Sensex Stays in the Red; Metal Stocks Witness Maximum Selling Pressure

Thu, 22 Dec 01:30 pm

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After opening the day on a flat note, the Indian share markets are now trading in the red. Sectoral indices too are trading on a negative note, with stocks in the Metal sector and IT Sector witnessing maximum selling pressure.

The BSE Sensex is trading down 267 points (down 1%) and the NSE Nifty is trading down 87 points (down 1%). Meanwhile, the BSE Mid Cap index is trading down 1.5%, while the BSE Small Cap index is trading down 1.3%. The rupee is trading at 67.91 to the US$.

Sun Pharmaceuticals Industries Ltd today announced its plans to acquire a branded oncology product, Odomzo from Novartis.

The company in its regulatory filings to stock exchanges said that an agreement has been signed with the subsidiaries of Sun Pharma and Novartis to buy the cancer drug Odomzo for an upfront payment of US$ 175 million and additional milestone payments over a period of time.

According to a press release by Sun Pharma, the acquisition of Odomzo will give the company its first branded oncology product.

The drug in question was approved by the US regulator US Food and Drug Administration in July 2015 and has marketing approval in over 30 countries globally, including Europe and Australia.

Odomzo is a hedgehog pathway inhibitor and used for treatment of adult patients with locally advanced basal cell carcinoma that has recurred following surgery or radiation therapy.

According to IMS Health, the hedgehog inhibitor class grew 40% over the previous year.

The pharma sector in India has come under regulatory pressure in the current period, with many of the industry's major players suffering due to lax regulations.

According to a report by agency rating company ICRA, the Indian pharma sector will glow at a slower pace due to a sluggish growth in the US market - which remains a major market for most Indian pharma companies.

Sun Pharma has been making various acquisitions over the past period in an effort to beat the current sluggishness in the industry. However, it remains to be seen if it can utilize its acquisitions in the best possible manner to profit in the long run.

In other news, the buyback offer from opens today. The board of directors have approved the buyback of up to 4.66 million equity shares at face value of Rs 2 each. This represents a buyback of 1.9% of its total fully paid-up equity capital at Rs 125 per share, at a premium of Rs 123 per share.

The aggregate amount of buyback will be upwards of Rs 582 million, representing 9.3% of the company's fully paid-up share capital and free reserves; well within the statutory limits of 10%.

The buyback opens today and closes on Wednesday, 4 January 2017.

Shareholders whose names appear on the company's record date of 25 November 2016 are eligible for the buyback on a proportionate basis.  The promoter group has indicated its intention to participate in the buyback.

In a buyback, the company purchases its own shares from the market. Then it often cancels them or keeps them as treasury shares. The result of the whole buyback process is that the number of shares outstanding for the company is brought down. Buybacks can pose a tricky proposition, and many investors wonder what their course of action should be when a company announces a buyback. Should one tender their shares or hold on to it for further returns?

In this situation however, you need not worry as our team has already complied a comprehensive research report (subscription required) on the prospects of Navneet Education and has also included a detailed analysis of the current buyback. Do give it a read to better plan your course of action.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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