Cipla shares fall as margin worries prompt downgrades

Reuters
Pharmaceutical tablets and capsules in blister packs are arranged on table in illustration picture in Ljubljana
Pharmaceutical tablets and capsules in foil strips are arranged on a table in this picture illustration taken in Ljubljana September 18, 2013. REUTERS/Srdjan Zivulovic/Files

MUMBAI (Reuters) - Cipla Ltd shares fell on Thursday to their lowest in a month, as worries about high costs on the drugmaker's profit margins triggered a stock rating downgrade by some brokerages.

The company, which on Wednesday reported a 16.5 percent fall in its third-quarter profit due to higher research-and-development and staff costs, will see pressure on its margins in the near term, the brokerages said.

Cipla, which made headlines in 2001 by making anti-retroviral drugs to treat AIDS in Africa for under $1 per day, will also see earnings pressured as gains from its product pipeline will take longer to materialise, brokerage CIMB said in a note.

CIMB downgraded the stock to "hold" from "add".

HSBC downgraded the stock to "neutral" from "overweight", while Religare cut it to "sell" from "hold".

"Continued R&D investments as well as front-end establishment costs in key markets would weigh on profitability over the medium-term without commensurate sales," Religare said in its research report.

Shares in Cipla ended down 3.5 percent, at 260.40 rupees.

(Reporting by Abhishek Vishnoi; Writing by Sumeet Chatterjee; Editing by Prateek Chatterjee)