Thursday, April 10, 2008

Hangers in don't have it easy

Orchid – Ranbaxy saga has sent chill down the spine of many owners that hang in by the teeth of their skin in drug companies. Dr.Reddy’s Labs, Strides Arcolab among the few.

Promoter group in Strides holds just 18% in the Company and is reportedly stalked by Nicholas Piramal. Recent market crash has knocked down stock prices by over 40% making it easier for raiders to ramp up their stakes. Promoters of DRL hold about 25%.

Market decline exacerbates their vulnerabilities. Shares in Orchid had dropped sharply after Bear Stearns, the troubled Wall Street Investment bank, was forced to quickly sell Orchid stock in the midst of the credit crisis. During the recent crash, stock brokers who held orchid shares on behalf of promoter K.Raghavendra Rao also sold heavily when margin calls got triggered and the stock price hit the rock bottom price of Rs.125. That resulted in a loss of over Rs.75 crore to Rao. Now he also has to find resources to up his stake by warrant conversions to thwart further adventures by raiders.

Life isn’t easy for hangers in! But some are privileged since they belong to the right league!

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