Share of Orchid Pharma has delivered nearly 10,000% returns to its shareholders in less than five months. The stock, which was relisted on November 3 last year at Rs 18 closed at Rs 1,787 today, delivering 9,827% returns during the period. In comparison, Sensex has risen merely 21.56% during the period.
The micro cap share has hit upper circuits in a majority of sessions ever since it got relisted. However, there is a catch: Dhanuka Laboratories, its promoter holds 98.07 per cent stake in the company and the entire stake is locked in, as per the BSE data.
Public shareholders hold less than half a percent stake in the company. The factor behind the spectacular rise in the stock of the pharma firm is that new investors bought majority stake in the firm at dirt cheap prices.
Once promoters start selling stake to comply with Sebi's promoter holding norms, the rally in the stock is likely to fizzle out. Sebi rules give promoters three years from the date of listing to bring down holding to 75 per cent. If the shareholding goes past 75 per cent because of acquisitions such as open offer or delisting, promoters get one more year to bring down the stakes.
The financial performance of the Chennai-based firm does not justify the rise in its stock since relisting. Orchid Pharma has undergone under the Insolvency and Bankruptcy Code (IBC) process. Its new management has infused money for the company's operations and research capabilities and expects to make it profitable in 6 to 12 months.
The company is yet to post profit and has been clocking losses each year since FY13 barring a year in between.
For the quarter ended December 31, 2020, the pharma company reported a 30% rise in loss. It posted a net loss of Rs 45.33 crore in Q3 compared to loss of Rs 34.75 crore in December 2019 quarter.
Net sales fell 20.18 per cent to Rs 102.63 crore from Rs 128.58 crore in December 2019. On operating front, EBITDA was negative at Rs 3.81 crore as against Rs 2.02 crore in December 2019.
Meanwhile, Orchid Pharma stock closed 4.84% higher at Rs 1,787 today. The stock opened with a gain of 5% against previous close of Rs 1704. The share stands higher than 5 day, 50 day, 100 day and 200 day moving averages but lower than 20 day moving averages.
The stock has gained 21.49% in the last 4 days.
Orchid Pharma was established in 1992 and is involved in the development, manufacture and marketing of diverse bulk actives, formulations and nutraceuticals.