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SHAREHOLDERS of Alpha Drug India (ADI) can consider tendering their shares in the open offer that has been announced by Punjab Chemicals and Pharmaceuticals (PCP) for cash at Rs 5.50 per share.

Background

While ADI is involved in the manufacture of bulk drugs and intermediaries PCP is engaged in the production of agro and speciality chemicals. The acquisition would provide PCP the opportunity to widen its product market and also explore possibilities of improving logistical efficiencies, as the manufacturing facilities of both ADI and PCP are proximate.

PCP has also acquired 49.72 per cent of the equity held by DSM Pharma Chemicals Venlo B.V of the Netherlands in ADI for a total consideration of Rs 25 lakh. The Dutch company, along with the Punjab State Industrial Development Corporation (PSIDC), is the original promoter of ADI.

During fiscal 2001-2002, DSM also withdrew its nominee directors from the board, thereby signalling its intent of not being interested in involving itself in the day-today operations of ADI.

Why accept the offer

ADI's financials are not encouraging. The company has been consistently posting losses — Rs 4 crore for the year ended March 2003 and Rs 6.5 crore for the year ended March 2002. Moreover, the stock quotes at about Rs 5.

The current offer price of Rs 5.50 is at a premium of close to 10 per cent to the current market price and existing shareholders could utilise this opportunity to move out of the stock.

The offer closes on May 20.

BL Research Bureau

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