Venus Remedies - SME Pharmaceuticals - LKP Advisory

Venus Remedies promoted by Pawan & Manu Chaudhary is a research driven pharmaceutical company with a clear focus on Antibiotics & Oncology. It is double the size of Suven and has revenues of more than Rs4bn and trades at Rs290 with a market capitalization of Rs280crs. Its star antibiotic - Vancoplus has secured more than 7 international patents. Venus has a clear focus on Oncology and has got the DCGI approval to conduct Phase-3 clinical trials on its NCE-VRP 1620 - a cancer molecule.

Venus launched half a dozen research products over the last four years and Anti-Microbial Resistance - AMR has been a key focus area in Antibiotics. Its products Sulbactomax, Vancoplus, Tobracef, Pirotum, Potentox and Supime are some of its leading products and account for almost a fourth of its Rs4bn revenues.

Similar to Suven, Venus too spends 20% of its revenues on R&D and during FY'11 & FY'12 spent 68crs and 82crs on R&D of which only 13crs and 14crs were charged to the P&L account while the rest was capitalized, a practice which we do not like. Hence what seems to be attractively valued at 5PE in effect ends up making losses if the entire R&D spend is charged to P&L. Venus Remedies enjoys a tax holiday at its facility in Baddi and claims a 200% weighted tax benefit on R&D.

Although the promoter holding is 34%, both the promoters together hold only 22% in Venus of which almost 90% is pledged. Rating Agency ICRA has assigned a BBB rating to Venus Remedies. We however do not have any rating on Venus Remedies at present.

Source : Equity Bulls

Keywords