Dr. Reddy's Laboratories Limited (RDY)

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It's ringfence time at Reddy's
C Chitti Pantulu / DNA MONEY
Wednesday, 07 May , 2008, 09:52


The Orchid Chemicals lesson has not been lost on Dr Reddy's Laboratories.

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The Hyderabad-based company's promoters are seeking to ringfence India's second largest pharma player.

Dr Reddy's vice-chairman and chief executive G V Prasad told DNA Money that the company's board, at a meeting on January 25, had approved a preferential issue of share warrants up to 5% of the existing equity of DRL, exercisable into an equal number of equity shares.

"We have not exercised that option because we haven't approached shareholders yet," he said, adding that the option may be looked at now.

The Bombay Stock Exchange's records show that promoters held 25.14% in Dr Reddy's as on March 31, 2008.

Asked about hostile bids, Prasad said the management was hoping to create good shareholder value and through this, keep such threats low.

"The only way (to avoid hostile bids) is to keep the share price from dipping. It shouldn't become low enough to attract such bids," he said.

But Dr Reddy's shares haven't exactly been soaring on the BSE.

The shares fell 8.49% to Rs 643.80 on Tuesday. After touching a high of Rs 747 on January 2, the company's shares have dipped 14% to date. Prasad blames the problems being faced by Betapharm, the German generics maker it acquired in 2006 to the drag on Dr Reddy's. Price reforms introduced by Germany in April have made life difficult.

The other factors that have hurt its performance are increasing rebates to insurance companies and a change in the composition of Betapharm's top products.

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Prasad, however, felt that the downswing is temporary and won't hurt the company in the long term.

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