Lupin, the country’s second largest pharmaceutical company by market cap, is going through a lean patch. The Mumbai-based company, owned by DB Gupta and family, has had a decent run till now with sales and profit clocking a CAGR of 12% and 14%, respectively, over FY13-17.
But a discernible quarter-on-quarter decline of 5.5% in sales and a drop in profitability in the fourth quarter has impacted sentiment. During the fourth quarter, Lupin reported a loss of Rs.168 crore owing to foreign exchange fluctuations. Since the beginning of the current calendar year, the rupee has gained by 5.05% against the greenback. Besides, the US Food and Drug Administration also issued the company with Form 483 in April, citing violation of good manufacturing practices at its Goa and Aurangabad plants.
Post the Q4 results, the stock has fallen by around 7% and, in fact, hit a 52-week low on May 29, at Rs.1,080. Over the past one year, the stock has declined 23% compared with 16% for the Benchmark CNX Pharma index.
The negative sentiment and weakness around the stock seems to have opened a window of opportunity for the promoter to jack up his holding. For the first time in CY17, promoter entity Visiomed Investments acquired 88,000 shares, worth around Rs.10 crore, at an average price of Rs.1,135 a share. Following the acquisition, the entity increased its stake by 0.12 percentage points to 9.78% in Lupin. In FY17, overall promoter holding had marginally increased from 46.52% to 46.69%.
Among institutional holders, there has been a churn of sorts. Domestic mutual funds have increased their stake from 3.86% in FY16 to 5.39% in FY17, with ICICI Prudential AMC holding 1.14%. Foreign portfolio investors, on the other hand, have reduced their stake from 35.14% in FY16 to about 32% in FY17. The single largest FII holding is that of First State Investments ICVC, which owns 2.43%.
Analysts reckon that if the firm is successful in making inroads into the branded and specialty market over the next few years, it will be able to stem the tide of pricing pressure in generics. But it doesn’t seem that a phenomenal performance is in store. For FY17, Lupin’s sales were up 24% to Rs.17,119 crore, while PAT rose by 13% to Rs.2,557 crore. However, in the current fiscal, sales are expected to grow at 8% and, over FY16-19, they are expected to clock a CAGR of 11%.
