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Sun Pharma stock tanks

Mumbai, July 21: Investors today dumped the Sun Pharmaceutical stock following a profit warning by the company on Monday, with the scrip falling 15 per cent and the company losing a staggering Rs 34,000 crore in market capitalisation.

The Dilip Shanghvi-led company had said its consolidated revenues for 2015-16 was likely to remain flat or show a decline. Profits may also be impacted because of certain charges arising out of the integration of Ranbaxy as well as the remedial actions taken by the company.

The announcement led to its shares coming under pressure from the start of trading today. After opening lower at Rs 852.15, the stock hit an intra-day low of Rs 799.05, a drop of nearly 16 per cent. It ended the day at Rs 805.30, a fall of 14.95 per cent, or Rs 141.50.

The scrip also dealt the maximum blow to the Sensex, which plunged 238 points to close at 28182.14. Total investor wealth in the stock came down to Rs 1,93,784 crore, a drop of Rs 34,056 crore.

After the warning, a few brokerages cut down their target price and trimmed their earnings estimates. Reliance Securities, which maintained neutral rating on the stock, brought down the fair value of the scrip to Rs 913 from Rs 953. A few others reduced their earnings estimates by 15-30 per cent.

Sun Pharma had said remedial actions at the Mohali, Dewas, Poanta Sahib and Toansa facilities of Ranbaxy was on track and it was also addressing deviations in current good manufacturing practices at its Halol facility.

The company pointed out that the remedial measures had resulted in supply constraints for some of the products. It expects this to continue for some more time till all the steps are complete, thereby impacting its revenues.

However, a few analysts said the company was known to turn around acquisitions (such as Caraco and Taro) and the same could be expected from Ranbaxy as well.

"We have been positive on Sun Pharma because of key factors such as strong product pipeline in the US and emerging markets, significant synergy benefits from Ranbaxy and upside from R&D pipeline," Jefferies said in its report.

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