Strides Arcolab, the Bangalore-based Rs 1,800 crore publicly held mid-size pharmaceutical company, is understood to be firming up plans to raise around Rs 450 crore through a QIP issue. The company is gearing up to raise these funds to part-fund its Rs 900 crore worth of acquisitions which it recently effected over the past 8 months. According to investment bankers close to Strides, the company is close to appointing bankers for the issue which may be expected any time soon. The promoters hold close to 63 per cent.
Qualified Institutional Placement is a route which many Indian companies are tapping into as its a relatively quick process of raising money through a private placement of shares or convertible securities with institutional buyers.
Strides Arcolab, in the recent past, has been pretty active in the acquisitions scenario. This March, Strides bought half the equity in Aspen Pharmaceuticals, a South African generics’ drugmaker, for $117 million (Rs 530 crore). It also acquired Aspen’s unit in Brazil for $75 million, taking the acquisition costs to $192 million (nearly Rs 900 crore). It is understood that $67 million has been paid and another $25 million is expected to be paid by the end of this calendar year. More than half of this initial payout is understood to have been funded from the receipt of licensing fee and internal accruals from a major outsourcing deal it signed with Pfizer during late 2009. According to market information, Strides has time till the end of 2011 to pay the remaining amount.
Strides on its part said that it has all options to raising the funds and will not be able to comment further until an option is finalised. The company recently got its shareholders approval to raise upto Rs 450 crore through equity and has also enabled itself to raise the borrowing limit to Rs 2,500 crore from the present Rs 1,500 crore. The company is leveraged 1.91 times and according to investment bankers Strides may be actively looking to bring parity to this ratio.
The company has been on an upswing ever since it signed a deal with American drug maker Pfizer. The collaboration was to have Strides manufacture 40 off-patent sterile injectables and oral medicines, to be then sold in the US market by Pfizer. The deal has now been expanded to include newer geographies and Pfizer will take these products to EU, Canada, Australia, New Zealand, Japan and Korea.
While the financial terms have not been disclosed, the quantum of the deal is visible from Strides paying in cash for its recent acquisitions. Strides has managed to payout nearly a third of the Rs 900 crore crore which it has to pay for its recent acquisitions.
Industry experts say that the deal is a game changer for Strides as the company was earlier vying for around $100 million PE funding to grow its injectables business. However, according to sources, Strides didn’t pursue it owing to sound licensing fee from Pfizer.
The company has 129 filings before various health regulators by March-end, from which 32 are in pharma and 97 in the specialities space. It has already received 38 approvals as of now and is waiting for the remaining 91 drug approvals from the US health regulator. The mid-size pharma company has 14 manufacturing facilities in six countries, including its joint venture with Aspen in India.
The company posted close to 10 per cent rise in net profit to Rs 45.75 crore for its second quarter (April-June) of 2010 on the back of sound growth in its specialities business. Total revenue of the company witnessed a 56 per cent rise to Rs 484 crore during the second quarter of this calender year. Operating profit of the company also rose to Rs 131 crore, compared to Rs 34 crore an year earlier.
