Why Cipla shares tumbled 5% today?

Shares of pharma major Cipla tumbled today after the promoters of the firm sold a 2.5% stake in the company via open market transaction. The share price of the drug maker declined nearly 5% to hit an intraday low of ₹910.05 amid a huge block deal.

On Tuesday, Cipla shares opened lower at ₹916.70 against the previous close price of ₹955.25 and declined as much as 4.7% to touch a day’s low of ₹910.05 on the BSE. There was a spurt in volume trade as 211.6 lakh shares worth ₹1,927 crore changed hands over the counter as compared to two-week average volume of 0.59 lakh scrip. The market capitalisation of the largecap stock dropped to ₹74,916.4 crore.

Cipla in an exchange filing said that its promoters, Yusuf Khwaja Hamied and Mustafa Khwaja Hamied, have offloaded 2.5% of their stake in the company through a block trade. The company did not specify the floor price of the block deal.

Earlier, reports had said Yusuf Hamied and Mustafa Hamied would sell shares at the floor price in the range of ₹904.8 to ₹916.7 per share that fetched them as much as ₹1,849 crore. The price range is a 4-5.25% discount to the last closing price of ₹955.25 per share on Monday.

“Y K Hamied, chairman, and MK Hamied, vice chairman, who are non-executive directors and promoters, have sold 2,01,69,756 shares (representing 2.5% of the total issued and paid-up share capital of the company) today,” Cipla said in a filing to the BSE.

Post this transaction, Yusuf Khwaja Hamied and MK Hamied will continue to hold 34.23% shareholding in the company.

“The group remains fully committed and invested in the future of Cipla Limited. The senior promoters who are both in their eighties, intend to use the funds generated from this sale for personal purposes including philanthropy. The promoter group does not plan to sell any further shares in the foreseeable future,” Samina Hamied, executive vice chairman, Cipla, said in a statement.

“Cipla today is being led by the third generation of the founding family. As a family, we are fully committed to the organisation. I will continue to carry forward the Cipla legacy and drive the company into the future – to achieve new goals and scale new heights,” Samina Hamied further stated.

At the end of December quarter of 2021, promoters held 36.11% stake in the company, foreign portfolio investors owned 24.35% shares, mutual funds (13.15%), and individual investors (18.01%).

Cipla shares have witnessed subdued performance in the last one year. The stock has gained 10% in the past one year and 4.5% over a six month period. It has given a marginal return of 1% in the last one month and negative returns of 2% since the beginning of the calendar year 2022.

For the third quarter ended December 2021, Cipla reported a consolidated profit after tax (PAT) of ₹729 crore, down by 2.6% from ₹748 crore reported in the year-ago period. The Mumbai-based company posted 6% growth in revenue at ₹5,479 crore as compared to ₹5,169 crore reported in the corresponding quarter of the previous year.