Biocon shares drop 3%: Analysts expect 'earnings dilution' after firm's Biocon Biologics buyout

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26 Aug, 2025 12:21

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The shares of Biocon dropped 3 percent on December 8 as analysts cautioned investors about equity dilution after the company fully acquires its subsidiary Biocon Biologics.

The shares of the company closed at Rs 381.60 apiece on Monday, the lowest level seen by the stock in over three weeks.

Biocon on December 6 announced that its board has considered and approved the plan to acquire the remaining 23.3 percent equity stake in Biocon Biologics, to make it the pharma giant's 100 percent wholly-owned subsidiary. The shares will be bought from Mylan, Serum Institute Life Sciences, Tata Capital Growth Fund II and Activ Pine LLP.

The company added that the board has approved the offer and issuance of more than 17 crore equity shares of the company on a preferential basis, aggregating to an amount up to Rs 6,950 crore. The board also approved the plan to raise up to Rs 4,500 crore via qualified institutions placement (QIP), rights issue, preferential allotment or private placement.

Here's what analysts say:

Systematix Institutional Equities analyst Vishal Manchanda said that to buyout minority interest in Biocon Biologics, Biocon may have to raise Rs 10,000 crore-Rs 15,000 crore, which would mean meaningful dilution for shareholders of the company.

Speaking with CNBC TV18, Dharmesh Kant, Head Research at Chola Securities, said that while the street may have anticipated the move to make Biocon Biologics a 100 percent subsidiary, the deal is likely to be dilutive to earnings per share (EPS).

JM Financial however kept a 'Buy' call on the stock, with a target price of Rs 476 per share. This implies an upside potential of more than 21 percent from the stock's previous closing price. The domestic brokerage said that the transaction could potentially add incremental 10 percent on Biocon valuation due to removal of holdco discount as well as increased stake in the subsidiary.