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.
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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