Ipca Labs stock tanks 10% after Unichem deal

Shares of Ipca Laboratories slipped as much as 10% in opening trade on Tuesday after the pharma company announced a deal to acquire a 33.38% stake in Unichem Laboratories.

The Mumbai-headquartered drugmaker's stock slumped to a three-year low of ₹943.85 apiece on the National Stock Exchange (NSE).

On Monday, the company entered into a 'definitive share purchase agreement' for the acquisition of 33.38% of the paid-up equity share capital of Unichem Laboratories from one of its promoter shareholders at a price ₹440 apiece amounting to ₹1,034.06 crore.

Ipca Laboratories is also making an open offer to the public equity shareholders of Unichem to acquire from them up to 26% of the fully diluted outstanding equity share capital at a price of ₹440 per share, under the relevant provisions of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.

These transactions are subject to the approval of the Competition Commission of India (CCI) under the Competition Act, 2002.

The business and product range of lpca and that of Unichem complements each other's business and product range, the pharma company said in a stock exchange filing.

"Unichem has developed an excellent and proven quality track record with a differentiated capability which is highly complementary to lpca's strengths. This acquisition is in line with our stated strategy to enhance our portfolio in our chosen growth markets. We both are well positioned to successfully integrate our product offerings and grow our businesses," said Premchand Godha, promoter and executive chairman, lpca Laboratories.

Established in 1949, lpca has a strong thrust on exports, which now account for nearly 50% of the company's income. The drugmaker markets its branded formulations in India and the rest of the world markets and generic formulations in Europe, the United Kingdom, Canada, Australia, and New Zealand.

Unichem manufactures and markets a large basket of pharmaceutical formulations as branded generics as well as generics in several countries across the globe. Its formulations manufacturing facilities are located at Goa, Ghaziabad (Uttar Pradesh) and Baddi (Himachal Pradesh). The Active Pharmaceutical Ingredients (API) manufacturing facilities are located at Roha (Maharashtra), Pithampur (Madhya Pradesh) and Kolhapur (Maharashtra).

"We are very excited about this transaction and believe that lpca is an ideal partner to take business of Unichem through its next phase of growth. For Unichem, employees and customers have been core to its business and I strongly believe, they will benefit from lpca's expertise in providing competitive and integrated services globally," said Prakash A Mody, promoter, chairman and managing director, Unichem Laboratories.

According to ICRA, the revenues of Indian pharmaceutical companies are expected to grow by 6-8% in the financial year 2023-24, primarily driven by steady performance across key markets -- the US and India -- and some recovery in growth in the European market. The operating profit margin (OPM) is expected to be steady at 21-22% in FY24, supported by stabilisation of raw material prices and increased focus on complex generics and specialty molecule launches in the U.S. market, the rating agency said earlier in April.