Natco Pharma's stock price saw a dramatic decline of over 19% on February 13, 2025, dropping to ₹986 on the Bombay Stock Exchange (BSE) amid heavy trading volumes. This plunging share price followed the company's disappointing financial results for the third quarter of fiscal year 2025, reported after market hours on February 12.
According to the company's report, Natco Pharma's consolidated profit after tax (PAT) fell significantly, decreasing by 37.8% year-on-year (YoY) to ₹132.4 crore. This sharp decline was even more pronounced on a sequential basis, with PAT dropping by 80% from ₹676.5 crore recorded in the previous quarter. The overall revenue also took a hit, plummeting 18% YoY and a staggering 54.6% quarter-on-quarter, totaling ₹651 crore. Analysts noted this was one of the weakest performances by the company, resulting from significant decreasing contributions from its export formulations business.
"Natco Pharma's consolidated revenue from operations fell 37.41% to ₹474.8 crore from ₹758.6 crore during the third quarter of the previous financial year," reported by Moneycontrol.com. Such declines not only reflect the company's internal management issues but are indicative of broader market conditions affecting the pharmaceutical sector.
The earnings before interest, tax, depreciation, and amortisation (EBITDA) margin also shrank considerably to 33% from 38.3% as reported last year, exacerbated by lower demand for their key products and pricing pressures prevalent throughout the generic pharmaceutical industry.
Market analysts highlighted the major issue as the decline within the export formulations segment, which reported revenues dropping 52.8% YoY and 76.4% quarter-on-quarter, indicative of changing market dynamics and regulatory challenges. "A key factor dragging the overall earnings for Natco Pharma was the sharp decline in its formulation exports, which plummeted more than half to ₹285.8 crore," noted The Economic Times.
This latest performance has led to investor panic, pushing Natco's share price down sharply during trading hours. At one point during the day, the stock had plunged 19.86% to reach the low of ₹975, significantly higher than its 52-week low of ₹849.20 recorded earlier in February 2024. Despite this turmoil, analysts believe there is potential for recovery as the company manages its export portfolio and adapts to market conditions.
On the technical analysis front, shares of Natco were trading significantly below their 5-day, 10-, 20-, 30-, 50-, 100-, 150-, and 200-day simple moving averages, indicating bearish sentiment from market participants. The stock's 14-day relative strength index (RSI) was recorded at 28.59, falling below the oversold threshold of 30, which often indicates a potential rebound point. A level below 30 is defined as oversold, lending hope to some traders watching for signals of recovery.
The adverse results have also prompted companies and stakeholders to assess their positions and revisit strategies moving forward. Investors remain cautious, particularly with insights from ratings agencies warning of potential revenue drops post-patent expiry of key products such as gRevlimid, expected to significantly impact Natco’s earnings after FY2026. According to ICRA's outlook earlier this year, "the product concentration risk is expected to remain high with the substantial revenue contribution expected from gRevlimid. Once the patent expires, revenues and margins will likely decline steeply."
Looking toward the future, Natco Pharma had announced plans to revamp its focus on domestic markets alongside enhancing its international strategy to mitigate risk. Reportedly, they hold significant stakes with 49.62% held by promoters as of December 2024, demonstrating confidence among core company leadership.
Investors are hoping for strategic shifts and recovery initiatives to turn the tide, particularly seeing how Natco manages current operations amid tightening regulations and competitive pressures within the pharmaceutical sector. Meanwhile, amid the plunging stock prices, the company's directors announced plans for third interim dividends of ₹1.50 per equity share, reaffirming their commitment to rewarding shareholders during this turbulent period.
With the stakes high for Natco Pharma, investor sentiment will likely hinge on its ability to navigate these challenges and recover its footing within the competitive pharmaceutical market. How the company adapts, restructures, and reacts to regulatory changes will be pivotal as it seeks to restore investor confidence and return to stable growth.