Torrent Pharma rises 2.5% ahead of board meet for fund raising

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Moneycontrol Bureau

Shares of Torrent Pharmaceuticals extended last week's rally, up 2.5 percent intraday Monday ahead of board meeting to consider fund raising. Last Friday, the stock gained 4.5 percent.

"Board of directors of the company, on March 23, will consider proposal for raising of funds by way of issue of equity shares including convertible bonds / debentures through qualified institutional placements (QIP) or depository receipts or any other modes," says the Ahmedabad-based pharma company in its filing.

The board will also consider issue of unsecured / secured redeemable non-convertible debentures/ bonds by way of private placement. Post board approval, this proposal needs to be approved by shareholders.

Credit Suisse, which has upgraded Torrent to outperform from neutral last week, says although no amounts are mentioned currently, current proposal is likely to be an extension of the previous year's approval for raising funds.

Torrent's board had passed a similar proposal for raising equity through QIP of Rs 3,000 crore and issue of debentures of Rs 7,500 crore in January 2015 and shareholders had approved this in an extraordinary general meeting March 9, 2015. These proposals are typically valid for one year and the current proposal coincides with the expiry of the one year.

The company has paid high dividends in FY16. "FY16 dividend is high at Rs 35 per share (total outgo of Rs 69 crore) and includes a special dividend of Rs 15 per share in March 2016. Overall the FY16 dividend payout is high at 42 percent compared to the historical 30 percent range of profits," it explains.

The brokerage says this fund raising could be for acquisition.

"Torrent has mentioned, on its call, about the possibility of strengthening its US pipeline through a possible acquisition (Torrent has only 16 ANDAs pending). In the branded generic markets, Torrent is looking for acquisitions in India and Brazil. Torrent has cash of Rs 90 lakh on its books (gross debt of Rs 2000 crore). With board of directors’ approval, the QIP route could also be used, in case of a big acquisition," Credit Suisse explains.

Last week, Torrent Pharma received establishment inspection report from the US health regulator for its Dahej SEZ plant in Gujarat. With this, three out of five plants of company have received US FDA nod. Its other USFDA approved plant includes Indrad, Gujarat and Pithampur (Indore), MP.

At 14:39 hours IST, the scrip of Torrent Pharmaceuticals was quoting at Rs 1,346.00, up Rs 33.25, or 2.53 percent on the BSE.Posted by Sunil Shankar Matkar