BILCARE LTD - PHOENIX FROM THE ASHES ?

Success of business depends on the outcomes of  calculated risks.A single miscalculation may lead to serious problems or even ends in total collapse of well run firms.Many Indian companies including large and  led by well known promoters caught on wrong foot few years back. Those are the companies initiated large  acquisitions just before the sub prime led global recessions. Leveraged buyouts creates severe pressure on their balance sheets on one side and lower demand for products on the other side worsened the situation.Many Indian promoters learned valuable lessons from this crisis and some  are still fighting for a come back.On the other side this unfortunate events this offering some attractive  opportunities to investors with high risk appetite to invest in companies with ability to come back, at attractive valuation . This week Let us look into one such opportunity – Bilcare Ltd

Bilcare was a high flying stock for past many years and its stock price touched a level of Rs.1830 in 2008.It was the  darling of  Foreign Institutions,Indian Mutual Funds and well known HNI investors including Mr .Rakesh Jhunjunwala.RJ is still holding 8 % stake in this company . Its business units are mainly classified into three divisions viz – Packaging Innovations,Global clinical Supplies and Non Clonable Id Technologies .Bilcare is the market leader of Blister packaging in India with more than 50% market share . It can’t be called as a packaging company but an R&D driven packaging solution provider mainly for pharma sector.As on March 31, 2013 Bilcare has filed over 167 patents worldwide .Out of this 34 have been granted and balance under process at various stages.Its Indian business is only a small  part  - 20 % of total turnover - and company is a preferred supplier of packaging solutions for world pharma leaders like Bristol-Myers Squibb, GlaxoSmithKline, Johnson & Johnson, Merck, Novartis, Pfizer, , Sanofi-Aventis, Teva ..etc .Company operating from 9 manufacturing facilies across the globe including India,US,Germany,Singapore, and Italy.Company supplying its products in more than 50 couturiers through own marketing channels.On a consolidated basis company reported more than Rs.3000 Cr sales in last financial year.

 

Reason for pain 

As I mentioned at the beginning ,many Indian promoters caught on the wrong foot due to large acquisitions just before the beginning of recession. Bilcare done the same mistake ( since nobody was aware about the arrival of recession in advance we may not call it as a mistake) which acquired the Switzerland headquartered plastic film making unit of  INEOS at a cost of Rs.607 Cr . One third of this all cash deal funded by the company’s internal accruals and the rest raised in the form of bank loans .With this acquisition INEOS’ film units manufacturing facilities in  US ,Germany ,Italy and India ( Caprihans Ltd) came under the fold of Bilcare  .Company expected good growth post acquisition of this unit which commands more than 20% market share of high quality polymer films in the entire world.. Contrary to the expectation of the management ,Bilcare become a victim of world wide recession . In addition to lower demand growth ,company could not service its large debt which taken to acquire the INEOS division. This market leader struggled for working capital and debt repayment and reported huge loss . Share price nosedived from Rs.1800 level to Rs.40 level.

Why this stock

Yes,there is many companies from listed space facing similar situation .But I believe this is something special due to following reasons.

1)      Promoter’s capacity to  realise mistakes ,learn lessons  and bring back to normalcy with quick and accurate decisions is an important factor in business . I believe ,its promoter Mr Mohan H Bhandari is capable to handle the situation and able  to bring back from the verge of collapse .

2)      Bilcare is not a small company .It is a large organisation with sizable market share in its products not only in India but globally too.

3)      Company having good assets across the globe

4)     BILCARE  is not mere a packaging company but driven by  strong R&D capabilities and innovations with many patented technologies in its credit.

5)      Company already started initiatives to reduce its debt by divesting non core assets and already sold its US and European Global Clinical supply related operations for Rs.340 Cr .Management also promised to concentrate in further debt reduction initiatives in the ongoing financial year.

The most Attractive Point 

R&D is the key strength of Bilcare Ltd. Company successfully developed an innovative  first-of-its-kind technology named  - nonClonableID ( nciD) .This is a nano technology based solution which  can be seamlessly integrated with products, ID cards and documents to provide a totally secure and reliable identification and authentication solution.Even this technology developed to fight against Counterfeiting and piracy of medicines ,Company is extending its scope to a number of fields including e-governance ,security ..etc. Pharma makers are loosing crores of Rupees due to counterfeit medicines and such medicines are estimated as high as 30 % of the total sales. This is a big headache for global pharma giants and nciD technology is emerging as a viable solution for this issue . Company claiming Biocon and Luping already started using this technology in medicines  exporting  to certain countries .This invention recently won the National Intellectual Property award 2014 by Government of India. ( Details  HERE ). Management made representations to  RBI to introduce this technology which can help to make Indian currency notes fake-proof in the future. This is a complete track and trace system which can be widely used in the field of export of any product. Since many technical terms are involved , it is better to go through the below links for more understanding about this technology 

1 ) Innovative Product of the month - Non Clonable Id Technology 

 

2)  New tech can check whether your medicine is fake

3)  Poker gaming to benefit from Non-ClonableID Tech

4) CSIR okays Bilcare’s nonClonableID tech to authenticate drugs

5) Track & Trace: A distant dream for domestic supply chain

6) Non ClonableID Technology for Secure Public Service delivery System

7)  Smart’ cards for Bryan Adams’ show in Pune

8) Bilcare’s nonClonableID Technologies -1

9) Bilcare’s nonClonableID Technologies -2

I believe this is a break through in fighting against piracy in many fields. New govt's expected initiatives in e-governance may open up big potential for this technology .Company already signed agreements with state governments for similar projects

Conclusion

This is not a stock for skeptics or critics but for optimists and risk takers . Many negatives are still there like promoter pledge ( pledged to avail loans for INEOS acquisition) ,huge debt,loss in last FY ..etc..etc.etc . But above all , I strongly believe, It is a must buy in the portfolio of an extreme risk taker. Company’s latest quarter consolidated figures indicating an early sign of revival . European economy is in a recovery path ,promoters taking steps to reduce debt , company improving in R&D front and inventing technologies with good potential. If nothing will happen – you will loose Rs.70 but if something happen on positive side ( probability is high)  this stock still possess potential to regain four digit figures  in few years down the line . This may be one stock which can change your fortunes .Yes ,risk is there ,patience is needed - take it or not .Stock listed only in BSE  ( Scrip Code - 526853) and CMP is Rs.72  . 

BILCARE IN BRIEF  LINK

Link to Company website HERE

Corporate video HERE



Disc: It is safe to assume that I have vested interest in Bilcare Ltd.