UPL rallies 7% on heavy volumes; stock surges 34% from December low

A combined 27 million equity shares, representing 3.5 per cent of total equity of UPL, changed hands on the NSE and BSE at the time of writing of this report

Shares of UPL hit an over 11-month high of Rs 558, up 7 per cent, on the back of heavy volumes in an otherwise subdued market on the National Stock Exchange (NSE). With today's gain, it has bounced back 34 per cent from its recent low of Rs 416, hit on December 21, 2020, in the intra-day trade.

The stock of the agrochemicals company was trading at its highest level since February 2020. Moreover, it was quoting close to its 52-week high level of Rs 601, touched on February 14 last year. Trading volumes on the counter more-than-doubled with a combined 27 million equity shares, representing 3.5 per cent of total equity, of UPL changing hands on the NSE and BSE till 02:42 pm.

UPL, on December 29, had announced that the company had successfully redeemed $410 million worth of dollar-denominated bonds before their due date of October next year. The move , it said, was in-line with the company's earlier commitment to reduce its overall debt and was seen addressing one of investors' key concerns.

"This prepayment is in-line with its commitment to reduce debt. UPL is committed towards deleveraging its balance sheet at the back of strong business prospects and agriculture commodity prices, and favourable agronomic conditions," UPL had said in a statement.

Earlier on December 10, the stock had tanked 15 per cent in the intra-day trade after section of the media reported that the market regulator the Securities Exchange Board of India (Sebi) had initiated a forensic audit with respect to the whistle-blower complaint. However, the company's management quashed these allegations that the whistle blower is a member of the board as reported in the news article. Calling the report "malicious", the management clarified that these allegations were discussed and investigated by the Audit Committee and the Board in 2017/2018.

Analysts at Dolat Capital have 'buy' rating on the stock with target price of Rs 621 per share as UP's geographic diversification is expected to bring in a robust sales growth in October-March (H2FY21) as commodity prices remain favourable coupled with synergies coming from Arysta’s acquisition.

"The management maintained 6-8 per cent revenue growth guidance and EBITDA growth guidance of 10-12 per cent in FY21. Price hikes implemented in H1FY21 and cost synergies should lead to a margin improvement in H2FY21," the brokerage said in its September quarter results update.

The management expects better FY22 outlook on the back of favourable crop prices. New product launches and improved weather conditions in the Europe and the US should lead to an improvement in margins in H2FY21, it added.