Insights on the Indian API, Formulation and CRAMS via a recent report from o3 Capital.

Tailwinds (China+1): 10% market share switch from China can double Indian API market.

Headwinds: Rising input costs in China due to power outage + freight hike. India has high dependency.
Indian API landscape

Scale, capacity, DMF filings, focus segments/ therapy areas and leading products.

#Divis #LaurusLabs #Granules #AartiDrugs #Solara
Growth strategies adopted by API companies

- Diversifying beyond API and CRAMS into Formulations, Biologics and Nutraceuticals.

- Laurus: Forward integrated into drug development via contracts from NATCO, Citron, Dr. Reddy + foray into new markets + new segments (Biologics)
Solara - Merger with Aurora L/S triples CRAMS revenue + customer & geographic diversification + new product (ARV)

Divis - Backward integration in key products like Naproxen (70% share) - lowest-cost producer. 1200 cr Capex.

Aarti Drugs - Forward integrated into Formulations
Understanding the scale and margin profile of key API companies.

Segment snapshot: CRAMS players command higher EBITDA margins than pure API companies (28% vs 15%) and thus higher valuations.

Valuation multiples metrics of all companies in API, Formulations and CRAMS
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More from @MultipieSocial

20 Dec
Decent correction in recent Tech listings in India.

We visited Motilal Oswal’s Wealth Creation Study in Digital Era - and sharing ket learnings & success traits, learnings from global models and possible winners in India.
Let’s start with how wealth is going to be created in the coming years.

The report claims that value is migrating from atoms (businesses dealing in physical matter) to bits (businesses that are digital in nature) across the globe.
How are companies classified as atoms and bits?

- Atoms - smallest element of physical matter (eg. cos in cement, autos, pharma, steel, etc sectors)
- Bits - smallest unit of information that can be stored in digital form (eg. Google, Yahoo, eBay, Oyo, Airbnb, Zomato, etc)
Read 24 tweets
19 Dec
Hello everyone👋Last week, ITC hosted its 1st ever investor call, but didn't include what existing shareholders wanted to hear- Concrete demerger plans.

A 🧵on- "Will the apparent value unlocking opportunity in ITC, really unlock value"? Image
First, look at ITC's segment wise contribution in total sales & EBIT:

- Cig. sales consistently declining since the last ~7 yrs.
-Rev. contribution of ex-cigarette segments is significant but the EBIT contribution is not material. Image
Management is planning to demerge & list- Hotel, FMCG-others & Infotech businesses separately.

This is being conceived as value unlocking for existing shareholders because of notion that there will be multiple expansion in individual segments.
Read 6 tweets
15 Dec
QSR chain market has been the largest contributor in terms of profitability to the overall Indian food services sector & has been growing at a flourishing 18% CAGR compared to 8% CAGR of industry in last 6 years.

A 🧵on one of the top QSR players Devyani International Ltd (DIL)
Devyani has stores of KFC, Pizza Hut & Costa coffee in its Core brand category which contributes 58%, 25% & 2% to the total revenues of the company.

Non-core brand category includes few international & other brands like Vaango, Food Street etc.

KFC is the largest store format of Yum brands in India, of which 55% is operated by Devyani followed by Sapphire foods- 41% & Yum itself operates 4%.

DIL operates 2 types of KFC stores, a) large format with full service dine in b) small format with limited seating.

Read 19 tweets
7 Dec
Imagine leaving a high-flying career in US and returning to India to build software. In the 90s. Building digital maps for a complicated nation when no one uses them. Competing with Google. Almost winding up a few times. Finally succeeding.

A thread on MapmyIndia (MMI).
Maps are synonymous with Google Maps, so what’s special about MMI?

For one, they chose their battles carefully. When Google Maps entered India in 2005, MMI made a choice - to focus on the enterprise segment (B2B and B2B2C) instead of taking on the tech giant & burning cash.

Over two decades, MMI has mapped over 98% of India's road network, 10.5 mn locations at street level across 7.5 lakh+ cities & villages.

They claim their mapping is deeper & more accurate than Google, which shows in their growing & profitable B2B clientele.
Read 21 tweets
19 Nov
In an address today at 9 AM, the prime minister repealed the three farm laws that have long been a subject of political debate.

A thread explaining what were the three laws and what were the proposed changes and pros/ cons.
Note: Pls. avoid political comments here.
Agriculture is the backbone of rural economy - supports ~70% of rural households. However, far from efficient - crop yields lower by 30-40% vs global standards (lower output per acre), only 45% of sown area is irrigated & agri-capex has remained dismal at 2.2-2.3% of GDP.
This limits production. Also, there are inefficiencies in the distribution process - too many layers between farmer and consumer, high pilferage and wastage due to poor warehousing and cold-storage infra, and non adherence to MSP, among others.
Read 12 tweets
13 Nov
CLSA Global has published a big sell report on Indian equities - "On borrowed time. Ten reasons to book profits on India." The report has been published by their Chief Equity strategist for Emerging markets.

We are highlighting their rationale for the community.
Thread 1/n
India has delivered the highest returns amongst Asian peers: 147% since March 2020 lows (29% in CY 2021 YTD).
Ex-Asia, it has been outpaced only by the net energy exporters of Saudi Arabia, UAE, Russia and Kuwait, which gain from rise in energy prices.
CLSA cites 10 key risks for India:

#1 High energy prices:
India imports most of its energy needs (83%, 56%, and 30% of its oil, gas & coal consumption resp.)

Their premise is that Indian equities underperform when avg of real coal and oil prices exceed $100. We are there.
Read 14 tweets

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