Omkar’s Portfolio Analysis and Discussion

The superior risk profile of Ajanta pharma because of diversified geography presence in branded generics comes at the cost. The margin hit this quarter and last quarter was because of following reasons

1. Derivative hedging loss
2. Pricing pressure in US and Euro fluctuation
3. Freight cost

All these 3 factors are related to non-India business. As per my thesis, this diversified geography model (especially in branded generics) will help Ajanta to mitigate geography specific regulatory risk better and create superior wealth over long term compared to only India focussed branded generic business like Abbott. Therefore I am ready to accept the cost which comes along with it. Abbott’s P&l will always have less moving parts which makes it very attractive but risks comes from nowhere and that is why I am ready to accept margin volatility for some period as long as brand franchise is intact. Therefore I still believe Ajanta pharma deserves better allocation in my portfolio as compared to Abbott

Current Allocation
Ajanta Pharma ~10%
Abbott India ~3 – 4%

Eris Life science – As per my judgment – business model focussing on acquiring brands for growth is less attractive to me as compared to launching brands organically. I am not convinced with capital allocation abilities of Eris’s management