Dr Reddy's board approves share buyback for Rs 1,569.4 crore

New Delhi: Drug major Dr Reddy's will buyback around 44.85 lakh shares, accounting for about 2.6 percent of the existing paid up capital of the company, for up to Rs 1,569.4 crore.

The company's board has approved a proposal to buyback shares, subject to the approval of shareholders, for an aggregate of amount not exceeding Rs 1,569.4 crore at a price not more than Rs 3,500 per share under the open market route, Dr Reddy's Laboratories said in a regulatory filing.

"The buyback is proposed on the account of the company's strong cash flow position and is expected to be EPS accretive contributing to an overall enhancement of value for shareholders going forward," it added.

The maximum buyback price represents 18.6 percent premium, compared to the average of the weekly high and low of the closing price of the company during the last two weeks, it said.

The Hyderabad-based firm said the indicative maximum number of equity shares bought back would be 44,84,049 comprising around 2.6 percent of the existing paid up capital.

"Based on the minimum buyback size and the maximum buyback price the company will purchase a minimum of 22,42,024 shares," it added.

The buyback is subject to the approval of the shareholders of the company by way of a special resolution through postal ballot and other regulatory approvals.

The company has appointed Kotak Mahindra Capital Company as its merchant banker for the buyback process.

The share buyback offer comes at a time when the drug maker is facing heat from the US Food and Drug Administration (USFDA) for manufacturing norm violations at three of its plants.

In November last year, the company received a warning letter from the USFDA for several violations with regard to current good manufacturing practices (CGMP) in API manufacturing facilities at Srikakulam in Andhra Pradesh and Miryalaguda in Telangana, as well as in oncology formulation manufacturing facility at Duvvada, Visakhapatnam in AP.

In the warning letter the USFDA has said that DRL did not implement a robust quality system at its sites.

The company today said it has completed its comprehensive corrective and preventive action plan (CAPA) but is yet to get a response from USFDA.

Dr Reddy's stock closed at Rs 2,961.05, up 3.52 percent, on BSE.