Post dilution promoter holding is expected to come down to 60 percent from 70 percent currently.
Having reported good set of earnings for Q4, SeQuent Scientific is now looking for a long-term strategy towards animal health, says CEO Manish Gupta.
The pharmaceutical company’s Q4 revenues were up 25 percent to Rs 133 crore versus Rs 106.63 crore. The company reported an EBITDA of Rs 19.61 crore versus loss of Rs 9.28 crore.
In an interview to CNBC-TV18, Gupta says promoters have infused Rs 290 crore in the business in the past two years. The company is looking to raise capital in next two-three months via qualified institutional placement (QIP). Post dilution promoter holding is expected to come down to 60 percent from 70 percent currently.
Below is verbatim transcript of the interview:
Q: You saw a healthy 25 percent revenue growth. In fact this time your losses are much lower than last time. What does FY16 look like? When do you think the company could turn into the black?
A: The recent set of numbers, while we have not turned profitable gives us enormous confidence or kind of ratification of our strategy and gives us significant comfort of our operating performance in the years to come.
We will be turning around our operations in the current year. Some of those glimpses are already visible in the last quarter that has gone by. I am very confident of our future overall.
Q: What makes you confident? A 25 percent revenue run rate is excellent would you continue to maintain that? Would you better it?
A: In the short-run I would suggest or what is in our mind is a kind of replication of these kind of growth rates but that acceleration will occur over a couple of years when our formulation pipeline comes into play and that will take about two more years. In the medium-term I do expect similar growth rates to be maintained.
Q: What is the next growth trigger for the company? You are diversifying into human API as well, how much business do you think that could bring in board for you and what could be other growth drivers be?
A: Let me take a step back in terms of what all things we have done over the last two years in terms of bringing a sharper strategy for growth in SeQuent. Fundamentally, two years back we had embarked upon creating a global power house in Animal Health business with a portfolio of niche human API’s.
In the last 12 months we have been sharpening our strategy further. First and foremost, we sacrificed volumes for value and also expanded our scope from more emerging market formulation player to include the regulated markets.
Now that clearly reflected in the kind of investments we did in the last 12-18 months. We took certain very tough decisions of divesting businesses or closing down operations in certain geographies.
We also sold or monetised our specialty chemical business. During the year we also operationalised our new API facility at Vizag and de-commissioned our facility at Ambernath.
We also did a very strategic acquisition of Provet in Turkey. Finally, we also expanded capacities in Bangalore and also under took a voluntary license deal with Gilead.
Now some of these capacities expansions and the voluntary licensee deal would be the short-term growth drivers which are going to reflect on the human API part of the business. The long-term strategy will be towards the animal health which will take some time to play out.
Q: You have raised some capital about Rs 52 crore from the Mankekar family and that is always of interest to the markets plus you have got Foreign Investment Promotion Board (FIPB) nod to raise money via QIP as well so when will this money come in? What is the equity dilution and when will you come back to our old return on equities (ROE’s) in that case?
A: We had couple of round of infusions from the promoter family itself during the last two years. The promoters have kind of infused and committed close to Rs 290 crore in the business. As a kind of ratification of our strategy Mankekar family invested about Rs 55 crore they are known as a value investor and that is why they have a following in the stock markets.
All this money is either already in or will we be there within next couple of months. However, as part of our significant fund raise we do have that FIPB approval and we would be looking to raise some serious capital in next two to three months time.
Q: That is that Rs 400 crore QIP?
A: That’s correct.
Q: What will be the equity dilution because of that?
A: As of now the promoters hold close to 70 percent of the share holding of the company. Post this dilution they will drop down to about 59-60 percent.
Q: You were telling us that capex and voluntary license deals will help you expand your human API business. How much money will you put in expanding the human API business? When will your capacity come on stream at the Mangalore facility and how much time will it take to show up into your revenues?
A: The capital expenditure programme has already been completed. Therefore, the revenue of that has already started.
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