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RAJIV KAPOOR
TAKING STOCK

Rajiv Kapoor is a Share Broker, Certified Mutual Fund Expert and MDRT Insurance Agent.

SS pharma is a good stock option

For Sequent Scientific (SS), inorganic growth has remained the core growth strategy since 2002. It has recently bid for Lyka Export's animal health business on slump sale basis. What this means is that the company is buying only the business and not the debt attached to it. Lyka Exports is in the cattle and diary business for the last six years and hence, this acquisition is a perfect complimentary fit for Sequent Scientific. The company management is silent on the acquisition price but it would be prudent to assume the cost of acquisition to be anywhere between Rs 15-20 crore. Put together, SS will have a combined strength of about 250 people making it a formidable global player in this segment. Over the last decade, SS has emerged as an integral pharma company with a global footprint in the domain of animal health and human health. The animal health branch has been branded as Alivira, focussing on products for livestock and poultry. The human health business is operating across multiple therapeutic segments and focussing primarily on the development and supply of high value low volume API. The company has chosen a different path of focussing on smaller old molecules to make a mark in the human API market unlike other pharma companies which are looking at products losing patent protection. While the top line has been growing at over 25% y-o-y, the margins have not kept pace. That has been corrected through the qualified institutional placement (QPI) issue to replace the large interest burden SS was carrying. The management has reported recently that the medium term focus of the company is not on margins but creating fundamental value by making investment in the area of formulation research and development. Meanwhile, in the last month, SS allotted 7.50 lakh shares at Rs 669 per equity share to the promoter group entity. The stock currently quoting at Rs 825 on the BSE is a multi-bagger in the making and investors with a two year investment horizon can include the SS stock in their portfolio for over 100% appreciation.

For the Indian stock markets it has been a roller coaster ride of uncertainty in the last week. After the initial mayhem, the indices recovered somewhat on the back of short recovering and mutual fund inflows. We do not expect any major upward move in the Sensex and Nifty next week but select stocks from the IT and pharma stocks may show positive momentum.

Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.

 
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