Vimta Labs Limited has informed the Exchange about Transcript of Analysts/Institutional Investor Meet/Con. Call
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Dear Sirs,
Vi
ta
Driven by Quality. Inspired by Science.
Asst Vice President National Stock Exchange of India Limited “Exchange Plaza”, Bandra Kurla Complex, Bandra (E) Mumbai — 400051 Trading Symbol: VIMTALABS
Ref:
Sub:
Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Transcript of the Q4-2022 earnings/investor call held on 13th May 2022.
Please find enclosed herewith the transcript of the Q4-2022 earnings/investor call held on Friday, 13th May 2022.
Further, pursuant to Regulation 46 of the Listing Regulations, the aforesaid information is available on the website of the Company i.e., www.vimta.com.
This is for your information and necessary records.
Thanking you,
Yours faithfully,
for VIMTA LABS L
/
Sujani Vasireddi Company Secretary
End: as above.
Life Sciences Campus, #5, MN Science & Technology Park, Genome Valley, Shamirpet, Hyderabad -500 101, Telangana, India T : +91 40 6740 4040 E : mdoffice@vimta.com URL : www.vimta.com CIN : L24110TG1990PLC011977
“Vimta Labs Limited Q4 FY2022 Earnings Conference Call”
May 13, 2022
MANAGEMENT: MS. HARITA VASIREDDI – MANAGING DIRECTOR
MR. SATYA SREENIVAS NEERUKONDA –EXECUTIVE DIRECTOR MR. NARAHAI NAIDU – CHIEF FINANCIAL OFFICER MS. SUJANI VASIREDDI – COMPANY SECRETARY
MODERATOR: MR. VISHAL MANCHANDA – NIRMAL BANG EQUITIES
Page 1 of 21
Moderator:
Ladies and gentlemen good day and welcome to the Vimta Labs Limited Earnings Conference
Call hosted by Nirmal Bang Equities Private Limited.
Vimta Labs Limited May 13, 2022
As a reminder, all participants’ lines will be in the listen-only mode and there will be an
opportunity for you to ask questions after the presentation concludes. Should you need assistance
during the conference call, please signal an operator by pressing ‘*’ then ‘0’ on your touchtone
phone. Please note that this conference is being recorded.
I now hand the conference over to Mr. Vishal Manchanda from Nirmal Bang Equities. Thank
you and over to you sir.
Vishal Manchanda:
Good morning everyone on behalf of Nirmal Bang Institutional Equities. I welcome you to
Vimta Labs Q4 FY2022 Earnings Conference Call. I thank the Vimta Labs Management for
giving us an opportunity to host the call.
Today, we have with us the senior management of the company represented by Ms. Harita
Vasireddi – Managing Director, Mr. Satya Sreenivas Neerukonda – Executive Director, Mr.
Narahai Naidu – Chief Financial Officer, Ms. Sujani Vasireddi – Company Secretary.
I now hand over the call to the company management for opening comments. Over to you,
Madam.
Harita Vasireddi:
Thank you Vishal. Good morning to all. Thank you for joining us in our Earnings Call covering
Q4 and full year FY2022 Results. We are very pleased to have this opportunity to update you
on our progress and answer your questions.
Overall, for us, the financial year 2021-2022 operationally has been quite robust, where we
substantially increased our sales and profitability. Q4 and as such the entire year will remain a
major milestone period for our food testing services and electronics and electric testing services.
As you may all know, we won the 25 years contract with FSSAI to set up and operate the
National Food Laboratory at JNPT, Mumbai which is in a PPP model and we have obtained
accreditation for 70% of testing scope in the fourth quarter and will be going in for a second
phase of accreditation in June’22. The lab operations commenced in Q4 FY22 and is steadily
delivering the revenues.
Likewise, during the quarter, we have also commenced the commercial operations of our new
service area that is testing of electronics and electrical products. We strongly believe that our
core strategy of service diversity continues to make our business more resilient and enable long-
term sustainable growth.
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Vimta Labs Limited May 13, 2022
We continue to focus on our key business drivers which are quality, knowledge, technology and
service innovations. We had two good US FDA remote record reviews with no observation. We
continue to invest in expanding and up grading our technology to meet the service requirements.
I will share a few key highlights of the quarter and later on our CFO Mr. Narahai, will get into
a little more detail on the numbers.
As I said, sequentially we have increased our revenue numbers quite well. We achieved
consolidated revenue from operations of Rs.740.9 million with a growth of about 10% from the
previous quarter and 23.8% over the corresponding quarter previous year. We achieved an
EBITDA of Rs.234.8 million for the quarter with a growth of 10% compared to previous quarter
and a growth of about 39% compared to corresponding quarter previous year.
With respect to full year performance:
We achieved a consolidated revenue from operations of Rs.2782.8 million which is growth of
about 32% year-on-year. So, in many ways it turned out to be a very good year for us. On the
operations side, most of our service sectors continued to grow steadily which lays a good path
to meet our short-term as well as long-term growth objectives. We entered the new financial
year with higher order book and the visibility remains to be good. Accordingly, we are moving
towards adding additional lab phase to our existing facilities at Genome Valley, Hyderabad. We
are estimating to incur about Rs.60 crores of investments for this expansion in the next two years.
This is basically to have a facility that will augment the growth of the organization.
So, with this I conclude my opening comments and request Narahai to please take over. Thank
you.
Narahai Naidu:
Thank you Ms. Harita. Good morning everyone. Thank you Vishal for organizing the call. Thank
you for joining us for our Q4 and Full Year Results Conference Call.
We are pleased to take you to the consolidated financial performance of the company for Q4
followed by the full year ended March 2022. I will begin with the commentary on the revenue
from operations. Revenue from operation for Q4 FY2022 INR 740.8 million as compared to
Rs.673.4 million in Q3 FY2022. This translates to a growth of 10% sequentially and 23.8% on
a YoY basis.
EBITDA for the quarter grew by about 10% sequentially and 38.7% on a YoY basis.
For the quarter, cost of materials decreased by 4.2% which is significant compared to previous
quarter, driven by higher revenue from operations. Employee benefit expense commensurate
with the increase in revenue from operations. However, the positive impact of economies of
scale from higher revenues where to an extent offset by higher G&A expenses, largely due to
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Vimta Labs Limited May 13, 2022
higher travel expense, sales commission. Further, there was a higher depreciation, owing to the
capitalization of our new product line which is electronics and electrical division.
Profit before tax for the quarter is at Rs.162.3 million which is a growth of 54% compared to
corresponding previous quarter. Moving on to full year performance. Revenue from operations
for FY2022 stands at Rs.2782.8 million as compared to Rs.2106.7 million in the previous
financial year. This translates to an EBITDA growth of 32.1% and for the full year the growth
is about 50% compared to previous financial year.
For the full financial year as well, the cost of materials decreased by 4.3% which is again
substantial, driven by higher revenue from operations. The employee benefit expense for the full
year in percentage, we have done decrease by 1.6% which also includes employee compensation
expense on grant of options of Rs.29 million. The finance cost for the full year has decreased
mainly due to the change in mix of products largely due to availing of multi- currency loans as
well as significant reduction in working capital utilization during the year.
During the financial year, we repaid a debt of about Rs.106 million and after the repayment of
the debt, there is positive cash of Rs.108 million at the end of financial year. The profit before
tax after providing for exceptional item of Rs.12.2 million stands at Rs. 556.8 million which is
growth of 95% compared to previous financial year. The net profit for the full year increased by
about 93.1% and stands at Rs.413.3 million. The better profit realization for the full year had
increased in return on capital employed which stands at 24.72% compared to 78.56% in the
previous financial year.
With this brief summary, I would like to hand over back to the operator and would be happy to
take any further questions.
Moderator:
Thank you Sir. We will now begin the question answer session. We have the first question from
the line of Ankit from Bamboo Capital. Please go ahead.
Ankit:
Madam, if you can broadly talk about how are the segmentary performance over the last year, I
know you do not disclose the numbers but in terms of qualitative, if you can give a heads up on
how has been the growth in our food, diagnostic and environment, if you can broadly explain
about last year growth. What has been major growth driver for us during FY2022.
Harita Vasireddi:
As such we do not segmentalize our revenues for our service vertical. We treat it all as testing
and contract research revenue. I will not be able get into the statistics of it but I can just say that
60% of our business is from the pharma contract research and testing services and the rest is
distributed in food, clinical diagnostics and environment business and of course, the latest one
is electronics and electrical. And for us all sectors are doing fairly well. Electronics and electrical
which we call E&E, E&E is still a baby for us. Its maiden operation was only in the last quarter,
so we are yet to enter into the market and test the waters thoroughly.
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Vimta Labs Limited May 13, 2022
Ankit:
Madam, you said your targeted revenue values of Rs.550-600 crores over the next three years.
How our strategy is evolving on the diagnostic testing side. If we are not able to achieve the kind
of growth that you are expecting from diagnostic division, the other segment’s growth will be
sufficient enough to cover for the lack of growth which might be there from the diagnostic side
and how confident are you staying to the targeted growth of Rs.550-600 crores revenue in next
three years.
Harita Vasireddi:
We are very confident about that goal; we have set for ourselves of about Rs.500 plus crores by
FY2025. The last year’s performance gives us more confidence with respect to that goal for us.
Diagnostics yes, will be a key driver as we are reaching there but then we have multiple service
verticals, even if one or two do not do as per expectations, we are confident of pushing majority
of the services forward to reach those targets.
Ankit:
Sure, last question on order book we will able to use. In your opening comments you spoke
about a very significant higher order and revenue will increase. Do not just give us the number
but in terms of compared to last year, how much of order book will increase in terms of
percentage if u can broadly give some view on that.
Harita Vasireddi:
See, half of the services are kind of retail in nature. There the order books are not going to be
there. But remaining half of our business is based on projects, for example environment services
are project based, our preclinical, clinical research services are also project based. So,
environment, we are seeing at least a 20% increase in our order book and likewise for the pharma
projects.
Ankit:
So, pharma also we are seeing a 20% increase in order book.
Harita Vasireddi:
Preclinical, clinical research, environment.
Ankit:
Okay, and last question was on the recognition and JNPT lab that you have setup. How is this
revenue is being recognized, because we have incorporated another company subsidiary for that
but I was looking at the numbers, but these numbers, I am like not sure if you tell us how has
been the revenue from those services and has been broken even in the past few months, since
we have started operations there.
Harita Vasireddi:
Okay, our wholly owned subsidiary name is EMTAC Laboratories. It is in the field of offering
safety and quality testing services, environmental testing services for electronics and electrical
products. So, with our EMI-EMC chamber capabilities that we have set up at Vimta Labs both
these companies together offer a very nice package for the electronics and electrical industry.
So, till now through EMTAC, we only had safety and environmental testing but once you add
the EMI-EMC capability it is a very good offering that we provide in the industry. So, the EMI-
EMC facility should also augment the sales in EMTAC, because they are complementary in
nature. So, we should see good growth even in EMTAC during the coming year. Coming to
National Food Laboratory JNPT like I said the operations started in our Q4. We have
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Vimta Labs Limited May 13, 2022
accreditation for about 70% of the scope, 30% scope is remaining which is phase-2 for us. Once
we complete that Phase-2 accreditation that is when we have the full accreditation scope for
testing and we will be able to realize the full potential of the samples for that laboratory.
Ankit:
It will be reflected in our consolidated revenue from going forward like the numbers for the
laboratory that you have set up at JNPT?
Narahai Naidu:
Yes, the revenues for quarter 4 also includes the revenue recognized through NFL Lab set up.
This will be a part of our consolidated as well as standalone revenues.
Ankit:
And are we broken even there or we are just incurring some, operating losses since we have just
started there.
Narahai Naidu:
As such, we are not seeing profitability that way, but of course we are expecting a profitable
investment.
Moderator:
Thank you. We have the next question from the line Abhishek Shah from Valcore Capital.
Abhishek Shah:
Just sort of adding a little, just confirming, you mentioned that 70% of volumes that we were
looking in the FSSAI lab, those are already recognized as of Q4? Is that understanding, correct?
Harita Vasireddi:
Yes, I said 70% scope. Scope is different from volume. Volume wise, we are recognized for
almost catering to about 80% of the sample inflow. Some samples in the scope, they deliver
lower volume as the imports are lower for the food category. The other product for which we
are accredited, they have higher volumes of imports into the country. So, we are focused on
higher volume products but that is phase 1 which is completed and now remaining are the ones
which are in lower volumes which we will be taking up in Phase-2.
Abhishek Shah:
Madam, just another data point, how many samples are we targeting for FY2023 again in this
field?
Harita Vasireddi:
We do not target any samples that all depends on the imports for the country. 60% of the food
imports for our country, happens through the JNPT port and it is a public information that is
available, sometimes it is a little seasonal. We can go and look at that information.
Abhishek Shah:
Madam, how many employees have we put in the FSSAI lab?
Harita Vasireddi:
There are about 50 people employed at NFL lab as of now.
Abhishek Shah:
Madam, do you expect any further ESOP cost to come in FY2023.
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Vimta Labs Limited May 13, 2022
Narahai Naidu:
Yes, the entire vesting is spread across five years. So, we expect some sort of cost to be booked
in future years as well, but going forward it may go down because the initial years will be taking
a larger hit...
Abhishek Shah:
Madam, one last thing was other expenses increased from Rs.9 crores to Rs.12 crores, does it
have any one-off or this is expected to sustain.
Narahai Naidu:
This includes commission from the revenue recognized on NFL revenue and also there is
provision for bad debts and bad debts written-off during the quarter which resulted in an increase
in other expense during Q4 FY22. Also, we had higher travel, sales promotion and
communication expenditure with the increase in travel of our employees.
Abhishek Shah:
Right, so of the 12 crores what will be the one-off, which may not be a recurring expense for the
coming quarter.
Narahai Naidu:
This could be a recurring scenario but may not be at the same level because bad debts are
something we periodically evaluate and take a call based on its recoverability. So, we will not
be exactly able to say this is a one-off item.
Abhishek Shah:
Lastly Madam, just a suggestion, I think we missed the con call last time and the presentation it
really helps investors gain some comfort if we were at least, there is quarterly con call. I am sure
one-hour quarter is not an issue for you. So, I would really appreciate if that consistency is
maintained for investors invested in this, as there is a support system for us, while being invested
in this company for the next 4-5 years. That is a just a suggestion from our side.
Harita Vasireddi:
Thank you. We will be putting up our investor presentation on the website shortly and try and
update it with every quarter results, as we go forward.
Abhishek Shah:
Alright and also the request on the con call, we can keep it consistent every quarter. I think last
year we skipped during the AGM quarter as well, just a request from our side.
Harita Vasireddi:
Yes, our plan is do this once in six months because we also noticed that there is not much to
share within just a three-month period which is very short period. If there is some good news,
exciting news and then we are always happy to actually come and share it with you. But the plan
is now to do it at least once in six months and as such we have an AGM connect so that makes
it about three times in an year, which we thought is sufficient.
Abhishek Shah:
Alright, so it will be every six months as such plus the AGM and depending if there is any other
news that you want to share, fair enough Madam. Thank you so much that is all from my side.
Moderator:
We have the next question from the line of Kapil who is an individual investor. Please go ahead.
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Vimta Labs Limited May 13, 2022
Kapil:
I have two questions about the business one is our government is working on this Health Star
Rating on the package food. So, does Vimta has any business opportunity in this and the size of
business opportunity?
Harita Vasireddi:
I am sorry, I did not get the name of the initiative that you mentioned. Please repeat.
Kapil:
This Health Star Rating on the package food rights, so the government is saying that Health Star
Rating is mandatory on all the package food. So, does Vimta has any role to play in that, in the
testing?
Harita Vasireddi:
We do offer package material testing. It is done mostly quite vigorously on the pharma side;
Food industry is slowly beginning to do it. Of course the regulation pushed is a little slow in the
food industry, but if there is regulation then we will automatically see an increase in testing
requirement around it.
Kapil:
Okay, thanks good to know and second question is regarding EMI-EMC business which is
recently opened. So, are we already generating revenue from that if it is going to have a good
revenue? Is Vimta planning to expand this business to other cities like, Danwar, Chennai, Delhi
where most of the hardware is made.
Harita Vasireddi:
Yes, our revenues have started in Q4 and yes, we also have plans to expand these services into
other cities going forward. Like you righty mentioned, Pune and Bangalore would be the next
best option to consider when we think of expanding into other locations.
Kapil:
Okay and Madam, just one last question, how much as a percentage of total revenue we are
expecting from electronic testing business in next 2-3 years. Is it going to be 30%, 10% or what
revenue does Vimta see from this electronic testing business in Pune?
Harita Vasireddi:
I am sorry, I will not be able to share that number like I always say, we do not segmentalize our
revenue. So, we will not be able to give that kind of bifurcation.
Moderator:
We have the next question from the line of Sunil Kothari from Unique PMS. Please go ahead.
Sunil Kothari:
Madam, my request to have some real detail presentation on our Company’s capability and
ability to make investor aware what exactly we are doing and what scope we have? That will be
really helpful, I think you are promising since long that will be updating and putting a
presentation. So, just want to confirm those things, I am sure, it will be useful for us as an
investor. My question is on, you have some objective to reach to some revenue by 2025. This
Rs.60 crores investment will be enough to reach there or will it require some more?
Harita Vasireddi:
As of now, this is the investment that we see in terms of facility expansion. This is mostly again
to augment the growth of our pharma sector where we have seen very nice encouragement from
the industry during the last few years. But this is mostly for that, so as such, as the business
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Vimta Labs Limited May 13, 2022
grows, we will have to keep on adding capacities we will have to keep on adding the knowledge
base in the company in terms of manpower. So, those investments will continue, we will not be
able to reach the Rs.500 crore plus growth target with the existing resources, obviously.
Sunil Kothari:
Right, current year and next year we are planning to do around Rs.60 crores.
Harita Vasireddi:
This is for a new building set up.
Sunil Kothari:
Alright, are there any other capex?
Harita Vasireddi:
CAPEX, we anyway take up on a year-to-year basis, looking at our prospects for the upcoming
year and the regulations that keep coming into market.
Sunil Kothari:
So, can you say, current year capex number for FY2022- FY2023?
Harita Vasireddi:
We have planned approximately about Rs.50-60 crores.
Sunil Kothari:
And Madam, last question is what is your major priority and focus area which you would like to
as a management focus onto make this growth and the opposite which is visible and feasible to
exploit those fully and what is your focus area which you would like to give a trust and to
overcome any hurdle?
Harita Vasireddi:
We have five major business verticals, first one is pharma under which we have analytical,
preclinical and clinical research. So, that covers the entire, drug discovery development spectrum
for us and as I have already mentioned, it is a major component of our overall revenue. So, that
will remain to be our focus area and thrust area. Second one is our food business, we have done
very good investments during the period of 2014-2016, so we will be driving that business
aggressively as we have done so far. So, that will also remain our focus area. Clinical diagnostic,
until very recently, we were primarily content with what we were doing in just these two states
for Telangana and Andhra Pradesh and a little bit of business in Uttar Pradesh but we decided
we want to go expand our geographic reach here and also convert our business which is majorly
a B2B into a B2C kind of business. So, there we have started our expansion plan, we are testing
out various models in the market. So, that will also remain our focus service for the upcoming
year. E&E we just started so obviously we will put a lot of focus and effort behind it. The fifth
one remains environment, it is not a very large component of our business. The growth prospects
are not as high as in all the other sectors. So, in that one segment alone, I would say that we do
not see any big numbers happening, but even in that business, we have expanded our reach and
set up satellite offices in Delhi and Kolkata. So, that is also yielding us good result in
environmental testing.
Sunil Kothari:
Madam, this B2C experience for the three, let us take diagnosis, how competition, what is your
gut feel about the success.
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Vimta Labs Limited May 13, 2022
Harita Vasireddi:
Your voice was getting broken. Can you please repeat.
Sunil Kothari:
Yes, Madam regarding this B2C diagnostic laboratory business, how is your experience about
the competition, what is your gut feel about major success?
Harita Vasireddi:
B2C as a first step, baby step that we have taken is in Hyderabad location. So, here our brand is
known, so there is a good acceptance in most of our B2C centers that we have opened up. But
in newer areas, we have not put too many. We have put one in Varanasi, there our experience is
not great, so we realized that we have to do a lot more marketing before we really open up B2C
centers.
Moderator:
Thank you. We have the next question from the line of V.P. Rajesh from Banyan Capital.
V P Rajesh:
Just wanted to hear your comments on the diagnostic business, if you can just give a sense of its
performance in fiscal year 2022, qualitatively and just see what you are thinking about it in the
next financial year? Thank you.
Harita Vasireddi:
Diagnostics we were expecting it to perform better, but it really did not perform to the level of
our expectation. But having said that we have gone into new territories that is in Delhi and in
Kolkata. So, it is going to take a little more time, we have very strong players in that market. So,
our efforts are sincere, our efforts are aimed at getting more penetration into the market, we feel
this will take a little more time.
V P Rajesh:
Okay, in terms of capacity utilization what is it looking like for you in that business.
Harita Vasireddi:
Our Delhi and Kolkata labs capacity utilization is only probably around 30%-40%, but again
capacity is quite elastic for that, now we have deployed low volume instrumentation there. The
moment our volume, scale up, we will be able to quickly replace them with high volume
instrumentation.
V P Rajesh:
Okay, and what is it in Hyderabad?
Harita Vasireddi:
Hyderabad, it is a central lab capacity utilization, is steady, it remains around 75%-80% but I
was mostly talking about the new regional lab that we have set up in Kolkata and Delhi.
Moderator:
Thank you. We have the next question from the line of Nagesh Rajanna from NR-Family Office.
Please go ahead.
Nagesh Rajanna:
My questions are two, such an outstanding performance it sustainable for the coming year is one
question, the second is what drove such outstanding performance in FY2022.
Harita Vasireddi:
First of all, thank you for the nice encouragement. Yes, we are also very pleased with our
performance in this year and we believe in sustainability. Therefore, we focus on all the
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Vimta Labs Limited May 13, 2022
parameters that first make us stronger inward and we believe this inward strength radiates into
outward strength in the market. So, we continue our focus on our quality systems, we continue
investing in new technologies. We continue to have a very close nose to the ground in the market,
just to get a feel of where the trends are moving and so we have remained a first-mover in terms
of new services that we are able to very quickly get to the market and get the first-mover
advantage. So, I have no doubt that the growth that we are experiencing now will continue in
the coming years, unless of course the market situation suddenly changes, and challenges come
up and this is an unknown happening. It is not that unknown things will not happen for us, but
our multi-basket services make us very resilient. Our experience during the COVID years itself
validates the multi basket business model that we have. So, we are very confident on our growth
strategy that we have set for ourselves.
Nagesh Rajanna:
So, happy to hear that, in fact I, at some point of time was one of the customers for you as part
of Pepsico. I used to be one the leaders and Pepsico who would actually interacts with your set
up. I am very happy to hear that. But what about the margins? I think your margin has
substantially grown; would you see that margins levels sustaining in the coming year?
Harita Vasireddi:
Margins should sustain because as the volumes go up, margins should get better. But again,
margins quarter-on-quarter might vary with the mix in the services that were pushed in that
quarter. Food is a very seasonal business. The margins in food will not be as high as what you
would normally see in pharma. So, there will be slight fluctuation but I strongly believe that we
are at a margin range that we can aim even for the upcoming years and achieve.
Nagesh Rajanna:
Awesome, happy to hear that. One last question, I do not see enough cash in your balance sheet
but however, you do have a certain capex plan. So, where and how would you find the capex?
Harita Vasireddi:
We will able to manage the capex from our operating inflow, we do not see a challenge there
and we do have sanctioned limits with our bankers which we are currently not using at all. So,
we have enough bandwidth to manage our capex plan for the year.
Moderator:
We have the next question from line of Aman Vij from Astute Investment Management. Please
go head.
Aman Vij:
My first set of questions are on the pharma business, so on the preclinical side, if you can talk
about briefly like you had explained nicely last time. What is the current market size in India
and what is the growth looking for the industry? Are there any frequent changes in the dynamics
of requirements of our study if you can talk about the same? As well as, who are the top three
players in India?
Harita Vasireddi:
To estimate the Indian market size, I do not think, we have exact number because most of the
players are not listed companies and it is very difficult to capture the amount of business that we
are doing in India. But, preclinical business for us is not only India oriented, we work in the
overseas market also especially US and Europe and the global market is actually very nice. I am
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unable to recall the exact growth rate but I am sure the CAGR that is projected for the next five
years is 10% plus and it is a very large market.
Vimta Labs Limited May 13, 2022
Aman Vij
And Madam, are we among the top three players out of India either export or domestic in
preclinical? If yes, then if you can talk about who are the other one or two players.
Harita Vasireddi:
I think we are definitely among the top players in the market. The biggest player, I know in India
is Eurofins Lab in Bangalore.
Aman Vij:
You are talking specifically about preclinical right?
Harita Vasireddi:
Yes.
Aman Vij:
Madam, estimate they will be like 2x our size, 3x our size or may be 30%-40% kind of bigger
than us.
Harita Vasireddi:
I have not clearly looked at their numbers off late but I am sure you will be able to find them.
Eurofins is also a listed company.
Aman Vij:
No in India, it is not, so India numbers they do not disclose much that is why I just according to
your estimate, are not they much ahead of us?
Harita Vasireddi:
It will not be right for me to comment on the numbers without knowing the exact numbers.
Aman Vij:
Let me get it from this point of view, in terms of capability, are there any capabilities which we
do not have where global giants like Eurofins have or we are equally if not better in our
capabilities in preclinical part?
Harita Vasireddi:
Capabilities wise, we have been predominantly for the pharma services with respect to
preclinical during the last two years. We have also built scientific asset to even support the
agrochemical and specialty chemical industries, whereas I think Eurofins which was erstwhile
Advinus, for them it is the other way round. They were mostly focused on the agrochemical and
later got into pharma services. So, I am thinking there would be a very nice overlap of our
services with theirs. I do not think; we would fall short in terms of capability.
Aman Vij:
Sorry, because I am little new on the clinical part, so when a customer is looking for a CRO
player, so there will be Eurofins who is a global giant. So, how do we compete with the global
giant who has a history of 10 years, 20 years working or they are trying to opposite Agrochem
and specialty chem, is it like we are plus 1. They want to risk all their businesses to one player,
so we get the benefit or do we have some capabilities which where we went because of our cost
advantage. If you can explain a little bit on this part.
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Vimta Labs Limited May 13, 2022
Harita Vasireddi:
Costing wise, I think we are comparable to any top CRO in the country. I think where the service
differentiated comes, is the service that you provide to the customer and inputs you are able to
give on the study design. So, there I think we are very strong, our service is quite speedy and
very effective. We are very true to the timelines that we commit to our customers and our client
attention is very high. So, it is mostly a word of mouth that helps us, it is a small industry all
said and done, the pharma world. So, we have very good reputation in preclinical services
especially.
Satya Sreenivas:
History of Vimta is not new in preclinical. We have over two decades of experience in the studies
and we were only the second lab apart from Eurofins which was called Advinus, earlier. Rallis
was the original name that had a GLP certification. We were having a GLP certification way
back in the late 90’s and the asset history, the service portfolio, the models Vimta offers is much
wider than what Eurofins or other labs in India offers. So, that is why we become a discovery
partner for both the domestic companies and also small and mid-size biotech companies outside
of India. It is a very unique set up which Vimta has in the preclinical.
Aman Vij:
Final thing of preclinical before I move on with export business which we do. Is it predominantly
preclinical or there are other portions also in this part?
Satya Sreenivas:
Export business is linked to all of the pharma service sectors
Aman Vij:
So, if not, only pharma, it has other food and other portion also.
Satya Sreenivas:
Predominantly, pharma
Aman Vij:
Madam you had explained that we have a good traction in the clinical part, the PAP studies part
also. The order book is like 20% higher. We had discussed about the bed capacity where we are
and may be close the full utilization. So, any plans of expanding now given you have now clear
visibility on this part and also are you seeing any increase competition in this part, if you can
talk about these things.
Harita Vasireddi:
This business is quite a mature service segment in the country, so we do not see actually the
number of CRO’s growing, the net remains the same because even if new ones come up, there
could be some old ones getting shutdown. The price is more or less driven down almost to the
ground and is remaining stable there. So, as of now coming to your question, we do not have
any plans of expanding the capacities here. We still think that the capacities that we have will
take us through for at least this year and the next year. But if suddenly, we see very strong rise
in our pipeline, then of course we will be able to react quickly and add to the capacity.
Aman Vij:
And Madam, you had explained that we are in touch with couple of customers on the clinical
trials are the PAP part, the cytokinesis or something like that, you had explained but I think
because of COVID or other reasons that has still not rectified. So, any visibility on that, you
have may be by H1 or by Q1, Q2, we will finally have such orders.
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Vimta Labs Limited May 13, 2022
Harita Vasireddi:
Ours clients have actually not moved on those projects yet. So, we are continuous touch with
them as when they are able to prioritize those projects that’s when these things will move. So,
as of now, it is status quo for us.
Aman Vij:
Madam, we cannot target any other client meanwhile because if their project is stuck, we can
still try to build capability while targeting your clients.
Harita Vasireddi:
It is always very difficult to win the first project in any new service line. And for clinical end
point studies are new so until we are able to deliver this and demonstrate that we are doing a
good job. It is not very easy to go into the market and get more projects. So, our efforts are
anyway there, as you rightly put up, we continue to try getting those first opportunities. We got
an opportunity especially because it was COVID, may be the other players who would normally
take up such projects could not deliver those, so they came to us and for us it was the same
situation. So, the projects are continued to be in a backburner for these customers and we will
keep pushing.
Aman Vij:
Madam, coming to food side, if you can explain the non-NFL part of the business which we
have been doing for the last couple of years, not included in the JNPT lab, I am talking about. Is
there a sudden change in the industry dynamics because I think this year we did quite well in
this, I may be wrong if you can correct me on that part. If you can explain do you see very strong
growth excluding JNPT part also.
Harita Vasireddi:
Yes, food business has been growing for us steadily, the growth rate is quite good YoY. Despite
a challenging early Q2 and also the previous year, where food business was quite affected for us
because of the pandemic situation. Our food business steadily grew. Now coming to future
growth prospects, I believe that the growth rates that we are experiencing will continue, but here
we are talking about growth those growth rates on a bigger size number. So, if you look at the
absolute growth numbers, then I think we are going to experience bigger absolute numbers in
the coming year.
Aman Vij:
On the JNPT part if you can explain, though we had a rough target of, I think the numbers that
was mentioned was Rs.1 lakh for three years sample. So, that is approximately 30,000 samples
a month, or sorry a year or is it 3000-4000 sample kind of a run rate. So, is this the peak
utilization only we can get or because I think our capacities are may be 3x of this number. So,
any ways we can may be use this facility to do other two testing or do you think the traction
from imports itself is strong enough to scale this number much ahead than the historical track
record.
Harita Vasireddi:
Now coming to NFL volume, we have to understand the FSSAI. FSSAI distributes the samples
through its own mechanism to all the labs in the region that support the import sample testing.
Now FSSAI has come up with its own food laboratory in Mumbai, which is the PPP that we
have entered into with them. So, the objective is to do majority of the sample testing at NFL.
But there will still be some samples that will go into the market because those laboratories
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Vimta Labs Limited May 13, 2022
survive mostly on these samples only. So, I think the government is trying to take a very balanced
view especially in these earlier years, so as to not cause any great discretion on the existing
businesses there. They are trying to walk that fine line. Now, how they fine tune that balance
going forward is actually a scenario that we do not know. They are not going to obviously share
those things with us. So, its basically dependent on how FSSAI will move those samples into
their own NFL lab in the coming year. So, we have to experience it, even I have to experience
those things and I think we will take a year to really understand the mind of the regulator.
Aman Vij:
Madam that part you had explained very well but meanwhile are we not allowed by the contract
to use this facility because the people are there, business opportunity in India is there. Cannot
utilize the same lab till the time the government figures out all those things to other food testing
for, I do not know may be export also may be some other kind of raw material, if you can talk
about it.
Harita Vasireddi:
We are allowed to do other samples there but the lab is mostly designed to handle high volume
of samples. So, one-off samples like what we normally have in our other seven laboratories there
we will not be able to get efficiency to deliver those small size samples. That is one thing, so if
we are able to hit some large volume samples in that region, we will definitely take those up at
the NFL lab.
Aman Vij:
On the accounting part, for commission, if any, the portion of government take is that included
in other expense or when we will record the revenue, we will net it off and then record it. How
will it work?
Narahai Naidu:
This is included as part of other expenditure.
Aman Vij:
So, the increase in other expense can be linked to this increasing scaling of our JNPT division
Management:
Yes, one reason for other expense increase for the quarter is commission on NFL revenue we
have provided for.
Aman Vij:
And ease off writing in the employer expense. Madam, finally on the electronic business if you
can briefly talk about, are we targeting only a particular sector like and if there is an opportunity
to do target other also. What is the feedback as of now? Yes, its very early days but the typical
order size will be in lakhs or will it be in crores also. My point is do we require 100 customers
to eventually fully utilize that capacity or even 10, 15, 20 customers should be enough over a
period of time.
Harita Vasireddi:
That is a very nice question. First, I will address the part about the what industries will target.
So, Hyderabad is hub for defence component manufacturer because there are defense
government institutes here so there is a very nice ecosystem of suppliers in Hyderabad, so that
will be our target number 1. Coming to the size of the projects, they can be mostly in lakhs but
it will be great to have customers in the size of crores, it is quite possible to have such a customer
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Vimta Labs Limited May 13, 2022
provided we become a strategic partner for one of the MNC for their R&D projects in India. So,
both are possible but typically I would say, the probability is more on having projects sizes which
are in lakhs.
Aman Vij:
Just one clarification. So, when we talk about defence is it mostly import related, is it R&D or
even say India is talking a lot about trying to manufacture in defense sector. Will we get benefit
of all these three opportunities? Which opportunities are we looking at?
Harita Vasireddi:
I think it is mostly for our domestic consumption.
Aman Vij:
So, with manufacturing increasing we should get more traction in this business, provided we get
more customers.
Harita Vasireddi:
Yes.
Aman Vij:
Thank you so much for answering the question patiently and Madam on the quarterly con call
part, yes, we understand sometime there is not big update but Madam, you can always have a
half-an-hour call and the reason I am asking is because we have set up two new businesses in
the last quarter and there was hardly any updates we could get. So, may be for one year till the
business stabilizes if possible do it quarterly, you can change the time period. There is no fix
amount, many companies do a half an hour quarterly call and may be half yearly we can do one
hour call. Because there is lot of moving part in our business, we are also testing water. So, the
only way, we can get update is through such con call and in worse case if you cannot do con call
at least have a quarterly presentation upload so that we can get an idea about updates that has
happened in the quarter.
Harita Vasireddi:
We will definitely put up our presentation that is updated every quarter and on the calls your
input is well taken, we will definitely consider it.
Moderator:
Thank you. We have the next question from the line of Dilip Sahu who is an individual investor.
Please go ahead.
Dilip Sahu:
Madam my question was in last-to-last con call you had said there were logistical issues
regarding our exports business in terms of engaging the client as well as the client sending
samples etc. My question is are we on track now that the COVID years are over and give me
some color on the export business how it shaping up, what kind of proportion of our revenue
comes from exports?
Harita Vasireddi:
I think that reference was mostly made in connection to the import of animals. We import
animals for our preclinical study. So, those things have come back to normal state, no issue there.
There was little challenge in getting timely standards as well which we mostly import. So, that
is also no longer a concern. Coming to export business, China should have actually win better
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for us by now but during these last two years, that is the market that we could not access and
therefore could not grow.
Vimta Labs Limited May 13, 2022
Dilip Sahu:
Okay, so export a substantial portion of our revenue going forward it is going to be?
Harita Vasireddi:
Historically, it has been around 27%-30% for us. It is our constant endeavor to make these
numbers higher but as our pie is growing, we see that at the exports and domestic business both
are growing parallelly.
Dilip Sahu:
My second question was regarding EMTAC it has been two years since we have acquired this
business, still not a substantial, no traction there. Can you please elaborate on some of the
initiatives we are taking both in terms of capability building, filling the competency gaps as well
as geographical reach out to customers in this business.
Harita Vasireddi:
The pandemic year, especially the year 2019-2020 was very difficult for this organization they
could not reach out to the customers. So, we could not actually push any more business coming
in. But what we have done during this period, is we looked at our scope of services. We went
ahead and expanded our scope, added a few more tests and few products to the scope. So, that
way, we have strengthened our capabilities but going out into the market it has been difficult
and most of the customers were not really operating, so that issue was there but this year, we
hope, we will be able to push these services nicely especially because of the complemented
EMI/EMC capabilities that you have at EMTAC.
Moderator:
The next question is from the line of Dhwani Desai from Total Capital. Please go ahead.
Dhwani Desai:
So, the first question is that our accretion of reaching in Rs.500 crores plus does come by, as
whatever numbers or calculations that you have internally. Is diagnostic a very significant part,
I am asking this question because we are still testing waters, trying out a lot of things on the
business side. So, if does not workout the way we expect, do we see significant change in our
numbers or accretion for FY2025?
Harita Vasireddi:
As of now diagnostic is a significant portion there but if that does not work out for us, then I am
not really thinking in those lines yet. If that does not work out for us then we will come up with
plan B.
Dhwani Desai:
Okay, there is a plan B, you have other consideration which can still take you to Rs. 500 crores.
Harita Vasireddi:
Like I said, I so far have confidence on the service mix that we have decided for ourselves,
targeting for ourselves to reach that number. So far, we do not have any hesitancy that something
could be off but we have enough buffers built-in to manage any dip in any of our service mix. If
something does not go well, then obviously we have to switch gears and push something else,
that I cannot comment at this point of time.
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Dhwani Desai:
Second question is more of a clarification so we are putting up with Rs.60 crores for a new
facility, this is in addition to about 20-30 crore typically capex that we do every year. So, in next
two years the total outflow for capex would be Rs.100 crores plus. Is that a right understanding?
Harita Vasireddi:
Yes, possibly where our estimate would also be same.
Dhwani Desai:
Madam, can you give more color without getting into a specific number but without JNPT, is
the scope for this business growing at above the 20% or we are yet to see that kind of a traction
in the retail business.
Harita Vasireddi:
20% is on the higher side but we are very close to that.
Dhwani Desai:
Madam, last question is that having from all our introduction one thing that it is quite clear is
that whenever we are multi-mover for the possible three year, we get an opportunity to get good
pricing with the help of the margin but as other player enter and as we scale up volume, the
pricing, we need to revise pricing downwards in many of our areas. So, in that context what
gives your confidence that we will be able to maintain this 29%-30% kind of a margin.
Harita Vasireddi:
We were expecting some price compression on the pharma analytical side but we have been able
to counter the price reduction with very good increase in volume, thereby maintaining our
margins.
Dhwani Desai:
Okay, is it a right understanding that essentially what we are setting on is operating leverage
going out with higher volume and are sustaining the margins in spite of price decrease.
Harita Vasireddi:
Yes.
Moderator:
Thank you. We have the next question from the line of Dixit Doshi from Whitestone Financial
Advisors. Please go ahead.
Dixit Doshi:
Firstly, clarification you mentioned that whatever volumes of input come from JNPT, FSSAI
distribute the volume to the many legs. So, in the RAP the volume was mentioned that 3000
samples per month that is for this leg. Right?
Harita Vasireddi:
They have given an indication of volumes but there is no commitment to the lab.
Dixit Doshi:
But pre-COVID this leg was handling 3000 samples a month?
Harita Vasireddi:
Sorry, I did not understand. Can you please repeat.
Dixit Doshi:
I am not asking for the future commitments by the FASSI but prior to the COVID this leg was
doing around 3000 samples a month. That is a fair understanding?
Harita Vasireddi:
No, FSSAI did not have any lab of its own, it was sending samples to private labs.
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Dixit Doshi:
Okay, so this 3000 samples, a month mentioned in the RAP what was that?
Harita Vasireddi:
That is the volume that is experienced from the imports. That is the existing volume. That is the
market for import sample testing.
Dixit Doshi:
Okay, my second question is in the diagnostic center how many centers we have currently,
diagnostic business?
Harita Vasireddi:
We have nine locations, the largest is in Hyderabad and we have substantial menu at Kolkata
and Delhi, rest of the places we have much smaller menu. So, totally nine locations.
Dixit Doshi:
Okay, I know you do not share the percentage what we have committed to FSSAI but is it fair
to assume that it will be more or less near to the Ghaziabad or it be substantially higher than that.
Harita Vasireddi:
Ghaziabad and JNPT lab are not comparable business models.
Dixit Doshi:
Okay, fine that is it from my side.
Moderator:
Thank we have the next question from the line of Nitesh Jain who is an individual investor.
Please go ahead.
Nitesh Jain:
Just a few questions while you do not give the revenue break up for your different vertical. Could
you at least tell in the March quarter rise so what is number of samples that got tested at JNPT?
Harita Vasireddi:
Sorry, your voice was not at all clear.
Nitesh Jain:
While you do not give the revenue break-up can give the number of samples that got tested in
JNPT for the March quarter.
Harita Vasireddi:
No, we will not be able to share that information.
Nitesh Jain:
Okay at least on the pharma side, you said, you are doing very good. So, was there a good
revenue jump from the December quarter to the March quarter? Are we seeing the traction
quarter-on-quarter?
Harita Vasireddi:
Your voice is not clear.
Nitesh Jain:
On the pharma side of the business, you said you are seeing a very good traction in order flow
also. So, are we seeing a great increase in the business from the December quarter to the March
quarter? What I want to ask you, is there a quarter-on-quarter increase in the growth that we are
seeing?
Harita Vasireddi:
Yes, there was an increase.
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Vimta Labs Limited May 13, 2022
Nitesh Jain:
Okay, it is not possible to tell the numbers, how much should be near if it increase?
Harita Vasireddi:
No, that is very competitor sensitive information.
Nitesh Jain:
Okay and on the FDA, you said you got two approvals, right? So, does that substantially help us
in our exports this year?
Harita Vasireddi:
They are not called approvals; the approvals are given to our customers for the applications they
file with US FDA. So, for us we just go through such reviews or audits and the expectation is,
we perform well and from there comes, the customer confidence in us to work more with us.
Moderator:
Thank you. We have the next question from the line of Yogansh Jeswani from Mittal Analytics.
Please go ahead.
Yogansh Jeswani:
Most of the questions have been answered but a few follow-ups I have, in the beginning of the
call you mentioned about having a significant order book compared to what we have had so far.
And if you look at the margin profile that we have known for last 3-4 quarters that has improved
considerably from 20%-22% odd to 28% and above 30%. So, this order book that we have, do
we have margins in this built up which are in line with this 28%-30% range or do we see some
dip there?
Harita Vasireddi:
No, we do not anticipate any dip as of now No.
Yogansh Jeswani:
Madam, in terms of the capacity addition that you mentioned for Rs.60 crores and you said for
next two years the growth will be taken care of from this. So, beyond this capacity addition do
we have more scope to increase in the same facility or will be the max out of post this?
Harita Vasireddi:
I just want to clarify we will be beginning the construction of the new facility this year. It will
take two years to complete the facility and make it ready for occupying it. So, we are actually
going to start building it now. Did I answer your question completely?
Yogansh Jeswani:
Yes, Madam that was sensible. Madam next thing would be on the EMTAC investment that we
have done. So, how much more investments do we need in this subsidiary any number that you
could share?
Harita Vasireddi:
They might have a capex investment of about Rs.70 lakhs to Rs.1 crore during the year, again
depends on the customers that we are able to build for that organization. Depending on the
interest for the services we will add respective capex.
Yogansh Jeswani:
Okay, so this will be small and a gradual scale up business there, in the overall capex.
Harita Vasireddi:
Yes.
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Vimta Labs Limited May 13, 2022
Yogansh Jeswani:
Madam, in the FSSAI business that you have mentioned on the call and you also mentioned that
currently there are many labs which are already doing this. So, in terms of margin profile, is this
business margin diluted because there is already a lot of competition and is this business also in
a similar margin scale.
Harita Vasireddi:
Margin should be better here because the volumes are higher and now if you take a particular
product you will get at least 10-15 of the samples everyday then obviously your margin of testing
such samples is better.
Yogansh Jeswani:
What is the typical order size in terms of value Madam?
Harita Vasireddi:
We have no orders here. These are the individual samples that are just allotted by FSSAI.
Yogansh Jeswani:
Okay and what would be the value of these transaction there, typically what would be the average
value of these transactions?
Harita Vasireddi:
The variety of imports that we have coming in is quite large and each product has its own
standard specs against which we have to test. So, the range of prices will be quite big.
Yogansh Jeswani:
Okay, understood and Madam, in terms of our customer confrontation I just wanted to
understand is there any significant consideration typically what would be the contribution of our
top three or top five clients in the total sales if you could shed some light on that?
Harita Vasireddi:
Top 10 customers contribute to about 25%-30% of our business.
Moderator:
Thank you. That was the last question. I now hand it over to the management for closing
comments.
Harita Vasireddi:
Thank you. I thank everybody for their wonderful questions. We look forward to again
connecting with you, may be in the AGM so until then goodbye and have a nice day.
Moderator:
Thank you. On behalf of Nirmal Bang Equities that concludes this conference. Thank you for
joining us and you may now disconnect your lines.
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