Mukul Agrawal Takes Fresh Position in Pharma Stock

The recent influx of retail investors into Indian equities represents a significant shift away from traditional investments like gold, real estate, and bank deposits.

For perspective, the number of stock trading accounts zoomed from 41 million (m) in 2019 to 140 million in 2023.

However, many of these investors are new to the market. To actively keep track of the market, many of these investors closely track the investments of superstar investors in India like Rekha Jhunjhunwala, Ashish Kacholia, Mukul Agrawal, and Vijay Kedia.

These gurus share valuable market insights from time to time. Their buy-and-sell transactions also tell us where the market could be headed or how the overall sector could perform.

Recently, Mukul Agarwal re-entered a pharma stock.

Who is Mukul Agrawal?

Mukul Agrawal is a prominent investor in India, who is known for his microcap stocks and smallcap stock picks.

His style of investment involves a mix of offence and defence.

He follows an offensive strategy for most of the time after proper analysis. He also keeps two separate portfolios for investing and trading.

Which Pharma Stock Did Mukul Agrawal Buy and Why?

The stock in question is Jagsonpal Pharma.

Jagsonpal Pharmaceuticals Limited is primarily engaged in the manufacturing and trading of pharmaceutical products and active pharmaceutical ingredients (APIs).

Ace investor Mukul Agrawal made a fresh move in Jagsonpal Pharmaceuticals during Q2FY25, acquiring a 1.8% stake, which amounts to around 4.63 lakh equity shares. Prior to this, in the March 2024 quarter, Agrawal also held a 1.8% stake.

This raises a question: If he held the same stake in March, he must have either exited the stock in the June quarter or his holding would have been reduced to less than 1%, as his name did not appear in the shareholder list for that period.

While the exact reason behind Agrawal's decision to buy into Jagsonpal is not immediately clear, there are several factors that likely influenced this move.

Here's a closer look at the potential motivations behind the investment.

#1 Sale of Faridabad Facility

In July, Jagsonpal Pharmaceuticals announced that it would sell its non-operational Faridabad facility to Regalia Laminates LLP for Rs 410 million (m).

The company had previously disclosed its intention to divest the facility in November 2023, and the sale is expected to be completed on or before 31 October 2024.

The Faridabad unit had not been operational for some time and did not contribute any revenue in the past year. Selling the facility is part of Jagsonpal's strategy to streamline its operations and focus on more profitable and productive assets.

This move could be one of the key reasons why Mukul Agrawal chose to re-invest in the company. The divestment of an underperforming asset may signal a more focused and efficient business model, which could improve profitability and unlock value for shareholders in the future.

#2 FII & Mutual Fund Buying

Another potential reason behind Mukul Agrawal's decision to re-enter Jagsonpal Pharmaceuticals could be the consistent buying interest from Foreign Institutional Investors (FIIs).

Since June 2023, FIIs have been steadily increasing their stake in the company. The FII stake in Jagsonpal has risen from 0% in March 2023 to 2.35% by September 2024, indicating growing confidence in the company's future prospects.

Quarter End	23-Mar	23-Jun	23-Sep	23-Dec	24-Mar	24-Jun	24-Sep
FII Stake (%)	0.0	0.3	0.4	0.5	0.7	1.1	2.3

Source: Equitymaster

FII buying activity often serves as a positive signal for the market, suggesting that institutional investors see value in the stock. The steady increase in their stake reflects a belief that the company may be on the path to improved financial performance.

This could have influenced Mukul Agrawal's decision to buy back into the stock, as institutional support is typically seen as a sign of credibility and stability.

In addition to FII interest, mutual funds also increased their exposure to Jagsonpal Pharmaceuticals for the first time in the September 2024 quarter.

Their combined stake in the company grew from 0% to 0.1%. While this may seem modest, it highlights a shift towards institutional recognition of the stock's potential, which could bode well for future growth.

These moves, coupled with the company's ongoing strategic initiatives, may have reinforced Agrawal's decision to invest once again in Jagsonpal.

Recent Developments

• Stock Split
  
  On 23 October, Jagsonpal Pharmaceuticals Ltd announced its decision to approve a stock split, pending shareholder approval.
  
  The company plans to split each equity share with a face value of Rs 5 into shares with a face value of Rs 2 each.
  
  The record date for this subdivision will be set after the equity shareholders' approval, which the company intends to seek shortly via postal ballot. This process will also involve amendments to the company's Memorandum and Articles of Association.
• Strong Q2 Results
  
  In Q2 FY25, Jagsonpal Pharmaceuticals reported robust financial performance. Revenue from operations reached Rs 747 m, marking a 29.2% increase from Rs 578 m in Q2 FY24.
  
  Net profit rose significantly to Rs 114 m, a year-over-year (YoY) increase of 53% from Rs 75 m. Operating EBITDA for the quarter grew to Rs 184 m, reflecting a 46% rise from Rs 126 m in the same period last year.
  
  The EBITDA margin also improved to 24.6%, up 2.8% from 21.8% in Q2 FY24.

A Close Look at the Financials

For FY24, Jagsonpal Pharma recorded a 11.8% YoY decline in revenue, totalling Rs 2,087 m. The net profit for the year declined 15.7% to Rs 225 m, primarily due to lower sales.

Jagsonpal Pharma's Financial Snapshot (FY20-24)

(Rs m, Consolidated)	FY20	FY21	FY22	FY23	FY24
Revenue	1,586.0	1,879.0	2,176.0	2,367.0	2,087.0
Revenue Growth (%)	(-5.0)	18.5	15.8	8.8	(-11.8)
Net Profit	79.0	171.0	189.0	267.0	225.0
Net Profit Margin (%)	5.0	9.1	8.7	11.3	10.8
Return on Equity (%)	7.1	14.0	14.2	17.8	13.2
Return on Capital Employed (%)	8.9	18.4	20.3	23.5	18.0

Source: Equitymaster

Over the past five years, its revenue saw a compound annual growth rate (CAGR) growth of 4.6%, while net profit grew 25.5%.

Jagsonpal Pharma has maintained a strong return on equity (RoE) and return on capital employed (RoCE), averaging a healthy 13.3% and 17.8%, respectively.

What's Next?

Looking ahead, Jagsonpal Pharmaceuticals has set ambitious goals, aiming for 12-14% revenue growth along with an improvement in operating margins by 100-150 basis points.

The company plans to utilise its cash reserves strategically for targeted acquisitions.

Jagsonpal recently introduced MemUp, a therapy designed to mimic the body's natural hormones for a balanced approach to hormone replacement therapy (HRT). Additionally, the company plans to roll out more tailored formulations in the upcoming quarters to strengthen its product lineup.

With growing demand bolstered by the "China Plus" strategy, Jagsonpal is well-positioned to capitalise on industry shifts, setting the stage for sustained growth.

How Shares of Jagsonpal Pharma have Performed Recently

The share price of Jagsonpal Pharma has declined by 50% in the past one month.

Over the past one year, shares of the company have rallied 52%. In the past five years, shares have delivered multibagger returns of over 2,121%.

The company touched its 52-week high of Rs 610 on 6 November 2024 and its 52-week low of Rs 273.6 on 27 March 2024.

About Jagsonpal Pharmaceuticals

Jagsonpal Pharmaceuticals Limited is an Indian pharmaceutical company that manufactures and trades pharmaceutical products and active pharmaceutical ingredients.

Its formulation products include Divatrone, Maintane 500 injection, Maintane 250 injection, Maintane Tablet, Indocap capsules, Metadec 50 and more.

Jagsonpal's products are used in gynecology, orthopedics, and other areas.

Jagsonpal outsources manufacturing processes through loan licensing arrangements, and supplies raw materials directly to manufacturers.

Jagsonpal has 17 brands, with several ranked among the top five in their respective molecule categories.

For more details, see the Jagsonpal Pharma company fact sheet and quarterly results. For a sector overview, read our pharmaceuticals sector report.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...