GlaxoSmithKline makes open offer: More profits, better dividends for MNCs

| Updated on: Dec 16, 2013

The year 2013 seems to be the year of buybacks by multinational companies. Ten months after products and healthcare giant GlaxoSmithKline Plc increased its stake in its Indian-listed consumer subsidiary, it plans to go ahead with it again. This time it has planned to pump in $1 billion by raising its stake from 50.7 per cent to 75 per cent in its pharma arm.

Analysts and market watchers align this trend of multinationals (MNCs) increasing their holding in their Indian entities to the depreciating rupee and the fact that the rate of growth in emerging markets (India) is much faster than that of the developed countries.

Earlier this year, the world’s second largest consumer firm Unilever increased its stake from 52 per cent to 75 per cent through a Rs 29,200-crore open offer, the largest so far. According to market regulator SEBI, Indian companies require a minimum public shareholding of 25 per cent to maintain a public listing in the country.

Saurabh Mukherjea, Head of Equities, Ambit Capital, said that MNCs are realising the growth potential of the Indian market. The mood has been positive since Indian companies have been giving better returns over the last three years. MNCs are seeing these good valuations as a window of opportunity, to invest more in research and development. They are also looking at it as a strategy to bring in more products from the developed markets, he added.

Terming it a long-term strategy, Nitin Mathur of Espirito Santo said that MNCs might be planning to de-list their Indian subsidiaries to escape some regulatory hurdles. He also said that it would mean more profits and better dividends for the parent companies.

Sunil Prasad, Secretary-General, Europe India Chamber of Commerce, said that there is also a growing perception that the new government would be able to attract record investments from companies in the US, Europe and Japan. Hence, a lot of investors are waiting for a change of guard at the Centre next year.

“Ever since Narendra Modi has been named BJP's prime ministerial candidate, there is an air of optimism in business circles, which MNC companies are trying to cash in on,” he said

In a recent report titled ‘Modi-fying our View: Raise India to Marketweight’, Goldman Sachs said that equity investors tend to view the BJP as business-friendly, and its prime ministerial candidate Narendra Modi as an agent of change.

“Going forward, we can see companies such as ING Vysya and Cummins come out with an open offer,’’ said Ambit’s Mukherjea.



Published on March 13, 2018

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