Export house classification is merely a mechanical process basis export volume some past period. Only implies that export volume has increased than when it was a two star export house. Same is already factored in the market from declared financials.
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I had been analysing IOCLP from the past 10 days and below are my observations:
Positives:
Valuation (Most of the Valuation methodologies are in Range which is very rare as far as companies that i analysed)
Decent Fundamentals and Technically looks good.
Negatives:
Too much dependant on the prices of Ibuprofen and IBB.
Also thanks to the people who posted in this thread (learnt good insights into the Business)
Disc: I am invested in a small amount as a Portfolio Percentage.
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I want to share couple of points related to IOL Chemicals
1- First, please watch this tweeted video which contains latest brief discussion with Mr. Garg. https://twitter.com/i/status/1258684253321101313 .Please also read the notes appearing in the bottom frame while the discussion is on in the video.
2- I wouldnât like to comment on strengths and risks, because I donât believe that I am competent enough (and this is not my humility but a truth). However would like to state
Products and Management
- Company produces APIs for Ibuprofen, Metformin Hydrochloride, Lamotrigine, Fenofibrate and Clopidogrel Bi sulphate. These are used in pain management, Cholesterol control, Diabetes etc. The diseases are universal and the need for treatment and so drugs (FDs and so APIs) should remain there for long time.
- Company produces speciality chemicals - Ethyl Acetate, Iso Butyl Benzene, Acetyl Chloride and Mono Chloro acetic Acid. These are used in multiple other drugs, textile and many other industries.
- Company is exploring to add more APIs in its basket - refer video where Mr. Garg explicitly states the intent ( selecting 4-5 APIs from a basket of 55 APIs where dependence on China is high)
- Management sounds overly optimistic about growth opportunities. My observation based on multiple other companiesâ management is that over optimism hides risks. And a purposefully hidden risk often comes back to bite.
- Management is open for suggestions and is adaptive - agreeing to consider for conf call and willing to answer questions on related party transactions. More importantly transforming company completely over the past 3-4 years speaks volumes about agility and competence of management.
General Comments
1- Company has âjustâ started paying dividends.
2- Company has completely wiped out debt.
3- No pledged shares. Management owned shares have remained same despite stock price increase.
4- In the past 3-4 years the fixed assets have not increased while the revenue and profits have soared. It indicates that price increase of the products, capacity utilization and operational efficiency are driving the growth. However at some point not far in the future company would be looking for Capex.
5- Cash flow and more importantly âFree Cash Flowâ has been strong last three years. It explains the debt reduction, dividend and no Capex done in past few years.
Overall, in my humble opinion IOLCP seem to be doing things right. But the over optimism of management, high dependence on Ibuprofen and related party transactions are some of the things which I would like to carefully watch. I would also observe closely their venture with new set of APIs and chemicals.
I know very little, and my competence in analyzing stocks can be qualified as âvery poorâ at best. Please ignore if you disagree with my notes because I am almost sure that you would be right. This is not a buy or sell recommendation.
Disclosure: Invested from lower levels.
Regards,
Krishna
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----------------from zaubacorp------------
https://www.zaubacorp.com/company/TOWELS-ENTERPRISES-LIMITED/U51900PB2015PLC039435
Towels Enterprises Limited is a Public incorporated on 07 May 2015. It is classified as Non-govt company and is registered at Registrar of Companies, Chandigarh. Its authorized share capital is Rs. 30,000,000 and its paid up capital is Rs. 22,500,000. It is inolved in Other wholesale [Includes specialized wholesale not covered in any one of the previous categories and wholesale in a variety of goods without any particular specialization.]
----------------from annual-reports ----------
Related party arrangements/ transactions for purchase of goods and services, entered between the Company and Towels Enterprises Limited, related party under SEBI Listing Regulations,for an amount of ` 119.30 crore during the period 2018-19 at armâs length basis and in the ordinary course of business .â
----------------------- from zaubacorp-------
https://www.zaubacorp.com/company/VIVACHEM-INTERMEDIATES-PRIVATE-LIMITED/U24304PB2018PTC047556
Vivachem Intermediates Private Limited is a Private incorporated on 12 March 2018. It is classified as Non-govt company and is registered at Registrar of Companies, Chandigarh. Its authorized share capital is Rs. 50,000,000 and its paid up capital is Rs. 28,100,000. It is inolved in Manufacture of man-made fibers [This class includes manufacture of artificial or synthetic filament and non-filament fibers.]
---------------------from annual-reports --------------------
The value of proposed aggregate transactions with Vivachem is likely to exceed the said threshold limit, and is expected to be around 500 crores during the financial year 2019-20
âŚBe CautiousâŚ
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So Towel Enterprises is started by younger brother of IOL and it is producing chemical. What they did is very simple divided both business into two segments chemical now goes to younger brother and medicine stays with IOL. This is from a very reliable source in Ludhiana city.
Disc - Interested to invest
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1.To Reduce dependency on single product IOL has started manufacturing Pantoprazole (drug used for acidity).
2.Already producing- clopidogril (one of the commonest blood thinning drug), metformin (anti diabetic drug )and fenofibrate.
3. Developing some new API and chemicals .
API under development Gabapentin, Losartan, pregabalin, folic acid, Domperidone, ofloxacin, fexofenadine.
4. Chemicals under development ~
(i) Sorbitol has many uses -sweetener (used in- syrups, toothpaste, mints, cough syrups, diet drinks, ice creams, many other food items), laxative, thickener, other medical applications. Currently produced by Gulshan Polyols, Sukhjit Starch.
(ii) Acetonitrile mainly used as a solvent in Pharma industries ~ already manufactured by Balaji Amines and Alkyl Amines.
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Thanks @ridesai, I agree with the thoughts overall. But it does make sense to consider the disclosures in the public domain about IOLCP. Vivachem and Towels both have been discussed before and forum members have done a good job in presenting details. There will always be discussion with people trying to present their ideas and thoughts.
To more conservative investors, looking for evidence of very high-quality management in a mid-cap, large related party transactions will look like a red-flag. There can always be doubts about why business is structured like this with public entity not doing what the private parts are doing. Personally, it seems ok, you have to guess intent of promoters and it looks fine to me. This is the idea I get from reading on this forum.
Disc: Invested, largest part of portfolio.
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Mentioning about it in AR is as good as in public domain. And that is what one of the member has put the link too? right? The AR pdf file to show the proof!
On the top of that, when asked by cnbc, Mr Garg was not confused or hesitated to reply on the question on the 3rd party transaction.
. I donât know what will be the reason given , when IOL Chem will go over Rs 500-600 which will show higher P/E ?
That is why I had written in past, donât try to find reason why it is discounted low. That is wrong way of researching a stock. I have e.g. of Lupin Ion Exchange etc. Even Wockhard gave multibagger return before market realise that it is a single product dependent.
When a Co is growing , there ought to be the wall of worries. We have to take bet on it , as market worries about the concerns, it is discounted cheap. Just 2 months back, IOL Chem was available at Rs 160! Buy IOL Chem at 800-1000 level or over 1000 when all the concerns will be taken care of!
âA bargain price comes with some risk tagâ If you want 100% concern free stock to invest, then just wait for IOL Chem or for that matter any stock to go higher and pay high price.
No problem with that.! 
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I would say low pe is due to these concern s and slowly concerns are being resolved. Mr garg promised to look into investor ppt and concalls. If that happens then such concerns will be clarified and it will lead to pe expansion and thus leading to increase in share price.
So it is upto you to gauge the risk and invest in the stock.
Discl: have small position in stock.
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IOL CP Story unfolding:
Ibuprofen demand is not declining and is not stablising but surging as said by Vinati saraf. The main beneficier of Ibuprofen demand rising and cost increasing is the Worldâs largest producer - IOL Chemicals. The company supplies a third of worldâs requirement of the drug with capacity of 12000 tons. With diversifying into new products and increasing capacity the company is set to acheive a jump of 25% in revenue this year.
With increasing demand the companyâs Joint MD says that the company has an advantage of price rise but due to current scenario do not want to force anyone unduly. With countries declining inclination on chinese products, the main source of Ibuprofen is IOL CP until BASF plants restarts (2021).
Disc: Invested
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I am unable to find the commentary on CNBC by Mr Garg related to Vivachem. (as mentioned by @ridesai). Here is one which says:
âClarification
*Transactions with Vivachem are audited & done at arms lengthâ
BUT the video does not have any such content!!
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Source:Pharma API and Speciality Chemicals Manufacturer and Supplier - IOLCP
https://twitter.com/Nigel__DSouza/status/1258686574490873856
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Hi Vikas - It was me, who requested Nigel to ask 3 queries to Mr. GargâŚ1) Conference call, 2) Investor Presentation , 3) Related party transaction and he did it quite wellâŚso thanks a lot to Mr. Nigel, he did a good job for all of usâŚ
You can watch the interview here - watch closely the second half of the video, till the endâŚ
https://twitter.com/hafizul09/status/1258744574106718208
Thanks
Hafizul
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Vasudev Commercial sold approx 12% of IOL in open market.
Why would someone sell shares of growing company that too a massive block.
is something fishy here? That is why correction happened from recent highs? that is why promoter has been so aggressive recently ?
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If we look into the shareholding pattern(source: phreakeconomics) sharehold.pdf, Vasudeva sold 0.7% in 13 march 2020, 0.24% in March 19, and 1.26% in March 2017. In my opinion, it may be their necessity of liquidity for selling the stock. We found in March Quarter 2020, Foreign portfolio investors have increased their stack by 1.29%, it is a good sign. If some one is aware of the actual situation, kindly educate us.
Disc: Invested
Hi Ankit- Did you bother to read the SAST disclosure in detail? There has been demerger of Vasudev and hence the original holding has just been distributed as per the demermer scheme which approved by the NCLT. There has not been any sale after 13th March, 2020( the sale of ~1% in Feb and March(13th) do reflect already in March 2020 SHP).
As there has not been sale after 31st March, even after the stock price increased to 400, this can actually be considered as a positive.
Disc- invested
Thanks
Hafizul
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If SHP disc are seen, Vasudev held 18.3% at end of Q4, and now this demerger distribution detail shows they held 20.7%, so they did buy around 2.4% in the past 1 month, would think when the price fell in the sell-off due to corona-panic.
which five Indian companies supply metamorphin to USA ???
Hello,
Can you share the link from where you are seeing products which are under development?
Thanks!