Pharmaceuticals giant Piramal Pharma has received the green light from capital markets regulator SEBI to raise up to Rs 1,050 crore through rights issue of shares. The stock settled 1.09 percent lower at Rs 100.30 apiece on the BSE in trade Tuesday. Piramal Pharma shares halved over the last 12 months.

Share Market Live

NSE

The pharma company submitted the draft papers with the regulator in March and obtained an observation letter from SEBI on July 12, an update with the Securities and Exchange Board of India showed on Tuesday.

SEBI's observation signifies its approval for public offerings, including initial public offerings (IPOs) and rights issues.

According to the draft papers, Piramal Pharma will issue fully paid-up equity shares of the company by way of a rights issue to its existing eligible shareholders for an amount aggregating up to Rs 1,050 crore.

The proceeds from the issue will be utilised for payment of debt and general corporate purposes.

"Upon examining the draft papers, it is clear that Piramal Pharma has a strategic plan for utilising the funds raised through this rights issue. By offering fully paid-up equity shares, the company ensures its existing eligible shareholders' participation, reinforcing its commitment to stakeholder value. The planned utilisation of the proceeds to pay off debt and for general corporate purposes signals a prudent approach towards financial management," said Sonam Chandwani, Managing Partner, KS Legal & Associates.

This could potentially strengthen the company's balance sheet, optimise capital structure, and enable it to pursue growth opportunities. "While this is a strategic move for Piramal Pharma, it's crucial for investors to assess their risk appetite and the potential for return on investment," Chandwani added.

Earlier this month, US-based investment firm Smallcap Fund Inc sold its entire stake in Piramal Enterprises through block deals. Smallcap Fund Inc offloaded 23.92 lakh shares or 1 percent stake in the company, according to data from exchanges.

Further, New Fund World also offloaded 1.45 percent stake in Piramal in the transaction, which was executed at Rs 941 apiece. Among the buyers were marquee investors including Tata Mutual Fund, Societe Generale, Morgan Stanley, Goldman Sachs, Citigroup, BoFA Securities, bulk deals data showed.

Piramal Enterprises is majority owned by public shareholders at 56 percent, while promoters own the rest of 43 percent in the company. Among the public shareholders, mutual funds have about 4.25 percent stake, and foreign investors own 28.4 percent in the company, as of March quarter.

Foreign brokerage Jefferies has a ‘Buy’ rating on Piramal Pharma, with a target price of Rs 115 per share. The brokerage said the company has begun financial year 2024 on a very strong note with a healthy order book in its CDMO division, increasing FTE demand, and supply normalisation in complex hospital generics.

Nuvama has initiated coverage on Piramal Pharma with a 'Buy' recommendation and a price target of Rs 130 per share. The price target implies a potential upside of 41 percent, as the brokerage expects a strong recovery in the company's overall business.

First Published:Jul 19, 2023 8:55 AM IST