Ipca Labs at 52-week low on plans to acquire stake in Unichem Labs at premium

Shares of Ipca Laboratories slumped to a 52-week low in early trade on April 25 on the company’s plan to acquire a stake in Unichem Laboratories at a premium.

Ipca plans to acquire a 33.38 percent stake in Unichem Labs at Rs 400 per share, aggregating around Rs 1,034.06 crores. The company will also buy an additional stake of upto 26 percent through an open offer priced at Rs 440 per share.

Since Ipca’s stake buy and open offer are priced at an over 3 percent and 13 percent premium, respectively, to Unichem’s closing price on Monday, it tilts the risk-reward in favour of the latter.

Brokerage firm ICICIdirect also pointed this out and said, “At 2.4x TTM FY23 sales, the deal seems a tad costlier given the lower profitability of Unichem’s exports-driven business.”

The firm believes Ipca’s financial outgo for the stake buy would be around Rs 1,800 crore after considering an open offer as well. “On the bright side, Unichem owns Rs 1,200 crore worth of gross block approved by global agencies with an unblemished track record,” ICICIdirect wrote in its note.

As a result, at 09.51 am, shares of Ipca Laboratories were trading with cut of 7.92 percent at Rs 761 while those of Unichem Laboratories were up around 1 percent at Rs 391.70 on the National Stock Exchange.

Ipca Labs shares also hit a 52-week low of Rs 751 earlier in the day. Around 20 lakh shares also changed hands on the exchanges so far, as against the one-month daily traded average of four lakh shares.

Also Read: Ipca to acquire 33.38% stake in Unichem Laboratories for Rs 1,034 crore

While Ipca Laboratories is an active pharmaceutical ingredients (APIs) player in the pharma industry, Unichem Labs makes branded as well as unbranded generics.

“This acquisition is in line with our stated strategy to enhance our portfolio in our chosen growth markets. We both are well positioned to successfully integrate our product offerings and grow our businesses,” Premchand Godha, promoter and executive chairman, lpca Laboratories ·stated in an exchange filing.

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Ipca’s finances have also been in turmoil as high input costs in the APIs segment put pressure on margins in recent quarters The company recorded its lowest operating margin since 2017 in the third quarter of FY23.

The company also witnessed a nearly 50 percent drop in its consolidated net profit in Q3FY23, reaching Rs 120.27 crore compared to Rs 218.17 crore in Q3FY22. However, its net total income saw a 9 percent year-on-year growth, amounting to Rs 1,458 crore.

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