Shares of Cipla touched a 52-week low of ₹853.5, down 2.47 per cent on BSE in Tuesday’s trading session on reports of the income tax (I-T) department investigating the drugmaker over potential tax violations and tax avoidance.
Market cap of the drugmaker fell to ₹70,532 crore as the shares succumbed to selling pressure. The stock was trading 0.22 per cent lower at ₹873.20 at 12:09 pm against the previous close of ₹875.15. Cipla shares hit an all-time high of ₹1185.2 on 1 November, 2022.
Cipla said that no tax demand has been raised so far, according to a CNBC TV18 report.
The I-T department had carried out a survey action against the company on 31 January.
The report added that the tax department is investigating whether Cipla made wrongful claims under Section 80-IA. Preliminary investigation has alleged wrong claims worth ₹400 crore made under that section.
Section 80-IA of the I-T Act provides for deduction of 100 per cent of profit and gains derived from specific businesses for 10 consecutive assessment years in a block of 15 years, only up to a certain period.
The I-T department has also alleged wrongful deductions worth ₹1,300 crore claimed for Research and Development, the report said.
Section 35 of the I-T Act provides for deduction on expenditure incurred for scientific Research & Development and ranges from 100-150 per cent on a case specific basis.
The report further said that tax avoidance on funds was given as benefits to doctors and medical practitioners, the I-T department has alleged.
“There is no claim or demand made on us. Cipla in an exchange notification on February 6 had shared that the company has fully cooperated with the IT Department in providing details and documents requested. Cipla continues to do so, on all items indicated by the I-T Dept,” a Cipla spokesperson was quoted as saying by CNBC TV18.
Meanwhile, brokerages Jefferies, Credit Suisse, JPMorgan and Nomura trimmed their targets on the drugmaker by ₹159-250.
Jefferies recently cut the target price on Cipla stock to ₹900 from ₹1,100 while retaining a ‘hold’ rating.
The brokerage has flagged a possible bear case scenario due to no big launches in the US for the next two years, sharp erosion in the value of top-selling US drug Albuterol, and higher R&D spends.
“While the stock is down 15% over the last month, it is still away from our bear-case valuation,” Jefferies said in its 7 March investor note.
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