Biocon Biologics Seeks Overseas Debt Financing to Optimize Acquisition Costs

Biocon Biologics, a leading biopharmaceutical company, is planning to raise $950 million through overseas bond sales to refinance a significant portion of the $1.2 billion debt incurred for the acquisition of Viatris Inc.'s biosimilars business. The fundraising effort, which will be managed by lenders including Standard Chartered Bank and HSBC, aims to optimize the company's debt repayment timeline and interest rates, as it navigates the challenges of high acquisition-related costs.

Biocon Biologics Seeks Innovative Financing Solutions to Enhance Profitability

Refinancing Acquisition Debt to Improve Financial Flexibility

Biocon Biologics' decision to raise $950 million in overseas bond sales is a strategic move to refinance a large portion of the $1.2 billion debt incurred for the acquisition of Viatris Inc.'s biosimilars business. By optimizing the debt repayment timeline and interest rates, the company aims to enhance its financial flexibility and reduce the burden of high acquisition-related costs. This initiative aligns with Biocon Biologics' commitment to exploring various avenues, including debt, equity, and hybrid options, to effectively manage its debt obligations and improve profitability.

Engaging Investors in Key Financial Hubs

As part of the fundraising efforts, Biocon Biologics' senior management has recently met with investors in Singapore and Hong Kong, showcasing the company's growth potential and the strategic rationale behind the proposed bond sale. The company has indicated plans to raise between $900 million and $1 billion, with a term exceeding five years, demonstrating its long-term commitment to optimizing its capital structure and reducing financing costs.

Navigating Debt Obligations and Exploring Hybrid Financing Options

In addition to the overseas bond sale, Biocon Biologics has also taken proactive steps to manage its debt obligations. The company has already prepaid $250 million of the $1.2 billion acquisition loan, as reported earlier this year. Furthermore, the company is facing a $335 million payment to Viatris shareholders in fiscal year 2025, including $175 million tied to an option to acquire the biosimilar Aflibercept. Biocon Biologics has indicated that it is in a comfortable position to make the balance $160 million payment, showcasing its financial resilience.

Leveraging Strategic Partnerships to Support Acquisition Financing

To support the acquisition-related financing, Biocon Biologics has secured strategic investments from Kotak Special Situation Fund and Edelweiss. In February 2023, Kotak Special Situation Fund invested ₹1,070 crore in Biocon Ltd., while Edelweiss invested ₹500 crore in non-convertible debentures. These partnerships demonstrate the confidence of investors in Biocon Biologics' growth potential and its ability to navigate the challenges posed by the acquisition-related debt.

Balancing Debt Servicing and Profitability Amidst High Interest Costs

Despite the company's efforts to optimize its debt structure, high interest costs continue to exert pressure on Biocon Biologics' profitability. The company's net profit margins for fiscal year 2024 are projected to be around 7%, reflecting the impact of the acquisition-related debt. Biocon Biologics remains committed to reducing its debt through various financing options, as it seeks to strike a balance between managing its debt obligations and enhancing its overall financial performance.

Biocon Biologics' Contribution to Biocon's Consolidated Revenue

Biocon Biologics, a 70% subsidiary of Biocon Ltd., contributed 57% of the parent company's consolidated revenue in fiscal year 2024, generating ₹8,824 crore out of Biocon's total ₹15,621 crore. This significant contribution underscores the strategic importance of Biocon Biologics within the Biocon group and the company's efforts to optimize its financial structure to support its growth trajectory.