Speaking to CNBC-TV18, Ranbaxy MD & CEO, Malvinder Singh said that he expects his company’s EBITDA margins to be 18%. 2008 core generic business to do well in US He sees 20-25% growth in PAT in 2008. The company’s guidance of 18-20% sales growth includes only base business and not first-to-files (FTF), he said. Ranbaxy’s core generic business would do well in US, he said.

Excerpts from CNBC-TV18’s exclusive interview with Malvinder Singh:

Q: What does it factor in - 18%-20% topline and 17.5% EBITDA that you have just guided for 2008?

A: 18%-20% growth in topline is based on a core base business between emerging and developed countries. It does not factor in the FTF that we are going to announce next week. That is going to be over and above this. Also we will have a strong expansion and EBITDA margins. Our EBITDA margins for 2007 were very strong, ending beyond the guidance at 16.5%. We see that going up to 18% for 2008 and I think that is going to significantly drive the core earnings of the business as we move forward. So I think PAT of 790 crore where we ended 2007, we will see strong 20%-25% growth in our PAT for 2008.

Q: You said the first-to-file would be over and above that - could you just give us some sense of the timing of when you expect this to kick in and what could be the quantum of the surprise even a ballpark number?

A: I will share that with you next week.

Q: What about the timing, forget the product or the quantum of profits and sells by when do you expect to kick in?

A: It will be towards the latter part of the year. But we will share that next week and I will give you all the details that you would like to have.

Q: There seems to be some expectation that Ranbaxy might be looking at hiving off their emerging businesses as well, is that something that is under active consideration?

A: I think where we are today, if you look at sum of parts - the company on a global basis and also some of the core strengths that we have in India between R&D, between manufacturing, between the SEZ, between emerging and developed countries, we certainly are of the clear view that the market value of the company is far higher than what is reflected in the stock price as of today.

So we are open to explore in a series of opportunities which will enable us to grow our business to look at optimizing a value and bringing the maximum value to shareholders. So the demerger of NDDR is only one aspect that we are going to do in 2008, which we had committed and said in 2007.

I believe there are series of other opportunities of unlocking value of looking at innovative structures which will still enable us to keep control and to consolidate the business at Ranbaxy but to grow the business significantly.

There are opportunities for growth and for acquisitions which we do not necessarily need to do at the parent company. But we could do it at different levels within the operations. So there is opportunity, we are evaluating a series of them and I believe we will get strong growth and strong value from that, as we move forward.

Q: I heard you mentioned at the press conference that you are aiming for H2CY08 listing for that R&D arm - can you just update us on where the pipeline stands at this point and are you still open to or are you looking at some kind of strategic sell as well before you do that listing?

A: We currently have a fairly large basket of compounds in that - it is around 15 odd compounds that we have there which are moving well. The lead compound - it is a Malaria compound which is 11160, which is in phase 2B clinical trials. There is another one which has finished phase one, we are working on three more which we should hope to file in our R&D, the compounds with the GSK alliance are doing well. We should be working on filing an R&D and we have added two more compounds in the GSK alliance. So we have a very strong basket of products there which is doing well and I think we are going to continue to build on that as we move forward. There is certainly a lot of excitement in this area. I believe there is huge value creation and getting in a partner at appropriate time is certainly an area where we are interested.

Q: The US had a very sluggish year at Ranbaxy. Do you expect 2008 to be similar- emerging markets and the European Union driving growth or do you expect US to bounce back, both in terms of profitability and revenues in 2008?

A: The US growth this year was in single digit. But we have been able to grow that business with really no first to file in 2008, the Pravastatin 80 mg was a very small opportunity and we have been able to grow that despite having a very strong base of Simvastatin in 2006. In America, we have added to that on branded side, significantly. So in 2008, you would see the core generic business there doing well. You will see an FTF coming every year for the next 4-5 years. You will see the branded business in America growing as well. So you will continue to see the core business growing well, which is grown at 19% odd in 2007. But more importantly, being added by the branded side and also by the FTF- that will come in every year for certain. So American business will be strong and will grow well.     

Q: Do you think you will be able to affect more than one leg of corporate restructuring in 2008? Of course, the NDDR will happen. But do you think you could make another move in terms of either hiving off your emerging market businesses etc in this current year?

A: I am not saying that I am going to hive it off. We are certainly going to evaluate a series of option and tomorrow if I get a very exciting opportunity to go and buy an Indian company and if they are willing to merge, then we can certainly evaluate spinning out our Indian business merging with another Indian company, having that listed and yet have the majority of that as controlled by Ranbaxy. So we will be able to consolidate that entire business which will allow us to significantly ramp up our market share in India.

So there are a series of structures and options available. What I am saying to you is I believe there is very significant value sitting in the company, which is not reflective in our stock price and we are going to work to see what is best way to bring that in and reflect in so our shareholders can get the maximum in terms of what there is in the company.

Q: How much do you see Terapia contributing to this 18-20% sales guidance that’s been set out?

A: Terapia in 2007 grew about 21%. It grew far higher than any of the other companies in Romania and we will continue to see a growth better than this as we move forward to the next year. 

Q: Tell us about Ponta Sahib, analysts are a bit concerned on the lack of information there, can you just update us on the situation?

A: There is no distinct information at this point in time. But what I can certainly say is that we have complied and we have done what was asked for us, we are fully cooperating with the FDA and we are hopeful that it will get resolved sooner than later.