Dishman Pharma eyes over 15% topline growth going forward

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During the second quarter FY12, Dishman Pharmaceuticals ' revenues grew 26.5% to Rs 269.2 crore. The company's operating profit margin (OPM) was 17.5% versus 17.4%.

Managing director JR Vyas expects the topline growth to be 15% or even more going forward. He also added that the bottomline will grow in the second half too.

Here is the edited transcript of his interview to CNBC-TV18. Also watch the accompanying video.

Q: After the second quarter, you withdrew your FY12 guidance. Do you now see enough visibility to give us guidance on your revenue growth for the current year?

A: Our revenue has grown about 26% in terms of the topline. Because of the market losses on the forex and being unsure of where the foreign currency movement will be, we have withdrawn our guidance.

In another three months, we will be able to give further guidance. We will definitely grow in the topline by 15% and the bottomline will also grow in the second half.

Q: In this 15% total revenue guidance for the whole year, what will be the performance of your marketable molecules (MM) business, which has seen a growth of about 93% in the quarter gone by? What is your perspective on your contract research and manufacturing services (CRAMS), which has grown at a very tepid rate?

A: For the MM business, we had a good opportunity on Benzethonium. MM business will go further because the Vitamin D3 plant just started production yesterday. In the second half, we will have significant revenue coming from Vitamin D3 unit.

In CRAMS, one of our major customers has decided to outsource the entire production from Dishman and opted out of the other European source. This will significantly increase the revenue in the remaining six months and FY13.

Q: You had decided to sell your Chinese unit. Is the sale complete?

A: Yes. The China unit doesn't look as an attractive proposition now because of the withdrawal of the tax benefits and interest rates going up. If we can recover our investment, then we will sell off.

Otherwise, we will convert it into an oncology unit and start production of various oncology products in China.

Q: If you happen to sell it, how much are you likely to get? Have you had any early indications with the prospective buyers?

A: The value would be close to USD 25 million.

Q: We understand that you will be using this money to repay the debt. What is Dishman's debt situation?

A: It will be purely used for debt-repayment. Our consolidated debt is around Rs 900 crore.

Q: Looking at the topline, can you give us guidance?

A: We are sure of a 15% topline growth or even more as our first two quarters have grown 26%.

Q: The EBITDA margins of your Vitamin D business dropped quite significantly. It fell by about 9% on a year-on-year basis. Is the trend likely to continue with respect to the margin performance?

A: No. On the contrary, this trend will change. The fall was because of a delay in starting the Vitamin D production in India. Dishman Netherlands has to buy Vitamin D from DSM at a much higher price, which is serviced to our customers at a lower price.

Once we make Vitamin D3 in India, we will sell it at a much better price to Netherlands. So, their margin will go up significantly.

Q: What is the source of your forex notional losses? Did you take a forex loan or is it because of exposure on your import-export front?

A: It is mostly on the imported materials and the foreign loans - dollar, CHF and euro.

Q: What is the exposure in terms of loans?

A: Our exposure on the forex loan is to the tune of about USD 100 million.

Q: None of it is hedged?

A: No.

Q: When is the loan due for repayment?

A: We are already paying about Rs 80-90 crore every year. In four years from now, most of the foreign currency loans will be repaid. Carbogen Amcis is doing well in the last and this quarter that they have surplus cash. They have prepaid USD 5 million CHF to ICICI Bank in the last week.

Q: Do your export earnings in foreign currency match your outgo in terms of loans and interests?

A: Yes.