Wockhardt - whats in store for future?

With results just announced, with net loss running in triple digits, whats in store for Wockhardt in medium to longterm perspective.

A rights or IPO in current bad phase is completely ruled out as this will result in bloated equity and markets will give a thumbs down to either of the rights/IPO. A decent premium won`t be possible at current valuations.

Khorakiwala`s in order to make over debt repayment, may opt for combination of -

1. Assets Sale
2. Divestment of some overseas subsidiaries
3. Exit from Wockhardt Hospitals fully at a premium
4. Rope in an MNC either with majority stake or as a JV by pref offer at premium

Point 4 is most likely option, as in recent months MNC`s like Pfizer, Novartis have increased stakes in their Indian subsidiaries and are actively looking for Generics outsourcing / contract manufacturing. GSK Pharma or Sanofi Aventis or Takeda Japan could be also be aspiring MNC`s to have interest in Wockhardt as & when Khorakiwala`s open the door for MNC`s.

As far as current melt down in Indian Pharma MNC affairs concerned whether its Wockhardt, Ranbaxy or Cipla, I think Malvinder Singh of Ranbaxy is the smartest and shrewd among others by sell off of Ranbaxy to Dai Ichi at a fabulous premium and sitting cool with 10,000 crores hard cash in his bank account in these liquidity crisis times. The prefect timing of Malvinder`s Ranbaxy exit makes him a perfect strategist. He will remain a trend setter in such divestments. Many more Indian pharma MNC`s are haunted by Forex losses, unmanageable debt due to business acquisitions/expansion, will sooner ot later follow Malvinder`s foot steps.

What should we do now for Wockhardt? Buy? Hold? Sell?

In the last one month, Wockhardt gave good run from Rs.70`s levels to 100+ giving about 30% returns in a month and 360% per annum. Its a reasonable return in current times.

After the results reaction, the stock may fall back to 70`s again and if coupled with election results blues, markets take plung then Wockhardt slipping below 60 also can`t be ruled out.

Those who have entered at high price, can average out at every decline, as Wockhardt is a well managed company under professional management and sound infrastructure in place, which is attractive enough for any MNC interested in joining the company.

New entrants can make small exposures in Wockhardt at declines as its being a front line Pharma cum Biotech company.