The key strength of the company is mint-derivatives—it is one of the largest exporters of these products
Moneylife Digital Team
Chandigarh-based Surya Pharmaceutical manufactures and markets active pharmaceutical ingredients (APIs) or bulk drugs, drug formulations and bulk intermediates. It has six manufacturing units for intermediates, APIs, menthol and its derivatives, formulations and two research & development (R&D) centres.
Surya Pharma is one of the major Indian players in the beta-lactum and cephalosporin range of antibiotics. But the key strength of the company is its focus on mint-derivatives. Surya Pharma is one of the largest exporters of mint/menthol derivatives. It has manufacturing plants in Banur (Punjab), Panchkula (Haryana), Baddi (Himachal Pradesh) and Samba (Jammu & Kashmir).
Mint is in great demand around the world for confectionery, chewing gum, cigarettes and toothpastes—and also for cosmetics like shaving gels and shampoos. In India, mint is used in paan masala, gutka, zarda and scented betel nut.
Surya Healthcare, a subsidiary of Surya Pharma, has started its pharmacy retail operations in Delhi, the National Capital Region, Punjab, Haryana and Chandigarh under the brand name ‘Viva’. Over the years, Surya Pharma has established a global footprint in fulfilling the requirements of clients across 90 countries. The company has expanded its network of overseas offices to China, Singapore and the US (California) to further strengthen its position as a leading exporter of pharmaceutical products.
For the financial year ended 31 March 2010, the company’s net profit increased almost 41% to Rs75.24 crore from Rs53.34 crore while net revenues rose by around 56% to Rs1,143.75 crore from Rs733.48 crore in the last fiscal. The company recommended a dividend of 15% (i.e., Rs1.50 per share) for FY09-10. Its net profit for Q3 FY10-11 rose by 30.82% to Rs28.01 crore over the corresponding period of the previous fiscal. It had posted a net profit of Rs21.41 crore in the year-ago period. Net revenues of the company rose to Rs398.08 crore for Q3 FY10-11, compared to Rs298.08 crore in the same period of the last fiscal.
Surya Pharma has entered into marketing tie-ups for launching global therapeutic brands in Indian markets. It has signed an exclusive agreement with US-based premium footwear brand Crocs Inc for marketing its therapeutic products in India and SAARC (South Asian Association for Regional Cooperation) countries. These medical shoes are aimed at diabetics and are sold at dedicated outlets throughout India. The company is in talks with leading cosmetic and nutraceutical brands from the US and Europe to obtain distribution rights for India and other countries.
Surya Pharma’s subsidiary had acquired US-based over-the-counter (OTC) analgesic drug manufacturer ActivOn for around Rs99 crore in December 2010 with global marketing rights. ActivOn is sold through established marketing networks—which includes leading retailers like Walmart, Walgreen, CVS and Rite Aid, etc. This acquisition would offer Surya Pharma an attractive opportunity to launch its OTC/FMCG products in US markets, using ActivOn’s distribution set-up.
India is a $12-billion market with strong growth in domestic formulations (medicines), and the demand is being fuelled by economic development and strong purchasing power. The domestic pharma sector outperformed the Sensex in 2010, recording a gain of nearly 34%.
The company’s average growth in revenues and operating profit over the past five quarters has been 57% and 48%, respectively. Its average operating margin is 15% and return on net worth is 25%. Its ratio of market-cap to revenues is 0.24, while its market-cap to operating profit is just 1.42 times. Buy the stock at around Rs20.
(This report was first published in Moneylife magazine, in the edition dated 24 March 2011, that was available on the newsstands on 10 March 2011)
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