Mumbai: Indian billionaire Cyrus Poonawalla is in talks with private equity firms and sovereign funds about selling as much as a 10% stake in Asia’s largest vaccine maker, Serum Institute of India Ltd.

Serum is seeking a valuation of as much as ₹ 80,000 crore ($12 billion), chief executive officer (CEO) Adar Poonawalla said. The company is in discussions with funds from Singapore and the US about the sale of a 5 to 10% stake, he said in a 16 September interview at Serum’s headquarters in Pune.

Selling a 10% stake at that valuation would be the largest private-equity investment in India, according to data compiled by Bloomberg. Private-equity transactions in the country more than doubled this year to $11.2 billion, up from $4.6 billion the same period in 2014, the data show.

“This would be just capturing the crazy valuations right now that information technology companies and pharmaceutical companies are getting," Poonawalla, 34, said. “Looking at all this, we decided: why not unlock some value if the valuations are good?"

Acquirers of Indian drug makers over the past five years paid a median 35.6 times earnings, compared with 21.9 times for such deals globally, according to the Bloomberg-compiled data. Listed Indian pharmaceutical and biotechnology companies trade at a median 31.6 times earnings, up from 22.7 times earnings a year ago, the data show.

Philanthropy plans

The incoming investor would get one board seat, according to Poonawalla. Serum could provide an exit for the investor in about seven years, either through a merger with a listed company or an initial public offering, he said.

The family’s closely held Poonawalla Group will use the proceeds from the stake sale to fund philanthropic programmes. The group’s activities include setting up a new hospital, as well as education and sanitation work in Pune, according to Poonawalla.

Serum will decide on whether to sell a stake in the next one or two months, Poonawalla said.

“We’re just waiting to hear back from the funds on their conditions and their valuations and what they would expect," he said. “Then we’ll go from there."

The vaccine maker is fully owned by the Poonawalla family. The Serum CEO’s father, Cyrus Poonawalla, has a net worth of $8.5 billion, according to the Bloomberg Billionaires Index. An ₹ 80,000 crore valuation would value Serum at about 30 times earnings, plus an additional ₹ 20,000 crore for its product pipeline, the younger Poonawalla said.

Cipla partnership

Serum had sales of about ₹ 4,000 crore in the 12-month period that ended in March, and net income of ₹ 2,000 crore, Poonawalla said. It plans to triple revenue to ₹ 12,000 crore over the next seven to eight years, as the company begins offering new products including a rotavirus vaccine that protects against five strains of the pathogen, he said.

The company also plans to start selling its main products in Europe in two years through a partnership with Cipla Ltd, Poonawalla said. Serum in November signed a Europe distribution agreement for affordable pediatric vaccines with the Mumbai- based generic drugmaker, which will equally share the profits from the partnership.

Cipla, which was founded in 1935 and made its name selling generic HIV therapies in Africa, has a market value of $8 billion. Serum isn’t discussing a merger with Cipla and is focused on its commercial partnership with the company, according to Poonawalla.

“Both companies are growing very well on their own. We really have to evaluate if it makes any sense" to pursue a merger, Poonawalla said. “Anything is possible in the future." Bloomberg

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