BQ Edge: Why Jeevan Patwa Is Betting On Chemicals And Pharma

That’s according to Jeevan Patwa, an individual investor who spoke to BloombergQuint’s Niraj Shah at a BQ Edge session.

If investors have the patience to hold the stock through different cycles and if they put in the hard work to make reasonable assumptions about the business and visualise the future of the company, Patwa said pharma and chemicals can help generate returns.

Patwa sees chemicals as the next big opportunity. It’s where Indian IT was in 1992, and chemicals is a story for the next five to 15 years, he said. But he expects makers of active pharma ingredients, and contract research and manufacturing firms to outperform export-oriented peers.

Researching chemicals and pharma requires a lot more domain expertise than other industries, and investors cannot apply a sector approach to these companies, he said.

He picks Deepak Nitrite Ltd. and Laurus Labs Ltd. as businesses of the decade, calling them “innovators, with proven execution capabilities and the ability to scale up”.

Current valuations notwithstanding, Patwa said the annual cash-flow generation for both from FY25 onwards is as high as the total capex. The two firms have multiple opportunities to reinvest the cash at an attractive return on capital employed, he said.