Aurobindo sells under 5% stake to Merlion for Rs 90 crore

Aurobindo Pharma Ltd, the city-based pharma major, expects to raise close to Rs 90 crore by selling a stake of just below five per cent to the $100 million Merlion India Fund.

APL's equity base of Rs 23.2 crore as on March 31, 2003, is expected to expand by about 10 per cent to reflect the infusion.

The Merlion India Fund is jointly managed by Standard Chartered Private Equity and the Singapore-based Temasek.

Aurobindo is one of the top five Indian pharmaceutical companies in terms of turnover and is one of the five largest manufacturers of penicillin in the world.

The company, which has close to Rs 600 crore debt, is set to see funds infusion of Rs 180 crore "" through the Merlion deal and through conversion of warrants issued to promoter-chairman P V Ramaprasad Reddy.

The stake sale was done at a higher premium than what was originally planned. Merlion and Reddy are both paying Rs 375 per share (face value of Rs 5 post a split in October 2003), which is Rs 73 higher than the original proposal.

Aurobindo will use the money to retire high-cost debt and also utilise it for capital expenditure. A source close to the development said Aurobindo has already received Rs 35 crore from Reddy. The company expects to receive money from Merlion in the next couple of days, the source added.

As per the Securities and Exchange Board of India guidelines, in cases where convertible share warrants have been allotted, promoters need to pay up a minimum 10 per cent of the money immediately, while the rest can be paid when the warrants are converted into shares.

Reddy will have to convert an additional Rs 58 crore worth of warrants in the next 18 months "" he has been issued 25 lakh convertible warrants. In the case of Merlion, fresh equity shares have been issued.

Earlier, the Bahrain-based Citicorp Banking Corporation had evinced interest in taking a stake in the company at Rs 302 per share. The Mauritius-based ChrysCapital LLC had also agreed to invest at the same price in the company.

According to sources, with the Aurobindo management deciding to increase the offer price, the two companies did not have enough time to get nods from their respective shareholders. This was because the original board resolution envisaged money coming into the company by February 4.