Shares of a pharmaceutical company dropped 7.5 percent lower to reach an intraday low of ₹ 443.85 apiece after it announced the merger of a subsidiary with itself. The company’s shares settled at ₹ 446.25 apiece on the National Stock Exchange (NSE).
The Board of Directors of Strides Pharma Science have approved the scheme of amalgamation for the merger of Vivimed Life Sciences Private Limited (“VLSPL”), a wholly-owned subsidiary, with the company.
The scheme was initially approved by the board at their meeting held on February 10, 2022. However, the company did not proceed with the merger at that time. It is now subject to the approval of the shareholders and regulators.
The company is looking to combine the Contract Development and Manufacturing Organization (CDMO) interests of the group which means consolidating the promoter-run injectable CDMO business under Strides into one platform. The business includes biologicals, complex injectables, and oral technologies such as drug delivery systems.
This merger is expected to simplify the group structure by consolidating similar entities with similar functions within the group. Moreover, it will result in operational and administrative efficiencies, optimum utilization of infrastructure facilities and resources, reduction in costs through focused operational efforts, rationalization, standardization and simplification of business processes and elimination of duplication.
There is no cash consideration involved. Moreover, there will not be any change in the shareholding pattern of the company’s shares, as the said amalgamation is of wholly-owned subsidiary with Strides, and does not involve the issue of shares as consideration to the shareholders of Vivimed Life Sciences.
The Bengaluru headquartered company witnessed a narrower net loss of ₹ 7.1 crore in the June quarter this year (Q1FY24), as compared to ₹ 136 crores in the corresponding quarter last year. It reported an exceptional loss of ₹ 6 crores in the latest quarter and of ₹ 66 crore in the corresponding quarter last year.
Its revenue was flat at ₹ 930 crore, which is a 1.1 percent drop from the same quarter last year. However, the company’s operating performance remained strong. Its EBITDA expanded to ₹ 166.5 crore in the latest quarter, as compared to ₹ 60 crores in the June quarter last year.
With a market capitalization of ₹ 4,337 crores, Strides Pharma is a small-cap company. It has a negative return on equity of 9.68 percent. Its shares were trading at a price-to-earnings ratio (P/E) of 24.47, which is lower than the industry P/E of 26.14, indicating that the stock might be overvalued as compared to its peers.
Retail investors hold a 30.85 percent stake in the company, followed by 28.07 percent by promoters, 16.67 percent by foreign institutions, 13.86 percent by mutual funds and 4.55 percent by other domestic institutions.
Written by Simran Bafna
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