Lasa Supergenerics Limited


(Changu Mangu) #1

Background

LASA Supergenerics is a company primarily in the business of Veterinary API’s (Active Pharmaceuticals Ingredients). Until recently LASA was a subsidiary of Omkar Speciality Chemicals Limited and has independently listed on the stock exchanges today 21st September 2017.

Management

LASA is led by Mr. Omkar Herlekar as the CMD who has done his Bachelor of Science and Master of Science (By Research) in Chemistry from the University of Mumbai and further a Doctorate Degree from the Institute of Chemical Technology which is one of the most reputed chemical education institutions in India. Just as a interesting tidbit, the institute is also known for one of it’s well known alumni Mr. Mukesh Ambani. The reason I mention it is to let you know on the respect the institute enjoys among Indian Chemical Industry and why one can give credence to Mr. Omkar Herlekar’s chemistry knowledge. A short list of the ex-students is available here: https://www.udctalumni.org.in/page/UAA-Super-Stars.dz

Omkar Herlekar has a specialization in Catalyst Chemistry and has several process patents to his credit.

A lot of the information on LASA has been captured extremely well by AlphaInvesco and instead of repeating it I would highly recommend a full read at https://www.alphainvesco.com/blog/lasa-supergenerics-omkar-speciality-chemicals/

Financials (Credit to AlphaInvesco for the image)

Further to the above financials (as the article was before the next set of financials were released), the latest current financials are now with us and they are attached below:

2017 Annual Report: LSL Audit report & Financials_2016-17.pdf (1.9 MB)

2018 Q1: June-17-Qtr-Result-LASA.pdf (17.6 KB)

Going through the latest financials with the previous data as posted above and a small addition, the annual sales for 2015 were 71 Crore, 2016 they were 136 Crore and in 2017 they were just shy of 200 Crores. But when we look at the last 2 quarter sales the run rate is now around 60 Cr per quarter. This should translate conservatively to 240 Crore in sales for full year 2018, even with no further growth and just maintaining the current run rate. But it is quite evident that sales are growing at a exceptional pace. It is possible the company may deliver around 250-270 Crores in sales in the coming year and that would mean 25% to 35% sales growth, which is what they have been doing for the last few years.

The below is from the pre listing SEBI mandated advertisement in the newspapers:

For the full pre listing advertisement please use this link: http://www.lasalabs.com/cs-pdf/Free%20Press%20Newspaper%20ad.pdf

When read carefully, it explains most of their business in bullet points. Just to make it easier…

  1. Fungible manufacturing facilities.
  2. No major product dependency.
  3. Over 400 customers in 27 countries (de-risking customer and geographical dependency)
  4. 10 DMF Approved Products & 7 Process Patents applied for.
  5. They also mention they have 4 units. (A key monitor-able and expected soon is the start of operations at Unit 5 which will increase their manufacturing abilities and thus in my opinion provide further sales growth).

This to me looks like a interesting and developing story with a lot more to play out. Their major listed competitor is Sequent Scientific who is doing a top-line of around 1000 Crore but unlike LASA Sequent is still not profitable except for the last quarter. The market size is quite large and the management of LASA seems capable of scaling up and keeping the growth momentum moving positively at least for the next visible 6-8 quarters.

Risks
Like any Pharma business it is subject to many regulations which may have a sudden impact on the future business of the company.

Pro’s
-They derive most of their sales from their patents and thus enjoy protection from competition.
-Execution ability resulting in increased sales has been shown over the last 3+ years.
-The company is owned and led by a qualified specialist in catalyst chemistry who works on developing the processes himself, has proven his knowledge and skill with previous patent filings which are now bearing fruit for the business, and the growth of the company is not dependent on external specialists who may leave the company.

Disclosure: I along with another ValuePickr member met with the management on 14th of September and we will try to post the notes that we can publicly as soon as possible. I can say this for the moment though, we walked away impressed with their plans.

Disclosure: I have a holding in LASA, my views may be biased, I may buy more anytime or sell anytime.


Omkar Speciality Chemicals Ltd -- OSCL
(Changu Mangu) #2

With many thanks to a ValuePickr Member who did all the hard work on it, please find below some useful numbers on LASA.


(sta) #3

There was an interview of Mr omkar on CNBC awaz at 1.30. Pm on 21 September


#4

Hi @valuestudent ,

Thanks for starting the thread for Lasa and the personal initiative for management interaction

Would like to mention couple of things in addition to the data you have given here, which were already in the OSCL thread, a bit old, but very relevant. Especially the risks and concerns:

On another note, May I check if the discussion with the management covered only Lasa or was there any interaction or feedback on OSCL - I guess Omkar is no longer associated with OSCL and hence might not be interested, though OSCL holds 10 % in LASA. Did you happen to meet Pravin or Hrishikesh or their managers?.

Disclosure: Am holding Lasa as well as OSCL.

Regards,

JP


(kolli abhishek) #5

Article in zeebiz


(nil_71) #6

I remember Dr Vijay Malik writing a good analysis on Omkar Speciality. Investors should have a look into that. It will also give one peek in to the management of Lasa.

Here is the link


(sta) #7

Yes that’s a very good analysis. But as one of the senior members said it’s reflecting the past. What you need is the story of future.


(Changu Mangu) #8

@adityajp

We met with both managements separately on two days.

Met with Pravin Herlekar from OSCL and Omkar Herlekar from LASA

I have limitations on what is allowed to post here. Apologies for that. I have been advised I cannot speak about it here. To setup a meeting, the formal way is to contact them via their IR and speak directly with the management with your queries. This is the legal way. I can say very little publicly because of SEBI laws and we must respect them.

On the risks and concerns, I believe we understand that they have primarily been left behind in OSCL and LASA does not carry the legacy issues as has been discussed previously on this forum on the OSCL page so the referencing to old articles should be done in current context. Where does the company stand today? That is a more viable question.

So, I have given my opinion that I was impressed with LASA management and the numbers which are in public domain seem to show us what the potential of LASA might be. As @sta correctly said, we need the story of the future.

I will post my current understanding of OSCL on the right board.


(Akhil) #9

Any update on unit-5?


(Changu Mangu) #10

@Akhil_7306

My personal opinion. Mentioned above, referencing for you.


(nkgambhir) #11

I had a brief interaction with Mr Omkar Herlekar on social media . Unit 5 is expected to start production very soon and will double the production capacity of LASA.The peer company having a similar profile is Sequent , which has turned around in q1 and commands a premium valuation of 116 times earnings , despite being a fv 2 share.


(nkgambhir) #12

Disclosure : Lasa forms almost half of my portfolio.


([email protected]) #13

Hi , Since you are following very closely on the Lasa story what ideally should be the fair valuation of the stock.


(Anil jain) #15

Can you post link to interview. Not able to find by googling.
Thanks


([email protected]) #16

thanks nkgambhir for the details and perspective on the stock


(nkgambhir) #17

(Chaitu) #18

Can some one translate it to English in Question Answer format for everyone understanding sake.


#19

I have attempted to summarize the discussion in a question - answer form.

Disclaimer: I apologize in advance if there are any errors or omissions due to:

  • Hindi being my 4th Language - I might have missed something or have misunderstood the conversation.
  • My English is typical Indian
  • Typical Grammar and Spelling errors - Grammar Nazis please forgive.

Posiives:
-You will find that Omkar Herlekar gives an air of high confidence through out the interview

  • Reduction of debt in Lasa - Omkar sold the shares in OSCL and used the proceeds to reduce debts in Lasa, which is an immensely positive step, and will improve the bottom line of Lasa. Especially with all the problems with debt in OSCL ( I think no value in finding parallels with OSCL anymore - Lasa is separate - lock stock and barrel).

Discl: I got Lasa shares allotted on demerger as well as bought during the past days.

JP

Transcript - TV interview of Omkar Herleker on LASA listing day.pdf (226.6 KB)


(Chaitu) #20

@adityajp,
Thanks for your interpretation in a right way.


(Bhaskar Jain) #22

Thanks valuestudent.

(1) How did you find Dr. Omkar as a person? Some people had earlier found him too ambitious and focussed on the stock price only? Can us minority shareholders be confident that the promoter is ethical.

(2) Have they (Dr Omkar and Mr Pravin) learnt their lessons with the debt and working capital issues which OSCL has found itself in? I ask because in the board meeting where rights was announced, they said they might look for further acquisition. I am not sure if they are going for full debt repayment with the rights proceeds.

disc - invested in Lasa from OSCL demerger, no investments in OSCL at this point