Creapharm buy funded via internal accruals: Dishman Pharma

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Dishman Pharma's subsidiary Carbogen Amcis AG has acquired Creapharm Parenterals. In an interview to CNBC-TV18, VVS Murthy, chief financial officer of Dishman Pharma says, it is a small R&D formulation development company.

The acquisition, he says, is funded trough internal accruals.

Below is the edited transcript of his interview with CNBC-TV18's Reema Tendulkar. Also watch the accompanying video.

Q: Could you tell us about this acquisition of Creapharm Parenterals that you have done?

A: This is a small R&D formulation development company. They will make supplies to clinical phases 1, 2, 3. The company is based in France. We acquired this to help our R&D to develop formulations also, to make supplies to clinical phase 1, 2, 3.

Right now, our Carbogen Amcis is making some development formulations for some customers. Up to lab scale, we are almost complete. Now, we make a facility to make supplies to clinical phase 1, 2, 3. That's why we acquired this company.

Q: How significant was this acquisition, how much have you paid for it and also if you could tell us how it was funded?

A: It is a very negligible amount. It will be funded through internal accruals. It is a very small amount, not worth mentioning.

Q: Is it profit making?

A: So far Carbogen Amcis is developing APIs. We are doing API research. Now, we are venturing into formulation development also to provide end to end service to our customers. So, this will help us in making supplies to hypo formulations for clinical phase 1, 2, 3.

Q: What are the financials looking, how would it look on a consolidated basis with Dishman Pharma?

A: First full year, we are expecting around two million euro turnover from this company with about 17% EBITDA.

Q: Could you tell us what you get on the table after this acquisition from them with respect to assets and liabilities?

A: We are taking only assets of the company and 16 employees

Q: How has been the restructuring of Carbogen, could you give us a progress on that?

A: Carbogen restructuring is already complete. By September 30, the employees, whom we had given notice, have already left. Q3 onwards, we are seeing benefits of reduction in costs.

Q: Carbogen Amcis return to profitability?

A: That depends on the market growth, R&D growth and requirement of the people. Right now, the people are sufficient for another 10-15% business also. Same people can be managed. As and when required, we will see at that time.

Q: What would be the plan on debt and the reduction of debt?

A: Our debt/equity ratio is only about 1:1. We are already paying around Rs 75 crore per year, normal repayments. 2014 onwards, Rs 100-125 crore debt will be repaid.

Q: Could you give us some amount of guidance? There is concern on the street that the company's RoC or return on capital invested and the interest coverage ratio have fallen

A: Last couple of years, we are expanding our capacities to meet our customers' requirements. Those will start giving returns from next year onwards. Q3, we already started trial production in most units. We are expecting commercial production by end of Q4, this fiscal year end.

Next year onwards, they will start contributing to the top-line as well as bottom-line. Once, these new units start giving profits, certainly the ratios will improve. Next two years, we are expecting it will come to normalcy.

Q: Could you give us an update on how the marketable molecules segment is doing? What we can expect from there by way of revenues?

A: Marketable molecules segment is doing well actually. We have introduced one new molecule called Benzethonium Chloride. We are expecting around USD 10 million businesses from this calendar year. It's doing very well.