Saturday, June 26, 2010

No need to throw stones

After my posting on ORCHID CHEMICALS ,I have received few mails stating that Orchid is a company like Satyam Computer and its promoter Mr Raghavendra Rao is similar to Mr Raju of Satyam.I have a different opinion on it and it is a continuation of my earlier post on Orchid Chemicals.

I think Mr. Raghavendra Rao does not committed any fraud.
When we recollect the past, Mr Rao was a first generation
entrepreneur with lot of idea but without deep pockets.
Since he doesn’t have enough money ,he forced to dilute
equity in favor of others (mainly for various FII’s )  and also
raised fund through FCCB’s. Using these funds company
created top class facilities for manufacturing. After these fund
raising exercise Mr.Rao’s stake in percentage terms come
down drastically in the company.
In order to increase his share holding in
the company Mr Rao wants to purchase shares from open
market .For this purpose he pledged his existing shares with
India bulls and Religare and bought money from them  for
market purchase of shares of his own company  .
Unfortunately at this time the subprime crisis worsened and
one of the share holder BSMA forced to offload their entire
stake in the open market. Such a huge sell off led to a sharp
drop in its share price which led to margin calls by India Bulls
and Religare , Mr Rao could not meet his obligation and even
forced to sell already bought shares .All these unfortunate events
led to a sharp fall in share price of Orchid from Rs.240/- level to
just Rs.56/- in 2009.On the other hand ,in the past two years
due to unfavorable volatility in exchange value of rupee company
also suffered loss in foreign exchange and FCCB   front .To save his
company,Rao had no other option than selling part of  his company
itself for escaping from debt trap.That’s why he sold the  injectable
business to ‘HOSPIRA’ last
year .But he didn’t took the amount personally and the entire amount
came to the company itself .Company realized an amount close
to 1900 Cr  and used Rs.1400 Cr out of it for repayment of loan
.Balance amount is with the company for further acquisitions and
repayment of  FCCB . It take the first move in this direction by
acquiring US-based generic marketing company Karalex Pharma
in this month. Orchid also declared a dividend of 100% for this FY.
Sell off of  the  injectables business is expected to result a revenue
loss of  $ 90 mn for Orchid ,but I strongly believes that Orchid will
compensate it through it new products and by increasing the volume
of existing products in two year time. Moreover  Mr Rao already
indicated that he is going to increase the promoter stake through
creeping acquisition and which is already visible in latest share
holding pattern. This is the real story , and I believes that it is
entirely different from ‘Satyam Saga’ . So there is no reason for
comparing both these companies and throwing stones to a
promoter like Mr.Raghavendra Rao. Some unfortunate things
happened in the past and Mr Rao may have learned valuable
lessons from past happenings and in my opinion he is capable of 
steering the company to new heights.
When there was a crash in share prices ,both Ranbaxy and
Serum Institute of India (a Poonawala Group Company) bought
huge quantity shares of Orchid  from the open market  itself is a
testimony for the quality of the company and its products.
So I believes that if there is any problems like the previous one
occurred due to higher  percentage of pledged shares  there will
be many takers for this 1300 Cr company .In nutshell Orchid is a
‘Class ‘company  for investment  if you have sufficient patience
with a three year target of  Rs.400/-.


  1. This is truely amazing, valupick sir this post is something that stands against the crowd.


  2. Many thanks for your valueable information.

  3. This comment has been removed by the author.

  4. Your research is amazing and I love the way you steer people away from a get rich quick mentality. You are a providing a great service for small time investors like me.


    Words nahi hai Thareef karne ke liye, hamara great guru sharma ji, kya bole ga Sacchi Niklega. great. great. great..

    he told only one thing. 100 shares of shirpur in comming years is equivalent to one Mercedes Benz.

    It is true. Shirpur is going to Rock.. Hold it. dont sell it. Its goldmine....

  6. sir you are simply gr8 do you have yahoo id??

  7. Sorry man, I have no yahoo id,feel free to contact at

  8. I do agree with Manju...about valuepick.
    A man with selfless attitude and a guiding retail investors towards value based investing and not giving dreams of quick riches...which all other paid websites do today........that is to promote GREED.

    Thanks Valuepick....and we salute you for continously guiding us.


  9. Dear Friends

    I really believes that ,Stock market is not a place to make quick money.But if we do hard work and show sufficient patience we can make return better than from any other investment opportunities, from here.Expecting only your prayers.

  10. Appreciate your clarification.

    I too have high regards for this company and have held on to this through the highs and lows.

    I see their transparency into operations and share price fluctuations despite low promoter holding as a sign of their class.

    it has a sure place in my longterm portfolio. I just hope their recent efforts & calculations pay off for this company.



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