A cartel led by a top stock market operator is believed to have exploited the negative sentiment to corner the shares of Ranbaxy Laboratories, India's biggest drugs company. The share closed at Rs 409.25 on the Bombay Stock Exchange (BSE) today.
The Ranbaxy stock has plunged 25 per cent in the past two days on persistent rumours that the deal with Daiichi Sankyo may not work as the US government has taken the company to court on charges of forging data. This is despite the categorical assurances given by both Daiichi as well as Ranbaxy that the deal is on track.
The stock tanked after a report by broking firm UBS today placed a sell call on Ranbaxy. Also, a report by CLSA yesterday said that the Daiichi deal with Ranbaxy could possibly have clauses under which the deal could fall apart in the case of serious material change in business prospects. Domestic broking houses have placed the stock under review since the matter is subjudice.
A total of 32 million shares worth Rs 1359 crore, the highest since June 11, were traded today, indicating that there were several major buyers which enabled some investors to sell.
According to sources familiar with the developments, the cartel, which earlier went short on Ranbaxy, was cornering the shares now that they are sure that the deal with Daiichi will go through. Sources say it's simple mathematics through which one can understand how the cartel could make a killing from cornering the shares and later tendering the part of it in the open offer.
Consider this: Even if one buys 100 shares of Ranbaxy at the current market price of Rs 409 a share, he will end up paying Rs 40,900 in all. Daiichi has announced an open offer at Rs 737 a share to acquire 20 per cent of stake from the market, after the company acquired a 34.8 per cent stake from the Singh family in June.
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At least two-thirds or 40 out of every 100 shares will be accepted in the open offer, earning the investor Rs 29,480.
For the balance 60 shares, which do not get accepted in the open offer, the cost of acquisition becomes Rs 11,020. This means that each share costs about Rs 184. Even after considering a short term capital gains tax of 15 per cent, the share would cost Rs 211.6 a share. Informed sources say that it is some insiders who are responsible for the mauling that the stock has received in the markets.
Analysts and brokers alike say that while the stock is a great buy at these levels, there is uncertainty about the outcome of the suit filed by the US government.