Margin growth to be driven by int'l biz: Panacea Biotec

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Margin growth to be driven by int'l biz: Panacea Biotec

Rajesh Jain, joint managing director of the company said Q4 would see a flattish growth of about 2-5%, unless they obtained permission to launch their products in Germany and the US. “We are quite hopeful that in Q4 growth should come in otherwise Q1 next financial year, anyway, is going to be quite exciting for us,” he said.

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Excerpts from Markets Midday on CNBC-TV18 Watch the full show » ALSO READ See latest News about Panacea Biotec See previous management interviews See what other Experts & Brokerages are saying about Panacea Biotec

Vaccine manufacturer Panacea Biotec saw their second quarter results for FY11 go up. The company saw a 52% growth overall, said Rajesh Jain, joint managing director of the company, in an exclusive interview on CNBC-TV18.

He added that the fourth quarter would see a flattish growth of about 2-5%, unless they obtained permission to launch their products in Germany and the US. "We are quite hopeful that in Q4 growth should come in otherwise Q1 next financial year, anyway, is going to be quite exciting for us," he said.

The company's margins are driven by their overseas business. "The entire growth is being driven by the international pharmaceutical business as well as international vaccines where margins are pretty high and where product mix is actually favorable to high margins," he said.

Below is a verbatim transcript of Rajesh Jain's interview with CNBC-TV18's Latha Venkatesh and Reema Tendulkar. Also watch the accompanying videos.

Q: If you can take us through the revenue growth hereafter. The growth from your numbers was very good because of the growth, in vaccines it was 61%, growth in pharmaceutical formulations business was 37% and your domestic business grew 18%. How much of this is sustainable and over how long?

A: We have had a very good first half with 52% growth overall. What we are expecting is on a yearly basis we will grow close to 26% in FY10-11 and we are looking at the third quarter growing at 30% and a flattish fourth quarter at around 2-5% growth as compared to the previous year.

However, we could see some excitement in Q4 provided we are able to obtain our registrations for launch of our products in Germany and US. We are quite hopeful that in Q4 they should walk in otherwise Q1 next financial year, anyway, is going to be quite exciting for us. So these growths are actually sustainable in the medium to long-term.

Q: How big is this launch in Germany and US and if it comes through what's the kind of growth and if not then in Q1 of FY12 what's the growth?

A: These are only predictions we are making because we do not know how and when these registrations will come because regulatory authorities can take their own time. Nothing as of now tells us that they won't happen.

How many months exactly we would get we are not very sure because the quarter is almost three-four months. What I can tell you is that the growth rate that would be very sustainable in the mid to long-term which will be around 25% to 30% on an average every year.

Q: Just a word on the margins while they look very good YoY, quarter on quarter they appear to have fallen by about 2%. Would you see margins continuing to be under pressure?

A: Our margins are driven by our international business. If you would see Q3, Q4 and even the next financial year, the entire growth is being driven by the international pharmaceutical business as well as international vaccines where margins are pretty high and product mix is actually favorable to high margins.

Q: You are going to have some of your FCCBs redeemed by February. How much is the outgo? We understand its above USD 52 million. Do you have that money with you or would you have to take a loan for it?

A: Yes, it's close to USD 52 million that's the right amount. We are well positioned to pay that out of our internal accruals and the debt raising that we have done in the recent past. We are very well positioned to pay that debt on time, in fact before time.

Q: Your promoter has been buying back shares. Apparently they bought back 5.5 million shares for a consideration of Rs 109 crore. The promoter stake has gone up to 72.7, is this a company or a promoter buy?

A: This was bought by the company just to make sure. Our stock does not actually reflect its true value so here was an opportunity for the company to let the investors know that we are here and the business is growing.

The stock value is not because of the operational issues of the company but it's to do with the market at large. Therefore, we really brought out money for the company to buy back those shares from those investors who wanted to quit and at the same time made sure they are getting value for the money that they were investing.

That was more to tell and give the message to the market that Panacea Biotec's business model continues to be strong with an EPS of 22 in FY10-11. I think the share value should be close to Rs 400 plus. It was in that respect the company decided to buyback its shares.