Symphony Capital-owned investment entity Zenith Pharmaceuticals has almost completely exited its nine-year-old investment in Bangalore-based drug-maker Strides Arcolab with 5.7x returns.
The investment firm sold almost its entire 19% stake held in the company for Rs 320 crore ($72 million) through open market sale. Bulk of the shares were bought by a bunch of institutional investors including Morgan Stanley Mauritius, Deutsche Securities Mauritius, SBI Life Insurance, Reliance Life Insurance, Carlson Fund and Reliance Mutual Fund.
This brings to an end one of the longest investment by a private equity firm in the country. Zenith is believed to have originally invested in the late 90s and it thereafter hiked stake to as much as around 71% in Strides through a preferential allotment around nine years ago in a deal worth around Rs 96 crore. The company was merged with Bombay Drugs & Pharmaceuticals around the same time.
In 2004, it had sold a large chunk of shares (estimated at double the acquisition cost in little over two years) which brought down its holding to around 36%. It had been holding on to the shares for the last five years even as the percentage ownership dwindled to around 31% due to change in equity base.
Zenith held as much as 30.96% in Strides as of December 2009. It sold around 5% in mid-January for around Rs 47 crore and further shares in March, netting around Rs 25 crore. The last transaction was struck at Rs 329/share against the cost of purchase of around Rs 70/share in late 2001.
Incidentally, promoters including Arun Kumar and K Ravishankar who owned around 25% as of end-December have converted warrants into equity and as of June 30 owned 30% stake.
Strides Arcolab, that recently acquired a facility centre of Brazilian drug-maker Aspen for $75 million, manufactures a range of generic drugs and tablets. The company is among the top five softgel capsule manufacturers with 14 manufacturing facilities across six countries including the US, UK, Mexico, Brazil and India. Net sales and net profit of the company in the year ended December 2009 were Rs 1,328.33 crore and Rs 121.03 crore, respectively.