Growth in margins sustainable going forward: Shasun Pharma

Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » ALSO READ See latest News about Shasun Pharma See previous management interviews See what other Experts & Brokerages are saying about Shasun Pharma Shasun Pharma BSE | NSE 30/05/12 Are Mutual Funds betting on Shasun Pharma?

Abhaya Kumar, managing director of Shasun Pharmaceuticals , tells CNBC-TV18 that the jump in margins is sustainable going ahead. "This year we are crossing revenues of Rs 1000 crore and next year we may cross revenues of Rs 1000 crore in India itself. So the growth story in India and UK will continue to be there," he said.

Shasun Pharma saw net profit jump to Rs 12.6 crore in the third quarter, taking operating margins to 15% from 3% last year.

Kumar goes on to say that a forex loss of Rs 8 crore, which was booked at 53 to the dollar, will be reversed this quarter. "So this is not impacting the PBT," he said.

Below is an edited transcript of his interview with Latha Venkatesh and Gautam Broker. Also watch the accompanying video.

Q: There was a block deal on your shares today. Is there any significant investor who has come on board?

A: I am not aware of this. We heard about it only in the morning when we came to Mumbai, so I do not know anything about this deal.

Q: Could you tell us what's led to this improvement in margins? Also, you a major API supplier for one of the prominent drugs in the US. Has that been able to help your margins?

A: Our product pipeline, the investments we have been making and consolidating and expanding our capacities have really paid off. As far as India is concerned we are registering revenues of more than Rs 70 crore per month

On the UK front also we have been doing very well and we have posted revenues of Rs 97.42 crore. As far as the customers are concerned, we do not talk about our customers.

Q: Are you looking at some fairly big API deal coming your way or new product? Is there something you can hint in terms of what's on the anvil?

A: Shasun is going to maintain its lead in as far as the Ibuprofen market is concerned. Being the world largest producer, we will continue to maintain our lead and continue to derive more from Ibuprofen derivatives market also.

As far as the other markets are concerned, we are growing our contract research and manufacturing service (CRAMS) and formulations business. Formulation business is where we are making huge investments because we see a lot of contract manufacturing opportunities coming from developed nations.

Q: While you may not be able to give us more details on what led to this jump, would you confirm whether this is sustainable?

A: This is very much sustainable because of the consolidation of the activities in India itself. This year we are crossing revenues of Rs 1000 crore and next year we may cross revenues of Rs 1000 crore in India itself. So the growth story in India and UK will continue to be there.

Q: What about the insurance recovery after this cyclone hurt your plant? How much was the loss and what may be recovered?

A: The damage to the factory was quite huge in Cuddalore, but the best part was we recovered within a week and we restarted our operations thanks to the employees and the suppliers who really helped us in restoring the entire roofing.

So there has been not much loss of production, and I think this quarter we will be able to cover up the loss of production. So we will be maintaining the same or a better quarter from what we have had in Q3. This is a big quarter for us and we have a big quarter coming up in this Q4.

Q: Your profit gets clouded by a forex loss of Rs 9 crore, a tax reversal of Rs 25 crore. Without all these extra ordinaries, what profit did you make?

A: If you look, Rs 8 crore is a forex loss because of the accounting standards. We have already booked our forex losses at Rs 53, but now the dollar has come down to Rs 49, so the forex loss which we have already written off may be written back in Q4.

So this is not impacting the PBT, but the forex loss coverage will not reflect the real value of the company. Real value of the company is definitely very robust and the company is going to grow and probably we will try to exceed these quarters in the coming years.