MUMBAI, February 5: The board of SmithKline Beecham Pharmaceuticals Ltd will consider an issue of bonus shares and dividend at a meeting scheduled for February 18. The board will also consider the company's annual accounts.The news saw the SmithKline scrip rise by over 9 per cent to touch an intra-day high of Rs 622.25, a new 52-week high, on the Bombay Stock Exchange on Thursday. However, according to market sources, profit-booking at higher levels by institutional operators saw the stock close at Rs 608, registering a gain of 7.16 per cent over Wednesday's close.
On the NSE, the scrip touched an intra-day high of Rs 625.80 before closing at Rs 608.80, with 96,000 shares changing hands.
A Reuters report quoted brokers saying that an intimation of the board meeting was flashed on trading terminals of the National Stock Exchange at 1042 local time (0512 GMT).
"The flashing of the board meeting on the BOLT and NEAT left little scope for punters to play on rumours," a BSE broker said.
Analysts heresaid that the bonus proposal indicates that the company's trend of registering a good performance in the first half of the year continues mainly due to the success of antibiotic brand Augmentin and new generation hepatitis vaccine brand, Engerix.
Augmentin, one of the top-selling antibiotic brands in the European market, is estimated to be growing at a rate of over 40 per cent. Engerix is growing at about 43 per cent, though competition from domestic vaccine brands could blunt this growth.
Analysts expect the bonus to be better than the company's existing record and added that the company was growing at about 28-30 per cent, which is among the highest growth rates in the industry. Sister-concern SmithKline Beecham Consumer Healthcare (SBCH) had, in March last year, declared a 3:5 bonus issue.
Given the proposed merger with Glaxo-Wellcome globally, analysts added that even if the company declared a 1:1 bonus, its earnings per share would be higher than Glaxo India.
SmithKline's last bonus was in 1994,when it capitalised its reserves in the ratio of 3:5.
1:1 bonus could smoothen merger
There is a strong possibility of SmithKline Beecham Pharma announcing a 1:1 bonus. Though the company has enough reserves to capitalise, the bonus could smoothen the process of its merger with Glaxo (India).
This is because a liberal bonus would help SmithKline Beecham Pharma to dilute its book value and thus bring it almost at par with the other group company SmithKline Beecham Consumer and its prospective partner Glaxo.
Since Glaxo (India) is a much stronger company with a higher turnover, strong brands, fixed assets, investments and undervalued assets, the merger ratio has to be loaded in favour of Glaxo (India). But the current book value and market price makes SmithKline a relatively stronger company and there is a gap of more than Rs 25 in the book value of SmithKline Pharma and Glaxo (India) (pre-Glaxo-Wellcome merger). A bonus would also help narrow this gap. While SmithKline Beecham Pharma's scrip isquoting at Rs 610, Glaxo (India) trades at around Rs 356. SmithKline's ex-bonus price could settle at around Rs 350.
Merger compulsions apart, a one for one liberal bonus is more likely as the company has a relatively small equity base of only Rs 14.7 crore and the reserves of Rs 85.02 crore are more than five times the current equity.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
