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#3: Return of the Foreigner, the Indian Pharma Opp!
China, Plus One may be a good thing after all.
Can you spot a trend here? This was just in last six months:
Be it pharma (more on that later), utility solar, specialty chemicals or Jio…foreign funds and strategics are lapping up India.
Or so it seems.
There are three forces:
Number one: distressed demand is “unlocking” value in domestic cos, thus making them attractive for foreign capital flows.
(also helped by insolvent promoters; Covid loan moratoriums; pressure to exit from “non core”; outstanding dues from Discoms etc.)
Two: geopolitical headwinds are almost magically creating a favourable India narrative for the world.
(“China, Plus One plus Atma Nirbhar”; the India-American realignment)
And three: a fear of politically flavoured economic backlash is helping break the usual policy level gridlocks…rather moving actionability on steroids!
(privatisation; manufacturing linked incentives; push for electric, clean energy, et al)
Motivated by all the foreign love for Indian pharma…we also looked at some stocks:
Piramal Enterprises (bought on Monday): Stock appeared to trade at a discount with poor NBFC biz numbers muddling overall financials.
Pharma part looks much better. Piramal does a lot of contract manufacturing which should hopefully benefit from the China shift.
Then there’s a plan to de-merge and IPO the pharma biz separately in the medium term. With Carlyle investing…that should surely be on the cards.
Last, the family has married well 🤣!
Natco (under watch): This is a mid market firm specializing in oncology and hep c, into generics, APIs, and contract manufacturing. Low leverage and available cheap. Demonstrated a rally this week so would wait and watch.
Dr Reddy’s (under watch): Leading end-to-end player - into generics, branded generics, APIs, formulations, and contract manufacturing.
Recently reported stellar results.
Would love to buy but expensive, so waiting till can see some price action.
On other pharma players: either too expensive or too levered
(reviewed Cipla, Lupin, Aurobindo, Cadilla, Divi’s, Glenmark, Alkem, Alembic, Ajanta, and Strides)
Part of WhatsApp Arkives, an on-and-off curation of interesting snippets and “takes” churning on my phone.
(cataloged as “#” followed by a reference number “x”)
Disclaimer: The views expressed above are the views of Arkvega Partners LLP, and are subject to change at any time based on market and other conditions. This is neither an offer nor solicitation for the purchase or sale of any security, and should not be construed as such. References to specific securities and issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. We strongly advise you to do your own research and consult an accredited investment advisor before investing based on what you read in a newsletter. Arkvega Partners LLP or its employees may have exposure in the financial instrument discussed above and can close positions in the future without prior intimation.