Smithkline Reviews Stake Hike Plan In 2 Local Arms

SmithKline Beecham Plc of UK is reviewing the possibility of hiking its stake in the two Indian companies to 51 per cent from 40 per cent.

The SmithKline spokesperson in London would not give any details but only said that the situation regarding the two Indian companies is under review. A decision will be taken in some time, he added.

He refused to elaborate saying the first priority for the company is to complete its ongoing merger talks with Glaxo Wellcome Plc. India is a high-priority area for us and we will always do whats best for the Indian operations.

 

SmithKline operates in India through three outfits: SmithKline Beecham Asia Pvt Ltd (SBAPL), a 100 per cent subsidiary; SmithKline Beecham Consumer Healthcare (SBCH); and SmithKline Beecham Pharmaceuticals (India) Ltd (SBPIL). The latter two companies are owned 40 per cent by the UK parent.

The stake hike assumes as the two Glaxo Wellcome subsidiaries in India are owned 51 per cent by their parent. In case of a merger between the Glaxo and SmithKline in India, the UK parents stake may fall to less than 51 per cent. To avoid this, analysts reason, SmithKline may step up its stake before the merger.

According to analysts, if SmithKline Beecham Plc does not increase its holdings in SBCH and SBPIL, it could merge SBAPL and SBPIL with the Glaxo Wellcome subsidiaries in India. This would give it an increased holding in the combined entity. An analyst with a leading research firm said he expected the consumer healthcare business to remain a separate company. In such a scenario, the issue of ownership of brands will have to be tackled. SmithKline Beecham Plcs brands are currently owned by three subsidiaries in India.

SBAPL owns Crocin, Tums and Eno, which are marketed by SmithKline Beecham Consumer Healthcare. While Crocin and Tums, both are manufactured by Smithkline Beecham Pharma, Eno is manufactured by SBCH. Among SBPILs products are Iodex, Zevit, Zentel, Dependal, Augmentin, Engerix-B and Furoxone.

Horlicks, owned by SBCH, is its highest revenue earner and has a 53 per cent share of the nutritional drinks market.

Smithkline Beecham Plc is charging a five per cent royalty on the Horlicks brand. A manufacturing unit is being set up in Haryana by SBAPL for meeting the global requirements of the UK parent.

SBCH also owns the oral hygiene business and launched Aquafresh toothbrush recently.