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Delisting and regulator's inaction failed to improve market capitalization of pharma entities
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Sanjay Pingle, Mumbai
September 27 , 2016
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The Bombay Stock Exchange (BSE) authorities have suspended major
companies from pharmaceutical segment like Elder Pharmaceuticals, Surya
Pharmaceuticals, Plethico Pharmaceuticals, Twilight Litaka, Dr Datson
Laboratories (formerly known as Aanjaneya Lifecare), Arvind Remedies,
Ankur Drugs and Hiran Orgachem from trading during last couple of years.
The list of delisted companies includes few relatively small companies
like Elder Health, Elder Project, Life Line Drugs & Pharma, Combat
Drugs, Toheal Pharmachem, Venkat Pharma, Anus Laboratories, KDL Biotec,
Citurgia Biochemicals, Jupiter Bioscience, etc. Several scrips are
currently quoted below par without any trading as these were delisted by
authorities. This list is likely to increase in due course if the
authorities will not take stringent action against management of these
players.
Though the overall financial performance of Indian
pharmaceutical companies improved during last five years, few majors
lost ground heavily and put pressure on market capitalisation of pharma
companies. The poor performance attributed to the stringent actions
taken by foreign regulators regarding quality issues, borrowings, stiff
competition and also government policies in respect of capping of drug
prices. Further, financial mismanagement, lack of timely actions, fund
shortages for improvements, lower than expected returns from research
activities and rosy picture at the time of entry into capital market
knock down several pharma majors.
Over the years, investors lost
heavily and stock exchange authorities failed to take any action against
culprits, except de-listing. The regulators only suspended these loss
making companies from trading and several crores were locked in.
Investors as well as financial institutions and banks suffered heavily.
While suspending from trading, the only reason given is 'Due to Penal
Reasons' on BSE. The stock exchange authorities and even market
regulator SEBI are not taking any serious action to solve the problem
and take actions against management of these lost entities.
Several
of these companies incurred heavy losses due to interest burden and are
now going under debt restructuring process. From the small investors
point, the loss is heavy, and for financial institutions, banks,
corporate bodies and foreign institutional investors, they are passing
through challenging situation. The shareholding pattern of many
companies is interesting and promoters are holding very small part in
these companies. For instances, Surya Pharma' promoters are holding only
0.96 per cent of its equity capital, and that of Twilight Litaka's
promoters have only 1.28 per cent. The promoters of Dr Datsons, Ankur
Drugs, Hiran Orgochem, Elder Pharmaceuticals are holding 10 per cent,
5.90 per cent, 23.88 per cent, 25.34 per cent respectively. Thus, the
delisting will not affect to promoters as compare to public investors.
The
focus on de-growth of net sales of these companies will show how these
companies lost ground and several of them were delisted. Five years ago
i.e. in the year 2011-12, Plethico Pharma registered a net sales of Rs.1,640 crore, Surya Pharmaceuticals Rs.1,637 crore, Elder Pharma Rs.1,324 crore, Twilight Litaka Pharma Rs.730 crore, Dr Datson Rs.450 crore, Arvind Remedies Rs.465 crore, Ankur Drugs and Pharma Rs.153 crore and Hiran Orgochem Rs.148
crore. All these major companies lost heavily and delisted from Bombay
Stock Exchange and National Stock Exchange for various reasons. Who are
the main losers? The answer is small investors, banks, corporate bodies
and financial institutions.
Out of these several companies did
not declare their latest financial working for the year 2015-16. We have
taken latest available figures for comparison purpose. Surya
Pharmaceuticals sales for the year ended March 2014 amounted to only Rs.12.64 crore as against Rs.1,637 crore in 2011-12, Twilight Litaka Pharma Rs.32 crore for June 2014 as compared to Rs.730 crore, Elder Pharmaceuticals Rs.1,006 crore for March 2014 as against Rs.1,324 crore, Dr Datson Rs.421 crore for March 2014 as against Rs.480 crore, Hiran Orgochem Rs.0.42 crore as compared to Rs.148 crore in 2011-12.
Hiran Orgochem equity share capital stood at Rs.98.66 crore (market capitalisation at the time of delisting was Rs.4.74 crore), Surya Pharmaceuticals equity capital at Rs.20.27 crore (M-cap Rs.3.24 crore), Plethico Pharmaceutical at Rs.34.07 crore (M-cap Rs.27.05 crore), Elder Pharma Rs.20.53 crore (M-cap Rs.78.04 crore), Twilight Litaka Rs.12.39 crore (M-cap Rs.7.14 crore), Dr Datsons Labs Rs.31.65 crore (M-cap Rs 20 crore), Ankur Drugs Rs.19.34 crore (M-cap Rs.7.47
crore) and so on. Thus this shows that due to poor financial
performance the market capitalization of these delisted companies went
down significantly and shareholder have lost huge amounts.
Hiran
Orgochem suffered heavily and there were no sales during 2015-16 as SBI
has taken manufacturing facility in its possession. The fixed assets of
Hiran Orgochem were sold by Edlweiss Asset Management Company for Rs.10.65
crore in attempt to recover dues of State Bank of India. Further, Hiran
has provided an interest free loan to Actgen Pharma Pvt Ltd, an
associate company and the bank has taken possession of factory of Actgen
for which Hiran has provided a corporate guarantee of Rs.27 crore.
Similarly,
Surya Pharma incurred heavy loss and currently under debt restructuring
sick company. The company restrained from disposal of assets by certain
Courts and BIFR. Due to recovery actions initiated by lenders, the
company was forced to suspend manufacturing activities at its various
plants in earlier years.
Thus the lenders are taking steps to
recover their dues. However, the stock exchanges and SEBI authorities
have not been able to take actions against management of these companies
for not providing latest information about the working. BSE, NSE and
SEBI authorities did not reply to our query regarding their actions
against several delisted companies. Latest financial results are not
available and it is hard to get current status of these companies. There
is no fear of actions of capital market regulators and only sufferers
are public investors.
The working of few important companies like
Orchid Pharma, Sharon Bio-Medicines, Ind-Swift Laboratories, Ind-Swift
Ltd, Panacea Biotec, Jupitor Biosciences, KDL Biotech, Sterling Biotec,
Syncom Healthcare, Syncom Formulations, etc have also put pressure on
market capitalization of pharmaceutical segment. Though these companies
are still quoting on stock exchanges, investors lost heavily in all
these scrips during the last couple of years.
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