ValuePickr Forum

Granules India Ltd

(a_anurag79) #803

As per interview on CNBC today, promoter mentioned following -

Pledge - They plan to bring down pledge from 42% to 32% in next 6 months (or 1 yr don’t remember exactly). And bring it to nil by FY21.

Debt - Debt to come down over a period of time. But for sure it won’t go up from current level.

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(mrai74) #804

Where do you see speculation. The snippets are from Q3 concall & that is mentioned clearly in comments.

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(reacher) #805

have doubts still on why cfo karuppannan ganesh left - seeing his profile he is not a person who has left cos so soon in his past career - he has been a long timer in each prior job - he is leaving gi at a stage where it is time to reap the benefits including of some of his strategic initiatives - he spent just 2 years - so i am naturally having doubts as to why he left - did they ask him to do something which he felt would be dangerous or unethical ? but this can be clarified only by him and he will not do that to outsider - unless co comes out with more details than just a dull statement saying he is leaving for better prospects.His ctc was about 1.5 crs as per public information so unless he is getting a hugely better role (which we can anyways verify once we know where he is heading to ) …

3 Likes
(ricky76) #806

How about the most basic reason- they just fired him for poor performance.

His articulation and grasp of the business did not impress me in the concalls.

1 Like
(Krishna Rai) #807

Dear Friends,

Here are some quick notes taken by me from the Granules Q4 earnings call

  • Consolidated topline excluding other income increased from 1692 crores in 2017-18 to 2279 crores in 2018-19 registering growth of 34%. PAT grew to 236 from 133 crores in the previous year.

  • Top 5 molecules contributed to 85% of revenue in the Q4. Most of the topline growth has come on the back of enhanced API capacity.

  • EBITDA margin for the year 2018-19 stood at 17.8% helped by increased share from Finished Dosage and contribution from US unit.

  • Metformin new unit would have a FDA inspection in July-2019. Post that company would enhance utilization and start selling in regulated market.

  • Guidance of 20% plus topline and 25% plus bottomline for 2019-20, and over the next three years. Later in the call Mr. Krishna Prasad said that he would like to give conservative estimates and beat it.

  • Total debt as on 31st March 2019 was 908 crores, almost 100 crores lesser than as on 31st Mar 2018. Guidance for this year is to bring it down to 850 crores. Please note that it includes working capital and long term debt.

  • Company had a FCF positive year. The free cash left on the table was only 1 crore, but it is a big milestone. Company would put effort to remain free cash positive now onwards and would improve the value of it by good starting this year.

  • Promoter Pledging was brought down from 60% to 43% in the last few months. In the next two months it would be further brought down 43% to 32%. By 31st March 2021 it would be brought to zero.

  • Capital Expenditure for 2019-2020 would be 150 crores including cost for capacity expansion in US. No new debt would be taken to fund it.

  • 3 to 5 more products would be launched this year. Some may have the penetration similar to Metherzine (which was launched by Granules this year and had a good run/acceptance).

  • Between US and India more than 20 ANDAs would be filed this year.

  • Onco plant is about a year away from commercial production. Things are on time and as per plan.

  • CRAMS business – Omnichem, the dependency on one customer was a mistake. Company has diversified the customer base to 3 to 4 customers.

  • Raw material prices first stabilized and then started trending a bit down from last quarter. Expected to remain soft in near future.

Few other observations from my side

  • I have found that management walks the talk but with a lag. In excitement they pull forward the timelines for themselves, but actually doing things takes a bit longer. Pledge reduction, debt reduction, new API capacity and Onco – I have seen this pattern in almost all of them.

  • Quick calculation by me - with 25% plus profit growth next year’s profit is projected to be 300 crores plus. Taking out 150 crores for CAPEX and 30 odd crores for dividend, the company would be left with enough money in hand for debt reduction. A lot of assumptions are in play here and please take it just a guess.

  • Regarding Mr. Ganesh resignation from CFO. He attended the earnings call and answered some questions. Sometimes understanding his could be a challenge but he spoke on how/why Granules capitalizes the R&D expenses. Mr. Krishna Prasad thanked him in the call for his contributions in the past two years. It did not feel like there was any bad blood and to that point I would not speculate anything bad from his departure.

I am not an analyst. There is fair possibility that I would have heard or interpreted points made in the call incorrectly. This is not buy or sell recommendation. I own Granules shares.

Cheers,

Krishna

9 Likes
#808

Thanks Krishna for sharing with us the call notes. Here Granules MD reiterating some of the points in the inteview. https://twitter.com/CNBCTV18News/status/1126710751815536640

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(Vilas D'Souza) #809

Dear Mr. Krishna, thank you for your efforts.

Some additional points:

  1. Total debt is not 900 crores. Net debt is 908 crores. Please stand corrected.
  2. Cost of capital wasn’t answered. Has anyone worked it out already?
  3. Some guys are speculating on the CFO departure. For any doubts, why not write to the company instead of speculating.
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(Amit Agarwal) #810

No wonder FIIs loading up Granules

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(mrai74) #811

just taking 20% topline & 25% bottomline growth… numbers look attractive

image

Few research houses have started sharing positive expectations… let us see how it pans out in next 2-3 years

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(Vilas D'Souza) #812

Even after good results consistently delivered, the stock refuses to move.

Any thoughts?