Investing Reflections On India

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

Jagsonpal Pharma is in the business of manufacturing capsules and bulk drugs for the pharmaceutical industry – with a focus on supplying solutions for lifestyle-related diseases (diabetes, blood pressure etc.) The company hasn’t really grown its revenues over the last five years but generated consistent operating profits – reporting about 15cr in operating profits on 160cr of revenues in the last financial year.  It operated with modest debt of 15cr (as at 31 st March, 2010). The company is exposed to risks of price controls on the end products, high competition in an undifferentiated product category, falling behind on innovative and more effective drugs, and stringent supplier demands.