Side-effect of Ranbaxy - Sun Pharma down 13%
World’s 5th largest specialty generics pharma co, Sun Pharma Industries, in a surprise move last evening, issued financial alert to analysts and investors over its upcoming first quarter results and also set a very muted tone for results of FY16 as a whole. In a stern reaction, share is down nearly 13% or by Rs. 125, at Rs. 821, having recovered from day’s low of Rs. 799, which is few percentage points away from share’s 52 week low price of 741.10, made exactly a year ago on 21st July 2014 on NSE.
Blaming integration challenges with the US $ 3.2 billion Ranbaxy buy, Sun Pharma indicated that its FY16 consolidated revenues would remain flat or even show a decline over FY15 (which stood at Rs. 27,000 crore) while FY16 consolidated profits could be adversely impacted due to integration charges and remedial actions. Sun Pharma is looking to divest 2-3 non-core non-strategic business from the buy, to return to a sustainable growth trajectory after FY16.
Although these remedial actions are likely to be one-off, coming in ahead of the time, indicates how severe they could hit shareholders of Sun Pharma. The company has already lost Rs. 30,000 crore in market cap within a couple of hours of the warning announcement. Lets hope this is the final bag of worms in Ranbaxy - Japan’s Daiichi has paid a hard price for it and now its Sun Pharma!