We had decided not to intervene in the Caplin discussion/debate beyond the cautionary statement issued by Admin. However seeing the continued over-optimism/bullish overtones, I have to make the following observations/bring out some indisputable facts:
The attempt is only to bring everyone on the same page as Ayush, Vinod MS, Omprakash, Tirumal Rao and myself.
1). The “Advances” position comes from only 3 countries (where family connections exist). The company admitted the advances model is not scalable - it cannot be replicated in bigger markets like Brazil & Mexico, or for that matter in most new markets.
2). The Injectibles capex is largely from internal accruals - that is a great position to be in. However the company admitted significant commercialisation of the same is far away. The company also admitted entry into developed markets/stories of USFDA approval are atleast 4-5 years away!!
3). Since current product profile is mediocre to poor, but financial metrics seem to suggest otherwise, we pressed for the company’s USP - the answer was “eliminating middleman”.
4). Eliminating middleman business model was largely applicable only in those 3 countries - there must be something else that’s key to the company’s visible success - we kept on pressing - Is it Products, Is it manufacturing technology, API strength, In-house processes, R&D, Marketing/Branding, what???
There was deafening silence (and or beating around the bush) on that front. I have never met a company which could not explain its own success!!
Suggest the Caplin-bulls to try and get on the same page first - preferably by talking to the above-mentioned. It’s always better to err on the side of caution.