Divis Laboratories (DLL) may consider a share buyback using its cash reserves, now that the company's share price is hovering near its year low.

Responding to its sharp drop in Divi's share price and the negative news circulating about the FDA move, the company held a management call with analysts last week, where they had pointed out that only a small proportion - 5% of its products - were affected by the FDA's import alert.

Operationally however, the import alert has broader consequences for the company. The import alert means that Divis will incur remediation costs to fix issues that the US FDA has raised. The company would also have to pay for batch testing of exempted products by a third party, before it can export these to the US. Divis would have to follow this special protocol on all exempted products as long as the import alert remains in force.

DLL said that they have submitted their CAPA plan to the FDA address the alert, to which the agency hasn't yet responded. The standard timeline for resolving  an FDA import alert is usually upto three years.

Analyst Vishal Manchanda of Nirmal Bang, in his report on DivisLab issued this week, points out that the section under which the FDA issued its import alert was Clause 99/32 - the consequences of this are more serious, since this clause indicates that "DLL restrained USFDA inspectors from fully inspecting its facilities". Divis was unable to explain the reason this clause was cited. "The two units had undergone 11 inspections in the past without any major observations," the Chairman, Murali Divi said. "This came as a big surprise."