Profit booking saps Lupin 4%

Our Bureau Kolkata | Updated on July 20, 2011

Sell-off by Rakesh Jhunjhunwala behind drop: Market-men

Lupin Ltd's stock lost around 4 per cent on Wednesday on strong profit booking. The counter witnessed five times its fortnightly traded quantity. According to a section of the market players, substantial reduction of holding by Mr Rakesh Jhunjhunwala, an active HNI, in the recent past has triggered selling in the stock.

The stock finished at Rs 460 after touching its weekly low of Rs 452. The stock's 52-week high was seen at Rs 520 on November 30 last year.

Mr Jhunjhunwala cut down his and his family's holding in the quarter to June 30 to 1.73 per cent from 3.22 per cent in the preceding quarter. At the end of June 2010, Jhunjhunwalas had a total stake of 3.65 per cent in Lupin.

According to CLSA analyst Mr Hemant Bakhru, the margin pressure is likely to continue for some time.

“With Lupin's Indore SEZ recently commissioned, we expect margin pressures to sustain during coming quarters,” he said. The analyst felt that owing to rise in tax rate in FY12 to 17 per cent from 12 per cent in FY11, the net profit growth might be impacted.

“However, FY13 will see a strong pick up led by approval of generic version of Geodon (Lupin along with Dr Reddy's and Sandoz will launch generic version of this $850 m product in the US),” Mr Bakhru added.

Ms Sonal Gupta, pharmaceuticals analyst with UBS, expected 19 per cent y-o-y earnings growth over the period between FY11 and FY13. “The management is looking at closing a couple of potential deals in the US speciality space as well as in the rest of the world in FY12. We believe this could further boost the earnings outlook and drive further share price performance,” she observed.

According to Mr Rajesh Agarwal, head of research at Eastern Financiers, unconfirmed news are doing the rounds that the company is considering selling its Indian operations. The promoters hold currently 46.97 per cent. Lupin is the fifth-largest supplier of generic drugs in the US based on prescriptions and US sales jumped 27 per cent to Rs 20.5 billion last year.

“Pirmal's sale to Abott was valued at around nine times the annual sales. In case Lupin contemplates a sale-off, it may fetch similar kind of a premium,” he felt.

Published on July 20, 2011

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