GlaxoSmithKline plc (ADR) (NYSE:GSK) share value dropped by around 9.2% in India after an order to test some of its products was imposed.
The order was instituted after lead was detected in Maggi noodles from Nestle India Ltd. The decline occurred when the Food safety and standards authority of India ordered the inspection of products from seven companies. The affected companies include Nestle, ITC Ltd, and GlaxoSmithKline.
On Monday, Glaxo healthcare listing closed at 4.3% with Rs 6,111.90, a deeper slump compared to 0.9% in BSE. Nestle India dropped by 7.4% while ITC was barely moved.
The Indian federal food safety authority requested all the states to test some of the noodles from Glaxo and submit the results on June 19. The incidence is Nestle’s biggest crunch following the findings that the noodles exceed acceptable lead levels in some of the Maggi Noodle packages. The company, however, maintains that the products are safe for consumption.
Following the occurrence of the unfortunate incidence, Glaxosmithkline Plc (ADR) (NYSE:GSK) responded with an email where they stated that they would provide as much support as they can. The email also quoted Glaxo’s commitment to the requirements so as to maintain a good relationship with the law.
Glaxo’s share decline in India was the biggest since 2013. It was quite a setback for the companies that were affected by the inspection order. So far, no information has been released with regards to the tests on the other products. GlaxoSmithKline is, however, sure that its products will be found without fault.
Apart from affecting the share performance at the stock exchange, the incidence also resulted in stoppages for the products. This will adversely affect the sales particularly for this month, thus affecting overall profitability. This is because there is obviously a large portfolio of products that have been put on hold pending the tests.
The incidence calls for more caution as the firms face scrutiny from authorities. Speculators suggest that the lead levels might have been caused by some flaws in the production process.