Growth Tonic Props German Remedies

The German Remedies counter witnessed hectic trading as operators intensified their activity.

Brokers attributed the spurt in interest to news that the company's Rs 80 crore plant at Ponda, Goa might operate at a higher capacity.

The stock price rose from Rs 508.25 on September 11 on the Bombay Stock Exchange (BSE) to Rs 536.75 on September 18. The National Stock Exchange also mirrored the sentiment.

At the National Stock Exchange , the stock closed at Rs 533.95 on Friday against the previous week's close of Rs 505.45.

According to one leading institutional brokerage, the stock also witnessed hectic institutional activity.

"The domestic and foreign institutional activity on the counter has been on the rise. Unit Trust of India (UTI) has placed buy orders.

"A value investing policy has been adopted by institutions with regard to this stock," they added.

The company has set up a plant in a collaboration with Madaus AG in Goa to manufacture Agiolax and Agiocur, herbal laxatives, which Madaus has been importing from Goa.

The project went on stream in March 1998, but is not operating at the rated capacit. The entire output is to be exported to Germany through Madaus. The deal is expected to add Rs 20 crore to the company's kitty.

Analysts say that the spurt in the price was due to hectic

warehousing by operators in anticipation of increased foreign institutional investors (FIIs) interest. "The company is expected to get US FDA approval which is necessary for exports through the Madaus venture.

"Official intimation is expected anytime this month and it is also expected to generate service income," says Vikrant Shah, a pharma analyst.

According to Shah, earnings through the Madaus venture is likely to be reflected only in the third quarter. "The first quarter results were below expectations. We expect the company to perform better in the latter part of the year. "The stock price has more than doubled from Rs 240 to Rs 539. However, we believe that at these levels it is overpriced," Shah added.

German Remedies faces high employee costs and high imported material content.

"The second half results for the company are expected to be better as sales of most of the respiratory products are on the rise. We expect an earning per share of Rs 35 for the company in 1998-99. This will be primarily due to Asta's anti-cancer and other high margin products," an analyst at a leading brokerage said.