Unichem Labs: Cash-Rich, Owner-Operated Pharma Business

Krishnaraj Venkataraman and Siddharth Mehta-Thomas of India Intrinsic Value Advisors presented their in-depth investment thesis on Unichem Laboratories (India: UNICHEMLAB) at Asian Investing Summit 2019.

Thesis summary:

Unichem Labs is a 70+ year-old, trusted pharmaceutical firm supplying drugs globally, including to important markets such as the U.S. and Europe. It recently sold off the poorly performing India business at a good valuation. The transaction will help fund Unichem’s fledgling U.S. business, which has long been cash-starved despite a large opportunity.

Medium-term business uncertainty has driven the stock price to eight-year lows. The shares recently traded at modestly above available cash, rendering the company’s six highly prized plants available for free.

CEO Prakash Mody has “skin in the game” as he owns a majority of the equity. He has compounded equity value at 25% annually for decades.

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About the instructors:

Krishnaraj (Kimi) Venkataraman is the Managing Partner of Kimi & Partners, an investment firm he founded in 2008. Kimi’s previous work experience includes Tata Steel and P&G India, as well as several business startups in India, including Marketics which was successfully sold to WNS. Kimi has been an investor for more than 20 years and, after reading Warren Buffett, has been investing in undervalued Indian stocks. Kimi lives in Bangalore, India, with his wife and two daughters.

Siddharth Mehta founded Beaconsfield Investment Management in 2010. Prior to that he worked as an analyst covering Asian equities at Fairfax Financial Holdings and as an associate analyst at Credit Suisse equity research. Born and raised in Chennai, India, Siddharth completed his bachelor’s of science degree from Purdue University. He is also a level 3 candidate in the CFA program.