Widely read:
Torrent Pharma is a mid-level pharma company that ranks 20th among domestic companies. Torrent is particularly strong in cardio vascular system (CVS) and neuro-psychiatry. In December 2013, Torrent acquired Elder Pharma for ₹2000 crore. Here are Torrent's growth drivers:
Strength in chronic therapies. Torrent is particularly strong in fast-growing chronic therapies like cardiovascular (CVS), central nervous system (CNS) and anti-diabetic segments. Close to two-thirds of the company's revenues come from chronic segment. It has entered new verticals of dermatology and oncology.
Benefits from Elder acquisition to accrue. The acquisition of Elder Pharma opened up the women's healthcare and pain management portfolio for Torrent. Elder brought 30 brands with it along with Shelcal - a calcium supplement that had a market share of 30 per cent. The best thing was that most of Elder's products were OTC and thus out of price control. Torrent is looking at increasing the contribution of Elder's brands through price increases and new launches. Torrent also acquired 1100 medical representatives as part of the deal.
Exports to gain traction. The contribution of exports declined from 59 per cent a year-ago to 55 per cent in Q2 mainly because of higher contribution of Elder brands. The US accounts for a little less than 14 per cent of Torrent's revenues. Torrent plans to launch 8-10 products in FY15. It has received 50 ANDA approvals and 21 pending filings. Latin America is Torrent's third largest market after Europe and US. After a period of slow-growth, Brazil sales seem to have picked up with sales up 28 per cent (y-o-y). The growth was led by price cuts, volume growth and institutional business. Torrent has guided 15 per cent growth in Brazil.
The risks. Improved sales in Brazil has to be sustainable. Also with 55 per cent of revenues from abroad, currency risks remain. It also remains to be seen how Torrent will pare its debt taken to acquire Elder.
Valuations and outlook. Torrent appears to be on track to all-round improvement. The India operations stand to gain from Elder's brands, margins are looking up, the company plans to to scale up US operations and the Brazil recovery is an added sweetener. At current price, it trades at 0.48 times its three-year PEG ratio. Buy.
This article was originally published on January 14, 2015.
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