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Last Updated : Feb 09, 2016 05:05 PM IST | Source: CNBC-TV18

Aim to grow biz at 20-25% CAGR: Strides Shasun

The growth trajectory is very strong going forward and the company has all the necessary engines to grow the business at 20-25 percent CAGR, said Arun Kumar, MD, Strides Shasun.

Strides Shasun reported a good set of third quarter Numbers.The Company saw a revenue growth of 30 percent for the quarter with improvement in margins.

Arun Kumar, MD, Strides Shasun in an interview to CNBC-TV18 said the numbers are in line with their guidance, adding that it was the first consolidated quarter after the two significant transactions involving Shasun and Arrow acquisition in Australia.

According to him synergies are playing a big role in margin improvement post integration of these businesses. The growth trajectory is very strong going forward too. The company has all the necessary engines to grow the business at 20-25 percent CAGR and become a good diversified player across geographies, said Kumar.

Basically, all parts of the businesses are doing well and the slight depression in numbers in Q3 was because of Chennai floods, where major manufacturing facility is located, said Kumar. He is confident of meeting the 20 percent EBITDA margin guidance.

Below is the verbatim transcript of Arun Kumar's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.

Sonia: Can you just start by telling us what led to this growth in margins to 19 percent and now that the merged entity financials are with us, what kind of sustainable margins do you see for the merged entity and what could the triggers be?

A: You are right in saying that we did have a very strong quarter this year and this in line with our guidance. Obviously, this is the first consolidated quarter of the company after the two significant transactions involving Shasun and the acquisition in Australia. Synergies are playing a big role in the margin improvements. We have managed to integrate these businesses fairly rapidly and the growth trajectory looks fairly strong going forward.

We have guided for about 20 percent margin achievement. We think we should be there. We have just reaffirmed our next quarter guidance for that. So I think all parts of the business are doing fairly well and these numbers are slightly depressed because of the rains we had at Chennai, where one of our major manufacturing facilities are allocated but in spite of that, it has been a good outcome.

Latha: You have upped your guidance on margins, so should we expect that you will want to up your EBITDA guidance as well? It stood at USD 3.5 billion to USD 3.8 billion, will you want to up it?

A: No, we wouldn’t because all I am saying is that that we are only about 45 percent of the guidance. So we still have to do 55 percent of that guidance to be on track. I am reaffirming that we would meet numbers because we have a strong quarter.

Sonia: In the first half of the year, you have done an EBITDA of Rs 220 crore and in the second half you are guiding for about Rs 350-380 crore. Just trying to understand how much will the new acquisition contribute to this, you have acquired 51 percent stake in General Partners Holding, what would the contribution be in revenues and in terms of margins?

A: All the transactions that we announced yesterday both Kenya and Australia, the transaction will close only during the quarter. We will see full effect of that only in the next financial year because both Australia and Kenya are fairly important assets, we have to go through Competition Commission approvals -- we don’t anticipate issues there but we think it will take the next six-eight weeks before we can get it.

Sonia: When you see the full effects of the Australia and Kenya acquisitions, what would it be in FY17, just to understand revenue and margins?

A: All we can say is that this obviously for Strides is the single largest quarter. We think that we will continue to grow our business at a historical 20-25 percent compounded annual growth rate (CAGR) given the new acquisitions. I cannot give you a ballpark number because we don’t guide.

We have guided for the first time because we had so many moving parts being combined into the company. So we thought it was important and it is a little too early to talk about next year but all I can tell you is that we have got all the necessary engines to grow the business at a 20-25 percent CAGR and become an important and diversified player across geographies.

Latha: Can you guide us about whether your penchant for taking over more companies for getting all those moving parts together is at an end or do you still think that there are areas you have to fill with acquisitions?

A: We are done, more or less done. We do have a couple of very small incremental transactions. You must appreciate that. We exited a very significant part of our business and since then we have moved very rapidly to build a completely integrated pharmaceutical business. A tiny bits and pieces of the strategy are still to be executed inorganically but they are not material. So I would like to believe that almost everything that we must do to build our businesses in our regulated and emerging markets have been achieved and for these small incremental transactions, we are now very focused on execution of the business.

Sonia: Your emerging market business is a niggling worry because over there, the revenues have fallen both in Q3 and in nine months, do you expect more pressure?

A: There has been some rationale that we apply in terms of our exposures in Africa and that is more to do with the volatility in the currencies. Also there has been a sluggishness in the supply chain because ours is a branded business but typically distributors also don’t stock up when the currency is devaluating so rapidly. So we have rationalised our business in Africa. That is one of the key reasons but given all the recent transactions we have announced in India and in Africa, this business will get back to an historical growth that we are known for in the emerging markets. What is important is that we have built a business and we have a branded business. So we are very excited about the prospects of our prime business in Africa but this is a temporary blip, which we would use the recovery as early as this quarter. 
First Published on Feb 9, 2016 09:40 am
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