Sensex Trades on a Dull Note; PSU Stocks Witness Selling Pressure

Tue, 28 Feb 01:30 pm

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After opening the day on a flat note, share markets in India continued to remain range bound. Sectoral indices are trading on a mixed note with stocks in the oil & gas sector and stocks in the PSU sector trading in red, while stocks in the realty sector are leading the gains.

The BSE Sensex is trading down by 11 points (down 0.1%), and the NSE Nifty is trading, down by 9 points (down 0.1%). Meanwhile, the BSE Mid Cap index is trading flat, while the BSE Small Cap index is trading up by 0.6%. The rupee is trading at 66.73 to the US$.

The stock of Lupin was in focus today as it received US Food and Drug Administration (USFDA) approval for generic SUPREP Bowel Prep Kit. India's second largest pharmaceutical major announced that the USFDA had granted it approval to market the generic version of Braintree Laboratories' Suprep Bowel Prep Kit.

Suprep follows a split dose regime and Lupin has got approval for Sodium Sulfate, Potassium Sulfate and Magnesium Sulfate Oral Solution, all of which are taken to cleanse the colon before colonoscopy in adults.

Suprep Bowel Prep Kit has a market size of US$ 207 million in the USA.

This is a positive development for Lupin as the company will launch the generic version under a 180-day exclusivity period. The Indian pharma major is expected to generate sales of US$ 30 million through this product launch.

The launch of this product will give more visibility to Lupin's earnings. Lupin is expected to have a limited competition in this product post the exclusivity period as well.

At the time of writing, Lupin share price was trading up by 0.5%.

The latest approval is a positive development for the Indian pharma sector, which has been under a lot of regulatory pressure in the past few years. The sector has faced great volatility over the years.

Volatility in the Pharma Stocks

Bhavita Nagrani, our pharma sector analyst has explained the current predicament of Indian pharma companies in one of the premium editions of the 5 Minute WrapUp:

• Over the past few years, risk in the US markets has increased. The US Food and Drug Administration (FDA) has become stricter on products entering US borders. Surprise inspections have increased and companies are being issued warning letters. This has impacted the business and earnings of Indian pharma players, causing major volatility for the sector.

Give it a read to form a better understanding of the current scenario in the Indian pharma sector.

Moving on to news from stocks in the PSU sector. Coal India's share price is down by over 2.2% as one its fully owned subsidiaries approved a share buyback plan.

State-run Coal India said the board of its fully owned subsidiary South Eastern Coalfields Limited (SECL) has approved a share buyback plan worth Rs 12 billion, following a government directive.

This comes in only a few days after another one of Coal India's fully owned subsidiaries Northern Coalfields Limited (NCL) approved a share buyback plan worth Rs 12.4 billion.

The SECL board considered and approved a buyback of 150,443 fully paid equity shares of face value of Rs 1000 each from the members of SECL. The shares are proposed to be bought back at a price of Rs 79,777 per share, totaling Rs 12 billion.

The equity shares proposed to be bought back by SECL represent 4.2% of its existing paid up share capital. The maximum permissible limit for the same is up to 25% of the company's paid up share capital.

According to an article in the Economic Times, a government directive has asked profit-making subsidiaries of Coal India to undertake share buybacks this year in addition to the regular dividends they pay to Coal India. As part of this directive, the profit-making subsidiaries of Coal India have committed around Rs 60 billion.

The government remains the biggest stakeholder in Coal India, with a shareholding of almost 80%, and stands to benefit the most from the share buyback by its wholly owned subsidiaries.

The government is exploring ways of shoring up its revenues and is leaving no stone unturned in exhausting its options through buybacks, steep dividends from PSUs, and other instruments.

Earlier this fiscal, the government had raised about Rs 7.9 billion through share buyback of MOIL. The government has so far raised about Rs 300 billion through minority share sale by way of OFS, share buyback and CPSE ETF so far in the current fiscal.

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