Cipla Stock Races Toward 52-Week High On Buzz That Bain, Dr Reddy Plan Joint Bid For Promoter Stake

Strong buying has been recorded in drugmaker, Cipla on Wednesday as the stock races toward its 52-week high of Rs 1,277.55 apiece on BSE. Cipla shares have rallied more than 2% on the exchange. The reason behind the stellar upside is due to reports claiming that private equity firm Bain Capital has dialled Dr Reddy's Laboratories for joint bidding to buy the promoters' stake in Cipla which is owned by the Hamied family.

At the time of writing, Cipla shares traded at Rs 1253.20 apiece, up by 1.2% on BSE. The stock gained by at least 2.23% by hitting an intraday high of Rs 1266.20 apiece. The company's market cap is over Rs 1.01 lakh crore.

Cipla shares are currently a couple of rupees away from their 52-week high of Rs 1,277.55 on BSE. While the stock has zoomed by nearly 49% from its 52-week low of Rs 852 apiece as of now.

An Economic Times report has said that Bain has approached Dr Reddy's Laboratories (DRL) to explore a joint bid to buy out the promoters of Cipla, the Hamied family.

It is being reported that senior leaders of both the company met along with their advisors to discuss and cumulate a strategy for the stake purchase in Cipla.

ET also reported that Dr. Reddy's Lab is also evaluating the opportunity and countering an offer from Torrent Pharma.

Torrent Pharma and Blackstone are some of the investors who have expressed their interest in Cipla.

Both Torrent and Dr Reddy's Lab are listed on exchanges.

On BSE, Dr Reddy's Lab stock has advanced by a little over 1%, while Torrent Pharma surged by over 3.4%.

Financial Express cited a report from Bernstein saying that Torrent Pharmaceuticals, the frontrunner to acquire the promoters' stake in rival Cipla, has a "fairly complementary" portfolio with leadership in certain segments where the latter's presence is relatively weak. It also makes strategic sense for Torrent to buy Cipla, though the funding could require some heavy lifting.

GoodReturns.In could not confirm these developments.

The news of promoters' stake sale in Cipla has been circulating since July this year. On July 27, Cipla clarified to exchanges that the company is not aware of any event that requires disclosure under Listing Regulations.

However, reports also last month mentioned that Chairman Yusuf K Hamied called the reports of stake sale speculative.

As of June 30, 2023, the Hamied family holds 10,79,85,320 equity shares of 13.40% stake in Cipa under the Individuals/Hindu undivided Family category. These promoters include Mustafa Hamied, Sophie Ahmed, Rumana Hamied, Samina Hamied, and Shirin Hamied.

But under the Individuals (NonResident Individuals/ Foreign Individuals), Yusuf Hamied along with Mustafa Hamied's son Kamil hold 16,14,60,683 equity shares or 20.04% in Cipla.

Yusuf Hamied alone has 15,05,21,183 equity shares or 18.68% stake in Cipla.

In another development, Cipla's 100% owned subsidiary, Cipla South Africa signed a binding term sheet with Actor Holdings (Pty) Limited to acquire 100% of the issued ordinary shares of Actor Pharma (Pty) Limited ("Actor"). This development underpins Cipla's commitment and investment in its over-the-counter (OTC) business and supports its journey to be a leading healthcare player in South Africa. This is a strategic acquisition for Cipla South Africa to unlock future growth opportunities and leverage cost synergies in the South African market.