Panchsheel Organics Ltd

Hello Investors,

I am creating this post since could not able to find a dedicated thread on Panchsheel Organics Ltd. (POL).

Industry Overview

• Panchsheel Organic Ltd. operates in the pharmaceutical industry.
• The current market size of this industry is ₹ 543 lakh Cr. (US$ 65 billion). India’s
pharmaceuticals industry is expected to reach US$ 130 billion by 2030, and US$
450 billion by 2047.
• During FY18 to FY23, the Indian pharmaceutical industry logged a compound
annual growth rate (CAGR) of 6-8%.
• Major competitors of POL are Hikal, Aarti Drugs, Gujarat Themis Biosyn, etc.

Company Overview

• Panchsheel Organics Ltd is a manufacturer of Bulk Drugs and Intermediate.
• Panchsheel an ISO CERTIFIED, GMP (Good Manufacturing Practices) approved, maintaining WHO Standards, a public listed company (listed on BSE) are manufacturer and exporter of Active Pharma Ingredients (APIs), Intermediates & Finished Formulations (both Human & Veterinary) having a wide experience of more than three decades in the healthcare field.
• The company has its corporate office in Mumbai and has two multipurpose manufacturing unit is situated in Indore (120 TPA to manufacture APIs) and Pithampur.

Products Categories

• Bulk Drugs & API Intermediates
• Steroids & Hormones
• Pharma Pellets of all ranges with different potencies.
• Pharma Formulations (Finished Products).
• Veterinary Products
• Agri Biotech products. (Bio Fertilizers, Bio Stimulants, Growth Promoters)
• Probiotics & Enzymes

Capex Plans

Phase 1:

• This capex plan is comprised of ₹ 40 Cr. at Pithampur, Indore (MP) for Probiotics & Enzymes.
• Capacity of 36-40 TPA.
• The funds were sourced through a mix of preferential allotment and warrants in September 2022 and the remaining done through Internal Accruals.
• Revenue potential is around ₹40-50 cr. once the full capacity is available in FY25.

Phase 2:

• This capex plan is comprised of an initial investment of ₹50-70 Cr. at DMIC Vikram Udyogpuri Biotech Park Near Indore (MP) for fermentation-based and API-based pharmaceuticals.
• Capacity for fermentation-based pharmaceuticals is around 36-40 TPA and for API-based pharmaceuticals is around 120 TPA.
• The funds were sourced through a mix of preferential allotment and warrants, Internal Accruals, and Debt/Equity (if needed).
• Revenue potential for fermentation is around 40-50 Cr. and up to 100-120 for API.

Corporate Actions

• The company has issued and allotted 17,75,950 Equity Shares on a preferential basis in September 2022.
• The company has also undertaken the bonus issue of shares in a 1:1 ratio in December 2021.
• The company is very regular in dividend payments with an average of 12-15% over the last 10 years.

SWOT Analysis

Strength:
• Very low debt (6 Cr. 3.7% of Balance Sheet).
• Constant growth in revenue and net profit.
• The pharma industry is expected to reach 130 billion US$ by 2030 which is currently at 65 billion US$ (More potential for revenue and profit).
• Rise in Cash Flow from Operation activity.
• Zero promoter pledge.

Weakness:
• Decrease in RoE (17% to 13%) this year.
• Decreases in RoCE (27% to 17%) this year.
• Dependency of products on the availability of raw materials.

Opportunity:
• Upcoming Capex plans help to generate more revenue and net profit.
• The Company has a wide range of pharmaceutical products in its portfolio.
• Export market opportunities.

Threat:
• Continues decrease in promoter holding.
• Rise in the cost of raw materials.

Key Clientele

• Swiss Granier Life Science
• Abbott
• Madras Pharma
• Akums
• Zydus
• Hetero Healthcare
• Ajanta Pharma Limited
• MacLeod’s Pharmaceutical Ltd.
• Aristo Pharmaceutical Pvt Ltd.
• Intas Pharmaceutical Pvt Ltd.

Key Financials

• Market Cap – 331 Cr
• Current Price – ₹ 281
• High / Low – ₹ 288 / 160
• Stock P/E – 23.4
• Book Value – ₹ 106
• ROE – 13.1 %
• ROCE – 17.4 %
• Price to book value – 2.64
• D/E – 0.05
• EPS – 11.98
• Promoter Holding – 56.12%
• Sales – 105 Cr.
• PAT – 14 Cr.
• Balance Sheet – 159 Cr.
• Borrowings – 6 Cr.
• Working Capital – 79 Cr.