The Guptas, promoters of domestic pharmaceutical major Lupin Ltd, on Wednesday announced that they would offload 12.55 per cent stake in the company in a negotiated deal to CVC International, a Citigroup associate, for Rs 125.9 crore (Rs 1.259 billion).
The deal was struck today at Rs 250 a share, a sharp discount to yesterday's close of Rs 303.15 on the Bombay Stock Exchange. The agreement between the Guptas and CVC is non-binding and subject to due diligence.
The promoter holding in the company as a result of this deal will come down to about 55 per cent. The Guptas had been weighing the option of diluting their stake in the company for quite some time.
It has been speculated that the Guptas will sell part of their holdings in Lupin to pay off debt incurred by their privately-owned real estate companies.
Lupin has been working on a debt recast plan for some time now. The company, which has an equity base of Rs 47.14 crore (Rs 471.4 million) and a net worth of Rs 339 crore (Rs 3.39 billion), had outstanding debt of almost Rs 628 crore (Rs 6.28 billion) till March 2002.
It is learnt that the promoters are planning to sell some more of their holdings in Lupin and are in negotiations with a few more private equity funds.
A source close to the company said: "An announcement will be made at the appropriate time."
Analysts said the deal would bode well for the company as the Guptas could use proceeds from the sale to pay back advances that Lupin had made to promoter-led real estate ventures.
"We are expecting that the deal will eventually help Lupin clear up its balance sheet," a pharma analyst said.
Lupin is one of the world's largest producers of anti-TB drugs and one of India's largest manufacturers of active pharmaceutical ingredients and formulations.
The company, for the financial year closing March 2002, posted a net profit Rs 72 crore (Rs 720 million) on a Rs 956 crore (Rs 9.56 billion) turnover.
Last year, Lupin embarked on a debt reduction plan and a voluntary retirement scheme to improve its finances.
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