In an interview to CNBC-TV18, Venkat Jasti, CEO, Suven Life Sciences spoke in details about the company’s third quarter performance and the business outlook going forward.
According to him for the fourth quarter the revenues would be similar to that of third quarter but expect them in the range of 10-15% for the next fiscal that is FY16.
Below is the transcript of Venkat Jasti's interview with Sumaira Abidi and Reema Tendulkar on CNBC-TV18.Reema: Could you share your Q3 numbers?A: We finished our board meeting and this quarter we have Rs 131.1 crore revenue versus Rs 120.3 cr revenue, its up by 9 percent whereas profit after tax (PAT) is only Rs 32.2 crore versus Rs 36.4 million and EBITDA margins also down by 9 percent at Rs 50.6 cr versus Rs 55.7 cr. However, for full year it is coming to Rs 91.8 cr. PAT which we are giving a guidance of around Rs 9.8 cr for the whole year, so we are almost 90 percent of the total year.Nigel: What are the margins for this quarter?A: EBITDA margin is about 35 percent.Nigel: That’s an improvement if you look at it on a sequential basis?A: Yes, on a sequential basis it’s an improvement but on a year on year basis its less. Nigel: What bought this big jump in EBITDA margin if you look at it on a sequential basis?A: In contract research and manufacturing services (CRAMS) there is always a product mix change whenever you have more research and development (R&D) projects with high net margins that gives the EBITDA margin.
Reema: Talk more about revenue growth. It has come in at 9 percent this quarter as oppose to the previous quarter where the topline has degrown. What contributed to the boost that we saw on the topline and what is the guidance going ahead?
A: The topline growth has contributed by one of the specialty chemicals which we were suppose to do in next year at the Vizag plant. We were able to do it ahead of schedule by doing part of the things in some of the out licensing facility so that I can take care of my customers’ requirement but when you out source some of the parts of the business temporarily, there will be less profit margins and hence you see lesser profit. However, going forward we see about same thing for the next quarter also in the same range and next year we expect about 10-15 percent growth.
Reema: What is the product mix looking like in this coming quarter, in January to March and therefore how will it affect your margins?
A: The margins will be affected because it’s mainly in specialty chemicals and mix and match and high value quality projects are not many; hence the bottomline will be less even though the topline growth is steady.
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Nigel: You had said that you have secured some more patents in Australia, Hong Kong as well as Japan. Could you take us through further details on that?
A: We have been filing these patents for long time and it keeps coming in. As of December 31 the total number of patents we have is 725 for 26 inventions that is product patent and there are 37 process patents for seven inventions. The number of active CRAMS projects also gone up during the quarter from 99 to 108.
Reema: What was the R&D cost in this quarter and what is the expected R&D cost in FY16?
A: The R&D cost for this quarter is 9.76 percent on sales and for next year also it will be similar as far as R&D is concerned but when it comes to percentage wise then less than 10 percent but when it comes to the clinical trial expenses, which is going to be a huge numbers because of the phase two clinical trial which we are going to commence in Q3 of 2015 – that will be additional expense, so that will be to the tune of 60 crore additional.
Reema: Your R&D cost has gone up by close to about 200 bps QoQ at 9.76 would compare with 7.78 percent?
A: Yes.
Reema: Is it the SUVN502 ready for phase two – that will commence you said in Q3 of this calendar year?
A: That’s right.
Reema: So that’s an additional 60 crore expense?
A: Right.
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