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Mar 07, 2013, 04.26 PM IST | Source: CNBC-TV18

JV with Kose to commence in 3 months: Elder Pharma

Elder Pharmaceuticals entered into an agreement with Kose Corporation of Japan to form a joint venture (JV) company to manufacture and sell cosmetics in the Indian market. Alok Saxena, director of the company shares details with CNBC-TV18 regarding the JV.

We are not putting up a new plant. We already have an existing plant, which is making pharmaceutical products

Alok Saxena

Director

Elder Pharma

Elder Pharmaceuticals entered into an agreement with Kose Corporation of Japan to form a joint venture (JV) company to manufacture and sell cosmetics in the Indian market. Alok Saxena, director of the company shares details with CNBC-TV18 regarding the JV.
 
Saxena expects the project to commence in three months and have no plans to set up a new plant in the near-term. He believes that the margins of the company will not be impacted by the JV.

Below is the verbatim transcript of Alok Saxena's interview on CNBC-TV18

Q: Could you give us details about the joint venture. How much funds will you need to infuse and when will revenue start accruing?

A: We are looking at getting this project on-stream in the next three months. The initial investments could run into couple of million dollars. We have not finalised the business plan as yet, but we are looking at giving them complete support of manufacturing and distribution in Indian market. Kose Corporation is one of the leading innovative cosmetic companies from Japan; in fact they are among the top three cosmetic companies. However, the plan is to bring their top-end unique products in the Indian market. They have been doing an analysis of the Indian market for sometime now and are quite confident that using our distribution and manufacturing support they will be able to do well in Indian market.

Q: Can you give us more detail on what kind of cosmetics are you speaking about? Is high end as well as food and drug administration (FDA) issue therefore will not come in; is there no question of any drug controls of any kind, quality or price?

A: There is no issue of FDA, but Japanese manufacturing requirements are very stringent. In fact they are asking us to follow absolute pharmaceutical norms for manufacturing. It is not just cosmetic norms. Therefore, we are planning to use one of our pharmaceutical factories for manufacturing because the quality issues are going to be as per international norms.

Q: Your mainline business is not cosmetics; do you need to put-up a new plant? Can you give us a ballpark idea of how much will be the money involved?

A: We are not putting up a new plant. We already have an existing plant, which is making pharmaceutical products. The same plant will be used for making cosmetic products because we will be following the same manufacturing norms as we do for pharmaceutical products. So, we are looking at top of the line products coming out.

Furthermore, the company is looking at both the mass segment and the prestige segments. All the products are intended to be made in India.

Q: What would they be, skin cosmetic, would they be creams?

A: Almost all the products initially in the first few years will be skin products in the form of creams, lotions and ointment. The total market in this segment is about Rs 18,000 crore. So, just a facial skincare segment is roughly a market of about Rs 5,500 crore. Therefore, their target is this market and almost all the products they are looking at are towards the skincare market.

Elder Pharma stock price

On July 23, 2014, Elder Pharmaceuticals closed at Rs 196.60, down Rs 2.2, or 1.11 percent. The 52-week high of the share was Rs 377.40 and the 52-week low was Rs 187.00.


The latest book value of the company is Rs 378.73 per share. At current value, the price-to-book value of the company was 0.52.

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READ MORE ON  Elder Pharma, JV, Kose, FDA, cosmetics, skincare, ROIs, FMCG
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