Orchid Chem, poised for growth

Courtesy :ET


Chennai-based Orchid Chemicals and Pharmaceuticals is at an inflexion point of growth. After selling its lucrative injectable formulations business to Hospira last year, the company has built upon its remaining non-injectable business to grow over and above its pre-sale revenues. Investors can participate in the company’s progress as it forges growth across its various business segments.

BUSINESS

The Rs 1,400-crore Orchid Chemicals is among the top five generic antibiotics manufacturers in the world. It earns 90% revenue from overseas markets. Since inception, Orchid has established a strong foothold in niche therapeutic segments that are relatively uncluttered due to the inherent technical complexity. In December 2009, the company sold its injectable business to US-based pharma major Hospira at Rs 1,900 crore. It used the proceeds to to reduce the debt and redeem foreign currency convertible bonds (FCCBs) to the tune of Rs 110 crore.

As a part of the deal, Orchid also has a 10-year arrangement with Hospira for supplying active pharmaceutical ingredients (API) for the sold injectable products. It has emerged as the single-largest segment with 25% contribution to the topline.

Orchid has also started supplying APIs to other companies. It is among the very few players in the world supplying certain group of anti-biotics like cephalosporins, penecillins etc to regulated markets in the US and Europe.

GROWTH OPPORTUNITIES

After reducing its borrowings, Orchid Chemicals is now getting into formulations business by either buying businesses or in-licensing brands in therapies outside of antibiotics. It recently acquired Karalex Pharma , a US-based generic marketing and sales services company. Karalex has been growing at 20% annually. The company expects strong growth over the next three years in nonpenicillin, non-cephalosporin (NPNC) segment.

For many of these products, Orchid possesses marketing alliances in the US and Europe with prominent players such as Actavis, North Star and Alvogen.

FINANCIALS

For the nine months ended December 2010, the company registered a 20% growth in net sales. Its net profit stood at `97 crore against a year-ago loss of `58 crore. The debt repayment from the Hospira deal proceeds helped to improve margins.Orchid is likely to surpass its guidance of 30% growth in revenue and net profit of Rs 140 crore for FY11. It would invest Rs 400 crore by FY12 in new therapeutic areas of ophthalmology and immuno-suppressants. Orchid’s management expects the contribution of revenue from Hospira deal to remain in the region of 20-25% in the near term.

VALUATIONS

At a market cap of Rs 1,867 crore, the company is valued at one-and-a-half times its last 12 months turnover of Rs 1,385 crore. Its stock is trading at 3.8 times its earnings. These are low valuations for a company that has potential to be a sector outperformer in the coming quarters. The promoter has been steadily increasing its stake in the company reinforcing management’s confidence.

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STOCKS TO WATCH ON BUDGET DAY

1) BAJAJ FINSERV
2) MAX INDIA
3) EDUCOMP
4) EVERONN
5) MONSANTO INDIA
6) KAVERI SEED COMPANY
7) BAYER INDIA
8) JAIN IRRIGATION
9) IDFC
10) IOC
11) BPCL
12) HPCL
13) PANTALOON RETAIL
14 ) SHOPPERS STOP
15) JUBILANT FOOD WORKS

16) SUZLON ENERGY
17) WEBSOL ENERGY
18) MOSER BAER
19) ALFA LAVAL
20) SHIRPUR GOLD REFINERY

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Beware of a fake high-yield guaranteed bonds offer

Courtesy :  Moneylife

An email offering high-yield guaranteed bonds tries to lure investors with the promise of an unbelievable 14% return. It uses the Bajaj Allianz company name, but the company says it does not have any such product

On the face of it, it seems to be a super offer from a well-known name like Bajaj Allianz. But it is not. If you receive an email that is ostensibly from Bajaj Allianz, offering 14% per annum return on a bond, as well as a customer service number, please ignore it. Bajaj Allianz has said that it does not have any such product and it has cautioned investors to guard against subscribing to it.

The email we received purports that the last date of this Republic Day offer has been extended from 18th February to 26th February following the overwhelming response from investors. It explains that the high yield of 14% will be earned through arbitrage. It assures that the bonds are secured and the corpus is deposited into the contingent fund of the Bajaj group, to give an impression of genuineness. The email has a contact number (1800-233-2727) number that gets no response even though it says its a 24x7 helpline. It uses the logo of Bajaj Allianz with the words 'Dial befikar', a copy of the Bajaj Allianz slogan 'Jiyo befikar'.

Let's emphasise the red flags again. The email has a gmail address. There was no response when we dialled the mobile number that is given. The product detail specifies 14% ap and not 14% p.a. It also mentions an insurance cover and tax benefits available along with the plan, but does not give any details. But what have guaranteed bonds got to do with insurance cover? The email also uses several words like 'guaranteed bond', 'fixed deposit', 'guaranteed investment return plan', 'wealth ins' and so on, quite loosely.

It describes the investment details in the following way: "Deposits invested basically in resources, infrastructure, consumption and human capital sectors. These sectors have grown by 48% every year in last 10 years & have majorly contributed to India's economic development." No matter what the sector, no credible institution is offering such high returns.

When Moneylife contacted Bajaj Allianz about this email offer, Santosh Balan, head of corporate communications at Bajaj Allianz, said, "We have checked our records and would like to state that this communication is not from any of our authorised persons or distribution channels. There is no person by the name Abhijeet Shaheja in our system. It seems that the person on his own has gone ahead and sent this communication and used the brand name of some of our popular products like Shield Insurance, Max Advantage and Wealth Insurance to his or her advantage. From the mailers attached it seems that he is not selling any of our insurance plans per se other than comparing it with some of the popular products. The SMS and toll-free numbers do not belong to Bajaj Allianz."

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WEBSOL ENERGY SYSTEMS LTD - BUY

Company             : WEBSOL ENERGY SYSTEMS LTD

BSE Code           : 517498

Group/Index        : B

CMP                   : Rs.59/-

FV                      : 10

Recommendation  : BUY

Websol Energy Systems Ltd is the first listed company in Indian stock market from the Solar space.For the last few years ,company's performance badly affected mainly due to the production disturbance on account of capacity expansion in existing production line ,change in technology and shifting of running plant to a SEZ where tax benefits are available..etc  Recently company has increased its SPV capacity to 60 MW and expected to double the same by 2011-12 FY.Even if there is some other companies are recently listed in this space ,Websol is more attractive on various financial parameters . .Now our government is paying much attention to non conventional energy sources and expecting some favorable announcements in near future .The Jawaharlal Nehru National Solar Mission is aiming 20 GW solar energy generation by 2020. Even if the current spike in oil price is due to some special reasons like unrest in oil producing countries ,the trend of rising prices of energy sources are expected to continue in tandem with the revival in western economies .Such a situation will again attract investors towards non conventional energy stocks .Websol is a good bet from this sector which is trading now at 52 low @ Rs.59/-

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COMPACT DISC / TOTAL EXPORTS - AVOID

It is very rare to see a company trading at a P/E below just 1. Yes , it is Compact Disc which posted an EPS of Rs.50/- last year and currently trading around Rs.39/- . No need to get exited and punch order to BUY this stock because of  its throw away  valuation. There is lot of questionable practices going on here . This multimedia - animation company is announcing the beginning of many projects but then there is nothing about its completion or releasing and cash flow from such projects. Instead of that ,company is announcing the beginning of another projects and so on. To keep the faith of the investors and shore up the share prices ,promoters are playing various tricks like dividend,de-listing ..etc. After declaring dividends company deferred it and again announced a date for reconsidering the same .But even after 6 months of the date of EGM for re considering the dividend ,there is no announcement about it. In the case of de- listing ,company announced an EGM after three months to take final decision .If past is any indication they will cancel the de listing decision in that EGM .  It is really funny to see that Forbes Asia Editors have selected Compact Disc India Ltd. as one of the 'Best Under A Billion' Company.I don't know ,what is the meaning of ' BEST'  the Forbes means .If they are selecting this types of companies it will only  help to destroy the reputation of even the well known 'Forbes' . Since we - the investors - have limited  options to check the validity of claims made by companies and no chance to check their  bank accounts ,we can see these type of results and claims even after the story of Satyam Computer. But the shocking part is ,even the police authorities informed the activities of the promoters of  Compact Disc  about a decade back ,the watchdog of Capital market did not take any action or inquiry about these people .You can read that story HERE

TOTAL EXPORTS is another company from the same management and its suspension revoked recently and now trading around its 52 week high .

So ,it is better to study the history of promoters before started buying stocks only on the basis of published financial results.

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CLARIS LIFESCIENCES - STILL IN THE SHADE OF CORE HEALTHCARE

Old investors may not kind enough to read anything about this company if they know the main promoter of Claris Lifesciences Mr. Arjun S. Handa is the son of Mr Sushil Handa, who was the promoter of  Core Healthcare Ltd (CHL).  Core Healthcare was a star in Indian stock market and its share price touched four digit marks in 1990 -1994 period .It was not without a reason or because of price rigging. CHL  started by Sushil Handa - an MBA- from Punjab  in 1986.Its state-of -the art manufacturing facility was located in a 600 acre campus  near Ahmedabad .  In just seven years CHL becomes the  largest manufacturer of IV Fluids in Asia with excellent  growth rate . The death was equally dramatic as the growth . Company went into serious troubles and ends as a  winding up case.Many points  mentioned as the reason for these unbelievable fall ,some of them are following :


* Siphoning of money by the top management 
*Diversion of company fund to own business
* Over aggressiveness and over expansion using leveraged funds 
* Inexperience of Handa as a first generation entrepreneur
* Exports without letters of credit to countries where exports were not backed by RBI guarantees 
* Crash of USSR where company had significant business interests 
* Diversification to unrelated fields like power which caused for a clear loss of Rs.100 Cr


etc...etc...etc..


Anyway ,CHL,  the company once stands almost equal to Dr Reddy's Lab ends in debt trap

Claris Lifesciences


It  is promoted by  Mr Arjun S. Handa  son of Mr Sushil Handa .Company came out with an IPO in recent times.After the opening of IPO ,due to poor response - mainly on account of the above mentioned bad mark -  company slashed the offer price from Rs.278 - Rs.293 to Rs.228 to Rs.235 and managed with 1.5 time subscription. Claris is one of the largest sterile injectables pharmaceutical companies in India. Company have five manufacturing facilities spread over a 78-acre campus located in Ahmedabad and it is  exporting its products to 76 countries across the globe.Company's financial year ending is in December and in FY 2009 ,company posted a turnover of Rs. 744 Cr and a net profit of Rs.125 Cr .Its net sales increasing at a CAGR of 26.9% and net profit posting a strong CAGR of 65.6% over CY2005-09.Company is going to declare its FY 2010 numbers on 24 Feb 2011. On the negative side ,US Food and Drug Administrator (USFDA) issued a warning letter to the company due to violations of Current Good Manufacturing Practice .US accounts about 6 % of company's total sale.


What to do ?


Company's size,prospects and growth deserves better valuation . But everything depends on the answer of few questions - What was the real reason behind the failure of Core Health care ?.Whether it is a pre-planned drama or due to reasons beyond the control of promoters even if they tried their level best ?. Have they learned a lesson from the past experience ?


TAKE IT OR NOT , IT IS UP TO YOU ....  
CMP is Rs.195/-

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FRAUD - NO STOPPAGE

Helios & Matheson fined Rs50 lakh by SEBI for financial irregularities; vMoksha co-founder also penalised
 
Courtesy  :Moneylife


H&M was investigated for making false announcements to influence the stock price and hiding information about acquisition of vMoksha

The Securities and Exchange Board (SEBI) of India has finally imposed a Rs50 lakh penalty on controversial Helios and Matheson (H&M) Information Technology, which has long been under the scrutiny of regulators for alleged financial irregularities.

The SEBI order was issued on 31 January 2011 and the company reported the matter of the fine to the Bombay Stock Exchange (BSE) on Friday. The issue mainly concerns some fake and favourable announcements that the company made to the stock exchange in order to influence the movement of the stock price.

SEBI had said in a show-cause notice to the company that "H&M had made various favourable corporate announcements during the investigation period, that is about the issue of bonus shares, dividend, and declared favourable unaudited quarterly results, etc., besides the announcement of acquiring three entities of vMoksha Technologies Pvt Ltd." SEBI also charged the company with not disclosing the status of the profitability of vMoksha companies that it allegedly acquired.

Incidentally, Rajeev Sawhney, a co-founder of vMoksha Technologies, has been fighting a relentless battle, even knocking on the doors of various regulators, including SEBI and the Reserve Bank of India (RBI), as well as the Ministry of Corporate Affairs, to expose dubious issues over the acquisition of vMoksha.

The company levelled counter charges of 'insider trading' against Mr Sawhney and this was also investigated by SEBI. Interestingly, on the same day that SEBI issued orders against H&M, it also passed orders against Mr Sawhney and fined him Rs 25 lakh.

H&M has filed winding up proceedings against vMoksha in Bengaluru and there is a separate arbitration proceeding pending between H&M and vMoksha which has been delayed due to the death of the arbitrator and the lawyer.

SEBI's order says that H&M "failed to make announcements/ disclosures with regard to price-sensitive information" and "had not informed the stock exchange about the interim developments such as (the fact that) its attempt to acquire three vMoksha companies had not materialised in the stipulated time period, i.e. within 120 days as specified in the SPA (share purchase agreement) and the judicial/arbitration proceedings which started in relation to the same".

H&M was under the scanner of the Enforcement Directorate (ED) in March 2008 and raids were conducted at the company's headquarters in Chennai. Moneylife learned that the raids were based on investigations by the RBI which revealed foreign exchange violations in the vMoksha deal and the reports were given to the ED in November 2007.

Moneylife has also reported about financial irregularities in the acquisition of vMoksha by H&M. The battle started in 2005, when H&M announced a $19 million buyout of vMoksha, co-founded by Mr Sawhney and Pawan Kumar (former CEO of the controversial DSQ Software). Mr Sawhney put in the money and Mr Kumar managed the operations.

Mr Sawhney realised that he had been kept in the dark about many aspects of the deal. For instance, he found that instead of receiving $19 million, a bank account had been 'fraudulently' opened with the State Bank of Mauritius in the name of vMoksha that was used to borrow US$13.5 million with the help of a fake board sanction and some false entries. That money was remitted to H&M ostensibly for subscription of redeemable preference shares on 28 June 2005.  (Read: Helios & Matheson under the scanner)

H&M has also informed the BSE that it plans to appeal to the Securities Appellate Tribunal (SAT) against the SEBI order. Mr Sawhney has also said that he will appeal against the SEBI order against him.

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