FUTURA POLYESTERS LTD. - Buying strongly recommended

Buying strongly recommended.
A Good Medium Term Buy

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: (this years not included)
(cr.) 31/03/06
Sales 563.30 521.40
Depreciation 24.79 23.92
PAT 10.62 -11.40
Equity 52.42 52.42

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.


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

- 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

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.


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

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

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

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.