Cipla is raising $175 million by selling shares to reduce debt: Reports

India’s leading generic player Cipla Ltd is planning to raise up to Rs 1500 crore or $175 million by selling shares to institutional investors, reports said.

Cipla plans to sell shares to institutional investors for at least 263.75 rupees, according to a sale document filed to the National Stock Exchange.

Cipla’s base amount of the share sale is $110 million, with an option to raise it to $175 million. Cipla would utilize $175 million fund to service short-term debt raised to meet working capital requirements in the past couple of years.

Cipla also wants the funds to invest in a few of its new projects in the next two years, sourced said. Presently, Cipla’s short-term loans total about Rs 1,000 crore, of which Rs 932.61 crore worth of unsecured loans are due by March.

Cipla has atleast two active pharmaceutical ingredients (API) facilities currently under construction, besides a couple of other research and development centres.

Cipla could invest a portion of the raised amount in its API facilities at Bangalore and Patalganga in Maharashtra.

Cipla may also expand the activities of its R&D centres located near Mumbai.

For export-oriented formulations, Cipla is constructing a Rs750 crore special economic zone (SEZ) for drug formulations at Indore, Madhya Pradesh. The Indore formulation facility is likely to be completed this year.

Cipla is also reportedly constructing another facility at Indore to manufacture aerosols, liquid oral medicines, pre-filled syringes (PFS), nasal sprays, large volume parenterals (LVP), eye drops, tablets and capsules. Commercial production at this site is expected to commence in 2010.

Recently, Cipla has entered into a 50:50 joint venture with a Chinese company for bio-similars. The joint venture would be called Biomab. Cipla has said it was looking to bring out the JV’s first biosimilar products by 2010.

Cipla posted net profits of Rs776 crore in 2008-09 on sales of Rs5,326 crore, whereas its interest cost was about Rs35 crore. Cipla’s promoters hold about 40% stake in the company at the end of June.

Cipla invested around Rs1,900 crore in fixed assets, in the past three years.

Cipla is the latest addition of Indian generic companies which are currently raising funds through dilution of their stakes. Indian firms have sold shares worth nearly $14 billion so far this year, spurred by a 75 rise in the main share index.

Glenmark Pharmaceuticals is also in the process to raise about Rs 12 billion (US$250 million) from overseas markets or by private placement of shares, the company said in an official announcement.

The Mumbai-based Glenmark would raise US$250 million by Global Depository Receipts, American Depository Receipts and Foreign Currency Convertible Bonds or by private placement of shares or by qualified institutional investors. Glenmark’s shareholders have approved to raise US$250 million.

Glenmarks share holders have also approved an option to raise an additional funds if the issue is oversubscribed, Glenmark Pharmaceuticals said in a filing to the Bombay Stock Exchange.

Similarly, Dr Reddy’s, India’s second largest drug firm, is reportedly in talks with GlaxoSmithKline for a possible trade-off of nearly 5% of the company’s promoters’ stake for an approximate $150 million.