Dishman Pharma expects margins to scale up to 20 percent by the end of FY15. The company is focusing on contract manufacturing to boost its margins over volumes in its Vitamin D business, says MD Arpit Vyas.
The company is now concentrating on high margins and high value business in Netherlands and expects a sizable improvement by the end of the year.
The company expects revenues for the Netherlands businessto be around 30-35 million and PAT to be around 12-13 percent going ahead. Below is verbatim transcript of the interview:
Q: You will be concentrating more on the margins as opposed to revenues, can you give us an update on that?
A: That is correct. In vitamin D business, we are now concentrating on the margins and not on the volumes and you can see from Q1 that it has worked very well and Netherlands has posted a profit after tax (PAT) of almost around 20-21 percent. It will not be feasible to maintain the PAT margins at those levels throughout the year but we expect a sizeable improvement by the end of the financial year.
Q: What would the revenues look like for the Netherlands business and by how much can you scale up your margins there?
A: The revenues would be around 30-35 million at the low level if I am being conservative and the PAT would be around 12-13 percent.
Q: Why are you concentrating more on your margins and not on your revenue, can you give us a reason for that? Is it just to build up your EBITDA?
A: It is not to build up our EBITDA. It is a simple strategy that the entire market demand - the world demand for vitamin D is 400,000 metric tonnes. Right now, some of the Chinese companies are flooding the market.
We provide much better quality, which is to be ingested by the humans and we can charge a premium on those products that we send out in the market.
Hence, we are controlling the market and not make it a commodity product but a profitable product.
Q: Give us one word on what is happening in China? What will the revenues look like and would it be a loss for you in China? If yes, could you quantify the amount?
A: In China, from what we have seen in this fiscal year, there might be a minimal loss. We are trying for a breakeven this year. If not, there will be a minimal loss of around Rs 2-4 crore and not like last year.
We have one product, which is going in and the value will be around 4 million with 1 million of margin. We expect that to finish within this fiscal year and that should get us breakeven.
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