GlaxoSmithKline (GSK) on Monday became the latest multinational to boost its investments in India, with a £629 million ($1 billion) offer to increase its stake in its India-listed drug unit
The UK-listed pharmaceuticals group is offering Rp3100 per share in GlaxoSmithKline Pharmaceuticals, a premium of about 26% to the stock's December 13 close on the National Stock Exchange of India, taking its stake from 50.7% to as much as 75%.
Earlier this year, GSK raised its stake in another Indian listed unit - GlaxoSmithKline Consumer Healthcare - from 43% to 72.5% for about $900 million.
Foreign investors were quick to dump bonds and stocks from May to September, amid worries over emerging market growth, causing the rupee to depreciate sharply. The currency has since stabilised, although markets are expected to stay volatile ahead of the Indian elections next year.
Despite the volatility, some multinationals have taken the opportunity to boost their investments in India. “For GSK this transaction will increase exposure to a strategically important market and for our Indian pharmaceuticals subsidiary’s shareholders we believe it offers a good liquidity opportunity at an attractive premium,” David Redfern, chief strategy officer for GSK, said in a statement.
In July, Unilever, which makes Dove and Lux soap, acquired an additional 14.8% stake in its Indian subsidiary Hindustan Unilever for $3.2 billion.
GSK's Indian drug unit makes and distributes pharmaceuticals and vaccines and generated more than Rs26 billion ($418 million) in revenue in the financial year ended December 2012.
HSBC was the sole adviser to GSK and is managing the public offer, which is expected to begin in February 2014, subject to regulatory clearance.
In a statement, GSK said it intends to keep the company listed. Indian regulations require a minimum free float of 25% for a company to stay listed. The deal will be funded through GSK's cash resources and it will be earnings neutral for the first year and accretive thereafter.
GSK has been re-balancing its business to focus on its core portfolio of consumer healthcare brands and earlier this year, sold off its drinks brands Lucozade and Ribena to Suntory.