GlaxoSmithKline plc Makes £629m Indian Investment

The shares of GlaxoSmithKline (LSE: GSK) (NYSE: GSK.US) slipped 4p lower to 1,566p during early trade this morning after the pharmaceutical group announced it would purchase a further 24% of its Indian subsidiary.

The FTSE 100 member confirmed it would invest £629m to increase its holding in Glaxo Pharmaceuticals Limited from 51% to 75%. GSK revealed it would pay 3,100 rupees for each Glaxo Pharmaceuticals share, equivalent to a 26% premium to the share price on Friday, for the additional stake.

The £629m transaction is also equivalent to a 13p per share GSK dividend.

GSK’s Indian subsidiary reported sales of £313m and pre-tax profits of £116m during 2012, while its share price has risen 19% during the last twelve months.

David Redfern, GSK’s chief strategy officer:

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.

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.

Mr Redfern also claimed the deal would be “earnings neutral” next year and “accretive thereafter“.

Prior to today, City experts were forecasting GSK’s 2013 results to show earnings of 115p per share and a dividend of 77p per share.

Following this morning’s price movement, GSK’s P/E could be 13.6 while the dividend may be 4.9%.

Of course, whether those ratings, today's Indian investment as well as the wider prospects for the pharmaceutical industry all combines to make the shares of GSK a 'buy' is something only you can decide.

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> Maynard does not own any share mentioned in this article. The Motley Fool has recommended shares in GlaxoSmithKline.