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The stock of Arvind Remedies is on an uptrend on the bourses after the company announced it was withdrawing a proposal to hive off a factory to manufacture drugs for the US market.
The scrip hit the upper circuit of ₹41.5 on the BSE on Tuesday, touching a total turnover of ₹1.15 crore. It continued to climb on Wednesday, ending trade at ₹44.10. On the NSE, Arvind Remedies ended up 7 per cent at ₹45.
Healthy earnings The company had also announced healthy earnings for the June quarter, with net profits rising 58 per cent on the back of new cardiovascular and anti-diabetic drugs in the domestic market.
“We have been focusing on the retail brands business recently, which is growing at a rate of 40 per cent,” Arvind Shah, Managing Director and Chief Executive Officer, Arvind Remedies, told BusinessLine .
Arvind Remedies had earlier announced the opening of a ₹250-crore factory in Irungattukottai near Chennai to manufacture generic cardiac and painkiller drugs for the US market. The factory commenced test production in March 2012. Arvind Wellness Ltd was incorporated in April 2013 to run the unit, and Arvind Wellness LLC in New Jersey, US, was set up to oversee marketing in the US. An independent valuation by chartered accountants suggested one share of Arvind Wellness for every ten shares held in the parent company. But, on August 9, it nixed the demerger proposal.
Bankers yet to agree Asked why the company called off the demerger, he said some bankers are yet to agree with the demerger, statutory approvals were taking time, and there was no immediate requirement to push ahead with the demerger. “We cannot keep this application with the Madras High Court for long. So we decided to pull out. Once our new drug filings are approved by the US FDA, we will reinitiate,” he said.
He declined to comment on the stock movement.
The company had been using the factory for its contract manufacturing clients. The facility will remain with Arvind Remedies and function as a contract manufacturer for its clients for another three years, he said.
With a large backlog of new drug applications in the US, it would take a minimum of two years for an Indian factory to get approvals, said Avinash Lodha, Associate Director at India Ratings and Research. “Product approval costs for new drug filings have increased by about 40 per cent,” he said.
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