homemarket Newsstocks NewsTorrent Pharma may be paying too much for Curatio, say analysts as shares drop
Torrent Pharma may be paying too much for Curatio, say analysts as shares drop
Torrent Pharma's Rs 2,000 crore Curatio deal will not only expand its dermatology portfolio but also make it the second-largest player in the cosmetic dermatology segment.
Ahmedabad-based Torrent Pharma marked its presence among the top 10 players within the dermatology space with the acquisition of Curatio Healthcare for Rs 2,000 crore. However, analysts are not enthused with the price that the company is paying for this deal, stating that the transaction may take years to turn accretive.
Torrent Pharma announced the acquisition of Curatio on Tuesday, stating that the deal will help the company become the second-largest player in the cosmetic dermatology segment.
The transaction also positions Torrent Pharma among the top 10 players in the dermatology segment and is likely to be completed over the next month, compared to closing conditions.
Here are some analyst views with regards to the deal:
Credit Suisse Says Acquisition Provides Scale
The brokerage maintained its "Outperform" rating on the stock with a price target of Rs 1,750. It suggests that the deal provides the company with an opportunity to scale in the fast-growing dermatology segment.
However, it cautioned that the valuation of 23 times forward enterprise value to EBITDA is expensive.
Citi Calls Out Valuations As Well
Citi has maintained its "Neutral" recommendation on Torrent Pharma with a price target of Rs 1,700. The brokerage believes that while Curatio is a good strategic fit, the acquisition is expensive and dilutes earnings.
The brokerage expects the deal to dilute Torrent Pharma's earnings per share by 9 percent in the current financial year and by 5 percent in the next. It also expects the deal to take two to three years to turn accretive for Torrent Pharma.
Motilal Oswal Sees Scope
Motilal Oswal remains "Neutral" on Torrent Pharma, citing limited upside potential. It expects the acquisition to widen Torrent Pharma's reach among dermatologists and paediatricians while terming the valuations of the deal as expensive.
The firm also sees scope to improve the productivity of Medical Representatives, thereby improving the margins of the Curatio business. It has tweaked its EPS estimates by 2 percent to factor in the acquisition's impact.
Antique Says Buy
Antique believes that the transaction will mark the exit of existing PE investors and will mark Torrent Pharma as one of the top 10 players within the Indian dermatology space. It has maintained its "Buy" recommendation on the stock with a price target of Rs 1,656.
Antique says the acquisition may dilute Torrent's earnings but expects dermatology to be a crucial part of Torrent's "chronic-heavy" portfolio and called the acquisition a "step in the right direction".
Shares of Torrent Pharma were down 3.4 percent as of 10 am on Wednesday, September 28. Shares of Torrent Pharma fell as much as 5 percent in early trade, which is the stock's biggest intraday drop since January this year. The stock is down nearly 10 percent this year.
First Published: Sept 28, 2022 10:16 AM IST
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