Why Is Sanofi India's Share Price Falling?

2021 was an eventful year in the history of Indian share markets.

We saw record high levels for Sensex and Nifty as easy money flowed into Indian markets. A flurry of IPOs and an unprecedented addition of demat accounts, added to the momentum.

The pharma sector was in full swing prior to the full-fledged recovery. The best pharma stocks stood out and delivered in a difficult Covid-19 period. Increased demand of medicines due to the pandemic, and/or vaccine development were driving up the pharma stocks.

However, as Covid cases eased in 2022 investors took note that the high growth seen in the past year would not be visible in all companies' earnings going forward.

Resultantly, the pharma sector saw a sharp fall in 2022. Almost all pharma stocks are still impacted by the market correction.

Gland Pharma share price is falling while Lupin share price has also corrected.

Another name on the list of falling pharma stocks is Sanofi India. Sanofi India's share price is down 31 per cent on a year-over-year (YoY) basis.

A fundamentally strong stock is trading near its 52-week low.

Read on to find out what triggers are driving the fall in Sanofi India shares.

Poor quarterly results

For the quarter that ended 30 June 2022, Sanofi India's total revenue stood at Rs 7,150 million. The revenues fell 9 per cent compared to the last quarter.

However, profits saw a massive fall. Net profit for the said quarter came in at Rs 1,204 million, which is 48 per cent lower compared to the previous year's profit.

Q4 of the financial year 2022 was fantastic for Sanofi India. Hence, the decline in profits hurt investor sentiment and the share price declined.

The stock could be falling in anticipation of its quarterly results.

Another factor is that in September 2022, drugs manufactured by Sanofi India were included in the updated national list of essential medicines (NLEM). The drugs in the NLEM are scheduled drugs that are under price control by the central government. 

Owing to this, Sanofi India's revenue projections do not look good.

Continuous Selling By FIIs (Foreign Institutional Investors)

Interest rates are rising in developed markets like the USA. This makes the emerging markets less attractive for FIIs because the risk-free rate of return reduces.

Hence FIIs sell their holdings in companies operating in emerging markets like India to return to the safety of dollars. The same has happened with Sanofi India.

FIIs have been divesting their stake in Sanofi since June 2021. FII stake stood at 11.5 per cent in the quarter ending March 2021. The stake was reduced to 8.7 per cent by the end of the June 2022 quarter.  

Apart from FIIs, even mutual funds sold some shares of Sanofi India in the June 2022 quarter.

For more details, check out Sanofi India's latest shareholding pattern.

Investment Takeaway

Sanofi India's short-term future may look uncertain because of the headwinds it faces currently. But overall, Sanofi India is a fundamentally strong stock.

Sanofi India has aligned itself with India's healthcare needs by building expertise, capability and capacity. It has done so with continued investments, strategic partnerships, and a shared commitment to patients.

That apart, Sanofi India's dividend payout has grown consistently over the years.

Sanofi India has also outperformed its peers. It has high ROE and low PE ratio.

About Sanofi India

Sanofi India previously known as Aventis Pharma is among the leading multinational companies in the Indian Pharmaceutical Market.

It offers a wide array of medicines for therapy areas such as Diabetes Cardiology Thrombosis Central Nervous System and Antihistamines.

The products manufactured by the company are distributed in India and exported to many developed as well as developing countries including Germany, Australia, UK, Russia, and Italy.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.

This article is syndicated from Equitymaster.com.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)