Description of the main business of the company and brief history of its journey since incorporation.
Oncology APIs, Custom Synthesis, Bulk Drugs, Nutritional Supplements, Drug Intermediates.
The company is currently exporting the APIs to European countries.
Customer List – Actavis, Ratio Pharma, Sandoz, Intaas Pharma, Dr Reddy, Cipla etc
- Shilpa has created a niche area for itself by taking a lead into manufacturing to high quality Oncology APIs and Custom Synthesis.
- The Oncology space is the fastest growing segment in the Pharma industry worldwide. Domestically the sector is expected to grow at CAGR of 25-30%+ for next few years.
- The entry barriers are high as this segment needs a lot of expertise and years of research. Therefore the margins are very lucrative – as high as 40-45%.
- Shilpa Medicare has an excellent past track record. The company has grown at a CAGR of 53% over last 5 years. From a turnover of 49 Cr in 2006 to 260 Cr in 2010.
- Shilpa is the largest Oncology API manufacturer in India
- The company has excellent margins of 30% and nice Balance Sheet.
- The company keeps debts under control. The company is expected to have reduced debt from 115 Cr in 2009 to under 60 Cr in 2010.
- The company keeps a tight check over inventory and debtors. Historically both these items remain less than 15% of turnover.
- Oncology drugs worth $ 9 bn will loose market exclusivity between 2009-13. Many of these products are on Shilpa’s product list.
- In Custom Synthesis, the company has entered into a JV with its long time customer, ICE Italy. ICE Italy is one the largest manufacturer of Bile Acid derivatives.
- Going ahead competition should increase as more players are entering the lucrative Oncology segment.
- Being major turnover coming from exports, Exchange fluctuations are major risk.
- Delay in off-take from European Customers
Barriers to entry
- Barriers to entry are high as this space needs lot of knowledge and involves complex chemistry.
- It took Shilpa 8 years to get hold of Oncology API space.
- Fast growing companies in Sunrise Sectors usually get very steep valuations – generally more than 25-30 times PE multiples.
- Shilpa Medicare is still available at about 15 times earnings.
- The company is expected to again double its Net Profits (from current 45 Cr to 90 Cr) in next 2 years backed by ongoing expansions and JV.
Ayush Mittal: More than 5% of Portfolio in the Company; Holding for more than 2 years