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Deeptha Rajkumar

Wellington , Dec. 15

FDC Ltd, a bulk drugs and formulations company, has been witnessing sustained interest on the bourses in the recent past.

The company, which has appreciated by 31 per cent over the past one month, touched a new intra-day high of Rs 96.50 on the BSE & Rs 96.20 on the NSE on Monday.

The stock has appreciated by almost 268 per cent from a low of Rs 25 on March 10, 2003.

Rumours of the company planning new USFDA and DMF (drug master file) filings in the regulated markets did the rounds of the market. There was talk of an acquisition on the anvil.

Company officials were not available for comment.

Brokers maintained that sheer valuation has been sustaining interest in the counter.

"FDC is a zero-debt company with investments of Rs 72 crore in liquid instruments. With the current focus on the high margin areas in the domestic and export market, we expect these return ratios to improve. We expect the ROCE to be 36 per cent in 2003-04 and 39 per cent in 2004-05 and the RONW to be 30 per cent in 2003-04 and 31 per cent in 2003-05,'' said Mr S. Jayaraj, an analyst with Cholamandalam Securities Ltd.

According to him, with the improvement in the market and the corresponding improvement in company valuations, the company could see an upside of Rs 105 very soon.

"Given that it is a cash-rich company, it is open to augment its product basket or market reach by way of acquisitions. This, it says, could be funded by its liquid investments. If this were to happen, the price target could see a further revision upwards.''

FDC is well known for its brands such as Electral and Pyrimon in the domestic market. It is looking to strengthen existing product baskets, enter into high growth lifestyle segments and reach out to tap the South Indian market.

"Electral was being spuriously manufactured in the northern and western regions. However, the Government has taken some action on this. Hence sales are expected to improve on the domestic front on this count too,'' Mr Jayaraj said.

Exports remain a major trigger for growth, contributing to 15 per cent of the company revenue in 2002-03. Analysts expect this to go up to 21 per cent of sales by 2004-05. Bulk drugs dominate the export basket.

The company, which has a marketing tie-up with Aspen Pharmacare of South Africa, also recently announced a similar such tie-up with the US-based Spectrum Pharma. It is reportedly planning marketing joint ventures in CIS countries and sub-Saharan Africa.

Brokers said that once export picks up, the dependence on the anti-infectives in the domestic market would reduce, which could narrow the valuation gap between FDC and its peers.

The stock ended the day at Rs 92.10, up 3.14 per cent with around 4.51 lakh shares traded on the BSE. On the NSE, it closed at Rs 91.80, up 2.51 per cent with around 7.5 lakh shares traded.

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