BTS India Private Equity-backed pharmaceutical firm Parabolic Drugs is looking to raise Rs 200 crore in its maiden public issue. BTS along with another financial investor Alden Global are going to make a partial exit at the IPO.
BTS had originally invested Rs 25 crore through cumulatively compulsorily convertible preference shares in April 2008 which got converted into equity last October. After accounting for bonus issue thereafter, BTS’ average cost of acquisition of shares through this deal works out to be around Rs 54.3. However, it appears BTS also participated in some secondary transaction to buy more shares. The exact cost of purchase in unclear.
As of now, BTS owns 70 lakh shares of Parabolic representing 19% stake of which it is selling 15.3 lakh shares (a third of shares it acquired under the direct purchase) in the public issue.
Similarly, Alden had invested Rs 4 crore in July 2006 which was converted into equity in March 2008. Its average cost of purchase of shares in this investment works out to Rs 33.3 a piece. Alden holds 14.75 lakh shares of which Rs 12 lakh was through its direct purchase, details of its other share purchase is unavailable.
Founded in 1996 by first generation entrepreneurs Pranav and Vineet Gupta, Parabolic is into manufacturing of bulk drugs on contract. It has two manufacturing facilities at Punjab and Haryana. For the six months ended September’09, Parabolic had net sales of Rs 232 crore with net profit of Rs 12.4 crore.
Parabolic plans to use the proceeds of the issue to set up some new production units at its existing plants besides setting up a new plant and retiring loans.
Assuming promoters (who currently hold 63% stake) would like to maintain majority control in the company, the maximum new shares at issue can be 1 crore shares which would give the issue a valuation of Rs 200 a share translating into around 3x ‘net return’ for BTS and 5x ‘net return’ for Alden. If the equity dilution is lower, then the pricing of the issue would need to move up to allow the company to raise Rs 200 crore.