Saturday, March 23, 2013

MARKSANS PHARMA - ON THE COMEBACK TRAIL ?





 
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





49 comments :

  1. Dear Valuepick
    Many of us would like to know the status of Vulcan.Is the present fall in price just because of the above mentioned reason or it has something to do with its fundamentals.I dont know why you are avoiding any comment. I have asked the question several times. Your guidance will be highly appreciated.
    Regards
    Suman

    ReplyDelete
    Replies
    1. After the posting on Vulcan and its not so good result later I have replied many times about it.As you are aware ,due to poor capital expenditure happening in India in recent times order flow to all these companies at historical low.Company having many niche power saving technologies but share holder will get fruits only when there is improvement in capex cycle.

      Delete
  2. i have been watching this stock for some weeks,but i didnt have that much courage as it looks like a penny stock.
    When I started researching, I couldn’t find their website (VP provided link to old website). And VP now come with a fantastic research that nobody ever could find facts like it’s relationship with Glenmark..
    Hats off VP.. I’m going to buy and forget.. this is gonna be next wockhard..

    ReplyDelete
  3. Another great pick VP sir.
    This one sounds similar in terms of what promoters of Sequent scientific are doing.How the true value of these shares are unleased soon.
    :)
    Mehul

    ReplyDelete
  4. dear VP,in2010you are skeptical about marks an manegment,now you tell percent of allocation.

    ReplyDelete
    Replies
    1. I think ,what has happened between 2010 and 2013 already explained above.If the situation is same as in 2010 ,nothing interesting in it.No hesitation to recommend a BUY on a stock earlier recommended as SELL and vice-versa,but there should be some logical reasons.We are here to create wealth and not to prove we will not commit any mistake at any time.

      Delete
  5. vpji at present your view in laopala.

    ReplyDelete
  6. VP,
    do you have any update on Granules expansion except that it may start in 1qtr of 2014.
    Worried as the stock has corrected way beyond fundamentals.

    Intending to avg but wanted to know if any change.

    thnx

    ReplyDelete
    Replies
    1. Not aware about any new negative developments.Why you are worried if you believe it corrected beyond fundamentals ,rather than taking it as an opportunity ?

      Delete
  7. Dear VPji no doubt agree to your views mentioned in the post but what potential investors must know is when and how will the FCCB repayments be made? who are the stakeholders of the FCCB will they be given warrants, convertible preference shares?

    Another stock which has seen a huge battering although belonging to different industry is 3i infotech which also has been burdened in the past due to huge FCCB payments. The stock is currently trading at 6 rs and FCCB redemption will be made at 19 rs. As a potential investor it is visible that the repayments will be made higher than its face value and that too in 2014.

    Hence sir wanted your view on this both for marksans and 3i

    ReplyDelete
  8. Dear Ravi

    In stock market we can take investment decisions based on various situations.Those who are not interested to take higher level of risk can take decision only after every information is available in public domain.Higher risk takers can take decisions based on possibilities and indications available.Normally in the first case risk and return will be low and in the second case it will be high.
    If the answers for your above question is available in the public domain and it is a favorable one, price of stock will be at another range.Here in this case ,since promoter started open market purchase just after the decision to settle the FCCB , we can only assume it will be a good one for the company .This is only based on common sense and no guarantee for 100 % accuracy and if the promoter is purposefully trying to mislead potential investors we can't do anything .That's the risk of stock market and that's why I mentioned this stock is for high risk investors.In short ,risk and return in investing in stocks after knowing everything and based on assumptions and indications are entirely different .One should select a method based on own risk profile.

    ReplyDelete
  9. what is the future of schneider electric?

    ReplyDelete
  10. dear valuepick,
    your view on shakti pump? After beating down..i want to buy..
    nirav

    ReplyDelete
    Replies
    1. Dear Venkat and Nirav

      Many stocks from power,capital goods..etc are available at cheap valuation.But don't expect any miracle in short period due to bad condition of economy mainly on lower capex and policy initiatives.Significant gain is possible once there is a stable government post Parl.election.

      Delete
  11. Hi VPji,
    I posted this question twice yesterday, but did not get published. Not sure if there is a problem with posting or you blocked it. Just trying my luck again. Please share your views on Selan. Is it a buy, hold, or sell at this price. Thanks a lot..
    Regards,
    Saj

    ReplyDelete
    Replies
    1. One of the best stock from this sector ,may outperform once the sector re rates provided no negative policy changes towards private oil exploration cos.

      Delete
  12. SIR,
    Please share your views on TIDE WATER OIL at CMP for long term investment.What are its growth prospects, fundamentals and their values for small investors.

    ReplyDelete
    Replies
    1. Sorry ,not tracking Tide Water Oil.

      Delete
  13. this is my portfolio ....
    tata global bevarages, marksans pharma, jhs swegard, selan exploration, shree renuka sugar, shalimar paint, sequent, all shares were i purchased at very low price its a time to exit or hold please suggest me....whats the reason behind sharp falling of share price sequent anything wrong happen.....

    ReplyDelete
    Replies
    1. Negative on JHS and not tracking Shalimar paint.Hold the rest.No new developments known to me about Sequent .Selling may be part of over all market mood in mid/small caps.

      Delete
  14. Hi, have been writing to you for some time...but did not get any response. Please let me know your view on suzlon

    ReplyDelete
    Replies
    1. One may add with a 3+ year time horizon

      Delete
  15. A similar company in different sector is nitco tiles ltd. Details about debt restructuring not available.mcap of 39 cr. Here the value is more deep set( with real estate business). Hitting all time lows everyday. U previously said " a turnaround is not impossible" .. Any new prespective about this company?

    ReplyDelete
    Replies
    1. Appointment of new CEO is a positive factor ,waiting for the details of CDR.

      Delete
  16. Dear VP Sir

    Wish U your family & Our Blog readers A HAPPY HOLI

    ReplyDelete
    Replies
    1. Thank you and wishing the same to all of my readers.

      Delete
  17. Dear Sir,
    Can you refresh your views on Kaveri Seeds. Its been holding well in this
    mid cap carnage. Can it be bought for those who had missed it earlier?

    Rgs
    Jerry

    ReplyDelete
  18. Hi VP Sir,

    Could you please tell me , What will be the impact for Balmer & lawre share price after issuing bonus shares.

    Thanks,
    Nagesh

    ReplyDelete
    Replies
    1. Normally it will come down proportionately on XB

      Delete
  19. Dear vp sir,

    What is your opinion on varun shipping ? I am holding @ 35

    Regards
    Kailash

    ReplyDelete
    Replies
    1. This entire sector is going through a tough period.No meaning in selling at this price hold and even buy in small lots if you have a 3 + years view.

      Delete
  20. WISHING A COLOURFUL HOLI TO DEAREST VALUEPICK AND ALL VISITORS.

    HAPPY HOLI

    ReplyDelete
    Replies
    1. Thank you Amit and wishing the same

      Delete
  21. Dear VP, First of all a big "thank you" for your time. More than buy/sell calls - the way you do your research is a very good guidance for all of us to do more than just "number analysis" of a stock.

    I have a question about the market outlook for next 3-5 years. I would like to hear your thoughts on which sectors to bet during times like today.

    Assuming:
    1)Indian economy to remain same or get worse in next 3-5 years.
    2) Global economy grow moderately in next 3-5 years
    3) Rupee gets to 60 levels in next 3-5 years

    Under these conditions, which sector would you bet on for next 3-5 years?

    I am not asking for a stock guidance but general focus areas when economy is not booming.

    ReplyDelete
    Replies
    1. Dear Karma

      I don't believe in the assumptions 1 and 3 .I think India will improve in the mentioned time period.

      Delete
  22. Dear vp
    wish you and ur happy holi.
    kindly throw some light on avanti feeds, is it worth looking at cmp.

    Best regards

    ReplyDelete
    Replies
    1. Expecting some tough times for the industry in near future.

      Delete
  23. Any clue on terms of settlement for FCCB of Marksans?
    They don't make a full disclosure to BSE?

    ReplyDelete
    Replies
    1. They only mentioned reached and agreement ,expecting the details soon.

      Delete
  24. Dear vp sir,

    Nowadays i am receiving mail's stating that become a member of Zurker(social networking site), so that virtual shares will be credited, if you have any idea please advice me about this sir, because i trust only you.

    D.Sathishkumar.

    ReplyDelete
    Replies
    1. Frankly speaking ,I have no idea about it.

      Delete
  25. There are No Doubt Economy is going through very rough patch! Global Recession hits quite hard; Strong Economical Measures should be taken by Govt in order stablize economy with effective manner!

    ReplyDelete
  26. May I know your viewabout mahindra finance.

    Swathi

    ReplyDelete
  27. Sir please update about Aries , I am holding at 62.

    ReplyDelete
  28. Hi VP, Right now Marksans has crossed Rs.10 and in UC... Is it still a good buy at this price.

    ReplyDelete
  29. i have abt 20k shares of marksans pharma @ an average of rs 7.5.accumulated @ various time.whats your view on marksans now.after their result and getting out of BFIR. i am planning to hold it for long term.please share your advice.

    ReplyDelete

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