What should Ranbaxy shareholders do?
The acquisition of Ranbaxy Laboratories by Daiichi Sankyo at Rs 737 per share offers no more than 7-10 per cent return to ordinary investors at its current price. From today’s closing price of Rs 561, analysts say, there is an upward expectation of Rs 40-60 per share.
Analysts feel that investors should participate in the open offer and cash out as the economic value of Ranbaxy shares is around Rs 500, a price around which many feel it would settle after the offer.
Daiichi has paid a price of Rs 737 per share, which is the sum of controlling premium and economic value said Asit Kotecha, chairman, ASK group. Despite pharmaceutical being a defensive sector, post open offer, its share price would settle down at its fundamental level, which is between Rs 500 and Rs 550, he added.
“I strongly believe that the investors should cash out in the current deal, and even if one is a long term investors, he can re-enter into the stock after the open offer closes at lower levels,” said SP Tulsian a senior analyst.
In fact, he investors should sell the shares in the open market at price level of above Rs 600 per share rather than tendering in the open offer. Tendering in open offer attracts long term tax at the rate of 22.4 per cent and short term taxes, in accordance with the income brackets which could be as high as 33 per cent, Tulsian said.
Since Daiichi is buying 42 per cent from the company and the promoters, the float size is around 60 per cent. This, in effect, means that chances of acceptance in open offer are in the ratio of one for every three shares on pro rata basis.
For the last couple of years, Ranbaxy shares were trading below Rs 450. In March this year, it breached the Rs 450 mark and in the last couple of days, it crossed the Rs 500 level, closing at Rs 561 on Wednesday.
For the current year, analysts believe that Ranbaxy would give an earning per share of Rs 25. Even at price to earning multiple of Rs 20, the shares should fundamentally be priced at around Rs 500.
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