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Dr Reddy’s shares fell around 23 percent on Friday morning as investors turned wary of a research note on observations issued to its Bachupally plant.
According to a CNBC-TV18 report, Jefferies, in its research note, said that the Form 483 issued by US Food and Drug Administration (US FDA) contains four repeat observations out of the total 11 observations.
The brokerage house has retained its underperform rating on the stock with a target at Rs 2,180 apiece.
Further, analysts at the firm wrote that the observations are around lack of thorough investigations along with written records lacking details. Employees not being trained and lack of infrastructure are also some of the issues, they added.
Among the observations issued, two of them are related to lack of space as well as drains. It terms one of the observations relating to facility structure being a negative.
Going forward, the company’s response to the US FDA letter will hold the key.
Speaking on the timeline, the brokerage expects a likely delay in approval and that the overall clearance for Bachupally unit could take more time. Even the valuations were not factoring in risk to earnings ahead.
The stock has fallen over 4 percent in the past one month, while in the past three days, it has fallen over 6.5 percent.
At 10:39 hrs Dr Reddys Laboratories was quoting at Rs 2,474.40, down Rs 194.90, or 7.30 percent, on the BSE.
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