Futura Polyesters Ltd. (Rs. 33/-): Belonging to Sonata Software Group, FPL is engaged in the production of Polymers, PET, Preforms and Polyester Fibre with installed capacity of 57,000 tons, 20,000 tons and 39,000 tons respectively.

Its focus is on Speciality Products. In Fibre Business, it has launched more than 300 shades of Dope Fibre which is in good demand, apart from PTTV-Flex, Flame Retardent, High Shrink Fibre etc. PET Business is also growing rapidly due to increase in capacity by MNC Companies. Here also, company is focussing more on new products like Beer PET, Hotfil PET, High-Heat PET etc.

Financial Performance:

In 06-07, Polymer Operations were more profitable. Company has received U.S. Patent for Antimony free resins which has big potential. Fibre Operations were also better due to higher result.

Its performance has been reasonable and company is likely to report steady improvement in its performance in coming year. Based upon its financial performance, scrip is fairly priced.

However, FPL is being recommended as there will be value unlocking for its share holders in near future. FPL has a Chemical Division which in 2002 was renamed Innovassynth.

PROFILE OF INNOVASSYNTH

Innovassynth Technologies (I) Ltd. came into existence since 1st August 2002. The company is catering to the needs of customers in the area of 'knowledge based R & D services' for the last 5 years, which include:

- Contract R & D
- Custom Synthesis
- Contract Manufacture

In a very short period the company has established its name as a reliable partner in above area of activities and has joined hands with many prestigious companies in the field. The company has identified NUCLEOSIDES as a niche area and earned reputation as a supplier of various protected Nucleosides and a partner for Process research.

The company is involved in business with well-known companies in various fields like pharmaceuticals, perfumes, agro chemicals, and fine and speciality chemicals. With two sites at its disposal, one already active at Khopoli near Mumbai and the other in the development stage at Chennai, it has chalked out ambitious plans to move in to cGMP and FDA approved facilities and is on a fast track to achieve them.

The company has also formed a Limited Liabilities Company named "Austin - Innovassynth Technologies LLC." in USA in collaboration with Austin Chemicals Company INC., USA for strategic business development and project management processes. Austin Chemicals Company is a 130 million dollar U.S. based Company mainly involved in business of development and implementation for supply of intermediates and raw materials to major pharmaceutical companies in USA and Europe. This joint venture company will help Innovassynth in their business development and marketing effort for catering to major pharmaceutical companies across the world.

BUSINESS SEGMENTS

1. Pharma Intermediates: Company offers intermediate products required for bulk drugs as well as New Drugs under development. Being a service company, Innovassynth has no issues with regard to Intellectual property rights. Moreover, it has formed a joint venture company in USA with Austin Chemicals Inc., U.S., which acts as a marketing arm for Innovassynth.

2. Nucleosides and Nucleotides: Company has identified this as the 'Niche' area. It has been working in this field since last 4 years and developed the skill sets for handling mostly all types of compounds. Specialization is in the scaling up of the various reactions. Column chromatography on kilo scale is a special feature of our pilot plant for Nucleosides and Nucleotides.

3. Flavour and Fragrance Chemicals: Innovassynth has an established base in USA to market the Flavour & Fragrance chemicals in U.S. and European markets. Innovassynth products fulfill the odour demands of the products, which is a primary requirement in this field.

4. Nutraceutical Products: Innovassynth has recently made a foray into this area. It has identified a few products which are of synthetic and standardized herbal extracts. A full-fledged laboratory has been set up to develop the products. In the meantime, a synthetic product is already in production and being marketed in USA through its associate company in U.S. Another herbal based product is in the final stage of commissioning. A few more products are in the pipeline.

5. Fine Chemicals / Intermediates: Innovassynth is dealing with big U.S. catalog companies to develop and provide high value fine chemicals and intermediates. It is also negotiating with European Fine Chemicals companies to participate in the outsourcing program of these companies.

In a recent interview, CEO of Innovassynth Mr. B Sahu said:

"Nucleosides are used for making amidites, which, in turn, are used for synthesising oligo-nucleotides, which have potential to become the final medicines. Nucleosides are a totally new area and highly technology driven. It has the potential to become a very lucrative segment. With the advances in genetics, it would be possible to predict at what age one would get a disease. The new generation of medicines would be able to block the appropriate part of the DNA or RNA and completely cure these diseases. Till now, no medicines based on this therapy have come to the market, but there are about 16 products in the phase II and III clinical trials. A lot of research, worth-bns of dollars, is happening in this field.

The two leading research organisations in this area are US-based lsis Pharmaceuticals & Geron Corporation and both have been working with us for the last three years. We work as if we are their extended research arm, for developing raw materials for the final product. We are the only company in India manufacturing a wide range of protected nucleosides amidites - both general purpose and specialised - at plant level in kilo-scale for Geron and others. We will be exclusively working on developing amidites for lsis and Geron for all their future compounds.

The other area include fragrance and perfumery chemicals, in which we basically undertake synthetic chemistry work for companies in the U.S. and Europe. In pharma intermediates, we have a joint venture 'limited liabilities company' with Austin Chemical Company, U.S.. Under this venture, we are involved in supplying raw materials for Phase 1, Phase 2 and Phase 3 trials and also for replacing present commercial suppliers of raw materials.

In Speciality Chemicals, we work with many leading companies like Sigma Aldrich, Honeywell, Mitsubishi, etc. for chemicals used in a wide range of applications, ranging from digital photography to various biomedical applications. Apart from these areas, we are also into nutraceuticals - an area in which very few chemical and pharmaceutical companies have ventured into. We have already developed 2 - 3 products, which are being marketed in U.S. One is synthetic gugglesterone (having cholesterol reducing property), which we manufacture at 98.6% purity level and at 100 kg. scale. Another product developed by us in this area is hydroxyisoleucine (it increases insulin level). We are the only company manufacturing this product at 75% purity. We have a tie-up with a U.S. company, which does exclusive marketing for these products in the U.S.

We have five manufacturing facilities, apart from a plant manufacturing coloured chemicals. We also have a large contract manufacturing facility for Ciba Speciality Chemicals (Switzerland), in which we manufacture a speciality chemical exclusively for them since the last four years. We have five laboratories at Khopoli - one is for necleosides, one for nutraceuticals and the rest are for pharma and other chemicals. We also have two 'kilo-labs' - one for nucleosides and the other for non-nucleosides.

Innovassynth, along with Shasun Chemicals and Drugs Ltd. and Suven Pharmaceuticals Ltd., have joined with Austin Chemical Company to form the 'Life Sciences Alliance'. The alliance helps us to jointly offer our services whenever a global pharmaceutical company scouts around to outsource some of its activities. The basic reason for this alliance is to present a complete package of capabilities and facilities to a foreign customer. For example, while Innovassynth provides its R&D based non-GMP capabilities, Shasun provides its GMP infrastructure and expertise and Suven its clinical facilities. Similarly, the exclusive capabilities at each are shared for a common goal."

Rationale to buy FPL: With above credentials and business model, Innovassynth has a good future. In 07-08, Innovassynth is likely to achieve of Rs. 60 crs. We are unable to estimate profit figures for the company.

Now, share holders of FPL will get 5 shares of Innovassynth against every 11 shares of FPL. Share Holders will not be required to make any payment for this allotment which means, shares of Innovassynth are free of cost. RAKESH JHUNJHUNWALA AND RAHEJA GROUP ARE HOLDING APPROX. 20% EQUITY OF INNOVASSYNTH. HENCE, IT IS ESTIMATED THAT INNOVASSYNTH WILL BE LISTED AT BSE ANWHERE BETWEEN RS. 60-80.

Suppose, investor buys 110 shares of FPL for Rs. 3800/-, he will get 50 shares of Innovassynth which should sell for more than Rs. 3000/-. Thus, investor will be able to recover his original investment by selling Innovassynth Shares. But, he will be still left with 110 shares of FPL. Record Date is around 4-6 weeks away. We estimate that before Record Date only, share price of FPL may go upto Rs. 45-50. Thereafter, on ex-basis, FPL may quote at minimum Rs. 28-30. Further, FPL will issue 8:10 Rights Shares at par (after writing out Face Value of Rs. 6/-). Thus, Rights Issue is also very attractive which will be additional bonanza for FPL share holders.

Giving the fact that R J is invested in Innovassynth since 5 years, there may be big hype at the time of Innovassynth listing and investors will reap rich harvest. In sum, investment in FPL at current levels should give minimum 100% - 150% appreciation in coming months. Buying strongly recommended. Lastly, Zenotech is a loss making company with big Equity of 28 crs. and still, share price is Rs. 170-180 mainly because R J is share holder of the company.


HEMANT K. GUPTA
Centre for Development of Financial Treasure
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