Friday, March 2, 2012

Claris Lifesciences Sold by Citigroup, as Annual Results Disappoint





By Staff Reporter:

Claris Lifesciences Ltd (BSE: 533288) on Thursday had  significant sells of 3.19 lakh shares by the institutional investor, Citigroup Global Markets India Pvt Ltd, amounting to over 0.50% of the total shares in the company.

Selling by Citigroup Global Markets India was executed in BSE. Interestingly, there were no identifiable major buyers or promoters, as counterparties to the sale, which implies that the significant sell was picked up by the wider market.

Promoter Group of Claris Lifesciences Ltd holds a nearly 69% stake, which is relatively high and robust, compared with many other companies in India.

Claris Lifesciences, a pharma company, is a leading sterile injectables player in India with products marketed in 91 countries. Claris specialises in generic or off-patent injectables and has products across multiple therapeutic segments, but dominated by injectables for critical illnesses. 

Therapeutic segments that Claris cover include anaesthesia, critical care, anti-infectives, renal care, infusion therapy, enteral & parenteral nutrition and oncology. Headquartered in Ahmedabad, Claris has five manufacturing facilities spread over a 78-acre campus there, with part of the facilities having USFDA approval.

Citigroup has been on a selective selling spree in India in recent weeks, with the most noted being their exit from India’s leading home loan company, HDFC Ltd. StockExplain had earlier reported of their other signifiicant sells like in Gateway Distriparks Ltd and KS Oils Ltd. 

While the selling in HDFC seems to be for raising significant funds in excess of Rs. 9000 crore, the sells in Gateway, KS, and now Claris, seems to be selective offloads, as the funds raised from these is relatively smaller. For example, Thursday’s Claris sell was only worth less than Rs. 4.80 crore. 

Nevertheless, these sells by Citi are significant for these smaller companies. Claris Lifesciences Ltd’s market cap is around Rs. 935 crore only.

Also signaling about the selective nature of these few sells, is Citigroup’s holdings in numerous Indian companies – with the noted FII holding +1% stakes in over 60 companies.

Also, at these smaller companies, Citi's selling has followed fundamentally dull, if not bad, news like Q3 results in Gateway Distriparks or CDR issues in KS Oils.

The probable sell cue at Claris Lifesciences too is not different. The company had posted annual results for 2011 on Wednesday. Unlike majority of Indian companies, its financial year ends on December 31st of every year. 

Consolidated net revenue is down by 1.80%, consolidated profit after tax is down by 10.74%, net profit margin is down by 1.7% to clock 17.1%, and only EBITDA margins has stood its ground at 32.5%, improving negligibly by 0.10%.

The scrip had corrected steeply with the market fall of 2011, falling from a 52-Week High of Rs. 199.45 on April 8th to a 52-Week Low of Rs. 98.10 on December 19th – a value loss of nearly 51%. 

But on market recovery, and on anticipation of good annual results, Claris had bounced back to Rs. 156, gaining by over 59%, before the identified sell by Citi came on Thursday.

Despite reasonable fundamental performance in the first nine months of 2011, the scrip was unable to regain its 2-year high of Rs. 232 recorded after its troubled IPO in November 2010, which initially saw poor response and downward revision of prices to make it sail through.

The poor IPO performance was attributed to the fact that the immediate family of Claris’ promoter group has had a troubled corporate governance history, as they were the promoters of Core Healthcare Ltd (earlier name, Core Parenterals Ltd) which was a listed company (BSE: 500091, NSE: COREPARENT), that ran into a multitude of problems like loan defaults, cases by CBI and Gujarat Police, as well as securities authorities like SEBI, NSDL, CDSL, BSE, NSE etc. May investors had also lost substantially in the Core Healthcare debacle.

It will be interesting to watch the calls other large investors will take post Citigroup’s sell on Thursday. The largest investor in Claris is First Carlyle Ventures with a 11.14% stake. Other large investors include Tree Line Asia Master Fund (Singapore), Indian Capital, Max New York Life Insurance, and Copthall Mauritius Investment.

Citigroup held 1.25% stake as of December end.

Overall there is 23% institutional partnership, which is healthy, split up approximately in equal proportions between FIIs and DIIs. Foreign Institutions had upped their stake by about 2.29% in Q3, probably due to the deep fall and in anticipation of good annual numbers, but which has not materialised now. 

Another overhang on the stock is a re-audit the USFDA had ordered on one of Claris' manufacturing facilities, and the company is expecting a final decision by FDA soon. Citi's sell has naturally raised doubts whether there is any problems on this front, as a positive decision on this is expected to cause a reasonable rally in the counter.

Citigroup’s sell was executed at an average price of Rs. 150.16 in BSE and the scrip closed at Rs. 146.40 on Thursday, still up by 0.69% from previous day’s close. On Friday, Claris Lifesciences opened at Rs. 142 in BSE, down by 3%, but is now trading at 148.55, up by 1.47%, in a strong Indian market up by 0.53%.

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