The DNA of our Company was rewritten in those challenging years: wesought opportunities in spaces the broad market was not looking at; we embraced theunknown and we developed an insight into what not to do if we were to succeed.
This is a challenging world in various ways.
The global economy slowed during the year under review trade barriersIncreased tariff disputes emerged between large economies and the COVID-19 pandemicbrought the world to a near standstill from March 2020 onwards.
The complement of these realities resulted in unpredictable changeswithin the global pharmaceutical sector warranting a shift in responsiveness from themedium-term strategy to the short-term tactical. Besides with social distancing likely toemerge as the new norm there is a possibility that the medium-term strategy may need tobe evolved on a periodic basis.
The big message then is that while the strategic goalpost appears to bemoving all the time one still needs to respond to stakeholders' needs to enhanceorganisational value and address our overarching purpose of making a positive differenceto the people at large.
If there is a single message that one needs to reinforce then it isthat Caplin Point remains committed to make a difference to the lives of patients In Itsaddressed markets.
In a world of change our objective continues to remain a constant.
To assess where we are headed it may be worth exploring where we havecome from.
Nearly 20 years ago Caplin Point was virtually a non-performing assetfollowing years of sustained losses. This sequence of unprofitability was derived from ourengagement in a conventional business and strategy. The result is that the Company's shareprice declined to a low of Rs. 2 against the face value of Rs. 10; at that time theCompany's market capitalisaiton was a mere Rs. 3 cr
With virtually no alternative but to exit conventional geographies andtherapeutic segments the promoters did what one would have least expected in thecircumstances: shifted attention to West Africa. This decision warranted courage onaccount of a difference in languages cultures risk to personal life safety securityliving conditions and business orientation.
In the relative absence of competition the Company did not justcapture market share but helped grow those markets.
As the business grew from that point onwards the Company extended to
contiguous Francophone markets on that continent generated surplusesand thereafter moved even more westwards - to Latin America where the Company continuesto operate grow and prosper
These details may be of academic interest for many; at Caplin Point webelieve that the DNA of our Company was rewritten in those challenging years: we soughtopportunities in spaces the broad market was not looking at; we embraced the unknown andwe developed an insight into what not to do if we were to succeed.
The result of these learnings during the period of a few years is thatwe did not just turn our small company around; we created wealth for all those who heldshares in our Company.
Addressing the immediate challenge
The big question that I have been asked is whether we can continue toremain relevant in a post-COVID-19 environment.
My answer is that we expect to deepen our relevance during thischallenging phase for some good reasons.
One the pandemic has affected engagements with medicalpractitioners as a result of which prescription-driven offtake has been replaced byportal-
influenced or pharmacy-influenced offtake where Caplin Point isextensively present.
Two we believe that the biggest asset for a distribution andmarketing company lies in the right inventory - by size and scope. In view of this theCompany rationalised a part of its inventory moved from noncritical to critical productsfocused on the fastest moving products recommended by WHO and continued to deliver toconsumers a superior package (excellent value for money consistent volumes wide varietyand portfolio novelty).
A number of competing companies manufacturing in Central and SouthAmerica continued to face problems in accessing APIs from China and India ; Caplin Pointwas better placed in accessing formulations out of India and China. By the virtue ofpossessing a shorter tail-to-head we increased our access to consumers through brick andmortar pharmacies and our health portal strengthening offtake.
It is necessary to communicate that the core of our business - ouroperations in Latin America - continued to remain profitable and cash-positive through thechallenging first quarter of the current financial year when most of our competitors weresqueezed for products and liquidity. The sustained growth of this business provides uswith the resources to strengthen investments in our other businesses before they reachcritical mass.
The differentiating competitive factor in a challenging globalpharmaceutical sector is not as much one's response to marketplace shifts; it is therobustness of one's business model and long-term strategic direction.
Caplin Point's business model is unique in a number of respects.
We are a number of companies in one: a marketing company with deepinsights into Latin America; a company seeking to enter the world's largest market withproducts a company engaged in exporting formulations outsourced from accreditedmanufacturing units in China; a company extending to the manufacture of APIs and a CROcompany.
For companies to engage in these spaces would have stretched managerialand financial bandwidth; at Caplin Point we have funded each of these businesses throughnet worth accelerated a number of them to break-even point and possess attractive revenueand profit visibility in each.
The complement of these businesses has spillover benefits into adjacentbusiness spaces. We are possibly the only company of our size in our sector to haveacquired this wholesomeness marked by the Company's ability to sweat resources andopportunities better
The next level
At Caplin Point most of what we expect to achieve is beginning to getvisible. Our US business has taken off and should report appreciable growth during thecoming years; we intend to extend to the front-end where we market our own products in thelargest pharmaceutical market of the world. We believe that this represents the start ofour multi-year growth journey in the largest pharmaceutical market of the world. Ourmarketfacing retail growth in Latin America should continue to generate attractive cash;the integration into APIs is likely to generate an attractive payback.
Considering that these businesses have been largely invested in thebig question we have been asked is the direction in which Caplin Point is headed. Webelieve that during the current financial year we will be able to generate a sizablesurplus from what we have invested in our business. The only effective deployment of thatsizable resource would be in a game-changing acquisition that strengthens our ability tomarket pharmaceutical brands acquire facilities (or ANDAs) in US or Latin America andenter other business opportunities.
Should the Company decide to grow inorganically it could graduate usto the next orbit strengthening our respect for being an outperforming organisationpunching perpetually above its weight.
CC Paarthipan Chairman