Glenmark Pharma Shares Decline as Nirma Acquires 75% Stake in Glenmark Life Sciences

Glenmark Pharma Shares Decline as Nirma Acquires 75% Stake in Glenmark Life Sciences
Glenmark Pharma Shares Decline as Nirma Acquires 75% Stake in Glenmark Life Sciences
Glenmark Pharma Shares Decline as Nirma Acquires 75% Stake in Glenmark Life Sciences
Glenmark Pharma Shares Decline as Nirma Acquires 75% Stake in Glenmark Life Sciences

Glenmark Pharma Shares Decline as Nirma Acquires 75% Stake in Glenmark Life Sciences

Glenmark Pharma Shares Decline as Nirma Acquires 75% Stake in Glenmark Life Sciences. Image/moneycontrol

Glenmark Pharma Shares Plummet Amidst Nirma’s Acquisition

Glenmark Pharmaceuticals saw its share price fall by over 5 percent during early trade on BSE as investors reacted to news of Nirma’s acquisition of a 75 percent stake in its subsidiary, Glenmark Life Sciences. The stock opened at ₹815.95, down from the previous close of ₹828.05, and dropped by 5.45 percent to ₹782.90.

Nirma Acquires 75% Stake in Glenmark Life Sciences

Glenmark Pharmaceuticals recently announced its decision to sell a 75 percent stake in its subsidiary, Glenmark Life Sciences, to Nirma at ₹615 per share, totaling ₹5,651.75 crore. While Glenmark Pharmaceuticals will retain a 7.84 percent stake in Glenmark Life Sciences, Nirma Ltd has agreed to purchase 75 percent of Glenmark Life Sciences for ₹5,651.5 crore, valuing the latter at ₹7,535.4 crore. Nirma will also make a mandatory open offer to all public shareholders of Glenmark Life Sciences for an additional 17.15 percent stake at ₹631 per share.

Nirma to Acquire 75% Stake in Glenmark Life Sciences for Rs 5,651 Crore

Mixed Performance in the Market

Both Glenmark Pharmaceuticals and Glenmark Life Sciences shares traded negatively in the morning, while the Sensex remained flat. Glenmark Life Sciences saw its share price decline by over 2 percent during early trading on BSE on Friday. Nevertheless, both stocks have experienced significant gains over the past year. Glenmark Pharma’s share price has surged by over 103 percent in the last year, while Glenmark Life Sciences’ share price has jumped by over 50 percent. In comparison, the equity benchmark Sensex has seen a 12 percent increase over the same period.

Brokerage Firms Show Caution

While the Nirma-Glenmark Pharma deal is seen as a positive move for Glenmark, brokerage firms remain cautious about the stock’s prospects. Nuvama Wealth Management believes that selling a profitable franchise to reduce debt may not be prudent. However, it also notes that Glenmark Pharma has various growth drivers, such as its presence in India, Ryaltris, and inhalers. With the inhaler franchise performing well in the European Union, Ryaltris ramping up, and improved control over research and development, the impact on profitability is expected to be minimal. Nuvama has given the stock a ‘hold’ rating with a target price of ₹830. It anticipates a 12 percent revenue and 19 percent EBITDA dilution but a 3 percent PAT accretion in FY25 due to lower depreciation and amortization, interest savings, and minority interest.

Positive Outlook on Glenmark Pharma

On the other hand, Motilal Oswal Financial Services maintains a ‘neutral’ view of the stock with a target price of ₹780. The firm values Glenmark Pharma at 14 times 12-month forward earnings, resulting in the target price of ₹780. Despite the stake sale, Motilal believes Glenmark Pharma will remain earnings-neutral, as the net reduction in EBITDA from the API business (₹550 crore) will be offset by a reduction in interest cost and higher other income. Motilal points out that new product launches, market share gains, and inflation-linked price increases for products under the National List of Essential Medicines (NLEM) are expected to sustain Glenmark Pharma’s growth momentum. The brokerage firm forecasts a 10 percent CAGR in domestic formulation sales, reaching ₹4,870 crore by FY23-25.

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