The company is also planning to hike the investment limit of foreign institutional investors (FIIs) up to 24 per cent.
ARL will use additional capital to fund the setting up of US FDA plant as well as diversification into medical nutrient business.
Top company sources told FE that the board of directors of ARL will meet on September 5 to consider a proposal made by Citiconsult, a UK-based fund investing in the emerging markets, to invest up to $10 million (approximately Rs 5 crore) in the equity of the company.
The UK fund has shown keen interest in picking up to 15 per cent stake in the company at a price of Rs 11 per share. Post issue, the promoters holding in the company would come down by around eight per cent, sources said. As on June 30, promoters holding in the company stood at 30.33 per cent.
The price quoted by Citiconsult carries a premium of over 77 per cent over the current stock price of the company. ARL stock closed on BSE at Rs 6.21 on Friday, up by 10 per cent than its closing price on Thursday.
Sources also said that the company has also decided to bring in an enabling resolution during the meeting of its director board to enhance the FII investment limit up to 24 per cent of the equity capital of the company. FII holding in the company currently stands at a negligible 0.01 per cent.
It is basically an enabling resolution aimed at future capital requirement of the company. At present, we are considering only the proposal of Citiconsult, the company official said.
ARL will use the proceeds from the preferential allotment to fund its expansion plans.
The company will use the proceeds to fund its ongoing projects like setting up of a US FDA compliant plant as well as our foray into medical nutrients, the company official said.
ARL is into the manufacturing of herbal and other over the counter (OTC) products as well as formulations.
The company has recently announced its plans to make a foray into the restricted markets by setting up an US FDA compliant plant. As of March 31, 2003, the company has clocked a net profit of Rs 2.4 crore on a turnover of Rs 121 crore.