Piramal Healthcare stock surges 24% as firm denies sell-out

Piramal Healthcare shares surged over 24% in intra-day trade on the Bombay Stock Exchange (BSE) after the company said reports of its possible buyout by global drug majors like GlaxoSmithkline and Sanofi-Aventis were "unfounded". Shares of Piramal opened at Rs 198, saw a high of Rs 242, up 24.48% from its previous close.

The shares, however, closed marginally down at Rs 192 on the BSE on Monday.

Piramal Healthcare had termed as "totally unfounded" reports in the foreign media that GSK and Sanofi had emerged as bidders for the Indian drug company. "It has come to our attention that certain sections of the media have been speculating about a potential sale of the company. We would like to clarify that this is totally unfounded," Piramal said in its media release.

"I do not foresee anything like that happening," said Sarabjit Kour Nangra, vice president-research at Angel Broking, referring to the acquisition reports. "The numbers being thrown are not attractive enough. I do not see any huge compelling reason for the company (Piramal) to be attracted to sell out." Nangra, who has a 'buy' on Piramal shares, said if the company was considering a sale, it would probably be for parts of the business and not the whole entity.

Analysts also said that it is unlikely that a company that had grown through aggressive mergers and acquisitions (MandAs) for most part of its growth cycle should sell itself off to an MNC at such low valuations. On June 6 last year, days before industry leader Ranbaxy was bought out by Daiichi Sankyo, shares of Piramal Healthcare were trading at Rs 388 on the BSE. Many then predicted that other Indian generic makers would follow the leader's path and would look at sell-off opportunities. Generics, that were once seen as a huge business opportunity, especially with patent expiries in the US, has of late come under pressure due to intense competition and extremely thin margins. But the stock markets tanked thereafter, hitting valuations of the listed entities.

Piramal saw its net profit dip 17.7% y-o-y for Q3 of FY09 at Rs 59.9 crore, down from Rs 72.8 crore in Q3 of FY08. This was particularly owing to a drop in revenues from the custom manufacturing business.

Reports had said that the sale price of Piramal would go upto potentially as high as $1.5 billion (Rs 7,350 crore), under anauction that is competitive but in the early stages.

Piramal Healthcare is one of India's largest pharmaceutical companies, focusing on nine disease areas and had revenues of Rs 2,879 crore in 2007-08. Its business includes custom manufacturing, in which it helps formulate and package drugs for other companies on a contract basis, with operations in North America, Europe and Asia.