Aurobindo Pharma stock continues to be under pressure on account of multiple reasons. The stock has already corrected 27 percent from its 52 week highs. It is close to its 52 week low and it's trading at around 11 to 12 times one year forward compared to a historical PE of nearly 14 times. So, already a significant correction has taken place in terms of stock price as well as valuations.

Reasons for correction:

The company has acquired 51 percent of a veterinary company, Cronus Pharma, for Rs 420 crore and the street is concerned about the valuations at about 17 times FY21 sales. However, the company said it is not a related-party transaction and that they know the Cronus promoters and have dealt with them. The company in a conference call trying to assuage investor concerns specified that they were diversifying into animal health and would not dilute their focus from other segments.

The other cause of concern was Unit One, which was inspected by the USFDA. The inspection was concluded yesterday. Around seven observations were issued by the USFDA.

The street is also worried about the weak US sales. This time around the US sales came in at $364 million versus an estimate of $395 to $400 million. In the previous quarter as well they had clocked sales of $393 million.

The company also alluded to price erosion, which was higher than normal, and said they could not estimate the duration of the price erosion at this point. Moreover, the antiretroviral sales for the company were down 40 percent quarter-on-quarter. All this has put the stock under pressure.

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(Edited by : Bivekananda Biswas)

First Published:Aug 13, 2021 4:17 PM IST