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Strides Arcolab spurts as PE firm eyes stake in arm

Capital Market / 11:07 , Nov 24, 2009

Strides Arcolab jumped 5.43% to Rs 202.95 at 11:08 IST on reports private equity firm General Atlantic is looking to buy a substantial stake in the company's injectables business arm for about $100 million.

Meanwhile, the BSE Sensex was down 10.51 points, or 0.05%, to 17171.31.

On BSE, 2.02 lakh shares were traded in the counter as against an average daily volume of 1.85 lakh shares in the past one quarter.

The stock hit a high of Rs 208.50, which is also its 52-week high. The stock hit a low of Rs 194.50 so far during the day. The stock had hit a 52-week low of Rs 60.65 on 5 March 2009.

The stock had outperformed the market over the past one month till 23 November 2009, rising 5.68% as compared to the Sensex's 2.20% fall. It outperformed the market in past one quarter, gaining 29.02% as against 12.72% rise in the Sensex.

The small-cap drug maker has an equity capital of Rs 40.16 crore. Face value per share is Rs 10.

The current price of Rs 202.95 discounts the company's Q3 September 2009 annualised EPS of Rs 4.21, by a PE multiple of 48.20.

General Atlantic (GA) may buy between 30%-40% in the company's injectables business, which is housed in a subsidiary called Strides Specialties.

Reports suggested that Strides had recently inducted New York-based financial advisory firm Lazard to bring investors on board for its injectables business. Strides has reportedly valued its injectables business at $300-400 million.

Earlier this year, Strides Arcolab announced a corporate re-structuring to hive off its research & development activity into a separate unit and its sterile injectables business into a speciality pharma subsidiary, Strides Specialities, while the parent company would retain the pharmaceutical business.

Strides Arcolab reported a net profit of Rs 4.23 crore in Q3 September 2009 as against a net loss of Rs 51.68 crore in Q3 September 2008. Sales fell marginally by 0.3% at Rs 165.79 crore in Q3 September 2009 over Q3 September 2008.

Strides Arcolab manufactures a variety of pharmaceutical products that are distributed in over 35 countries. The group's therapeutic portfolio includes steroids, cephalosporins, antibiotics, vitamins, and analgesics. Strides Arcolab also runs a contract research and manufacturing division.

Promoters have pledged 68.96 lakh shares representing 17.17% of the equity capital of the company. Total promoters shareholding in the company is 25.73% (As on September 2009).

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