Sun Pharma surges as brokers welcome Ranbaxy purchase

Shares in Sun Pharmaceutical Industries (SUN.NS) gain as much as 7.95 percent, adding to their 2.9 percent rise on Monday, as brokers upgrade the stock after Sun agreed to buy Ranbaxy Laboratories Ltd (RANB.NS) for $3.2 billion.

Sun Pharma is heading for its biggest single-day percentage gain since May 2009. UBS upgraded Sun Pharma to “buy” from “neutral” and raised its target to 720 rupees for 660 rupees on Wednesday, citing the expected contribution to earnings from Ranbaxy.

“We believe the deal makes sense given limited overlap for Sun and Ranbaxy in India and Sun’s limited presence in ROW (rest of world) markets, UBS said in a report dated Tuesday, adding Sun would be able to cut administrative and research and development costs.

On Monday, Bank of America Merrill Lynch also upgraded Sun Pharma to “buy” from “neutral”, citing a higher price-to-earnings multiple after Ranbaxy’s acquisition.