Cabinet nod to ₹9,589 cr FDI in Suven Pharma; stock surges 5%

Shares of Hyderabad-based pharma major Suven Pharmaceuticals Ltd surged 4.27% today after the Cabinet approved foreign investment of up to ₹9,589 crore in the company.

The stock opened a gap-up at ₹540, compared to the previous session close of ₹517.4, and surged to an intra-day high of ₹551.45. At the time of filing of the story, shares were trading 3.94% up at ₹537.80 on the BSE, taking its m-cap to ₹13,690.5 crore.

Suven Pharma shares have given a 4.54% return in the past week; 5.52% in the past month; 13.28% in the past six months; 9.59% in the year-to-date period; and 12.45% in the one-year period.

The Cabinet Committee on Economic Affairs (CCEA) has approved the FDI proposal for foreign investment of up to ₹9,589 crore in Suven Pharmaceuticals by Cyprus-based Berhyanda Ltd for up to 76.1% equity shares.

The stake buy will be executed by way of the transfer of shares of existing promoter shareholders and public shareholders via a mandatory open offer. The aggregate foreign investment may increase up to 90.1% in the future.

The proposal has been evaluated by SEBI, RBI, CCI, and other relevant agencies. The CCEA says the approval has been granted after examination of the proposal by the departments concerned, RBI and SEBI, and is subject to the fulfillment of all rules and regulations as applicable in this regard.

The CCEA says the approved investment aims to generate new jobs and capacity expansion of the Indian company via investments in plant and equipment. "Association with Advent Group is expected to provide a larger platform to M/s Suven Pharmaceuticals Limited by expanding business operations; achieving operational excellence; enhancing productivity and accelerate growth; improve the environment, health and safety standards of Indian Company; and bring in global best practices in management as well as excellent training opportunities to existing professionals."

The entire investments in Berhyanda are held by Advent Funds, which pools investments from various Limited Partners (LPs). The Advent Funds are managed by Advent International Corporation, an entity incorporated in the USA. Advent International Corporation, set up in 1984 has made investments of about $75 billion in 42 countries.

Advent India started investments in India in 2007 and so far it has invested about ₹34,000 crore in 20 Indian companies across healthcare, financial services, industrial manufacturing, consumer goods, and IT services sectors.

As per the extant FDI Policy, 100% foreign investment is allowed under automatic route in greenfield pharmaceutical projects. In brownfield pharmaceutical projects, FDI up to 74% is allowed under the automatic route, and government approval is required for investment beyond 74%. Total FDI inflows in the pharmaceutical sector stood at ₹43,713 crore during the last five years (from 2018-19 to 2022-23). The sector has witnessed significant growth in FDI of 58% in the last financial year.