Glenmark Pharma shares falls 5% after subsidiary stake sale to Nirma

According to a regulatory filing, Glenmark Pharmaceuticals has entered into a definitive agreement with Nirma to divest 75 percent stake in Glenmark Life Sciences for Rs 5,651.5 crore, at a price of Rs 615 per share.

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Glenmark Pharmaceuticals share price fell 2 percent at open on September 22, after the pharma company agreed to divest 75 percent of its stake in subsidiary Glenmark Life Sciences to Nirma. Glenmark Pharma stock was trading at Rs 827.70 on the NSE a close on September 21. At 10 am, the stocks were trading lower by 5 percent at Rs 784.36.

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According to a regulatory filing, Glenmark Pharmaceuticals has entered into a definitive agreement with Nirma to divest 75 percent stake in Glenmark Life Sciences for Rs 5,651.5 crore, at a price of Rs 615 per share. After the sale, Glenmark Pharma will own 7.84 percent in Glenmark Life Sciences, down from the current 82.9 percent.

Nirma will have to make a mandatory open offer to public shareholders of Glenmark Lifesciences for an additional 17.15 percent stake at Rs 631 a share.

In June 2023, according to a CNBC TV18 report, Nirma and PAG-backed Sekhmet Pharmaventures were among the final shortlisted bidders for a controlling stake in Glenmark Life Sciences.

Also read: Glenmark recalls 1,200 bottles of generic hypertension drug in US

Glenmark Pharma stock call – Deleveraging to help

According to Motilal Oswal, which maintains a Neutral rating on Glenmark Pharmaceuticals, after the stake sale, Glenmark will transition from a net debt position of Rs 0.29 crore to a cash surplus of Rs 0.21 crore. Additionally, the net reduction in overall EBITDA due to the sale of API business would be partially offset by a reduction in interest. Analysts expect an improved outlook over the next two to three years because of “significant deleveraging and superior execution in both the domestic formulation (DF) and EU/ROW markets”. This they believe should positively impact return ratios to some extent.

Also read: Glenmark Life Sciences deal to reduce parent’s debt, make it net cash positive: CMD

In a September 21 press conference, Chairman and MD Glen Saldanha had said that their goal is to be net cash positive for the next two years after the total debt gets extinguished after the deal. Going forward, he said, the company will focus on “Growth, ROCE and being cash positive.”

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