Elder Pharma stock falls on worry about residual business

Shares in Elder Pharmaceuticals slump 7 per cent after rival Torrent Pharmaceuticals agreed to buy its branded formulations business in India and Nepal for about  Rs 2,000 crore ($324.1 million).

Analysts tracking the sector say Elder is now left with only low-margin active pharmaceutical ingredient and European businesses which will be assigned a lower valuation multiple.

"Brands which are growth-oriented and contributed significantly to profits have been transferred to Torrent hence they are left only with anti-infective business" said Ranjit Kapadia, an analyst tracking the sector at Centrum Broking.

Torrent Pharma shares also fell 6.2 percent as cash would be going out of its books of accounts which may weigh on the sentiment dealers say.

Torrent will fund the acquisition through a mix of internal accruals and bank borrowings, the company said.