Why did small cap stock Sequent Scientific hit 20% upper circuit today?
On Wednesday, in its regulatory filing, Sequent Scientific said, the Company will not acquire Tineta, and the Share Purchase Agreement entered by the Company with Tineta and its Promoters on November 07, 2022 stands terminated.
Bulls favoured small-cap stock Sequent Scientific despite the broader markets being under pressure on Thursday. Sequent saw a strong rally hitting nearly one-month high and even touching its 20% upper circuit. The reason behind the sharp upside in Sequent comes after when the company decided to not acquire a 100% stake in Tineta Pharma.
On BSE, Sequent share price closed at ₹74.37 apiece --- soaring by a whopping ₹11.99 or 19.22%. The stock touched a 20% upper circuit of ₹74.85 apiece during the trading session.
On the previous day, Sequent's stock was at ₹62.38 apiece on BSE.
Sequent witnessed this rally after 3 consecutive days of selling pressure. The last time the stock touched the ₹74.85 mark was on February 14th.
On Wednesday, in its regulatory filing, Sequent Scientific said, "the Company will not acquire Tineta, and the Share Purchase Agreement entered by the Company with Tineta and its Promoters on November 07, 2022 stands terminated."
Last year, in November, Sequent announced a 100% acquisition of Tineta for ₹218 crore to enhance its presence in the Indian veterinary market. As per Sequent, the acquisition was in line with its strategic priority to scale up the India formulations business which was expected to be EBITDA accretive and give a significant boost to its 2.0 plans.
However, on Wednesday, Sequent said that the transaction contemplated under the share purchase agreement with Tineta "has not been materialized." Thereby, it will not acquire Tineta and the agreement is terminated.
For the nine months period of FY23, Sequent posted a revenue of ₹1,054.2 crore up from ₹1,029.1 crore in 9MFY22. However, EBITDA plunged to ₹35 crore in 9MFY23 from ₹76.1 crore in 9MFY22.
In Q3FY23, the revenue climbed marginally to ₹375.3 crore versus ₹337.6 crore in Q3FY22, while EBITDA soared to ₹18.8 crore from ₹5.1 crore in Q2 of FY22.
Last month, on February 14, Rajaram Narayanan, Managing Director stated “Q3 FY23 reflects the strengthening of our business,
across both APIs and key formulations markets, with overall revenue growth of 10.0% in constant currency terms over Q2 FY23. While the cost environment continues to be challenging for the industry, gross margins have remained stable. EBITDA before ESOP costs stood at
₹277 Mn for the quarter, an 85% growth (300 bps improvement) over Q2 FY23."
Going ahead, Narayanan said, "the company has undertaken a comprehensive profitability improvement program with initiatives across API and formulation businesses, to strengthen cost competitiveness, meet the changing demand landscape, and remain resilient in the current global macro environment. SeQuent has a robust and diversified business model, and we remain confident that the outcomes of such wide-ranging initiatives and investments in strengthening our capabilities will help us deliver on our long-term growth plans.”
Sequent Scientific is the country's largest and amongst the ‘Top 20’ global animal health companies, backed by global investment firm ‘The Carlyle Group’ as the promoter.
It has 9 manufacturing facilities across Europe, Turkey, Brazil & India with the Vizag site being India’s only USFDA-approved dedicated veterinary API facility.
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