Shares of Sun Pharmaceuticals plunged 15 per cent and the firm lost nearly Rs 34,000 crore in market capitalisation on Tuesday, a day after the company stated that its consolidation measures post Ranbaxy acquisition will impact its overall revenues and profits adversely for the financial year 2015-16.
The market cap loss of Sun Pharma on Tuesday is equivalent to the entire m-cap of Power Finance Corporation which is ranked 58th in terms of market capitalisation on BSE.
On Tuesday, the company stated that “These measures (consolidation initiatives) are likely to adversely impact the overall revenues and profits of the company for FY16… consolidated revenues are likely to remain flat or show a decline over FY15 and profits may also be adversely impacted due to certain expenses/charges arising out of integration as well as remedial actions.”
While the scrip has been a strong performer at the stock markets in the past and it rose by 164 per cent during April 2013 and April 2015, it has come under pressure over the past couple of months. On Tuesday, the stock market reacted sharply to the announcements and the shares fell 15.6 per cent during the day and closed at Rs 805.3 witnessing a fall of 15 per cent. It closed at a high of Rs 1,168 on April 6, 2015.
Brokerage houses, however, argue that the company’s core investment arguments remain intact. “The all-stock buyout of Ranbaxy makes Sun the largest emerging market and domestic player in the Indian pharma sector and well-placed to pursue further transformational M&A deals to evolve into a global specialty major,” said an IDFC Securities research report.
While the decline in share prices of Sun Pharma over the last three months has also seen its overall market cap decline from a high of Rs 281,155 crore on April 6, 2015 to Rs 193,784 crore on Tuesday, the promoter’s wealth has also declined from Rs 153,820 crore to Rs 106,019 crore in the same period. Thanks to the sharp rise in the stock price of the firm over the last two years, Dilip Shanghvi, managing director of Sun Pharma had overtaken Mukesh Ambani of Reliance Industries to become the richest Indian earlier this year.
The company had also completed the $4 billion merger deal with Ranbaxy Laboratories in March this year.
International brokerage house Jefferies said it is positive about Sun Pharma’s strong key fundamentals, though its stock plunged on Tuesday, a day after the firm warned of a deeper cut in bottomline and topline this year due to ongoing integration with Ranbaxy.