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Deeptha Rajkumar

REPORTS of Nicholas Piramal being in the race to acquire the France-based generic company, RPG Aventis, saw the stock of the former surge ahead on the bourses today.

Brokers, however, said that while the news may have provided a shot in the arm for the counter, it was more in tandem with the current interest in pharma stocks in the market.

"Pharma stocks are once again in the limelight. It is more of a cyclical trend and is likely to be sustained over, say the next two months or so,'' a broker said.

While not denying that the bid is in line with the company's position on M&As and its renewed thrust on exports, market sources were sceptical over the funding aspect, for the deal would mean a cash outflow of Rs 250-300 crore.

"All of Nicholas Piramal's acquisitions have been fairly priced. They are not known for their aggressive bidding. In fact one would say Ranbaxy is better positioned,'' sources said. Reiterating this, analysts said that given that Ranbaxy already has an infrastructure and product base in Europe, an acquisition in France would be timely and would mean investment from the word go. "Considering the cash flows that Ranbaxy generates and the fact that they are aggressive bidders, it is better placed between the two,'' said an analyst.

Yet , the market is bullish on both Nicholas Piramal and Ranbaxy. While Nicholas Piramal at 10-11 times, is reportedly quoting at a discount to its peers, Ranbaxy at 23-24 times is also considered fairly valued, keeping in mind its business model and prospects. "It is a growth story in both companies. Even if Nicholas Piramal was to lose out in the race, it would at best be a hiccup. However, if the deal were to materialise it would be a re-rating story. As for Ranbaxy, while there is no denying that the deal would place it on a very competitive footing overseas, if it did not come through, fundamentally it would make no difference,'' sources averred.

Nicholas Piramal ended the day at Rs 452, up 4.48 per cent on the NSE with around 1.2 lakh shares traded. Ranbaxy ended the day at Rs 1048.20 up 1.91 per cent on the SE with around 15.9 lakh shares traded.

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