Balaxi Pharmaceuticals

Saw the interview of Mr. Ashish Maheshwari the chairman & MD. Sharing my notes.

• There are 2 limitations which the current exporters from India face, 1. They don’t control distribution in other countries 2. They concentrate their exports to the finished dosage forms for which they have factories. Like they would be concentrated in either tablets or capsules or injectables but no one really provides everything. Balaxi disrupts that by exporting in all dosage forms in sufficient quantities.

• There is just 1 other listed & 1 other unlisted company having similar business model. There is a high entry barrier because you need good human resource management, cultural integration, product registration & infrastructure in countries to which you export.

• Till now, 100% of their production is outsourced to WHO GMP compliant factories in India, China & Portugal. They are in 7 regulated markets currently where WHO GMP is the norm. After 4-5 years, they plan to expand in CIS countries, South east Asia where WHO GMP is not the norm. Instead, you need a EU GMP factory.

• WHO GMP factories do contract manufacturing at very reasonable prices but EU GMP factories charge a lot. That’s why they are setting up their own EU GMP factory because there are 2 other advantages too. 1. They would be able to control the quality & would be manufacturing their best sellers of Central America in their own factories. 2. The EU GMP produced medicines have higher efficacy (ability to produce the desired result) than WHO GMP medicines. So, people will get better medicines at the same price which would further help the company grow their sales.

• Before setting up stores, the company has to register its products with the government which takes time like 2 or 3 years which also is a pretty decent barrier to entry. Another advantage of having an EU GMP factory is that you can given priorities for the product registration if you have them. EU GMP is slowly becoming the new norm.

• They will probably start production in the EU GMP plant by April 2024. They would make tablets, capsules & injectables there while still outsourcing liquids, ointments & infusions. It would give backward integration to them as well to help them expand.

• They also started selling biscuits in Angola pre covid in 2020. The demand has been decent. The opportunity they saw was that India is one of the biggest exporters of biscuits with Angola & Dominican republic being our top 2 importers. With the company having a great presence in both of the countries in the pharmaceutical segment, they had a nice brand recall which would probably help them. Currently the margins in this business is thin but they plan to setup a plant after the sales reach a certain amount which would then shoot up the margins by 60-70%.

• His son & daughter would be next in line to run the businesses. His son currently handles the Central American business while his daughter handles the FMCG business.

Disclaimer :- Not invested, tracking the company.