Paracetamol API price expected to rise; Granules India and IOL Chemicals shares jump

Shares of pharmaceutical companies—Granules India and IOL Chemicals & Pharmaceuticals Ltd.—jumped in Wednesday's trading session (September 13). The buying interest in the stocks came after Zee Business reported that the prices of Paracetamol Active Pharmaceutical Ingredient (API) in the US market are expected to increase by 9–22 per cent in September.

Granules India's shares climbed over 5 per cent, touching the intra-day high of Rs 323.7 apiece, and IOL Chemicals's shares zoomed over 9 per cent, touching the day's high of Rs 497.45 apiece on the BSE.

At around 10:15 am, Granules India's stock was up 4.14 per cent at Rs 320.45 apiece, and the market capitalistaion of the company stood at Rs 7,756.26 crore.

IOL Chemicals' shares traded 9.1 per cent higher at Rs 477.15 apiece, snapping a two-day losing streak. The market capitalistaion of the company stood at Rs 2,801.13 crore.

Why are Paracetamol API prices expected to rise?

According to Zee Business research, Paracetamol API prices are expected to remain at the highest levels in the coming three months due to supply chain problems in China.

The market expects further price increases due to a shortage of raw materials used in API.

What do analysts suggest?

"Till the prices are hiked it would be positive for Granules India and IOL Chemicals," said Zee Business panellist Ambareesh Baliga.

ICICI Direct has given a 'buy' rating on Granules India for a target price of Rs 360 apiece on the back of the company's focus on strengthening the core API portfolio, geographical expansion with product mix changes, and a compelling risk-reward matrix with the ability to play in strength areas.

B&K Securities has maintained a 'buy' rating for IOL Chemicals and Pharmaceuticals for a target price of Rs 510 apiece in its Q1 results review note. The brokerage notes that the company reported a good set of numbers in the pharma segment, led by Ibuprofen and non-Ibuprofen APIs.

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