each of its core business segments of Pharma Solutions, Critical Care and Consumer Products.

“We are excited to work with the company’s experienced management team, and will leverage our global network, extensive knowledge of the healthcare sector, and operating experience to seek to expand its platform, develop strategic opportunities and facilitate broader market access.”