June 2013

We made an exit from Glaxo Consumer on 6th June, 2013. We built it in our portfolio when we started with India Equity in February 2010 at market price of 1300. Its business at that time was valued at 5500 crores. When we exited its valuation was at 24000 crores at a market price of 5650. At 7 times price to sales and 53 time trailing PE we believed that all the good things have been priced in. The stock has delivered a spectacular 334% absolute return to our early investors in just 3 years. Their Business has grown in the last three years and they have successfully added to their product range. There were two events in the last six month which re-rated the stock - open offer and MSCI index inclusion which created panic buying in the stock. After these events we tried to figure out the story behind such a sharp move. We also deliberated on potential delisting by promoters in the next few years.

As a company GSK Consumer sets very high corporate governance standards and hence they will hold future strategies to their chest. We believed that after the dust settles, focus will come back to earnings and valuations. At this price the company will find it difficult to justify valuations. Keeping the rich valuations and risk parameters in mind we have exited the company. We personally wish that Glaxo grows from strength to strength and reward shareholders at this price as well. Contrary to the market we would always like our picks to do well even after our exit. We wish all the best to Glaxo Consumer and its shareholders.