Brokerages Raise Concerns Over Zydus Life’s Costly Amplitude Surgical Acquisition

Analysts caution that the high acquisition price and weak synergies could lead to EPS dilution for Zydus Life.

High-Cost Deal Raises Red Flags

Zydus Lifesciences’ decision to acquire an 85.6% stake in France-based medtech firm Amplitude Surgical for €300 million (₹2,700 crore) has received a lukewarm response from analysts, who believe the deal is expensive and lacks meaningful synergies.

• The acquisition is being executed at a massive 81% premium to Amplitude Surgical’s current market price.
• Brokerages Nuvama Institutional Equities, Nomura, and UBS have raised concerns over the deal’s limited strategic fit with Zydus’ core pharmaceutical and wellness businesses.
• EPS dilution of 1–3% is expected in FY26–27, as per estimates from both Nomura and Nuvama.

Brokerages’ Take on the Acquisition

1. Nomura:

   • Warns that MedTech operates differently from pharmaceuticals, requiring distinct R&D and product development capabilities.
   • Sees limited synergies between pharma, wellness, and MedTech, apart from market access.
   • Estimates EPS dilution of 1.5–3% in FY27 but retains a ‘Buy’ call with a price target of ₹1,140.

2. Nuvama Institutional Equities:

   • Notes that Amplitude Surgical lacks the scale to offset rising competition in Lenalidomide (Revlimid), one of Zydus’ key drugs facing revenue decline.
   • Cuts Zydus Life’s price target by 16% to ₹840 while maintaining a ‘Reduce’ rating.

3. UBS:

   • Reaffirms its ‘Sell’ rating with a price target of ₹850.
   • Calls the acquisition too expensive and warns of cash reserve depletion, impacting near-term profitability.

Strategic Risks and Financial Impact

• Long Amortization Period: Assuming 50-100% of the acquisition cost exceeding book value is classified as an intangible asset and amortized over 15–20 years, Nomura expects limited immediate financial benefits for Zydus.
• Execution Challenges: MedTech is dominated by established global players with strong customer loyalty, making it difficult for new entrants like Zydus to gain traction.

Zydus’ Rationale for the Deal

The acquisition is seen as a long-term diversification strategy to compensate for declining revenue from cancer drug Revlimid, but analysts believe the move comes at a significant cost with uncertain returns.

While the company is betting on MedTech’s strong growth potential, brokerages remain cautious due to execution risks, limited synergies, and the high acquisition premium.