IPCA Labs To Buy More Than 26% Stake In Lyka Labs; Shares Jump

IPCA Laboratories Ltd. has agreed to acquire more than 26% stake in Lyka Labs Ltd., triggering an open offer. That drove up the share prices of both drugmakers.

IPCA’s board approved buying of a 26.57% stake in Lyka for Rs 97.89 crore, according to an exchange filing. That includes acquisition of voting capital from Lyka’s shareholders under a block deal.

Deal Details

IPCA held a 9.84% stake in Lyka prior to the block deal on Tuesday morning.

It acquired 48 lakh shares, representing 16.73% of the fully paid-up equity share capital, at an average price of Rs 130.4 apiece via the stock exchange’s block deal window at an aggregate value of Rs 62.59 crore.

• Up to 18 lakh shares representing 6.27% of the fully paid-up equity share capital and voting rights of Lyka Labs through block deal/open market purchase from Mayank Shah.

• Up to 15 lakh shares representing 5.23% of share capital and voting rights through block deal/open market purchase from Shruti Shah.

• Up to 15 lakh equity shares representing 5.23% of equity share capital and voting rights through block deal/ open market purchase from Prasham Shah.

An another 1.18% stake is held by persons forming part of the acquirer’s promoter group. That takes the total shareholding of IPCA in Lyka to be at 27.75%.

Open Offer

The proposed execution of the 48 lakh share purchase is more than the threshold limit, and Joint management control agreement triggered the open offer, the filing said.

IPCA will make an open offer to public shareholders of Lyka to acquire up to 74.6 lakh equity shares additionally, accounting to 26% of paid-up share capital and voting rights in the Gujarat-based company, for Rs 130.5 apiece.

Lyka has agreed to classify IPCA as a co-promoter along with existing promoters. Arihant Capital Markets Ltd. is the manager of the open offer.

The deal is not subject to any regulatory or government approval since the shares were acquired from public shareholders in the secondary market.

Financial Snapshot

• Lyka reported after-tax losses of Rs 55.4 crore and Rs 14.5 crore in financial years 2020 and 2021, respectively.

• In the six months ended Sept. 30, 2021, Lyka reported an after-tax profit of Rs 49.5 crore on a revenue of Rs 109.9 crore. Its Ebidta margin stood at 69%.

This acquisition is expected to provide IPCA inroads in lyophilized injectables business in India and rest of the world, where Lyka majorly operates. IPCA currently does not have any direct business in lyophilized or freeze-dried injectables — a process where water is removed from the product and frozen and placed under vacuum to increase shelf life of perishable products and ease transport.

Besides, Lyka manufactures and markets other injectables and topical formulations.

Lyka operates out of its facility in Ankleshwar. The company is also expected to benefit from IPCA’s marketing expertise in the branded generic formulations business in Africa, Latin America, South East Asia and the Middle East, where it is currently not doing business.

Shares of Lyka Labs hit a 5% upper circuit for the third straight session. The relative strength index on the stock was 79, suggesting it may be ‘overbought’.

Shares of IPCA Labs, too, hit a 5% upper circuit.