UK-based GSK group’s open offer to increase its stake in Indian arm GSK Pharma received strong response, as investors tendered their shares. This oversubscription would help the parent company increase its holding to 75 per cent from the existing 50.67 per cent.

The offer, which was open from February 18 to March 5, saw the tendering of over 2.3 crore shares by public shareholders as against an offer for 2.06 crore shares. The UK major fixed the offer price at ₹3,100, making the total issue size ₹6,389 crore. Final payment for shares tendered and accepted will be completed by March 20.

According to analysts and industry watchers, the key to the offer’s success was the attractive price of ₹3,100 a share, offering a good exit option for existing investors to cash out and then buy at lower levels.

Sailav Kaji, Director — Institutional Equities and Chief Strategist, Padmakshi Financial Services, said the financial performance of GSK Pharma has not been well in the last few quarters.

In 2013, the Government revised the National Pharmaceutical Policy, increasing the number of drugs under price control to 348 from 74. Over 28 per cent of the company’s current sales fall under National List of Essential Medicines. For the year ended December 31, 2013, GSK Pharma saw revenues decline 3 per cent to ₹2,538 crore with net profit shrinking 14 per cent to ₹482 crore.

“As in the normal course investors would have to wait for three to four years for the stock to reach ₹3,100 levels, it makes sense for them to exit the stock at the offered price and invest in other pharma company stocks focussed on exports and doing better,” added Kaji.

Rikesh Parikh, Vice-President — Equities, Motilal Oswal Securities, said: “Going forward, we are neutral on the stock though investors could consider entering this stock around ₹2,400. The stock may have limited upside after the oversubscription as no new impetus is there.”

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