Biocon Gets Target Price Cut From HSBC Over Likely Impact On Earnings Per Share Post QIP

HSBC has cut the target price on Biocon Ltd. from Rs 400 to Rs 390, as it sees negative impact on earnings per share due to the company's Rs 4,500-crore qualified institutional placement that happened June 16. However, the brokerage has retained its 'buy' rating.

It remained bullish on the turnaround of Biocon's biosimilars segment and new launches, but stated that it has adjusted its model to account for higher opex and depreciation related to the new plants—the peptide API plant and the Vizag fermentation capacity—since these changes might result in 11-13% cuts in FY26-28e EPS.

Biocon intends to utilise the funds to pay-off financial obligations, HSBC noted. "This includes outstanding optionally convertible debentures or OCDs of $200m issued by Biocon Biologics Ltd. (BBL, its subsidiary for biosimilars) from Goldman Sachs India AIF schemes."

Biocon plans to utilise QIP proceeds to redeem other financial liabilities like structured instruments issued by BBL from Edelweiss and Kotak. "A successful QIP should help BBL to reduce its debt burden to 4.95x net debt/Ebitda from c7x." This will also aid the company to concentrate on scaling up biosimilars, it said.

To achieve an operational turnaround, expansion of biosimilars remains pivotal for the company, according to HSBC. "Over the next 15-18 months, Biocon has a pipeline of launches in the US-bevacizumab (imminent), insulin aspart (launch expected after FDA review decision in July 2025), and aflibercept (settled for launch in 2H CY26). Biocon expects a gradual pick-up in market-share and sales for recently launched biosimilar ustekinumab."

The research firm attributed peptides to be a key growth driver for the company. "Biocon has built significant in-house capabilities for GLP-1 peptide products, including semaglutide. Its new peptide API unit and upcoming fill-and-finish should further enhance its manufacturing capacities."