Trend Spotting | Ashish Kacholia betting big on a little-known drug maker

MUMBAI: Renowned value investor Ashish Kacholia has made a hefty bet on a microcap pharmaceutical company based out of Haryana. The ace investor recently raised his stake in by 2.03 per cent to raise his total holding to 12.12 per cent, making it one of the biggest bets in his portfolio.

Beta Drugs is a pharmaceutical company specialising in branded generics in niche oncology therapy. The company is listed on National Stock Exchange’s Emerge platform for small and medium-scale enterprises.

Over the past year, the stock has risen nearly 400 per cent amid strong earnings for the financial year ended March 31, 2021, and hopes of it graduating to the main board of NSE.

Average volume on the counter has jumped 25 per cent in 2021 so far to 8,918 shares compared with that in 2020. The stock currently boasts of a market capitalisation of Rs 390 crore with a 12-month trailing price-to-earnings ratio of 33 times. Being an NSE Emerge-listed company, the stock does not have any analyst coverage currently.

In the previous financial year, the microcap company’s consolidated revenues jumped 28 per cent to Rs 116 crore, while consolidated operating profit grew 38 per cent to Rs 25.2 crore. Beta Drugs also managed to expand its margins by a neat 200 basis points to 22 per cent in the previous financial year.

The firm also managed to substantially reduce its short-term borrowings in 2020-21 and registered a 230 per cent increase in cash and cash equivalents to Rs 4.1 crore.

“An overall improvement in Ebitda was on account of higher sales of branded products and exports. Cost rationalization initiatives and backward integration due to acquisition of Adley Lab also pushed the margins higher across the board,” Rahul Batra, Chairman and Managing Director of Beta Drugs, said in the company’s latest annual report.

Batra said the company was witnessing “decent momentum” across all four of its segments of operations: own branded generics, exports, OEM and active pharmaceutical ingredients; and each of the segments are “poised for strong growth in 2021-22”.

“We expect that the company will continue to be in a position to gradually expand market reach and improve market share,” Beta Drugs said in its annual report.

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