GRANULESNSEfinancial year 2021-22May 23, 2022 Granules India Limited
9,417words
119turns
10analyst exchanges
7executives
Management on call
Krishna Prasad
CHAIRMAN & MANAGING DIRECTOR - GRANULES INDIA LIMITED
Kvs Ram Rao
JOINT MANAGING DIRECTOR & CHIEF EXECUTIVE
Priyanka Chigurupati
EXECUTIVE DIRECTOR, GPI
Sandip Neogi
CHIEF FINANCIAL OFFICER - GRANULES INDIA LIMITED
Irfan Raeen
ORIENT CAPITAL
Krishna Prasad Sir
Chairman and the Managing Director; Dr. KVS Ram Rao - Joint Managing Director and Chief
Priyanka Madam
Executive Director, GPI; and Mr. Sandip Neogi Sir - Chief Financial Officer. I
Key numbers — 40 extracted
rs,
overcome most of the challenges that we are facing now. Looking back at our journey over the years, we have progressively moved from being an API to a fully integrated player with dominant finished
27%
egions other than US has been on an upward trend. In fact between EU and LATAM we had a growth of 27% to 31% in the last one year. While our current business model continues the time had come for us
31%
other than US has been on an upward trend. In fact between EU and LATAM we had a growth of 27% to 31% in the last one year. While our current business model continues the time had come for us to take
Rs. 1030 Crore
Let me now take you through the performance for the year. Revenue: The fourth quarter revenue was Rs. 1030 Crores as compared to Rs. 799 Crores in FY2021. The full year revenue was Rs. 3765 Crores as compared t
Rs. 799 Crore
performance for the year. Revenue: The fourth quarter revenue was Rs. 1030 Crores as compared to Rs. 799 Crores in FY2021. The full year revenue was Rs. 3765 Crores as compared to Rs. 3237 Crores in the previ
Rs. 3765 Crore
er revenue was Rs. 1030 Crores as compared to Rs. 799 Crores in FY2021. The full year revenue was Rs. 3765 Crores as compared to Rs. 3237 Crores in the previous year showing a growth of 16.3% over the previous
Rs. 3237 Crore
as compared to Rs. 799 Crores in FY2021. The full year revenue was Rs. 3765 Crores as compared to Rs. 3237 Crores in the previous year showing a growth of 16.3% over the previous year. With supply constraints i
16.3%
revenue was Rs. 3765 Crores as compared to Rs. 3237 Crores in the previous year showing a growth of 16.3% over the previous year. With supply constraints in API we have maximized our profitability by opt
18%
zed our profitability by optimization of portfolio. Share of revenue from Europe has gone up from 18% to 21% for the full year. Revenue share for other molecules stood at 19% on a full year basis ver
21%
profitability by optimization of portfolio. Share of revenue from Europe has gone up from 18% to 21% for the full year. Revenue share for other molecules stood at 19% on a full year basis versus 16%
19%
om Europe has gone up from 18% to 21% for the full year. Revenue share for other molecules stood at 19% on a full year basis versus 16% in the previous year in line with our strategy. Short supply of P
16%
21% for the full year. Revenue share for other molecules stood at 19% on a full year basis versus 16% in the previous year in line with our strategy. Short supply of Para Amino Phenol (PAP) resulted
Guidance — 20 items
“When the trend which started in the last couple of quarters on the incoming input costs continues there may be a positive trend in terms of PAP supplies as one of the biggest manufacturers in China will be starting and stabilizing its production in the next couple of weeks.”
“Our strategy going forward focuses on three elements.”
“I am happy to walk you through the strategy of the company going forward.”
“A very important initiative will be to relook at the commercial engines to propel growth not only in US but also in chosen geographies like Europe and LATAM where we have already started the needle moving.”
“The B2B businesses will be focused with the value-added APIs.”
“We have several launches planned in the next 18 months we will be focusing on enhancing the quality of our pipeline as we strengthen our R&D capabilities.”
“Our pipeline will be moving from me-too products and other generics to products which focus on innovation, science, technology and going forward will target more first wave launch products, niche products and also balance the portfolio with high volume products which is strength of Granules.”
“Granules India Limited May 19, 2022 The Europe partnership business, the growth for Europe in the upcoming years will be driven majorly by partnership business model as this offers value adds to our partners and strengthens Granules’ footprint across Europe.”
“Europe business model in terms of partnering with customers has been promising as we have already seen growth and as we enter into new business agreements with some of the strong players in Europe generics with signed contracts we are in process of signing also some contracts with the country players which should help us to refocus commercial excellence and geography of Europe and the same strategy can be extended and will be extended to LATAM.”
“The R&D spend would be monitored very closely throughout the next year and prioritization would be made as per the strategic priorities across various technologies as alluded earlier by our JMD and CEO.”
Risks & concerns — 6 flagged
Unrecovered freight and container cost, unrecovered increase in the material cost across all molecules and US price erosion has resulted in bottomline decline in this year.
— Sandip Neogi
How do you see your gross margin moving from the current levels do you still see because you have already mentioned that there is a lot of pressure on the KSM and solvents do you see that it would be improving from here on whatever we have done in FY2022 or we think that it will be at the similar levels in FY2023?
— Rashmi Sancheti
In terms of North America sales from last two, three years we were doing a strong growth more than 25% in FY2022 we have done mostly in the range of 12% so is it that the lower growth is because we have seen a huge pricing pressure in our base product and what kind of launches have we done in FY2022 and what is the outlook for FY2023 in terms of number of launches then what do you think the price erosion would be for next year?
— Rashmi Sancheti
If you look at the absolute terms we have grown about 13%, 14% over the last year in the US itself and as a percentage we will continue to grow much better even in terms of absolute numbers we will be at a much higher level next year as well, but you did answer the question yourself because of price erosion we have had a significant decline versus what we projected for the year.
— Priyanka Chigurupati
As doctor said that it will be difficult for us to give any sort of guidance on the gross margin trajectory unless and until we come back to normal in terms of supply certainty and also in terms of stabilization of the cost which is highly dependent on crude and other things.
— Sandip Neogi
Though you are not giving guidance one thing I wanted to understand what actually what are challenges for not giving guidance because I can understand the raw material prices are volatile but at least on revenue side whether the run rate we have achieved for this quarter, any part of this revenue is one off or this is sustainable at least that kind of indication you can give us?
— Ranveer Singh
Q&A — 10 exchanges
Q
Thanks for the opportunity. Firstly on the raw material side other than PAP for the other core molecules has there been any disruption on the prices or the supply side or that is pretty smooth?
KVS Ram Rao
I think all the raw material supplies other than the PAP are smooth to the extent where we are able to get the product supplies to the market, but PAP continues to be an issue for us and the prices of other raw materials either have gone up or maintained the same as in the previous quarters. So will that have some repercussions on the gross margins in the near-term or will we be able to pass it on in terms of higher finished goods prices? I think while our effort has been and as mentioned by the CFO that on B2B business we are able to pass on the prices to certain customers in the last couple
Q
Thanks for taking my question. Just one clarity in footnote we have mentioned Rs. 17.25 Crores duty drawback claim has been recognized so which line item is this appearing?
Sandip Neogi
It will be in the line of raw material cost reduction when it comes to the current year and when it comes to the previous year it is the gross margin. So it is in form of (inaudible) 20:25? Rs. 17 Crores is in the other operating income line which is affecting the gross margin. Secondly the capex we mentioned for FY2022 for this year how much is attributable to MUPS block and how much is related to remaining Vizag block? Current year MUPS block will be in the range of Rs. 220 Crores. So remaining Rs. 180 Crores is related to? Yes, relating to all other spends including the routine capex that w
Q
Hi! Good afternoon. A couple of questions, one the CFO attributed gross margin compression to price erosion amongst other things and it has been fairly visible over the last year for sure, now if you look back were you to attribute this more to channel filling and consequent destocking of channel or did you see heightened competition in terms of more supplies coming in for your products and going forward for the year to come by how do you see this evolving on the pricing front because I did hear your comment whereby you mentioned that in Q1 at the end of Q1 you should hopefully be able to pass
Tarang Agrawal
If I look back, price erosion has been a pervasive trend across this FY2022 as a whole just wanted to get a sense in your opinion was it on account of more channel stocking in FY2021 and consequent destocking or was it on account of more supply kicking in and in terms of more competition for your products and how should we see this going forward from Q1 FY2023 onwards? I would like to look at this price erosion from three perspective, what you are asking is only from the US perspective on the formulation, but when you really look at the price erosion coming to API on account of raw material, s
Q
Thanks for the opportunity. You have mentioned in your initial comments that PAP manufacturing the supplies will be starting in China, so of your total raw material requirement from now on how much we will be dependent on Indian supplier and how much we will be sourcing it from China?
KVS Ram Rao
I think the way to answer this question will be twofold one is China and one is non-China rather than Indian suppliers, so the way we see the entire thing that will be coming up if things go well should be to the tune of 15% to 20% from China and beyond that will be from suppliers outside China. Suppliers outside China you mean India as well as Europe? Granules India Limited May 19, 2022 Yes, I do not want to be very specific there but just to say that this is one part which we are looking at in terms of derisking the supplies. Having said that being the largest manufacturer of Paracetamol we
Q
Hi! Good morning everyone thanks for taking my question. I have two questions actually one short-term and second long- term. In terms of short-term question, is there any guidance we are giving in terms of revenue growth and EBITDA margins for FY2023 if you can that would be great, the long-term question is really what sort of contributions are we looking from MUPS block as well as the new onco/complex API block over the next five years and what does it mean in terms of our revenue growth trajectory over the next five years and our EBITDA margin trajectory over the next five years?
KVS Ram Rao
On the guidance I think looking at the kind of unfortunately that we have both on the prices of raw materials, freight and others I do not think we can give a guidance on both revenue and EBITDA directly but organization can qualitatively say that we are positive in the direction of looking at both revenue and EBITDA in the coming couple of quarters and we are working towards making sure that how do we really look positive all along in the next four quarters I think that is on the first one. On the long-term I think as Priyanka just pointed out that MUPS has become one of the specialized Granu
Q
Hi! Sir just wanted to understand between the revenue impact because of the deflation versus the logistics and impact on the margins how is the trajectory from your end, I understand you do not want to give any guidance for FY2023 but just wanted to understand whether it is going to be product launches and how will the trajectory shape up over the next four quarters?
Sandip Neogi
As doctor said that it will be difficult for us to give any sort of guidance on the gross margin trajectory unless and until we come back to normal in terms of supply certainty and also in terms of stabilization of the cost which is highly dependent on crude and other things. So what we can think is that there will be yes our endeavor will be always to maximize topline and bottomline and obviously when I talk about topline and bottomline the gross margin through various portfolio optimization and other things beyond that I do not want to comment further. Just to add to what Sandeep has told th
Q
Thanks for taking my question again. Sir just one thing on R&D side can you guide what level of expenses you can expect in FY2023?
KVS Ram Rao
We are looking at an R&D expenditure at least between Rs. 160 to around Rs. 165 Crores is what we are anticipating as a next year R&D expenditure as compared to Rs. 143 Crores this year. How many new ANDAs we are planning to file or launch? Priyanka Chigurupati: Currently we have 25 dossiers that we are working on and like I mentioned earlier this year we are looking to launch about, not this year but within the next 16 to 18 months we are looking to launch about 17 different dossiers in the US and Europe and Canada of course. Granules India Limited May 19, 2022 This is 17 finished products we
Q
Thanks for the opportunity and it is good to see numbers starting to trend up again. Congratulations to the management for that. Sir last few quarters and especially with Mr. Rao coming in there has been a lot of focus on the science and innovation part and strategic thinking going forward but if you could maybe detail it out a little bit more say for example CNS which is our second largest in terms of number of products what kind of strategies we could adopt for specific segments or what new therapies or areas we are looking at maybe a bit more detail if it could be shared to understand bette
KVS Ram Rao
I think Tushar first of all we are therapy agnostic, so what we will be looking for is innovative opportunities where we will be able to a) contribute through our innovation in the entire science technology space, b) we will be looking at the first wave of launches of some of those important products and c) it will be fitting into our strategy or a backward integration through all this what I have spoken as a strategy so that we will be a player who will start with the chemical intermediate and all the way we will go towards the finished product I think that is how we approach the new portfoli
Q
Hi! Thank you for the opportunity once again. Just slightly longer question and correct me if I am reading it wrong, you guys have been in the North America space for quite some time as the API suppliers and now as formulators yet the oncology piece that is coming up you are looking at building a contract manufacturing business out of it instead of building a North America facing formulation space, similarly if I were to look back at the manner in which the commentary was feeding it did seem like a lot of trust was going towards building a formulations business because you moved from API to PF
KVS Ram Rao
First let me take your oncology question. While we are doing the contract manufacturing business because we have a good infrastructural capability and we have the capacity available and there is an opportunity I do not think the management has ever said that we are not focused on oncology formulations and the development of oncology formulation which is already happening and we will be developing the products but we would not launch the old products of P2 or generic - generic products but we will be definitely looking at launching oncology products in US and other geographies either by us or t
Q
Thank you everyone for an interesting line of questions on this call and thank you very much and look forward to an exciting next quarter despite all the challenges that we said. Thank you very much and have a good day. Bye-bye.
Opening remarks
Irfan Raeen
Thank you Mike. Good morning everyone. Myself Irfan Raeen from Orient Capital. We are an Investor Relation Advisor to the company. I hope that all of you and your family are safe and healthy. On behalf of Granules India I extend a warm welcome to all participants on Q4 and FY2022 financial results discussion call. Today on the call I am joined by Dr. Krishna Prasad Sir - Chairman and the Managing Director; Dr. KVS Ram Rao - Joint Managing Director and Chief Executive Officer; Ms. Priyanka madam - Executive Director, GPI; and Mr. Sandip Neogi Sir - Chief Financial Officer. I hope everyone had an opportunity to go through our investor deck and press release that we have uploaded yesterday on exchanges and on company’s website. Before starting this call I would like to give a short disclaimer. This call may contain some of the forward-looking statements which are completely based upon our beliefs, opinions and expectation as of today. These statements are not a guarantee of our future per
Krishna Prasad
Thank you Irfan. Ladies and gentlemen a very good morning to all of you and thank you very much for joining us today for our Q4 FY2022 Earnings Call. I am happy to inform you that our Q4 performance had improved when compared to the last quarter. Over the last three quarters for Q2, Q3 and Q4 we had a sequential growth in revenue, absolute gross margin, EBITDA, and PAT. This performance came in the face of a challenging year for the industry. During this period there were headwinds around both the availability and price of raw materials, solvents, catalysts, uncertainties arising out of Ukraine Russia conflict as well as re-emergence of COVID cases in China. The global supply chain and the logistics continue to remain under duress. The logistics costs have remained at elevated levels. We also continue to face the pricing challenges in the US market. This has resulted in low EBITDA and gross margins, but we had a good revenue growth. Granules had demonstrated great resilience in the fac
KVS Ram Rao
Thank you Mr. Chairman and very good morning to everyone. I am happy to walk you through the strategy of the company going forward. Our strategy aims at creating technology platforms in chemistry, in biotransformation to bring the innovation engine to full throttle and looks at creating the synergies for existing and new businesses. Our efforts are geared towards reimagining manufacturing through innovative process technology and become an industry leader in segment over long-term through partnerships and internal innovations. We are dedicating our efforts towards executing on our strategy through the following. Creating a very strong R&D engine for both API finished formulations and chemical intermediates bringing excellence in technical intellectual property and regulatory engines. A very important initiative will be to relook at the commercial engines to propel growth not only in US but also in chosen geographies like Europe and LATAM where we have already started the needle moving.
Sandip Neogi
Thank you doctor. Let me now take you through the performance for the year. Revenue: The fourth quarter revenue was Rs. 1030 Crores as compared to Rs. 799 Crores in FY2021. The full year revenue was Rs. 3765 Crores as compared to Rs. 3237 Crores in the previous year showing a growth of 16.3% over the previous year. With supply constraints in API we have maximized our profitability by optimization of portfolio. Share of revenue from Europe has gone up from 18% to 21% for the full year. Revenue share for other molecules stood at 19% on a full year basis versus 16% in the previous year in line with our strategy. Short supply of Para Amino Phenol (PAP) resulted in loss of Paracetamol API business. The gross margin loss was at least Rs. 65 Crores in FY2022. The sales breakup as per business verticals and regions are presented in our investor presentation which is available on the website. Gross margin: Our gross margins for Q4 contracted by 8.3% on Y-o-Y basis, but improved by 2.3% sequenti