Dividend distribution policy as disclosed by the Company
http://granulesindia.com/uploads/9500GIL-%20DDP.pdf
In here under point 8(usage of retained earnings) they have disclosed that they are open to Share Buyback. Something I would like the company to do after 2019… 
QIP
Company will do fine over the next 2 years. The key issue is of the growth in Sales. If they can achieve even lower double digits, stock can fly. Else you have current levels of 110-150 range.
Worried, how much further they dilute equity. Any idea on how long this 500cr will be used before next dilution ?
That is true… so much pledging of shares and now QIP placements. Company is raising a lot of capital by either pledging or diluting.
But in the last concall company had mentioned they need 600 crore(USD 40 million in US and rest in India) as capex for FY18. So i think this 500cr will mostly be used this year for above.
I hope all this incremental capex will fuel the growth in coming years. Key to watch the next few years how this plays out.
Disc: Invested
If Granules wants to continue to grow then they have no option but to undertake high capital expenditure. Present line of business is reaching a saturation point as they are already having very high capacities of existing products which are B to B. At the most they will be able to take one more expansion three years down the line. Now the company is branching off into B to C and retaining existing business to finance the move, up the value chain. B to C is a safer business model if you know the business. It will be interesting to watch the company post FY 19.
Q1 FY18 results are out.
http://www.bseindia.com/xml-data/corpfiling/AttachLive/5badeff1-b94f-409b-8574-a12fd72009fa.pdf
Has any one able to connect on concall? Im trying but not connected to it .
US FDA issues EIR for Gagillapur manufacturing facility
My granules concall summary. Please add/correct if necessary
Mr Ganesh is the new CFO, earlier worked with Philps India, Coca Cola, ABB, Manali Petro, and latest as senior VP with Dr Reddy’s.
Biocause- 70cr rev, PAT 11cr at JV level.
Omnichem- Rev 16.4cr, PAT loss 5.8cr. Omnichem JV had a loss but due to cyclical nature, orders will be delivered in Q2 and Q3. FY18 will be better than FY17, 200-250cr at JV level, with better PAT numbers. Q2 itself will be half of what we did in FY17 (so 100 cr odd).
USFDA approval progressing well on Omnichem (Vizag SEZ). Earlier USFDA had inspected this facility and gave 7 observations. Granules has answered all queries and USFDA confirmed that they dont need any more information so EIR should come anytime, maybe in next few weeks. Once this approval comes, Granules will be able to sell API directly to customers and this will result in increased margins
Only if Omnichem commits for orders, they will go for doubling the capacity of JV with capex of 150-200cr.
Ibuprofen contribution increased substantially because competitors lost some orders to Granules. There is a shortage of ibuprofen in the world today. Pricing has increased in China
QIP plans- no development, will communicate at right time. LT debt 330cr, ST debt 505cr and there is not much cash left. This doesnt look good at all.
Drop margins Q-o-Q is due to increase of raw material cost. Sales prices are linked to RM price, increase in sales price will be corrected in next quarter. Margins on existing business will have same margins as last year. For new businesses, the validations are going on so there could be a small impact of depreciation and interest so there could be a small dip in EBITDA margin but it could be made up elsewhere.
Biocause and Bonthapally havent been inspected in last 3 years. Expecting inspection in Biocause within next 6 month. With the Metformin expansion completed at Bonthapally, inspection can happen anytime.
US 2 key filings- First filing target action date is Jan 2018, expecting FDA to come any day. 2nd filing done early this year and target action date is March 2018. For FY18, all filings are on track and we expect to file 5-6 from US and 5-6 from Hyderabad. Most of these are very interesting products. No filing in Q1 but there will be 2-3 in Q2. There will be 10-12 filings for full year and 1 may slip to April-May.
Expect to launch first product- Prasugrel- from US Pharma in Oct-Nov. Market size of this product is about 500mn. Innovator- Eli Lily. This is a blood related CVS drug. Granules submitted all queries to USFDA and they dont have any unanswered queries so expecting approval soon. Mylan and Auro have approvals. Management assumes 6-8 players to be in market.
Started doing product development for intended onco API and formulations, sterile API. In line with construction plan, we have finalized product portfolio. The moment facility is ready, we will prepare filings. Products from Indian market will be high volumes and from US will be “limited competition” products which are difficult to produce.
Total R&D spend during the full year could be 25cr in P&L. Gross spend for full year would be 100cr odd.
Capex in Q1 was 150cr, everything is on track. Bonthapally Metformin validations going on but approvals take long time. Paracetamol validations in early October and Guafenesin in November. PFI validations will start next month. There will be 15-20% growth in FY18 due to some expansion but full effect will be seen next year. Paracetamol capacity will contribute from Nov onwards. Full utilization will happen in FY20.
Growth drivers in FY19- Expanded capacities (6000T PFI will enable to utilise FD capacity). After that it will be new products and full utilization of capacities.
Other expenses increased due to R&D project lab consumables and one-off freight costs. Staff costs should be similar in coming quarters.
There is Pricing pressure everywhere in US but Granules doesnt see it because of operating efficiencies and Granules is already the lowest cost producer. Based on prior experience of prices quoted by others, management believes it is very difficult for somebody to go below Granules on cost of core molecules.
No significant impact of GST because business is B2B and exports.
OTC is going steady, customer orders are increasing. Current contribution is small, about 3-4%. In next 3-4 years it could go to 100cr+. Once you build customer confidence, this is a good sustainable business.
Thank you very much sir for it .
But I think one mistake is there , prasugrel market is 500 million dollar not 500 million only .
And have you recorded it ? If yes then please share it .
Thank you sir
Thank you very much.
How to open concall in research bytes ? As I’m trying but can’t reach it .
Use internet explorer
The link to concall is given on Granules page
QIP starts at floor price of 127.63. Any one tracking this?
If earlier QIPs are considered as benchmark, the share price may remain capped for short to medium term… long term value unlocking is still possible… let us keep fingers crossed for longer term only
