Risks involved with Aurobindo Pharma

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Aurobindo Pharma

The recent attachment of few immovable properties of YSR Congress President, YS Jaganmohan Reddy in connection with disproportionate assets case by Enforcement Directorate is viewed by the stock market as a high-risk,high-return bet.

The attachment has no impact on the company operations but observers feel that investors can use the correction to buy the stock. The positive hope comes from FDA nod to its products and facilities ( the company has as many as 171 abbreviated new drug approvals from the FDA. This accounts for the wave of improvement in its revenue from the US.

In the recent quarters, Aurobindo Pharma has recorded improved margins due to current launches in the US and reduction in sales from the low margin antiretroviral formulation contract business. Analysts expect the margin to improve during 2013-15 because of the rise in the sales in US. The company has received the US approval for its Unit IV and expecting approval for unit VI as well.

On the home front, any move by the Directorate of Enforcement will impact the Aurobindo Pharma risk factor. Investors treat it as high risk, high return scenario.

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