Nevertheless, the company has managed to post a 303 per cent growth in net profit to Rs 5.08 crore. The Brics report estimates the revenues to touch Rs 79 crore in FY06 and Rs 155 crore in FY07.
The first phase of unit-2 at the new US FDA standard plant in Baddi in Himachal Pradesh was completed in seven months and commercial production commenced in October 2005. The first phase consists of anti-cancer section with a capacity of 20,000 pieces per day and cephalosporin section with a capacity of one lakh vials. The company has spent Rs 15 crore on this facility.
Chakraborty adds that the new plant would give tax benefits bringing cost competitiveness. It would enjoy an income-tax holiday for five years and excise exemption for 10 years. The company expects the benefits of unit-2 to reflect in the second half of FY06. It availed a term loan of Rs eight crore for the project and would fund the remaining phases through internal accruals.
On the flip side, as this small company scales up its operations, it faces several challenges. Chakraborty adds that managing new products, marketing through new channels in different regions and maintaining the current scorching pace of growth would be the tasks on hand.
Moreover, in different areas of operations, Venus faces competition from players like Novartis, Astra Zeneca and Lupin. But, analysts point out that the new FDC of Venus is better in comparison with Voveran of Novartis.
While Voveran needs to be administered four times a day, with resistance strain developed over time, Venus' FDC is less toxic to the body and needs to be administered only once a day. The estimated market size for this FDC is $ one billion worldwide and is growing at a pace of about 18 per cent, according to analysts.
At an annualised EPS of Rs 24.16, Venus trades at a P/E of 15.06x. This is comparable with its peers in different product categories, viz. Novartis (19.74x at an EPS of Rs 28.88) and Lupin (21.35x at an EPS of Rs 44.04). Astra Zeneca trades higher at 38.7x at an EPS of Rs 84.28.
A new small-cap company like Venus may be expected to trade cheaper. But analysts argue that the company's growth potential, strong R&D base and projected upside on the stock price, justifies the valuations. Chakraborty adds that his report stands by its growth projections for FY06 and FY07.
