Cipla surges to record high on buzz over Blackstone eyeing to buy out promoter’s stake

Promoters of Cipla, the Hameid family, were looking to pare their stake as part of the company’s succession plan.

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Shares of Cipla soared over 6 percent in early trade on August 4 to hit a all-time high of Rs 1,238.70 amid buzz that the world’s largest private equity fund, Blackstone is set to submit a non-binding bid as early as next week to acquire the entire promoter stake in the drugmaker.

The Hamied family, which are the promoters of India’s third-largest pharma generics player by revenue Cipla, hold a cumulative 33.47 percent stake in the company.  On July 27, Moneycontrol reported that Cipla promoters are exploring to partially pare their holdings as part of the company’s succession plans.

Since the surfacing of the news, shares of Cipla has shot up over 15 percent. At 10.37 am, shares of Cipla were trading at Rs 1,215.30, up 4.2 percent on the National Stock Exchange.

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Intellectual expertise

In the event that Blackstone proceeds with the move, it would lead to an open offer for an extra 26 percent of the company’s shares. If this offer is fully subscribed, Blackstone has the potential to own as much as 59.4 percent of the pharmaceutical major. Such a scenario would mark one of the largest private equity-led buyouts in the Indian market.

Also Read | Blackstone sets its sights on buying out Hamieds from Cipla

Analysts also welcome the entry of a PE investor in Cipla as they believe the upcoming investor can fuel the company’s growth to newer heights. An analyst, who spoke on condition of anonymity, explained that the entry of a PE investor doesn’t just bring financial capital but also intellectual expertise and a strong management pedigree, which holds the potential to turn things around.

Analyst view

And with Cipla’s already strong standing within the pharmaceutical space, along with multiple industry tailwinds, the entry of a PE investor only magnifies its growth prospects, the analyst said.

Technical chartist also rolled out a positive trend for shares of Cipla. The stock broke out of its consolidation following a strong run-up in today’s session. Ratnesh Goyal, senior technical and derivatives analyst at Arihant Capital Markets, foresees an upward trend in the stock and expects it to rise towards levels of around Rs 1,300 if it manages to close above Rs 1,230.

For those already holding the stock, Goyal suggests investors to hold their positions with a stop loss of Rs 1,170.

Moreover, strong long buildup was also seen in the derivatives segment of Cipla, with open interest jumping over 12 percent along with robust volumes that rose 91 percent, the highest in a week.

Also Read | Will Cipla shares scale greater heights if PE players buy stakes?

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