Glenmark Pharma shares surge on S&P Global outlook

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Glenmark Pharma shares surge on S&P Global outlook

Glenmark Pharmaceuticals shares surged 10 per cent on the BSE after the rating agency revised the outlook to positive on proposed Glenmark Life Sciences stake sale. The proposed stake sale by Glenmark could accelerate the latter's deleveraging and strengthen its financial position, according to S&P Global's view. According to S&P Global, Glenmark is likely to maintain resilient operations despite the stake sale. It expects the company's EBITDA to recover to the fiscal 2023 level over the next 12-24 months, without any significant remediation costs. The positive outlook on Glenmark reflects our view that we could raise the ratings upon successful debt repayment, S&P Global said in a research update. S&P Global said the debt reduction will more than offset the company's weakened business position following the divestment. After the company's divestment, Glenmark will own 7.84 percent of GLS. As of June 30, 2023, the company had a debt of about 4,440 crore. The sale of the shares is subject to regulatory and shareholder approval, removing the debt-related concern for Gelnmark Pharma. In fact, it would have additional cash to retrofit the innovative pipeline and improvise branded generics business. It will be earnings neutral, as we believe the net reduction in EBITDA from API business would be offset by a reduction in interest cost and higher other income, CRISIL Ratings said in a statement. The rating agency further said that the company's business risk profile could be marginally affected in the near term, with expected moderation in revenue and operating profit, given that GLS contributed to about 11 per cent and 25 per cent of consolidated revenue and operating profit. CRISIL Ratings will continue to monitor progress on the transaction and will remove the rating from watch and take a final rating action at the end of the transaction, receipt of funds and higher confidence on debt reduction plans.