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Wockhardt - Hale And Hearty

| 9/6/2012 9:03 PM Thursday

Not too long ago, Wockhardt was floundering in a vortex of debt and losses. In a remarkable reversal supported by a debt restructuring initiative and a consistent focus on R&D, the company now presents a value proposition for investors, says Shrikant Akolkar.



Companies with a high debt on their balance sheet will always be avoided by investors, especially in times when the interest rate scenario is not favourable. Needless to say, the stocks of companies that have been referred to the debt restructuring cell would be the last ones on investors’ minds. From the investment perspective, such companies are obviously a big NO as they find it very difficult to return to profits. Of course, there is one factor that cannot be ignored before you jump to any conclusion – the management’s willpower to stand up to odds and perform better. Generally speaking though, the cases where companies have actually managed to come out of such a mess are rare.

From huge forex losses to debt restructuring and a dirty balance sheet, pharma company Wockhardt has been through what can best be described as a hellish situation over the past five years. The company, though, has been among the rare cases, emerging victorious from these trying circumstances. All this strengthens our conviction in this company, which we believe is having a dream run on the bourses and helping investors create wealth. The bullish phase of the stock may have already begun some time ago (up 329 per cent on a YTD basis), but we believe that the counter has a whole lot of steam yet before it reaches its peak.

Background

This 45-year old company is among the first few Indian companies to have started business in the developed US market, and has always proactively engaged with the changes in the international pharma markets. Wockhardt is also the first company in Asia and outside of the US to have developed its own version of Recombinant Insulin. It is further developing insulin analogues at its research facilities. It has also been actively seizing the correct opportunities to acquire companies to grow inorganically, particularly in the European region.

 

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