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Our Bureau

Hyderabad, Aug. 7

With the promoters of Dr Reddy’s Laboratories hiking their stake through open market purchase, the stock of the pharma major ended positively by gaining 4.48 per cent on the Bombay Stock Exchange on Thursday.

The trading of the scrip began at Rs 582.7 and closed at Rs 608.80.

The promoters group firm, Dr Reddy’s Holdings Ltd, increased its stake from 22.92 per cent to 23.75 per cent through market purchase, the company informed the BSE.

On Wednesday too, the holding company’s stake was increased from 22.46 per cent to 22.92 per cent through open market acquisition executed by DSP Merrill Lynch. It acquired 1, 95,348 equity shares for Rs 11.6 crore.

The company officials were not willing to comment on the reason for increasing the promoter’s stake.

Promoters’ stake stood at 25.12 per cent at the end of June quarter, while foreign institutional investors’ holding at 23.81 per cent.

Insurance companies’ stake also remains substantial at 12.65 per cent, while that of mutual funds including UTI holding in the company stood at 8.01 per cent. Retail investors have about 10 per cent stake in the company.

Though among the strongest of Indian players, the Hyderabad-based company was troubled by supply constraints for its German Subsidiary, Betapharm for quite some time.

However, the turnaround of Betapharm in the first quarter of the current fiscal would trigger further profitability, according to Mr G.V. Prasad, Chief Executive Officer, Dr Reddy’s Labs. The impact of Betapharm turn around was also felt in the first quarter, he adds.

Dr Reddy’s net profit decreased 26 per cent at Rs 134.6 crore in the first quarter ended June 30, 2008 compared with Rs 182.5 crore in the corresponding quarter for last fiscal year.

However, due to good revenue growth in North America, Germany and Russia, the total revenues grew by 25 per cent and the increase in formulations revenues in Russia could give impetus to further growth in market share, according to analysts.

“The shift of Betapharm products to India and the entry of Dr Reddy’s into biologics space and the new products lined up for launch could be another trigger for the company,” according to a HDFC Securities report.

The key concerns, on the other hand, for Dr Reddy’s will be the higher SG&A (selling general & administration) costs which might continue to put pressure on the margins.

Despite increased revenues, the 50 per cent increase in SG&A expenses (Rs 469.8 crore) and research and development costs had brought down the profitability of the company in the first quarter.

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