Torrent Pharmaceuticals: A company on fast track
Torrent Pharmaceuticals, a Rs.4,650 crore Ahmedabad based pharma giant, is moving ahead vigorously with expansion and higher investments in R&D. The company is focusing on highly regulated markets and has invested Rs.650 crore in new facility at Dahej in Gujarat. The first phase of new facility was commissioned during November 2015 for the manufacturing of formulations and APIs.
The company added installed capacity of 7,500 million tablets/capsules and 25 MT APIs per annum This plant will export products to highly regulated markets like US, Brazil, Germany, etc. The construction of phase II will commence soon and once commissioned, the total capacity will increase to about 14,000 million tablets/capsules and 80 MT API per year. With the help of 600 scientists, Torrent is well set to established its presence in highly regulated markets in the next couple of years.
Currently, Torrent Pharma’s Rs.5 share is moving in the range of Rs.1,300-1,325 on BSE with market capitalisation of over Rs.22,000 crore. Torrent scrip touched to its yearly high level at Rs.1,720 during September 2015 as against its lowest of Rs.1,033 during February 2015. The promoters are holding 71.25 per cent and remaining is with the public including banks, mutual funds, financial institutions, etc. The company declared hefty interim dividend of Rs.20 per share for a share of Rs.5 each (400 per cent) recently.
The impressive growth in top line and bottom line during the nine months ended December 2015 and an announcement of hefty interim dividend have given necessary push to share price despite depressed investors mood in the stock markets. As against the equity capital of Rs.84.62 crore, its reserves & surplus amounted to Rs.2,406 crore.
For the nine months ended December 2015, Torrent Pharma’s consolidated net sales increased by 46.5 per cent to Rs.5,056 crore from Rs.3,451 crore in the corresponding period of last year. Its net profit went up sharply by 142 per cent to Rs.1,500 crore from Rs.621 crore. Its domestic sales increased by 20 per cent to Rs.1,701 crore from Rs.1,418 crore and international sales moved up by 65 per cent to Rs.3,366 crore from Rs.2,039 crore. EPS for the nine months worked out to Rs.88.62 as compared to Rs.36.67 in the last period.
The company has set up a manufacturing facility for Oyster Shell powder (natural calcium source), a API for manufacture of Shelcal brand. Further it is setting up an integrated manufacturing facility for drug substances and drug products (API and formulations) in oncology for international market. Torrent is also investing in expansion of its Sikkim facility.
Torrent is focusing mainly on CNS, cardiology, diabetes, gastrointestinal and dermatology. With integration of acquired Elder Pharma’s domestic formulation business has assisted well. It is expanding the portfolio in newly entered segments and accelerating performance in the acute segment. The company entered the nephrology market through a new division. It entered into an exclusive licensing agreement with Reliance Life Sciences for marketing three biosimilars in India viz., Rituximab, Adalimumab and Cetuximab.
The company’s consolidated net sales for the year ended March 2015 increased by 13.6 per cent to Rs.4,585 crore from Rs.4,036 crore in the previous year and net profit by 13.1 per cent to Rs.751 crore from Rs.664 crore. Domestic sales went up by 28.7 per cent to Rs.1,882 crore from Rs.1,462 crore and contributed 41 per cent of its total net sales. Its international sales moved up by 5 per cent to Rs.2,711 crore from Rs.2,581 crore and contributed 59 per cent to its net sales. The income from contract manufacturing segment declined to Rs.295 crore during 2014-15 from Rs.393 crore in the previous year, a major portion of which is from manufacture of human insulin.
The company’s sales in US increased to 7.2 per cent to Rs.832 crore from Rs.776 crore in the previous year. The lower growth in US is due to higher revenues from one of the new launches in previous year. Adjusting for oneoffs, revenue grew by 54 per cent. Its sales in Germany increased by 8 per cent to Rs.620 crore. Dossier out licensing and product supply business continues to be an important part of the Europe business and its revenues reached at Rs.221 crore. Its sales in Brazil increased by 14 per cent to Rs.606 crore and it has approvals of 40 products and 20 products are in pending for approvals.
Its R&D expenditure worked out to 4.8 per cent of turnover at Rs.163.57 crore during 2014-15 as against Rs.137.46 crore in the previous year. The company has initiated investment in the areas like oncology, dermatology and opthalmic. It is now planning to spend 6-8 per cent of sales on R&D activities. It received 6 ANDA approval from US FDA and it filed 73 ANDAs and 26 DMFs in the US. It also filed 56 new product dossiers and 24 DMF in the EU. Torrent filed 818 patents for NDDS technology, drug discovery projects and innovative process of API & formulation for various regions and it has been granted 325 patents. The company has initiated new discovery programmes in chronic obstructive pulmonary disease and inflammatory bowel disease.
The company has 17 subsidiaries as at the end of March 2015. It has completed acquisition of domestic branded formulation business of Elder Pharmaceuticals in India and Nepal for a consideration of Rs.2,004 crore during 2014-15 and strengthened its position in women health, pain management, wound care and neutraceuticals therapeutic segments. Further, it entered agreement to acquired 100 per cent stake in Zyg Pharma Pvt Ltd, which engaged in manufacturing various dermatological formulations like creams, ointments, gels, lotions and solutions.
Due to these acquisitions, its fixed assets increased by 148 per cent during 2014-15 to Rs.3,495 crore from Rs.1,409 crore in the previous year. Total borrowings moved up by 162 per cent to Rs.2,504 crore from Rs.954 crore. Its interest burden jumped up by 196 per cent to Rs.175 crore from Rs.59 crore and its depreciation provision increased by 120 per cent to Rs.191 crore from Rs.87 crore.
Based on the first nine months of financial performance and commissioning of new project, Torrent is set to achieve top line growth of 40-45 per cent for the year 2015-16 and net profit growth of around 150 per cent to Rs.2,000 crore, which is far better than the Indian pharma segment. This is better opportunity for investors to increase their investments in Torrent at market price level of around Rs.1,350 on BSE.
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