Ranbaxy Labs might see bounce of Rs 25-50

CNBC-TV18’s Executive Editor, Udayan Mukherjee – Ranbaxy Labs might move up a bit from here because the news (The company has reached an out of court settlement with Pfizer on Lipitor litigation) is positive and it removes quite a bit of uncertainty. So is bounce of Rs 25-50 possible on Ranbaxy from here? It is entirely possible that the stock inches up from here to those kinds of levels.
 
Just one niggling thing is that earlier they might have launched at risk albeit, with uncertainty in March 2010 now it only gets into the second half of 2011, so almost a 1.5-2 year delay or a push back on earnings which will come in. Ofcourse the earnings will come now but its being deferred by about 18 months. So that is the consideration you keep in mind because now the numbers will only come in 2011 or last 2011, that said it is a positive almost unambiguously. So the stock might inch up a little bit.
 
For somebody who is getting into Ranbaxy right now has to look at two possible things. The stock is already at Rs 600 and what is the residual price, which the stock will drift down to once that open offer is over. We are not even talking about the Pfizers open offer possibility now. I think the earlier calculations indicted that Ranbaxy might be around Rs 500 after the open offer is done but because of the Lipitor settlement its entirely possible that that settling price post the open offer may have gone up to Rs 530-550. So that gives a little bit of cushion of comfort for somebody who is entering the stock now to tender at Rs 737.
 
I think the bigger call is whether we are going to get an open offer from Pfizer or not because I think one could argue both ways. Now the settlement has done. Does it make it more likely that Pfizer is going to make a counter bid for Ranbaxy or less likely now that the settlement is done? I think one has to weigh the possibility of that open offer if one is going to buy at these levels. Because once it gets up to that Rs 620-630 levels assuming it doest that this morning then if there is no open offer from Pfizer, then you are opening up a little bit of risk with your possibilities of the Daiichi Sankyo offer. Even with Lipitor in, I think with Rs 625 one is not going to make money if one share is accepted at Rs 737 and the residual stock despite even if Lipitor goes up to Rs 550. So one has to work the math out and for people who are going to enter after opening of this mornings trade for them its absolutely necessary for higher counter offer to come in from Pfizer otherwise they might be in a spot of bother.
 
So one has to analyze the situation post settlement whether Pfizer is going to go ahead or not with its counter offer and then take a call on whether one wants to jump in the fray and buy Ranbaxy at Rs 620 plus because of Lipitor.