Maintain ‘buy’ on Strides, Sept 16 target price Rs 1,570: Religare Institutional

By: |
Published: December 17, 2015 12:17:11 AM

Strides Arcolab (STR) has received notification of claims from US-based Mylan pertaining to regulatory concerns over STR’s acquired Agila plant following a USFDA warning letter.

Strides Arcolab (STR) has received notification of claims from US-based Mylan pertaining to regulatory concerns over STR’s acquired Agila plant following a USFDA warning letter. While management intends to dispute the claims, it is confident that the US$ 200mn escrowed cash under the deal would be sufficient in the worst case scenario of these claims materialising. We expect this to be a long-drawn out arbitration process, and don’t assign any value to the pending cash balance.

STR sold off its injectables business, Agila Specialties (Agila), to Mylan for a consideration of US$ 1.75bn in Feb’13. In Sep’13, one of Agila plants received a warning letter from the USFDA, post which Mylan held back US$ 250mn from the deal consideration towards costs and expenses. Mylan also held back US$ 100mn towards regulatory expenses and another US$ 100mn towards potential tax contingencies Management is confident that the US$ 200mn escrowed cash would be sufficient in the worst case scenario of claims materialising (claim amount undisclosed).

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.