Ranbaxy fairly priced at current levels, say analysts

Ranbaxy Laboratories shares on Wednesday closed unchanged at Rs 560.80 on the BSE, despite Daiichi Sankyo announcing a buyout of the promoters’ stake in the company and open offer at Rs 737 per share.

The flat closing of the stock is explained by analysts saying it is fairly priced at these levels and there may be some upside left in the counter.

During the day, the stock rose to a high of Rs 592.70. The low was Rs 565.

Promoters Malvinder Singh and Shivinder Singh have sold their entire 34.8 per cent stake in Ranbaxy to the Japanese drug maker at Rs 737 per share, a premium of around 32 per cent to today’s close. The stock had already rallied around 20 per cent in the past one month on a stake sale buzz.

“Out of the 65.2 per cent holding in the market, 20 per cent will be accepted in the open offer. That is, for every three shares held, one will be tendered in the open offer,” said Ranjit Kapadia, head of research of private clients group--pharma and midcap at Prabhudas Lilladher.

Thus, for an investor who bought three shares of Ranbaxy at Rs 560 per share, the total purchase price would be Rs 1,680. Of this, only one share would be tendered at Rs 737 in the open offer. The remaining two would be at a cost Rs 943, or Rs 471 per share, to the investor.

“The stock is fairly priced at current levels. Investors will have to wait for the open offer to surrender the stock at Rs 737 per share,” Kapadia said.

Sarabjit Kour Nangra, vice president-research at Angel Broking, said, “Ranbaxy has run up a lot recently. We have a target price of Rs 603 on the stock and after taking into account the open offer price of Rs 737 per share, it still leave some upside in the counter.”

She went on to add, “The deal is a win-win situation for Ranbaxy and Daiichi, as the latter can leverage the low cost advantage offered by India complemented by the world-class infrastructure. In turn, Ranbaxy would benefit from the product pipeline of Daiichi.”

Prabhudas’ Kapadia acquiesced, “Ranbaxy will be part of a global group and amongst the top 15 pharma companies. It will be a hybrid model of innovator and generic company. The deal is 4.2 times CY07 sales and 20.4 times EBITDA, which is very good.”