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Business News/ Markets / Stock Markets/  Dr Reddy's Laboratories sheds around 7% as USFDA issues 3 observations for firm
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Dr Reddy's Laboratories sheds around 7% as USFDA issues 3 observations for firm

Shares of Dr Reddy's Laboratories (DRL) shed almost 7 percent in trade on Monday after the US Food and Drug Administration (USFDA) issued three observations for the company's Telangana plant.

Shares of Dr Reddy's Laboratories (DRL) shed almost 7 percent in trade on Monday after the US Food and Drug Administration (USFDA) issued three observations for the company's Telangana plant.Premium
Shares of Dr Reddy's Laboratories (DRL) shed almost 7 percent in trade on Monday after the US Food and Drug Administration (USFDA) issued three observations for the company's Telangana plant.

Shares of Dr Reddy's Laboratories (DRL) shed almost 7 percent in trade on Monday after the US Food and Drug Administration (USFDA) issued three observations for the company's Telangana plant.

The US drug regulator had inspected the Bachupally unit between October 19 and October 27, 2023, post which, it had issued the Form 483. The observations range from unclean types of equipment and utensils to failure to explain any unexplained discrepancy, as per media reports.

The stock lost as much as 6.7 percent to its day's low of 5,371.75. It is now over 10 percent away from its record high of 5,986.20, hit on August 24, 2023, but has advanced almost 29 percent from its 52-week low of 4,176.85, hit on January 25, 2023.

The stock has risen 31 percent in the last 1 year and over 38 percent in 2023 YTD, giving positive returns in 6 of the 12 months so far and negative in the remaining 6. The stock declined 5.6 percent in December so far after an 8 percent rise in November. It has gained the most in June, up 14.6 percent, and lost the most in May, down 8.7 percent.

Dr Reddy's Bachupally unit contributes 30 percent of its overall revenue from the US and manufactures four out of the top 10 products like Ciprodex, Nexium, Valcyote and Toprol generic.

Meanwhile, the company announced on the exchanges that its Board of Directors has approved the allotment of 9,181 equity shares of Rs. 5/- each, fully paid up, on December 9, 2023, to employees pursuant to the exercise of their Stock Options, as per the following details:

a) 736 equity shares of 5/- each, pursuant to Dr. Reddy's Employees Stock Option Scheme, 2002.

b) 8,445 equity shares of 5/- each, underlying 8,445 ADRs pursuant to Dr. Reddy's Employees ADR Stock Option Scheme, 2007.

Recently, brokerage house Sharekhan retained its ‘buy’ call on the stock with a target price of 6,373, implying an almost 19 percent upside for the stock.

"Management retains its strong guidance of over 25 percent EBITDA margin in the near term, driven by settled product agreements like gRevlimid and double-digit growth in the India business. The stock trades at an attractive valuation of 17.3x and 15.4x its FY2025E and FY2026E estimates vs. peers’ 26x and 22.1x, indicating attractive valuations. Hence we maintain BUY with PT of 6,373," it had said.

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Published: 11 Dec 2023, 10:06 AM IST
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