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Alembic Ltd.
Company Update
April 11, 2011
Bhagwan Singh Chaudhary
Research Associate
Mobile: +91 77383 93427
Tel: +91 22 66188835
bhagwan.chaudhary@indianivesh.in
Alembic demerger details
Alembic Ltd has demerge its pharma business and its other business. After demerger
new entity will be APL (Alembic Pharmaceuticals Ltd) which will operate main
pharma business (API & Formulations) except Pen G business. Post demerger
Alembic will be left with Pen G business, land and power assets.
As proposed by the company, after demerger one share holder in Alembic will get
one share in APL. As a result, share holding pattern of the two entities is likely to be
in the following manner. (see table given below)
Share(Mn) % Share(Mn) % Share(Mn) %
Promoters 84.7 63.5% 84.7 45.0%
Public 48.7 36.5% 48.7 25.8%
Alembic 55 100% 55 29.2%
Total 133.4 100% 55 100% 188.4 100%
Pre and Post demerger Pre demerger Post demerger
APL Alembic
After demerger the balance sheet of both companies is likely to be as given in the
table given below. Of total debt 15% is expected to go to Alembics balance sheet
and 85% to APL.
Source: Company Filings; IndiaNivesh Research
Balance Sheet (Rs/mn) Pre Demerger
APL Alembic Ltd
Total Share Capital 267 377 267
Reserve 2,890 1,761 752
Networth 3,157 2,138 1,019
Debt 4084 3,471 613
Total Assets 7,241 5,609 1,632
Post Demerger
Value of both entities (Alembic & APL):
Alembic LTD:
Post demerger, Alembic is likely to be left with loss making Pen G business, land of
approximately 115 acre in Baroda, out of which 45 acre is occupied by manufacturing
facilities and power assets consisting of 3 cogeneration plants of 11MW and 4
windmills of total 5 MW. Additionally, Alembic will have 29% stake in APL.
In FY 10 Alembic has reported loss of Rs 240 million. Its net worth stands at Rs 1
billion i.e (Rs7.64 per share). Additionally, its 29% stake in APL is likely to add Rs 2.30
per share to its net profit. However, its remaining land of 70 acre and power business
is still to be valued. On a lump sum basis, Alembic has the value of more than Rs 18
per share (As we stated in our earlier report). Currently its trading at Rs 24 per
share.
Sales details of combined entity:
Source: Company Filings; IndiaNivesh Research
FY10 ( Rs Mn) APL Alembic Ltd
Nat Sales 11,365 10,215 1,150
EBITDA 1,169 1,300 (131)
EBITDA margin 10% 13% 11%
Depreciation 430
Interest 300
PBT 439 680 (240)
Tax 44
PAT 395
PAT Margin 3.5%
Source: Company Filings; IndiaNivesh Research
IndiaNivesh Research Alembic Ltd | Company Update April 11, 2011 | 2
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Alembic Pharma Ltd (APL): APL business has shown consistent growth after
restructuring. Its EBITDA margin in Q3 FY11 was at 15.8% level, mainly led by strong
growth in domestic formulation business and restructuring efforts. In FY10 APLs
PBT was Rs 680 million, however in 9 months of FY11, company reported net profit
of Rs 640 million despite adjustment to the loss of Pen G business. In FY12, we
estimate company to report net profit of Rs 1.05 billion (EPS =Rs 5.6). Hence the
stock of demerged entity (APL) is expected to list at Rs 56 per share. (valuing at 10x
of FY12 earnings estimate)
Our take:
We mentioned earlier in our report that demerger of pharma business is likely to
unlock the value. Currently, the share of Alembic Ltd are trading at Rs 24 and valuing
its APL business at Rs 56 per share, the value of premerger stock of Alembic stands
at Rs 80 per share.