Thanks!
(esp. for the well researched Granules thread!)
Pharma wind has just started blowing! I keep asking myself why do I not buy DRL, Cipla, Aurobindo etc.? Do I know what I am doing? Well, maybe there is a plan!
API (‘bulk drugs’) are like auto-parts manufacturers (bosch, motherson sumi, SKF bearings, asahi, banco) catering to several auto brands, which may face tough competition and have lower profitability than the parts makers. Maruti will not buy parts from Toyota but both will buy from essentially the same parts makers.
Laurus guy says no (positive) impact from covid/china+1/PLI (policy of Indian govt.) to current performance and that it will take 1-2 years for this to start showing. Like I explained before I do not buy pharma in bulk, but I do buy bulk pharma! Picked only the cheapest and strongest upside bets. Starting with your well researched contribution and tons of help from other VPers!
Bulk drugs players are dominant because they offer the best value in the market, having developed the best efficiencies in their offerings. This is sufficient moat for such a product.
I have conviction, Arman is different kind of MFI, I might have been better off with AU which I sold off. But, now not much help is expected from switching due to the deep correction. Financials will recover and get back to the usual business, Arman with dairy/rural focus may recover sooner.
This is my list for next 2-3 years, barring some better bets of course. Yes, risk-reward ratio is on higher side (due to the sectoral concentration, 58% is pharma*), I might tone it down after some gains.
Appreciate detailed explanation… affirms rigorous ground work behind each rupee invested
Thanks for your words on granules… good to know that my effort helps the community. Its all collective effort where we help each other & grow together.
PF update:
No trades since past post (3 weeks ago)
Company name
Last price
Share cost
% of Total
Return %
Laurus Labs Ltd.
1141
845
22.0
35
Aarti Drugs Ltd.
3134
1651
12.4
90
Kilpest India Ltd.
435
325
8.2
34
Solara Active Pharma Sciences Ltd.
981
702
8.0
40
IOL Chemicals & Pharmaceuticals Ltd.
817
283
7.6
189
Diamines & Chemicals Ltd.
491
233
6.8
111
Granules India Ltd.
315
154
6.7
104
Suven Pharmaceutical Ltd.
678
492
5.6
38
HLE Glascoat Ltd.
1369
835
5.5
64
Arman Financial Services Ltd.
489
854
5.3
-43
Black Rose Industries Ltd.
141
144
3.6
-2
Kanchi Karpooram Ltd.
425
262
2.8
62
Gujarat Themis Biosyn Ltd.
180
180
2.2
0
Jain Irrigation Systems Ltd.
13
16
1.7
-21
SREI Infrastructure Finance Ltd.
8
15
1.6
-49
The figures in ‘% of Total’ column are based on current value.
65% up since end Jan 2020.
Break-even achieved from the carnage since after 2017, overall PF life is little less than 3 years.
Actually the losses only started after August 2018, ILnFS and 4% (best manipulated) growth rate etc., bottom was reached in Oct 2019. (capital infusion helped, about 35% of original PF value was added after that low point)
After 1st year had consolidated the PF mostly in infra, metals+minerals, NBFC stocks, just a month before ILnFS happened, and did not do any transactions for a year after that, was left with just 50% of original PF in Oct 2019.
Good to see your overall portfolio growing well in a competent market . . I have a long way to go to cover my losses which has given me a good scar since 2016 . .
Have you consider any thought going ahead for the correction?
Would love to hear your patterns for move ahead . .
Thanks!
Yes, froth in the markets, but where will the money go with negative interest rates? Just look at the gold bubble!
At least with shares we have real businesses with the underlying assets yielding REAL returns and not just commodity value of gold (purely safe haven, almost no practical use).
The whole market should get re-rated, just wait till the vaccines make a block-buster entry by end-year/early-next-year.
In one interaction, I think Mr Das was even encouraging businesses to be more cheerful, by looking at the optimism in the share markets.
Anyway, my PF is 80% or little more just Pharma, economic performance really does not matter much here, it will perhaps do better if the rest of the industries tank!
UPDATE:
Booked half of Aarti Drugs and moved it to Pokarna.
Reasoning:
Aarti rose too fast, it is bound to be side-ways for a while, Pokarna can have another bad (worst) quarter but seems it can grow well in the coming year(s) on back of favorable US customs ruling and capacity added. My pharma bet was getting too much as % of overall PF.
I guess bonus offers a good trading opportunity (book part short term loss), but fundamentally almost nothing.
UPDATE:
Divested Aarti Drugs fully and added to Pokarna, Gujarat Themis.
Bought Shivalik Rasayan, about 5% of PF.
Reasoning:
Their expansion of mostly oncology APIs is going live likely by end of year, with supplies to Africa mainly fully tied up. Seems a decent quality management. Bottomline should expand 3x-4x with the better margins if USFDA etc. can happen.
UPDATE:
Sorry, moved out of Shivalik, added more to Pokarna and Gujarat Themis.
Bought Balaji Amines, ~4% of PF.
Reasoning:
Shivalik looks priced to perfection, I am not a patient investor, it can take more than a year to unlock value.
Balaji has a ready runway ahead of it, with ADDs piling up in its favor just as additional capacity for Pharm, agrochem etc. kicks in and general industrial demand comes back online.
Hi… Can you please share your investment thesis behind investing in Arman financial as there are many quality NBFC available at attractive valuation & Arman promoter holding is little bit concerning. Whats your conviction level behind betting on Arman? Thanks
Arman was because of rapid growth, relative cheapness (P/E, P/B), which you can see on screener.
The thread on it has good research, with a high stakeholder Debashish, contributing scuttlebutt.
It was resilient to DeMo, and high concentration on dairy seemed like a good returns and highly secure lending business. PE investment was also a confidence giver.
Being part of micro finance company operating in rural livestock financing , I am closely watching the working of Arman finance since last 3 years.
I had some position in arman and relyig on the same thesis which mr.sinha mentioned,…
If u buy one cow at rs.20to30k today morning.
It could give u rs.150 milk on same day evening none of the business can produce such ROI.
Armans business model rely on livestocks. So eventually it owns 500cr worth cows indirectly.
So according to my understanding it was indias most unique micro finance co.
I met some borrowers at ground level they told me they will never cheat arman because of joint liability as well as because of their grid to get another loan from arman.
Arman gives 30000 loan and customer has to pay 2150 installment for next 20months.
If one is unable to pay than other members in the group can help. Thats how there is win win situation for both lender and borrowers . @DEBASHISH have done tremendous research on arman that also helped me a lot.
During the lockdown my conviction for Arman finance have become stronger.
Correct me if i am wrong anywhere…@vikas_sinha
Are u still holding the same quantity.?
Thanks for the insight! Yes, no change, holding is intact for the past year, this is a long term compounder quality play. I could have diversified and did hold Ujjivan, MAS, AU (biggest), Bandhan (longest) etc. but decided to concentrate because am only part-time investor.
Sorry yet again! Switched from Balaji Amines to Spandana.
Reasoning:
Balaji looks right-priced, upside is limited after the good ramp up till around the 1000 mark. It will likely consolidate here and there are no triggers till next year for more re-rating. Their typical execution is shaky after all.
Spandana coz I like MFI biz model, this is one good aggressive lender, with much improved metrics after surviving AP clampdown and DeMo crisis. Rural focus of 91% and dairy 57% of lending PF, even better than Arman, and it is in the top 2-3 of the industry by size. It will take time but this might qualify for longish term holding.
Since last 1 month I am planning to switch some of my position in Arman financial to spandana spoorthy, because I have large part of my PF invested in Arman.
It will be very helpful if you can share your rational in detail for spandana sphoorty.
Credit access gramin is also my another option but It moved too fast so I am not able to catch it.
Why not credit access then spandana sphoorty?
I could have added to Arman, it had consolidated around the sub 500 mark for very long. But there was the same risk of concentration.
Spandana I found to be better on most metrics than even Arman, though growth maybe bit slower, there is the advantage of size and geographic spread.
I see on the thread of CreditAccess Grameen (CAG) that East and South are very heavy in MFI concentration. Both CAG and Spandana have mostly avoided the East.
CAG I avoided simply because it had already run up. On its thread there is mention of Spandana still collecting while CAG is offering moratorium.
Maybe rural India does better in coming year than urban areas, Spandana presentations say that none of their operational areas were in red-zones.
With global warming, there is more energy and moisture in circulation, typically storms and monsoons will get stronger. India’s mostly rain-fed agriculture will benefit from this booster dose, which rural economy depends on.
