LISTED pharmaceuticals company CAPS Holdings Ltd (CAPS), has launched a $77 billion renounceable rights offer to urgently refurbish the manufacturing facilities of its joint venture subsidiary,
CAPS Shreya Ltd (CAPS Shreya) and upgrade its IT infrastructure.
CAPS Shreya is a joint venture between CAPS and an Indian drug manufacturing firm called Shreya.
Out of the $77 billion rights offer proceeds, CAPS intends to spend $66 billion on the refurbishment, $7 billion on the upgrade of the IT infrastructure and the balance of $4 billion to cover the estimated expenses of the rights offer.
According to the abridged circular issued to shareholders by CAPS, the refurbishment of the manufacturing plant has not only become a necessity but a matter of urgency.
“It is essential that the manufacturing plant be upgraded in order to meet and comply with internationally recognised current General Manufacturing Practice (GMP) standards for pharmaceutical plants,” the company said in the circular.
Failure to conform with the standards could lead to products manufactured by CAPS Shreya being rejected in crucial markets.
“Non-compliance could lead to products from the plant being rejected in certain key markets, a development that would, no doubt be detrimental to the overall profitability and long term survival of CAPS Holdings.”
CAPS exports its products to countries like Botswana and South Africa.
Exports have remained key to CAPS’ business survival as high inputs costs and high inflation in the domestic market have eroded earnings.
More than 70% of CAPS’ raw materials are imported.
The company also said that the resultant increased capacity and improved manufacturing efficiencies will open up further opportunities for international toll manufacturing arrangements.
“With a refurbished plant, the company will be able to meet the challenges of larger scale manufacturing of Anti-Retroviral Drugs (ARVs) and other critical drugs,” the company added.
Under the terms of the rights offer, shareholders are entitled to subscribe for approximately 140 614 811 rights offer shares, on the basis of nine new shares for every 20 ordinary shares already held, at a price of $550 each.
The rights offer opened on December 12, 2005 and will close on January 6, 2006.