Foreign fancy: SMEs chart out buyout plans

PUNE: India Inc’s shopping spree has just begun. Armed with private equity funds, or funds raised through foreign currency convertible bonds (FCCBs), SMEs from disparate sectors are looking out for acquisitions. In a coincidence hard to match, September 19 was a day for Pune Inc to celebrate.

For, two companies announced acquisitions in the US or the UK while a third announced its investment in a US-based company.

This is like a curtain raiser, with other SME players drawing up plans, the first step being to get the funding. So, the day the two acquisitions happened, Virgo Engineers, a Rs 172-crore manufacturer of valves, announced a $10-m private equity investment for overseas acquisitions.

The three Pune-based companies that announced acquisitions were Praj Industries, Bilcare and Serum Institute of India. Praj, the Rs 267-crore ethanol and brewery technology major, used some of the private equity it raised last fiscal for its Rs 22.5 crore acquisition of CJ Scheider Engineering (CJS), a US-based provider of detailed engineering services to the bio-fuel industry including ethanol plants.

Bilcare’s UK subsidiary acquired DHP, a clinical trial services company for Rs 23 crore ($5m). This was Bilcare’s second acquisition in a span of just over a year, having acquired Pro Clinical in the US for $12m in July ’05. Bilcare, the Rs 260-crore pharma packaging and clinical trial services (CTS) provider had raised FCCBs of $50m last fiscal for acquisitions in the CTS space in the European Union market.

This latest acquisition positions Bilcare ahead of global, multi-billion dollar players who offer clinical trial services across the globe. Mohan Bhandari, chairman and managing director, Bilcare, explained that this latest acquisition positions them with the capability to roll out clinical trial services from any location, Asia (from India and Singapore), the US and now the UK.

“Pharma companies are moving trials out of the US and Europe into Asia and specifically India. We are able to offer services in any location they want, with the requisite national certifications,” Mr Bhandari said. Serum, on the other hand, acquired a stake and a seat on the board of Akorn, a US-based manufacturer and marketer of sterile speciality pharmaceuticals on September 8 for $3.56m.

This was Serum’s second investment, having picked up a 14% stake for 2.6m pound in Lipoxen, with the possibility of picking up another 3% stake.

Lipoxen is a bio-pharmaceutical company specialising in the development of differentiated biologicals, vaccines and oncology drugs. Akorn and Serum began an exclusive drug development and distribution agreement for oncology and other injectible products in October ’04. Serum is expected to locate manufacturing for Akorn in its Rs 90-crore bio-pharma SEZ in Pune.

While news reports have been suggesting that major European manufacturers are taking steps to ward off acquisitions by Indian companies, it is the SME segment in India which seems to have sprung the surprise. And it is they who are in turn being wooed by global private equity to go global.