Kilpest India Ltd - Personalized Medicine For Your Portfolio


(Bosco Menezes) #1

Kilpest India Ltd (BSE Code : 532067) is an established 38-year old Agri-input company, manufacturing & selling a range of crop-protection products like pesticides (including bio-pesticides), micro-nutrients & bio-fertilizers.

The company has a product portfolio of about 50 different products which it sells through a nationwide distribution network of over 2000 dealers. The “Kilpest” brand is well established in the north, particularly Madhya Pradesh, and in some areas it is even used generically by farmers when they wish to ask for pesticides in general.

Medical Diagnostics Foray

In 2010, Kilpest identified molecular diagnostics as a future growth-driver, and tied up with a leading Spanish Biotechnology company M/S Biotools B&M Labs S.A )- focussed on molecular biology & diagnostics - and it’s spin-off company 2B Blackbio S.L )- a biotech company focused on Personalized medicine, nutrigenomics , pharmacogenomics & companion diagnostics - to form a new joint venture company 3B Blackbio Biotech India Ltd.

3B Blackbio Biotech India Ltd intends to lead the research and development of new tools in the field of personalized medicine, medical diagnostics, pharmacogenomics, as well as provide diagnostic tests to predict drug treatment effectiveness (Companion Diagnostics) and enter the field of nutrigenomics.

It has already put up a state of art GMP compliant biotech facility in Industrial area, Govindpura, Bhopal, the first plant of its kind in central India. The plant was inaugurated in April 2011 by Dr Narottam Mishra, Minister of Health, Govt of Madhya Pradesh, along with Mr. Erik Rovina Mardones, Commercial Counsellor, Embassy of Spain & Mr. Adrian Gutierrez, Chief Representative, The Centre for the Development of Industrial Technology (CDTI, www.cdti.es) - a public enterprise under the Ministry Of Science & Innovation, Spain, which promotes innovation & technological development of Spanish companies.

As reported by Pharmaceutical-Technology.com :

" The facility will produce molecular biology products such as PCR enzymes, PCR reagents, real time kits, reverse transcriptase kits, cloning vectors, electrophoresis reagents, nucleic acid purification, accessories and plastic products, molecular diagnostics, AGFoods kits, BIOFood ID kit, BIOFood mixed kit, BIOGenics standard kit and 3B control DNAs.

It will also manufacture equipments such as end-point thermal cyclers, real-time thermal cyclers and gradient thermal cyclers. 3B Blackbio Biotech India has an international patent for the gelification technology owned by Biotools B&M Labs.

The R&D team will focus on proteomic and genomic biomarkers and technology development to global standards. Its focus areas also include oncology, microbiology, allergy, cardiovascular, metabolic disorders and pharmacogenomics.

The customer services will include DNA & RNA extraction, sample isolation, microbial identification, micro-sequencing and genotyping complying with the latest GMP practices. Other services include companion diagnostic tests, human genetic tests, prognostic tests, critical referral tests, nutrigenomics, bulk clinical samples processing and fungal identification services."

(Source : **Pharmaceutical-Technology.com . **More information - including details of laboratory equipment - are available in the referred article :

http://www.pharmaceutical-technology.com/projects/3b-blackbio-biotech-india-manufacturing-plant

Other Required Reading :

  1. The 2011 Annual Report of the company,
  2. Websites of Collaborators,
  3. GenomeWeb.com article, which covers the Nutrigenomics aspects of the partnership, and the reasons for Biotools to partner with Kilpest:

http://www.genomeweb.com/arrays/biotools-kilpest-form-joint-venture-offer-arrays-dietary-food-testing-india

)

The tools & services to be provided by 3B Blackbio Biotech India are also becoming essential for Pharma companies in order to show the efficiency of newly developed drugs and penetrate in that way markets in an easier way, as well as differentiating themselves from other competitors.

It is quite likely that in the next 5-10 years most Healthcare systems will request companion diagnostic tests especially in oncology and metabolic disorders before prescription and treatment can be initiated.

Nutrigenomics

Nutrigenomics has been defined as the application of high-throughput genomic tools in nutrition research. It can also be seen as research to provide people with methods and tools who are looking for disease preventing and health promoting foods that match their lifestyles, cultures and genetics. Nutrigenomics is a developing science and its contribution to public health over the next decade is thought to be major (source : Wikipedia).

Besides the Medical Diagnostics products, the Joint Venture will also launch the collaborator’s Nutrigenomics products - such as “Diet-Chip”, a micro-sequencing array that analyses the expression of 133 essential metabolic genes - which will help doctors & nutritionists to recommend and monitor specific dietary & lifestyle changes for individuals that will prevent, assess & treat disease risk, especially in individuals with a high risk of obesity, cardiovascular disease, diabetes etc.

The company’s nutrigenomics products will not just be useful for doctors & nutritionists. Food makers can use these products to assess the health benefits of their products & back up claims of the special health benefits of their products with scientific data. Similarly, laboratories offering food intolerance testing can also use these products. (Source : GenomeWeb.com article referred above)

Briefly :

Kilpest India Ltd

Company Website : http://www.kilpest.com

Dygnogene Division : http://dygnogene.com/index.html
(Diagnostic Services Division of the company. Tie-up’s with hospitals, nursing homes,doctors will be executed through this division)

JV - 3B BlackBio Biotech India : http://www.3bblackbio.com/

Collaborators & Joint Venture Partners

Biotools B&M Labs : http://www.biotools.eu/

2B BlackBio : http://www.blackbio.eu/en/index.html

BSE Scrip Id : KILPEST
BSE Scrip Code : 532067
CMP : Rs 16.25 (closing price, BSE, 4th Oct, 2011)
FY11 EPS : Rs 1.30
FY11 Dividend : 10% (Rs 1/- )

Recommendation :

With it’s new joint venture, Kilpest India now operates in 2 exciting spaces :

1). Agriculture, focusing on crop-protection protection products , both chemical-based & biological (chemical free).

2). Healthcare, with special focus on molecular diagnostics , nutrigenomics & personalized medicine.

The humungous potential of both these segments need not be explained. Rather, what needs to be closely watched is the company’s growth plans, execution skills & also it’s ability to raise the funds required to propel growth.

Hitherto, the company has been rather conservative & has not chased growth aggressively, but this is expected to change going forward, with the 2nd generation of promoter management now effectively at the helm. If Kilpest India can optimally execute it’s growth plans going forward, it can deliver excellent returns to it’s shareholders over the medium to long term.

But crucial to shareholder returns will also be how & by what route the company is able to raise the funds it requires for it’s expansion, especially in the new line of business which is a high margin business. Any substantial equity dilution will dilute shareholder returns.

Keeping this in mind, the author recommends investors to closely study & track this company going forward, and take an appropriate call based on their conviction in this idea, after proper study.

Author : Bosco Menezes

Recommendation Date : 04.10.2011

PS :

Some of our members may know me, but for the rest, a very brief intro :- I am not an analyst, but stocks have been my passion since my college days (late 80’s).

I generally invest in small caps which i feel have the potential to make it big in the longer term.The flip side of investing in small caps is of course the very high risk they carry.

I wrote the above article on my blog last month. I hold the stock (my avg price is 19-20 Rs approx), so i may be considered +vely biased . The above research is a starting point, a base to go deeper.

The next couple of years will give us an opportunity to look at the company’s progress in executing their growth plans . Members should understand that it could take a few years for the story to bear fruit.


(Donald Francis) #2

Thanks Bosco for sharing your interest in Kilpest. Welcome to ValuePickr and we hope we will regularly benefit from your experience in the market here at ValuePickr.

Bosco is not only passionate about his stocks, he is passionate in most things he does. Phoenix, another stock discussion forum actively moderated and nurtured by Bosco for years, where I got to know many seniors and benefited from their experience. Bosco’s bloghttp://zeenut.blogspot.com.

Bosco - Coming back to Kilpest, my initial observations/queries. Look forward reading up more on the company post some inputs from you:

a) for such a small company(FY11, 21 Cr) isn’t the stock already priced expensive at 16x. I also notice that it has been quoting at these levels and higher for more than a year (Oct 2010 onwards)

b) The stock had appreciated a lot during April/May/June 2011. Was that when the new JV announcement was made? Any other reasons/ Was there good improvement in sales/profits?

c) Company doesn’t have much by way of cash flows or reserves. It has low debt. What are the funding commitments for the JV? Has anything been arranged/spent already?

d) There has been good incremental improvements in margins and returns in last 2 years. However with RoE still less than 10%, the company has still a long way to go before it can catch attention. Growth in Sales/Profits have been decent, but not enough to sit up!

So what is the main Investment hypothesis? The potential and promise from the new JV? Am I missing something? We can also get some ground level feedback on Kilpest from Saurabh Srivastava - he and friends have some farming interests in Madhya Pradesh.Saurabh?

-Donald


(TCX) #3

Some non-compliance issues against the company.

http://www.watchoutinvestors.com/Press_Release/bse/BSE095.pdf

FAILED TO SUBMIT SHAREHOLDING PATTERN UNDER PROVISIONS OF CLAUSE 35 FOR THE QUARTER ENDED 31-DECEMBER-2009


(Ram Arvin) #4

Is anyone tracking this stock…moved from 8 to 41 in 52 weeks and in 52 week high…any news going around??


(Jatin Soni) #5

Its 87% subsidary 3B Blackbio has started to contribute to both top and bottomline. Revenues of 3B are growing at 85% YOY with more than 50% EBITDA margins.
Link to its Investor Presentation
http://corporates.bseindia.com/xml-data/corpfiling/AttachHis/4E0223BE_7BDE_47F5_BDD7_18CB14A1E3A4_155446.pdf


(dhaval shah) #6

Yes, the subsidiary 3B Blackbio seems to be doing well, I was one of the vendor for this company and whatever transaction we had with company were very smooth and the interaction with procurement team led by Mr. Shirish Koshti were a good experience. They were very optimistic about this business though their Agri business has become stagnant, this subsidiary looks promising.

Disc.: Invested from 8 rupees with only tracking position, could not scale up position due to negligence.


(Ram Arvin) #7

Hi Dhaval…I would like to discuss with you, is it okay? Can you pls share your email id as a personal message?

Rgds
Ram


(Gaurav152) #8

anyone keeping a track of this one? their diagnostics business seems to be scaling quite well


(Dhiren Shukla) #9

Kilpest came out with stellar consolidated number.seems their diagnostic business through subsidiary is doing good. The business seems scalable.


(Bosco Menezes) #10

Company is making a preferential issue of shares/warrants to promoters & non-promoters including Varun Daga (founder & partner of Girik Capital) : http://www.bseindia.com/xml-data/corpfiling/AttachLive/ee84a83e-a506-4f2f-9177-3a07557c3998.pdf

Its subsidiary is also making a preference issue of shares, mostly to the parent : http://www.bseindia.com/xml-data/corpfiling/AttachLive/79cbe845-06d8-47dd-a8ad-dde0220a8ad8.pdf


(zain) #11

Hi Bosco,
Nice to see the management movement to infuse fund to fasten growth. I think they are now more aggressive to build the subsidiary business to a new orbit.
But since it’s already moved to s+ stage 2, it’s very difficult to buy (as we require 3 times fund to buy it) now. The solution may be listing in NSE too. Do you have any insights on these? (Plans for NSE listing or moves to come out of s+ stage)

Disc: Invested 10% + portfolio (like to add more if it move out of s+ category )

Rgds


(ambujlko) #12

Hi Zain

Kilpest has moved to GSM category, as a result my brokers ICICI direct and Zerodha both have blocked the trading in scrip… Any idea which are all brokers allowing trade in Kilpest and other GSMs.


(Gaurav152) #13

share khan has blocked too…


(vij) #14

It’s been in gsm since long. You need to put a deposit to buy.


(zain) #15

Hi Ambuj,
Geojit is allowing,but you require fund + additional 200% upfront.


(ambujlko) #16

Thanks Zain
In case stock price reaches its yearly price band, do you see any prospects for NSE listing as that will be the only option to come out of price band imposed by bse.


(Bosco Menezes) #17

For an existing listed stock on other exchanges to list on NSE, it’s net worth has to be 100 Cr.


(zain) #18

Thanks for the information.

Net worth mentioned by you here means market cap or based on balance sheet ( book value or something similar) ?


(2RU Fundamentals) #19

3B Blackbio started contributing significantly. Trupcr brand is gaining momentum in Mdx


(ravish) #20

I am attaching some prepared PPTs i have prepared by finding info on various sources please look in to it and give feedback.Kilpest India By Ravish Malav.pptx (54.2 KB)

These ppts are made to concentrate on 3B BlackBio Biotech India Ltd.

Discl: holding shares