RPG LIFE SCIENCE LTD :- Keep an eye on it.

Market Price:  Rs. 91/-

BSE Code: 532983

FV/ Shares: Rs.8/-

Market Cap: Rs. 152 crore

Promoter Holdings: 61.83%

      Perhaps it may not be prudent if giving positive views on a Pharmaceuticals Company, particularly a part of infamous for wealth creation to their Share holders,  which reporting stagnant financials since the past several years and suffering from a warning letter found from the USFDA (US Foods and Drugs Administration). I am talking about the RPG group's pharmaceuticals and Biotechnology company, RPG Life science Ltd. Subsequently the partition of the RPG group businesses to RP Goenka's two sons in 2010, almost all companies from the two groups have re-rated (company financials and Stock performance) in a big-way, especially Harsha Vardhan (HV) Goenka's group companies including CEAT Ltd, Summit Securities, Zensar technologies and KEC International Ltd. But still, RPG Life science, the pharmaceutical arm of the HV Goenka's group stands a paradox to it. 

       RPG Life Science Ltd, formerly known as Searl India Lts is engaged in the business of Formulation, APIs and Bio technology segments. It has three manufacturing units; one in Navi Mumbai, Maharashtra and Two in Ankaleswar, Gujarat. As per the FY 2014 balace sheet 62% of the company’s revenue come from Formulation, 22% from APIs and about 9% from Bio technology. The company also undertakes contract product development on the back of strong R&D. Gastrointestinal, Respiratory, Pain Management and Nutritional are the acute therapies and Cardiology, Anti-Diabetic, Oncology and Nephrology therapies are the Chronic speciality therapies' focuses area of the company.

          In May 2013, RPG life Science got a warning letter from the USFDA for violation of current good manufacturing practices at its two plants each at Ankaleswar  and Mumbai. After it got the warning letter from the USFDA, the company have aggressively started corrective actions to meet the regulators requirements. However, normally the estimated time for corrective steps and complete adherence  with the stipulation indicated by the USFDA is two years. Now it is almost over one and half years, we hope that the company will get the approval from the regulator sooner than later. Anyway, the management of the company is full confident about the future functioning of the company. It may be the reason they are sharply increasing their holdings through open market purchase. During the past four quarters, the promoters of the company have increased more than 5% stake from the open market. We have already seen the same type of accumulation in the CEAT Ltd's and Summit securities' counters ahead of its sharp rally on the market.

          Even though the company holdings EU GMP, WHO GMP and TGA, Australia certification for the API facility at Navi Mumbai and UK MHRA certification for Ankaleswar palnt, the warning letter from the USFDA adversely affected the business of the company in the last FY.  For the HY ended September 2014. the company reported a sales turn over of Rs.119 crore and Net loss of Rs. 6.4 crore on an equity capital base 0f Rs. 13.3 crore. 

      To build a strong and sustainable product portfolio, the Company has undertaking a backward integration for Di-phenoxylate and Azathioprine. It has plans to introduce new APIs every year in various key therapist segments. With successful achievement of USFDA certification, the Company plans to penetrate developed  markets with new APIs. However, in the short term there may be some uncertainties about the company's performance, but in the medium to long term growth story is intact. Investors with some patience can consider to accumulate this stock on declines only for medium to long term objective.