Investing Reflections On India

Vikram Thermo operates in the pharmaceutical industry and manufactures excipients i.e. inactive drug coating. The company owns the relatively popular ‘DrugCoat’ brand and has a reasonably prominent customer base. The company has reported consistent growth in revenues and profits over the last five years – reporting about 6cr of operating profits on about 30cr of revenues in the last twelve months.  It employed minimal debt in financing its operations. The company did report negative reserves about a decade ago as a result of accumulated losses.  This is largely irrelevant to the business as of today but may be a factor for consideration in case there appear to be indications of aggressive financial policies (e.g. taking on greater debt financing for expansions etc.), which isn’t the case at present. It is exposed to a lot of competition in the generics field (although somewhat mitigated by its brand).  It is also subject to the risk of crude oil price in...

Jenburkt Pharma is in the business of manufacturing pharmaceutical formulations – in tablets, capsules, ointments etc. Its plant has been approved by 13 countries for distribution.  Its R&D focus is on lifestyle diseases including diabetes, inflammatory conditions, pain relief etc. Its objective is to create long term therapies in acute and chronic ailments. The company has reported modest growth in revenues and operating profits in the last five years – reporting about 10cr of operating profits on revenues of 56cr in the last financial year while employing no net debt to finance its operations. The business is subject to heavy regulatory norms.  It is dependent on its R&D to create new and better formulations to maintain competitiveness in an ever-evolving pharmaceutical industry.  Moreover, it is subject to high competition and pricing pressures in its generics segment.

NGL Fine Chem operates in the pharmaceutical industry and is in the business of manufacturing bulk drugs and finished dosages. The company has reported stable operating profits on rising revenues over the last five years indicating a bit of margin compression during that period.  It reported operating profits of around 5cr on revenues of about 35cr in the last financial year.  It generated this using moderate debt. The company, however, has also reported negative free cash flows (operating – investing cash flows) in aggregate over the last five years requiring additional debt to finance the capital expenditure.  It would need to generate commensurate future profits to justify the excess capital expenditure. The business is primarily exposed to the risk of heavy competition in the fragmented generics market.  It is also export-dependent with a concentration of sales to Africa – exposing to foreign exchange rate risks.  In addition, it is also exposed ...