Ind Swift Ltd - Rs 19.00

Incorporated in 1986, Ind Swift Ltd (ISL) is the flagship company of the north India based Ind Swift group which has diversified interest in pharmaceuticals, education, infrastructure, media & publication and software development. However the group’s core business remains manufacturing of pharmaceuticals products as it is a leading player in both the segment of industry namely bulk drugs and formulation. In order to concentrate & grow both the segments independently, the formulation business is looked after ISL whereas Ind Swift Lab another listed group company specializes in bulk drugs and API’s (active pharmaceutical ingredients). Thus ISL’s forte lies in production of various formulations, branding and marketing them in finished dosage form encompassing several therapeutic segments. It mainly focuses on critical but relatively under crowded therapeutic segments like pediatrics, cardiology, gynecology and diabetes apart from having significant presence in high growth segments like Cardiology, Diabetology, Anti depressant, anti-allergic, Anti- infective, Neurology & Oncology. Infact company boasts of formulating Neurophen - a composition of Ibuprofen & Acetamenofen for the first time in India apart from introducing another formulation Suprox SR, a composition of Isoxprine Hel in tablet form. It also claims to be the pioneer for the mouth dissolving tablets technology in India. Notably, ISL is among the top 500 fortune companies of India and have been ranked at No. 35 by IMS/ORG in Pharmaceutical industry during 2007-08 with a portfolio of 650 products and a nationwide distribution network comprising 1200 marketing professional, 50 offices in India, and 3000 stockists and distributors.

ISL’s core competency lies in its manufacturing capabilities as it has 7 state-of-the art multipurpose, multilocation manufacturing set-ups spread over an area of 12,00,000 sq ft with an installed capacity of 3 billion units comprising tablets, capsules, Ointments, Injectable, Liquids & Dry Syrup. All it production facilities are spread across tax free zone in Parwanoo & Baddi (HP), Samba(J&K), Jawaharpur (Punjab). Importantly, all the units are built according to current guidelines of USFDA and comply with WHO cGMP standards. Most of its units are audited and certified by international rating agencies like MHRA(UK),TGA(Australia), MoH(UAE), TFDA(Tanzania), NDA(Uganda) and DACA(Ethiopia). Simultaneously, ISL put equal emphasis on Research & development and gained critical expertise in development of non infringing process, novel drug delivery system, new process development for cost effectiveness, NCMR handling etc. Its only because of its strong R&D effort, company has been able to launch on an average 25~30 products over the last five years. After gaining commands over manufacturing and R&D, ISL is now focusing on marketing aspect. To effectively track the operations and growth of each therapeutic segment, ISL has formed 12 different marketing divisions. Out of these 'Diagnozis' division dealing in medical equipments & devices for personal health care was launched in December 2007 and 'Animal Health Care' division is also relatively new. On the other hand its ‘Ethical’ marketing division continues to excel with regular introduction of unique products. Of late it has introduced Topclav 625, Emtee 25, Timcol Eye Drops etc and Cirrholiv which has proved out to be extremely useful in curing Hepatities and other liver disorders. Interestingly, ISL’s strategy is counter to general industry’s practice of maximizing sales thru higher dosage consumption, with introduction of one dosage per day thereby resulting into greater consumer acceptance. Infact, ISL’s few brands such as Amyclox, Swimox, Oxo, Swiflox and Cafzone have been rated as the top brands in Generics commanding sales of more than Rs 25 cr each in short time. Whereas its brand Swimox and Amyclox are among top 300 brands of the industry. Besides, company also exports to Latin America, Middle East, African countries, Srilanka, Vietnam, Myanmar, Combodia and CIS countries.

Apart from creating and marketing its own brand, ISL has put special thrust on CRAMS (Contract research and Manufacturing Services) business. Company provides contract research from conceptualization till the final dossier of the product. Till date it has delivered two major R&D contracts and is expecting more research contracts on product development and stability data profiling. Side by side it also offers complete support to international partners for preparing and filing dossiers for finished dosages. On the other hand, it supplies large quantities of products to reputed Indian pharma companies including Ranbaxy, Cipla, Glenmark, Lupin etc. It even has contract manufacturing alliances with different companies in UK, Europe, Turkey and Iran. For future growth company is betting high on contract manufacturing and expects this segment to contribute more than 30% to its total bottomline.

Financially, ISL has over leveraged itself with a high debt equity ratio of more than 2x times. Sarcastically, its detrimental for growth in bottomline as cost of debt works out to nearly 8% whereas return on capital employed is merely 3%. However for the year ending March 2009, it recorded 15% growth in sales and net profit to Rs 589 cr and 31.50 cr. This works out to an EPS of Rs 8.50 on tiny equity of Rs 7.40 cr having face value as Rs 2/- per share. On the back of constant capex, company follows a very low dividend payout ratio policy. It has augmented its Gross Block at CAGR of 60% in the last 5 years. At an estimated reserve of more than Rs 200 cr, scrip is trading at steep discount of 65% to its book value. Moreover for FY10, ISL is expected to clock a turnover of Rs 700 cr and PAT of Rs 38 cr on standalone basis. Incidentally, company holds 26% stake in Ind Swift lab which is another growing company and currently commanding a market cap of Rs 100 cr. To conclude, although ISL looks reasonably valued at EV/EBIDTA of 5.50x times, still investor can accumulate it sharp declines for 50% gains within a year.

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