Fermenta Biotech Limited (Old Name DIL - Duphar-Interfran Ltd)

I am quite sure because of liquidity.

“Vitamin D3 Crystals for use in pharma / human food supplements and Vitamin D3 500 feed grade for use in animal feed supplements are the main products of Fermenta”

I am tracking dishman pharma, which offers Vitamin D2, Vitamin D3, Vitamin D analogues (Calciferol, Calcitriol, Alfacalcidol,probably 20 different analogs) cholesterol and lanolin-related products for the pharmaceuticals, cosmetics and related markets through its Netherland subsidiary: Dishman Vitamin & Chemicals.

Putting up some comments from Q2FY19 concall, which could be interesting for DIL investors

There are two things. The high value is a pharmaceutical use. On the pharmaceutical use, we know how big the market is and we have a very large share of that market. We have customers who want to pay for European Quality and they do not want to trust the Chinese. This whole market is dominated by essentially a cartel. A Chinese cartel linked with a European company and as Arpit said, every two years they play with the market on Vitamin D, which is the starting material for some of our analogs. They play with the market, they restrict supply using excuses like the Chinese government shutting plants down. That drives the price up, then they come back in with full volume and for six months they make a lot of money and then they restrict market again. We stepped out of that four years ago and we are not playing this game anymore at Dishman Carbogen Amcis. That will stabilize our revenues and drive our profitability hugely. The pharmaceutical market is small and is highly profitable for us and we are a trusted supplier and we have continued loyalty with our clients going forward. The other side of the business is the nutritional and healthcare and feed side of the business. We have seen that shrimp has taken a hit. Mr. J. Vyas has taken upon himself to lead and drive a technology project to look at the nutritional use and some of the nutritional benefits to patients who had certain procedures, by having formulations of Vitamin-D and Vitamin-D analogs, to support their immune system and to help them get better. We have been carrying our clinical trials with Boston University and those trials are starting to read out, in the next 12 months they will read out. In the meantime, we have a nutritional opportunity with the Soft Gel facility to produce Vitamin-D and analogs for use outside of the regulated market today, but utilize the data generated there to attack the regulated market. So, that is the strategy which is being driven by Mr. J. Vyas and we’ve made massive inroads into the development of starting materials, the optimization of the starting materials to enable us to provide excellent quality but at a much lower price, which is something that Chinese cannot do at the moment. Putting a monetary value on that is difficult, but nevertheless that is the project we have been consistently talking about over the last 12 months, So, we have a substantial pharmaceutical market for the analogs and those are all manufactured in Holland, with starting materials now coming from India, from Bavla, and the optimization of those starting material processes has allowed us to drive better margins. So, the combination of Bavla and Holland is working very well and that is why you see the sustainability of the margins, even if the top line revenue is flat. Then we have got the feed market, which is for the cholesterol side of it and the feed market is ugly especially as it relates to shrimp. We are also looking at poultry now in the US because that is a big market. We are also looking at a very interesting opportunity in salmon trade. Salmon is a very high value product relative to shrimp and there is a sustainability issue with feeding, basically while they feed salmon is they kill little fish and feed little fish to big fish; this is a terribly unsustainable way of doing things. We have a project ongoing where we are in talks with a single customer now, to develop a product to enable us to attack the salmon market…


Also , below is from the AR FY19 of Dishman-

We expect the marketable molecules business to grow on the back of increased demand for Vitamin D analogues. The strategy to shift from supplying Vitamin D3 500, to focusing on margin strong Vitamin D analogues, has bolstered our Vitamin D operating margins. In FY2019, our margins for this business escalated to 41%, compared to 20% in FY2015. FY2019 was the year in which our focus on vitamin D analogues business started gaining traction, with about 38.5% year on year revenue growth

This is like saying - my margin increase is due to my efforts while margin increase for others is due to cartelization! (Lol?) I think given what has happened, everyone in the value chain has benefitted. It is to be seen how much of this is sustainable.


Yes agree…My point is not comparing DIL and Dishman but only to bring in the aspect of price volatility played by these Chinese players.

I see that the material cost as % of revenues was 22-24% in 2008-2011 and then 41-44% in 2014-2017. From this high value it came down to 26% in 2018 and 23% in 2019. So are we at close to peak margins? How sustainable will this be?

I don’t have the detailed understanding of DIL business as I am not tracking it, but thought of raising this point for a discussion.

Very valid point, too much of fluctuation. Sustainability is an issue.

Yes, there has been lot of volatility in past. I tried understanding this at the AGM - as per them, the human Vitamin D3 segment is much more stable and they have kind of exclusive relationships with some large MNCs and pharma cos. The animal feed D3 segment has been very volatile in past and it used to be controlled by few Chinese cos in past and the window to make money used to be few months and hence DIL couldn’t do well in past in this segment. However, in their view, things have changed and most probably Chinese won’t be able to come back at the same prices as before. They can do well if prices are reasonable.


Any recent news for sudden almost 20 percent dip in past few days?

Chinese Vitamin D3 animal feed prices have crashed to below $15 per kg from $ 25 in mid November. ( Prices were as high as $ 75 + in 2017). Fermenta prices traditionally are lower than China prices. Animal Feed VD3 is a significant contributor to Fermenta topline. So profits will take a severe hit, IMO.

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This is a classical case and proves that insiders knows more than retail shareholders and they can get benefit from the movement of the price (this is always indeed) promoter group bough huge quantity on share as they declare Rs 100 as interim dividend. they know beforehand that there will be merger on the cards and now they have giving 2: 1 bonus that’s is every one share if hold will get 2 additional shares. they know their working and the product demand They have fixed 3rd Feb as cut-off date for the bonus issue this will lead to further up movement in the stock and they already have the bonus in their account and due to increased volatility they can easily offload the shares.

Disc: not invested This is not any sell buy or hold recommendation

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Insiders definitely know more than retail shareholders, and many promoters buy their shares before events. What is wrong (or illegal) there? I don’t think they will sell their own shares in Feb but other shareholders may. If all these things happen, the stock may be available around 600 levels (unadjusted for bonus, that is around 200 after adjustment) after Feb.

Disc: Not invested but considering.

Standalone Financial Performance – Q3 FY20
• Total Revenue (including other income) at Rs. 69.90 Cr as against Rs 112.93 Cr in Q3 FY19
• EBITDA (including other income) at Rs. 17.39 Cr, margin is at 24.9%
• PAT at Rs. 9.75 Cr as against Rs 27.99 Cr in Q3 FY19.
Mumbai, 12th February 2020: Fermenta Biotech Limited announced its unaudited financial results for
the quarter and nine months ended 31st December, 2019.
includes other income
Fermenta Biotech Limited (Standalone Results)
Particulars (Rs. Crs) Q3 FY20 Q3 FY19 YoY% 9M FY20 9M FY19 YoY% FY19
69.90 112.93 -38.1% 238.07 324.20 -26.6% 417.01
EBITDA* 17.39 45.83 -62.1% 65.64 121.47 -46.0% 161.24
Margin (%) 24.9% 40.6% 27.6% 37.5% 38.7%
PAT 9.75 27.99 -65.2% 56.46 72.01 21.6% 117.90
Margin (%) 13.9% 24.8% 23.7% 22.2% 28.3%

Business Update:
• Backward Integration: The Board of Directors had decided to utilise the multi-synthesis plant
at Dahej for manufacturing of Cholesterol (Key raw material) from wool grease. Successful trial
run has been completed and the production run has been initiated.

• Wholly owned subsidiary in Germany: FBL has opened a wholly owned subsidiary in Germany,
to be closer to our customers. This subsidiary would also manufacture our value-added
products like D3 500 Feed grade, D3 100 Food grade etc. in Europe through third parties. These
value-added products would typically be new variants wherein we would utilise third party
resources in terms of plant, equipment etc. This will strengthen our position in terms of quality,
reach and tap into new customers without any additional CAPEX. The Company has
manufactured and invoiced its first sales of Vitamin D3 500 Feed grade from German subsidiary.

Commenting on the performance and merger, Mr. Krishna Datla, Managing Director, Fermenta
Biotech Ltd. said,
“Based on the recommendation of the Board of Directors in its meeting held on 24th December 2019,
the members of the Company through Postal Ballot approved on January 28, 2020 the issue of bonus
shares in the ratio of two (2) fully paid up equity share of Rs 5/- each for every one (1) existing fully
paid up equity share of Rs. 5/- each held by the members.
We are pleased to inform that the trial run for the manufacturing of cholesterol from wool grease has
been successfully completed in February 2020. The Company has received the CEP certification for the
same. This will bring in self-sufficiency, de-risk us from vagaries as experienced in FY2015 apart from
cost savings in the future years.
The coronavirus outbreak and disruption of supplies out of China would not have any negative impact
on the operations of the Company.
During 9MFY20 the revenue was Rs 238 crores as against Rs 324 crores in 9MFY19. The EBDITA margins
are 27.6% in 9MFY20 as against 37.5% in 9MFY19. The margins continue to be under pressure due to
decline in Vitamin D3 Animal Feed prices.
We are happy to inform that the company has been able to recover an amount of Rs 608.48 lakhs
against the share application money of Rs 597.00 Lakhs given to Noble Explochem Limited. This matter
was earlier qualified by the statutory auditors in their review report. This now no longer remains a
matter of qualification by the statutory auditors.

Looking at the demand for Vitamin D3 backed by growing awareness, we continue to believe that the
volume will continue to grow at 15-20% CAGR over the next 5 years. We continue to look at avenues
to monetise our real estate assets to strengthen our efforts towards transforming from solely Vitamin
D3 to a multi-vitamin & value-added ingredient based, Nutraceutical Company”

Details here


Explaining everything but not mentioning why revenues got decreased any idea?

Though segment wise reporting is not there, Vitamin D3 appears to be the cash cow of Fermenta. Three chinese companies hold almost 85% of the Vitamin D3 market. Is there any disruption in Vitamin D3 supply?

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Manufacturing was suspended on March 25, 2020 at Dahej and Kullu facilities due to lockdown and resumed partially with minimum workforce on April 4, 2020 at both the facilities.

Investor Presentation - February 2020

How Coronavirus affects India’s pharma value chains



In the case of Vitamin D, India is net exporter for the vitamin D API and capsules. Here, Fermenta Biotech, which has a market share of about 25-30 percent in the Vitamin D3 API (Cholecalciferol) market for human beings, can benefit. As Chinese manufacturers such as Zhejiang Garden Biochemical High-tech, Taizhou Hisound Pharmaceutical, Kingdomway and NHU are among the large players globally, lower exports from China can help Fermenta Biotech in increasing market share.

Ideas for Profit | This Vitamin D API maker could benefit from the Coronavirus after-effects



So if this business turns out to be profitable, India snatches market share from China. Won’t the other pharma API manufacturing companies try to join the party? Like Divi’s or Biocon. They are well placed and with a better team too.

There seems to be some entry barrier.

The Vitamin D3 manufacturing market in India remains fairly unexplored due to limited raw material—cholesterol in sheep wool—and the complex procedure of extracting it. Many companies have entered and left the business, but there is one B2B Indian firm that has survived for 60 years. Fermenta Biotech, a subsidiary of Duphar Interfran (DIL), currently a ₹xxx crore company, is the only home-grown maker of concentrated Vitamin D3 that is sold to pharmaceutical or food companies, which recalibrate it for their final product.

Ayush said earlier in this discussion thread:

There seems to be some entry barrier (due to either technology or raw material sourcing or chemistry involved) and Fermenta is the only company from India and one of the few globally to be manufacturing this product.

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Investor Presentation - June 9, 2020:

@ZeeBusiness recently featured an article on the role of #VitaminD in #immunesupport, including the mechanisms by which the sunshine vitamin regulates #immunity. Click on the link below to read the entire coverage: