The scrip value of Ankur Drugs and Pharma, a major player in contract manufacturing segment, has recently touched its 52-weeks low at Rs 76 in the Bombay Stock Exchange (BSE) despite strong growth in operations with satisfactory profit level. Though its bottom line for the third quarter ended December 2008 impacted by the foreign exchange losses, Ankur's operating profit remained strong and the company can overcome these setbacks in future. The scrip is still moving near to its 52-week level mainly on account of poor sentiment but there is good reason for investors to add this scrip to their portfolios. The scrip touched to its 52-week peak of Rs 292 in April 2008.
Currently, the promoters are holding 30.6 per cent of the total equity capital of Rs 18.62 crore, foreign institutional investors 11.6 per cent, corporate bodies 18.09 per cent, individual shareholders 24.28 per cent and remaining 15.4 per cent by NRIs, MFs and foreign corporate bodies.
The company is manufacturing over 400 different formulations for different dosage forms with 100 per cent focus on contract manufacturing. Its three plants are strategically located offering varied financial advantages to its customers. Its two units are located in Himachal Pradesh and one unit at Daman. The company is offering contract manufacturing services to leading companies like Ranbaxy, Cipla, Cadila, Workchardt, Glenmark, Piramal, Torrent Pharma, etc. With investment in expansion, the company is well set to boost its top line in the coming years.
The company's net sales for the first nine months of the year 2008-09 went up sharply by 54.9 per cent to Rs 722.26 crore from Rs 466.14 crore in the corresponding period of last year. These sales are higher than the full year 2007-08 sales of Rs 673.50 crore. The net profit for the first three quarter has taken a jump of 22 per cent and touched to Rs 52.28 crore from Rs 42.84 crore. Ankur provided Rs 16.70 crore for the foreign exchange loss as against nil in the last period.
The profit before interest, depreciation, taxation and extra-ordinary items moved up sharply by 89.2 per cent to Rs 135.69 crore in the corresponding period of last year. However, the interest cost went up sharply to Rs 36.85 crore from Rs 16.52 crore on account of expansion programme. Similarly its staff cost also moved up by 57.2 per cent to Rs 12.17 crore from Rs 7.74 crore. With these provisions, its profit before tax and extra-ordinary items increased by 65.4 per cent to Rs 82.98 crore from Rs 50.18 crore in the similar period of last year.
Ankur has completed a new production facility during the second quarter of current year and the manufacturing lines at Baddi plant were further enhanced to address the increased demand from its present & prospective customers. Besides tablets, capsules, liquid orals and dry syrups, it is planning to manufacture injectables, effervescent tablets/powders, water for injection, eye and Ear Drops and ointments at Baddi. The benefits from this Greenfield plant have started and the company is fully geared to gain higher returns.
The company stepped up its capacities during 2007-08 and now able to produce 14,400 million tablets as against 5,400 million in the last year. Similarly, the installed capacity of capsules went up to 2,579 million from 1,125 million in 2006-07. The production of tablets increased by 31.8 per cent to 7,150 million tablets during the year ended March 2008 and that of capsules increased by 34.7 per cent to 1,716 million.
Ankur's net sales crossed the Rs 500-crore mark during the year ended 2007-08 and increased by 80.4 per cent to Rs 673.49 crore from Rs 376.29 crore in the previous year. The earning before interest, depreciation and taxation also translate a growth of 86 per cent and touched to Rs 108.33 crore as against Rs 58.22 crore. With the expansion programme in hand, the interest cost went up significantly by 93 per cent to Rs 24.93 crore from Rs 12.92 crore. Despite significant burden of interest, its profit before tax moved up by 90.6 per cent to Rs 75.02 crore from Rs 39.52 crore.
The investment in assets pushed its gross fixed assets to Rs 228.04 crore from Rs 127.96 crore in the previous year. Out of this, the plant and machinery figure worked out to Rs 90.96 crore as compared to Rs 26.83 crore in the previous year. The capital work-in-progress touched to Rs 331.49 crore as against Rs 245.03 crore. With expansion, its inventory level also increased to Rs 123 crore from Rs 62.18 crore.
As against the equity capital of Rs 12.70 crore as at the end of March 2008, its reserves stood at Rs 198.03 crore or 15 times. To cater new demands from international and domestic clients, the company has stepped up its borrowing to invest in assets. Its total borrowings went up to Rs 618.13 crore from Rs 351.79 crore in the year 2006-07.
Considering the growth in the business operations, the higher borrowings will not likely to create any major problem in short term. The global players are eyeing Indian companies for contract manufacturing due to cost advantage. The contract manufacturing business in India is growing at an accelerated pace with low manpower cost, availability of expert technical staff and better infrastructure facilities. With large number of products going off patent, the generic market is expected to be in the forefront. This will help Ankur to push its business in the coming years. The company management stepped up equity dividend of 22.5 per cent during 2007-08 from 18 per cent in the previous year. Considering the performance of first nine months of 2008-09 and previous track records, the company will be able to maintain its growth rate in the coming months.
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