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Why did small cap stock Sequent Scientific hit the 20% circuit high today?


Bulls favored small-cap stocks Sequent Scientific, despite broader markets being under pressure Thursday. Sequent saw a strong rally that was close to a month high, even hitting its 20% upper circuit. The reason behind the sharp increase in Sequent comes after the company decided not to acquire a 100% stake in Tineta Pharma.

On BSE, Sequent’s share price closed 74.37 each — a massive increase 11.99 or 19.22%. The stock hit a 20% higher circuit of 74.85 each during the trading session.

The previous day, Sequent ran out of stock 62.38 each on BSE.

Sequent witnessed this rally after 3 consecutive days of selling pressure. The last time the share the 74.85 marks was on February 14.

On Wednesday, Sequent Scientific said in its filing, “The company will not acquire Tineta and the stock purchase agreement that the company entered into with Tineta and its promoters on November 7, 2022 will be terminated.”

Last year, in November, Sequent announced a 100% acquisition of Tineta for 218 crore to bolster its presence in the Indian veterinary market. According to Sequent, the acquisition was in line with the strategic priority of scaling up the formulation business in India, which was expected to contribute EBITDA and provide a significant boost to the 2.0 plans.

However, Sequent said on Wednesday that the contemplated transaction under the share purchase agreement with Tineta “has not materialized”. As a result, it will not take over Tineta and the agreement will be terminated.

For the nine-month period of FY23, Sequent posted revenues of 1,054.2 crore as of 1,029.1 crore in 9MFY22. However, EBITDA collapsed 35 crore in 9MFY23 of 76.1 crore in 9MFY22.

In Q3FY23, sales increased slightly to 375.3 crore vs. 337.6 crore in Q3FY22, while EBITDA rose to 18.8 crore of 5.1 crore in Q2 of FY22.

Last month, on February 14, Rajaram Narayanan, Managing Director stated, “Q3 FY23 reflects the strengthening of our business,

in both APIs and key formulation markets, with total revenue growth of 10.0% in constant currency in Q2 FY23. While the cost environment remains challenging for the industry, gross margins have remained stable. EBITDA before ESOP costs

277 million for the quarter, an 85% growth (300 basis point improvement) over Q2 FY23.”

Going forward, Narayanan said, “the company has undertaken a comprehensive profitability improvement program with initiatives in API and formulation businesses to strengthen cost competitiveness, meet the changing demand landscape and remain resilient in the current global macro environment. SeQuent has a robust and diversified business model, and we remain confident that the results of such broad initiatives and investments in strengthening our capabilities will help us deliver on our long-term growth plans.”

Sequent Scientific is the largest in the country and one of the ‘Top 20’ global animal health companies, backed by global investment firm ‘The Carlyle Group’ as a promoter.

It has 9 manufacturing facilities in Europe, Turkey, Brazil and India, with the Vizag site being the only USFDA-approved dedicated veterinary API facility in India.

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Joanna Swanson

Joanna Swanson is Europe correspondent at the Thomson Reuters Foundation based in Brussels covering politics, culture, business, climate change, society, economies and inclusive tech. With specific focus in breaking news, she has covered some of the world's most significant stories.