India’s largest vaccine maker, Serum Institute of India, has picked up close to 7% stake in rival firm Panacea Biotec. Though the promoters of the Delhi-based Panacea Biotec have a significant holding in the firm, the deal assumes significance as Serum Institute and Panacea are the top two Indian firms in the vaccine business. Earlier, Serum had picked a similar minority stake in Hyderabad-based Orchid Chemicals.
As per disclosures to the stock market, Serum has hiked its holding in Delhibased Panacea Biotec from 3.6% to 6.92% on October 14. At an average trading price of Rs 220 per share, Serum would have bought the stake for about Rs 48 crore. Part of this equity stake was bought from asset management firm Mirae. Panacea Biotec is promoted by Soshil Kumar Jain.
If Serum buys more shares, it could ask for a board seat in Panacea which could lead to conflict of interest as the two firms are prime competitors in their segment.
When contacted, Serum Institute of India ED (operations) Adar Poonawala said that the company’s stake is a “strategic investment.” Sources in Panacea Biotec, however, allege that Serum is taking advantage of the market slowdown to increase its stake in the company looking for a take-over opportunity.
Serum informed the stock exchange that it has bought 21.9 lakh shares or 3.28% shares from the open market. “Panacea Biotec was not aware of Serum increasing their stake. They are taking advantage of the stock market crash and this is possibly a take-over bid. Otherwise, why would they invest in a rival firm who is in the same business,“ according to a company source who didn’t wish to be named.
However, a hostile takeover is unlikely as the promoters held 65% stake in Panacea Biotec as of June 30. According to Indian laws, if Serum increases its stake over 15%, it will have to make an open offer to buy an additional 20% stake. Both Serum and Panacea Biotec compete in the niche Rs 1,000-crore vaccine market and global markets.
In the past, Serum Institute had invested in other Indian pharma companies, notably Orchid Chemicals. But, in that case, Orchid is a biotech company and does not directly compete with Serum. Panacea Biotec is the first vaccine company where Serum has picked up such a significant stake.
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