 "Stars take opposing bets on Wockhardt")
Two of the top-performing money managers in India’s mutual fund (MF)sector are taking opposite bets on drug maker Wockhardt.
SBI MF’s head of equity, R Srinivasan, has exited the stock in the wake of its 75 per cent tumble. Prashant Jain, chief investment officer of HDFC MF, has bought more for the funds he manages.
As on September 30, Srinivasan, whose Emerging Business Fund has been topping several return charts, had sold the 1.12 per cent it held as of June. Jain, a veteran star fund manager, had bought 1.24 per cent stake in the company as on September 30.
The average daily price of the stock in July-September was Rs 625. The stock, which traded between a Rs 1072 and Rs 362 range on a closing basis during the quarter, had a low of Rs 344.15 on August 8. The 52-week high was Rs 2,115 in March.
What could have prompted Jain, who manages the country’s largest equity schemes, HDFC Top 200 and HDFC Equity, to take this bet as Srinivasan decided to exit?
Analysts said the stock has been under pressure as the company has been facing the wrath of foreign regulatory agencies. One of its largest facilities, at Chikalthana in Maharashtra, has been under the adverse observation of the UK Medicines and Healthcare Products Regulatory Agency, which has withdrawn its previously issued good manufacturing practice certificate. Analysts are not ruling out the probability of the US Food and Drugs Administration taking similar action.
Rikesh Parikh, vice-president, Motilal Oswal Securities, says: “In that case, margins will be affected. Such regulatory bans take two to three years to rectify and begin normal operations. From a three-year plus perspective, growth can come back and margins could be over 30 per cent but from the short to medium term, it looks difficult.”
Foreign institutional investors also cut their holdings in Wockhardt by 2.8 percentage points to 7.58 per cent in July-September. Domestic institutions reduced theirs’ to 3.15 per cent from 3.24 per cent earlier.
Bhagwan Chaudhary, research analyst, IndiaNivesh Securities, says: “There is a possibility that the shares can slip further, as there will be nothing spectacular from a two years’ perspective and the risk-reward ratio is not in favour. The company can even report net losses.”
Adding: "The risk is very high and unless there is clarity, the outlook looks bleak. Even if all goes well, I do not see the counter crossing Rs 800."
Yet, some analysts believe the worst might be over for Wockhardt. Sarabjit Kour Nangra, pharma analyst at Angel Broking, feels it's a good time to invest in the stock.
SBI MF’s head of equity, R Srinivasan, has exited the stock in the wake of its 75 per cent tumble. Prashant Jain, chief investment officer of HDFC MF, has bought more for the funds he manages.
As on September 30, Srinivasan, whose Emerging Business Fund has been topping several return charts, had sold the 1.12 per cent it held as of June. Jain, a veteran star fund manager, had bought 1.24 per cent stake in the company as on September 30.
The average daily price of the stock in July-September was Rs 625. The stock, which traded between a Rs 1072 and Rs 362 range on a closing basis during the quarter, had a low of Rs 344.15 on August 8. The 52-week high was Rs 2,115 in March.
What could have prompted Jain, who manages the country’s largest equity schemes, HDFC Top 200 and HDFC Equity, to take this bet as Srinivasan decided to exit?
Analysts said the stock has been under pressure as the company has been facing the wrath of foreign regulatory agencies. One of its largest facilities, at Chikalthana in Maharashtra, has been under the adverse observation of the UK Medicines and Healthcare Products Regulatory Agency, which has withdrawn its previously issued good manufacturing practice certificate. Analysts are not ruling out the probability of the US Food and Drugs Administration taking similar action.
Rikesh Parikh, vice-president, Motilal Oswal Securities, says: “In that case, margins will be affected. Such regulatory bans take two to three years to rectify and begin normal operations. From a three-year plus perspective, growth can come back and margins could be over 30 per cent but from the short to medium term, it looks difficult.”
Foreign institutional investors also cut their holdings in Wockhardt by 2.8 percentage points to 7.58 per cent in July-September. Domestic institutions reduced theirs’ to 3.15 per cent from 3.24 per cent earlier.
Bhagwan Chaudhary, research analyst, IndiaNivesh Securities, says: “There is a possibility that the shares can slip further, as there will be nothing spectacular from a two years’ perspective and the risk-reward ratio is not in favour. The company can even report net losses.”
Adding: "The risk is very high and unless there is clarity, the outlook looks bleak. Even if all goes well, I do not see the counter crossing Rs 800."
Yet, some analysts believe the worst might be over for Wockhardt. Sarabjit Kour Nangra, pharma analyst at Angel Broking, feels it's a good time to invest in the stock.