Strides Pharma Science

Stock Opportunities
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Current Market Cap: 2164Cr

Strides recently distributed 88% of cash available with Agila sales to the shareholders. There is about $75Mn held back as growth capital. In 2014 they are expected to get back $290 Mn and additional $100 Mn will remain in tax escrow account until their business tax filing are closed in different countries.Company plan to return back these receivables to share holders.

If they are successful in getting this amount, shareholder may expect to get ~200/- per share special dividend.

Remaining payout from Agila sale :~$290 Mn - $50 Mn (tax out go) expected to be available in 2014. +$100 Mnover 4 years

Regulatory contingent of $250 million

(Related to the warning letter situation forone of the Agila facilities. - Outlook- available in full in 2H 2014)

Regulatory escrow -$40 million

(that we believe will not be usedbecause in the $150 million we have already budgeted cost of remediation but for any reasonthose costs are not contained within that estimate and the resolution takes much longer, thenthere is a possibility that the $40 million in escrow could also be used up. Outlook - available in full in 2014)

T****ax escrow)- $100 million -which will be released in four years, upon successful closure of tax filing in different countries.

Growth capital)- $75 million

Tax liability - $50 Million

Business

Management has record of successfully building and growing brands. As of now they have legacy pharma and incumbent Biotech business with them.

Pharma business /Agila Biotech

** 2011 2012 2013E**

Revenue 716 926 1000

EBITDA 152 103 200*

*** Licensing Income 83Cr**

FUTURE GROWTH AVENUES

Agila Biotech || Pharma Generics

||

Africa Business || India Brands

Pharma

  • Core Pharma will continue to register products in the US market
  • Drive growth in Africa through the launch of new products, expansion into untappedmarkets and possibly set up local manufacturing
  • Expand the business of branded drugs in India with niche branded pharmaceutical products

Biotech

  • Enhance focus on the biologic space; we have planned a state-of-the-art facility in Malaysia, backed by strong technical expertise
  • Develop an internal pipeline of biosimilars, supported by an R&D facility in Bangalore,which is capable of handling high-end research

commitment to compete hard globally and of affordable medical care and consistent innovation rages across the world, we try to align both ends of the spectrum by focusing

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2 Likes
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Reviving this thread. I see another one (not substantial by depth but a single brief), post the shasun merger.
What attracted me was this (slightly dated brokerage report) http://rakesh-jhunjhunwala.in/stock_research/wp-content/uploads/Strides_Arcolabs-Initiating_Coverage-16-December-2014.pdf
I took my time to act on it and finally made the first move now. What are the triggers that look good to me?

  1. Aspen Australia business acquisition a few days ago. The generics business here is high margin one (30 plus%) and the muddled thinking when earlier sale of Agila had created some doubts in me
  2. Japan, with its ageing population is ripe for another acquisition sometime later. Lupin has found this market tough to grow exponentially and hence I like the inorganic route aimed by Strides
  3. Finally, I feel that the Shasun merger and effective usage is yet to play out

I have only done a preliminary look up and have not done the detailed study ( I am humbled, after seeing the depth in threads like Ambika cotton and feel that I have an infinitely long journey ahead) and that is where I am counting on the veterans to weed out the cheese from the chalk.

Views invited
Disc - Got in a tracking position. This is not a reco. Please do your own research and due diligence

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There is no doubting capability of the promoter in creating long term value for the stakeholders. This whole group is too M&A intensive. They create value but largely through buying and selling businesses. I do not know if this is right for a long term investor.

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Strides Arcolab Limited and Shasun merger conf

Strides Arcolab Limited AnalystMeet 25 May 2015 - Aspen’ generic business Acquisition

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He may fail or succeed but as long as impact of it is manageable and rewards comparable to other opportunities, as long as they are not over leveraging it should be fine.

Looking at Investor meet videos of last two corporate action, It reflect to me that Arun …

  • value partnership
  • value professionalism
  • have good relationship with partners
  • can have both sort and long term view together
  • not overly ambitious
  • committed to shareholder value.

< invested since last year Jan-March>

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Lot of Analysts are estimating 40+% EPS growth for Strides namely Nirmal Bang, IIFL and Macguire.
The Aspen M&A deal needs to be watch out and see if all triggers work as predicted and company had a good record in past

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Stelis Biopharma (unit of Strides) plans to out-license two biosimilar molecules in next 18 months

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Don’t know why the FIPB approval got rejected. Anybody having any idea? Many other approvals were dependent on FIPB approval. I always thought these are just formalities for a sector like pharma. The merger would get delayed further. Stock could be soft in the near term which could be an opportunity.

http://economictimes.indiatimes.com/industry/healthcare/biotech/pharmaceuticals/government-approves-fdi-worth-rs-4000-crore-by-four-pharma-firms/articleshow/47707261.cms

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The issue of new shares by Strides to overseas investors of Shasun has been rejected it seems. This might be due to the high FII stake in Stides.

As per their BSE filing today morning, the company is still awaiting a formal order. Let us wait for their clarification.

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tie up with australian firm seems impressive

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Strides Arcolab said it has been informed by the FIPB that the company’s application has not been okayed on the grounds that the Scheme of Amalgamation is yet to be approved by the competent High Courts in India.

Read more at:
http://economictimes.indiatimes.com/articleshow/47734429.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

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This is a strange reason. I am sure FIPB follows a protocol and the FIPB application would ask for all the details.

Lets see how the whole merger progresses

Gaurav

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FIIs can now buy more shares after RBI removing restriction

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A Dated but interesting video on Arun Kumar the founder

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http://www.bseindia.com/bseplus/AnnualReport/532531/5325310315.pdf

a fantastic AR

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Strides Acrolab - AR summary.pdf (808.1 KB)

My summary of Strides Acrolab AR.

Disc: Stride acrolabs in my 4th largest holding in my pf.

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Isn’t it somewhat expensive? My rough estimates suggest that after merger with Shasun, the entity will be trading at >4 times revenues and at trailing p/e of arnd 55.

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@vicky_7900 could you let us know your calculations and are you including Australian biz as well. This is being marketed by some pharma analysts as one of the cheapest pharma stock on FY17 basis.

Disc: recently added in my portfolio.

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^
Sumit, did not include Australian biz. (which is a mistake on my part).
Just used TTM figures of Shasun and Strides. Market Cap = 7800Cr+2500Cr(for shasun)
revenue= 1200cr +1300cr
PAT = 155cr+41cr.

These are a just trailing numbers, do not estimate for the future growth or benefits that synergy the merger will create.

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Mgmt. has said that Aspen acquisition is EPS accretive from day 1 while you need to keep in mind that Strides and Shasun both are at inflection point. Shasun will keep moving up the value chain while Strides will likely fire on all cylinders. Even without that on your calculation it is trading at 4x sales which is a reasonable valuation in pharma universe.

Disc: Holding Strides