Dishman Pharmaceuticals expects to close this fiscal with around Rs 250 crore sales for its Vitamin D business and ‘very good’ EBITDA margins, says CFO Rajashekhar Bhat. The EBITDA margins for Vitamin D business was around 27 percent for the first half of the fiscal.
The pharma company is eyeing capex of around Rs 50-60 crore this fiscal year.
Speaking to CNBC-TV18, Bhat says the consolidated debt of the company is at a comfortable position of around Rs 900 crore. “We are focusing on repaying debt, so within a year or two we should be substantially reducing our debt position,” he concludes.
Below is verbatim transcript of the interview:
Q: Before talking about your capex plans, I wanted to focus on the Vitamin D business because the last time we had spoken to Dishman Pharmaceuticals and Chemicals, the management said that there was a lot of competition from China in terms of the Vitamin D business but now that seems to be turning around because your big competitor seems to be having environmental problems in China. What incremental benefit can we see for the Vitamin D business for Dishman?
A: Dishman Netherlands with Vitamin is doing excellent, in fact for the first half we have clocked EBITDA margin of 27 percent. Part of it is because the competitor is producing less but part is more of a marketing strategy which is being directly handled by our CEO, Mark Griffiths.
However, previously they use to sell to about 26-27 distributors and there was no control on the pricing, volumes was the game.
Today, the game is to increase margins and over the last three-four months we are seeing the results come in with 27 percent EBITDA margin.
We do not expect to close this year at 27, slightly lesser but easily about Rs 250 crore sales and a very good EBITDA margin.
Q: Do you expect the Vitamin D business to benefit even into FY16 and not just FY15? What would be a sustainable margin run rate and would 27 percent then be an aberration which would be limited to FY15?
A: At this stage I do not want to give any guidance but all the management team at Netherlands and Switzerland is strongly focusing on this because this makes about 16 percent of our total turnover and we are expecting this sort of a margin to continue further but I do not want to give any guidance.
Q: In terms of your debt to equity ratio – that stands quite comfortable but I believe you have plans to reduce debt over the next two-three years. Can you take us through that plan?
A: The first thing I saw as a CFO was that over the last few years we have built a lot of quality assets. We have about eight manufacturing facilities; three at Switzerland, we have at Netherlands, in China. Therefore, one of the first decisions we took internally was to focus on sweating the assets, no more capex.
Maybe we can do some little maintenance capex when there are certain clients who are willing to pay for the capex. They pay for it, it comes in our books and that’s a good scenario. Therefore, this year we will be doing about Rs 50-60 crore of capex.
Today, my utilisation is around 60 percent and till we reach about 85-90 percent utilisation no more aggressive capex maybe after three years we could look at some acquisition especially moving into formulations.
Q: That is a long-term plan. Give us a near-term sense in terms of what your absolute debt stands at this point in time and what would you like to reduce it to and by when?
A: Today our consolidated debt levels are at comfortable position. We are at around Rs 900 crore and today whatever my cash accruals are, we are just focusing on repaying of the debt, so within a year or two we should be substantially reducing our debt position.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
