Alembic Pharma Approves ₹ 1,150 Cr Impairment Charges; Stock Slides 5%

Alembic Pharma Approves ₹ 1,150 Cr Impairment Charges; Stock Slides 5%

Alembic Pharma’s Share Price Hits 52-Week Low Following Approval of Impairment Charges Worth Rs 1,150 Crore

Alembic Pharma shares took a dive on Friday, dropping 5 percent to a 52-week low of Rs 476.30 on the Bombay Stock Exchange (BSE). The drop followed the company’s announcement that it had approved impairment charges amounting to Rs 1,150 crore for three of its under-construction manufacturing plants in Gujarat.

An impairment review of Capital Work in Progress (CWIP) assets of three new facilities in Gujarat, namely Facility 2 in Panelav, Facility 3 in Karakhadi, and Facility 4 in Jarod, resulted in the charges. Alembic Pharma said that the Covid-19 pandemic caused delays in the approval of its manufacturing facilities by the US Food and Drug Administration (USFDA). As a result, the company is worried that its cash generation estimates from these facilities will need to be significantly revised downwards, partly due to price erosion in the US generics market and also due to rising global interest rates.

The company will write off the charges from the Statement of Profit and Loss of the FY22-23 and use it from the general reserve to maintain the accumulated unconditional distributable profits. It believes that using these reserves will allow for the creation of additional shareholder value, subject to the discretion of the Board of Directors in accordance with the relevant provisions of the Act and other applicable laws.

ICICI Securities commented that this move would be beneficial for future return ratios and profitability, despite the one-time impairment impact. It added that more impairments could be expected in the future. Similarly, brokerage firm JM Financial said that the return ratios could improve due to a lower base and that most of the balance sheet clean-ups, write-offs, and capex cycle are now complete.

The share price of Alembic Pharma has dropped around 32 percent in the last one year, but the company hopes to regain its footing soon. At 11.38 am, the share price had dropped 0.40 percent to Rs 500.45 apiece on the BSE.

About Alembic Pharma:

Alembic Pharmaceuticals is in the business of development, manufacturing, and marketing of Pharmaceuticals products i.e. Formulations and Active Pharmaceutical Ingredients.
The company has 3 R&D and 5 manufacturing facilities.

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