The Merlion India fund has reached an agreement to buy 3.1 million shares or 5.46% of listed Indian pharmaceutical company Aurobindo Pharma. The fund will pay Rs302 per share for a total consideration of Rs936.2 million ($20.5 million). The price that Merlion is paying for the shares is in compliance with SEBI guidelines using the last two weeks average traded price, which is calculated as the average of the high/low of the last two weeks' prior to the notice of the EGM.
This is the first such investment made by the Merlion Indian fund, which was established in August this year. The fund has $100 million to invest in Indian companies seeking growth capital. It will also invest in regional companies looking to expand into India. Standard Chartered Private Equity and Temasek jointly manage the fund.
Aurobindo Pharma is one of the top five Indian pharmaceutical companies by terms of turnover and is one of the five largest manufacturers of penicillin in the world. It has six manufacturing plants and one R&D centre making products such as antibiotics, antivirals, antidepressants, antifungals, cardiovasculars and macrolides. It has annual sales approaching $250 million a year and is seeking US FDA approval for two of its manufacturing plants.
The investment comes at a time when Singapore Inc is looking very closely at both India and at biotech. The Merlion Fund itself was established in the wake of the Comprehensive Economic Cooperation Agreement (CECA) between Singapore and India that was signed earlier this year, and which is aimed at securing investment and economic ties between the two countries. Indeed the CECA looks very much like the CEPA signed between Hong Kong and China in that both agreements give preferential access to companies from the advanced economies to the huge hinterland markets of China and India. Further links between India and Singapore have been established in recent days when it was announced that the two countries' stock exchanges are exploring closer ties with the aim of allowing dual listings for Indian and Singaporean companies.
Temasek has also been showing great interest in the biotech sector in recent months, putting real money behind its spoken strategy that the sector is a crucial one for Singapore Inc. In late September it was announced that Temasek had invested $90 million for a stake of 16.4% in Quintiles, a US company that is the world's largest provider of clinical trial and commercialisation services to the pharmaceutical and biotech industries. Temasek was part of a consortium, Pharma Services Holdings, which made a successful bid of $1.8 billion to merge with Quintiles.
The Aurobindo investment has to be approved at an EGM at the company's Hyderabad headquarters on December 26. The allotment of new shares will be completed by March 25. According to a shareholders' resolution being presented at the EGM, the proceeds from the issue will be used "to mobilize funds for funding future Research & Development activities, potential acquisitions, repayment of high cost debts, working capital and general corporate purposes."
