Zydus Lifesciences shares tumbled to a nearly two-month low on Monday, following the company’s announcement of a 50% stake acquisition in Sterling Biotech Ltd. for Rs 550 crore. The stock opened 6% lower at Rs 1,108.35 apiece and traded 4.4% lower at Rs 1,127 as of 9:22 a.m.
The acquisition marks Zydus’ entry into the fermentation-based protein business, with Sterling Biotech becoming a joint venture with equal board representation. However, brokerages Nomura and Citi expressed concerns over the deal’s impact on Zydus’ financials.
Nomura maintained a ‘neutral’ rating, citing the acquisition’s unlikely near-term earnings accretion due to Sterling Biotech’s weak profitability. Citi reiterated a ‘sell’ call, attributing Zydus’ recent US sales strength to non-recurring and non-replaceable small molecule products.
Despite a 76% rise in the last 12 months and 57% year-to-date gain, the stock faces a potential 8.4% downside, according to analyst price targets. Thirteen out of 32 analysts recommend a ‘buy’, while 10 suggest a ‘hold’ and nine advise a ‘sell’.
The acquisition’s impact on Zydus’ business and financials remains a concern for investors, leading to the stock’s decline. The transaction is expected to be completed within two months, and its long-term implications will be closely watched.
