Laurus Labs gains 5% on acquisition of Richcore Lifesciences

Shares of Laurus Labs rose 5 per cent to Rs 298.80 on the BSE on Thursday after the company said it has signed a definitive agreement to acquire a majority stake in Richcore Lifesciences Pvt Ltd (Richcore).

Laurus Labs has signed a definitive agreement to acquire 72.55 per cent of Richcore’s shares from Eight Roads Ventures and VenturEast for a value of Rs. 246.7 crore,” the company said in a press release.

This acquisition marks Laurus Labs’ entry into the broader biologics and biotechnology segments, providing the company access to its high growth areas, globally and in India. Laurus Labs will help and drive Richcore to achieve scale and improve product offerings. With this acquisition, Laurus adds a fourth revenue stream to its three existing divisions - API, Formulations and Synthesis. Following the successful closure of the transaction, Richcore will be renamed to Laurus Bio Pvt Ltd, it said.

Richcore, a biotech company based in Bengaluru, has large scale fermentation capabilities and manufactures animal origin free (AOF) recombinant products. Richcore's Apri-September 2020 period (H1FY21) sales were at Rs 29.1 crore and 38.8 per cent of EBITDA (earnings before interest, taxes, depreciation, and amortisation) margins. Laurus will fund the acquisition from its internal accruals. This acquisition will be revenue and profit after tax accretive.

Prima facie, the valuation looks reasonable on the EV/EBITDA front. On the financial front, the acquisition would contribute marginally to Laurus' financials. However, it gives Laurus entry into the high barrier biotechnology segment, ICICI Securities said in a note.

Richcore brings significant expertise in enzyme development for pharmaceutical and other industrial applications. Laurus will bring scale to Richcore’s operations to become a major player in the biotech CDMO space. That said, in the backdrop of significant capex already announced, together with volatile financials of the target company, we remain cautious and await management comments, it said.

At 09:24 am, Laurus Labs was trading 2.5 per cent higher at Rs 292 on the BSE, as compared to 0.06 per cent rise in the S&P BSE Sensex. A combined 1.2 million equity shares changed hands on the counter on the NSE and BSE.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel