Caplin up almost 60% since that debate.
Can anyone let me know why is it increasing so much? I understand the AGM was held in December. Any news on the AGM?
Because of more demand of shares than supply.
Why more demand?
This is the reason. Most of his small caps recommendations behave this way in first few days.
Is anyone still following this stock? Q3 results look good and the stock is up almost 300% since it was trading at the mid-50s.
New Injectible unit has started commercial production on March 24. Good days are ahead.
I believe I sent the following message on Nov 19th, when the share price was quoting at Rs.73, and the “experts” said this was a “total avoid” for them.
Lets give it a bit of a rest (I would presume 8-9 months from now) and see who’s going to be the first to say “I told you so”.
Its June 27th today, I think a few people missed the bus while listening to that advice, it just crossed the Rs.200 mark today.
Still a long way to go for this company though…
Adding onto Arjun Chandrappa’s comment above which is “As Investors we need to have lot of humility. Humility to accept that fact that we can be wrong.”
Humility is something that investors should have when one is not only wrong, but also when one is right!!!
It isn’t easy to emulate thestock pickingqualities of Great Stock Market Wizards like the Buffetts or the Lynchs of the world.
But it is not that difficult to emulate one other quality that most of the great investors always had, and that is Humility!!!
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Dear Ruan.
Am holding caplin lab in my family portfolio.but i regret for not allocating a higher portfolio weightage.thanks for your conviction.
my humble request for you is to please take part actively in VP discussions and enrich us with your thoughts and ideas…
Totally agree with you HR.
One can only re-emhasise what I understood as Arjun Chandrappa’s central point.
Management Integrity comes first - the stock can go on to triple from here also - that doesn’t measure upto much in these markets.
What measures up is can you go to sleep peacefully - having allocated bulk of your hard-earned money to a stock like this - which every one of the senior investors in the forum has looked at, questioned and then shunned?
If you can, that’s great! And Good Luck!
Experiences in the market hav taught me that return of capital has to be the
topmost priority.As they say if you survive you live to fight for another day.
Happy all the members who made money from investment. However, the concern which were raised in discussion continue to affect. I have gone through Balance sheet June 2013. Find enclosed my observation on same:
Point 1
During FY13 (June End), Mfg goods sold Rs 48.39 Cr and Traded goods sold Rs 66.9 Crore
Raw material consumed Rs 30.84 Cr and Traded goods purchased Rs 52.73 Crore.
So if I deduct Mfg RM from Sale, I get gross contribution of Rs 17.55 Cr (36% of Sales value)
Similarly Trading sales gross contribution is Rs 14.17 Cr (21% of sales value).
My real concern is how can the company earn 21% of trading margin?
Point 2:
Argus Salud Pharmaceutical is associated firm to the company. As per annual report, the company booked Rs 3.89 Cr as share from profit from Argus Salud Pharma. On Page 60 , Argus Pharma PAT for March 31, 2014 full year is Rs 3.47 Cr. Further, Purchase from Argus by Caplin is Rs 6.34 Cr (June 2014) which is around 43% Argus Pharma Sales. Now, in normal case,on consolidated (assuming margin from Caplin is same as other sales), nearly 43% of net profit should have been cancelled out. (I am not CA hence open to correct my understanding). i.e, 43% of 3.89 Cr shall be cancelled out on consolidated i.e. reduction by Rs 1.67 Cr. However, as per Company Consolidated accounts, PAT after minority interest is lowered only by Rs 0.32 Cr to Rs 13.98 Cr. Having different accounting year from subsidiary which very high inter related profitable transaction raised flags. Please also note that the company own 99% of equity capital of LLP with balance 1% again own by another group company.
Similarly, total sale of company is Rs 115.29 Cr, with Exports being Rs 108.47, giving us domestic sales of rs 6.82 Cr. Of these, sales to Argus is 4.24 Cr which is 62%.
This is serious concern from my side.
Point 3:
The company paid Rs 13 Lakhs of interest of income tax. If the company is genuine cash earning with very huge interest income, why it shall pay interest for delay in paying income tax?
Point 4:
Despite substantial growth in sale, Power units consumed in manufacturing declined by 13%. Possible very unlikely with sale increasing and power consumption declining.
Point 5:
The company employs 300 persons (Page 17) which employee cost of Rs 796.54 Lakhs giving average cost of Rs 2.66 Lakh per annum which appears very low. The company explained that employee cost increase was "because your company had engaged the services
of highly skilled technical persons having knowledge matching with international standards
keeping in view of the future business plans in the regulated markets."
Point 6:
With concern about associate profit Rs 3.89 Cr, Capitalisation of R&D Expenditure of Rs 3.07 Cr, and Export incentive of Rs 3.49 Cr (with Rs 4.30 Cr was receivable outstanding), nearly Rs 10.45 Cr of Rs 14.31 Cr PAT is of doubtful category in my understanding.
Open to all reverts, particularly on consolidation. Despite all concern, share price may continue to grow. However, the real point to earn with understanding and that is why I would say pass to Caplin.
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These days, every other stocks is going up without any known/solidly-justifiable reason, irrespective of eps growth, management/business quality, irrespective of return ratio, management quality, and so on.
To shout loudly on how someone is right just because stock has rose significantly, just shows how naive he is in investing, nothing less, nothing more.
IMHO…These days, every other stock is going up without any known/solidly justifiable reason because the same stock went down to dustbin without any known/solidly justifiable reason because of market’s undue importance to just one parameter - Published Earnings 
There are many animals in the market with different instincts…They differ in their investing style…Investment return is a function of what business boat you get into, who’s the rower and what price you pay to get into the boat…and if you do exceptionally well on business and price…you can still make good returns with perceived inferior management quality…So I think it’s just fine, if Ruan speaks about some investment where he did well and community members disagreed…we can just agree to disagree :). As a community, I think it’s good to have diverse viewpoints, while I think, one should not boast of one’s results unnecessarily.
Folks,
ValuePickr prides itself on objective discussions.
Perhaps both sides have had a fair round of opinionating.
Its better to get back to the business - of discussing merits of the business, strategies, products, margins and the like.
We see very little of that discussion in this thread. Please help keep up the standards and refrain from too much beating of the same drum!
Applies to both sides!
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Caplin point related video -https://www.youtube.com/watch?v=ool3u5P38kM (Not best in quality view though but contents are excellent - Seems a excellent business model to become to B2C via direct direct selling).
Currently valuation looks to be high. VP Team, please share the updates and current view on the business and outlook expected from here (Red flags if any). Thanks.
According to annual reports , chariman - C C Paarithapan`s remuneration is 0 , which is quite a suprise , Great management
After attending the AGM and some thinking on our discussions with Mr. Parthiapan, I think I have finally unraveled the mystery of “advances from customers”.
Here is my take (this is connecting the dots based on our discussion. So, it has my interpretation overlayed):
The flow of intermediaries from Caplin to final consumer is as follows:
Caplin - Importer - Distributor - Retailer - Consumer.
Now, when Caplin entered into the LATAM/ African markets, it found it very difficult to crack the distribution chain. Also, it could not get an import license. The only way to make inroads was to tie up with “local importer” who already had/ could obtain an “import license”. These “local importers” were happy to give their name and their face to the Company on a certain consideration but were not really equipped to or had the ambition to scale up business. Thus, all operations and business of “local importer” were run by Caplin. An agreement was entered into between “Caplin” and “Local Importer” which ensures that Caplin gets rewarded for running the operations.
Now,as per this agreement, though the “Local Importer” owns the Company, he takes a certain percentage of revenues for himself and all the profits generated are transferred back to Caplin. But, Caplin does not own any stake in the “Local Importer”. So, there is no question of consolidation of accounts. So, under what name should these profits transferred back? This name is “Advances from customers”. So, the advances from customers are nothing but the Caplin’s share in accumulated profits of the “Local Importer”. However, it is not routed through the Profit and Loss Account. To that extent, the profits of Caplin are understated.
Eg: Caplin makes product at Rs 80 and sells to Local Importer at Rs 100. Local Importer sells to Distributor at 120. Local Distributor keeps Rs 5 for himself. It transfers back Rs 15 to Caplin stating it as “Advances to Caplin”. In Caplin’s books, you record profit of Rs 20 (Rs 100 - Rs 80). Rs 15 only enters the Balance Sheet as cash inflow and “Advance from Local Importer”.
Hope this makes it clear!
Some questions which remained unanswered (which you may ask if you happen to meet them):
Why doesen’t Caplin sell to Local Importer directly at Rs 120? (Might be transfer pricing or Tax considerations)
What exactly is the nature of agreement? Is Caplin legally liable to pay back the advance to the “Local Importer” if a rift where to arise between the two? (Caplin has already used that money in building the injectables facility)
Is there any debt on the books of “Local Importer”? Anything that Caplin might be obligated towards but not entering into its books because of such nature.
Kindly note that this is my interpretation and I could be wrong in understanding it.
Would like to know your comments on this type of a business model. Would you be comfortable with it? Any risks that you foresee.
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Some stories looks too good to be true… and usually they are. I know companies which earned huge money in Russia, and now many are earning in Africa… they can be good trading picks in good markets, but from a point of view of a long term investor- I will give anything a pass which I dont understand. I have not been able to understand their more than decent margins on run of the mill products.
Anyone still tracking this stock? Crossed 600 already, almost a 10x since that big debate! Latest results seem like they’re on target to achieve 35% CAGR with a healthy bottom line…and no debt! Regulated markets entry would really augment their position, I think.