Gujarat based pharmaceutical company, Alembic Pharmaceuticals Ltd., is planning stake sales of USD150 to 200 million via QIP placement. The company is trying to catch the tide when the pharma companies are registering significant growth amid COVID-19 outbreak. The pandemic condition has shifted the economy’s focus to pharmaceutical companies, and their stocks are currently rallying in the market.
Alembic saw a steep fall in its share prices in March, but since then, its stocks have bounced back by gaining more than double. Alembic is trying to capitalize on the opportunity when their stocks are high in demand. In the period after March, the company share grew 50 percent as against the benchmark SENSEX, which grew by 45 percent.
Pharmaceutical is one of the few sectors which registered substantial growth amid the pandemic condition. A couple of Indian pharma companies has already launched IPO shares in the exchange. Alembic appears to be walking on the same path. Its directors will meet on June 27 to make the final decision regarding Alembic stake sale.
SEBI Guidelines For QIP Of Equity Shares
Alembic has proposed to launch QIP equity shares in the market, which brings us to the discussion of what QIP is.
QIP is a recognized way for companies to raise capital funds from the market without needing to file the pre-issue legal paperwork with the regulator. It is popular in India and some of the Southeast Asian countries.
SEBI allowed Indian companies to raise funds using QIP placement in 2006, aiming at simplifying fundraising for Indian companies in the domestic market and deterring them from depending on foreign investors. The SEBI guidelines regarding QIP read that QIPs can be equity shares or any financial instrument, apart from a warrant, which can be converted or exchanged with equity shares. Additional guidelines regarding QIP suggest,
- Only QIB or qualified institutional buyers are eligible to bid for QIPs
- QIBs can’t be the promoters or parties related directly or indirectly to them
- QIP size can’t exceed five times the net worth of the issuer (company) as calculated at the end of the previous year
- SEBI requires companies to comply with filing of placement documents containing all information regarding the offer
- The company needs to involve SEBI approved merchant banks to handle the issue on its behalf
- The floor price of the share is decided basis GDR/FCCB issues and subject to adjustment following prices of stocks, splits, rights issues and the like
- If the company is planning to launch QIPs in tranches, it should allow at least six months gap between two releases
- The issuer and appointed merchant bankers must submit all relevant documents of the proposal with the regulator to receive in principal approval
- As mentioned u/s (1A) of Section 81 of the Companies Act, 1956, resolution approving QIP or any other resolution passed shall remain valid for twelve months
Alembic is a 100 years old company with presence across Canada, Europe, Australia, South Africa, and Brazil. The company has a strong market presence in anti-diabetic, cardiology, nephrology, gynaecology, cough and cold, and anti-infectives drugs segments. In the last fiscal, Alembic launched 22 generic drugs in the US and has plans to expand its product offerings further with ten more products by this fiscal.
It is worth mentioning that the company registered 80 per cent growth so far in this year while the benchmark slipped 10 percent. As per the company report published in May, the company’s consolidated net profit grew to Rs 225 crore in March quarter, a total of 81.15 percent surge.
Sources aware of the development mentioned that the raised capital from the share sale would go towards repaying high-cost debts and financing business expansion. JM Financial and Monarch Capital will assist Alembic Pharmaceuticals Ltd. in share sales.