Ajanta Pharma

In the Cipla concall, the management said inspections have started in the country, and in quite significant way. That is quite opposite of what Ajanta said. Any view on this?

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Ajanta management had mentioned that current FDA inspections are targeted towards facilities that produce mission critical products, so its largely at FDA discretion. I have no idea how FDA categorizes mission critical products (maybe based on shortages?). I do expect FDA inspection on Ajanta’s facilities sometime this year, that should fuel next leg of US growth.

Currently, market share gains may have peaked out for Ajanta (as reflected in the highest ever US sales per ANDA launch). US sales will start de-growing if they cannot launch more products.

FY17 FY18 FY19 FY20 FY21 FY22
ANDA launched 12.00 18.00 25.00 30.00 36.00 39.00
US revenue per launch (cr.) 15.42 10.78 11.32 17.20 17.69 17.85

It is very irksome to see constant promoter pledging & re-pledging in Ajanta Pharma. Now there is a margin shortfall and they have to pledge more shares. Does anyone have any idea why there is constant pledging, what is the end use of the borrowed funds or what the promoters do with the money?



Ajanta Pharma came out with FY22 annual report, here are my notes.


Product launches:

  • Launched 16 (vs 21 in FY21) products in India out of which 4 (vs 5 in FY21) were first to market. Have a basket of 300+ products (vs 300 in FY21) with 50% being 1st to market
  • 3 launches in USA
  • Developed 14 APIs (vs 23 in FY21)

Branded Generics (73% of revenues; grew @23% to 2’382 cr.):

  • Indian branded generics (982 cr.) grew at 21% (IQVIA reported Ajanta growth of 18% vs 18% for IPM). IPM rank dropped to 29 from 28 in FY21
  • India ophthalmology: Growth of 25% vs industry growth of 21% (IPM rank maintained at 2)
  • India cardiology: Growth of 11% vs industry growth of 10% (IPM rank maintained at 18)
  • India dermatology: Growth of 17% vs industry growth of 10% (IPM rank maintained at 15)
  • India pain management: Growth of 28% vs industry growth of 22% (IPM rank improved from 33 in FY21 to 32 in FY22)
  • Emerging market branded generics (1’400 cr.) grew at 24%

Generics and Institutional (27% of revenues; de-grew @(-1%) to 902 cr.):

  • Africa anti-malaria institutional business (206 cr., 6% of revenues) de-grew at (–24%)
  • US generics business (696 cr., 21% of revenues) grew at 9%. Filed 8 ANDAs (vs 2 in FY21) vs target of 10-12 ANDAs and launched 3 new products. Plans to file 10-12 ANDAs in FY23. Awarded as the Best Overall Generic Manufacturer in the category of less than USD 100 million sales for the 2nd time by Distribution Industry for Notable Achievements (DIANA)


  • Developed Extended-Release/Delayed-Release oral solid dosage form products using Matrix technology (repeat of FY21 AR)
  • Developed products based on solid dispersion technology similar to innovator products (repeat of FY21 AR)
  • 750+ scientists
  • Total R&D expenses was 6% (vs 5% in FY21) of revenue (204 cr. vs 139 cr. in FY21) most of which was expensed

Financial Performance:

  • Consolidated revenue grew by 16% to 3’341 cr.
  • EBITDA margin normalized at 28% (vs 35% in FY21) due to resumption of marketing and R&D activities
  • PAT grew by 9% to 713 cr.
  • Cash ~ 334 cr. (vs 375 cr. in FY21), Paid back 436 cr. (vs 250 cr. in FY21) (buyback + dividend) and generated operating free cashflow of 453 cr. (vs 284 cr. in FY21)
  • Gross margins compressed from 78% to 75% due to API price increase, USA price erosion, and product mix change
  • ROCE was down from 30% in FY21 to 27% in FY22
  • Employee cost remained at 19% of sales and other expenses increased from 24% of sales in FY21 to 28% in FY22


  • Three pillars: Smart product selection, superior formulation development capabilities, focused business segments
  • Will focus on branded generic business and allocate more resources on product registrations, team, and launch of new products which will increase marketing expenses
  • Be a niche player in global pharma space with a customized market specific product portfolio focusing on 1st to market products
  • US: Launch of limited competition products and have an impeccable service record thus becoming a preferred partner for customers

Share issuances:

  • ESOP: During the year, 4’000 shares were issued against options exercised (vs 5’500 in FY21) and 3’000 new options were granted (vs 3’000 in FY21)
  • Bought back 1’120’000 shares at 2’550 price (vs 735’000 shares at 1’850 price in FY21)

Other Points:

  • Spent 154 cr. on CAPEX (vs 145 cr. in FY21). FY23 maintenance capex will be ~200 cr.
  • Net fixed asset turns improved to 2x in FY22 (vs 1.8x in FY21)
  • Receivable days increased to 113 days (vs 95 days in FY21) due to US
  • Inventory days reduced to 88 days (vs 98 days in FY21) due to supply chain normalization
  • Trade payable was reduced to 70 days (vs 91 in FY21) to take advantage of early payment discounts from suppliers
  • Sources raw materials from over 2,550 suppliers
  • Invested 25 cr. in ABCD Technologies LLP (to be renamed as Indo Health Services LLP) for 4% equity
  • Auditor remuneration at 1.1 cr. (vs 0.99 cr. in FY21)
  • Hedging policy: ~70% of company’s income via exports with major currency exposure being in USD, the company generally does currency hedging up to a maximum period of 6 to 18 (vs 12 in FY21) months and up to the extent of 50% to 150% (vs 75% in FY21) of its net foreign exchange earnings.
  • No major contingent liability (~7 cr.)
  • Employee count: 7‘234 (vs 7’035 in FY21) (median salary increase: 12.67%)
  • Non managerial remuneration hike was 12.67% and managerial remuneration hike was 41% (in-excess of performance)
  • CSR: Spent 13.13 cr. vs obligation of 12.60 cr. (0.53 cr. available for set off)
  • Share price high: 2435, low: 1631.15
  • Number of shareholders: 62’139 (vs 45’826 in FY21)
  • Ajanta Pharma Mauritius Limited (APML) closed down its 25-years old manufacturing unit as it needed upgrade involving major capex that was commercially unviable. Company has sufficient manufacturing capacity in India and all supplies would be catered from India. APML will continue to operate with trading activities. APML’s subsidiary Ajanta Pharma Mauritius (International) Limited located in the Free Trade Port is being wound up as it has lost its relevance due to rationalization of tax structure in Mauritius

Disclosure: Invested (position size here, no transactions in last-30 days)


What they have mentioned in the Annual Report may be slightly misleading as they are the second finalist :slightly_smiling_face:

HDA Recognizes Pharmaceutical and Consumer Product Manufacturers With DIANA Awards

The award mentioned in the annual report is for 2021. If you look carefully at the picture shared in the annual report, its mentioned that the award is for 2021. The 2021 links are also below.

For 2022, the prize has gone to Camber, as shared in your link.


Another strong set of results from Ajanta, sales grew at 27%, there was margin compression which led to PAT being flat. Management is confident of getting back to 25-26% EBITDA margins in FY23. Notes from concall below.

FY23Q1 concall

  • Sales grew at 27% (looks higher due to lower base of Q1FY22), Gross margin ~ 71% (2% due to one-time inventory write-off + 1% due to raw material and packaging price increase + 1% US price erosion), EBITDA margins ~ 23%, PAT margins ~ 18%. Expect gross margin to recover to 74% and EBITDA margin to 25-26% in FY23
  • US:
    o 6% YOY growth (gain in market share + 0 new launches), despite severe price erosion. Estimating price erosion to come down to 6-8%
    o Filed 1 ANDA and received 1 tentative approval, plans to file 10-12 ANDAs during FY23 (0 new launch)
    o Have 20 ANDAs under approval and 4 tentative approvals
    o Without new product approvals, expect around 5% growth for FY23
    o gChantix – Still under review with FDA
    o gVimovo – Approval can happen after facility inspection
  • Domestic:
    o 22% YOY growth, launched 7 new products (2 is first to market). Most of the new launches will be in cardiology and diabetes
    o 7% price increase + 6% volume growth + 3% new product increase
    o 3rd fastest growing company in Top-30 cos (IQVIA MAT June 2022)
    o Trade generics: 33 cr. vs 27 cr. last year. Growing similar to peers, focusing more towards chronic therapies. Manufacturing is a mix of in-house and outsourced
    o Improved overall rank to 28 from 29 (in Q4FY22), gained 1 rank in dermatology and cardiology and 2 ranks in pain management
    o Growth due to new product launches, market share gain & price increase
    o 3 brands are now in top-500 in IPM
    o 12% is under NLEM
  • Emerging market (branded generics)
    o Africa branded grew by 34%. New product launches + higher field force. 20-25% growth was sustainable, excluding 1-time benefit from lower base. Expect this to sustain at around 15%
    o Have larger presence in Franco Africa, 8% has been growth in MR network in Africa
    o Asia branded grew by 45% (looks elevated due to slightly lower base of FY22Q1)
    o Launched 10 new products
  • Africa institution
    o Growth of 44% YOY
  • CAPEX of 43 cr. in quarter (full year planned capex of 200 cr.)
  • R&D stood at 6% of sales
  • Freight costs increased from 6% to 8% of sales
  • Quarterly other expense rate was 266 cr. (increased slightly from 258 cr.)

Disclosure: Invested (position size here, no transaction in last-30 days)


Probably a elementary question, what does “tentative approvals” mean here chief ?? @harsh.beria93

In tentative approval, your molecule is approved but you can not market it as there is existing patent/exclusivity for that molecule. You can start marketing as soon as patent expires.


Insightful ratings report (link)

  • Procures 90-95% of raw material from domestic market
  • Major currency exposures are USD, Euro, Mauritian Rupee, Philippine Peso and Nigerian Naira
  • Hedges currency up to a maximum period of 6-18 months and up to the extent of 50-150% of its net foreign exchange earnings
  • Pledging: In FY22, promoters pledged 20.09% shares (vs 14.95% in FY21) of their shareholding constituting 14.16% of total share capital of company. These pledged shares pertain to Mr. Aayush Agrawal and Mr. Ravi Agrawal who are not part of company management and also not involved in day to day operations (@Chandragupta)
  • FY22 operating cycle remained elongated at 193 days (vs 178 days in FY21) due to reduction in payable days (52 days vs 70 days in FY21). Inventory days was 150 days (vs 153 days in FY21)
  • Utilized non-fund-based limit stood at 24% for 12 months ending June 2022

Disclosure: Invested (position size here, no transactions in last-30 days)


Ajanta gets approval for Vimovo and it can be a material opportunity as there are limited competitors in the market.

I dont know the current market size, it used to be $400mn in 2020. Since 2020, there have been multiple players entering the market (Dr. Reddy, Lupin).

Disclosure: Invested (position size here, no transactions in last-30 days)


Very average set of results from Ajanta with sales growing by 6% and EPS declining by 20%. Company is facing margin pressure from high raw material prices and elevated shipping costs. This margin pressure has now been ongoing for last 3 quartes, we are probably left with 1 more quarter of PAT decline which will reset the base.

In terms of actual business, Ajanta is doing exceptionally well in Indian and Asian market. They have been outperforming IPM by a large margin since 2020. Most of their IPM outperformance have come from pain and derma therapies. Additionally, an EIR for Dahej facility should lead to resumption of growth in USA. My concall notes are below.

FY23Q2 concall

  • Sales grew at 6%, Gross margin 72%, EBITDA margins 21%, PAT margins 17%. Other expenses have increased to 31% of sales (vs 26% last year) due to higher freight costs (9% of export sales vs 7% pre-covid).
  • Guidance: COGS ~27% and EBITDA margins ~ 26 ± 1% in H2FY23
  • Most of the other income is forex gain
  • Air freight component of shipments is very low and most shipments are through sea
  • Freight costs for refrigerated containers have not reduced significantly
  • US:
    o (-5)% YOY decline (no new launches)
    o Filed 2 ANDA (H1: 3 ANDA), received 1 final approval (H1: 1 final + 1 tentative), plans to file 10-12 ANDAs during FY23 (0 new launch)
    o Have 21 ANDAs under approval and 4 tentative approvals
    o Mid-double digit price erosion in this quarter
    o gVimovo: Will be launched in Q4FY23 (product size has reduced significantly)
    o Lot of ANDA filings were done from Dahej which was inspected and they are expecting EIR to come in a few months as the 2 observations were procedural. Expect a flurry of approvals after that
  • Domestic:
    o 27% YOY growth, launched 15 new products in H1 (3 was first launch in India). Expect high teen growth for full year
    o 3 brands in top 500
    o Doing very well in dermatology and pain management
    o Gained 2 ranks in pain management
    o Trade generics: 38 cr. (vs 30 cr. in Q2FY22); 71 cr. in H1FY23
  • Emerging market (branded generics)
    o Africa branded declined by (-8)%. Should grow at high single digit for full year
    o Asia branded grew by 31%. Expect 20%+ growth for full year
  • Africa institution
    o Decline of (-50%) YOY
  • Working capital: Significant reduction in inventory days to 73 (vs 88 in Q4FY22), slight increase in receivable days 115 (vs 113 in Q4FY22) and payable days (76 vs 70 in Q4FY22)
  • CAPEX of 63 cr. in H1 (full year planned capex of 150 cr.). Capacity utilization is 60-65%
  • R&D stood at 6% of sales

Disclosure: Invested (position size here, no transactions in last-30 days)


After bad results, Ajanta Pharma continues to disappoint with their guidance.

:small_orange_diamond:1-2 product launches vs earlier guidance of 3-4
:small_orange_diamond:EBITDA margin guidance of <25% vs earlier guidance of 25-27%
:small_orange_diamond:Capex of Rs. 150 crores vs earlier guidance of Rs. 200 crores.

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Fresh presentation from the company with some new information.




If this puts an end to the constant pledging, it might actually turn out to be a good thing in the long run.

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Very good revival in sales from Ajanta, however some part of this growth is one-time due to the flu season in US. They had massive margin pressure due to losses on currency hedges, higher freight costs due to air freighting and large increase in MR strength. Ajanta has increased their MR strength by 50% in International markets. Concall notes below

FY23Q3 concall

  • Sales grew at 16%, Gross margin 72%, EBITDA margins 21% (adjusting for forex derivative loss), PAT margins 14%
  • FY24 Guidance: COGS ~26% and EBITDA margins ~ 25-26%
  • Unrealized hedge losses are around 4% of sales. This along with higher air freight costs have contributed 6% to margin loss
  • Launched 30 new products across markets. Such a large product launch required a larger field force expansion
  • Employee cost increased by 18.5% (10% was due to increment and remainder was due to increase in team size). Have strengthened MR strength by 50% in international business (Asia and Africa), this has been the most aggressive field force expansion done so far by the company. MRs start performing in 2nd year and become really productive by 3rd year
  • Total MRs: 4400+ (2800 in India) vs 4200+ in last presentation
  • Expect mid-teens growth in branded generics
  • US:
    o 61% YOY growth
    o Filed 1 ANDA (9M: 4 ANDA), received 0 final approval (9M: 1 final + 1 tentative)
    o Have 22 ANDAs under approval and 4 tentative approvals
    o Benefitted from Flu season in Q3 (mostly Tamiflu). Do not see this benefit coming in Q4
    o Mid to high single digit price erosion
    o 16 cr. higher cost due to air freighting of some flu product
    o Will have 1 launch in Q4 and 4-5 product launches in FY24
  • Domestic:
    o 13% YOY growth , launched 21 new products in 9M (6 was first launch in India). 6% volume growth (vs flat for industry), price and new product introduction is at par with industry
    o Gained 1 rank in cardiology (to 16), 1 in pain management (to 27) and lost 1 rank in dermatology (to 15)
    o Trade generics: 38 cr. (vs 30 cr. in Q3FY22); 109 cr. in 9MFY23 (vs 87 cr. in 9MFY22)
  • Emerging market (branded generics)
    o Africa branded declined by (-13)%. 6% decline was due to INR appreciation vs Euro which has reversed now, so it should be better in Q4
    o Asia branded grew by 17%
    o Putting more thrust in Anglo Africa (especially Uganda and Kenya). Should start getting approvals from next year and launching products
  • Africa institution
    o Decline of (-15%) YOY
  • CAPEX of 114 cr. in 9M (full year planned capex of 150 cr.). Capacity utilization is 50-60% and should suffice for next 4 years growth
  • 70-80% of receivables are hedged
  • Other expenses normalized run rate (excluding forex) is 280-290 cr.
  • R&D stood at 6% of sales
  • About 50% of pledge will get removed from the funds raised by promoter entity

Disclosure: Invested (position size here, no transactions in last-30 days)


FY23Q4 concall

  • Q4FY23: Sales grew at 1%, Gross margin 72%, EBITDA margins ~ 17%, PAT margins ~ 14%
  • FY23: Sales grew at 12%, Gross margin 72%, EBITDA margins ~ 21%, PAT margins ~ 16%
  • Logistics costs contributed 2% to margin dip and have now normalized
  • FY24 growth: Branded will see mid-teens growth, US will see mid-single digit growth, Africa institution will be flattish
  • FY23 forex: 47 cr. net gain (adjusted for unrealized losses) vs 73 cr. net gain in FY22
  • Margins have bottomed out. Expect 2% margin revival in freight cost + 2% in gross margin in FY24 which should bring EBITDA margin to 25%
  • CAPEX of 160 cr. in FY23. FY24 maintenance capex + corporate office will be 200 cr.
  • Improvement in working capital resulted in 99% cashflow conversion
  • For 12 months, employee cost increased due to expansion in field force by 50% internationally. 27 cr. sales incentives (for FY23) were earlier reflected in SG&A and are now categorized in employee costs
  • Hope to recoup margins in years ahead
  • R&D stood at 6% of sales for FY23, absolute R&D will be same in FY24


  • 19% in FY23 (17% in Q4) (1 new launch in FY23; 40 launched products)
  • Mid-single digit growth for FY24
  • Expect to launch 5 products in FY24 (including gChantix)
  • gVimovo will be launched in Q1FY24
  • gChantix: target action date is Q2FY24, will launch in Q3FY24 if get approval
  • Filed 1 ANDA in Q4 (5 in FY23) and plans to file 6-8 ANDAs during FY24
  • High single digit price erosion
  • Want to keep US contribution at similar levels (20-22% of sales)
  • Flu product was $10mn in Q3, that is not present this quarter. Base revenue run rate has increased from 180 cr. to 200 cr.


  • 20% in FY23 (17% for Q4), launched 23 new products (6 is first launch in India). New brand launches will be lower than in last couple of years
  • FY23 growth breakup: 8% volume, 6% price, 3% new product launch
  • Trade generics: 42 cr. (vs 30 cr. in Q3FY22); 151 cr. in FY23 (vs 117 cr. in FY22). Expect low double digit growth (more chronic focused vs largely acute for the industry)
  • FY24: expect low double digit growth (vs 8-9% industry growth).
  • IPM rank 27 (gained 2 ranks in FY23), 4 brands are in top 500 of IPM
  • In MetXL, NLEM reduction was 18% and they have been able to gain back 11.3% from WPI based inflation price increase
  • MRs: 2800

Emerging market (branded generics)

  • Africa branded de-grew by (-26)% this quarter due to pension strikes in France. Shipments first happen to France and then go to Franco Africa. (-5%) de-growth in FY23 due to INR depreciation. 8 new products launched. Hoping for mid to high teens growth in FY24
  • Asia branded grew by 18% in FY23 (de-growth of -9% in Q4). Launched 38 products
  • Asia + Africa MR: 1300

Africa institution

  • De-growth of (-8%) in FY23 (and -1% for Q4)

Disclosure: Invested (position size here, sold few shares through participation in buyback in last-30 days)