Strategic Equity Conversion by Shilpa Medicare to Support its Subsidiary Growth

Shilpa Medicare Ltd announced in a stock exchange filing that its wholly-owned subsidiary, Shilpa Biologicals Pvt. Ltd (SBPL) allotted equity shares to Shilpa Medicare on July 8, 2024, through a rights issue.

This transaction was executed by adjusting the subscription amount against a pre-existing intercompany loan provided by Shilpa Medicare. The primary aim of this arrangement is to strengthen SBPL’s capital structure, enhance profitability, and support business growth without involving any fresh capital infusion.

The conversion of loans into equity is significant as it might increase SBPL’s net worth by more than 20% of Shilpa Medicare’s consolidated net worth, potentially qualifying SBPL as a material subsidiary in the fiscal year 2024-25. For the fiscal year 2024, SBPL reported a turnover of ₹368,782,392. The conversion was executed on an arm’s length basis, maintaining fairness and transparency in the process.

This strategic move focuses on two main objectives: strengthening the capital structure to meet business growth requirements and reducing indebtedness to de-leverage the company and improve profitability. By converting existing loans into equity, Shilpa Medicare aims to enhance SBPL’s financial stability and support its long-term growth ambitions.

The biological segment of SBPL encompasses the production of biosimilars, including monoclonal antibodies (MAB), microbial and vaccine manufacturing, and CDMO (Contract Development and Manufacturing Organization) operations. This conversion is not classified as an acquisition, as there is no fresh infusion of capital and SBPL remains a wholly-owned subsidiary of Shilpa Medicare.

Overall, this strategic conversion of loans into equity is a vital step in strengthening SBPL’s capital foundation, thereby fostering an environment conducive to sustained growth and improved financial health.

About Shilpa Medicare Ltd

Shilpa Medicare Ltd specialises in manufacturing niche active pharmaceutical ingredients (APIs), intermediates, and formulations. Additionally, the company provides contract research and manufacturing services for select customers. Shilpa Medicare’s product portfolio includes 16 injectable dosage forms and 19 oral solid dosage forms under its own brand, SML. Furthermore, its wholly-owned subsidiary, Shilpa Therapeutics, offers 13 distinct formulations.

On July 9, 2024, the share price of Shilpa Medicare Limited opened at ₹669.00, touching the day’s high at ₹676.20, as of 9:57 AM on the NSE.

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