Venus remedies & ESS DEE Aluminium.

Well Venus Remedies is on fire (it hit the upper circuit of 20% yesterday) over news that a prominent investor (Dolly Khanna) has bought the stock. However, we cannot base investment decisions on events like that. The Company has a poor track record. Its present valuations reflect the investors' lack of confidence in the stock. One needs to understand whether there is an improvement in the operating performance and whether it will sustain.

 

Well, IPCA itself is a very well run Pharma stock with high ROE's and an exemplary track record. The present crises caused by the FDA warnings is a good opportunity for a patient investor to invest. The only disadvantage is that there is no clarity when the FDA issue will be resolved. It may take 12 to 24 months (or even longer) is what experts expect.

As regards Krebs, it is not known whether IPCA will in fact get management control because it depends on the success of the open offer. IPCA currently holds about 30% of the equity while Ranbaxy/ Sun Pharma holds 11%.

Krebs is currently a loss making entity. We don't know what plans IPCA has for Krebs (assuming it gets management control). Also, what will be the relationship vis-a-vis Ranbaxy/ Sun is not known.

As a general theory, one may say that if IPCA has taken the trouble to buy over Krebs, it must have ambitious plans for it. However, unless full details emerge, one cannot really take an informed investment decision.