Lupin was in the recovery mode on Tuesday, after a fall on Monday.

The stock of the domestic pharma firm was up by 2.1 per cent at Rs 167.65 on the BSE in afternoon trades. Earlier in the session, it hit a high of Rs 169.35 and a low of Rs 160. 2 lakh shares changed hands on the counter.

The Lupin stock had shed 6 per cent on Monday to Rs 164.05. 3.36 lakh shares changed hands on the BSE and 5.26 lakh shares were traded on the NSE on that day.

The slide on the counter came after the company dismissed rumours that it was planning to place about 20 per cent of its equity on a preferential basis.

There were rumours that the allotment would be made at Rs 200 per share.

Before Monday's fall, the Lupin stock witnessed a spirited rally. The scrip, in just three sessions, rose by 22.5 per cent to Rs 174.75 last Friday (10 January 2003), from Rs 142.55 on 7 January 2003.

The three-day surge on the counter was accompanied by average daily volume of 7 lakh shares on the BSE. This was against an average daily volume of 1.08 lakh shares registered on the counter in the last one year to 3 January 2003.

From a recent low of Rs 97.80 on 27 November 2002, the Lupin stock rocketed 78 per cent in a few weeks to the recent high of Rs 174.75 on 10 January 2003.

The mind boggling surge on the counter in such a short span was believed to been masterminded by operators, who have played a key role in driving up the stock, as per market circles. Dealers said the stock has been a favourite of disgraced stock broker Ketan Parekh and they do not rule out the possibility of Parekh being active in the stock.

Lupin has a strong presence in the anti-tuberculosis segment. It has recently set up a dedicated facility at an investment of Rs 20 crore for the manufacture of anti-TB formulations complying with WHO GMP standards, which will cater to the $ 500-million WHO-tender market.

Lupin plans to capture around 8 per cent of the World Health Organisation tender market.

Lupin is a dominant player in bulk drugs such as ethambutol, rifampicin and pyrazinamide in the global anti-tuberculosis market.

By 2010, the anti-tuberculosis drug market is expected to grow to $670 million (primary care - $220 million, institutional - $330, multiple drug resistance).

The company has a 45.8 per cent market share in the anti-TB segment, which contributed around 33 per cent of Lupin's turnover during the first half of 2002-03.

Analysts feel the reduction in prices of these drugs by the government will affect the profitability of the company. There has been a sharp cut in the prices of anti-TB drug formulations in various combinations such as rifampicin-isoniazid/pyrazinamide and ethambutol.

The company is expanding its portfolio and expects the contribution to the turnover from anti-TB formulations to decline over the years.

A major cause for concern is the company's huge debt position. As of March 2002, they were at Rs 627.97 crore. According to reports, the company plans to retire 30 per cent of its debts in the next 12 to 18 months. It has already repaid Rs 20 crore in the six months ended 30 September 2002.

With no major expansion plans, a sizeable portion of the cash generated will be utilised to retire debt.

For the second quarter ended 30 September 2002, Lupin registered an 18 per cent rise in net profit to Rs 27.8 crore (Rs 23.6 crore) on a 25 per cent increase in sales to Rs 279.82 crore (Rs 223.79 crore).

The increase in exports by 47 per cent to Rs 93.9 crore, especially to advanced markets, in this period contributed to higher sales and profit of the company for the above quarter.

Meanwhile, Lupin will announce its Q3 results on 28 January 2003.