Nifty has to hold above 11850 for major up-move

India pharma companies continued to be hit by warning letters from US Food and Drug Administration (US FDA). Aurobindo Pharma Ltd is the latest casualty, having received a Form 483 with 14 observations for its injectable plant in Hyderabad, Aurobindo Pharma stock plunged 8.5 per cent on Thursday. Earlier three major Indian drugmakers — Cadila Healthcare Ltd., Glenmark Pharmaceuticals Ltd. and Lupin — received similar warning letters from the US health care watchdog in the last two months.

Aurobindo’s Unit IV, its general injectable formulation manufacturing facility in Pashamylaram, Hyderabad, underwent a US FDA inspection from 413 November, following which the drug regulator issued a Form 483 with observations to the unit.

Given the sizeable number of observations, it has overshadowed the company’s decent September quarter numbers.

Meanwhile, Aurobindo has said none of these observations was related to data integrity issues and that the company will respond to the US FDA within the stipulated timeline.

The unit contributes significantly to revenue and operating profit. Besides, this unit has around 47 pending filings, and about 30 per cent of overall filings, according to a brokerage report.

“According to our assessment, Unit IV accounted for around 9-10 per cent of US sales and 8-9 per cent of overall Ebitda in FY19. It accounts for around 50-60 per cent of total injectable sales of $213 mn in FY19, with the rest being from Unit XII, Eugia and Auronext facilities,” Emkay Global said in a note to its clients.

Meanwhile, Aurobindo reported better-thanexpected second-quarter numbers. Sales surged 18 per cent year-on-year (YoY) in Q2FY19. This was largely led by the US market and Europe, which rose by 27.3 per cent and 21 per cent YoY respectively. Higher sales of existing products coupled with new launches were the main reasons for the strong overseas growth. Net profit also beat analysts’ estimates.

The markets have seemingly overlooked these numbers and chose to focus on larger US FDA issues, experts said. “While we remain positive on Aurobindo Pharma based on the limited price erosion in the base business and the robust ANDA pipeline, including complex generics, regulatory issues may remain an overhang over the near term,” said Motilal Oswal Financial Services in a note.

The Central Bureau of Investigation (CBI) will soon file fresh charges in the $2 billion Punjab National Bank (PNB) fraud case and detail how the alleged wrongdoing was carried out, according to a source with direct knowledge of the matter.

In the police’s initial charges, billionaire jeweller Nirav Modi, 21 other people, including PNB officials, and three Modi companies were accused of being involved in fraudulent transactions that led to losses of roughly Rs 65 billion for PNB.

Three other Modi employees, a PNB officer, and a relative of Modi's are now also likely to be charged, said the source, who asked not to be identified as the charges have yet to be made public.

“The investigating officer’s report is in and the chargesheet is ready. It is being reviewed by the head office,” said the source.

CBI did not respond to a comment.

PNB, India’s second-biggest state-run bank, in 2018 alleged that a few rogue employees had issued fake bank guarantees over several years to help jewellery groups — controlled by Modi and his uncle Mehul Choksi — raise funds in foreign credit. Both have denied any wrongdoing.

Modi was arrested in London in March and is currently fighting extradition to India. Police filed their first charges in May last year and at the time detailed immediately request for only some of the alleged fraudulent transactions to Modi and his associates.

The new chargesheet will include 150 transactions and provide details on how fake bank guarantees were used to funnel funds between countries and dummy companies, the source said.

A separate second chargesheet against Choksi and his associates, is still pending and will take time as police link 142 other transactions to that case, another source told Reuters on condition of anonymity.

PNB has said losses related to Choksi and his associates were more than Rs 70 billion. PNB and a lawyer for Modi and Choksi did not immediately respond to Reuters’ requests for comment on Thursday.

The first source said that while the employees of Modi would be being charged with facilitating the funnelling of funds, Modi’s relative would be charged with destruction of evidence.

— Reuters

The market ended higher after a choppy day of trading with hopes of further cut in repo-rate to boost consumer sentiment amid macro-economic challenges. The Sensex closed 170 points or 0.42 per cent higher while the Nifty ended with a gain of 31.65 points, or 0.27 per cent, at 11872.10. Broader BSE Mid-Cap and Small-Cap indices ended on a flat note.

Technical View

Siddhartha Khemka, Head — Retail Research, Motilal Oswal Financial Services, said, “Technically Nifty formed a small bodied candle with comparatively long lower shadows on daily scale which indicates that dips are being bought while resistances are intact at higher levels. It has been forming lower lows from last four trading sessions as supports are drifting lower but a decisive hold of 11850 could pause in the recent consolidation to test the higher band of the trading zones. Now it has to hold above 11850 levels to witness an upmove towards 11950 then 12000 zones while on the downside major supports is seen at 11780 levels.”

Market View

Vinod Nair, Head of Research, Geojit Financial Services, said, “Trend of the market is dictated by macro releases, as WPI inflation numbers indicated weak demand in the manufacturing segment. RBI is likely to give focus on growth rather than rising inflation in the near term which may influence a few more rate cuts. In-terms of earnings growth, we notice that the strength of Q2 result slowed by the end of the season, which can put pressure on stock performance.”