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Cupid Ltd.

BSE: 530843 | NSE: CUPID |

Represents Equity.Intra - day transactions are permissible and normal trading is done in this category
Series: EQ | ISIN: INE509F01011 | SECTOR: Miscellaneous

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Annual Report

For Year :
2018 2016 2015

Chairman's Speech

Dear Shareholders,

It gives me great pleasure to present the developments and financial performance of fiscal 2018. The year was a mixed bag as we started off on a bright note but experienced a bit of slowdown in the second half due to macro and a Female Condom orders related issues. Nonetheless, this year was also a good one in terms of your Company using this mild downturn to focus on developing new products as well as enhancing capacities.

On the financial front, we ended the year with a Total Operating income of Rs. 806.0 million (mn) for FY18 as compared to Rs. 836.4 mn in the corresponding period of the previous year reflecting a decrease of 3.6 %. EBITDA stood at 283.3 mn as compared to 346.3 mn during the corresponding period of previous year translating to a margin of 34.6%. Net profit was thereby impacted, and we closed the year with a net profit of Rs. 170.9 mn for FY18 as compared to Rs. 205.5 mn in the corresponding period of the previous year which is a decrease of 16.8 %.

Let me take you through the reasons for the dip in revenue and profitability for the year. The revenue of the Company, particularly in the second half of the year, was impacted by the political upheaval in South Africa which resulted in a drastic cut back in the health department’s budget. This was compounded by the shifting of dispatches of the Government of India order for male condoms from the fourth quarter of FY17. The decline in revenue along with an unfavorable product mix between male and female condoms impacted the margins and hence the profitability at the net level. We expect the above to be a temporary phenomenon and hence would see some of these orders come back to the Company in the current fiscal.

On the positive side, in addition to fulfilling several repeat orders from our existing customers from various countries, the Company received new orders from WHO/UNFPA covering new geographies and two new contract manufacturing orders from the Domestic market. Despite the significant cut backs in the South African demand for Female Condoms, we increased our sales into new Geographies like Central African Republic, Guatemala, Honduras, Jordan, Tajikistan, Morocco, Tanzania & Uzbekistan. As on Mar 31st, 2018, we have confirmed and repeat order worth 630 mn to be executed during this year. This does not include any potential orders Cupid may get from the South African and the Government of India tenders.

Further, we initiated a process to increase our capacities by about 40% despite the tepid order inflow in the second half and this was a well thought out strategy to address future opportunities that your Company envisages. The other interesting development on the capacity augmentation side is that in addition to continuing to import female and male condoms and lubricants, the Government of South Africa has decided to offer some incentives for manufacturers like Cupid to set up a local manufacturing unit in South Africa and Cupid has joined hands with a local partner to set up a domestic local manufacturing unit and submitted a bid to the Treasury as a part of the tender bid document, which is under review. We believe this will further entrench our presence in the market which has the largest population of HIV positive and STIs in the world.

We made significant strides on the R & D front too. We launched a patented male condom which is unique in design and offers extra sexual satisfaction while the second product, a water-based lubricant jelly in form of sachet, tubes and bottles was launched in the third quarter of this year. The demand for the water based lubricant jelly looks encouraging. We are also in a process to launch a specialized and innovative hand sanitizer which would also be sold in the form of sachet, tube and bottle and we are hoping that with time these new products would add to our revenue streams.

Another important development during this year is that we have completed all the modules for the premarket application service for the USFDA registration. We have written to the FDA to guide us in terms of the protocol for the clinical trial to be done in US under US regulations. We are still awaiting the guidelines from USFDA on this issue. A related development in this respect is that the USFDA is considering downgrading the classification of female condoms from Class III to Class II, which is just like male condom. If that happens, we believe that clinical trial requirements may also be eased out which will help your Company to accelerate its entry into the US market.

One key area where the Company is making rather slow progress is brand promotion. This is a very challenging task and we have taken small steps in the last six months to improve our visibility and reach in the country. We do believe that we have great products in our portfolio and a better brand awareness would further enhance the performance of the Company. We have set ourselves a target of approximately 100 mn in the next 3 years from retail sales in India. One small step in this direction was an extensive Digital marketing strategy which was done to spread awareness about Cupid Male & Female Condoms.

Training and educating users and influencers of our products is an important part of our strategy. To this end, Cupid developed a comprehensive training program related to the HIV and Cupid Female Condoms with the cooperation of Department of Health, South Africa. The training program is in the process of being presented to Health personnel and the users of Female Condoms covering all the 9 provinces of South Africa.

The outlook for FY19 looks promising with the recent contract received from South African Treasury Department through our agents situated in South Africa worth Rs. 40.09 Cr for supply of Male and Female condoms and we are confident that we will put the struggles of fiscal 2018 behind us and embark on the orbit of growth. At this juncture, I would like to thank all our employees,customers and more importantly our shareholders who have fully supported us in this journey.

As I close, I would like to remind you that your Company had paid Rs. 2 per share as an interim dividend after the second quarter results and we had proposed Rs. 2 per share as a final dividend and Rs. 0.50 per share as a special dividend, bringing the total for the FY’17-18 to Rs. 4.5 per share which is the highest dividend your company has paid to the shareholders as of date. We are hoping that we will continue in the same trajectory and maximize shareholders wealth as we move ahead.

Best regards,

Omprakash Garg

Chairman & Managing Director