Lupin hits 52-week high on buzz of API business demerger

Shares of Lupin rose around 2 percent in early trade to hit a 52-week high of Rs 889.90 on June 27 after Moneycontrol reported said that the pharma company was considering a demerger of its active pharmaceutical ingredients (API)  business.

“Lupin is planning to carve out its API vertical in a bid to unlock value. It remains to be seen if a potential listing or a stake sale of the separated entity is explored at a later stage,” a source told Moneycontrol.

Another source also confirmed the development but also said that even though talks of a demerger were being pursued, the eventual transaction might or might not fructify.

Lupin rival Glenmark Pharma, too, undertook a similar restructuring exercise and hived off its API business into a new company, Glenmark Life Sciences.

At 10.08 am, shares of Lupin were trading at Rs 885.95 on the National Stock Exchange, up 1.3 percent from the previous close.

In recent quarters, the API segment witnessed strong pressure on margins largely because of elevated raw material costs, covid-led de-stocking, China supply chain disruptions and the US price erosion. A decline in raw material prices and normalising of price erosion set the segment on the recovery path in the January-March quarter.

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During the March quarter earnings call, CEO Vinita Gupta highlighted the developments in Lupin’s API business. “In addition to India achieving double-digit growth and improvement in the U..business, our API business rebounded in the quarter due to increased demand for our core products,” Gupta said.

Ramesh Swaminathan, the executive director and global chief financial officer, said on a quarter-on-quarter basis, API business sales grew 14.6 percent.

Also Read: Lupin recast may demerge API business for unlocking value

“The sales of core Cephalosporin API continued their recovery trajectory, driven by higher sales of Cefaclor and 7-ACCA. On a year-on-year basis, the sales growth was an impressive 46.4 percent.”

Cephalosporins are a large group of antibiotics that are closely related to penicillin and are used in managing a wide range of infections. Cefaclor is a cephalosporin used in treating respiratory and skin infections.

According to Lupin’s annual report for 2022, its API arm contributed around 6 percent of the total revenue, with sales of Rs 990 crore.

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