Gland Pharma sinks on fears of distress sale by Chinese owner

Gland Pharma’s earnings for the September quarter have also done little to ease investors’ anxiety given that the company reported a sharp decline in net profit

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Shares of Gland Pharma continued to plunge on October 31, taking the overall decline to 23 percent in three sessions on fears of a likely distress sale of stake by its promoter entity Fosun Pharma Industrial Pte, dealers said.

Fosun Pharma holds 57.86 percent in Gland Pharma, which has a strong presence in injectables export to regions like the US and Europe.

Fosun Pharma’s ultimate beneficiary, China-based Fosun International, has come under severe financial stress with media reports suggesting that the company is unable to raise fresh capital and may have to resort to selling off its assets to raise funds.

Fosun International was recently downgraded deeper into ‘junk’ rating by credit rating agencies as the storm in the Chinese real estate market swept other sectors of the economy, according to a report by the Forbes magazine.

Gland Pharma’s earnings for the September quarter have also done little to ease investors’ anxiety, given that the company reported a sharp decline in net profit. The company’s consolidated net profit sank 20 percent on a year-on-year basis to Rs 241 crore in the September quarter.

Revenue for the quarter saw a surprising decline of 3 percent on-year to Rs 1,044.4 crore due to lower business in India and rest of the world market.

Brokerage firm Jefferies India downgraded the stock in light of another weak earnings performance by the company. Jefferies cut its rating to ‘hold’ and slashed price target 21 percent to Rs 2,241.

The firesale in the stock can be quantified in the 532 percent jump in average volumes on the stock in previous three sessions, including today, as compared to the average volume in the past three months.

At 11:05 am, shares of Gland Pharma were down 9.8 percent at Rs 1,700 on the National Stock Exchange.

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