Delisting pill, yet another time

Though the AstraZeneca Pharma India shares have surged 43 per cent over the last two days, investors should wait for the announcement of the floor price before taking a decision. While the minimum price to be announced by the company-appointed lead managers is likely to be Rs 930-950 (if the two-week averages are taken into consideration), analysts believe the final price could be much higher as the company tries to delist shares for the third time.

Third time lucky?
Its earlier efforts to delist shares in 2002 and 2004 were unsuccessful though the company was able to increase its stake from 56 per cent since then to about 90 per cent now through open offers and open-market purchases. The previous prices for an open offer as well as delisting were at Rs 375 and Rs 825, respectively. Though it is prudent for investors to decide on the issue of tendering their shares post the reverse book building process, they must bear in mind that the company is not under any obligation to accept the price which comes out of it. 

The last time this exercise was done (in 2004) the price was decided at Rs 3,000, which the company rejected. Analysts believe the company’s offer this time around might be attractive given the fact that at least 50 per cent of the outstanding equity by public shareholders needs to be tendered for the delisting offer to go through. 

If the delisting exercise fails, the company will be forced to reduce its shareholding given the new rule of a minimum 25 per cent public holding. Since the AstraZeneca management has maintained that it wants complete control of its Indian operations during the previous open offers, it is likely that the company might pull out all stops to make it successful this time. 

Aggressive expansion plans
The CY09 performance of the company whose cardiovascular and respiratory segments contribute nearly half of its revenues has been disappointing with the total revenues growing at 9 per cent. Operating profit and net profits were down 30 per cent and 22 per cent, respectively, due to a 24 per cent increase in costs on the back of new product launches and investments in key therapeutic categories. 

However, the company plans to expand its presence in the Indian market with new product launches adding to the eight products it launched in CY09. Among its product launches last year was the blockbuster cholesterol drug, Crestor, which grossed revenues of $4.5 billion worldwide for the parent company in 2009. 

The Swedish parent company won an international lawsuit on Tuesday, which will help it to keep the patent on the drug till 2016. The company’s aggressive expansion plans in India can be gauged by the fact that it doubled its sales force last year and wants to become a major player in the Rs 40,000 crore Indian market. 

With just 0.6 per cent market share, the company does not figure in the Top 15 list and is a marginal player, say analysts. Given its plans, this could change.