Maintain 'reduce' rating on Ranbaxy- Geojit BNP Paribas Financial Services Limited

- 'Reduce' rating on Ranbaxy is maintained with the same target price as earlier.

- The company has entered in to a consent decree with the US FDA for the ongoing manufacturing issues at its two facilities and the company has made a provision of USD 500 million as liability for the ongoing DoJ (Department of Justice) inquiry.

- Under the consent decree, the company and the US FDA will work together to iron out issues at the manufacturing facilities and the approval process for banned products/ products pending approval may be rejuvenated.

- However, earlier experiences show that the process under a consent decree is time consuming, taking months or years. This will delay the recovery in the core business of the company in the US and may put a downside risk in the EPS estimates of Rs.19 for FY12 and Rs.25.6 for FY13.

- The provision of USD 500 million paid to US FDA (Rs.60 per share) is expected to fully offset the FTF (First to File) opportunities of the company and it has also raised net debt to USD 750 million.

- On the basis of these negatives, estimates will be revisited subsequently.

Source : Equity Bulls

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