Rubicon Research in talks to raise Rs240 crore from Everstone Capital, HNIs

Mumbai: Rubicon Research Pvt. Ltd, a Mumbai-based contract research and manufacturing services (CRAMS) firm, is raising up to Rs.240 crore from home-grown private equity firm Everstone Capital and a clutch of high-net-worth individuals (HNI), three people aware of the development said.

“The company is in advanced talks with Everstone and a few HNI investors to raise Rs.240 crore. Everstone Capital will be investing around $25 million (approximately Rs.168 crore) in the round. The transaction is expected to be closed shortly,” said one of the three people. All three requested anonymity as the talks are private.

Investment bank IDFC Securities Ltd is advising Rubicon on the transaction, he said, adding that Everstone is acquiring a controlling stake in the firm.

The Mumbai-based company’s main business lines include contract research services and product development and licensing services. Rubicon offers pharma firms a range of services from formulation development to analytical services. The company also offers lifecycle management services for pharmaceutical products.

The latest fund-raising will also enable a complete exit to its investor Kotak Private Equity, which had invested an undisclosed amount in the company in August 2008, said the second person mentioned above.

“The investment has both a primary and a secondary component. Kotak PE is selling its entire stake in the company. The primary component, however, is bigger than the secondary purchase of Kotak’s stake,” he said.

The primary capital will be used to increase the company’s manufacturing capabilities so that it can serve more customers and offer additional services to them, he added.

According to data from the company’s filings with the registrar of companies (RoC), Rubicon reported revenue ofRs.39.53 crore in 2014-15, compared to Rs.41.7 crore in the previous year. In 2014-15, the company reported a profit ofRs.2.66 crore, against Rs.4.49 crore the previous year. The latest financial numbers of the company were not available with the RoC.

The company focuses on regulated markets and more than 85% of its revenue is generated from export markets such as the US and Europe.

Everstone Capital declined to comment on the development. Emails sent to Rubicon and Kotak PE went unanswered.

The company claims to have filed around 53 patents as of 31 March 2015. It is focusing on developing products that would enable it to increase its presence in regulated markets of the US and Europe.

Rubicon currently operates a facility at Ambernath near Mumbai, which was set up in 2010. The plant is compliant with US Food and Drug Administration and EU specifications, according to the company’s website.

Rubicon has the capability to develop and manufacture oral solid dosage forms such as powders, granules, pellets, immediate release tablets, dispersible tablets, etc.

According to industry experts the contract research and manufacturing space has seen a revival in PE interest lately.

“Investors are looking for companies that are into making differentiated products, which are difficult to make and have higher margins. Though there has been a revival in interest, investors will continue to shy away from players that are into commoditized products,” said Manish Begrajka, executive director at advisory firm Euromax Capital.

Last month, Mint reported that Mumbai-based Encube Ethicals Pvt. Ltd is in advanced talks with Renuka Ramnath-led PE firm Multiples Alternate Asset Management Pvt. Ltd to raise around Rs.275 crore. Encube Ethicals is a contract development and manufacturing firm for topical semi-solid formulations such as gels and ointments. It serves pharma and cosmetic companies in the US, Europe and India.

Last year, another contract research services firm, Biocon Ltd’s subsidiary Syngene International Ltd, issued an initial public offering that was subscribed almost 32 times.

In 2014, India Value Fund Advisors, a home-grown PE fund, had picked up a 10% stake in Syngene, through its fund Silver Leaf Oak (Mauritius) Ltd for about Rs.380 crore.

The growth of contract research and manufacturing firms is closely linked to the growth in global pharmaceutical research and development (R&D) spending.

According to a February 2015 report by Frost & Sullivan, the global R&D expenditure for the pharmaceutical industry in 2014 was approximately $139 billion, of which $105 billion could have potentially been outsourced.

The global contract research and development market, in terms of value, was approximately $28.8 billion in size in 2014 and is expected to reach $44.6 billion in 2018, reflecting a growth rate of 11.6%, according to the report.

Everstone, the PE and real estate investment firm, has assets under management of more than $3.3 billion. Last September, the PE firm announced that it has raised its third fund, Everstone Capital Partners III, with a corpus of $730 million.

The PE firm has invested in companies including fashion house Ritu Kumar, VLCC Healthcare Ltd, Internet services provider Tikona Digital Networks, beauty salon chain YLG India, restaurant operator Pan India Food Solutions Pvt. Ltd (Blue Foods), food products maker Capital Foods Ltd, wind-turbine maker Regen Powertech Pvt. Ltd, non-banking financial company IndoStar Capital Finance Pvt. Ltd, healthcare services provider Global Hospitals Group and winemaker Sula Vineyards.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.