I still have my reservations about management quality. In this very forum, we saw someone raising the comp issue of promoter plus execution skills of these 2 managements are different. That said, we have to start somewhere…even, if it does not become a Lupin later…but half as good…enough for me
I have a few questions…
1.Did Lupin start and grow as an API, PFI player ?
2. What were the trigger that made Lupin a Gulliver ?
3. Is it also involved in R & D or is it strictly CRAMS oriented ?
Friends, i have been heavily in learning mode about pharma sector.
Any good links, sources to understand INDIAN PHARMA shall be highly helpful.
Bro you are comparing apples and oranges here
A branded generic player (Lupin) which had presence in US, Japan and other developed markets vs an API,PFI player who has just started to move into formulations.
The business model is totally different with Granules being a negative FCF player as it builds capacity as per demand because of which its growth is not as stable as was Lupin’s 10 years ago
Lastly the most important factor needed for sustainable growth is management quality and 2 years of performance is way too short time to judge managements quality.Next 2-3 years should give us the real picture.
Disclaimer : Holding from much lower layers
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Thanks for the heads up bro.
You guys are pouring information left & right.
Yes, you are right…2 years of time is a quite less time.
But, in the AR they have mentioned that their aim was to earn revenues of 65% from FDs. We actually have good chance of creating wealth, if their actions & words catch up.
5000 crore revenues by 2017…sounds like TOO AMBITIOUS…( I did read that figure somewhere )
(…Actually, I am not able to learn any info regarding the Companies and their track record as I currently serve in a village in Gujarat & don’t have access to computer too…)
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5000 cr is long term target by 2020
Intermediate target is 2000 cr (by 2017) which management gave last year and said it will take them about 3 years to double revenue from 1000 cr.
They had given a similar target(of achieving 1000 cr turnover in 3 years) in 2011 which they achieved in 2014
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Kiran,
You can read Moti Lal Oswal report on Pharma.
Can you please give a direct link ?
I have a report which was published in 2010-2011. Not so helpful now.
I am brooding over Suven and Granules. Seeing the product portfolio, I am finding Suven attractive and also the promoter holding and activity give me more confidence…Its on MOst 100x list I think
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I btw. mean no less respect to the Granules story. It however is now too common after the Basant Maheswari interview.
Bro Suven is a completely different play than Granules. Suven is into the exciting yet very risky drug molecules discovery business where the returns are very high but at current valuations the risk is even higher. Even in the space of drug/molecule discovery it has chosen the most difficult that is CNS division. Financial number wise Suven may look better but please try to understand their business better.Although I am not very conformable with the Granules ever increasing requirement of capex and hence very low Free cash flow I would anyday prefer a boring but less riskier business than the fancier one
P.S My views will be biased as I was a investor in Suven from much lower levels and had exited few months back and posted the reasons in the Suven thread
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Thanks for providing a lot of detail in this thread . I have started Investing in this Stock as well/ Couple of weeks ago BM , has given a detailed interview on this stock …
looking at the kind of research capabilities and after visiting the plant of suven here in Hyd. I feel they are better in the kind of things they are doing compared with peers in Aus. NZ and even Europe. I think SPARC is the only near peer in nature of biz. but not the substance these guys make. I think Suven if it can break out with some good inventions and R&D can be 4 digit stock. btw. I am not looking at past performance after the new employees came in.
Granules was a great buy if I could have got in before the split and take over of Vizag plant, now as I sid, too open and fairly priced.
Granules has informed BSE that a meeting of the Board of Directors of the Company will be held on June 20, 2015, inter alia, to consider the issue of warrants on preferential basis to promoters of the Company.
Is there any specific reason for Mutual funds not investing in granules. As far as I see is it because Debt To Equity(1.15) is high for granules or any other reason.
Granules India
Granules India manufactures Paracetamol, metformin, Ibuprofen, Guaifenesin,methocarbamol.
Dominant share in first line of defense molecules
Paracetamol (in TPA)
Market Demand Supply Supply Gap
Regulated Mkts 46,500 44,200 2,300
ROW Mkts 53,500 97,000 (43,500)
Ibuprofen Suppliers (TPA)
Shasun 6,000 20%
IOL Chemicals 6,000 20%
Albemarle 5,200 17%
BASF 5,000 17%
Granules Biocause 4,800 16%
Metformin Suppliers (TPA)
Granules 1,800 5%
USV Ltd 10,100 28%
Wanbury 9,000 25%
Harman 6,000 17%
Methocarbamol Suppliers (TPA)
Granules 200 20%
Synthochem 250 25
Guaifenesin Suppliers (TPA)
Granules 1,200 26%
Synthochem 800 17%
After acquisition of Auctus pharma they have molecules like
Product Val - $bn Vol – MT
Valsartan 8.7 1,054
Clopidogrel 5.2 572
Pregabalin 4.8 342
Olmesartan 4.5 97
Pantoprazole 3.4 338
Losartan 3.2 662
Telmisartan 3.1 259
Cetrizine 1 58
Fluconazole 1 87
Rifaximin 0.8 85
Levocetrizine 0.6 15
Doxylamine 0.6 40
Total 36.9
Granules India is involved in the manufacturing of the common molecules which are used in the first line of defence and after acquisition of Auctus pharma Granules India will get the footprint in other segments like hypertensive,antihistamine,antithrombotic segments which is life style diseases and which will keep on growing at massive rate all over the world.
Now Granules India has very concentrated portfolio of drugs and moreover the molecules which are ages old and still used as first line of defence and other life style related diseases which has to be used in combination of other advanced drugs ( you will always find metformin with all the lastest antidiabetic drugs, which is unavoidable )
Another important all this drugs are OTC and have very large dosages ( eg paracetamol 650mg, twice a day and metformin dose is 800mg minimum ). Thus it has a large consumption in world.
This drugs are very cheap and no frontline companies which has major business from formulation can afford to make ( require huge capacity to manufacture for backward intergration and not economically viable to engage capacities in such products )
But COMBIFLAM,CROCIN,SOFRAMYCIN,BENGAY etc are huge brands for the innovators like MERCK,NOVARTIS,PFIZER etc which they can’t lose ( its like a tangible assest to them, and also they afford to manufacture owing to requirement and scale involoved in manufacturing )
Here comes in picture GRANULES INDIA which has developed huge scale to manufacture this drugs in huge scale ( given in first table ) It has the largest batch size of 6 MTA which is largest in the world for any pharma company ( just imagine ). Even if some company has to produce 6MT and has batch size of 1 ton ( it in itself is very large ) has to take 6 batches. Now to take 6 batches another company has to have various equipments like reactors,dryers etc. After every batch solvents to clean the vessel, analysis and most important time which increases the TRT. This company manufactures in single batch ( imagine the saving he is doing in solvents, analysis and time )
GRANULES INDIA has also done unique thing in supplying this products to his large clients with special designed bags of 500kgs, which on reaching clients sites can be directly poured into the vessel for further upstream process.
SAME WITH PFI’S, here the formulator customer don’t have to invest heavy on the backward intergration and can directly use PFI’s in compresser and just do tableting and packaging and sell to markets for selling.
Now GRANULES INDIA is gradually moving to FD’s and moving up in the value chain.
They have installed capacity of 18MTA FOR API’s, 12MTA for PFI’s and 6MTA FOR FD’s. Now with current expansion and capex it will have all with 18MT capacity.
JV with Aginomoto for CRAMS will further add to value.
I think the demand for this products is never going to die and first line companies will never enter in this segment and the established players will enjoy the market and with concentrated portfolio,automation and process improvement will improve the process and efficiency.
This the classical example of ‘ ECONOMICS OF SCALE ‘ AND ‘LOW COST EFFICIENCIES MOAT’
After current completion of capex which according to mgmt. is FY18 will trigger the sales and profit. Also company has all the regulatories approval from various FDA and companies of developed world ( because they can’t afford to manufacture this products in their countries ). They have B2B business ( regulatory risk is very less as it has very minimum products ) and now gradually entering B2C business ( better realisation in profits )
More ideas invited from seniors members @ Mr Donald, Mr Hitesh and Mr Ayush ( please give your comments )
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Suven life sciences is a better bet on innovation compared to SPARC. SPARC has never disclosed on which molecules they are working and in what stage.Also SPARC is engaged in drug discovery since last 17 years but no hint on any successful NCE.
Moreover Mr Jasti is very honest man and he is writing of the expensed on drug discovering instead of capitilizing the expenses.
I personally think Suven life sciences has developed a very unique position in india for CRAMS and drug discovery services and own drug discovery programme and chosen a very unique segment of research ( CNS )
Recent QIP of 200 crores for SUVEN 502 shows his confidence in molecule. If it clears phase IIa with good efficacy I think they easily fetch ( 300 - 500 million ) dollars.
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