Stock markets in India are presently trading marginally higher. Sectoral indices are trading on a mixed note with stocks in the metal sector and auto sector witnessing maximum selling pressure. IT stocks are trading on a positive note.
The BSE Sensex is trading up 22 points (up 0.1%) and the NSE Nifty is trading flat. The BSE Mid Cap index is trading down by 0.5%, while the BSE Small Cap index is trading down by 0.2%.
The rupee is trading at 68.82 to the US$.
In the news from the pharma sector, Shilpa Medicare share price is witnessing buying interest today as the company received an establishment inspection report (EIR) from the US health regulator.
The company reported that it has received of EIR from USFDA for both of its API manufacturing facilities located at Raichur, Karnataka.
This inspection was carried out between 16 to 19 January 2018 and it has now been closed by USFDA.
At the time of writing, Shilpa Medicare share price was trading up by 11% on the BSE.
Speaking of the pharma sector, the BSE Healthcare Index has been on a roller coaster ride in the past few years. The period from 2012 to 2015 saw the index go up more than three times.
Since then it has been a painful ride downwards.
Pre-2015, pharma companies enjoyed a fairytale ride in the US market. Low labor costs, good chemistry skills, along with efficiency, ensured Indian companies could copy innovator drugs to make generic drugs at a fast pace.
The generic business had lucrative margins for all major pharma players. But the party did not last long. In the quest to supply drugs quickly, they compromised on quality at their manufacturing facilities.
No wonder, the US regulatory authority (USFDA) took strict action. Sun Pharma received a warning letter for its Halol manufacturing facility in 2015. It was like a bolt out of the blue. Since then, the downward spiral began and has continued till date.
Lupin, was also issued a warning letter for two of its plants last year.
These regulatory issues coupled with price erosion in US markets has impacted the business of major pharma players. How the pharma industry handle this situation remains to be seen. Meanwhile, we will keep you updated on all the developments from this space.
In the news from the banking sector, IDBI Bank share price is in focus today. The shares of the lender are witnessing buying interest on reports that the Life Insurance Corporation (LIC) will make an open offer to minority shareholders for up to 51% equity.
As per the news, LIC will approach market regulator SEBI after getting approval from its board for acquiring stake in IDBI.
Insurance regulator IRDAI has already given its approval to LIC for the stake purchase, a move which will help the debt-ridden IDBI get a capital support of around Rs 100 billion.
The above developments come as last month the Insurance Regulatory and Development Authority of India (IRDAI) permitted LIC to acquire up to 51% stake in state-owned IDBI Bank.
This attempt by LIC to bail out the troubled IDBI Bank is a classic case of the state insurer buying toxic assets. In fact, LIC has been acting like the government's ATM for years. It has bailed out public issues of scores of PSUs. This is evident from the chart below:
LIC - The Default Bad Bank?
As Tanushree Banerjee writes in a recent edition of The 5 Minute WrapUp...
- Given the high stakes that LIC owns in the most troubled banks, the government needn't even consider the proposal of setting up a 'Bad Bank'. It could just turn LIC into one. At least then the investors owning investments in LIC policies would know the real risk they carry.
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