Stock Review: Wockhardt Pharmaceutical

Wockhardt Pharmaceutical is the fourth largest player in pharmaceutical industry. This company has gone through financial distress in financial year 2008-2009 due to forex losses. If I see the entire sales for last year, it was around Rs 1,800-1,900 crore. Looking at the pharma deals, it is happening around 8-9 times sales. This stock's enterprise value is less than Rs 7,000 crore.

The company has not been out of distress even as of now but we feel that the residual value that the company is trading at is definitely cheap. If we see the restructuring process that the company has undergone recently by selling their land for Rs 200 crore in Mumbai, along with that they have gone for hiving off their non strategic assets to other players to make sure that their financials are on backdrop.

There is only one catch over here is how much time this could take. The biggest challenge for the company is to come out of the woods because FCCB conversion has gone forward by five-years for QVT, a hedge funds based in US. The entire aspect if I see the stock is trading at least 50-60% discount to peers like Ranbaxy.

If you see the entire business—insulin business—it is one of the pioneer in that particular business. If I see the entire market cap, it is approximately Rs 1,600-1,800 crore, it is definitely a cheap buy given that we expect the value of the crore assets after reconstructing the debt would be around Rs 3,500 crore for the equity player and enterprise value would be around Rs 8,400 to Rs 9,000 crore. We are trading at 50% discount for Wockhardt.