Novartis India N-Exit plan in Disarray: Market Rollercoaster Derails $200 M Stake Sale

strategy

Varshith SV

Stock swings and valuation woes are learnt to have stalled Swiss pharma giant Novartis's plans to sell its 70.68 per cent stake in Novartis India

The Swiss pharmaceutical titan Novartis' much-anticipated exit from its Indian arm has hit turbulent waters, with market volatility and valuation concerns throwing a wrench in the $200 million stake sale, according to a report from The Economic Times quoting sources familiar with the matter. What was supposed to be a strategic retreat from the Indian market has turned into a high-stakes waiting game as potential buyers baulk at current terms.

Just months after global CEO Vas Narasimhan confidently stated the deal was "on track," describing India as "still a small market relative to other global markets," the harsh realities of India's stock market rollercoaster have forced a rethink. Novartis India's share price has taken a brutal 37 per cent nosedive from its 52-week high of Rs 1,248 to current levels of around Rs 780, vapourising nearly Rs 600 crore in market capitalisation since March 2024.

The report reveals three key roadblocks derailing the deal:

"Buyers are not sure about the timing," confessed one industry executive, highlighting how the market turbulence has created a standoff. Potential acquirers - including domestic pharma companies and private equity firms - are playing hardball, waiting for Novartis to blink first on its asking price.

While Novartis India's profit margins have miraculously improved from 13.2 per cent to 34.6 per cent since FY2021, its sales have steadily eroded from Rs 415 crore to Rs 396.75 crore during the same period. As one source bluntly put it: "Novartis might have to lower expectations" for its legacy brands that now face cutthroat competition in the Indian market.

The 2022 distribution deal that handed Dr Reddy's Labs exclusive rights to Novartis India's established brands like the pain drug Voveran has become an unexpected complication. "An ownership change will call for a review of that deal," warned an analyst, unless Dr Reddy's itself steps up as the buyer - a scenario the company refused to comment on when approached by The Economic Times.

Novartis India's official response to the stalled sale was carefully noncommittal: "As a company, Novartis India is not privy to the process of strategic review and does not have any information about any conclusive action on this matter."

The standoff highlights the challenges multinationals face when attempting to exit Indian ventures amid market volatility and regulatory complexities. With the Drug Price Control Order (DPCO) squeezing margins and inflation pressuring costs, Novartis' predicament serves as a cautionary tale for other global pharma players eyeing the Indian market.

As the stalemate continues, industry watchers are left wondering: Will Novartis bite the bullet and accept a lower valuation, or will it wait out the storm in hopes of calmer markets? For now, the Swiss giant's Indian exit strategy remains stuck in limbo, a victim of timing and turbulent markets.

Source: The Economic Times, Novartis India FY2024 Annual Report

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