Strides Arcolab has sold its Agila Specialties Division to Mylan for a total of USD 1.75 billion, but USD 250 million of that has been held back by Mylan. However, Hitesh Mahida of Fortune Equity Brokers believes Strides Arcolab is likely to get the remaining amount of the deal.
Also read: Special dividend of Rs 500/share to cost us $525mn: StridesSpeaking to CNBC-TV18, Mahida says that the company is also likely to pay this in the form of dividends to its shareholders.
The USFDA issued a warning letter to Strides Arcolab for its Bangalore unit following which Mylan held back USD 250 million contingent. Below is the edited transcript of Mahida’s interview to CNBC-TV18. Q: First we will focus on Strides Arcolab considering that is the stock of the day. The stock is currently down around 7 percent. What are you factoring in, in terms of a special dividend which they could declare today and how much would the outflow be and what would your target price be post the special dividend?
A: Right now, the company is positioned to declare dividend of close to USD 500 million as a first tranche. The dividend would have been close to USD 750- 800 million had it not been a USD 250 million hold back by Mylan because of the USFDA warning letter given to one of its manufacturing plants.
Right now, the company is in a position to at least declare the first tranche of dividend of close to USD 500 million. USD 500-600 million could be close to Rs 450-550 per share after factoring the dividend distribution tax.
Q: In your answer you said the first tranche could be Rs 450-500 per share. Do you think after the provision of USD 250 million which the company recently announced that they were making; once perhaps that overhang is out of the way, that money comes in you are expecting that the company will give out this USD 250 million of payment as a second tranche?
A: Once the company receives another USD 250 million they should be in a position to repay another USD 250-300 million of dividend to the shareholders.
Q: In your conversation with the companies how likely is it that this USD 250 million provision that they have made could come back to the company?
A: It is highly likely. So has been the commentary from Mylan that they also feel it is highly likely Strides Arcolab could get the USD 250 million which it is holding back right now.
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