BIOCON STOCK MAY GIVE SOLID GAINS IN THE MEDIUM TERM

Biocon Ltd declared its Q3 financial results on 22 January and analysts and fund managers were disappointed with the same. It reported a 18% fall in net profit to Rs 186 crore, while the revenue increased marginally by 7% to Rs 1878 crores. The generic business reported weak set of numbers due to delay in regulatory approvals and muted demand from customers who had stockpiled anticipating a supply disruption during the Covid pandemic. The management explained that 2020 has been a very challenging year for the company and the global economy due to the pandemic. The company faced multiple headwinds across operational, regulatory and commercial functions which have been deterrents to the market expansion. The impact of the pandemic on revenue and margins have been greater than anticipated due to delay in tender awards and higher entry barriers in newer markets. They expect normalisation to kick in by the next fiscal. The company’s subsidiary, Biocon Biologics, had recently approved a primary equity investment of Rs 555 crores by Abu Dhabi based ADQ in the company. Post the completion of this transaction, Biocon Ltd would hold a 89.89% stake in Biocon Biologics valuing it at USD 4.17 billion . The parent, Biocon had also announced that it proposes to list the bio similar unit on the stock exchanges by going public in the next few years. The company has secured equity investments in the Biologics company from marquee investors like Goldman Sachs, Tata Capital, True North and most recently from Abu Dhabi’s ADQ. The Biocon stock took a terrible beating on the bourses on Friday by declining over 10% to close at Rs 393 in the closing hours on the back of disappointing third quarter financial results and missing street expectations. But most analysts and market men are bullish on the company from a medium term point of view as they feel that it is only a matter of the next two quarters for the company business to rebound and normalise and post decent financial results.

The separate listing of the Biologics will be an added trigger for value to be accretive in the next 18 months or so. It is a value buy for investors to accumulate the Biocon stock for solid gains in the medium term.

Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.