Shilpa Medicare spurts after board nod for biological unit sale

Shilpa Medicare hit an upper circuit limit of 5% at Rs 515.20 after the company said its board approved the sale of biological unit to a wholly owned subsidiary.

The board of directors of Shilpa Medicare approved the sale of biological unit via slump sale to Shilpa Biologicals, a wholly owned subsidiary of the company, subject to the approval of shareholders. The announcement was made after market hours yesterday, 24 February 2020.

The biological unit is currently under construction stage and not yet commenced commercial operations. Net worth of the proposed unit is estimated to be around 22% to 24% (i.e. Rs 321.77 crore approximately) on standalone financials basis.

The consideration for the proposed sale will be paid in cash. The sale is expected to be completed on or before 31 March 2020 subjected to shareholder's approval.

Sale of Biologicals unit would result into operational synergies and lead to overall cost optimisation. It would result into sector focused company and facilitate for strategic investment. Facilitates to create a Biological business with a separate focused management that would provide greater flexibility in pursuing long-term growth plans and strategies. Helps the management to efficiently exploit opportunities for Biological business independently.

In the past one month, the scrip has almost doubled itself by soaring 98.19% to its current market price of Rs 515.20.

On the technical front, the stock's RSI (relative strength index) stood at 80.452. The RSI oscillates between zero and 100. Traditionally the RSI is considered overbought when above 70 and oversold when below 30.

Shilpa Medicare's consolidated net profit surged 248.7% to Rs 55.06 crore on a 36.6% jump in net sales to Rs 236.85 crore in Q3 December 2019 over Q3 December 2018.

Shilpa Medicare is engaged in the business of manufacturing of bulk drugs or active pharmaceutical ingredient (API) and intermediates, and wind power generation. The company's segments include bulk drug/intermediates and energy. It deals with APIs, intermediates, formulations, new drug delivery systems, peptides/biotech products and specialty chemicals.

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