Stock gains just 1.4% after announcement

The announcement of a blockbuster dividend of Rs 500 a share failed to create ripples in the Strides Acrolab Ltd counter, with the stock price remaining virtually unmoved on the bourses on Tuesday.

This was in sharp contrast with the price movement witnessed in the case of Pfizer and Wyeth on November 25 when the former announced an interim dividend of Rs 360 a share and the latter Rs 145 apiece.

Both stocks zoomed on the bourses.

Record date Dec 20

On the other hand, Strides gainedjust about Rs 13 to close at Rs 878.35 on the NSE on Tuesday.

Strides has announced the special dividend in the wake of the $1.75-billion sale of Agila Specialities, its injectable drugs unit, to Mylan Inc of the US. The company said the record date for the payment of special dividend will be December 20 and it would be paid on or after December 27.

Arun Kumar, Founder and Group CEO, said he was happy to create value for shareholders by returning 88 per cent of the free cash available with it.

Initially, the company had planned to distribute $700-800 million pre-tax to the shareholders. But the board has approved the special dividend of Rs 500 a share, which would result in a pre-tax distribution of about $525 million.

Apparently, the expectation of a huge dividend has been built into the Strides stock price.

Rally, correction

The stock has gradually moved up from a 52-week low of Rs 552.50 it fell to on August 1. But since the beginning of the month, the stock has come down from Rs 979.75 on December 2 to the current levels.

The sale of Agila Specialities to Mylan was announced on February 28 this year for an aggregate value of $1.6 billion in cash and potential additional consideration of up to $250 million.

One possible reason for investor caution could be that the stock appears to be fully priced. The company had reported a total revenue of Rs 208.94 crore in the quarter ended September, a net profit of Rs 2.22 crore and the earnings per share ofRe 0.38. In the quarters ended June and September, the company appears to have suffered because of exchange rate fluctuation.

(This article was published on December 10, 2013)
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