I attended Gufic’s AGM where some of my earlier highlighted concerns got clarified. I have highlighted them below.
As a side note, Pranav Choksi’s energy is contagious. I think he went on for more than 1.5 hours talking at length about their plans, and answering each question with incredible detail. This guy is crazy passionate!
Its incorrectly mentioned in AR, anything beyond 60 day receivable is mentioned in credit impaired. Actual impairment is very low.
Gave extra credit to sell covid products
Sales returns only happen in domestic business (& not in contract manufacturing or exports). 4-5% average sales returns in domestic business (2-3% product due to damage + 2% sale returns which are then resold to other customers). So overall ~3% is sales returns in normal scenario
Split between divisions
- Domestic: 52% (sallaki – 45-50 cr.)
- CMO: 22-25%
- Export: 15%
- API: 8%+
Management also shared their thoughts on how they approach the hospital business, which I found pretty useful. They categorize hospitals into 1) primary – single doctor (25-50 beds), 2) secondary 75-100 beds, and 3) tertiary – large hospital chains. In terms of segments, they categorize by
- Fungal
- Prima care – focused on single nursing homes and catering to rural markets
- Critical care (largely for tertiary hospital) – pan India. Gufic’s target market is growing at 30-35% volumes but there is huge pricing erosion which results in 15-20% value growth
- Sparsh: 128 products currently (target to stabilize 135 products in FY24). 20-25% MoM growth currently. Distributors are still involved, company is doing more demand and negotiate better prices. Will manufacture 80-90% product once Indore ramps up
What is very interesting is they are directly reaching out to hospitals and will sell via their own direct channel where they get a daily idea about demand from individual hospitals. In a way, they want to be a 1-stop provider for all hospitals.
Currently, around 180-200 people are promoting their products via hospital channel.
Miscellaneous
- Expect to maintain 12-15% minimum growth
- With Indore now catering to domestic market, Navsari will largely focus on export market. Export business will be next growth driver (focus on injectable, lyophilization, PFS, complex injectables like liposomal, extended release, peptide based APIs, etc.) – plan to sell Botulinum toxin in export markets
- Indore plant will be initially used for contract manufacturing business, focus on larger companies. Indore facility will be one of the largest lyophilizer factories globally. Will start in next 1-2 months
- 1-3 cr. cost for creating a new dossier (80-90 dossiers have to filed in next 2-3 years)
- Working on recombinant biologics with Balram Singh which can reduce imports
- Remdesivir: 63 cr. (processing income). This business went away
- 170-190 days normal inventory period
- Residential apartment (in Mumbai close to office, in Surat close to Navsari): for own employees and business associates as they are expanding
- 20-25 cr. depreciation cost
- Indore has been taken on 100 year lease
- Indore will take 3-4 quarters for validation and stabilization
Disclosure: Invested (position size here, no transactions in last-30 days)