Sun Pharma Ready to Spend Around $7 billion on Further Acquisitions

Encouraged by the takeover of its competitor Ranbaxy Laboratories, India's biggest drugmaker Sun Pharmaceuticals Industries Ltd., seems ready to spend around $7 billion more on such acquisitions.

"What has changed after the Ranbaxy acquisition is that their ambition has grown and now they want to become a global company which is more innovation-oriented," a banker at a foreign bank familiar with Sun Pharma's plans told Reuters.

Sun Pharma is now eyeing acquisitions in the U.S. and the Europe, with a focus on companies that manufacture biosimilars, the low cost products similar to biotech drugs, which are seeing a fast pickup in sales.

However, Dilip Shanghvi, who along with family members holds control in the pharma giant, will remain patient in his search for a suitable company, as he identifies the importance of a "transformational acquisition", the bankers said.

The company, with a market capitalisation of around $36 billion, also appears to make investments in non-biotech complex generic medicines, which bring in higher margins compared to Indian firms that manufacture "simpler copycat drugs".

One such possibility in the near-term is Sun Pharma bidding for any divestments by Teva Pharmaceutical Industries, the world's largest generic drugmaker, arising out of its successful bid to acquire rival Mylan for $40 billion, the bankers added.

Further, Sun Pharma's cash position remains strong to finance any large scale deals. The company's is sitting on a cash pile of $1.5 billion and debt-to-equity ratio stands at only 0.13.

"The company is also generating lot of cash every year and if they don't use it to fuel growth, it will erode shareholder value," said an India M&A head at a European bank.

As a part of its aggressive acquisition plans, Sun Pharma appointed Arvind Kumar in April, to oversee its acquisitions. Kumar has worked as M&A executive at Reliance Industries Ltd and JSW Steel Ltd.