With 45 minutes of trade remaining before the close, the Sun Pharma stock has clocked Rs 24800 cr in value. If out of this Dai-ichi sale comprises Rs 20,000 cr then the balance is either intra-day trade or more investors diverting money to the Sun stock. This transaction will have some implications-first; USD 3 Bn of funds that could have been allocated to some other asset have been diverted here. If the Buyer are FII/DIIs they have now even lesser money to play with in India. The GOI itself is targeting a divestment of Rs 40,000 cr this fiscal. Their sales could be impacted.
But importantly, the Sun Pharma stock lost 10 per cent market cap or Rs 20,000 crore in the run down to the Daiichi sale. And Daiichi it sold the stock down a further 10 per cent from the Monday close. Considering that Sun issued 33 crore shares to the erstwhile shareholder of Ranbaxy worth Rs 33000 crore. The impact of the Daiichi sale has been a collapse in market cap of Rs 400 Bn, making zero accretive value from the Ranbaxy purchase to the market cap of Sun.
If a top class pharma company can lose 20 per cent market cap when a large investor exits, it only underscores how perilous it is to invest in India. On Monday, the Exit of First Carlyle from Claris Lifesciences had a similar impact. The stock fell from Rs 340 on Friday to Rs 270 on Monday. Improved performance may help both Sun and Claris in the future, but for the remaining holders of Equity this is nothing short of a massacre.
If tomorrow ING Bank moves out of Kotak Bank, the GOI sells Axis, LNT and ITC, then where will the Nifty and Sensex go down to. A combination of 3-4 large Exits from Indian stocks can pull down the market by 5000-10000 points on the Sensex, making a mockery of the basic tenet of thinking long for investing. The important point being what is meant by being :Long:?
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