There has been a strong wave of M&A activity in Indian domestic formulations space

Analysing the increased M&A and investment activity across India’s API, formulations and nutraceutical ingredients, driven by domestic consolidation and inbound global investor interest, Subhakanta Bal, MD, Rothschild & Co tells Viveka Roychowdhury that he is highly confident to grow meaningfully in the next two to three years

As one of the world’s largest independent financial groups, with more than 200 years of global expertise, how important a market is India to Rothschild & Co’s overall business, in terms of revenue share (or percentage growth in revenue share)?

Rothschild & Co is one of the largest independent financial advisory firms globally with over 1,500 professionals on the ground in 58 locations across 42 countries. During 2021 and 2022, the firm successfully advised on over 1,000 M&A deals globally, which makes us the most active global advisor by volume of transactions. India has been essential to the firm’s global strategy for over 20 years. With a team of 25+ bankers and advising on an average of 12-14 transactions every year, we are one of the country’s largest pure play global M&A and financial advisory firms.

Our business in India has grown significantly over the last five years, both in terms of banker strength and revenues. Our focus on pure-play M&A and financial advisory service offering, strong global sector expertise coupled with experienced local bankers, and longevity of senior bankers within the firm in India is certainly paying off, evidenced by the rising share of repeat business from our existing clients. Given how our business in India has shaped over the last five years, we are highly confident to grow meaningfully in the next two to three years.

What’s been the engagement levels with India’s healthcare and pharma sectors, in terms of growth in value/volume of deals transacted as a percentage of Rothschild & Co’s global business?

Healthcare is an important and growing market at a global level. With a global team of c.100 bankers dedicated to the sector, Rothschild & Co has advised on over 170 transactions in the healthcare sector globally in the last three years. It is also a globally interconnected sector, especially in pharma and medical devices, which leads to a large volume of cross-border activity for us.

We have scaled up our healthcare sector franchise in India over the last few years and are now regarded as among the top two global firms in the healthcare sector in India, having advised on over 15 transactions in the last seven years. Some of the healthcare sector transactions we have advised in India include the sale of 20 per cent stake in Piramal Pharma to Carlyle, sale of Medreich to Meiji Seika Pharma, Intas Pharma’s acquisition of Actavis UK & Ireland, fund raise from Temasek by Integrace Health, sale of Oaknet Healthcare to Eris Lifesciences, TPG Growth’s investment in Solara Active Pharma and sale of majority stake in Symbiotec Pharmalab.

We continue to be busy in the sector, advising currently on multiple transactions across pharma, MedTech and healthcare services. We have advised a diversified set of clients in the healthcare sector in India, with our client base comprising large Indian generics majors, private equity (PE) funds and family-owned firms. In general, across sectors, we have had extensive experience in advising family owned/founded firms, which comes naturally to us, given our own heritage as a family-owned firm.

Quite a few pharma promoters in India are divesting stakes, as the next generation is not interested in taking forward their legacy in the same sector. As an investment banking and advisory firm, which are the segments most attractive for such deals and strategic investors like PE/VCs?

We have seen strong deal activity across multiple segments within the healthcare sector in India.

Not surprisingly, a lot of activity has been in the pharma sector, across multiple sub segments including domestic formulations, API/CDMO and nutraceutical ingredients. In the domestic formulations segment, we have seen a healthy level of activity from strategics as well as PE funds. Trade activity has been driven by a desire to enhance market share, plug specific whitespaces from a therapy area standpoint and accelerate beyond organic growth. Pharma B2B has witnessed consistent M&A activity, especially in the Active Pharmaceutical Ingredient (API) segment. The industry continues to be fragmented, providing the opportunity for consolidation. PE activity has been led by funds seeking platform investments and subsequent bolt-on acquisitions to acquire capabilities and scale up. Trade activity has been primarily driven by a desire to expand in high growth segments such as HPAPI, oncology, peptides and injectables.

Nutraceutical ingredient segment has also had recent deal activity, such as Novozymes’ acquisition of a majority stake in Synergia Life Sciences and TA Associates’ investment in OmniActive Health Technologies. The space is witnessing interest from global strategics as well as PE funds on the back of strong growth driven by rising consumer awareness and a shift towards preventive care. This segment is also witnessing strong inbound interest with overseas companies looking to acquire assets in India to access niche/high growth product portfolios, expand their manufacturing base and benefit from revenue synergies.


We have seen quite a few M&As/deals centered around Active Pharmaceuticals Ingredients (APIs) manufacturers as investors look to secure the global pharma chain to avoid the disruptions seen during the Covid pandemic. By when will we see the results of such moves? 

There is more focus on APIs now post-Covid. Several regions/countries have historically relied on China for bulk drugs/APIs. Given the supply chain disruptions faced during Covid, there is a greater realisation of the need to diversify the supply chain and avoid over reliance on one country/source. In certain product categories, China is likely to continue to be the major source/supplier, given the vast capacities (and consequently cost efficiency) built over time. This would be especially relevant in high volume intermediates/APIs, where cost is a key consideration and having large scale capacities helps drive costs of production down (i.e., benefit from economies of scale).

However, in categories which are either high value/niche or considered critical, we are witnessing a desire on the part of customers to diversify the supply chain outside of China i.e., China + 1 strategy. Outside of China, India and Italy are two of the major API manufacturing hubs, which are expected to further fuel the demand for APIs from India. We expect such supply chain diversification moves to take time to show results, given the gestation period involved in setting up large capacities and building/developing the eco-system required to have local production at a meaningful scale.


What are the trends driving M&As in the domestic formulations space in India and how is it likely to evolve going forward?

There has been a strong wave of M&A activity in the Indian domestic formulations space. Large Indian domestic companies are doubling down on the Indian market driven by a desire to enhance presence, plug specific whitespaces from a therapy area standpoint and accelerate beyond organic growth. Some key deals include Torrent Pharma’s acquisition of Curatio Healthcare, Eris Lifesciences’ acquisition of Oaknet Healthcare and Mankind Pharma’s acquisition of Panacea Biotech’s domestic formulation brands. Several strategic transactions have been in the form of brand acquisitions to fill specific portfolio gaps and strengthen specific divisions. Most large Indian pharma companies enjoy a healthy balance sheet, providing the ammunition to fund inorganic growth. This coupled with the fact that there are limited avenues for inorganic capital deployment (with similar risk-reward dynamics) implies that domestic M&A activity is expected to continue going forward.

Several larger domestic companies are looking to focus on core portfolios and sharpen capital/resource allocation decisions. This in turn has also resulted in companies divesting select non-core brands, a trend that is likely to continue.

There has also been a fair amount of PE activity in the Indian domestic formulations space, including Advent’s acquisition of Bharat Serums and Vaccines, KKR’s acquisition of a controlling stake in JB Chemicals & Pharmaceuticals and True North’s acquisition of Glenmark Pharmaceuticals’ orthopaedic and pain management business. This trend is expected to continue as some local companies look to sell, driven by a lack of succession considerations or as some of the larger companies look to restructure/shed non-core portfolios.

Given uncertain macroeconomic trends, increasing pricing pressures, escalating regulatory overhang due to quality concerns shadowing even the bigger Indian pharma companies, what’s been the track record of M&A in the healthcare/pharma ingredients sector (globally versus India) and how do we expect it to evolve over the next few years?

Pharma B2B has been an area with consistent M&A activity, especially in the API segment driven by PE funds and corporates. The industry has been and continues to be fragmented, providing consolidation opportunities. The industry continues to benefit from a structural move from customers to increasingly outsource manufacturing activities and shift towards an asset-light business model driven by cost pressure, the desire to migrate from a fixed to a variable cost structure and supply chain complexity.

In addition, there has been a growing share of mid and small pharma companies in the late-stage pipeline, which bodes well for continued growth in outsourcing, as several mid and small pharma companies rely on outsourcing to meet their manufacturing requirements. Also, there seems to be rising demand from customers for integrated service offerings, which would further drive consolidators to fill gaps in service offerings through acquisitions. China + 1 strategy could also drive inbound activity with overseas companies looking to acquire assets, especially those with strong regulatory track record, meaningful regulated markets exposure and presence in high-growth and niche areas.

As you rightly said, there is clearly a greater focus on compliance and regulatory track record. Given the increase in regulatory scrutiny and the spate of OAIs (Official Action Indicated) issued by USFDA over the last few years, investors and acquirers are increasingly emphasizing regulatory compliance/track record. Based on our experience, we believe a strong regulatory/compliance track record, especially with US and European regulators has clearly evolved into a “must have” for most investors.  



deal activitydomestic formulationsHealthcare SectorM&A activityM&AsNutraceutical ingredient segmentPharma B2Bpharma ingredients sectorRothschild & CoSubhakanta Bal
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