British drug-maker GlaxoSmithKline has said that it would increase its stake in its publicly listed pharmaceuticals subsidiary in India — GlaxoSmithKline Pharmaceuticals Ltd — from 50.7 per cent to up to 75 per cent at Rs 3,100 per share.

Public shareholding

Securities regulations in India require a minimum public shareholding of 25 per cent for a company to maintain a public listing in the country. GSK intends to keep the company publicly listed, it said.

The company shares shot up 18 per cent at Rs 2919 on the BSE in the morning trade.

The potential total value of the transaction is approximately Rs 6,400 crore or £629 million.

David Redfern, Chief Strategy Officer, GSK, said: “For GSK this transaction will increase exposure to a strategically important market and for our Indian pharmaceuticals subsidiary’s shareholders, we believe it offers a good liquidity opportunity at an attractive premium.

“GSK has a proud heritage in India. Today’s announcement is a further demonstration of our long-term commitment to the country having increased our holding in our consumer business earlier this year and more recently committed to a significant manufacturing investment.”

SEBI norms

The offer, which is made pursuant to the rules of the Securities and Exchange Board of India (SEBI), is to acquire up to 2,06,09,774 shares, representing 24.3 per cent of the total outstanding shares of the Indian Company.

The offer represents a premium of approximately 26 per cent to the company’s closing share price on the National Stock Exchange of India on December 13. This closing price represents an appreciation of 19 per cent over the last 12 months.

Funding mode

The transaction will be funded through GSK’s existing cash resources, will be earnings neutral for the first year and accretive thereafter and will not impact the expectations of the Group’s long-term share buyback programme.

GSK’s Indian pharmaceuticals subsidiary manufactures, distributes and commercialises pharmaceuticals and vaccines across multiple therapeutic areas, including respiratory, cardiovascular, oncology, anti-infectives and dermatology.

Turnover, headcount

The company employs more than 5,000 people across its operations and generated more than Rs 2600 crore turnover in the financial year ended December 31, 2012 (approximately £313 million at 2012 average exchange rates).

The company’s profit before tax in the financial year ended December 31, 2012 was approximately Rs 980 crore (approximately £116 million at 2012 average exchange rates) and approximately Rs 560 crore after tax and exceptional items (approximately £66 million at 2012 average exchange rates). Subject to regulatory clearance, the offer period is expected to begin in February 2014.

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