Granules India shares

Granules India Shares Plunge 21% Over Two Sessions Due to USFDA Concerns

Granules India Ltd. experienced a significant drop in its stock price, falling by 21% over two consecutive trading sessions. This decline was triggered by concerns following six observations from the US Food and Drug Administration (USFDA) regarding the company’s Gagillapur facility in Hyderabad.

Key Developments and Market Impact

1. Stock Decline On Friday, September 13, shares of Granules India were down by over 3%, following a steep 17% decline the day before. As a result, the company has been added to the Futures and Options (F&O) ban list due to the volatility in its stock price.
2. USFDA Observations The USFDA’s inspection of the Gagillapur facility, which took place from August 26 to September 6, led to the issuance of Form 483. This form lists six key observations, including violations related to equipment cleaning, quality control, and facility maintenance.

Key Violations Identified:

1. • Inadequate cleaning of equipment and utensils.
   • Failure to review discrepancies thoroughly.
   • Repeat observations from a January 2023 inspection.
   • Incomplete quality control procedures.
   • Deficiencies in manufacturing process assessments.
   • Poor maintenance of buildings and facilities.

The USFDA also noted contamination issues in the Air Purification Unit, including fungal and bacterial colonies, as well as bird droppings on the units. Additionally, concerns were raised about the water tank, which had not been cleaned since installation, leading to concerns about data integrity and potential contamination risks.

Granules India’s Response

In response to the USFDA’s findings, Granules India reassured investors that they are fully committed to resolving the issues raised. The company stated, “Quality and compliance are paramount, and we are actively addressing the observations.” Granules also confirmed that they will work closely with the USFDA to rectify the violations and provide timely updates as necessary.

Market Outlook and Analyst Opinions

Despite the recent setbacks, brokerage firm Motilal Oswal has maintained a ‘Buy’ rating on Granules India, setting a target price of ₹680 per share. The firm expects the company to implement remediation measures to address the concerns raised by the USFDA.

Motilal Oswal’s projections:

• A compound annual growth rate (CAGR) of 36% in earnings is anticipated between FY24 and FY26.
• The recent violations are not expected to impact major products awaiting approval from the Gagillapur facility, though there is still uncertainty regarding how the remediation efforts will affect ongoing business operations.

Conclusion

Despite the 21% decline in stock value over two days, Granules India remains confident in addressing the concerns raised by the USFDA. The company has committed to resolving the issues and maintaining its focus on quality and compliance. Market analysts, including Motilal Oswal, remain optimistic about the company’s growth potential in the coming years, projecting strong earnings growth and recovery once the current issues are resolved.

FAQs

1. Why did Granules India’s stock price fall? The stock price declined due to concerns following six observations made by the USFDA regarding the company’s Gagillapur facility, leading to market apprehension.
2. What were the key issues identified by the USFDA? The USFDA’s concerns included improper cleaning of equipment, microbial contamination, poor facility maintenance, and incomplete quality control procedures, among others.
3. How has Granules India responded to the USFDA’s findings? Granules India has assured investors that they are working closely with the USFDA to address the issues raised and will continue to provide updates on their progress.
4. What is the future outlook for Granules India? Despite the recent challenges, brokerage firms like Motilal Oswal remain optimistic about Granules India’s growth, projecting a strong 36% CAGR in earnings between FY24 and FY26.
5. Has the USFDA raised these concerns before? Yes, some of the current observations were repeat violations from a January 2023 inspection.

Granules India shares

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