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Dr Reddy's may sell stake in domestic formulations biz

21 Jun 2010 Evaluate

Dr Reddy’s Laboratories (DRL) is exploring the option of demerging its domestic formulations business and unlocking value. Several multinational drug firms have already begun talks on a potential deal for the Rs 1,000 crore businesses. The promoters have a 25.7 per cent stake in DRL and investment bankers said they were expecting a significant premium to the current sales. The move comes about a month after US-based Abbott acquired the domestic formulation business of Piramal Healthcare for $3.7 billion.

Dr Reddy’s is involved in almost all aspects of generic drug business, like bulk drugs and formulations, and even research. It had a turnover of Rs 7,000 crore in the year ended March 2009, and is now the second largest Indian drug company.

The market is abuzz with Glaxo Pharmaceuticals being in the fray, though the company said it has no such plan. Glaxo is among the top five players in domestic business and can scale up its business to the second spot after the Abott-Piramal healthcare combine, if it could succeed in acquiring the domestic business of DRL. GSK and Dr Reddy’s have a long-standing relationship in business and better understanding of the systems of both companies. Last June, GSK had entered into an exclusive long-term outsourcing agreement with DRL to supply a diverse portfolio and future pipeline of more than 100 branded pharmaceuticals in the fast growing therapeutic segments such as cardiovascular, diabetes, oncology, gastroenterology and pain management.

Dr Reddy's has at least half-a-dozen branded generic drugs that are among the top selling drugs in the domestic market. These include Omez, which treats an upset stomach, pain killer Nice, heart disease drugs such as Stamlo and Atocor, one of the first indigenously developed biosimilar drug named Revitex and anti-baldness drug Mintof.

DRL has a very attractive business proposition, as their corporate culture is similar to multinationals in terms of governance, manufacturing systems and practices and for such assets, buyers do not mind paying even valuations like nine or 10 times of the turnover, as happened in the case of Piramal Healthcare

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Dr. Reddys Lab Share Price

1235.40 14.15 (1.16%)
17-Apr-2026 16:59 View Price Chart
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Company Name CMP
Sun Pharma Inds. 1675.20
Dr. Reddys Lab 1235.40
Cipla 1238.30
Zydus Lifesciences 942.55
Lupin 2324.25
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