Aiming for 20% sales, revenue growth in FY16: Granules

A better product mix and higher capacity utilisation boosted June quarter margins for Granules India, its Managing Director C Krishna Prasad told CNBC-TV18.Granules India’s total income grew 14.6 percent to Rs 199 crore and net profit was up 18.3 percent to Rs 27.15 crore for the first quarter of FY16. Prasad said the pharmaceutical formulation intermediates (PFI) contributed 30 percent to sales, finished dosages (FD) was 30 percent and the active pharmaceutical ingredients (API) contributed 39 percent. He expects a 20 percent plus topline and bottomline growth for FY16. The company recently raised nearly Rs 200 crore through warrants for its expansion plans. The funds will be used for capital expenditure and abbreviated new drug application (ANDA) filings, he said. The company is targeting 80 percent capacity uitilisation for the PFI segment in next two years, he said.Focus markets for the company are emerging markets, Latin America, Africa and semi-regulated markets. Below is the transcript of C Krishna Prasad’s interview with Ekta Batra & Anuj Singhal on CNBC-TV18.Ekta: Can you just take us through how the pharmaceutical formulation intermediates (PFI) segment, which is your pharma formulation ingredients segment and as well as our active pharmaceutical ingredients (API) segment did this quarter in terms of sales?A: Out of our total sales, API did about 39 percent, PFI did 30 percent and finished dosages (FDs) did about 31 percent.Ekta: Your margins however haven’t seem to have increased year on year (YoY) but there was a good 400 basis point push that came in sequentially. What led to the upmove sequentially as opposed to YoY move on the margins? A: Basically it is a product mix. As we move towards more FDs there will be a better margin. Also the type of FD or type of PFI we do each product has a different margin. So, primarily it is mix and capacity utilisation.Anuj: Last financial year, you did about Rs 1,200 crore of revenue and Rs 95 crore of profit. If you were to extrapolate your performance, what kind of growth numbers do you think you will be able to report for this financial year since you will have quite a bit of visibility in terms of your numbers?A: We think we should do about 20 percent growth in the normal course.Anuj: 20 percent growth for both sales and profit?A: In sales and profit, could be little higher than 20 percent.Anuj: Also there is some fund infusion from the promoter group via warrants. What is that for and how will the proceeds be used?A: We had some plans for expansions in the next two years, basically for increase in API capacity, also a Greenfield venture in API and also for findings of ANDAs. So, the requirement is little more than Rs 250- 300 crore in the next two years. We wanted to go for a qualified institutional placement (QIP). We got the shareholders approval, but meanwhile I was able to raise some funds and I thought rather than go through expensive and tedious process of QIP, I better put in the money. That is how the warrants were taken.Ekta: has this completed your fund raising activities and for how long are you buffered? A: Whatever we wanted, we took an approval for about Rs 250 crore from the shareholders for QIP. About Rs 200 crore is coming in now and that should be enough for our current plans.Ekta: Your capacity in your PFI segment, is it already approved by the various regulatory authorities. How much is capacity utilisation?A: We have done all our qualification of different products in this block and some customers have approved it and some of the customers approvals are in the process. We will not be able to utilise the full capacity now, but may be in the next one and a half years, we should be able to touch almost 80 percent of this capacity. Ekta: For your PFI segment, we do understand that you are possible one of the global players that do this. Which are the clients that you serve globally as well as in India and what is the incremental increase that we have seen in client addition in this fiscal and possibly the last six months to a year?A: Let us go back a little. This was a concept, which I personally developed and this was about 20 years ago and from zero a 20 years ago we have come a long way. We do almost like about Rs 400-500 crore only in this segment and there has been a constant addition. The main markets continue to be the emerging markets or semi regulated markets like Latin America, which is a big market for us. Canada is a big market, Europe and a little bit of US. India, we don’t sell much. We are also doing more in emerging markets.Anuj: Your stock has done well, but I was looking at the share holding pattern. The foreign institutional investors (FII) exposure is consistently coming down from five percent to four percent. In the last quarter, it was down to 2.8 percent any particular reason for that. Have you had any chat with the investors in terms of any concerns they would had?A: I don’t think there is any investor concern. Whoever comes to talk with us go back quite excited and they continue to be in touch with us. I really can’t answer that question. I don’t know what is happening. I am not market savvy. I don’t think I will be able to do anything.