Reacting to the possibility of legal action from Daiichi Sankyo against the company?s former promoters, the shares of India?s biggest drugmaker, Ranbaxy Laboratories Limited, plunged 8.8% to close at Rs 393.15 on Thursday. The 37-point fall was the biggest intra-day fall since March 5, 2009, taking the stock to within striking distance of its 52-week-low of Rs 370.50, which it had hit in March.
The stock plummeted after Ranbaxy Laboratories Limited’s majority stakeholder Daiichi Sankyo said on Wednesday that it is considering legal action against the Delhi-based drugmaker?s former promoters for misrepresenting information regarding court cases and regulatory issues in the US. Daiichi had bought majority stake in Ranbaxy Laboratories Limited from Malvinder Singh & family in 2008.
Meanwhile, the health ministry has also reportedly asked the Drug Controller General of India (DCGI) to examine the US court documents that allege Ranbaxy Laboratories Limited sold adulterated drugs in US markets. DCGI has also indicated that it would investigate applications of Ranbaxy seeking fresh approval.
Amid this series of negative developments, the company?s stock have lost 21.88% so far this year. Among its peer group within the BSE Healthcare Index, only Opto Circuits (57.24%) has lost more in value this year. Meanwhile, the healthcare index is up 8.77% in CY13. Since USFDA began its investigation against the generic drugmaker in 2008, the company’s stock has lost about 30%.
The company also reported losses in the last two quarters. In Q4CY12, it reported consolidated net loss of Rs 492.44 crore, while, for Q1CY13, its consolidated net profit was down 90% to Rs 126 crore q-o-q. Its net sales were also down 35% to Rs 2,440 crore.
Although market observers see the stock remaining weak in the near-term, they remain bullish on the company?s ability to bounce back in the long-term.
?The new owners have already paid the penalties for the violations. They know this business and will be able to revive the company. However, in the near-term, the scrip will witness some headwinds. But, in the next one or two weeks, we expect prices of the stocks to improve,? says AK Prabhakar, senior VP-equity research, Anand Rathi Financial Services. Not all brokerages hold that view.
