Lupin considers demerger of API Business, stocks hit a 52-week high

27 Jun 2023 , 10:57 AM

Lupin’s stock surged by around 2 % in early trading, reaching a 52-week high of Rs 889.90 on June 27, following reports of the pharma company’s consideration of a demerger for its active pharmaceutical ingredients (API) business.

Sources reported that Lupin aims to unlock value by carving out its API vertical, with the possibility of exploring a potential listing or stake sale of the separated entity in the future.

However, it is uncertain whether the discussions regarding the demerger will materialize into an actual transaction, according to another source familiar with the matter.

Glenmark Pharma, a competitor of Lupin, previously undertook a similar restructuring process by separating its API business into a new company called Glenmark Life Sciences.

At the time of writing, Lupin’s shares were trading at Rs 885.60 on the National Stock Exchange, marking a 1.32 % increase from the previous close.

The API segment has faced significant margin pressure in recent quarters due to factors such as higher raw material costs, destocking caused by the COVID-19 pandemic, disruptions in the China supply chain, and price erosion in the US market. However, a decline in raw material prices and stabilization of price erosion led to a recovery in the segment during the January-March quarter.

According to Lupin’s annual report for 2022, its API arm contributed approximately 6 % to the company’s total revenue, generating sales of Rs 990 crore.

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