Bilcare Ltd. (Code: 526853)                                                                          (Rs.359.05)

(Bilcare was recommended earlier on 21 March 2011 at Rs.417.10. Since the share price has fallen almost 15% in the current bearish market, it is a relatively safer bet. It has also posted decent results for the June 2011 quarter and is expected to remain comparatively unaffected by the global debt crisis.)

Bilcare Ltd., promoted in 1987, is a niche player in the pharma packaging industry with expertise in delivering research-based packaging solutions. From a modest beginning as a small packing material supplier, it has evolved into a global organization with 13 state-of-the-art manufacturing facilities and 25 representative offices across Europe, USA and Asia serving over 2500 customers globally including Johnson & Johnson, Pfizer, Merck, Novartis, Glaxo, Dr Reddy’s, Ranbaxy, Cipla etc. to name a few. It has a strong team of over 2300 professionals globally and has 15 subsidiaries including step down subsidiaries. Its manufacturing facilities in USA, UK, Germany, Italy, Singapore & India are ISO 9001, ISO 14001, ISO 18001 (OSHAS) and GMP certified and the products manufactured are USFDA DMF and Canadian DMF registered. Its Singapore facility is the world's largest multi-functional barrier film processing plant. Today, Bilcare’s competence lies much beyond packaging as it provides effective and affordable solutions that enhance the speed and quality of drug discovery and helps build/protect brands by ensuring the delivery of genuine medicines to patients.

Bilcare operates through following three Strategic Business Units (SBUs):

(1) Pharma Packaging Innovations: It offers a comprehensive range of pharmaceutical packaging solutions, from product-specific research to brand-building materials and design. Apart from addressing the issues related to retention of drug shelf-life and patient compliance, it also addresses concerns like brand communication and prevent counterfeit drugs being delivered to the markets. Over the years, Bilcare has researched, developed, registered & commercialised dozens of unique packaging solution, which no other company can match. Bilcare Optima, Bilcare Ultra, Bilcare Secure, Bilcare Protect, Bilcare Crispack, Bilcare Lamiflex, Bilcare Silnova, Bilcare MetNova are some of its popular trademarked offerings. Its unique material solutions like coloured metallized substrates, image-embedded films and foils and micro text printing, have helped healthcare majors in ensuring product sanctity and authenticity. Its extra efforts in developing a technology for printing UV visible ink on aluminium substrates have strengthened its anti-counterfeiting measures. Bilcare strongly believes in Intellectual Property Rights (IPRs) and is the only company in its space to have filed almost 150 patents for which it received an award from CII-DIPP in 2009.

(2) Global Clinical Supplies: It serves the global pharma and bio-pharma industries with clinical trial materials (CTM), services and complete project management. Its services for solid, semi-solid, liquid and biotech CTM satisfy a broad range of requirements from pre-formulation R&D, manufacturing, analytical services and clinical supplies packaging and labelling and worldwide distribution and returns and destructions accountability. Some of its technological processes include batch manufacturing, product & protocol design, kits assembly and IVRS systems. With the best-in-class manufacturing plants and facilities on three continents, this division delivers end-to-end solutions that support a client's drug through the entire clinical trial life cycle. Thus being an R&D driven organization, Bilcare focuses on developing cutting-edge solutions that enable the pharmaceutical industry to realize significant qualitative and measurable cost and time benefits in the 'drug discovery to market' value chain.

 (3) Bilcare Technologies: This SBU focuses on creating next-generation solutions for anti-counterfeiting, security and brand protection across a wide array of industry sectors. In association with IBM and using breakthrough research in nanotechnology, Bilcare has developed a unique security technology called nonClonableID™ fingerprint that can be seamlessly integrated into any Supply Chain system, providing totally secure and irrefutable real-time product identification and authentication. It also provides a reliable means for effective track-n-trace and e-pedigree of products across the supply chain - from manufacturer to consumer. These tamper-evident fingerprints are irreproducible and cannot be duplicated even by Bilcare. The company is working closely to expand the application of this technology to agrochemicals, luxury & retail, heritage assets, aviation, automobiles, identification, security and by government for document and currency security. Thus, the horizons for its growth are immense.

Apart from above operations, Bilcare also manufactures & supplies high quality cores and overlays for all kind of cards for banking, mobile, loyalty, club memberships, casinos etc. It is also a leading supplier of a wide range of rigid mono and multilayer films for food & FMCG industry. It even makes high quality films for sectors such as printing, decoration, shrink films, visual packaging, technical applications, office materials and furniture.

In FY10, Bilcare acquired a foreign company much bigger than itself after it took over the global film business of the Rs.1500 crore INEOS Group through an all cash deal of Rs.600 crore. INEOS is a major player in pharma blister packaging, films for printing and decoration, shrink film for sleeves, capsules and plastic credit cards.

In FY10, Bilcare expanded its facilities both in India and abroad in the last few years. It started a new facility at Crickhowell in UK on stream. From 2012, which will generate a large demand for blister packaging from generic formulation manufacturers. As Bilcare already has its drug master file (DMF) in place, it is ready to exploit such emerging opportunities in USA, where 40% of the global pharmaceutical trade takes place. Simultaneously, it is also enhancing efforts in markets that offer faster growth. Secondly, there is a considerable shift from conventional packaging materials to advanced technologies to overcome problems of counterfeiting. As per latest reports almost 8% of the drugs imported into USA are counterfeit and are either ineffective or harmful. Apart from a loss of revenue to the government and the pharmaceutical companies, it endangers the patient’s life. By providing sophisticated & hi-tech packaging solution Bilcare, will benefit from this change. In fact, its nonClonableID™ solution has the potential to be deployed across 80 billion packs worldwide, allowing the end users to determine the authenticity for usage and thus realize the full efficacy of the drug delivery for consumers. Till date, over 50 global pharma companies have audited Bilcare’s Indian and Singapore facilities and it expects long-term contracts for packaging material from many of them.

For FY11, Bilcare reported consolidated sales of Rs.2287 crore with net profit of Rs.150 crore posting an EPS of Rs.63.50 on its equity of Rs.23.55 crore. Even for the latest Q1FY12 it has announced a decent set of numbers with consolidated revenue at Rs.836 crore with PAT of Rs.39 crore i.e. an EPS of Rs.16.50 for the quarter. Presently, the company has a debt of almost Rs.1000 crore with no FCCB outstanding. For the current fiscal, it is expected to clock a turnover of over Rs.3,000 crore with net profit of Rs.170 crore. Thus at the current market capitalisation of Rs.850 crore, this stock is trading extremely cheap at a forward P/E multiple of just 5 times. Considering its niche business operations, research strength and manufacturing capabilities, it deserves much better valuation. The scrip can easily appreciate 50% within a year. Considering the current global scenario, it is a relatively safe stock and a solid investment option. Investors are strongly recommended to buy now and add on declines.