JB Chemicals Shares Fall: Reasons & Analysis

Shares of JB Chemicals and Pharmaceuticals fell sharply on Monday morning, dropping over 6% to Rs. 1,691.80 on the Bombay Stock Exchange (BSE) around 10:10 am.

The market reaction came swiftly after Torrent Pharmaceuticals announced it will acquire a controlling 46.39% stake in JB Pharma from global investment firm KKR, with plans to subsequently merge the two companies.

In a joint statement released on Sunday, Torrent Pharma, JB Chemicals, and KKR said the deal implies a total equity valuation of Rs. 25,689 crore (approximately $3.01 billion) for JB Pharma on a fully diluted basis. This marks one of the biggest consolidation moves in India’s pharma sector this year.

Under the agreement, Torrent will first purchase JB Pharma shares worth Rs. 11,917 crore from KKR. Following this, it will launch a mandatory open offer to acquire up to an additional 26% stake from public shareholders at Rs. 1,639.18 per share. That open offer price is below JB Pharma’s last closing price, which partly explains Monday’s selloff.

Torrent also aims to acquire an additional 2.8% from certain JB Pharma employees, and eventually merge the two companies under a proposed scheme of arrangement. As per the merger terms, JB Pharma shareholders will receive 51 Torrent shares for every 100 JB shares held.

Torrent’s Executive Chairman Samir Mehta said the acquisition and merger will help the company deepen its presence in the Indian market and expand its global footprint. “This strategic alignment furthers our goal of strengthening our presence in the Indian pharma market and building a larger diversified global presence,” he said.

JB Pharma’s CEO Nikhil Chopra echoed the optimism, stating, “We are confident that the combined strengths of our organisations will unlock greater opportunities to enhance healthcare access across our markets.”

KKR, which bought a controlling stake in JB Pharma in 2020 at Rs. 745 per share, is reportedly exiting the investment with a fivefold return, translating to a 36% gross internal rate of return in rupee terms.

Torrent Pharmaceuticals has been steadily growing its portfolio of chronic and speciality drugs. JB Pharma, known for gastrointestinal and cardiovascular medicines, has also reported strong recent earnings, making this consolidation a significant reshaping of India’s pharma landscape.

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