I am new to this blog but an old investor in this stock.
If one looks at result in detail, the effect on net profit is due to tax, operatingperformancehas been along the expected line I feel.
The management had clarified no litigation/ liability on the tax front as posted by senior Donald on November 21, 2012 .So one time expense of 15 crore isn’t consistent with management guidance
Can some senior throw a light on this discrepancy ?
Regards
(Disc: Ajanta pharma is my major holding)
Is Ajanta now in the land of the trailing stop loss?
A lot of folks at valuepickr seems to have a good amount of price anchoring bias. If we do simple math, we can have a feel where the market cap of Ajanta is heading in 1-2 yr time frame.
Assuming 0 growth scenario, so next 4 qtr will have similar sale as of Mar13 qtr, and removing one time tax of 15cr, per qtr earning coming around 42cr, So 1yr it will be around168. So let me take a range of 170-180. And as we know Ajanta operates in a secular pharma industry where trailing pe of ~17 should be easily achievable considering the fact that FY15 expansion will be in the offing by then. So 1-1.5yr down the line the expected Mcap for Ajanta is 2890-3060. This implies an upside of 50-60% in 12-18 month period.
There is one added benefits for guys like me who have bought ajanta in less than 1yr time frame, and hence are sitting in 50-100% profit. So a flat 15% short-term tax loss when we sold it. By not selling it I am saving the 8-15% gain, and compounding over it. Seems nice to me.
Disc: I have been adding ajanta in monthly sip way for last 5-6 months and planning to do the same in coming future. Ajanta is my top holding as of now.
And did I forget to tell you that promoters are pledging part of their share to raise money to buy the stock from open market at this supposedly very high valuation 
. See MC message board for the same.
Something has to be missing in our analysis.
Subash,
Hats off to your conviction. I remember advising you against buying Ajanta on TED 1-1.5 years back as I felt price was very high.
Ajanta Pharma crosses 900! Amazing run this has been
Hi nani0507,
One gem of advice to remember, price are never ever high or low. It is the valuation which tends to go up and down.
The second thing I learned from “Common stock, and uncommon profit” is that one shouldn’t sell a growth stock because it has moved to overvaluation zone temporarily, it pays well to get latched with it.
Sometime I feel alien in the world of quick profit booking, and buying at lower price. But because of my low conviction on my ability to execute the same with decent accuracy, I tend to follow accumulate, and grow strategy.
Regards,
-Subash
couldn’t agree more subash. this stock has been an amazing wealth creater over any time period and if technicals are anything to go by, it would be for next several years as well. i have been buying on every dip and enjoying the ride. i do believe though that to scale to the bigger league like lupin etc, it would have to move more and more to branded formulations and drugs with limited competition which have huge scale of oppurtunities.
It pays handsomely to remain with the trend.
Not sure why promoters are buying at such high prices and creating pledge simultaneously
http://www.moneycontrol.com/livefeed_pdf/May2013/Ajanta_Pharma_Ltd_060513_SAST.pdf
Hi,
Guessing here, but thinking from a promoters perspective, he borrows money @ say 14% to purchase shares. His assumption would be that these shares or the businesswould yield him atleast 14%+ FD rate ~ 23-24%.
Also, since these loans are being taken by a company they can show interest paid as expense and reduce their tax outflow, thus reducing the borrowing rate.
regards,
Even though promoters are buying, why such low levels of delivery? <5%
Highest amount of buying in the past months has been around 4000 shares.So we cannot relate promoters buying with the delivery percentage
Quoting a beautiful fragment from Ken Fisher “The Only 3 Questions that Count” which shows fallacy of selling 50% of portfolio because it has gone up very fast. A nice depiction on how a combination of pride-regret misbalance, gain-loss inconstancy, loss avoidance and short term view create a lollapaloza effect and make a sucker of us.
If the hunters didnât accumulate pride and shun regret, they would have become despondent over failure. They would have given up hunting giant beasts as a foolâs errand. Their brains had to function this way to forage enough food to pass their genes. It is a motivational tool. If a hunter became beset by regret and ultimately depressed, those benefiting from his future po-tentially lucky hunting would have starved and died, and that isnât such a good way to perpetuate the species. Accumulating pride and shunning regret were basic to our ancestorsâ survival. That was necessary then, and we still do itâ motivating ourselves to keep trying.
But in modern times, these behaviors cause investing mistakes. Suppose Bill owns a stock that rises 40 percent. Bill was smart to have chosen such a stock. He is a savvy stock picker, and he believes he can do it againâhe accu-mulates pride.
Then his stock drops 10 percent. He feels the loss about two and a half times as much as the gain, and disregards the fact that overall he is still up 26 percent. The sudden drop causes pain he wants to avoid, so he shuns regret. He believes he was just unlucky on this 10 percent drop because previous pride accumulation convinces him he can and will succeed overall. He con-siders selling while he can. He concludes the stock will fall further and loses sight of his long-term goals, focusing only on the short-term and acts to min-imize potential short-term pain. He sells the stock and protects his ego for an-other day of hunting. But the stock bounces back and goes to new highs. He chooses to ignore that because acknowledging it would cause too much pain and ignoring it shuns regret nicely.
Regret causes Bill to avoid pain by taking actionâselling at a temporary relative low point. Pride prevents him from analyzing his behavior accurately so he is doomed to repeat this vicious cycle. Loss aversion causes investors to buy high and sell lowâwhich is a pretty stupid strategy.
The previous comment was for depicting the fallacy of advantage of selling 50% of ajanta after recent run-up in share price.
Disclaimer: I have no knowledge of Ajanta Pharma and infact do not understand pharma sector at all. Just trying to highlight few of my concerns, which might be just my illusion…
My analysis of combined delivery volume on BSE and NSE, together with the quality/reputation of large shareholders suggest that there is need to do additional analysis on this stock. I suspect there might be some scheme going on PUMP THE SHARE PRICE. Below are some of my observations:
Delivery volume [combined volumes of BSE and NSE] over the last one year has increased from its low to 20% in June 12 to its peak of 60% in early 2013 [monthly moving average]. But since early 2013 it has suddenly declined from 60% to less than 20% [MMA] and on occasion fallen below 6% that too on very high volumes.
Quality of large investors seems to be questionable or in other words who is buying over the last one year. Share price has increased by more than 3x in the last one year. FIIs holding has increased only by 0.3%, Bodies corporate holding more or less flat at around 10% since June-12 and large individual shareholders [nominal capital more than 1 lakh] has steeply declined both in % terms and in absolute numbers. Large individual holding has declined from 8.9% [with 27 Shs] in Mar-12 to 4.2% [with only 12 Shs] by Mar-13. Shareholders who are holding more than 1%, I could recognise only Anand Rathi and Goldman which together hold less than 3% stake out of 11% which is held by SHs with more than 1% stake.
Please do your own due diligence, quite possible that my analysis is TOTALLY WRONG and share price continue to increase. But its always better to be question possibility of PUMP AND DUMP schemeâ…Just question who is the buyer of shares. Generally, though not necessary such steep rally is mostly driven by steep increase in FIIs and MFs or some other HNIs. Here that does not seem to be the caseâ.
Delivery-vol.xlsx (30.5 KB)
Hi Anil,
Let me agree for the time being to your fact that quality of large shareholder is low, and delivery %age is too low, and hence there might be some scheme going on to increase the share price. If it is so then promoters who will be privy to all information pertaining to ajanta in maximum details shall sell their share, pledge it, or at least not make new purchase at cmp. That I guess is a fair assumption to make.
Now look this 2 links
One of the promoter increased his stake from 9.06% to 9.24% at its peak. It tells me possibility of 2 things, a> either the promoter has gone absolutely mad, or b> he is privy to some information that we are not. To add to it, promoters are pledging (a small %age) to raise fund to acquire more of ajanta pharma.
If you see Ajanta shareholding pattern, 75% is with promoter, 10% is with institutional, and bodies corporate. That leave 15% (300cr odd) floating share holding for public. So the room is too small to accommodate big guys.
To add to the conspiracy theory…
They want to raise fund, pledging shares might be mandatory for them to raise funds from banks. Higher share price will allow them to raise fund more efficiently with lesser pledging. Buying shares by promoter and operator activity will ensure prices go through the roof…
Time will tell weather the low % delivery was actually gaming or real.But as far as investors are concerned just enjoy the ride as long as you can.
Fundamentally one thing I did not like about the fourth quarter results was that the tax rate was so abnormally high. In answer to donald’s queries there was a categorical answer that there would be no retrospective tax payment and still it looks like fourth quarter shows tax payment to the tune of higher than 50% of pbt.
Any clarifications by the management what kind of tax rates the company will face in next few quarters?
Regarding conspiracy theory etc, I think one has to enjoy the ride and dance to the music till it lasts. Stock seems to be in a very strong bull run and doesnt show any sign of weakening.
Valuationwise, ajanta has higher market cap as compared to unichem inspite of both of them having almost same consolidated net profit figures and same cons sales figures. market cap of ajanta is 2160 crores versus unichem’s 1660 crores. Not so long ago, ajanta was quoting at around 5-6 PE and unichem used to command PE of around 15-17.
I prefer unichem bcos of the comparitively strong presence in US markets, excellent cash surplus balance sheet and the company having finished a major expansion spree which should help it in its next phase of growth. Plus the funds expected from mylan should also strenghthen an already strong balance sheet.
We should not give much significance to promoters buying in small qty. I feel anything less than 1 % is not significant.
