Torrent Pharmaceuticals is poised to launch India's largest bond issue of FY26, aiming to raise ₹14,000 crore ($1.6 billion) to finance its acquisition of JB Chemicals & Pharmaceuticals. This move follows the Competition Commission of India's (CCI) approval of the acquisition, paving the way for Torrent to integrate JB Chemicals into its operations.
The bond issue is expected to close before mid-December and will offer multiple tenors ranging from 15 to 42 months. Banks including Barclays and Standard Chartered are arranging the sale. India Ratings and Research has assigned the bonds an AA+ rating.
Torrent's acquisition of JB Chemicals is valued at ₹19,500 crore. The acquisition is structured in phases, with Torrent initially acquiring a 46.39% stake in JB Chemicals from KKR for ₹11,917 crore, followed by a mandatory open offer to acquire up to 26% of JB Pharma shares from public shareholders. Torrent will also acquire an additional 2.80% of equity shares from certain JB Chemicals employees. Subsequently, JB Chemicals will merge into Torrent Pharmaceuticals. Upon the merger, for every 100 shares held in JB Chemicals, shareholders will receive 51 shares of Torrent.
The CCI's approval for the acquisition is subject to voluntary modifications proposed by both companies. These modifications may address potential concerns about market dominance, with Torrent and JB Chemicals reportedly proposing a three-year price freeze on certain drugs.
This acquisition is the second-largest in India's pharmaceutical sector, following Sun Pharma's acquisition of Ranbaxy in 2015. Once completed, the acquisition could elevate Torrent Pharma from the seventh to the fifth largest pharmaceutical company in India. Some reports suggest it could even become the second-most valued pharmaceutical company in the country.
Torrent anticipates synergies and cost savings in procurement, manufacturing, research and development, and distribution beginning as early as Q4 FY26, with the full benefit realized in FY27-28. The company expects borrowing costs to remain under 8% and has secured a ₹20,000 crore credit line from global banks to support the acquisition. Torrent projects its gross net debt/EBITDA to peak at 2.8x in FY27, with a target of reducing it to below 0.5x within two years post-merger. The company anticipates recovering its acquisition cost in approximately 2.5 years following the completion of the deal, based on incremental cash flows and synergies.
The Reserve Bank of India (RBI) recently allowed Indian banks to fund acquisitions, a segment previously dominated by foreign lenders and credit funds. The RBI permitted unrestricted bank lending against listed debt securities and increased the lending limit against equity from ₹20 lakh to ₹2 crore.
The acquisition and subsequent bond issue highlight a growing trend of Indian companies utilizing domestic debt markets to finance large-scale acquisitions.
