*Suven Life Sciences De-merger Update*
Suven Life Sciences has demerged its CRAMS business into one of its wholly owned subsidiaries Suven Pharmaceuticals Ltd. In consideration for the demerger, shareholders of Suven Pharma shall issue 1 share for each share of Suven Life Sciences. Post record date (22nd Jan 2020), allotment of shares will be done by the end of this month and simultaneously company will also file applications to exchanges. We think it will take 45 to 60days, subject to queries and observations from SEBI.
*Post demerger, we expect a reduction in the R&D expense and will improve margins (by~650-700bps), which will unlock value of existing CRAMS business. We value CRAMS business (Suven Pharmaceuticals Ltd) (excluding the R&D spend) at INR 367 based on FY22 earnings (18x P/E) and Suven life sciences (currently listed) at INR 25 based on combined NPV of 3 NCE molecules.*