Aurobindo Pharma: Rs 4.38 lakh crore money manager pares stake; here's what brokerages have to say

HDFC Mutual Fund, the country’s third-largest money manager, has cut its stake in pharmaceutical firm Aurobindo Pharma. The latest update showed at the asset management company reduced its stake by 2.03% on August 16 from 5.11% earlier. The mutual fund now holds 3.08% or 1.80 crore shares in the company. Shares of Aurobindo traded 0.30% higher at Rs 733.60 at around 10.50 am (IST). Meanwhile, the scrip scaled its new 52-week low of Rs 715.80. The benchmark BSE Sensex traded 0.49% up at 56,067 at around the same time.

With an asset under management (AUM) of Rs 4.38 lakh crore, HDFC Mutual Fund is the third biggest fund house in the country. SBI Funds Management had an AUM of Rs 5.57 lakh crore as of July 31, while ICICI Prudential Asset Management Company had Rs 4.55 lakh crore.

Latest report card

The company on August 12 posted a 1.68% decline in its consolidated net profit to Rs 769.97 crore for the quarter ended on June 30, 2021, mainly on account of a reduction in expenses. It had posted a net profit of Rs 783.16 crore for the corresponding period of the previous fiscal.

Consolidated total revenue from operations of the company stood at Rs 5,701.98 crore for the quarter under consideration. It was Rs 5,924.78 crore for the same period a year ago, it added.

Brokerage view

Sharekhan has a ‘Buy’ call on Aurobindo Pharma with a target price of Rs 915. ” Aurobindo is witnessing multiple headwinds that have emerged especially for its US business such as higher price erosion and built up of inventories across channels. These headwinds are expected to exert pressure on the US revenues at least in the near term. While the company has plans to launch over 30 new products in the US in FY2022, which could enable to partly mitigate the impact of the price erosion, but lack of clarity exists around the liquidation of higher channel stocks. The other geographies such as Europe have a strong growth outlook,” the brokerage said.

Nirmal Bang Securities also maintained a ‘Buy’ call on Aurobindo Pharma with a target price of Rs 981. However, it added that Aurobindo Pharma’s stock price has corrected sharply post Q1FY22 results due to concerns around pricing pressures in US Generics, acquisition of animal health assets and ongoing compliance woes (Unit 1 has received Form 483 observations after a recent USFDA inspection).

“We believe that the compliance situation at Aurobindo is a matter of concern considering their large dependence on the US market and the multiple sites that are under currently facing a regulatory challenge. With respect to pricing/volume pressures, we think that the situation is temporary and Aurobindo has an efficient platform/business model to sail through these challenges,” Nirmal Bang Securities said.