The Hindu Business Line : Merlion to pick 5% stake in Aurobindo at a premium

MERLION India Fund has decided to pick up a sizable stake of over 5 per cent in Aurobindo Pharma Ltd (APL), the city-based pharmaceutical major. This is despite the decision of the APL management to significantly increase the premium for its shares through preferential offer route.

"Merlion India has expressed its intention to pump in funds to the tune of $20 million," sources familiar with the development told Business Line.

According to them, the APL management had recently decided to place shares at a price of Rs 375 per share of Rs 5 each as against the approval earlier obtained from the shareholders of a minimum price of Rs 302 per share (Rs 604 per share of Rs 10 each). The increase in offer price works out to over 24 per cent.

The APL promoters, who initially planned to acquire 12.5 lakh shares of Rs 10 each at a price of Rs 604 per share, have decided to subscribe to the shares at the revised price. They are now subscribing to 25 lakh shares of Rs 5 each at a price of Rs 375 per share.

The APL board had planned preferential offer of 38 lakh shares of Rs 10 each at a price of Rs 604 for raising funds to the tune of Rs 229.52 crore to deploy them for future research and development activities, potential acquisitions, working capital, repayment of high cost debts, and general corporate purposes.

As per the original proposal, Bahrain-based Citicorp Banking Corporation expressed intention to subscribe to 16.5 lakh warrants, while Mauritius-based ChrysCapital LLC planned to acquire 9-lakh shares.

"With the APL management deciding in favour of increasing the offer price, both Citicorp Banking and ChrysCap have stepped back from the deal. As both of them were supposed to bring in allotment money by February 4 - within 90 days from the date of obtaining the approval of shareholders, the resolution now stands cancelled," sources said.

"Aimed at reiterating their commitment, the APL promoters have not only decided to subscribe to shares at the higher premium, but also to pump in more funds than required as per regulations.

"Though the SEBI guidelines on preferential offers allow promoters to pay 10 per cent of the amount at the time of allotment of warrants and pay the balance 90 per cent at the time of conversion of warrants into shares, the APL promoters have decided to pay over 37 per cent as upfront and balance as early as possible. They have already paid Rs 140 per share warrant on February 4 and propose to bring in balance Rs 235 per share warrant at the earliest."

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