Investing Reflections On India

Bliss GVS Pharma operates in the pharmaceutical industry and manufactures vaginal contraceptives, anti-malarial drugs, anal suppositories etc. The company is in expansion mode setting up local manufacturing units as well as abroad via joint ventures. The company has reported good growth in revenues and operating profits over the last five years – reporting about 60cr of operating profits on about 220cr of revenues in the last financial year.  It employed no net debt in accomplishing this performance. The company is a net exporter with lots of US$ and EUR receivables and is therefore, exposed to a strengthening INR.  Moreover, it provides products that those in need may be largely unaware of – and requires larger than usual educational campaigns.  It exports a substantial portion to African countries, which is subject to erratic regulations.  Furthermore, the company may not be able to avail of certain specific tax benefits that it used to enjoy in the past.

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 to risks of a narrow pro