InvestorQ : Why did the stock of Laurus Labs correct so sharply on 05 March 2021?
Riya Dwivedi made post

Why did the stock of Laurus Labs correct so sharply on 05 March 2021?

shrinidhi Rajan answered.
3 months ago

On Friday, 05 March, the shares of Hyderabad based pharma major, Laurus Labs, was nearly 4.7% down at Rs.351 on the NSE. This was after the promoters of the firm were reported to have sold 1.3% stake in the company for a sum of Rs.258 crore through the open market in order to release pledged shares. The promoter, Dr. Chava, sold 5.2 million equity shares of Laurus Labs in the market at an average price level of Rs.368.6 per share.

The total value of the sale by the promoter stood at around Rs.192 crore based on the price realization on the stake sale. Normally, markets do tend to get a tad jittery about promoter selling their stakes and this is more so with respect to companies in the pharmaceutical and other IP related sectors where the promoter as a person makes a big difference to the valuation of the company. Otherwise, this can be seen as a routine transaction.

Apart from the main promoter, the company also reported to the exchange that another promoter, Nagarani Chava, had also sold 1.8 million equity shares at an average price realization of Rs.367 per share resulting in a value of Rs.66 crore. If their stakes were combined, then a total of 7 million equity shares representing 1.3% of the paid-up capital of the company got shifted. The identity of the buyer could not be verified.

However, the company has also clarified that a significant part of the above amount shall be utilised only to release the pledge on the equity shares of the company. As of the exchange report in Dec-20, the promoters had pledged 15.76% out of their total holdings of 28.76% with banks for raising capital for the company. Laurus is an integrated pharma company with a strong R&D footprint in India