Solara Active Pharma Sciences - Pure Play API

Solid results.
PAT up 95% YoY.
EBITDA up 43% YoY. EBITDA margins at 27.6%.
Revenues up 13% YoY.


3 Likes

All seems to be on nice track from business perspective. Only concern and puzzle for me is the resignation of CFO and COO at the same time. Any Red Flag?

1 Like

Mr. Subash Anand appointed as ED & CFO

His last held position
was as President & CFO at PI Industries Ltd (PIIL). Prior to
PIIL, he worked in Whirlpool, Sterlite Industries, Hindustan
Copper Ltd and Calcom in senior finance roles

One more interesting fact

One of the promoter pledged shared today PROMONZ Ventures LLP

Did some googling and come across this promoter is linked to http://tenshi.co.in/
and https://www.olenelife.com/

Source

I picked it from the secretary email id domain name.

1 Like

https://economictimes.indiatimes.com/industry/healthcare/biotech/pharmaceuticals/solara-promoter-tpg-plan-to-sell-stake-in-co/articleshow/81078592.cms

1 Like

Solara Q3FY21 Concall Summary

Investor Presentation

Growth is more from semi regulated markets (growth market is flattish )
Vizag FDA / Regulated markets inspection is pending, this may take some time due to covid impact , Vizag plant is contributing generic bulk drugs
1/3 capacity utilization and the ramping up going on
Expansion in Mysore - Intermediate and Api, investment in tech platforms
PLI - Applied
Also looking for other options in Mysore
Looking into 3-4 new Tech platforms , two POC by EO this calendar this year further next year
Capex - 180-200 Crore this year , similar Capex next year as well, this is across the sites , Vizag is SEZ so more opportunities in Vizag so more capex will be in Vizag
Growth Guidance - 40% EBIDTA (Confident of delivering this)
Good growth unregulated markets this quarter
Really done well in India, Middle east, APAC, Latin America (75+ countries) , took strong positions and we can maintain this run rate in unregulated markets
Complex products (high barrier to entry ) - no clear answer (expected) , this is achieved by complex chemistry
Cuddlore - remediation - All the details submitted to FDA (Pending FDA site visit and close the inspection)
But no impact on the going business due to this, there are no warnings issued only observations from FDA so we are quite confident
Tail winds by CRAMS and Vizag plants
Marginal Headwinds due to unregulated market are contributing where margins are less
Give some colour on CRAMS
Our business in commercialised molecules or intermediates
Gross Margins are slightly lower
This is mainly due to product mix
Capacity limitations dues to Covid shutdown
Allocated capacity for higher margin profiles (Multi product unit is a +ve )
Pricing environment is stable
Chinese supply is coming back - not impacting us in anyway, we are pretty strong in our position we are seeing situational up ticks
Demand will be strong and couple of products demand is moderated, overall we are stable, pricing also stable
Vizag is commercialised so further investment there will be expensed our in P&L
Ibuprofen - We are in in good position in the market with regards to this product and we expect 6-7% growth in the market
CRAMS - Looking for inorganic opportunities (we are actively looking for in coming months )
covid impact - we didn’t lost the opportunity (didn’t loose any sales but we were unable to meet the demand due to shutdown)
How the vizag unit plays in the whole scenario
A very positive investment
Phase 1 - Ibuprofen (unable to meet the demand due to capacity constraint this plant help us ), 3-6 months we will reach full capacity (we sold out whatever we made in the last quarter)
Phase 2 - Multi product portofoli0 - seeing huge transaction - our customers pulling us to make something specific , this will help us to make new products and profiles
We are also looking for opportunities in Mysore and other locations
fy21-22 - capex - 150 - 200 crores ( includes growth and maint. )

When is MTP (Multi product facility ) will kick in FY22

Only DMF filer from India on molecule Colchicine - management said they are receiving traction on this

Implemented cloud based platform, to share all the regulatory related info. with all the stake holders like FDA etc… across all the sites of solara, and all the departments of various sites can see these reports and see where any of these are applicable for their plants

Many of the learning’s are structured and this is learning is part of our DNA in solara

CRAMS

Our CRAMS platform is built on with key differentiates, with legacy relationships existing clients, R&D capabilities
Added 8 new customers (2 big pharma and one is already giving repeated business)
Building blocks are in place 
Strong headroom to grow 

Acquisitions

Looking for acquisitions based on signs or scales (based on tech capability )

Refer all the DMF here (Courtesy @Worldlywiseinvestors )

1 Like

This seems to have been the reason of todays’ fall. If anyone having access to this article, please summarize?

3 Likes

Somebody has already posted a link to that article in post#45.

Anyways, the summary is that as per the ‘Buzz’ from people in the know, the Promoter and TPG may exit given the huge interest in API story and stock moving up 5 times from low, this will also trigger open offer.

They have apparently already appointed an investment banker who has approached various PE funds.

The article also points toward Sequent Scientific getting sold last year to Carlyle and similar deals in the API space.

5 Likes

This is not the reason…it is related to fall in Ibuprofen API prices

1 Like

@vnktshb doesn’t Solara have long term supply contracts for Ibuprofen? I don’t think their margins are affected much with fluctuations in the prices

The long term contracts are in regulated markets. The new plant is not FDA approved. Till that happens output goes to unregulated markets where you face vagaries of price

6 Likes

Can someone please explain why there have been no tax payments?

1 Like

31st March closing price is 1394.25 , 20,000 shares allotted under ESOP on a discount of 73.17% , am I correct ?

Number of Shares : 20,0000
Total Value : 74,80,000
Per Share value : 7480000/20000 = 374

1 Like

Solara Active Pharma and Aurore Life Sciences Limited combine to create second largest Pure Play API / CRAMs company in India

4 Likes

Summary of the official disclosure

1 Like

As an investor, I feel this is a step in the right direction at least after reading the official disclosure. Can this become an overhang on the stock price in short to medium term? Can somebody elaborate on what other ratios get impacted with this merger?

With the investor presentation released today for the merger. Things become clearer and assuring that this merger will accelerate the pace of growth for Solara going forward. The details of this development makes it tough to think if Arun Kumar will still go ahead with the promoter sale and commit another SeQuent, I hope not, as it seems from this merger. He went ahead and increased his stake (to 55% from 42%) in Solara via offering Aurore and creating the 2nd biggest Pure play API entity.

Most likely there will be questions regarding the promoter sale news in the call tomorrow. Let’s hope the air is cleared for future.

Few key points I noticed.

  • Promoter stake holding in Solara will move from 42.57% to 55.15%
  • Aurore’s intermediates presence will help in supply chain de-risking by backward integration for key KSMs
  • Scale provides opportunities for supply chain efficiencies
  • ROCE for the merged entity increases by 200 basis points to cross 20%
  • Assets turn at Aurore is ~2x and that of the merged entity increases from 1.5x to ~1.7x
  • Operating leverage will drive incremental free cash generation
  • The nascent CRAMS business of Solara is ~INR 75 Cr. and benefits from significant addition of Aurore’s CRAMS revenue of ~INR 150 Cr. to reach a meaningful size.
  • Existing Aurore partnerships with innovators for high value molecules can be leveraged
  • Well balanced product pipeline / portfolio with a good mix of high volume (Amlodipine, Valacyclovir) and niche products (Nafamostat Camostat, Levothyroxine) complements Solara’s similar strategy at a different scale
  • Solara’s stated position is to significantly increase its APAC region sales with particular emphasis on Japan & Korea. ~29% of Aurore’s sales is from this focus region. Transaction will make the combination one of the largest API suppliers in the region1 with revenues in excess of INR 300 Cr.
  • Aurore complements Solara’s China focus by addition of 7 DMF submissions taking total submissions to 14
  • Solara’s leadership position in the US gets further augmented by strong filings of Aurore. Aurore has filed 20 DMFs for US market. These products are complementary to Solara’s existing filings

Investor Presentation for reference

Disc. Invested & Biased.

9 Likes

Solara pharma concall details

5 Likes

Something is really looking off on the Annual report:

Page 7 of the annual report 2109 - 20 has this graph representing revenue split by geo:

image

Whereas, segment report (page 142 has following info):

image
(I am aware, this table is representation of external customers only however that is covering ~ >90% of topline)

Same short of difference is there in 2018 -19 AR.

Genuinely, am I missing something?

Tarun

6 Likes

While we dont have historical financials for merged entity, neither do we have other details like asset/capability etc… whatever its worth, the valuation looks like:

  • EV/Revenue = (2140/545) = 3.92
  • EV/EBITDA = (2140/175) = 12.22

On the face value, looks okies for a ~30%+ EBIDTA company with 20+ DMF and small 150 Cr+ CRAMS business.

Again, at this point, I have very limited info at disposable. So, all this is preliminary and crude (and irrelevant in a way).

Thanks,
Tarun

6 Likes

Q4 & Fy21 are on expected lines. If someone is attending the 3:30 PM concall, request you to share the imp points.

5 Likes