Drug major Lupin on Monday said that its promoters, the Gupta family, have called off discussions with the Hong Kong-based firm Newbridge Capital on their proposed 12.5 per cent equity stake dilution in favour of the private equity fund.
Newbridge had issued a non-binding letter of intent to the promoters of Lupin on July 9, stating its intention to buy around 5 million Lupin shares at Rs 252 per share, for a total of Rs 125 crore (Rs 1.25 billion).
Desh Bandhu Gupta, chairman of Lupin, refused to comment on the issue.
Analysts said the development could ruin the possibility of the promoters paying back a large portion of their outstanding debt to the company.
The development comes close on the heels of Lupin selling a strategic stake to CVC International, a Citigroup global investment unit. Gupta and his associates placed 12.55 per cent of Lupin's equity with CVC for Rs 125.9 crore (Rs 1.259 billion).
Following the deal, the promoter group's stake in Lupin fell to 54.62 per cent.
The Lupin promoters had borrowed substantial sums from company at the height of the real estate boom in the early 1990s, but suffered significant losses. The loans subsequently were not paid back.
The promoters had earlier said the stake dilution was primarily aimed at clearing the Gupta family's debts to the company.
Lupin develops, manufactures and markets generic intermediates, active pharmaceutical ingredients and finished dosages.
Lupin's revenue for the financial year 2002-2003 was Rs 1,120 crore (Rs 11.20 billion) on an equity base of Rs 40.1 crore (Rs 401 million).