Fidelity loses Rs 64 crore on Dr Reddy's slide

Foreign institutional investor Fidelity Management & Research Company (Fidelity), a wholly owned subsidiary of US-based FMR Corp, has incurred a Rs 64 crore notional loss because of the 18 per cent slide in the city-based pharma major Dr Reddy's Laboratories (DRL) stock on Monday.

Fidelity which had bought Dr Reddy's shares two months back through market operations had increased its stake in DRL to 5.24 per cent from the 3.18 per cent level as on December 31, 2003.

Interestingly, Fidelity had increased its exposure to the DRL scrip just prior to the decision by the US court of Appeals which ruled that the patent cover for Pfizer's hypertensive drug was applicable to DRL's AmVaz too.

Fidelity increased its stake in DRL from 24.3 lakh shares level as of December 31,2003 to 40.12 lakh shares on February 17. The court ruling left Fidelity with a notional loss of Rs 64 crore on its fresh acquisition of shares.

Analysts are of the opinion that Fidelity must have built up its position in the counter with the hope that the US court would deliver its judgment in favour of DRL, which suffered a setback when the court declared that the company's AmVaz drug did infringe on Pfizer's patent.

The court ruling leaves Pfizer's patent on its hypertensive drug Norvasc intact till 2007 which means that DRL can not launch its generic version of the drug till that time.

Fidelity has also increased its equity stake beyond the five per cent level in Satyam Computer Services.

The FII increased its stake in Satyam from 1.54 per cent (48.73 lakh shares) on December 31, 2003 to 5.01 per cent (157.58 lakh shares) as on February 17.

The crossing of the five per cent equity threshold in DRL is the second instance for Fidelity in the last six months.

The investment firm has acquired 1.69 lakh shares in October 2003 as a result of which its holding in the company's equity exceeded five per cent level.

For the past so many quarters, Fidelity remained as the largest FII in the DRL equity with its average holding maintained beyond the three per cent level.

As on December 31,2003, institutional investors including FIIs held 35.02 per cent stake in DRL's equity with Life Insurance Corporation holding the major share at 6.33 per cent.

FIIs held 25.03 per cent stake with Fidelity holding 3.18 per cent followed by Emerging Markets Growth Fund at 1.78 per cent.

Promoters held 25.76 per cent stake and others held 39.22 per cent including the 22.97 per cent of the ADR investors.