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Granules India Ltd.

BSE: 532482 | NSE: GRANULES |

Represents Equity.Intra - day transactions are permissible and normal trading is done in this category
Series: EQ | ISIN: INE101D01020 | SECTOR: Pharmaceuticals

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Sep 17, 16:00
327.90 -5.05 (-1.52%)
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327.85 -5.15 (-1.55%)
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Annual Report

For Year :
2018 2017 2016 2015 2014 2013 2012 2011 2010

Chairman's Speech

Dear Shareholders,

We continue to deliver positive performance while concurrently building for our future despite a challenging operating environment. Our Company has focused on long-term sustainability by strengthening our foundation through the execution of our Core business division while building the blocks for our future growth. Granules has always focused on sustainability which is why we invested in our Core business to bolster our position as a market leader while also developing the know-how to get into more lucrative and complex pharmaceutical products so we can continue growing for the long-term. The preparation that began four years ago is taking shape as we see realizations coming in from our investments. We are on the mark, ready to surge ahead and reap the benefits of the knowledge and financial investments we have made over the past several years which will help take our Company to the next level.

Given the dynamics and challenges of the global pharmaceutical industry, it is easy to chase trends that might appear to be lucrative in the short-term but we have been resilient in terms of building for the future due to our robust processes, mindset and culture we have developed within our organization. We believe forward thinking, bucking groupthink and willingness to march to our own tune will lead to strong, sustainable growth. We have fine-tuned our strategy by talking to existing and prospective customers to understand their needs which helps us develop innovative solutions which drive meaningful value and satisfaction.

Performance review, 2017-18

While the macroeconomic and geopolitical environment remained volatile, we created the right framework for a high growth trajectory. It has been a difficult financial year at Granules in terms of pressure on margins on account of supply constraints for key raw materials. Against the background of global macroeconomic cues and sector specific developments, I am pleased to report that our Company delivered revenue growth of 18% from RS.14,353 million in FY17 to RS.16,918 million in the current fiscal year. We had growth across all product verticals, with APIs registering a 9% increase; PFIs growing 22% and FD registering 24%. We grew on account of our expanded capacities in Bonthapally for APIs and Gagillapur for PFIs. Our expanded capacities have helped us realign our product mix. While our increased capacities led to enhanced revenue realizations, geographic distribution of our products as well as, supply constraints and a surge in oil prices impacted our profitability, resulting in EBIDTA and PAT being reduced by 6% and 19%, respectively. In FY18, our EBIDTA was RS.2,893 million and PAT was RS.1,326 million. Our EBIDTA margin stood at 17.1%, declining by 442 bps, while PAT margin stood at 7.8%, declining by 363 bps from the previous year.

Our Core business was able to grow due to the inherent stability of the molecules along with our relentless focus on efficient manufacturing. Our five core molecules contribute 86% of our total revenue, helping us maintain our leadership position in the world. In FY18, semi-regulated markets represented 37% of our revenue, which is an uptick from 33% in FY17. We supplied to the semi-regulated markets from our enhanced capacities while we waited for approvals to come in from regulated markets; once we get approvals, we anticipate supplying to the regulated markets which will positively impact our profitability.

Operational Review

Our Company remains among the few to have invested in significant scale across the value-chain, improving our operating efficiencies. We successfully began the commercial production of our additional API capacity of Metformin and Paracetamol at the Bonthapally facility and PFI capacity at our Gagillapur facility. This has helped us debottleneck capacity constraints and seize business opportunities. Paracetamol, Metformin and Ibuprofen contributed 80% of our top-line and individually grew by 17%, 11% and 47%, respectively. We are particularly proud of our state-of-the-art, fully automated facility at Bonthapally which is where we expanded our Paracetamol and Metformin began in FY18; we will subsequently add new Guaifenesin capacity in FY19.

We maintain a positive outlook on our joint venture Granules OmniChem, having set the foundation of growth for the next five years. We are optimistic of recording double-digit growth from our CRAMS segment in the coming years. In FY18, we reported revenue of RS.1,470 million with an EBIDTA of RS.281 million on a joint-venture entity level. The focus, going forward, will be on de-risking concentration risk of the business by adding new customers and products to the portfolio.

Granules Biocause, which supplies Ibuprofen API, has continued to deliver in the financial year 2018 as well, reporting revenue of RS.2,621 million on a joint-venture basis. As Ibuprofen API prices have shown an upward trend in the recent times, we continue to benefit from the JV in terms of better realisations and mitigation of supply risk for Ibuprofen PFI and FD, which is a part of our Core business.

We are making significant headway in the evolution of Granules with our Emerging Business Division. This division plays a key role for business expansion for both the Core and US Generics divisions. Apart from supplying niche, high value - low volume APIs to third party customers, the Emerging Business Division also provides support by supplying select APIs for forward integration to Finished Dosages to our Core and US Generics divisions. In addition, the Emerging Business division will, in the future, help serve as a prominent CMO to other pharmaceutical companies by giving them access to in-house APIs and thereby strengthening the Core Business with capacity and new products. We have already seen regulatory filings in Europe translating into an increase in regulated market sales with partner companies.

The construction of the Oncology and High Potent/Multiple APIs facility is proceeding as per our expectation and is estimated to be completed in the second half of fiscal year 2019. We have started the validation of the Oncology block and expect High Potent/Multiple APIs block to begin validation this year.

Our stringent focus on quality and compliance has been our core strength in business sustainability. We continue to remain strong on our efforts towards achieving and maintaining high levels of regulatory compliance. I am happy to inform you that during the year, we have completed USFDA inspections at our Gagillapur and Jeedimetla facilities. We also successfully completed a first US FDA audit at our Virginia facility, post our acquisition in 2014.

We invested a significant amount of organisational resources towards R&D to further strengthen our product portfolio in various therapeutic areas. Our R&D was conducted across our three R&D facilities located in Hyderabad and the US. We maintained the momentum of regulatory filings for APIs and FDs in the US, Europe and other key regulated markets. We have built a strong foundation and bandwidth in product development as well as filings.

- We filed 4 US DMFs in FY18, bringing our total USDMF filings with the USFDA to 21 as of March 31, 2018.

- We now have a total of 11 CEPs with the EDQM of whicRs.1 was filed in FY18.

- We filed 2 EDMFs in FY18, which brings our total to 6 EDMFs filings as of 31st March 2018, along with other regulatory filings in key regulated markets to support potential AN DA and dossier registration filings.

- As of March 31, 2018, we have filed 20 ANDAs with the US. FDA of which seven have been approved. Of the total ANDAs, we filed 10 in the last financial year and we expect to file similar number of ANDAs in the FY19 between India and the US

Road ahead

It is an exciting time for us at Granules as the Company enters a new phase, backed by a focused approach towards new product development and leveraging its operational excellence. Our Company has invested heavily with the objective of further solidifying our existing business and creating auxiliary engines to drive sustained growth. We have a dedicated team that has demonstrated its unswerving support towards taking the Company ahead and sustaining continued growth. Today we stand on the threshold in which we are ready to deliver strong performance that will create value for all stakeholders and script a new chapter of success for the Company. I take this opportunity to thank you for your support and encouragement over these past years. We will continue to communicate how we seek to innovate and introduce products that enhance value for our shareholders.


Krishna Prasad Chigurupati

Chairman & Managing Director