Foreign investors accumulate Ranbaxy shares

Foreign institutional investors over the year — September to September — have increased their stake in Ranbaxy Laboratories to 13.08 per cent from 10.42 per cent, an increase of more than 1.1 crore shares. The mop-up has come in the back drop of Sun Pharmaceutical Industries acquiring the company, in an all-stock transaction. Under the agreements, Ranbaxy shareholders will receive 0.8 share of Sun Pharma for each share of Ranbaxy. This exchange ratio, at current value of Sun Pharma, represents an implied value of ₹675-676 for each Ranbaxy share.

On Friday, shares of Ranbaxy closed at ₹632.10 on the BSE.

The FII investments have been made over a period of one year when the highest share price was ₹667.30 and the lowest ₹306.05. On Friday, Ranbaxy closed at ₹632.10 on the BSE.

“The company as we all know has gone through a lot of turbulent times but things are settling down for it now. They have made some settlements and things are looking up for Ranbaxy. As such, interest from long-term investors has been on the uptick for the company,” said Sarabjit Kour Nangra, Vice-President — Research (Pharma), Angel Broking.

She added that the lower stock price was another attraction for investors, even as the company’s fundamentals started looking up, with news of settlements being made with the US.

The company’s shares on the BSE have nearly doubled since September 30, 2013, to ₹639.7 a piece on September 30 this year from just ₹330.7 on the same date last year. On Friday, the company had a market capitalisation of ₹26,837 crore. When contacted, the Ranbaxy spokesperson refused to comment on FII investments in the company.

The sunrise sector of pharmaceuticals is of high interest for investors, given the increasing valuations for the sector and improving returns on invested capital, despite regulatory challenges in foreign markets. According to Arvind Bothra, Vice-President — Institutional Research, Religare Capital, the regulatory challenges being faced by several pharmaceutical companies in the US and Europe have no impact on the investments made by long-term investors.

Bothra said the pharma companies attracting most attention from FIIs are Lupin, Sun Pharma and Dr Reddy’s. Sun Pharma, which is also on its way to completing a buyout of Ranbaxy, has been a favourite for investors given its continuous acquisitions and significant value creation, Bothra said.

However, FII investments have remained more or less static in the major players Lupin and Sun Pharma — at around 31 per cent and 22 per cent, respectively.

Like Ranbaxy, Dr Reddy’s has also seen increased attention from FIIs, with shareholding having risen to 38.41 per cent this September from 32.56 per cent in September 2013.

Meanwhile, FII investors appear to be pulling out of Jubilant Life Sciences. FII shareholding in it has dropped from about 27 per cent on September 30, 2013, to 22.38 per cent in September 30, 2014.

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