Mumbai: Shares of personal care products maker Emami Ltd jumped 20% to hit its upper circuit on Monday after its attempt to acquire privately-held Indian Paras Pharmaceuticals fell through as fears of overpaying for the deal subsided, analysts said.
British consumer goods company Reckitt Benckiser said on Sunday it agreed to buy privately-held Paras Pharmaceuticals for Rs3,260 crore ($726 million).
Paras, which clocked sales of more than Rs400 crore in 2010, makes several over-the-counter medications, including Moov pain relief ointment, Krack heel care lotion, and D’Cold cold remedy.
“With this acquisition the main fear was that Emami would overpay and raise a lot of debt and now that has dissipated, which is why the stock has reacted so positively,” said an analyst with brokerage Prabhudas Lilladher.
Emami, which own brands such as ‘Fair and Handsome’, ‘Navratna Oil’, ‘Boroplus’ and ‘Sonachandi Chyawanprash’, has been scouting for acquisitions in the personal care space after it acquired Zandu Pharmaceutical Works in November 2008.
“An acquisition only makes sense if valuations are correct...we will continue to focus on buys in India and overseas,” Harsh Agarwal, director, Emami told Reuters.
In October Emami’s board had approved investing upto Rs5,000 crore in India and overseas to enhance its business in the personal and healthcare space.
A number of global drug companies like GlaxoSmithKline Plc, Sanofi-Aventis, Novartis AG, Johnson & Johnson, Taisho Pharmaceutical had bid to acquire majority stake in Paras.
At 11.26 am, shares of the firm were locked in its upper circuit at Rs430.25 in a weak Mumbai market.