Panchsheel Organics Ltd

Stock Opportunities Not-so-Hidden Gems
1

Hello Investors,

I am creating this post since could not able to find a dedicated thread on Panchsheel Organics Ltd. (POL).

Industry Overview

• Panchsheel Organic Ltd. operates in the pharmaceutical industry.
• The current market size of this industry is ₹ 543 lakh Cr. (US$ 65 billion). India’s
pharmaceuticals industry is expected to reach US$ 130 billion by 2030, and US$
450 billion by 2047.
• During FY18 to FY23, the Indian pharmaceutical industry logged a compound
annual growth rate (CAGR) of 6-8%.
• Major competitors of POL are Hikal, Aarti Drugs, Gujarat Themis Biosyn, etc.

Company Overview

• Panchsheel Organics Ltd is a manufacturer of Bulk Drugs and Intermediate.
• Panchsheel an ISO CERTIFIED, GMP (Good Manufacturing Practices) approved, maintaining WHO Standards, a public listed company (listed on BSE) are manufacturer and exporter of Active Pharma Ingredients (APIs), Intermediates & Finished Formulations (both Human & Veterinary) having a wide experience of more than three decades in the healthcare field.
• The company has its corporate office in Mumbai and has two multipurpose manufacturing unit is situated in Indore (120 TPA to manufacture APIs) and Pithampur.

Products Categories

• Bulk Drugs & API Intermediates
• Steroids & Hormones
• Pharma Pellets of all ranges with different potencies.
• Pharma Formulations (Finished Products).
• Veterinary Products
• Agri Biotech products. (Bio Fertilizers, Bio Stimulants, Growth Promoters)
• Probiotics & Enzymes

Capex Plans

Phase 1:

  • This capex plan is comprised of ₹ 40 Cr. at Pithampur, Indore (MP) for Probiotics & Enzymes.
  • Capacity of 36-40 TPA.
  • The funds were sourced through a mix of preferential allotment and warrants in September 2022 and the remaining done through Internal Accruals.
  • Revenue potential is around ₹40-50 cr. once the full capacity is available in FY25.

Phase 2:

  • This capex plan is comprised of an initial investment of ₹50-70 Cr. at DMIC Vikram Udyogpuri Biotech Park Near Indore (MP) for fermentation-based and API-based pharmaceuticals.
  • Capacity for fermentation-based pharmaceuticals is around 36-40 TPA and for API-based pharmaceuticals is around 120 TPA.
  • The funds were sourced through a mix of preferential allotment and warrants, Internal Accruals, and Debt/Equity (if needed).
  • Revenue potential for fermentation is around 40-50 Cr. and up to 100-120 for API.

Corporate Actions

• The company has issued and allotted 17,75,950 Equity Shares on a preferential basis in September 2022.
• The company has also undertaken the bonus issue of shares in a 1:1 ratio in December 2021.
• The company is very regular in dividend payments with an average of 12-15% over the last 10 years.

SWOT Analysis

Strength:
• Very low debt (6 Cr. 3.7% of Balance Sheet).
• Constant growth in revenue and net profit.
• The pharma industry is expected to reach 130 billion US$ by 2030 which is currently at 65 billion US$ (More potential for revenue and profit).
• Rise in Cash Flow from Operation activity.
• Zero promoter pledge.

Weakness:
• Decrease in RoE (17% to 13%) this year.
• Decreases in RoCE (27% to 17%) this year.
• Dependency of products on the availability of raw materials.

Opportunity:
• Upcoming Capex plans help to generate more revenue and net profit.
• The Company has a wide range of pharmaceutical products in its portfolio.
• Export market opportunities.

Threat:
• Continues decrease in promoter holding.
• Rise in the cost of raw materials.

Key Clientele

• Swiss Granier Life Science
• Abbott
• Madras Pharma
• Akums
• Zydus
• Hetero Healthcare
• Ajanta Pharma Limited
• MacLeod’s Pharmaceutical Ltd.
• Aristo Pharmaceutical Pvt Ltd.
• Intas Pharmaceutical Pvt Ltd.

Key Financials

• Market Cap - 331 Cr
• Current Price - ₹ 281
• High / Low - ₹ 288 / 160
• Stock P/E - 23.4
• Book Value - ₹ 106
• ROE - 13.1 %
• ROCE - 17.4 %
• Price to book value - 2.64
• D/E – 0.05
• EPS – 11.98
• Promoter Holding – 56.12%
• Sales – 105 Cr.
• PAT – 14 Cr.
• Balance Sheet – 159 Cr.
• Borrowings – 6 Cr.
• Working Capital – 79 Cr.

Incorporating the key financials of the Panchesheel Organics Ltd.

  1. Profit & Loss
  2. Balance Sheet
  3. Cash Flow Statement

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Disclosure: I am invested in Panchsheel Organics Ltd. and this is not an investing advice. Please do your own due diligence before investing.

5 Likes
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Hi, Thanks for the information.
Can you share source of this information?

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This research thesis has been developed by me, primarily utilizing the company’s Annual Reports, Investor Presentations, and data from Screener. Additionally, I have engaged directly with the Investor Relations department, as the company does not conduct any concalls.

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Panchsheel Organics Ltd. has several strengths, including its low debt, diverse product portfolio, strong financials, and promising growth prospects within the expanding pharmaceutical industry. Its strategic capex plans, low promoter pledge, and solid client base add to its attractiveness as an investment. However, investors should also consider the risks, such as decreasing RoE and RoCE, and the impact of rising raw material costs. Low PE, indicating growth opportunity. Overall, POL appears to be a company with solid fundamentals and growth potential, but further detailed analysis and due diligence are recommended before making investment decisions.

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POL promoters, the Turakhia brothers are immensely experienced and well reputed. This capex in fermentation API by 300 CR market cap company is no mean feat. This company is bound to be rerated fabulously much before the ongoing capex which has lowered it’s return ratios, will start yielding fruits.

It also has quite a decent OTC portfolio for e-commerce… protein supplements and all. It’s a story worth tracking in microcap pharma space.

3 Likes