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Buy Zydus wellness @ targets of ₹2300 : ICICI Direct

ICICI Direct’s research report on Zydus Wellness

Zydus Wellness (ZWL) announced a ₹1100 crore fund raising with ₹350 crore infusion by promoter and ₹750 crore by QIB placement of equity/equivalent instruments.

We believe the company would utilise funds to repay high cost debt of ₹1500 crore that was raised at the time of acquisition of the Heinz business. With equity infusion of ₹1100 crore, existing cash of ₹200 crore, FY21 earnings, ZWL would be able to repay almost entire debt by March 2021.

This would result in saving of ₹140 crore interest cost. Assuming equity infusion at current price of ₹1650/share (given promoters have infused ₹350 crore at ₹1643/share), the equity dilution would be ~12%. The mere saving of interest cost would increase our FY22 EPS estimate by 21%.

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