Hi RsKm,
Ok. I think we both are talking about the same issue. ButI think the gravity of situation differs in both case (if the charges on Caplin are correct).
It’s like selling milk adulterated with water is a crime, also selling artificial milk produced chemically like the chinese style is also a crime. But i guess the gravity of the illegality would be different ?
Raj,
u r right. caplin’s is more grave a crime. I guess we should stop spending time on such stocks. As Donald says if you cant make serious capial allocation, why bother? Market is going balle balle, and there are various opportunities around.
I have been monitoring this topic for a while now, and being an investor in Caplin and other Pharma related stocks over a very long period, I would like to bring a few points to my fellow shareholders’ notice. These points are a combination of reliable sources close to the company, and basic common sense on what adds up and what doesnât. Being involved in the Pharma stocks for a long time, I have the privilege of understanding certain points better than others. Here are a few for you to ponder:
1). The company has adopted a unique business model which seems to target the âlast linksâ in the chain in the form of Pharmacies and Distributors in its target markets of Latin America, Africa and SE Asia. Despite what most people have observed, the markets mentioned by Kiran are NOT non-regulated markets, these would be classified as âsemi-regulatedâ markets. A âsemi-regulatedâ market may be defined as one where there is a requirement for products to be registered before selling there, a process that takes over 6-9 months per product, but there is normally no need for a factory inspection so long as all the documents submitted are clear. As per Caplinâs website, the company has over 1000 product registrations in various dosage forms in their name, from these markets. This might be a reason why their customers pay in advances, as they will find it hard to select another company with such a large basket of products and services.
2). The company seems to have almost no presence in the domestic market. This may be a disadvantage to the company considering most of the big companies have their presence in the form of brand marketing. But if you look at success stories like Strides and Aurobindo Pharma, they also donât seem to have a big presence in the domestic Market.
3). The company, as per their latest Financial Report, is almost debt free, and considering the advances received, we can be sure of continued business in the immediate short term.
4). As someone else pointed out, the promoters seem to have marital ties in Latin America, and also worked out a good model of combining sourcing from China for products such as penicillins and cephalosporins that might be cheaper there. This would be a huge advantage over existing competitors in their size category. This might also reflect why almost 35-40% of their sales come from Trading.
5). Their latest big move seems to be the Injectable facility for regulated markets. As others have pointed out, definitely there is a risk involved with this move as they donât have exposure to Regulated Markets. However, what comforts me as a shareholder is â
a) They havenât taken any term loans which means the project is constructed almost fully on internal accruals, so debt will not be an issue once they complete.
b) From recent news, it seems like they have taken higher level senior staff who would have experience with Regulated Markets. Afterall, your Ranbaxy, Strides and Reddys also migrated from non-regulated space to regulated, nobody was born there!
c) Considering their strong bottom line, the risk of not breaking even during the gestation period of getting Regulatory Approvals, might be mitigated. They might also do Contract Manufacturing for other larger players, to breakeven during this time.
d) As someone else pointed above, company is foraying into more countries in the same region such as Panama, Costa Rica etc. With proper replication of existing model in these countries, business in Semi-Regulated markets should grow, and hopefully offset the major overheads from the regulated plant. Unless the management has anything else in mind, this seems the logical step.
6). Finally, on the topic of good fundamentals and ethics followed by the company, as a long-term shareholder and one with reputed sources of information, you may ponder over the following points:
a) The company had gone into all sorts of troubles in the late 90âs where the share price went to Rs.2. Had they delisted during this time, none of us would be here discussing this topic.
b) This company, when it went IPO, it was oversubscribed by 117 times with a share price quoting around Rs.95. The promoters still havenât sold a single share and made money, from the Annual Reports I have seen.
c) When the company was listed as an NPA by their lenders in late 90âs, they couldâve given up on it. They have bounced back and paid off all the debts. Had they given up on the company and put that money in real estate in late 90âs, it wouldâve reaped 100x returns by 2013.
d) From that senate report mentioned, note that many Chinese and some Indians seem to have been arrested. If there was really counterfeiting done by Caplin, donât you think the UK Govt or Pfizer wouldâve taken steps to ensure the same fate happens to Caplin?
I have tried to explain in the best way I can, from my understanding of their situation, and also as a shareholder in the company. I suggest everyone else to have a clear look before jumping to conclusions and pointing baseless allegations at a small cap company thatâs showing great signs of progress after coming out of a troubled period over a decade ago.
Ok, first thing first. I want to take back my so very naive comment about the milk & water adulteration for Ranbaxy. It’s much more deeper.
Do yourself a favor, and go through this absolutely fabulous article.
http://features.blogs.fortune.cnn.com/2013/05/15/ranbaxy-fraud-lipitor/
Will start a thread on corporate fraud for this in sometime.
Speaking of fraud and fake drugs, seems like one of the largest drug manufacturer in india and US is a genuinelyfraudulentone. Will anyone buy its pills after reading the article linked by Raj.? Who dares to take its pills?
Iam highlighting few startling points about Ranbaxy from the link given by Raj. Please read the entire one, an eyeopener. If this can happen in US, what about India and Indian pharma companies ??
“Ranbaxy was the first foreign generics manufacturer to sell drugs in the U.S. and rose rapidly to become, today, the** sixth-largest generic-drug maker in the country**, with more than $1 billion in U.S. sales last year (and $2.3 billion worldwide)”
“Ranbaxy now majority owned by Japanese drugmaker Daiichi Sankyo, sells its products in more than 150 countries and has 14,600 employees.”
“By the end of 2012, it was the fourth-fastest-growing pharmaceutical company in the U.S.,** both by sales** and number of prescriptions”
“With her suspicions arousedDr.Spreen began asking her Indian counterparts to send underlying data that supported the test results.She recalls begging, “I don’t care if it’s written on the back of toilet paper. Just send me something.” But it never arrived.”
“Six other pharma veterans who worked for Ranbaxy in the U.S. as recently as 2010 tell_Fortune_they found themselves in a corporate culture like nothing they’d ever experienced. Executives approached the regulatory system as an obstacle to be gamed. They bragged about who had most artfully deceived regulators.”
"Ranbaxy has survived one disaster and punishment after another. As one incredulous employee put it, “We don’t know why we’re still in business.”
“But under the direction of David Nelson, investigators interviewed the FDA inspectors who went to Paonta Sahib and asked them a simple question: Would they feel comfortable taking Ranbaxy drugs? "Every single inspector that went to India said they would never take a Ranbaxy drug,” says Nelson, “like eight out of eight.”
“One by one, each of the former Ranbaxy executives_Fortune_interviewed had determined, while still at the company,** to stop taking Ranbaxy drugs**”
Disclosure:Was a Shareholder in Ranbaxy, couple of years back, for a short term. Mind you I was fundamental investor even then. Had bought Ranbaxy pills,creams, suspensions in the past.
From the Ranbaxy story and with help from fellow investors i started following Mr. Dinesh Thakur’s blog and stumbled on the idea of searching for company names in FDA site. This is what comes up for Caplin. No, idea how to interpret this import refusal report. Is this normal ?
there are similar reports for Ajanta too…
Not sure what it means, but seems like pretty much every company from Merck to Ranbaxy to Nestle seems to have been subject to “Import refusal” at some point. Check the link below for their entire list from 2001 till date for all refusals for companies from all parts of the world.
http://www.accessdata.fda.gov/scripts/importrefusals/ir_months.cfm?LType=C
Does anyone know what is the contingent liability of 30Cr on this company?
Pankaj, where did you get this figure? Cont liab was only 4 crore as per last annual report.
Breakup:
2cr disputed taxes
LCs 64 lac
bank guarantees 8 lac
From Moneycontrol:http://www.moneycontrol.com/financials/caplinpointla/balance-sheet/CPL
Money control may be wrong but it says June-2012 balance sheet so i guess thats the latest.
Ruan,
Do you have any comments on the contigent liabilities ?
Pankaj, have a look at annual report. if you want, i can email it to you. give me yr email id.
Please email me: pankajpandekar@gmail.com. Maybe moneycontrol has made a typo but we should verify as this is not a small amount.
RsKm is right…
Plz have a look at annual report, my friend…
Yes. Thank you for pointing it.
CP IV Phase1 is supposed to get validated in dec’12 and go into production in may’13
any update on the progress ?
Commercial production is now expected in Oct13.
any idea why capling stock is tumbling? any news or rumours?
thanks.
any idea why capling stock is tumbling? any news or rumours?
thanks.
I am not exactly sure but prudentequity.com guys have written a negative report on this company. Earlier they wrote on Parekh Aluminex. That stock is down 32% after that article.
It could be due to some other factors as well. Can’t say for sure.
