Biocon Ltd

Biocon came out with an IPO in 2004 with a price band of Rs 270-315. It then gave bonus shares 1:1 in 2008. It trades currently at Rs 213.75 (BSE close 12-Jun-09) with P/E of 38. But that should not deter one from looking further into the details. Even if the stock does look expensive currently, much of it is because of bad Net Profit figures for several consecutive quarteres- 3 if i am not wrong. Forex losses reduced its profits.

When the results came out on the 28th of April this year, KM Shaw said that all the forex loss that was going to take place- has taken place. No forex loss (due to the older positions) now. If one looks at the Net Income figures for Biocon, they show an almost 60% growth. From Rs. 1053.7 crore (March 08 cons), it has clocked 1616 crore this year ended March (cons). Business was booming, but unfortunately it could not capitalize on a higher Net Income. And it is due to this fact- this rise in the topline, that i think it trades at P/E of 38- and continues to rise. There are expectations that the new year would be better in terms of both- topline and bottomline.

Apart from the accounts, Biocon announced some interesting things recently.On 29 May, it announced the launch of BASALOG - long lasting basal insulin for Type 1 & Type 2 Diabetics. On 23 May, it announced about Bristol-Myers Squibb and Biocon's Syngene opening new R&B Facility at Biocon Park. Before that, on 9th March '09 it announced an R&D partnership between Syngene and DuPont. And on the 21st of Jan, it announced a partnership with Sapient Discovery to expand integrated drug offerings. Now the common thing here in these announcements is R&D. As the largest biotech company of India, Biocon focuses on R&D which has been the key factor in its growth story. Biotechnology was called the next big thing- which it turned out to be. But it has the potential to be bigger than what it is- and companies that focus its R&D will make it bigger than what it is- commercially and non-commercially. Lower costs in India have already created outsourcing opportunities in R&D. This sector has the potential of doing what IT did recently.

So, what we have here we have a company that is expanding its markets for increased commerce, as well as expanding its product catalog. These are the fundamental characteristics of a well managed enterprise that is sincerely attempting to grow its business. There are companies and stocks of companies that ride on speculations. And then there are companies like Biocon that create real shareholder value.