Positive on API manufacturers, prefer Sequent Scientific: Prakash Diwan

In a chat with ET Now, Prakash Diwan, Director - Altamount Capital Management shares his view on makers of active pharmaceutical ingredients (APIs).

ET Now: Is there any stock that you would like to recommend?

Prakash Diwan: We have been tracking a lot of midcaps, but we have not come across any stock which we can recommend to buy. It is because we feel that the market could probably give you better opportunities in May post the earnings season.

That said, we are looking at a couple of interesting names in the chemical pharma space including Sequent Scientific. The stock has been in the news after promoters bought some 11 lakh warrants of the company. If you look at the business model, the company has turnaround — it has become profitable after last year’s losses. It would be worth watch seeing how other players are performing in this particular space (API).

As far as Sequent is concerned, this company in in to a niche activity, where we have very smart scaled-up players who are in the API business.

Even as we talk about how good generic players are doing, it is these active pharma ingredients (API) makers who make those guys grow faster.

They have some very good niches. All of them have some niche specialisation which is difficult to replicate. Remember, these companies do not compete with each other in the API space. Hence, it is a peculiar thing which I am discovering in a trade. There is a host of companies in that space which were evaluating.

They are almost about like 20 players with decent scale, good market cap, clean management and have been in business for at least 20 years or more. You do not find them because they are not branded like the Sun Pharma, Ranbaxy, Cipla and DRL. These are quite players who supply to all of these big guys. Sequent is also one of those top contenders there . And since promoter have bought warrants in the company, it does show the confidence that probably the management has in its own business.