Aurobindo may take its injectable unit public

Mumbai: Aurobindo Pharma is in talks with bankers to revive a planned strategic stake sale in its injectable unit Eugia Pharma Specialities, including through a potential initial public offering (IPO), said chief financial officer Santhanam Subramanian.

"The bankers have reached out, we are exploring all options," Subramanian told ET in an interview. "At this point of time, we may not look into private equity because it is time consuming. We (are) looking into other options...mainly IPO," he said.

Subramanian added bankers will weigh Eugia's business including potential impact of regulatory inspections by USFDA at the unit's facilities before advising the best way forward.

Eugia recorded a revenue of $541 million (₹4,480 crore) in FY24, a 31% growth, making it the largest Indian injectable drugmaker in the US market. Eugia is aiming for $600 million revenue this fiscal.

The US alone contributed about 73% of the revenue from injectable and specialty sales. Aurobindo's consolidated revenue stood at ₹29,000 crore in FY24.

Aurobindo was earlier in talks with PE investors like Blackstone and Baring Asia for a strategic stake sale, but a deal didn't materialise over valuation mismatch.

ET reported in August 2023, citing sources, that Aurobindo is trying its luck for the second time, by appointing investment bank Moelis to run the strategic sale process. As per the report, Aurobindo promoters Ramprasad Reddy and his family have lowered valuation of the injectable business to $2-$2.5 billion from $3 billion previously.

Meanwhile, regulatory headwinds at Eugia's most critical Unit-3 facility at Pashamylaram near Hyderabad has temporarily halted the planned strategic sale process.

The USFDA inspected Eugia's Unit-3 in January-February, following which it made nine observations, and later classified the inspection for Official Action Indicated (OAI) which blocks new approvals from the site until the company addresses regulatory shortcomings to the agency's satisfaction.

Of the 54 abbreviated new drug applications (ANDAs) under review before US FDA, 29 are filed from Eugia's Unit-3. Nearly half the injectable filings in the US are from Unit-3.

Regulatory challenges at Unit-3 impacted revenues as Aurobindo had to temporarily stop production lines to address USFDA concerns and submit a comprehensive Corrective Action and Preventive Action (CAPA) plan within the stipulated time frame.

Aurobindo said operations at Unit-3 are normal, the CAPA plan has been submitted and reinspection is awaited.