Par Drugs and Chemicals: Why its sharp crash is a wake-up call for micro cap investors

Besides firefighters and defence personnel, investors in micro-cap stocks also know a thing or two about daring and bravery. On one hand, there is the promise of exhilarating growth that can transform their small investments into fortunes. On the other, they brave the risk of waking up to a boardroom decision that can erase wealth faster than they can hit the sell button. The latter, as it often does, recently happened to investors of Par Drugs and Chemicals —a pharma micro cap that otherwise stands out on financial stability and growth. Its stock plummeted 36 per cent in just two days after the company on December 2, 2024, announced a slump sale of its entire pharma business for a cash consideration of just Rs 93 crore, a nearly 78 per cent discount to its market capitalisation of Rs 429 crore (prior to sale announcement). Why the pivot unnerved the market Specialising in active pharmaceutical ingredients (67 per cent of FY24 revenue) and fine chemicals (33 per cent), Par Drugs is India's largest manufacturer of antacids, including magnesium oxide, sucralfate, and magnesium trisilicate, and counts giants like United Phosphorus, Pfizer, and Cipla among its clients. The company's financials have been robust due to the core business. In healthy spirits Company's revenue and profit after tax have grown 14 and 32 per cent annually, respectively FY24 FY23 FY22 FY21 FY20 Revenue (Rs cr)