Management talk: Alembic explains rationale for demerger

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Management talk: Alembic explains rationale for demerger

RK Beheti, CFO of Alembic, in an interview CNBC-TV18’s Latha Venkatesh and Gautam Broker, spoke about the demerger process and the listing of the new entity.

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Alembic fixed April 14, 2011 as a record date to ascertain the eligibility of the shareholders of Alembic Limited to receive the equity shares of Alembic Pharmaceuticals Limited, as per the scheme of arrangement sanctioned by the High Court of Gujarat.

Alembic has been engaged in manufacturing and marketing of fermentation, and chemistry based Active Pharmaceuticals Ingredients (API). It has been into power generation, leasing out real estate and holding certain strategic, long term investments, and research and development activities.

The listed entity will now have power generation and some of the listed businesses as well.

RK Beheti, CFO of Alembic , in an interview CNBC-TV18's Latha Venkatesh and Gautam Broker, spoke about the demerger process and the listing of the new entity.

Below is the verbatim transcript of the interview. Also watch the accompanying video.

Q: When will Alembic Pharma get listed? What will the current listed entity have? Will it have only the power generation and real-estate that the company owns?

A: As far as the legal aspect is concerned, the demerger process is complete and we have filed the honourable Gujarat High court's order with ROC of Gujarat. Now, both the entities are independently working.

The shares are trading ex-scheme of arrangement, so today's price reflects the value of Alembic Limited. Post the record date, we will have to make allotments to all the shareholders of Alembic Limited.

Alembic Pharma has to make allotment of shares to the shareholders of Alembic Limited. After that, we will make an application to the stock exchanges, both BSE and NSE, for listing.

We plan to do it between April 18 and 20 and we would be submitting the application to the exchanges post the allotment formalities. Thereafter, the exchange will have its own course of time for deciding when to list the company. Alembic Pharmaceutical will also be a listed entity.

Q: What is the reason to monetize some of your stake in Alembic Pharma? Why did you demerge the division? Do you want to consider any kind of a stake sale in Alembic Pharma eventually?

A: No, there is no stake sale. The rationale of demerger was to segregate two businesses different in nature. Alembic limited, the current listed company, though it falls into pharma, the line of business is quite different from the core pharmaceutical. That is why we are demerging it.

Q: What is the share of revenues that the current Alembic Limited has in the unmerged business? Was the revenue 50% of the unmerged?

A: 90% of the current business is in Alembic Pharmaceuticals and 10% of the current business is in Alembic Limited.

Q: When do you plan to sell the real estate?

A: No, there is neither any plan nor any proposal to sell the real estate. The plan is to start the development on our surplus real estate.

Q: Would it be commercial or residential?

A: We will have to plan a mix of both.