Aurobindo’s conundrum


Well-Known Member
The stock action in Aurobindo in last 3 days is quite interesting!

The new margin regulations that are aimed at discouraging Cash holdings for trading purposes, effective today onwards, are hurting Aurobindo!! Anyone trading with Delivery holdings is in trouble, because the cash from selling holdings is not available till T+2. And Aurobindo was biggest impacted by this, because of the fresh position ban by NSE for most of the second half of August, which forced traders to take positions in delivery!!

Secondly, market has misunderstood the court case against Aurobindo by Merck. This sort of thing is meaningless and to be expected. Every generic maker plays this game - copy pasting ANDA applications on drugs that have expiring patents. And it is upto patent holder to stop them. It costs Aurobindo nothing if they lose, and gets them everything if they win. So the court case itself means nothing.

Aurobindo is one of three vaccine manufacturing companies, that have been in different phases of trial. We don’t really know who will win this race - but one thing is clear - the demand for the vaccine is huge - so multiple players can benefit - not just the first player.

The company has done quite well in recent results, and is available at relatively cheap valuations at below 20 times earnings. This sort of structural weakness, is probably short term and could be excellent opportunity to enter the stock.

Disclaimer: I own derivatives of the stock.
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you are absolutely spot on, any pharma stands to gain in the long run, it's a matter of time. Past few days been a bad weather for the stock but I do expect a support around 775 if not we might catch it again further down around 735
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