Recent Management InterviewâŚ
The transcript of C Krishna Prasadâs interview with CNBC-TV18.
Nigel: First things first, your first half of the year has been quite good. I think you are expecting second half of the year to be much better, because your guidance states that your revenues are likely to come in higher by close to around 20 percent for the year, so we are expecting the second half to be good. And margins as well, currently it is at around 18 percent, you expect it to go from around 18 to 20 percent?
Ans: 20 is the target, but I would be happy if it is within 19 and 20 percent. And like you said, the topline is bound to grow and the margins also are going to be in line.
Reema: Can you tell us a little more about your OmniChem joint venture (JV), you have indicated that revenues from there would go up from current Rs 100 crore to Rs 550 crore by FY20. What would be the concomitant increase in your margins?
Ans: Margins in contract research and manufacturing services (CRAMS) business are relatively high and it is also a factor of capacity utilisation. This year we expect to do about between Rs 90 and Rs 100 crore. And that would be about 30-35 percent of capacity utilisation and we expect it to be a cash breakeven this year, but as we go by, next year there will be a nice profit and the year after that, when we go to about 70-80 percent capacity utilisation, the earnings before interest, taxes, depreciation and amortisation (EBITDA) can be upward of about 30 percent.
Reema: So, you will hit capacity utilisation by FY18?
Ans: FY18, we would be touching about 80 percent, but in the CRAMS business, you always need to keep some spare capacity and we already have plans to start expanding and maybe next year, we will start construction of the new block and double the capacity.
Nigel: Your Pharmaceutical Formulation Intermediates (PFI) business currently constitutes close to around 25-27 percent of your total sales. I believe that you had a capacity of close to around Rs 4,000 tonnes that came on stream. What kind of revenue traction can you see on that front?
Ans: The PFI would be increasing by about 15-20 percent this year and all that. We would not be able to utilise the entire capacity of the new modules because more products have to be validated there. This year, we expect about 60-70 percent utilisation of this capacity and that will deal about 15-20 percent growth in the PFI business.
Nigel: So, your PFI business now as a revenue contributor, it would increase from around 27 to what levels? And also in terms of margins, what can we expect? What is the impact over there?
Ans: Margins overall is a mix of different factors and PFI does contribute to increase of margins and overall, we expect to be close to 20 percent.
Reema: You were aiming to file four Abbreviated New Drug Application (ANDA) in FY16 maybe another 14 by the end of FY17, are you on track for that? â
Ans: This year, in the next three months, we expect to do about two to three ANDAs this year and maybe eight to nine ANDAs in the next year. We have been focusing on very complex molecules and rather than file numbers, we have gone the way of filing quality and highly marketable products.
Nigel: For FY17 particularly, Metformin is going to be the big drug, because the capacity over there is going to go up multi-fold, could you tell us what is the contribution currently, what is the margin currently and what is the potential that we can see coming in?
Ans: Metformin, today, contributes about 24 percent of our topline and as we go by, even when the new capacity comes in, it is capacity for the Active Pharmaceutical Ingredient (API) and that needs to be made to file amendments for ANDA and we expect the production to start in June of next year and it could take anywhere from three months to a year for the approvals from the Food and Drug Administration (FDA) to come in. And once that comes in, today actually we buy API from other sources. It is not that the topline is just going to go up, but the profitability will increase because most of the API will be produced in house. But we also expect Metformin to grow by about 10 percent over the next few years, year-on-year (Y-o-Y).
Reema: You spoke about upping your capacity. What would be the total fund requirement for that and how will you get those funds?
Ans: The total fund requirement for the next two year, current year and next year is Rs 450 crore and Rs 140 crore would be for the new API plant and Rs 70 crore for increasing Metformin and other capacities. Our US plant will be needing about Rs 80 crore. And for filing ANDAs, we will be spending about Rs 90 and the rest is normal capital expenditure. And this is being brought in by â out of this, about Rs 200 crore plus is being brought in by me, by way of warrants and all that money should come in by first quarter of next year and the rest will be internal accruals.
Here is the video link:
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