Aurobindo - misunderstanding or manipulation?

protrade

Well-Known Member
#1
Aurobindo’s Cronus acquisition has created huge confusion in the market - and even suspicion that the company management has overpaid massively for the acquisition, giving rise to suspicion that management might be using these methods to siphon out money from the company!

During the earnings call of the company, on the 13th, there were pointed questions, whether the promoter of Cronus was a related party, etc. And management replied that while they have had dealings with him for several years, he wasn’t part of Aurobindo. They also said he wasn’t a related party to Aurobindo, and he wasn’t part of Aurobindo. But clearly the suspicion didn’t go away!

And this suspicion also was stoked by one article in news.

https://www.google.co.in/amp/s/www....ry-firm-cronus-for-51-stake-304031-2021-08-13

Business Today claims Cronus revenue was ₹13 crore last year, and ₹6.5 crore so far this year.

https://www.google.co.in/amp/s/www....-on-us-generics-antiretroviral-sales-slowdown

Bloomberg Quint had a totally wrong number in Rupees - but mentioned the correct number in USD. That Cronus revenue was $13M last year and already at $6.5M this year.

Obviously there is a big difference between these two numbers. If you see the first numbers, it is natural to assume Aurobindo has overpaid.

If you see the second numbers, it is much more reasonable acquisition - especially for a transaction where company owns 10 acres of SEZ land. With revenues of $13M, Cronus is valued at about 8 times sales.

My belief is that Aurobindo Cronus transaction has been misunderstood completely by the market, and the reason for misunderstanding is also indicated - because of incorrect reporting by some outlets that has created confusion.

The other thing that is suppressing Aurobindo stock is the rejection of Emergency Use Approval for the UB-612 Covid vaccine by Taiwan’s FDA.

While this is a negative for the company, no doubt, it’s not like the shares have had a big run up in anticipation of this vaccine succeeding! So the fall is not quite justified.

Looking at the share action, it does seem like there is a bear cartel that is pushing this stock down. But there isn’t much of a reason for the share to be so low.

It’s even likely, that news outlets aren’t making innocent mistakes, and some of the reporting is intentionally biased to move the stock in specific ways!

Let me give another example of such manipulation by media outlets, and how this game is played.

Aurobindo transferred the injectables business to Eugia - which is a 100% owned subsidiary. This obviously means stand alone revenues will drop, but consolidated revenues will be fine.

Look at how a popular site manipulated headlines:

https://www.google.co.in/amp/s/www....93-75-crore-down-15-38-y-o-y-7328521.html/amp

This is the truth - the standalone numbers did fall. But that’s only because management transferred a valuable business to a 100% subsidiary - with intention to unlock value.

Most ordinary investors won’t know or remember the details of this - so when they see standalone revenue down 15%, they will think it’s a major impact on the company. But in reality, the revenue impact is only 5% - not 15%! And because of operational efficiencies and increased margins, despite 5% drop in revenues, profit fell just 2%.

But look how the same information can be twisted, and some irrelevant number highlighted in the headline, to paint completely different picture!

Read these, and decide for yourself what is going on.
 
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TracerBullet

Well-Known Member
#2
Ordinary investors likely do not move the market. There will always be others who will try to take advantage of pricing errors and that keeps price in reasonably fair value.
Price is king but yeah can also be fickle. My past experience is to stay away from companies that fall like this and not get into reasoning/value/averaging trap. Can always buy it once price starts rising and holding. Anyway, my funda knowledge is 0, pa only ..

Maybe price will go back may be not. But we have so many other options .. This could be sector related too, as lupin also had a (slightly less) severe fall, and some in dr reddy too
 

protrade

Well-Known Member
#3
Ordinary investors likely do not move the market. There will always be others who will try to take advantage of pricing errors and that keeps price in reasonably fair value.
Price is king but yeah can also be fickle. My past experience is to stay away from companies that fall like this and not get into reasoning/value/averaging trap. Can always buy it once price starts rising and holding. Anyway, my funda knowledge is 0, pa only ..

Maybe price will go back may be not. But we have so many other options .. This could be sector related too, as lupin also had a (slightly less) severe fall, and some in dr reddy too
Good point, Tracer - lot of fish in the sea is definitely one way of looking at it. And yes, logic doesn’t always work out.

But I wonder - why isn’t a WallStreetBets type action not possible in India? When operators are manipulating stocks this way, why can’t ordinary investors determine the price action?

If a company like GameStop can be squeezed, why not an Aurobindo?
 

protrade

Well-Known Member
#4
GameStop was a struggling business - but hedge funds were making merry shorting the shares and pushing them to zero. Till WallStreetBets caught on to it, and squeezed these funds so badly, that they had to cover the shorts at ridiculous levels.

Businesses do go through cycles, ups and downs are normal - but sometimes, there are vulture funds out there that want to profit by shorting companies that are otherwise fine, but might be going through minor bad phases.

If this is happening because management is dubious, it is one thing - however, if this is happening because of manipulated news articles, etc, it’s completely different thing.

For ordinary investors, this sort of thing is invariably a loss - at least in short to medium term. And if these vulture funds succeed in triggering selling of pledged shares, it could even become a permanent loss.

It would be nice to see a GameStop like squeeze led by ordinary investors, that puts an end to this sort of vulture capitalism.
 

protrade

Well-Known Member
#5
One of the factors impacting Aurobindo is that the UB-612 vaccine was rejected by Taiwan, based entirely on the fact that GMT figures were significantly less than that of Astra Zeneca vaccine.

However, it appears that medical community is reacting to this rejection as meaningless. We still don’t know enough about COVID vaccines, and how exactly they work. GMT measures one aspect of the efficacy of covid vaccines in generation of antibodies.

However, immunity is about much more than just antibodies. There is significant research showing that T cell based immunity is far more effective in protecting the body from severe covid. And UB-612 induces significant T cells.

Taiwan may have actually rejected the one vaccine that will help against all variants of Covid, because of its ability to boost T cells!

There is a review petition being filed shortly - and UB-612 might still get EUA approval!

https://focustaiwan.tw/sci-tech/202108160023

https://www.cebm.net/covid-19/what-...n-why-immunity-is-about-more-than-antibodies/
 

Nish

Well-Known Member
#6
One of the factors impacting Aurobindo is that the UB-612 vaccine was rejected by Taiwan, based entirely on the fact that GMT figures were significantly less than that of Astra Zeneca vaccine.
~snip~
There is a review petition being filed shortly - and UB-612 might still get EUA approval!
Bhav Bhagwan Hai !

If anyone have positions in Auropharma, then PROPER SL should be followed as per RISK appetite, which many ignore and then start worrying !

But FnO traders mostly avoid SL, which cost them fortunes !

BEST LUCK !
 

TracerBullet

Well-Known Member
#7
Good point, Tracer - lot of fish in the sea is definitely one way of looking at it. And yes, logic doesn’t always work out.

But I wonder - why isn’t a WallStreetBets type action not possible in India? When operators are manipulating stocks this way, why can’t ordinary investors determine the price action?

If a company like GameStop can be squeezed, why not an Aurobindo?
That is just one stock, cant use that as hope for another. Anyway i do not know much about that - and i dont think we can have large shorts in India like that ( even more than 100% of available stocks ) - perhaps in Fno.

Point is this - If a stock falls a lot( need to define that too..) in small amount of time, is it worth risking an entry/hold? Different people will have different answers to that based on their way of working. My very limited experience has been that it does not work for me - esp if i start looking for different ways to confirm my logic. But certainly there will be people who can specialize in these kinds of things and make money. Some one has to buy for price to start rising. But for small money, it seems to me that it is much easier and less risky to wait for price to move and hold well instead of buying a falling dagger based on whatever logic once can come up ( some of it very rational i am sure). These are advantages of small money where impact cost is minimal if any.

It depends on market too. US stocks are well known for mean reversion. So there buying falling daggers in a systematic way while managing your risk will likely work well.

For ordinary investors, this sort of thing is invariably a loss - at least in short to medium term. And if these vulture funds succeed in triggering selling of pledged shares, it could even become a permanent loss.
There is nothing wrong in taking defined permanent loss.

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Anyway, looking at HTF charts - say monthly the fall isn't that much. We are close to 52w high. Weekly is only beginning to look bad but can easily bounce back. How price bounces can give some clue. So depending on style, it may be perfectly reasonable to ignore this as just noise ...
 
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