Why is Piramal Pharma falling/rising?

Recent Price Performance and Market Position

Piramal Pharma’s shares have been under pressure, falling 3.67% over the past week and 8.53% in the last month, significantly underperforming the Sensex benchmark, which has remained relatively flat or positive during these periods. Year-to-date, the stock has plunged over 30%, contrasting sharply with the Sensex’s 8.25% gain. Even over the past year, the stock has declined by nearly 26%, while the broader market has advanced by 5.59%. Despite this, the company’s three-year returns remain positive at 41.75%, slightly ahead of the Sensex’s 35.79%, indicating some resilience over a longer horizon.

On 25-Nov, the stock traded close to its 52-week low, just 2.51% above the lowest price of ₹180.35, signalling sustained weakness. The stock has also underperformed its sector by 1.09% on the day and has been declining for three consecutive sessions, losing 2.48% in that span. Technical indicators show the share price is below all major moving averages, including the 5-day, 20-day, 50-day, 100-day, and 200-day averages, reinforcing the bearish momentum.

Interestingly, investor participation has increased, with delivery volumes rising by nearly 32% on 24 Nov compared to the five-day average, suggesting heightened trading activity despite the price decline. The stock remains sufficiently liquid for sizeable trades, supporting continued market interest.

Financial Performance and Profitability Concerns

While Piramal Pharma has demonstrated healthy long-term operating profit growth at an annual rate of 23.29%, its net sales growth over the past five years has been modest at 9.15% annually. More troubling are the recent quarterly results for September 2025, which revealed a sharp deterioration in profitability. The company reported a loss before tax excluding other income of ₹111.78 crores, a staggering 340% decline compared to the previous four-quarter average. Net profit after tax plunged even more dramatically by 613.2% to a loss of ₹99.22 crores. Additionally, net sales fell by 10.5% relative to the prior four-quarter average, signalling weakening revenue momentum.

These results have contributed to a significant contraction in profitability metrics. The average return on equity stands at a mere 0.32%, indicating very low returns generated on shareholders’ funds. The return on capital employed is also subdued at 2.7%, which, combined with an enterprise value to capital employed ratio of 2.4, suggests the stock is relatively expensive despite trading at a discount to its peers’ historical valuations.

Debt Burden and Valuation Challenges

A critical factor weighing on the stock is the company’s high leverage. The debt to EBITDA ratio is 3.83 times, signalling a low ability to service debt obligations comfortably. This elevated debt burden raises concerns about financial stability and future earnings sustainability. The combination of weak profitability, declining sales, and high leverage has understandably dampened investor confidence.

Over the past year, the company’s profits have fallen by 158.7%, a stark contrast to the broader market’s positive returns. This underperformance extends beyond the short term, with the stock lagging the BSE500 index over one year, three years, and the recent three-month period. Such below-par performance highlights persistent challenges in both operational execution and market perception.

Investor Outlook and Market Implications

Despite the negative near-term outlook, the company benefits from a relatively high institutional holding of 45.17%, which may provide some stability given these investors’ capacity for fundamental analysis. However, the combination of weak quarterly earnings, high debt levels, and underwhelming sales growth has led to a cautious stance among market participants, reflected in the stock’s recent price declines and technical weakness.

In summary, Piramal Pharma’s share price is falling primarily due to disappointing quarterly financial results marked by significant losses, a high debt burden limiting financial flexibility, and subdued long-term sales growth. These factors have overshadowed the company’s operating profit growth and institutional backing, resulting in sustained underperformance relative to market benchmarks and sector peers.

Get 2 full years of MojoOne Premium for only Rs. 12,999. Subscribe for 1 year and we'll add another year FREE. Offer valid for a limited time. Start Saving Now →