The shares of Glenmark Pharma fell as much as 6.3 percent in the session on Friday after the company announced that it will sell its stake in its life sciences arm.
Glenmark Pharma on Thursday, September 21, announced that it will sell 75 percent stake in Glenmark Life Science at a price of Rs 615 per share to Nirma. The sale will imply an equity valuation of Rs 7535.4 crore (Rs 75,354 million). The Nirma Group entered the pharma space in 2005 via acquisition of Core Healthcare’s ailing injectable business.
The company will continue to own 7.84 percent in Glenmark Life Sciences.
Brokerage BOFA Securities reiterate its buy rating on the shares of Glenmark Life Sciences with a target price of Rs 745 per share. The brokerage noted that after the re-rating in anticipation of the deal, focus will now shift to the earnings trajectory.
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BOFA Securities expects high teen earnings before interest, taxes, depreciation, and amortisation (EBITDA) growth over the financial year 2024-26 driven by capacity expansion in Dahej and backward integration project in Ankleshwar as additional expansion announced given visibility in demand. Increase in higher margin CDMO contribution from current 7-8 percent levels to nearly 15 percent by calendar year 2027 and improving raw material pricing and backward integration related savings from Ankleshwar will also drive growth.
According to Nuvama, Glenmark Life is not vital to Glenmark Pharma’s growth. The brokerage said path to profitability unlikely to be impacted. Estimated three percent profit accretion in the financial year 2025, as per the brokerage.
Nuvama said the company will turn net cash positive after the deal of Rs 2,700 crore before settlement payouts. It retained a 'hold' rating with a target price of Rs 830 per share.
The pharma company said in the press release that it will continue to focus on consistent growth across its key markets and will have a strong emphasis on return ratios with a net cash positive balance sheet.
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Glenmark Life Sciences is in the business of developing, manufacturing and supplying non-commoditised active pharmaceutical ingredients (APIs) in chronic therapeutic areas and end-to-end support.
Earlier on Thursday, we reported that sources with knowledge of the matter had told CNBC Awaaz that the company will be holding a press conference to announce a potential stake sale in Glenmark Life Sciences.
According to sources, the proceeds will be used to pare debts and US market expansion.
Announcing its first quarter results, the company said it had posted revenue from the sale of finished dosage formulations in North America amounting to Rs 808.5 crore for the quarter ended June 30, 2023, against revenue of Rs 662.8 crore in the year-ago period, recording a growth of 22 percent.
As of the June quarter shareholding pattern, Glenmark Pharma held 82.85 percent stake in Glenmark Life Sciences. A stake sale would make Glenmark compliant with minimum public shareholding norms.
On August 16, in an interaction with CNBC-TV18, V.S. Mani of Glenmark Pharma had said the company was looking to reduce its stake in Glenmark Life by 7-8 percent.
Catch the latest market updates with CNBC-TV18.com's blog
Glenmark Pharma on Thursday, September 21, announced that it will sell 75 percent stake in Glenmark Life Science at a price of Rs 615 per share to Nirma. The sale will imply an equity valuation of Rs 7535.4 crore (Rs 75,354 million). The Nirma Group entered the pharma space in 2005 via acquisition of Core Healthcare’s ailing injectable business.
The company will continue to own 7.84 percent in Glenmark Life Sciences.
Brokerage BOFA Securities reiterate its buy rating on the shares of Glenmark Life Sciences with a target price of Rs 745 per share. The brokerage noted that after the re-rating in anticipation of the deal, focus will now shift to the earnings trajectory.
Also Read: JSW and LG Energy Solution discuss potential EV battery production in India
BOFA Securities expects high teen earnings before interest, taxes, depreciation, and amortisation (EBITDA) growth over the financial year 2024-26 driven by capacity expansion in Dahej and backward integration project in Ankleshwar as additional expansion announced given visibility in demand. Increase in higher margin CDMO contribution from current 7-8 percent levels to nearly 15 percent by calendar year 2027 and improving raw material pricing and backward integration related savings from Ankleshwar will also drive growth.
According to Nuvama, Glenmark Life is not vital to Glenmark Pharma’s growth. The brokerage said path to profitability unlikely to be impacted. Estimated three percent profit accretion in the financial year 2025, as per the brokerage.
Nuvama said the company will turn net cash positive after the deal of Rs 2,700 crore before settlement payouts. It retained a 'hold' rating with a target price of Rs 830 per share.
Commenting on the divestment, Glenn Saldanha, Chairman and MD of Glenmark Pharmaceuticals Limited, said, "This deal aligns with Glenmark’s strategic intent of moving up the value chain to become an innovative/brand led organisation, with continuous focus on our core therapeutic areas of dermatology, respiratory and oncology. It also presents an opportunity for us to strengthen shareholder value through deleveraging and enhancing our overall return profile.”
The pharma company said in the press release that it will continue to focus on consistent growth across its key markets and will have a strong emphasis on return ratios with a net cash positive balance sheet.
Also Read: Manipal Hospitals acquire 84% stake in Emami Group's firm AMRI Hospitals for Rs 2300 cr
Glenmark Life Sciences is in the business of developing, manufacturing and supplying non-commoditised active pharmaceutical ingredients (APIs) in chronic therapeutic areas and end-to-end support.
Earlier on Thursday, we reported that sources with knowledge of the matter had told CNBC Awaaz that the company will be holding a press conference to announce a potential stake sale in Glenmark Life Sciences.
According to sources, the proceeds will be used to pare debts and US market expansion.
Announcing its first quarter results, the company said it had posted revenue from the sale of finished dosage formulations in North America amounting to Rs 808.5 crore for the quarter ended June 30, 2023, against revenue of Rs 662.8 crore in the year-ago period, recording a growth of 22 percent.
As of the June quarter shareholding pattern, Glenmark Pharma held 82.85 percent stake in Glenmark Life Sciences. A stake sale would make Glenmark compliant with minimum public shareholding norms.
On August 16, in an interaction with CNBC-TV18, V.S. Mani of Glenmark Pharma had said the company was looking to reduce its stake in Glenmark Life by 7-8 percent.
Catch the latest market updates with CNBC-TV18.com's blog
First Published: Sept 21, 2023 7:08 PM IST
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