Views on Cipla - Acquires 51% stake in Quality Chemicals Ltd - Angel Broking

Views of Ms. Sarabjit Kour Nangra (VP Research - Pharma, Angel Broking)

Cipla - Acquires 51% stake in Quality Chemicals Ltd:

"Cipla (EU) Limited, U.K., the wholly owned subsidiary of the Company has entered into a definitive agreement to acquire a 51% stake in Quality Chemicals Limited, Uganda ("QCL") from the existing shareholders of QCL. As per the agreement, the cash consideration for 51% stake is payable in tranches with approx US $8mn payable upfront on completion and 5 equal instalments of US $4.4mn payable at annual intervals thereafter.

QCL was incorporated in the year 1997 and is engaged in the business of import and distribution of pharmaceutical and consumer products. QCL also holds a 22.05% stake in the Company's subsidiary in Uganda, Cipla Quality Chemical Industries Limited ("CQCIL" ). Consequent to this acquisition, Company's effective stake (held through its subsidiaries) in CQCIL will increase from the existing 51.05% to 62.30%. This acquisition will further strengthen the Company's overall presence in the African market.

The turnover of QCL for the financial year ending Dec 2014 was Ugandan Shilling 14.85 billion (~INR 30cr). The transaction is expected to be completed by end of July 2015, subject to completion of certain conditions precedent. The transaction has been done at ~12x Market Cap/ sales, which is on the higher side, though given the balance sheet of the company can be easily funded. We remain NEUTRAL on the stock."

Shares of CIPLA LTD. was last trading in BSE at Rs.674.05 as compared to the previous close of Rs. 674.4. The total number of shares traded during the day was 108881 in over 2354 trades.

The stock hit an intraday high of Rs. 680 and intraday low of 667.4. The net turnover during the day was Rs. 73311622.

Source : Equity Bulls

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