Caplin Point Laboratories


(Growth_without Debt) #422

Many have burn their capital in Vakrangee, 8K and PCJ by just looking at profit and revenue growth. How to identify red flag in Caplin Point? It is better to be wise than sorry!


(Ranjit Solkar) #423

That’s exactly what we’re trying to say. If you’re able to identify red flags, please do share with us. But until then, is the right approach to consider “guilty until proven innocent”? With the age of social media and the power to write anything without potential consequences for the person writing, I think its upto each boarder, especially well-learned and established ones like the ones on this forum to be a bit more responsible and back up statements with substantiated proof.

Anyway, thats only my opinion. You guys are much more experienced in this than me. Will always have respect for the work being done by the people of this forum! :slight_smile:


#424

Pathetic set of Q2 numbers on standalone basis sales growth is simply got added to cost of traded goods and net profit dipped. Although the consolidated EPS rose by 31% but sales growth at 18.75% is much lower than the historical averages. If they are not able to maintain sales growth despite moving in to new markets and products and other initiatives, I think it is time to hold back to your buying purse and wait for company to start delivering again.
As per my analysis it is now hold vs buy on dips previously.

Disc: Vested interest and biased views


#425

On receivable front, the company has been very open wrt the disclosures and they announced that Trade Receivables are likely to go down in 24 months… lets not jump the gun on that front but dip in growth rate is certainly worrisome coupled with entry in to China. Now they have three markets to focus, LatAM (Bread and butter), USA (Regulated market) and now China. Do they have bandwidth available to focus on all fronts at same time? I have my own set of doubts and investor conference is missing even post these results. Hope management improves the way they are making disclosures.

Disc: Vested interest and biased views


(EL) #426

India GDP is growing at 7-8pc
If Caplin can grow at 18pc and we are not happy someday it will have get bigger than all of India GDP

Secondly I think we shld always look at consolidated as we paid for consolidated business not standalone business. When i bought caplin I paid for consolidated business and thats what I am interested in and that what will continue to grow.
10-15% per annum is good growth


(Ranjit Solkar) #427

I dont understand this concept of Standalone vs Consolidated. Maybe some experienced boarders could throw light on it. My understanding of this company is that they dont have any domestic business, and they’ve always been a global (albeit small) player where they manufacture half of their exports in-house and outsource-manufacture half from China and sell them in Africa and Latin America. Also they have subsidiaries in the East and West now, so obviously the results have to be looked at from a consolidated angle right? Or am I not seeing it correctly? As Edward said - no one buys a company’s stock for their standalone business, right? And I know I’m not making apples to apples comparison - but maybe we should check some of the bigger guys such as Sun or Lupin’s Standalone vs Consolidated, and make a comparison to see where Caplin stands.

Growth trajectory-wise, I usually ask these questions:

  • How is their Cashflow?
  • How is their indebtedness?
  • How is their capacity to fund Capex/Opex, in continuation with the above 2 questions?
  • How is their EBIDTA/PBT/PAT levels compared to peers and compared to industry average?
  • Is their growth higher or lower than their peers and compared to industry average?

If I’m able to answer these questions, I’ll know if the results are pathetic or not :slight_smile:


(Ranjit Solkar) #428

I think you’re right. Obviously as the base grows bigger, the Percentages to remain at the same levels is difficult, unless you’re Divi’s :slight_smile:

Anyway, they have made a public statement of 300cr bottom line in 2022/23. Will have to wait for that. At current rate, they look like they should hit 200cr PBT by FY19. Lets see if that is accomplished first!


(Growth_without Debt) #429

I don’t understand objective behind this. What will be impact?


(Multiplier777) #430

Could be a precursor to an eventual sale of the business or getting a strategic/PE partner in the business…will be interesting to know ….


(Varun) #431

mostly in all pharma companies the business in various countries is done by the subsidiary model only. there are pros and cons of this

  1. any penality or problem with one country is isolated with that. it can be wound up in extreme cases without need of further capital or without affecting business in other countries.

  2. different companies means more mangement bandwidth.

  3. sale of business can be there.

  4. if subsidiary is set up in different country, there is ease of operations like lesser approvals (just 1 country instead of 2).

this is industrywide practise… so i think there is nothing to worry about.

disc: invested


(EL) #432

I dont follow Divis but a cursory look at them, over 3 years they have had zilch eps growth


#433

All the conversation needs to be understood wrt valuations…

The company is richly valued be it sales to market cap or book value to market cap wise…

The rich valuations were derived from the fact that the company was growing at much above the industry average and all payments in advance from customers.

Both of these theories are busted for now so the company does not deserve this kind of valuation and this is what market thinks that’s the reason it has not moved in fact dropped by almost 50% since last August (2017), mid cap melt down happen only in February 2018.

I can argue on facts not expectations or just urge to argue.

Disc: Vested interest and biased views


#434

Company has decided to divested its USFDA approved injectible plant in to another company (a 100% owned subsidiary of Caplin points ltd) and plans to explore stake sale in this entity.

The divestment is expected to be complete by Jan 19. However, the company has not disclosed details on stake sale in the press release. Let’s wait for more details.

Disc: Vested interest and biased views


(Varun) #440

Issue of CCPS to Eight Roads Ventures India Ill LP. and F-Prime Capital Partners Life Sciences Fund VI LP. These preference shares issued for Rs 218 cr will be converted to equity for a minimum share capital of 25.29%.

Effectively valuing the subsidiary at Rs 862 cr 3-4 years hence.

*** As per my understanding of further reading of the notification, since, the issue is of Preference Shares which are to converted compulsorily after some time (not disclosed), the maximum value till that time is Rs 862 cr. They will hold at least 25.29%, that means if the performance is not up to mark, their equity share may rise further.

Disc: Invested


(Subbu) #441

Caplin Steriles Limited, the wholly owned subsidiary company of the Company will issue 7,45,82,875 Compulsorily Convertible Preference Shares of Rs.10 each (“CCPS”) at a premium of about Rs.19.23 per share to the Investors in two tranches (subject to applicable laws and fulfilment of terms and conditions of the Investment Agreement) .

# of convertible shares is fixed, so I don’t think that if performance is not up to mark more shares will be issued. I think they mean that if Caplin Steriles issues more shares in future then it means that Caplin must make sure the investors don’t get diluted below 25.29%.

Do we know how much money was spent on this unit and how the valuation of 826 cr compares with revenue and profit of caplin steriles? thanks!


(Varun) #442

Conversion rate is not known. How many equity shares for 1 preference share?

Anyways, it my opinion. The basis being why not issue equity shares directly and why take the route of preference shares and then getting them converted. If it were not to save against any capital loss, then what?

Regarding revenue and profits, I do not think there is much information available. I do not think there are any material sales from this company yet.


(Growth_without Debt) #443

It looks like “good days gone” for Caplin. Now management is trying to fix books of accounts.


(Varun) #444

I don’t think this is kind of book fixing, as these types of terms need to be there when investing in a company with no material revenue. Only thing they have is a USFDA approved plant, but I do not think they have started shipments to USA.


(Subbu) #445

I agree, without any evidence I don’t think you can say book fixing etc. The company is getting 218 crores of investment into its subsidiary which doesn’t have any revenue. I don’t see hwo this is book fixing if cash is going up.


(Ranjit Solkar) #446

I’m sorry but thats just a very silly statement to make. You think a group like Fidelity who’s one of the world most renowned financial institutions with over $2 trillion AUM will get into a company without any due diligence? No offense, but we need boarders to make informed responsible statements, because Valuepickr has a good name in the investment community…

Anyway, my take on the topic is - similar to what Strides have done with Agila and Cipla have done with Cipla health, this seems to be a move to unlock value from their injectable business for the US. Instead of diluting in the parent company, they seem to have subsidiarized one arm of the business and raised funds there. As per their earlier statements, they were spending around 60cr a year on this company as Opex, which means now they can start to use this 60cr for expansion into other areas, as I guess this 218cr from Fidelity would be used purely for the injectable business.

Seems like Biocon is doing something similar for their Biosimilars business:

And Glenmark for their API business: