Elder Pharma rallies 5% on stake sale reports

NEW DELHI: Elder Pharma rallied 5 per cent in morning trade on Tuesday, after the Mumbai-based pharmaceutical company has been put on the block as it grapples with mounting debts and rising competition in the pharmaceutical industry.

At 09:20 a.m.; Elder Pharma was locked in 5 per cent upper circuit at Rs 357.15. It hit a low of Rs 347.70 in trade today.

Commenting on the valuation, ET said that the company is likely to be valued at Rs 3,000 crore as promoters of Indian pharma companies recently cashed out at a valuation of three to four times of annual sales of their respective companies.

“The company's advisors are currently doing a vendor due-diligence at the corporate office in Mumbai to review the business ahead of offering assets to a potential buyer,” ET reported.

“Pharma multinationals such as Sanofi, Pfizer and GSK and some Japanese companies are understood to be among the players that have evinced an initial interest,” added the ET report.

Prospective buyers are keen on taking over a part of the Indian business and brands instead of a complete buyout.

Elder has accumulated debt of Rs 1,300 crore after expanding operations through acquisitions.

The company which earns its revenues predominantly from the domestic market posted a 9 per cent rise in turnover at Rs 1,454 for the year ended March 2013.

The company's operating margin for FY13 is down 100 bps to 14.8 per cent impacted by high interest costs, which has been above Rs 100 crore in the last two fiscals.