In an interview with CNBC-TV18, Dinesh Dua, CEO of Nectar Lifesciences spoke about the results and his outlook for the company.
Below is the verbatim transcript of Dinesh Dua’s interview to Nigel D’souza.
Q: The numbers were a mix set this time around, so let us start off with a big positive, margins at around 16 percent versus 14.8 percent. You expect to improve from these levels? You expect to hold on to these margins?
A: As far as the numbers are concerned, we definitely, as a little bit of an indication within the parameters of law is that we will definitely maintain the earnings before interest, taxes, depreciation and amortisation (EBITDA) levels. Having said that, there is a challenge on the topline because of the controversy which is going on right now in the Indian domestic formulations market which is plagued by this issue of fixed dose combination (FDC), which is sub judice from the Delhi High Court. However, out of our mix of 55 percent of domestic contribution to the topline, close to about 20-25 percent comes in from domestic, which is mired in and a little bit of an issue with the regulators on the fixed dose combinations.
Q: So for this year then, what can we target in terms of a revenue number? First quarter, as you said, it has been a tad bit difficult. It is down by close to 13 percent, but some guidance for the remainder of this year, for FY17, can we see some kind of revenue growth on the topline and also, I wanted to ask you about your menthol business because over there we are seeing pressure; it is down close to around 7 percent. What is the plan on that front?
A: There are two ways to look at our pharmaceutical business which constitutes 91 percent of our total revenues. If the FDC controversy does not get resolved from the judiciary, I hope it gets resolved. There are two ways, at the cost of repetition I would say, is that if FDC goes in favour of the industry then we would do a 10 percent growth. If it goes the reverse way, maybe for Q2, we may not be in a position to level peg at the last year, but Q3-Q4, H2 which is always a good season for pharmaceuticals and particularly antibiotics that we are in, we should be able to more than make up for that because single ingredient drugs, for example my cephalosporin molecule gets mixed up with penicillin and a couple of others. So, instead of that, all the formulators will go in for cephalosporin and that will ultimately in the long-run going to benefit me. So any which way I look at it, either FDC or no FDC the minimum I expect is to level peg at the last year and if all goes well, more than last year to the extent of about 10 percent. So, this is broadly what I can tell you.
So far as the second question is concerned on menthol, yes it continues to be under pressure because of synthetic menthol from BASF, Germany. So, we are doing only very selective profitable business in menthol and we just leave it to the economic forces at pharmaceuticals and food products all over the world use our natural menthol and the rest is left to synthetic. If that is the way things are, so be it. We will leave menthol where it is, in fact.
Q: Are there any plans to hive off that business?
A: No comments.
Q: But nothing in the offing?
A: Absolutely nothing as of today. One thing I would like to mention here is the fact that we have been able to get some very major breakthrough in the European market, both on the active pharmaceutical ingredient (API) side as well as the formulation side. So, strategically speaking we have taken this step forward to ensure that we enter European market in a significant way on the API side and on the formulation side also, which we had put on hold for a little while. We are going to be spending significant amounts because you have a time bound approval system in European Union unlike US which is timeless. You never know what may happen in the US. So, we are bringing in predictability to our global business which is going very well as compared to the domestic.
Q: So, what is your current contribution coming in from Europe? What do you want to take it to?
A: Europe currently contributes about 20 percent of our topline and a very significant part of our EBITDA. And I look forward to maintaining that momentum in the years to come for sure.
Q: What is the update on the Baddi facility? Could you give us some guidelines, when do you expect it to restart supply? What is the update basically on that front?
A: Our facility has been approved recently by the European authorities. So far as US is concerned on the sterile injectible front, as luck would have it, from the time when we were inspected by the US FDA authorities to now, there has been a significant change in the regulations; they have upped the bar. So, they have requested us to engage a US FDA credited auditor from the US which we have done. And if all goes well, I expect hopefully within six-nine months to get the approval from the FDA authorities.
Q: Any other facilities awaiting US FDA approval?
A: Yes, when we get the approval for our Baddi formulation facility, our sterile injectible part of the business in API also will get automatically approved, because these are triggered together back to back. If that is the case, then the flood gates on that are going to open on a very sizeable way because we, the biggest in the world in terms of backward integration, we have the largest capacities in cephalosporin steriles anywhere in the world. So, that is going to be good news as and when it happens in the next six-nine months hopefully.
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