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Jun 08, 2012, 03.13 PM IST | Source: CNBC-TV18

Expect to maintain EBIDTA margin ahead: Wockhardt

Habil Khorakiwala, chairman of Wockhardt says, the company’s EBITDA margin is increasing QoQ for nine consecutive quarters. "We believe that we should be able to maintain the margin, if not improve upon it," he adds.

Expect to maintain EBIDTA margin ahead: Wockhardt

Habil Khorakiwala, chairman of Wockhardt has fought all odds in the last few years and the company is still going strong.

In an interview to CNBC-TV18’s Archana Shukla, Khorakiwala says, the company’s EBITDA margin rose QoQ for nine consecutive quarters. “We believe that we should be able to maintain the margin, if not improve upon it,” he adds.

Today, he says, the company’s balance sheet is very strong. “The debt/equity ratio is below 2. If you look at our debt to EBITDA ratio, it is also at 2. That is very healthy for any organisation. Our interest coverage ratio is something like 6-7. So, from that point of view, our balance sheet even today is very healthy. Obviously, it will be much healthier,” he asserts.

Below is the edited transcript of his interview on CNBC-TV18. Also watch the accompanying videos.

Q: You really have fought all odds and the numbers show that you have come out strong. The company has been posting profits in the last couple of quarters at the operational level. What really is driving these numbers for Wockhardt?

A: Over the last three years, since we had these financial challenges, two things have happened. One, we focus more on the business on one hand and manage the external environment. Secondly, our whole management team believed in the organisation and the company. As a result, we have reduced our operating costs significantly over the years.

During these tough times, we did not take our eyes out of research and development. Infact, we continued to invest in R&D. That not only gave confidence to our team within the organisation, but it created a future for us. We have always been focusing, for the last three-four-five years, on technology driven products for the US market primarily. That is where we have been able to introduce number of those products and that has been very successful.

Q: Thirty five percent EBITDA margins, do you see these being sustainable in the coming quarters as well? What really could help them be at this levels?

A: If you look at our EBITDA margin, three years back, it was about 18%. Previous year, then subsequent year, it moved to 24% for the year. This year, it is about 31% and 35% for quarter. Our EBITDA margin is increasing QoQ for nine consecutive quarters and absolute EBITDA also. We believe that we should be able to maintain the margin, if not improve upon it.

Q: You have taken a provision of Rs 160 crore as interest expense as part of the CDR rollout. Could you highlight where this provisioning have been taken?

A: This is basically a provisioning of interest difference of the lower interest we were paying to CDR banks. Whenever we exit in future, the differential interest was payable. That is the provisioning we have taken. For the whole year, it is around Rs 40 crore. It would have provisioning in the future.

Q: The other write-off that you have taken is on goodwill, some Rs 330 crore. What has led to this sort of a write-off?

A: This is goodwill of Wockhardt France. The auditors and our internal management team felt that because of the setbacks we had in France, this goodwill requires to be written off.

Q: Because you are restructuring your business, globally as well, could there be some more of such provisioning taken into account in the coming quarters?

A: Whatever provisioning needs to be taken, we have already taken.

Q: Your net debt position has improved substantially in the last couple of quarters. The debt/equity ratio is at 1.9. Has all the foreign currency derivatives been paid off? Where do you see this net debt position going forward?

A: All derivatives have been paid off completely. In our net debt, which two years back was 5.5, has come down to 1.9 this quarter. Obviously with the level of profitability we have and the cash flow which is generated, this debt will further go down during next 12 months.

Q: Any indications as to from 1.9 where could you see, let’s say, at the end of next fiscal?

A: It would be significantly lower.

Q: We have not got clarity on your deal with Danone. Where is it progressing? You had earlier said that you would be closing it by March of 2012. By when could we expect that to close and when the money comes in? Whenever the closure of the deal happens, what sort of impact will that have on the net debt?

A: The deal is announced, it is already in the public knowledge. Whenever it happens, we will announce that. It will further improve our debt position significantly.

Wockhardt stock price

On November 21, 2014, Wockhardt closed at Rs 816.10, down Rs 11.35, or 1.37 percent. The 52-week high of the share was Rs 886.50 and the 52-week low was Rs 336.60.


The company's trailing 12-month (TTM) EPS was at Rs 38.12 per share as per the quarter ended September 2014. The stock's price-to-earnings (P/E) ratio was 21.41. The latest book value of the company is Rs 85.16 per share. At current value, the price-to-book value of the company is 9.58.

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