Alembic: Prospects sound, but investors should await a better entry point

Higher capex and depreciation post commercialisation, increased operating costs as well as interest costs are expected to hit the company's FY22 earnings

After hitting its 52-week high last week, the stock of Alembic Pharmaceuticals shed about 4 per cent. The company has announced that it is raising Rs 1,200 crore through a qualified institutional placement (QIP) to reduce debt and fund its expansion plans. 

The equity infusion is expected to lead to a dilution of 6.4 per cent. Higher capex and depreciation, and increased operating costs, as well as interest costs, are expected to hit the firm’s FY22 earnings. Though there will be equity dilution, part of this may get offset by lower interest cost as the company is planning to pay up