IPCA Labs Shrugs Off US FDA Warning, Pares Losses

Ipca Labs

Ipca Laboratories (NSE: IPCALAB) has shrugged off the US FDA warning issued for three of its manufacturing units. The stock opened higher at Rs 679 but as the warning letter became public knowledge, the stock began a seemingly unending decline before opportunistic buyers stepped in and pared the losses.

In a large swing day, the stock hit a low of Rs 562.05 on NSE losing 16% in quick succession after the Company said in a BSE filing that it has received a warning letter for three of its manufacturing units at Ratlam (M.P.), SEZ Indore (Pithampur), and Piparia (Silvassa).

Market Is Not Too Worried

It could have been the case that someone with big holding dumped the stock over the news without realizing the true impact of the warning. According to the BSE filing, the Company has not shipped any APIs or formulations to US markets except the products which do not come under the import alert. Therefore, there is a very less probability that the warning will affect the Company’s balance sheet adversely.

Recently, another pharma major Dr. Reddys Laboratories ran into trouble with the US FDA, panicking investors who dumped the stock relentlessly. Dr. Reddys slumped from a peak of Rs 4,386.60 to hit a low of Rs 2,750 on BSE. The Company has started receiving tentative nods for its products and the stock is on the rise again.

Ipca Labs ended today’s trading session at Rs 655.15, down 2.06% with 24,09,625 shares being traded. That investors rejected the FDA warning is a strong confirmation that IPCA Labs will resolve this issue sooner than later.

The pharmaceutical company is due to post its Q3 results on Feb 8, 2016. Ipca Labs in its Q2 results had disappointed the investors with 81% decline in net profit. The stock has a standalone P/E of 103.53 and an unimpressive dividend yield of 0.15%. The current market cap of the Ipca Labs is Rs 8,270 crores.