Promoted by Mr. Suresh Kare in 1947, Indoco Remedies Ltd. (IRL) is engaged in research & development, manufacturing,
marketing and distribution of pharmaceutical products and services in the domestic and export markets. Basically, it
manufactures APIs, formulations and provides contract research and manufacturing services (CRAMS). Besides, it has a
unique revenue inflow from the dossier development and marketing them. Over the years, IRL has a built a strong brand
portfolio of 120 products across 11 major therapeutic segments. Earlier, it was focusing on acute therapies like respiratory,
anti-allergy, anti-infective, dental, ophthalmic etc which are volume led businesses. But of late, it has also ventured into
the high growth and lucrative lifestyle segment like anti-diabetes, cardiovascular, central nervous system, nutrition,
dermatology etc. It has a strong presence in the domestic formulations market with more than 75% of total revenue
coming from it whereas the balance 25% comes from export to over 33 countries globally including regulated and semi
regulated markets. Notably, the company boasts of 10 brands that are among the top five in their respective segments
with Febrex Plus, Cyclopam, Vepan, Sensodent and ATM being the most successful ones. In order to ensure a focused
sales approach, IRL has created separate marketing divisions namely Indoco, Spade, Warren and Surge-Radius, each with
specific therapeutic focus and working as an independent profit centre. This year the company created two more
divisions – Warren Excel and Spera.
Presently, IRL has five facilities for formulations - Goa Plant I, Goa Plant II, Baddi and the two plants at Aurangabad &
Tarapur for the non regulated market. Post acquisition of La Nova Chem and merger with SPA Pharma Ltd., IRL is now
backward integrated to manufacture API for captive consumption as well as export with two commercial manufacturing
facilities - one at Patalganga and the second at New Mumbai. Importantly, the company's Goa plant II is USFDA certified
for ophthalmic and injectables whereas the Goa plant I is approved by MHRA-UK and Darmstadt, Germany. To fully
integrate into the CRAMS space, IRL has set up a state-of-the-art standalone R&D Centre at Rabale, near New Mumbai
equipped with facilities like synthetic chemistry labs, F&D, AMD, regulatory and IPR cell. The unique feature of this R&D
lab is the Kilo-lab, which can produce one gram to several kilogram quantities of APIs and key intermediates for pre-
clinical phase to phase-III clinical studies. The lab intends to take up NDDS research and expects to commercialize the
first NDDS product in calendar 2008. In order to maintain the growth momentum for domestic formulations, the
company has been launching around 25 new products every year and is expected to maintain the pace over the coming
two years as well. However, it looks forward to capitalize on the export opportunities in the high margin regulated
markets like USA and UK. Under contract manufacturing, the company has 21 projects for Germany, 9 for UK and 6 for
Eastern Europe. More importantly, IRL has entered into the US market through a supplying pact with Nexus Opthalmic
and has already made one shipment. It has also finalised a long term joint venture partnership with Amneal Corporation,
New Jersey (USA) to develop and manufacture ophthalmic formulations for marketing it in USA.
IRL is taking initiatives to increase its presence globally. Apart from 14 projects in formulation research, it has undertaken
six projects for custom synthesis (molecules under Phase-I, II, III) with innovator companies. To summarize, IRL has laid
the foundation and is now poised to enter into a strong growth trajectory in the coming years.
Although the company doesn't have any capex plan, it intends to set up a second manufacturing facility in Baddi, HP,
with the same capacity as in the present plant over the next two years. Financially, the company has amalgamated La
Nova Chem (India) Pvt. Ltd., Indoco Healthcare Ltd. and the Pharma Division of SPA Pharmaceuticals Pvt. Ltd with
itself. For FY07, company recorded net sales of Rs.326 cr. with PAT of Rs.42 cr. thereby posting an EPS of Rs.35. It
reported encouraging Q1 results as well. Accordingly, it is expected to clock a turnover of Rs.375 cr. with net profit of
Rs.48 cr. for FY08 ending June 2008. This translates into EPS of Rs.39 on its current equity of Rs.12.30 cr. Hence at
reasonable discounting by 12 times, the scrip has the potential to touch Rs.475 (60% appreciation) in 15-18 months.
Investors are strongly recommended to buy at current levels.
