Piramal Pharma drops 5% after listing at Rs 201.80; Motilal sees Rs 210 as fair value

Shares of Piramal Pharma, the demerged business of Piramal Enterprises, fell nearly 5 per cent in Wednesday's trade after getting listed at Rs 201.80 a piece on BSE.

The scrip debuted at Rs 200 a piece on NSE. Brokerage Motilal Oswal said the stock has a fair value of Rs 210.

By 10.01 am, the scrip had hit a low of Rs 191.75, down 5 per cent.

Piramal Pharma was demerged from Piramal Enterprises as a part of the simplification of the corporate structure. Shareholders of Piramal Enterprises have been issued four equity shares of Piramal Pharma for every equity share they held.

Motilal Oswal said Piramal Pharma has a differentiated business model, comprising contract development and manufacturing (CDMO), complex hospital generics (CHG), and India Consumer products (ICH), wherein CDMO accounted for 59 per cent of FY22 sales, CHG 30 per cent and ICH 11 per cent.

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"While Piramal Pharma has been facing business headwinds over the past 15-18 months, we expect resource hiring to revive the CDMO business and the easing of Covid-related restrictions to drive the CHG segment," it said.

The brokerage sees continued investments to the tune of $157 million towards capacity expansion and expects the company to attract customers through differentiated offerings.

"Moreover, there is a healthy pipeline of developmental projects across clinical phases. We expect CDMO revenues to exhibit a CAGR of 10 per cent over FY22-24 to Rs 4,800 crore, led by a strong pipeline of molecule with high visibility of revenues over the next four to five years," Motilal Oswal said.

Axis Capital in another note said Piramal Pharma's financials in recent past have been weak amid challenges in CDMO (attrition, raw material availability, logistic delays and customer-led delivery schedule changes) and CHG (third-party CMO supply constraints).

Ebitda margin, it said, was impacted by lower growth in high-margin CDMO and higher packaging, logistic, raw material and operating costs.

"While recent execution challenges in CDMO and supply chain challenges in CHG remain in near term, we expect demerger to improve focus on CDMO (integrated offering across locations), CHG (high entry barrier business) and OTC (fast growing underpenetrated market)," Axis Capital said in a report," the brokerage said.