Alembic Pharma slips 5%; board approves Rs 1,150 cr as impairment charges

This one time impairment impact notwithstanding, we believe this move bodes well for future return ratios and profitability. We expect more impairments in due course, ICICI Securities said in a note.

Shares of Alembic Pharmaceuticals hit a 52-week low of Rs 476.30, as they slipped 5 per cent on the BSE in Friday’s intra-day trade after the company said its board approved impairment charges of Rs 1,150 crore for three Gujarat plants. The stock of drug maker slipped below its previous 52-week low of Rs 490.35, touched on February 15, 2023.

Alembic Pharma has done an impairment review of Capital Work in Progress (CWIP) assets of 3 new facilities in Gujarat namely Facility 2 (for oncology injectables and oral), Facility 3 (ophthalmic and general injectables) and Facility 4 (for oral solid dosages). The impairment amount as on Jan 1, 2023 stood at Rs 1,150 crore.

The same shall be written-off to the Statement of Profit and Loss of the financial year 2022-23 which shall be utilised from General Reserve in order to maintain the accumulated unconditional distributable profits.

Alembic Pharma said due to Covid-19 pandemic, the United States Food and Drug Administration (USFDA) approvals process for these Manufacturing Facilities took significant prolonged period than ordinarily expected.

Further, in view of the price erosion witnessed in the US generics market in recent past as well as increasing market interest rates domestically and globally, the management believed that estimates of cash generation from these Manufacturing Facilities are significantly impacted and likely to have undergone a significant downward revision.

The company is of the view that these reserves can be utilized to create further shareholder’s value, in such manner and to such extent, as the Board of Directors of the Company in its sole discretion, may decide, from time to time and in accordance with the provisions of the Act and other Applicable Laws, Alembic Pharma said.

“This one time impairment impact notwithstanding, we believe this move bodes well for future return ratios and profitability. We expect more impairments in the due course,” ICICI Securities said in a note.

At 10:05 AM; the stock erased most of its intra-day losses and was down less than 1 per cent at Rs 499.15 on the BSE. In comparison, the S&P BSE Sensex was up 0.91 per cent at 59,445.

Meanwhile, in past one year, Alembic Pharma has underperformed the market by falling 32 per cent, as against 8 per cent rise in the Sensex.