Avesthagen to raise $60 mn in complex deal from Cayman-based fund

To transfer a chunk of its biosimilar IPR to new company to facilitate fund raise

Avesthagen, the Bangalore-based life-sciences company which is facing financial stress, is understood to be closing a complex fund raise of $60 million from Cayman-based investment company Equity Partners Fund (EPF). Avesthagen is banking on its biosimilars portfolio for this funding.

Under the proposed funding, Avesthagen is expected to form a new company, most probably in Switzerland, the shares of which can be listed at the General Standard of Stock Exchange in Frankfurt. The new Swiss company is expected to hold an Indian entity and in this Indian entity, Avesthagen will transfer eight intellectual property assets pertaining to Avesthagen’s biosimilar portfolio which comprises a substantial part of Avesthagen Ltd’s value. It is understood that Hong Kong-based Key Capital is advising Avesthagen on this transaction. When Business Standard contacted Avesthagen CMD Villoo Morawala Patell for her views on the funding, she said they will be able to discuss aspects next week.

In all probability, a special private placement may be entered into between Avesthagen Group Entity and EPF whereby Avesthagen Group Entity will have the ability to draw down the investment through the issuance of stock exchange-listed shares to the Investor. Avesthagen would control the timing and amount of any draw down subject only to a share trading price and draw down limitation mechanism.

Avesthagen is going in for this structure to align with EPF investment philosophy. EPF usually funds companies through the purchase of the shares based on a small discount off a value weighted average price formula and does not provide upfront funding.

It is further understood that Avesthagen Group Entity may draw down proceeds for working capital, general corporate purposes, acquisitions, pass through, reverse merger or takeover.

If Avesthagen succeeds in this complex fund raise, it will add to the long list of its funding history. Avesthagen is among the top few private equity funded companies having raised funding from ICICI Ventures, Tata Group, Godrej, Cipla, Danone, New York Life among others in various of its projects.

The company which has a debt of around Rs 200 crore has been in discussions with Oriental Bank of Commerce and Axis Bank to restructure its debt. Oriental Bank of Commerce has in fact taken into its possession some of the land held by Avesthagen to get back its debt, the issue of which is being discussed for an amicable settlement.

Even as the company is getting ready for this much needed fund raise, it was recently slapped with civil suits from a group of ex-employees over non-payment of a part of their salaries. The company had also trimmed salaries with retrospective effect.