With five pharmaceutical companies, including three multinationals, due to announce their annual results this week, their scrips are much in demand. Glaxo, Burroughs Wellcome and Pfizer have seen considerable demand for their shares recently, with German Remedies also finding a place in the group even though its results are due a little later. Merind, a Tata group company which follows a March year-ending, is also reportedly getting ready to announce its third-quarter earnings. The company is looking at a revenue growth of 35-40 per cent, and an annualised net profit of about Rs 8-10 crore. But that is only a partial explanation for the demand for Merind's shares.Merind has very often been at the centre of controversy over its future ownership. Currently, it is substantially owned and managed by the Tata group, but for long there have been rumours that the company may be taken over by leading companies in the domestic pharma industry. Like Cipla, another domestic pharma company, the markets have taken itfor granted that the present substantial owners are planning to get out of the business, despite frequent statements from the management stating otherwise.
Recently, when Glaxo announced its grandiose acquisition fund, the market reacted not just in Glaxo's stock, but in Merind as well. Then came reports about a leading FII broking house having got the mandate to look for a buyer for the Tata stake in the company.
The latest round of news surrounding Merind has been that Wockhardt (also due to announce its results this week), its reported long-time suitor, was seeking to buy out the majority stake. And this time around, despite denials from the Wockhardt management, the market seems to be in no mood to relent. With corporate India beginning to mature in terms of seeking growth through acquisitions, the news of the deal going through seems more believable now than before. And going by the kind of stocks reacting to possible takeover attempts these days, especially in the cement and textile sectors,Merind's rumoured takeover at least seems plausible and beyond the shadow of covert manipulation. In their group's business restructuring plan, the Tatas have identified Merind as one of the non-core businesses that they would like to exit from.
Merind is a healthy profit-making company with a very strong product in vitamin B12, in which it is a market leader. It also has, as part of its portfolio, the bulk drugs business of Tata Pharma, a one-time division of Lakme, which is a leading manufacturer of an anti-malarial bulk drug.
Further, any takeover of the 47 per cent Tata stake will necessitate the buyer to make a public offer for a minimum additional shareholding of 20 per cent from the minority shareholders. Under the Sebi guidelines, this will have to be made at the last price paid for the stock. Since the rumoured price agreed upon is around Rs 250 per share against a market price of Rs 170-176 (the stock was trading at Rs 120 when the reports surfaced recently, subsequently having appreciated by 45per cent), the open offer will have to be made at the same price and hence the growing demand for the stock.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
