Mumbai: Sun Pharmaceutical Industries Ltd, India’s largest drug maker, tumbled the most in six years after its net income missed analyst estimates as the costs of integrating Ranbaxy Laboratories Ltd eroded margins.

The shares, among the top performers on the S&P BSE Sensex index in 2014, slumped 9.2% to 877.65 at the 3.30pm close in Mumbai, the steepest drop since June 2009. The stock was also the second-worst performer on the MSCI Emerging Markets Index.

Net income in the quarter ended 31 March was 888 billion crore, which includes earnings of Ranbaxy. That trailed the 1,750 crore median estimate of four analysts surveyed by Bloomberg. The numbers aren’t comparable with those from a year earlier, according to a statement from the Mumbai-based company.

“Our performance has been impacted due to various one-time charges, mainly on account of the Ranbaxy merger as well as due to price erosion for some of our products in the US," founder and managing director Dilip Shanghvi said in the statement.

Shanghvi had a net worth of $20 billion, according to the Bloomberg Billionaires Index. He is Sun Pharma’s largest shareholder.

Group sales were 6,140 crore for the period versus a 7,510 crore survey estimate. So-called other expenses more than doubled to 2,540 crore. Costs of materials consumed doubled to 1,090 crore.

Ranbaxy integration

Sun Pharma, the world’s fifth-biggest generic drug maker with the purchase of Ranbaxy, faces the challenge of resolving US import bans on four of Ranbaxy’s Indian facilities while maintaining its profitability.

“There was a significant increase in other expenses, a lot of that might be regulatory fees related to the Ranbaxy integration," said Hitesh Mahida, an analyst at Antique Stock Broking Ltd in Mumbai. “Their margins were significantly lower than expected."

Ranbaxy’s then-parent Daiichi Sankyo Co. in April 2014 agreed to sell its controlling stake in Ranbaxy to Sun Pharma. The deal came after the Tokyo-based company had taken writedowns on the Indian drug maker, seen its own share price slide and failed to improve manufacturing conditions at the unit to levels that would pass muster with the US Food and Drug Administration (FDA).

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