Dishman Pharma expects earnings to improve in Q3, Q4

In an interview to CNBC-TV18’s Anuj Singhal and Sonia Shenoy, Arpit Vyas, Managing Director of Dishman Pharma spoke about the latest happenings in the company and the road ahead. Below is a verbatim transcript of the interview Anuj: What is the outlook for the rest of the year because Q1 was quite decent for you even though your EBITDA performance was slightly muted but topline performance was quite good? For the rest of the year what kind of outlook can you give us?A: I will talk a bit about the Q1. Q1 the interesting thing to see is that from Carbogin Amcis, the turnover that had happened was mainly coming from development projects. Development projects if you look at, two years ago Carbogin Amcis were making a loss on the development projects. However, this quarter we have posted around USD 700,000 of profit but on the other hand they have added some employment cost as well of USD 1.2 million. So, if you negate that the actual profit of the development project is around USD 2 million. So, this is an exceptional quarter for Carbogin Amcis and for India as well. Unfortunately the higher margins are coming from commercial projects which are back-ended for Carbogin Amcis which will be coming on in the rest of the quarters. The other thing is that we have given a guideline of around Rs 1500 crore by the end of FY15. We are excepting the margins to go to 25-26 percent. Sonia: What about the profit guidance for FY15? A: Profit we are targeting to be around Rs 130-140 crore. Sonia: You said your Carbogin Amcis business has seen a slowdown. Going forward, what kind of a growth rate can you see? This time around CRAMS growth was about 13 percent year-on-year (YoY), right?A: It is not a slowdown. How Carbogin Amcis works is that they have 50 percent of the revenue coming from commercial products and 50 percent from developing products. Developing products are R&D projects. You have to work on many projects in phase 1, phase 2 for that to increase your options of product going into phase 3 and commercial, which yields very large revenues for us. So, they have to be working with many R&D projects to make sure that we secure our future revenue growth. Anuj: If I heard you right, would we expect some bumper numbers from Dishman in Q3 and Q4 since you said some of the growth would be back-ended? A: We will see a lot of number changes in Q3 and Q4.Sonia: Your marketable molecules business saw good run in this quarter. There was a 30 percent growth over there. What is the outlook for the next couple of quarters? A: For marketable molecules, especially vitamin D3, we have changed the strategy. Before, the previous management was not adequate and was flooding the market with vitamin D3 as they were selling it to anyone and everyone. Now, we have changed the strategy and we have restrained the supply and increased the prices for vitamin D3. Hence you see an exceptional growth in Q1. If this quarter was an outperformer for the marketable molecules it is not sustainable at the same level but we expect it to be at around 20 margin throughout the year. Sonia: Any plans to retire your debt? You still have a debt of about close to Rs 900 crore?A: The debt is around Rs 880 crore and Rs 450 crore is working capital and rest is long-term debt. We are doing a debt repayment of Rs 90-100 crore every year. So, even if you consider the same debt repayment every year in two or three years we will retire the entire long-term debt. We are working to reduce working capital (expense) by 5 percent.