Our economy and stock market is going through a rough patch for the past many months ( not the indices) .Reasons may vary from weak government,policy paralysis,higher inflation,current account deficit ,crisis in power supply,mining ban ,additional supply of PSU shares ..etc.etc.In mid and small caps space a real carnage is going on where stock prices of many companies ruling around life time or multi year lows.In addition to the above mentioned reasons , I believe one of the major factors affecting the sentiment in small/mid caps is the uncertainty created by the latest SEBI decision to change the trading method for illiquid stock.( not the method but the criteria for fixing the eligibility is the real reason for concern).It seems all market participants including stock exchange authorities,brokers and investors are in full of dark and no clue about the impact of this method on volume and price .I think ,this uncertainty is a major reason for the sharp fall in small/mid caps in past few weeks .There is no takers and hence no market depth for midcaps .Many of the investors are in a wait and watch mood and not ready to take any new commitments before some clarity emerges even they know the fact that many good companies are trading at attractive valuations.This is the feeling many of my friends shared in recent weeks .Some investors even selling their holdings and shifting their positions to other stocks which may excluded from new method based on the declared criteria. I believe ,SEBI is actually ‘burning the house to kill a rat’ .Let us wait one more week and see its implications.
This week’s recommendation is a low priced scrip which is not an illiquid stock under new criteria !! .Reason is not this alone but some more positive developments happening in this company after a long period.MARKSANS PHARMA is owned by Mr Mark Saldhana , the younger brother of the MD of Glenmark Pharma .Actually the name GLENMARK derived from the name of two brothers GLEN Saldhana and MARK Saldhana.In 2003 Glenmark Pharma’s wholly-owned subsidiary Glenmark Laboratories de-merged from it and later in 2005 this division merged with another listed company Tasc Pharma .Then its name changed to the present one MARKSANS PHARMA and Mark Saldhana took charge of this company.Company’s performance was satisfactory till 2008 and thereafter derailed due to different reasons.It raised FCCB for overseas buyouts and took over some foregin companies in UK and Australia which did not perform initially, as expected.FCCB holders not converted their bonds due to lower stock price and the repayment of the same ends as a huge burden on the company. As in the case of many other company’s issed FCCB’s during that period ,Indian currency’s diminishing valuation added fuel to fire.
When we analyse in detail,it is clear that the two major reasons for huge loss in past many years and complete erosion of net worth of this company is FCCB obligation and loss of its API division. Last year company exited from API and sold out this loss making unit.In a surprising announcement ( Read it HERE) ,in this month , company informed BSE that it has entered into a Settlement Agreement with the holders of Foreign Currency Convertible Bonds.Even the nature and means of this settlement not explained,MD's open market purchase of shares in the past few days indicating they have reached in a favorable settlement terms for the company and some clear ideas in mind.Last year promoters subscribed preferential issue and hiked their stake to 51% from 48% .
After selling out its API division, company now concentrating in Formulations,CRAMS and Bio pharmaceuticals . Oncology, Gastroenterology, Antidiabetic, Cardiovascular, Pain Management, and Gynecology are selected as key areas of interest.Of late company’s Australian Subsidiary( Link HERE) is also started to perform . Since company’s foreign operations are bigger than Indian business ,true picture is not reflecting in its stand alone result.Its consolidated Sales was Rs.357 Cr where sales from India was just Rs.156 Cr in FY 2012. In the just preceding two quarters,both Indian and foreign operations are showing significant improvement.
This low priced scrip selected mainly because of four reasons – Pedigree of promoter,Fair chance for a Settlement of FCCB with favorable and practical terms and conditions , Improved financial performance,promoter’s effort to increase stake through preferential issue and open market purchase.We know last year’ fantastic turn around of another big pharma company started only after a similar settlement of FCCB obligation.Let us wait and see what will happen for this one.Those willing to take extreme risk and enough patience may try it around CMP Rs.4/- .Stock listed both in NSE and BSE.
Link to company's old website (new one is under construction) - HERE
Link to Company's UK Subsidiary HERE
Link to Company's Australian Subsidiary HERE
Link to latest Annual Report HERE
Disc: I have vested interest in MPL
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