GSK added that it intends to keep the company listed, which means it will not hike its stake any further after the open offer. Securities regulations in India require a minimum public shareholding of 25 percent for a company to maintain a public listing.
The open offer, in which the parent firm intends to buy 2,06,09,774 shares, or 24.3%, of the company, represents a premium of about 26 percent of the stock's closing price on December 13.
"For GSK, this transaction will increase exposure to a strategically important market and for our Indian pharmaceuticals subsidiary's shareholders we believe it offers a good liquidity opportunity at an attractive premium," David Redfern, Chief Strategy Officer, GSK, said in a statement.
"GSK has a proud heritage in India. Today's announcement is a further demonstration of our long-term commitment to the country having increased our holding in our consumer business earlier this year and more recently committed to a significant manufacturing investment."
Also read: GSK's malaria vaccine not for profit pricing says CEO Witty
HSBC Securities is the manager for this open offer.
CNBC-TV18's Aastha Maheshwari had broken this story in May 2013.
The transaction will be funded through GSK's existing cash resources, will be earnings neutral for the first year and accretive thereafter and will not impact expectations for the group's long-term share buyback programme, the parent company said.
Expensive valuations?
Sales have been sluggish for GSK Pharma in the past few quarters: the company clocked sales of Rs 626.65 crore in the September quarter, compared to Rs 675.99 in the year-ago quarter.
Margins were even more pressured with net profit in the most recent quarter coming in at Rs 100.95 crore compared to Rs 152.35 crore year-on-year.
The results were severely impacted by five of its key drugs coming under the National Pharmaceuticals Pricing Policy, which put a cap on pricing, apart from trade issues.
At the open offer price of Rs 3,100, the stock would be trading at 48 times 2012 earnings-per-share.
Should you tender in?
"At the premium of 26 percent over Friday's closing, this is a good price," Ranjit Kapadia, Pharma Analyst, Centrum Broking, said. "The stock's valuations are stretched: it is trading at 44 times calendar year 2013 and about 35 times calendar year 2014 estimates."
Referring to GSK's November announcement of investing Rs 850 crore in setting up a manufacturing facility in Bangalore, he said it appears the company intends to make India a manufacturing hub.
Talking about the stock's fundamentals, he said things should improve after resolution of trade issues that had plagued the firm even though the price-control drug policy would continue to remain an overhang.
GlaxoSmithKline stock price
On December 16, 2013, at 11:10 hrs GlaxoSmithKline Pharmaceuticals was quoting at Rs 2935.00, up Rs 466.60, or 18.90 percent. The 52-week high of the share was Rs 2952.00 and the 52-week low was Rs 2005.00.
The company's trailing 12-month (TTM) EPS was at Rs 61.81 per share as per the quarter ended September 2013. The stock's price-to-earnings (P/E) ratio was 47.48. The latest book value of the company is Rs 237.30 per share. At current value, the price-to-book value of the company is 12.37.
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