ICICI Direct: Zydus Wellness - Deleveraging On The Cards, Earnings To Get Boost
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ICICI Direct Report
Zydus Wellness Ltd. announced a Rs 1100 crore fund raising with Rs 350 crore infusion by promoter and Rs 750 crore by qualified institutional buyer (QIB) placement of equity/equivalent instruments.
We believe the company would utilise funds to repay high cost debt of Rs 1500 crore that was raised at the time of acquisition of the Heinz business.
With equity infusion of Rs 1100 crore, existing cash of Rs 200 crore, FY21 earnings, Zydus Wellness would be able to repay almost entire debt by March 2021. This would result in savings of Rs 140 crore interest cost.
Assuming equity infusion at current price of Rs 1650/share (given promoters have infused Rs 350 crore at Rs 1643/share), the equity dilution would be approximately 12%.
The mere saving of interest cost would increase our FY22 earning per share estimate by 21%.
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