Sun Pharma board to consider buyback of shares next week

Analyst say more promoters likely to seek ways to cushion share price

The pharma major Sun Pharmaceutical Industries on Thursday announced that its board will consider the buyback of company's shares next week.

According to analysts, more promoters could announce buybacks to reinforce confidence among shareholders and protect their market caps during the panic selling that is being seen in the markets.

"We are seeing unprecedented carnage in markets. Promoters would now look at ways in which further erosion of shareholder wealth can be prevented. We could see more companies announce dividends, buybacks, to keep shareholders' confidence intact," said G Chokkalingam, managing director, Equinomics Research and Advisory Services.

According to analysts, promoters and company managements are likely to be less focused on tax implications of buybacks or dividends and focus more on staving off market cap erosion.

In year-to-date, the share price of Sun Pharma has seen erosion of Rs 17.7 per cent. The stock on Thursday touched its 52-week low of Rs 346.65. The share price ended eight per cent lower at Rs 357.

As of December 31, 2019, the promoters held 54.56 per cent stake in the company.

According to analysts the ongoing price-fixing case in US remains an overhang on Sun Pharma's share price. However, ICICI Securities in a note said that the current valuations factor in the negative outcomes of the price-fixing case and concerns over slow ramp-up of specialty portfolio.