Drugmaker Novartis is set to consider a proposal to buy back its equity shares at a board meeting later this week.

Currently, its Swiss parent Novartis AG holds 75 per cent in the company, while institutions and non-institutions hold 1.43 per cent and 23.57 per cent, respectively. The company’s share price zoomed 17.16 per cent on the news of a buyback to ₹833 at close on the BSE. At this price, the company’s market capitalisation is ₹2,662 crore.

The intent behind the company’s buyback proposal will become clear at the board meeting on Thursday and company officials did not divulge whether Novartis was headed for a delisting from the local stock exchanges.

In 2009, the Swiss parent had decided to hike the equity in its local arm to 90 per cent. But the open offer then did not meet the projected benchmark, despite the participation of institutional investors.

In fact, the company had to raise its offer price in a recessionary market. Despite that, the Swiss parent had increased its holding in the Indian entity to 76.4 per cent from 50.9 per cent. In 2009 another drugmaker Pfizer also had to raise its offer price, while hiking its equity in the Indian entity from 41 to 75 per cent.

Novartis is undergoing some realignment in its local business following its global mega-asset swap with GlaxoSmithKline (GSK), where Novartis got GSK’s oncology portfolio while letting go of its vaccines business to GSK.

In the past, multinationals have looked to up their stake in Indian arms depending on the regulatory environment prevailing in the country.

The other possibility is that the parent Novartis AG itself tenders shares through the buyback and sucks out money from the Indian company’s balance sheet.

The company’s board meeting on May 26 should offer more clarity on this issue.

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