Glenmark Pharma slips 5% on inking deal to sell 75% stake GLS to Nirma

The company announced that it will sell 75 per cent stake in Glenmark Life Sciences (GLS) to Nirma for Rs 5,652 crore at Rs 615 per share.

Shares of Glenmark Pharmaceuticals slipped 5 per cent to Rs 782.90 on the BSE in Friday’s intra-day trade after the company inked a pack to sell 75 per cent stake in Glenmark Life Sciences (GLS) to Nirma for Rs 5,652 crore at Rs 615 per share. Glenmark Pharma will own 7.84 per cent in GLS after the divestment.

In past two trading days, the stock price of Glenmark Pharma dipped 11 per cent from its 52-week high of Rs 782.90 touched on Thursday. In past one month, the stock has rallied 14 per cent.

“The company has entered into a definitive agreement with Nirma to divest 75 per cent stake in its subsidiary, GLS, at a price of Rs 615 per share for an aggregate consideration of Rs 5,652 crore, subject to closing adjustments and necessary approvals,” Glenmark Pharma said in a press release.

This deal aligns with Glenmark’s strategic intent of moving up the value chain to become an innovative/ brand led organization, with continuous focus on its core therapeutic areas of dermatology, respiratory and oncology, Glenn Saldanha, Chairman and Managing Director, Glenmark Pharma said.

Glenmark Pharma will continue to focus on consistent growth across its key markets whilst having a strong emphasis on return ratios with net cash positive balance sheet, ultimately creating value for its shareholders, the company said.

According to ICICI Securities, Glenmark Pharma is set to become cash positive and see improved return ratios (ex-cash). GLS got listed in 2021, manufactures APIs. Nirma products range from soaps to cement, will make a mandatory open offer to all public shareholders of GLS.

The stake sale removes the debt-related concern for Gelnmark Pharma. In fact, it would have additional cash to recalibrate innovative pipeline and improvise branded generics business. However, it would be earnings neutral as we believe the net reduction in EBITDA from API business (Rs 550 crore) would be offset by a reduction in interest cost and higher other income, Motilal Oswal Financial Services said in company update.

Meanwhile, shares of GLS too were down 2 per cent to Rs 612.75 on the BSE in intra-day trades today. The stock had hit a 52-week high of Rs 674 on August 1, 2023. GLS made its stock market debut on August 6, 2021. The company had issued shares at price of Rs 720 per share.