Torrent Pharma Ltd


(Rohit Ojha) #228

I am also of the same camp that this is not prudent.

However, one point to note is that management has a stated dividend policy of 30% payout. Back calculation from full year 35rs dividend suggests FY16 EPS of Rs 117. The 9 month EPS was Rs 88 and I would be (pleasantly) surprised if Q4 EPS comes to 117-88=29. Q3 EPS was 28.5 and I was expecting it to drop in Q4.


(indumouli) #229

Its debtor days value is 105. So may be last Q3 sales still contributing? I am new to investing. Just started an year back. So my perspective may not be correct.

Disc: Invested in TP. It is 10% of my PF.


(v4value) #230

Promoted doesn’t mind the minorities paying thr Hugh interest as long as they get their dividends without income tax. Clearly shows what they care about. Would be doubly wary of the high related party receivables Dr. Mallik pointed out…


(Rohit Ojha) #231

You should consider that they are running the business in a good and transparent manner. They have had a stated policy of 30% payout and this dividend too has been around that range. Obviously they are the biggest beneficiaries because they hold >70% in the company. I would have also liked to see as much reduction in debt as possible. (In, fact the debt is already reduced sharply). But your statement paints the management as frauds. This is uncalled for.

Regarding receivable days, we need to look at management comments in concall. This increase maybe due to some valid reasons.


(Arun S G) #232

Bringing the money into the country might have Tax consequences. Would we the shareholders prefer they bring the money into India and pay 30% tax, or hold the money abroad?

Btw, please have a look at this :

Disc: Invested in Torrent, so assume a biased view. Very biased :expressionless:


(v4value) #233

I did not say they are frauds. And I can’t understand how that was
construed. My limited point was promoters have priorities and an important
way for minority shareholders like us to judge them are through such
capital allocation decisions. Nothing more or less.


(Hitesh Patel) #234

As pikrohit mentioned, management is following the stated dividend policy. The only thing different this time is that they are trying to escape the dividend tax on dividend income above 10 lacs. I see nothing wrong in that.

About debt, for a company with market cap of 20000 crores, debt of 2000 crores odd is nothing big. And with the abilify windfall they can easily wipe out part of the debt. They are probably keeping debt bcos they want to keep cash ready for any opportune acquisition which might come about.

And about analysing the company, one needs to just look at the kind of wealth it has consistently created over past few years.

I also read dr vijay malik’s analysis and comments on the company. But I feel that kind of analysis is not the only way to analyse the company. It can be an aid in analysing a company. But one has to look at what kind of future prospects the company has in terms of growth to evaulate the company. One cant be stuck too much with debtors and receivables etc in a high quality company. One has to evaluate how much importance one can give to such parameters in view of the bigger picture for the company.


(Ankit Gupta) #235

Agree with you Hitesh Bhai. Even I went through Dr. Vijay Malik’s posts. I think it will be better to look at consolidated financials for debtors since a part of the debtors was given to its wholly owned subsidiaries. And there can be some or the other issues in analysing the working capital position as on March 31 of every year. For e.g. Kaveri always had high inventory as on March 31 of every year. In fact, I used to get excited seeing higher inventory expecting the company to do well in Q1.
Also, on the issue of free cash flow I agree with the points of Donald where he mentioned that if a company can employ its cash generated from operations into capex or for acquisition and generate returns of above 20-25%, it’s better for the shareholders in the long term. I think very few companies have asset light model as well as low/negative working capital like Symphony, Page etc. Also, I find no issues with company keeping cash on balance sheet as its scouting for acquisitions until and unless it doesn’t overpay. The debt of the company is not that high compared to its overall size, networth and market capital.
I think apart from doing this financial analysis, one should also put emphasis on understanding the company better like what led to good growth in revenues during 9MFY16, company’s growth plans and its ANDA pipeline for the future. Also, on the valuation front, one cannot just look at a company on trailing basis. Market gives more importance to how the earnings will look like in the future.


#236

: And the Elder acquisitions, we paid INR 2,000 crores, so if there is an
acquisition in the future of equal size or larger size? Would the funding we
both by debt and equity or would it be only by debt?

: Yeah, it will be a combination of debt and equity.

Already there is a debt of Rs 2000 cr ( Elder) .Though we can say Net debt Rs 800 cr, mkts will rerate this scrip unless the debt situation improves and strategy on acquisitions becomes clear. Please note that it is quoting lower than when this thread was started.

There is a big jump coming from U.S. As regard to funding of an
acquisition in future, I don’t think this sort of cash would make a
significant [Technical Difficulty]

Further debt is confirmed here for acqusition.

: So in this current fiscal year, so far we filed one and we expect to
file one more, so it will be two, I think it will be the last year where
Torrent files single digit ANDAs, from next year I hope to file at least 15
to 20, so - but this year is, I would say at the end of the flurry side of
single-digit ANDAs.

This is too optimistic. We all know the time taken, FDA issues with FDA being overhauled now there will be delays.

All the other things like 10 new products from Dahej, etc are excellent.


(Raj) #237

Interesting watch about the promoter.

Regards,
Raj


(Akshay Kumar) #238

http://economictimes.indiatimes.com/industry/healthcare/biotech/pharmaceuticals/investors-in-elder-pharmas-fixed-deposit-scheme-cry-foul/articleshow/51403382.cms


(linga) #239

This has no impact on Torrent. Torrent had only acquired some brands from Elder, not the company itself.


(Rakesh ) #240

Torrent Pharmaceuticals has successfully obtained the Establishment Inspection Report (EIR) from USFDA for its plant located at Dahej SEZ, in Gujarat


http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/9EF40563_31C1_49F4_BBC3_8B9DCB13FDC4_115656.pdf

Also, Credit Suisse upgrades Torrent Pharma on improved US & India biz… gives target of 1500.


(Rohit Ojha) #241

Torrent Pharmaceuticals Ltd has informed BSE that a meeting of the Board of Directors of the Company will be held on March 23, 2016, inter alia, to consider the proposal for raising of funds by way of:

  • Issue of Equity shares including Convertible Bonds / Debentures through Qualified Institutional Placements (QIP) and / or Depository Receipts and / or any other modes.

  • Issue of Unsecured / Secured Redeemable Non-Convertible Debentures/ Bonds by way of Private Placement.

If approved by the Board of Directors, the Postal Ballot shall be held to take Shareholder’s approval for the same.

Further, as per the provisions of the Code of Conduct to Regulate, Monitor and Report Trading by Insiders of the Company, the trading window will remain closed between March 21, 2016 to March 25, 2016.


For me, this points to loading up for an acquisition.


(Rohit Ojha) #242

Torrent Pharmaceuticals Ltd has informed BSE that the Board of Directors of the Company at its meeting held on March 23, 2016, has decided to obtain enabling approvals, from the shareholders inter alia, for issuance of following securities through postal ballot process:-

  1. Equity Shares including Convertible Bonds / Debentures through Qualified Institutional Placement (QIP) and / or Depository Receipts or any other modes for an amount not exceeding Rs. 3,000 crores: and

  2. Unsecured / Secured Redeemable Non-Convertible Debentures / Bonds by way of Private Placement for an amount not exceeding Rs. 7,500 crores, subject to the overall borrowing limits of Rs. 10,000 crores.

Company said that it was prudent to have requisite enabling approvals in place for meeting the fund requirements for its organic and inorganic growth, capex, working capital, refinancing the existing borrowings and other corporate purposes. This would help company to take quick and effective actions to capitalize on opportunities, primarily those relating to in-organic growth, as and when available.


(Sandeep Patel) #243

Torrent R&D Center is working on six Discovery projects in the areas of diabetes and its related complications, metabolic syndrome, renal disease, neuropathic pain and cardiovascular disorders. Torrent’s Discovery team has 130 trained scientists distributed between Chemistry and Biology.

Torrent pharma website illustrated decent progress on few of these Discovery projects from Jan 2010 to Jan 2013; captured in the following snapshot using http://web.archive.org/web/20100131085905/http://www.torrentpharma.com/discovery_portfolio.php. From Jan 2013 to Mar 2016 somehow the content has not changed; appears deliberate to keep it low profile and make silent progress. Let’s ask management if they can throw light on the latest status in the next qtrly result conf call. Who knows we may have one or two new molecules silently entering/approaching Phase III here - icing on the cake.


(Sandeep Patel) #244

Hyderabad-based drugmaker Gland Pharma attracts bids from Torrent Pharma and Baxter

Source: http://economictimes.indiatimes.com/industry/healthcare/biotech/pharmaceuticals/hyderabad-based-drugmaker-gland-pharma-attracts-bids-from-torrent-pharma-and-baxter/articleshow/51691940.cms

  • An enterprise valuation of $1.2b (7900cr)
  • Seems eyeing global supply constraints of injectables
  • Makes API and injectable formulations in osteoarthritis, anti-coagulants, gynaecology and ophthalmology.
  • Produces injectables, including vials, ampoules, pre-filled syringes, lyophilized vials, dry powders, infusions and ophthalmic solutions.

(Vishnu Ch) #245

http://articles.economictimes.indiatimes.com/2015-08-20/news/65667216_1_gland-pharma-ravi-penmetsa-india-life-science-fund

Much more details in 1 yr old article…

It was on the block 1 yr earlier itself, but not officially acknowledged by the firm.

KKR may exercise its right of first refusal to match the highest bid and take over the company as per its current agreement with the Gland promoters. Alternatively, it can also opt for “put”, or the right to exit, if valuations cross the expected billion dollar mark, having more than doubled the value of its 18 month old investment.

The company reported an operating profit of about Rs 369.15 crore on sales of about Rs 1,029.45 crore in the year to March 31, 2014. Analysts, however, say such premium valuations could turn out to be a potential deal breaker. “They are largely a contract manufacturer and have out-licensed most of their products,” said a Mumbai-based pharma analyst with an FII.

However, Gland may leverage on the heightened interest in the space that coincides with global supply constraints of injectables—drugs that are widely used through vials, syringes and bags, as well as pumps used to deliver them and other fluids— that has driven many recent transactions both in India and overseas, including Pfizer’s $17 billion takeover of Hospira.

Moreover, there are very few injectable businesses left in India that are independently owned after Mylan acquired Agila from Strides Arcolab for $1.6 billion in 2013. Earlier in 2009, Hospira had acquired Orchid’s injectables business for $400 million. Mylan’s takeover of Agila was reportedly valued at 24 (x) EBITDA & 8 (x) revenues. Considering paucity of assets available, strategic buyers are willing to pay sizeable premium for regulated market-approved injectable assets and multiples are far more than the traditional 12-14 (x) EBITDA multiples for regulated market solid dosages assets, argue analysts.

The recent Pfizer-Hospira deal, as per industry sources, was at 20 (x) EBITDA and 4 (x) revenue multiple. Pfizer also paid a 39% premium to the prevailing market price, which significant by global standards.

The total global injectable market is estimated at around $144 billion, with the lion’s share being with innovators. The generic injectable sector is estimated at around $16.5 billion as per various industry estimates and is avery attractive piece going forward. Hospira, before the Pfizer buyout, was the clear global leader in the generic injectable space.


Possible Risk: One needs to be aware based on the past experience, as in the case of Ranbaxy/Sun where drug recalls were a precursor to eventual warning letters/OAI’s.

Disc: I had switched from Torrent to Alembic. Felt Alembic had better visibility and certainty. Did not feel there were enough acq. candidates with decent quality profile around in the 5k-10k cr. range.


(Ankit Gupta) #246

The rationale on Glands Pharma is pretty interesting. The link

The company has had margins of more than 30% over the past many years now. According to unaudited 9MFY16 financials, the company recorded revenue of INR9.96bn (FY14: INR9.94bn) and an EBITDA margin of 38.2% (31.9%). The more interesting part is their ANDA filings. During FY14, the company had sales of Rs.1000 crore and PAT of around Rs.220 crore. The company filed 10 abbreviated new drug applications (ANDAs) in 9MFY16 and received five ANDA approvals. In all, the company has 48 ANDA approvals, 84 ANDA filings pending approval and 153 ANDAs in the pipeline. Of these, it currently has 18 ANDA filings in oncology, which is a high-margin therapeutic segment. One cursory look at USFDA website shows it has 17 - 18 ANDA filings. I think the remaining ANDA filings will be through partners.

The valuations for such company with multiple USFDA approved facility wont be that cheap. As per ET report, the promoters having 60% stake are asking USD for 1.20 Billion.

Disc: Long on Torrent Pharma


(Rajesh_R) #247

Aurobindo gets approval for Esomeprazole Magnesium Delayed-release Capsules (Nexium).

http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/4A89B9A7_56A9_4D4F_B5BB_1857635CF868_114858.pdf