Expect 15-20% revenue growth in FY17: Granules India

Product rationalisation and lower oil prices and subsequent low selling price impacted growth in the third quarter of FY15, says C Krishna Prasad, MD of Granules India. The company’s revenue rose 8 percent to Rs 344.8 crore and profit grew 15.2 percent to Rs 27.15 crore in the quarter gone-by. The operating efficiency (EBITDA) rose 24.3 percent to Rs 67.7 crore. Going forward, Prasad expects a 15 percent revenue growth in Q4 and 15-20 percent rise in FY17. Profit margin will also improve by 15-20 percent in coming quarters, he adds. Below is the transcript of C Krishna Prasad’s interview with Reema Tendulkar on CNBC-TV18.Q: Your topline growth has slowed down to only 8 percent this quarter. Could you give us a reason why?A: It is basically because we have some multi-year contracts with key customers which is linked to raw material prices and due to lowering of oil prices some of the key raw material prices have decreased. So, we decreased our sales price to them without decreasing our profit margin. In fact the profit margin is slightly higher and this is one of the main reasons. And the second one is rationalisation of product mix, especially in our new active pharmaceutical ingredient (API) business which is Auctus, we had about Rs 45 crore of revenue last quarter. This quarter it is about Rs 30 crore. But we still managed to make a small profit compared to about Rs 2-3 crore in the last quarter. These are the two main reasons.Q: Will this impact your revenues even in the coming quarters? What is the prognosis?A: We may not see very robust growth in revenues, but we definitely are going to see growth in our profit margins. In fact, even this quarter, our earnings before interest, taxes, depreciation and amortisation (EBITDA) was at Rs 70 crore, a growth of 27 percent over the corresponding quarter and profit after tax (PAT) was Rs 27 crore which is 15 percent growth over the last quarter. So, we expect that the profit margins will be maintained and maybe slightly increased, but revenue growth may not be very aggressive. This is a very informed decision where we are trying to rationalise our products.Q: When you say revenue growth will not be aggressive, will it be less than the 8 percent that you saw in the December quarter?A: No, we expect that it will be somewhere for the coming year, about 15-20 percent.Q: That is for FY17?A: Next quarter also, we expect it will be somewhere around 15 percent. Q: So, it is a pickup compared to this quarter. You indicated that you are looking to maintain your profit margins, perhaps even improve it. Could you guide us through how much could it go up to?A: We always look at it around 20 percent plus as EBITDA, and that we definitely expect to maintain. And we expect a little bit more than that, but we just have to see as we go by.Q: Could you give us an update on what the total debt on the books is because finance costs continue to inch up and this quarter, it was at Rs 11.3 crore.A: Finance cost has not really changed. It is about Rs 370 crore which includes about Rs 104 crore of working capital debt. But the reason for the interest going up this quarter is, we had a bank working capital loan processing fee which was Rs 1.8 crore which was written off in this quarter itself. That is one of the main reasons for the interests going up. We expect that interest will definitely be maintained and we are always constantly looking to reduce the interest.Q: You indicated revenue growth of 15-20 percent in FY17, how much of that would be courtesy higher capital expenditure (Capex) because you are increasing your capacity?A: We did increase and whatever capacities we are increasing, the actual revenues will come in 2018 and 2019 because in the pharmaceutical industry, you know that it is a long haul, approvals have to be obtained before we actually use these capacities. But next year, revenues are going to be with existing capacities.