Glenmark Life Sciences

The significant terms of the share purchase agreement as per by the GLS disclosure gives one some insight into the eventual delisting quandry in the minds of minority shareholders and the domestic business support from GPL:

1. Restrictive clause on GPL to sell the equity shares retained by it (7.84%) upon the completion of the Transaction until the earlier of:
   (i) one year from the closing under the Share Purchase Agreement and
   (ii) one month from the date of compliance with minimum public shareholding requirements by the Company and the Buyer (such period, the “Non-Disposal Period”).

2. Prior to the closing of the Transaction, the board of directors of the Company may consider, approve and declare an interim dividend of INR 22.50 per equity share. In such event, the sale consideration will stand adjusted in the manner specified in the Share Purchase Agreement. This will adjust the buyback price as well.

3. In connection with the Transaction, certain ancillary arrangements among the Company, GPL and certain subsidiaries of GPL have been agreed, for the provision of support services for a specified period to facilitate the transition of ownership of the Company from GPL to the Buyer. Such agreements include:
   (i) an amended and restated API supply and purchase agreement dated September 21, 2023, pursuant to which GPL has agreed to procure active pharmaceutical ingredients from the Company for a period of five financial years with effect from April 1, 2024; and
   (ii) a services amendment agreement dated September 21, 2023, pursuant to which GPL and certain subsidiaries of GPL will provide support services for a specified period, including with respect to business development arrangements in overseas jurisdictions.

I am drawing certain inferences from the above terms:

1. GLS will continue to get significant business from GPL for 5 years.
2. Prospect of a substantial interim dividend in the near term.
3. GLS will remain a public listed entity for 1 year atleast from the close of the share purchase transaction. And GPL wont/cant tender their residual shares in the mandatory open offer. The other restrictive clause on GPL selling their shares is lifted only after Nirma has been able to comply with minimum public shareholding norms.

Also, if Nirma has secured debt to buyout GPL shares and this transaction cant be funded by domestic banks, then the lender may need Nirma to keep GLS public listed (from valuation perspective comfort of the lender).

The GPL management surprised me with their about turn from the concall reply on selling only to comply with minimum public shareholding to full stake sale but perhaps it was for the best for minority shareholders as the market never gave it a premium earnings multiple from the date of listing anf things only started looking up for this stock when the reumor of stake sale became public post March of 2023.

Disclosure: significant allocation and in significant confusion, but happy that downside to present market cap is limited due to the incumbent open offer!