GlaxoSmithKline Pharma was the point of focus for defensive buying, being propelled higher by 1.20% to Rs 299 in the bargain.

A total of 17,113 shares of the pharma MNC changed hands on BSE by 14:50 IST.

GlaxoSmithkline has witnessed much see-sawing of late. In seven sessions (including Monday), the stock rose 3.10% from Rs 290 on 12 March 2003. In eight prior sessions, between 28 February and 12 March 2003, the scrip lost 9% from Rs 318.70. In the nine earlier sessions (between 17 and 28 February 2003), the stock rose by 15.4% from its 52-week low of Rs 276.20. The scrip had earlier shed 38% from its 52-week high of Rs 445 on 18 April 2002.

Defensive buying seems to be taking place in the stock, as the scrip, it is reckoned, displays steadfastness in times of uncertainty, and therefore, is a safe bet. At the current level, the downside for the stock looks limited, dealers say.

The GPL stock's earlier slide was attributed to concerns that the company's domestic sales may be adversely affected due to the introduction of the uniform Value Added Tax at the rate of 12.5% from 1 April 2003, replacing the sales tax levied by various state governments. Due to this, the off-take of the company's products by the trader community has declined considerably.

The current rate of sales tax is around 7 to 8% on an average, across the country. However, the uniform VAT is fixed at 12.5%. In addition, considering the trade discounts and commissions, the effective rate is likely to be around 15.5%. Further, the pharma industry is also worried about the treatment of stock-in-trade of goods at the wholesaler and the retailer end. As a result, some wholesalers and retailers have requested pharma companies to take back the stocks as of 31 March 2003, while a few others have substantially reduced their purchases. Unless the Centre comes out with clear terms regarding the impact of change over from sales tax to uniform VAT regime, the domestic pharmaceutical sales for the quarter ending 31 March 2003 will be adversely affected.

Already, for February 2003, sales of GSP were reported to have declined by 1.5%. However, the company still retains its number one position in the pharmaceutical sector, with a market share of 5.91% and sales of Rs 1,075 crore (Rs 10.75 billion).

Meanwhile, the Union Budget for 2003-04 is likely to benefit the company following the reduction in customs duties for life-saving drugs and also a cut in import duty on raw materials and finished dosages from 25% to 30%.

Things could take a turn for the better for the GPL stock once the Centre comes out with the new Drug Price Control Order. The company is expected to be a major beneficiary of the new DPCO as it has a very high portfolio of price-controlled products, which constitute about 65% of its sales.

Earlier, GPL said it expects a 50% rise in earnings this fiscal (FY 2003) through its focus on 30 power brands and cost-cutting measures. Sales are likely to rise by 10%. As per reports, the company will focus on power brands in segments like anti-asthma and anti-infection drugs, vitamins and vaccines. These are expected to contribute 65-70% to the company's turnover in the next 2-3 years, from the current 60%.

GPL is the merged entity of erstwhile Glaxo India and SmithKline Beecham Pharmaceuticals India. The Indian merger followed the international merger of GlaxoWellcome and SmithKline Beecham to create GlaxoSmithKline last year. GPL's pharma division accounts for 77% of the company's sales, while the remaining 23% comes from other divisions.

For the full year ended 31 December 2003, GPL recorded a net profit rise of 122.96% to Rs 98.06 crore on a 4.04% increase in total income (net of excise) to Rs 1,089.35 crore (Rs 10.89 billion). The board of directors has recommended a dividend of Rs 7 per share for the year ended 31 December 2002.

As on 31 December 2002, the promoter held 48.83% stake in GPL, while the public and institutions held 22.83% and 23.95% respectively