My colleague Nupur Anand is the lead writer of this story appearing in DNA Money edition on Monday, Janart 13, 2014.
Last time when the Wockhardt shares shot up a whopping 350% was in 2012 after the drug firm successfully came out of debt restructuring.
This time buffeted by issues with the US Food and Drug Administration, the stock is again in doldrums -- between April and December it lost 83%, down to a new low of Rs 339.85 from Rs 2,024.90 at the start of the fiscal.
And now rooting for an encore is Prashant Jain, chief investment officer of HDFC MF, India’s largest fund house, who known for taking contra calls and unusual bets that have paid off.
As Wockhardt stock nosedived, several retail investors and mutual fund houses started dumping it.
In the same period, Jain quietly picked up the pharma firm’s shares.
Till April last year, HDFC MF had zero shares of Wockhardt, whereas other mutual funds held 10.34 lakh shares.
By September end, HDFC has 13.59 lakh shares, a whooping 97% of the total shares held by mutual fund houses.
Out of the total 1.36% shares of Wockhardt held by MFs, Jain alone holds 1.29%.
Under Jain’s watch, the asset under management of HDFC MF have grown to mammoth size of Rs 108,990 crore.
And market experts believe that this contra call by Jain may pay off.
An expert with a foreign brokerage said, “The rationale behind Prashant Jain’s optimism has to do with his philosophy on finding deep value stocks which he can hold, and expect higher value to unravel when it tides through difficult times. To me, the recent stock correction factors a worst-case scenario.”
A pharma analyst from a leading domestic brokerage added, “Fundamentally, despite trouble with US FDA, the residual business would have enough earnings power to justify current price. The current balance-sheet health is much stronger than ever, and hereon there can only be upside to earnings outlook. The kind of turnaround Prashant Jain has seen in Aurobindo could be something he is betting on in case of Wockhardt, once the regulatory issues are tackled.”
Bad times for Wockhardt started in May after the USFDA put an import alert on its Waluj plant and intensified between May and November, when the company being hauled up four more times by the US and the UK drug regulators.
Sarabjit Kour Nangra, VP-research, pharma, Angel Broking also believes that Jain’s bet may pay off.
“The Wockhardt stock took significant beating last year and has probably gone through the worst times. But one needs to also take into account that the company successfully came out of the financial mess in the years before that and Jain is certainly betting on its revival from the US FDA and UK Medicines and Healthcare Products Regulatory Agency issues,” said Nangra.
“One also needs to remember that Wockhardt is one of the biggest players in the pharma industry and investors with a long-term view would certainly take exposure as the risk-reward is huge,” she said.
Wockhardt stock has been recovering slowly and is now trading at Rs 424.95, already up 25% from the December low of Rs 339.85.
Wockhardt’s foreign drug regulator alerts
May 2013 - US Food and Drug Administration import alert on Waluj Plant
July - UK Medicines and Healthcare Products Regulatory Agency (UK MHRA) import alert on Waluj plant
Oct - UK MHRA withdraws Good Manufacturing Practice (GMP) certificate for Daman plant
Oct - UK MHRA withdraws GMP for Chikalthana plant
Nov - US FDA import alert on Chikalthana plant
Dec - US FDA import alert on Chikalthana and Waluj units for veterinary drugs
Last time when the Wockhardt shares shot up a whopping 350% was in 2012 after the drug firm successfully came out of debt restructuring.
This time buffeted by issues with the US Food and Drug Administration, the stock is again in doldrums -- between April and December it lost 83%, down to a new low of Rs 339.85 from Rs 2,024.90 at the start of the fiscal.
And now rooting for an encore is Prashant Jain, chief investment officer of HDFC MF, India’s largest fund house, who known for taking contra calls and unusual bets that have paid off.
As Wockhardt stock nosedived, several retail investors and mutual fund houses started dumping it.
In the same period, Jain quietly picked up the pharma firm’s shares.
Till April last year, HDFC MF had zero shares of Wockhardt, whereas other mutual funds held 10.34 lakh shares.
By September end, HDFC has 13.59 lakh shares, a whooping 97% of the total shares held by mutual fund houses.
Out of the total 1.36% shares of Wockhardt held by MFs, Jain alone holds 1.29%.
Under Jain’s watch, the asset under management of HDFC MF have grown to mammoth size of Rs 108,990 crore.
And market experts believe that this contra call by Jain may pay off.
An expert with a foreign brokerage said, “The rationale behind Prashant Jain’s optimism has to do with his philosophy on finding deep value stocks which he can hold, and expect higher value to unravel when it tides through difficult times. To me, the recent stock correction factors a worst-case scenario.”
A pharma analyst from a leading domestic brokerage added, “Fundamentally, despite trouble with US FDA, the residual business would have enough earnings power to justify current price. The current balance-sheet health is much stronger than ever, and hereon there can only be upside to earnings outlook. The kind of turnaround Prashant Jain has seen in Aurobindo could be something he is betting on in case of Wockhardt, once the regulatory issues are tackled.”
Bad times for Wockhardt started in May after the USFDA put an import alert on its Waluj plant and intensified between May and November, when the company being hauled up four more times by the US and the UK drug regulators.
Sarabjit Kour Nangra, VP-research, pharma, Angel Broking also believes that Jain’s bet may pay off.
“The Wockhardt stock took significant beating last year and has probably gone through the worst times. But one needs to also take into account that the company successfully came out of the financial mess in the years before that and Jain is certainly betting on its revival from the US FDA and UK Medicines and Healthcare Products Regulatory Agency issues,” said Nangra.
“One also needs to remember that Wockhardt is one of the biggest players in the pharma industry and investors with a long-term view would certainly take exposure as the risk-reward is huge,” she said.
Wockhardt stock has been recovering slowly and is now trading at Rs 424.95, already up 25% from the December low of Rs 339.85.
Wockhardt’s foreign drug regulator alerts
May 2013 - US Food and Drug Administration import alert on Waluj Plant
July - UK Medicines and Healthcare Products Regulatory Agency (UK MHRA) import alert on Waluj plant
Oct - UK MHRA withdraws Good Manufacturing Practice (GMP) certificate for Daman plant
Oct - UK MHRA withdraws GMP for Chikalthana plant
Nov - US FDA import alert on Chikalthana plant
Dec - US FDA import alert on Chikalthana and Waluj units for veterinary drugs
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