Massachusetts Institute of Technology (MIT) has bought a 1.45 percent stake or 66 lakh shares in smallcap Pharma player, Markans Pharma. This is a reasonable chunk of the company acquired through block deals on April 15.
As per data available on the exchanges, MIT picked up this stake through its investment management company at Rs 158 per share.
MITIMCo, short for MIT Investment Management Company, operates as a unit of MIT and is responsible for managing and supervising the investment activities of the institute's endowment, retirement, and operating funds.
Markans Pharma is a 'chota-packet, bada dhamaka' in the stock market. Despite minimal information or market buzz about the stock, it has quietly become a multibagger. Over the past year, the stock has rewarded shareholders with 125 percent returns.
Apart from MIT's newly bought stake, nine other fund houses have a cumulative 4.23 percent ownership in the drugmaker. Aside from that, Quant Smallcap Fund holds a 2.79 percent stake and OrbiMed Asia IV Mauritius FVCI has a 10.88 percent ownership of the company.
The company's product portfolio is skewed towards over-the-counter segments and soft gel products mainly in the US and UK markets. The thing about OTC drugs is that the segment is much more stable as compared to traditional generics that often face concerns of price erosion.
HDFC Securities believes that the over-the-counter (OTC) segment in the US is poised for stable demand with minimal price erosion. Considering that Marksans Pharma derives approximately 74 percent of its sales from these products, this trend is expected to contribute to a robust margin profile for the drugmaker.
Another growth driver for the company is its plan to capture a significant share of the OTC market and launch 34 new, niche, high-value products in the UK over the next two years.
An analyst covering the pharma sector at a domestic brokerage also regarded Marksans Pharma's strong hold in the OTC segment, its solid channel and a robust portfolio as the biggest growth multipliers for the company.
"Companies operating well in the OTC segment can also command a higher valuation as they are not bothered by issues like price erosion that generic players have to face," he said, on the condition of anonymity.
Meanwhile, its consistent revenue CAGR of 15 percent over FY18-23, fanned by the shift to frontend distribution, product launches, market share gain in the existing products and increased capacities, also sparked considerable optimism.
The company also raised funds through preferential allotment of shares in recent times, which it is utilising towards expanding the capacity at the acquired Goa plant of Tevapharm India, which would increase its overall Indian capacity to 16 billion units (vs the current 8.4 billion).
Given the fund raise, acquisition of Tevapharm India (completed in April 2023) and scale-up of its facilities, strong numbers in FY23 and 9MFY24 and better earnings visibility, HDFC Securities expects Marksans Pharma to deliver a 16 percent CAGR in revenue and a 20.3 percent CAGR in net profit over FY23-26.
"Also, Marksans Pharma's strong cash rich balance sheet would support inorganic growth through acquisitions of Abbreviated New Drug Applications (ANDAs), and capacity expansion. With a focus on backward integration, operating margin is expected to improve in the medium term," the brokerage stated.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
