Ranbaxy Rises On Dilution Canning
After a disappointing run at the bourses the week before last, the Ranbaxy scrip bounced back on the news that the management would not be diluting its equity stake for the time being.
The scrip gained Rs 67.50 over last week's close to end the week at Rs 624 on the Bombay Stock Exchange.
At the NSE, the scrip closed at Rs 603.50, up by Rs 53.60 over the previous week's close.
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The Ranbaxy scrip took a beating at the major bourses two weeks earlier after the market gave a thumbs down sign to the management's decision to divest its stake. The scrip fell from Rs 600 levels to below Rs 550 levels within the same week on sustained selling pressure.
However, the scrip started edging up on buying support at lower levels at the start of the week and shot up by nearly Rs 50 on the last trading day of the week.
Said a dealer at an FII broking house, The recovery in the scrip price was primarily due to three reasons. First, the fundamentals of the scrip are quite strong. At Rs 550 levels, the scrip was definitely an attractive buy. Second, there was some short covering at this counter on the last day of settlement cycle at the BSE.
Lastly, the management's decision to shelve the idea of diluting their stake was received positively by the market.
Said Sapna Malhotra, pharma analyst at SSKI, Our recommendation has changed now that the price has moved up to 625 levels. It still remains unclear whether the promoter will be divesting a part of his stake. If he does, there is bound to be an adverse reaction from the investors.
Ranbaxy is the largest manufacturer-exporter and has increased the formulation content in its export business this year. Industry sources say that this is a positive development as the returns on formulation exports in the developed countries are high.
However, on the joint venture front, Ranbaxy Labs' research joint venture with Eli Lily is in deep trouble and even the investments in the marketing joint venture with Eli Lily have been scaled down.
The company was hoping to make a foray into the US market with this tie-up, but relations between the partners have soured and could have an impact on the company's future plans.