Novartis AG,the $41.5-billion Swiss pharma giant,said on Wednesday that it would take an additional 39 per cent stake in its Indian subsidiary,Novartis India Ltd,through an open offer to public shareholders at a price of Rs 351 per share. Though the company has not indicated it,there is a possibility that the company would go for delisting from the stock exchanges in the near future,analysts said. A company listed on the stock exchange can opt for delisting when the promoter holding crosses 90 per cent.
The price is a 27 per cent premium to Novartis India’s share price of Rs 275.60 on the Bombay Stock Exchange (BSE) on Tuesday. Successful completion of this offer,valued at Rs 440 crore (around $87 million),will raise Novartis’ stake in its Indian arm from 50.9 per cent at present to around 90 per cent,the company said in a note to the BSE.
Following the announcement,Novartis shares were up 20 per cent or Rs 55.10 on the BSE on Wednesday to close at Rs 330.70. The offer for these shares is expected to open in May 2009 and is subject to regulatory approvals,the company said.
The offer also represents a premium of 35 per cent over Novartis India’s average share price during the last month. A host of multinational corporations (MNCs) that listed their Indian entities on stock exchanges had delisted shares in the last couple of years,thereby enabling them to avoid tough listing norms and public scrutiny. Reckitt Benckiser,Kodak,Rossell Industries,Otis Elevator and Carrier Aircon are some of the MNCs that delisted their Indian entities. Even Indian companies were involved in delisting their shares.
According to an analyst,the move by Novartis will help improve the company’s share price. “Typically,promoters go for delisting when share prices are at rock bottom-levels. This is against the interests of small investors. Share prices of most of subsidiaries of multinationals in India have been languishing,” said an analyst.