Shasun has decided to issue 35 lakh equity shares of R110 each and another 71 lakh convertible warrants of R110 each to SeQuent Scientific.
There is a great opportunity for Shasun to leverage or capitalise on this opportunity and that is why we are participating through this financial investment
Manish Gupta
CEO
SeQuent Scientific
Bangalore-based custom research and manufacturing services provider SeQuent Scientific will buy a minority stake of 16 percent in Shasun Pharma for nearly Rs 117 crore. Shasun has decided to issue 35 lakh equity shares of R110 each and another 71 lakh convertible warrants of R110 each to SeQuent Scientific.
Speaking to CNBC-TV18 regarding the deal, Manish Gupta, CEO, Sequent Scientific says the company has a board mandate to invest upto Rs 150 crore in Shasun and is awaiting shareholder approval for that entire amount.
Gupta also says the investment in Shasun Pharma is purely financial. SeQuent Scientific is comfortable in making a financial investment with Shasun Pharma and believes in the long-term growth of the company.
"Given the current situation wherein lot of API plant are getting shutdown because of Food and Drug Administration (FDA), we believe there is a great opportunity for Shasun to leverage or capitalise on this opportunity and that is why we are participating through this financial investment," adds Gupta.
Below are excerpts from the interview:
Q: What is your interest in picking up this stake?
A: For us this is a pure financial investment. Having been part of the industry – we announced a strategic tie-up with Shasun on the animal business. We also got a chance to review their pharmaceutical business and found it interesting. Having understood their business model, we had a comfort level with the management team and we believe that they were at a point of inflection in their business model. So, our board was comfortable in making a financial investment in the company to participate in its growth.
Q: Will you not see any kind of synergy with Strides Arcolab?
A: This has nothing to do with Strides. It is an investment made by SeQuent and it's a pure financial investment at this point of time.
Q: What kind of prospects do you see for Shasun?
A: We understand the active pharmaceutical ingredients (API) industry and believe that they are a high quality business in terms of compliance and other parameters that drive this industry. Therefore, given the current situation wherein lot of API plant are getting shutdown because of Food and Drug Administration (FDA), we believe there is a great opportunity for Shasun to leverage or capitalise on this opportunity and that is why we are participating through this financial investment.
Q: Will you buy more in that case?
A: Right now the board has mandated or given us permission to invest up to 150 crore. So, anything beyond that is not foreseen at this point of time.
Q: Do you still have headroom to buy?
A: Yes, the board mandate is to invest up to Rs 150 crore and we still require shareholder approval for that.
Shasun Pharma stock price
On April 17, 2014, Shasun Pharmaceuticals closed at Rs 86.30, up Rs 1.30, or 1.53 percent. The 52-week high of the share was Rs 94.20 and the 52-week low was Rs 45.60.
The company's trailing 12-month (TTM) EPS was at Rs 6.08 per share as per the quarter ended December 2013. The stock's price-to-earnings (P/E) ratio was 14.19. The latest book value of the company is Rs 50.37 per share. At current value, the price-to-book value of the company is 1.71.
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