Supriya Lifescience Limited has informed the Exchange about Transcript of Analysts/Institutional Investor Meet/Con. Call Pursuant to Regulation 30 of the SEBI (Listing Obligations and Disclosure Requi...
SUPRIYA LIFESCIENCE LTD. Creating true values that bind global health Date: August 23, 2022 To, To, BSE Limited National Stock Exchange of India Limited Phiroze Jeejeebhoy Towers Exchange Plaza, C-1, Block G Dalal Street, Bandra Kurla Complex Mumbai — 400 001 Bandra (E), Mumbai — 400 051 Scrip Code: 543434 Scrip Symbol: SUPRIYA Dear Sir (s), Subject: Transcript of the Earnings Call of Ol of FY 2022-23 Pursuant to Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 we hereby enclose the transcript of the Earnings call held on Tuesday, August 16, 2022 at 3.00 P.M. IST to discuss operational and financial performance of the Company for the quarter ended June 30, 2022 (QI of FY 2022-23), This is for your information and records. Thanking you, Yours faithfully, For Supriya Lifescience Limited Shweta Singh Company Secretary & Compliance Officer Membership No.: A44973 Corporate Office : 207/208, Udyog Bhavan, Sonawala Road, Goregaon (East), Mumbai 400 063, Maharashtra, India. Tel : +91 22 40332727 / 66942507 | Fax : +91 22 26860011 | GSTIN : 27AALCS8686A12X CIN: L51900MH2008PLC180452 |E-mail: supriya@supriyalifescience.com |Website: www.supriyalifescience com Factory : A-5/2, Lote Parshuram Industrial Area, M.1.D.C., Tal.-Khed, Dist. Ratnagiri, Pin: 415 722, Maharashtra, India. Tel: +91 2356 272299 | Fax : +91 2356 272178 | E-Mail: factory@supriyalifescience.com GOVT. RECOGNISED EXPORT HOUSE “Supriya Lifescience Ltd. Q1 FY23 Earnings Conference Call”
August 16, 2022
MANAGEMENT: DR. SATISH WAGH – CHAIRMAN AND MANAGING
DIRECTOR DR. SHIREESH AMBHAIKAR – CHIEF EXECUTIVE OFFICER MR. ASHISH NAYAK – CHIEF FINANCIAL OFFICER MS. RASIKA SAWANT – ORIENT CAPITAL, INVESTOR RELATION PARTNER
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Moderator:
Supriya Lifescience Ltd. August 16, 2022 Ladies and gentlemen, good day and welcome to the Q1 FY23 Earnings Conference Call of
Supriya Lifescience Ltd. 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 Ms. Rasika Sawant from Orient Capital, Investor Relations Partner. Thank
you and over to you, Ms. Rasika.
Rasika Sawant:
Thank you and welcome to the Q1 FY23 Earnings Conference Call of Supriya Lifescience Ltd.
Today on this call we have Dr. Satish Wagh – Chairman and Managing Director along with
senior management team. This conference may contain forward-looking statements about the
company which are based on beliefs, opinions and expectations as of today. Actual results may
differ materially. These statements are not the guarantees of future performance and involve
risks and uncertainties that are difficult to predict. A detailed safe harbor statement is given on
page number two of the company’s investor presentation which has been uploaded on the stock
exchange and company’s website as well.
With this, I hand over the call to Dr. Satish Wagh for his opening remarks. Over to you, sir.
Satish Wagh:
Good afternoon and warm welcome to all the participants. Thank you for joining us today to
discuss the Supriya Lifescience Ltd. Q1 Financial Year 2023 results. I am joined by Dr. Shireesh
Ambhaikar, the Chief Executive Officer, Mr. Ashish Nayak, the Chief Financial Officer of
Supriya Lifescience and our Investor Relations Partner, Orient Capital.
I hope everyone got the opportunity to go through our financial results and investor presentation
which have been uploaded on the stock exchange as well as the company's website. We started
Financial Year 2023 on a good note. Despite the ongoing crisis between Ukraine and Russia and
the extremely unstable macroeconomic environment, we have been able to register an operating
revenue growth of 32% over Q1 FY22 as well as a healthy EBITDA margin of 31% and PAT
margin of 25%.
Our focus has been to register new products in the regulated markets and further penetrate
existing products in the regulated markets.
To strengthen the portfolio, we are adding more products in the basket from existing and newer
therapies.
Other than the aforesaid mentioned, the important focused areas where we are experiencing
excellent progress includes backward integration, increasing capacity for the future prospects
and capitalizing on CMO/CDMO potential.
We committed on improving infrastructure which includes debottlenecking and the development
of 2 new R&D centers and 2 manufacturing blocks.
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Supriya Lifescience Ltd. August 16, 2022 Our endeavor is to healthy revenue growth while maintaining healthy margins and upgrade to
the evolving GMP and EHS standards.
With this, I now hand over the call to Dr. Shireesh Ambhaikar, our CEO to share the key
highlights of our business performance, over to you, Dr. Shireesh.
Shireesh Ambhaikar:
Thank you Mr. Wagh. Hello everyone. As mentioned earlier by Dr. Wagh, despite the volatility
in the markets due to the Russia Ukraine war and supply chain disruptions, we have been able
to register a stable growth. Our measures to counter these challenges by building up inventory
of raw materials to ensure smooth operations have worked well. Raw material supplies were
well organized with no significant impact on capacities. Result is that we could deliver a decent
top line while maintaining healthy EBITDA and PAT margins.
We are working in R&D to add new products to our product basket and are expanding into newer
geographies with existing products. Supriya Lifescience is committed to providing sustainable
and reliable performance. Our strength is in large scale chemicals manufacturing and we have
the experience in handling hazardous complex chemistries. Significant progress is made in the
CMO/CDMO space. Work is in progress with various companies ranging from big pharma to
innovator companies to work as a partner for supplying products as per their needs. Work is now
in advanced stages for the first commercial quantities to qualify Supriya Lifescience as a source
for a couple of companies.
Work is progressing on building and expanding capacities. A new warehouse facility for finished
goods is now ready to be commissioned and we are setting up 2 R&D facilities, one at Lote for
product lifecycle management and backward integration and the other one in Ambernath along
with the pilot plant for new molecules and CMO and CDMO business. The lab at Lote will be
operational in Q2 FY23 and the R&D Lab at Ambernath along with the pilot plant is expected
to be operational end of Q3 FY23. Currently, Supriya facilities are running at full capacities.
As regards manufacturing capacity expansion we have started construction work on a new block
called E Block which is going to add 350 m3 or KL of reactor capacity in Lote. A new
manufacturing block of 70 KL capacity attached to the new R&D at Ambernath is also coming
up. Along with that, we are currently debottlenecking our manufacturing capacities in existing
blocks in 2 blocks, namely A and B blocks, capacities are being increased and debottleneck for
running products. We are seeing an increase in demand for some of our current mature products.
Lastly, I would like to touch upon the company's backward integration business model. Our top
12 products out of about 38 we are backward integrated, and these contributes 70% to our sales.
We are extending the backward integration model to a new product as well, so that we maintain
the competitive edge. A large part of the growth and sustainability was driven and will be driven
by these backward integrated products.
With this now I hand over the call to Mr. Ashish Nayak, our CFO to share the key highlights of
our financial performance, over to you Ashish.
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Ashish Nayak:
Supriya Lifescience Ltd. August 16, 2022 Thank you Dr. Satish and Dr. Shireesh. Thanks to the Orient Capital team for being here and
thanks to all of you guys for being here.
I will now share the operational performance for the Q1 FY23. This first quarter for FY23, this
quarter was a good quarter for anesthetic therapy. Anesthetic, which was contributing about Rs.
113 million of operating revenue in Q1 FY22 has now contributed Rs. 500 million in Q1 FY23.
That's almost 5 times what we did in the same quarter last year. Our exports continued to be 83%
of sales and share in the regulated markets has increased from 33% in Q1 FY22 to 44% in Q1
FY23, primarily driven by increased penetration in the European market.
Talking about the quarterly performance, companies reported revenue from operations of Rs.
1,014 million in Q1 FY23 as against Rs. 769 million in Q1 FY22, delivering a growth of 32%.
EBITDA stood at Rs. 312 million Q1 FY23 as against Rs. 154 million in Q1 FY22, a jump of
102%, EBITDA margin stood at 31% in Q1 FY 23 as against 20% in the same period last year.
Profit before tax increased by 115% to 301 million for Q1 FY23, as against Rs. 139 million in
Q1 FY22. Profit after tax stood at Rs. 252 million Q1 FY23. As a percentage, it was about 25%
of the operating revenue. Value growth in regulated markets compared to last year same quarter
was 106%. Despite of the volatility in the market due to the war and lockdowns on further
COVID, we have been able to register a strong growth. We ended Q1 FY23 on a very strong
note. This is all from my side.
We can now open the floor for questions and answers. Thanks to all of you.
Moderator:
Thank you very much. We will now begin the question-and-answer session. The first question
is from the line of Dhaval Shah from Girik Capital. Please go ahead.
Dhaval Shah:
A couple of questions from my side. First one in the reported quarter, how much of the revenue
has come from the block 4 which had gone live in Q122.
Ashish Nayak:
To reply to that, se, all these blocks that we have, four blocks, they are interconnected and
integrated. It would be impossible to identify as to how much sale is coming in from a particular
block. Because a given product let us say the initial stages may be through the first block and
then the final stage may be through the fourth block. So, it's a combination of all. It's very
difficult to identify what's coming in and what's the revenue generated from particular block.
Dhaval Shah:
Okay, so the reason for asking this is that like in FY21, we were operating at an optimal
utilization of around 70%, 71%. That is the optimal as for the presentation. We did around Rs.
400 crores of annual revenue. Now in Q1 23 we are Rs. 100 crores, so what is the increase in
revenue and this Q1 23 will have a new added block as well. Now the new block as the
presentation, is operating at 70% utilization. I just wanted to understand what is the revenue
from that Q1 FY21 when we were at a company level operating at 70% and now also, we are at
70%, while the quarter ended is Rs. 100 crores.
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Ashish Nayak:
Supriya Lifescience Ltd. August 16, 2022 If you look upon it, what I can tell you is, there has been a phenomenal growth and that's
something that said in my speech as well earlier, in the anesthetic category. The anesthetic
category, if you look upon it in terms of value, the sales has been almost five times what we did
in the same quarter last year that itself gives you an idea as to jump from almost Rs. 11 crores
to Rs. 50 crores, that itself gives you an idea as far as the overall increase in the value is
concerned. Also try and understand that we have also increased the inventory levels for the
finished goods, as compared to what were at in Q1 FY22. Obviously, the production is also one
is the sales which has happened, and the second part is it is lying in stock in terms of the orders
that we have in hand.
Dhaval Shah:
Okay, thanks for that. Now secondly given the kind of expansions which are going on, which is
giving us a visibility around 810 KL in capacity, so is it safe to assume that we should be around
Rs. 1,000 crores sales by FY25 on 810 KL capacity?
Ashish Nayak:
Okay, I will answer it in a different way, I will put it, currently if you look at my asset turnover
run rates, FY21 was about 4 where we were sitting on a gross block of Rs. 100 odd crores and
my revenue was around Rs. 390 odd crores. The run rate was about 3.9 to 4 asset turnover. FY22
we were 2.85. But that was as I said earlier, since the new fourth block had just got operational
in that year, and it takes about a year and year and a half for any block to get to reach its peak.
As I see going ahead because let us understand that revenue is a factor of two things. One is
which regulated markets, how much of that percentage is going into regulated markets, because
in regulated markets, because of the highest average selling price, value would be higher. That's
one. The second thing is the additional capacity to that effect if you look upon it going ahead,
we would be around asset turnover of about 3. That's what I'm looking at, because of the new
capacities which are going to come up. I am sitting on a gross block of Rs. 200 crores as on date
and in addition to that, over the next one and a half years, we are adding another Rs. 230 odd
crores. So Rs. 430-440 crores is what we are looking at gross block. So, you can very well
imagine 3. But understand that would be when once these blocks start reaching their peak
capacity. To reach that peak capacity it takes about one or one and half years for any block to
reach its peaks. Also understand that the new products that are being rolled out, they will be first
rolled out in the semi regulated market and it takes about two and a half to three years for any
product to enter into the regulated market. You have to give us that much time. At least 26, I
would say 26, 27 is what when I'm looking at that kind of a top line.
Dhaval Shah:
So Q2 what 2 expansions which we are undergoing right now. One is that one is on the adjoining
plot of land which is around 12,500 square meters and the other is 20 kms away of 25,000 square
meters. 24,600.
Shireesh Ambhaikar:
This is Shireesh Amabhaikar. Let me answer that. A new block of 350 cubic meter capacity the
work has just started at Lote site. The construction has started and typically during monsoon the
construction is slow, but it will pick up speed. We have taken care of the basic, I would say
construction requirements and work is progressing. Typically, it takes 12 to 15 months for a
block of this size to get ready. Somewhere next year, next financial year Q1 or Q2 we will start
commissioning this. As Ashish mentioned, it typically takes one, one and a half years to do the
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Supriya Lifescience Ltd. August 16, 2022 process validations of the products that are targeted, thereafter the regulatory approvals. So, the
capacity utilization will happen in phases starting let's say 18 months from today I would say
with the new capacity. The second block is coming up in Ambernath where we have an existing
site, and we are setting up our main R&D center there to cater to CMO/CDMO projects and this
would need scale of facilities. It will have a pilot plant along with semi commercial capacity
plant of 70 m³ capacity which will be multi-purpose in nature.
Dhaval Shah:
Correct. The Isambe plant is for the growth beyond this 810 KL, correct?
Shireesh Ambhaikar:
That's right, sir.
Dhaval Shah:
Got it. The last question, it's a short-term visibility question. Now, last year second quarter we
had a very fantastic show off. We did around Rs. 150 crores top line with around 53% of
EBITDA margin. Do you think you'll be able to show growth over this in the second quarter?
Ashish Nayak:
Let me not commit on any quarterly targets but what I can tell you is for the full year we would
be doing very good, and the margins would also be at a very healthy rate.
Moderator:
The next question is from the line of Keshav Kumar from RakSan Investors. Please go ahead.
Keshav Kumar:
As far as I understand, Ketamine has been generic for a long time for anesthetic and analgesic
purposes. In the US Ketamine used there is a racemic mixture of S & R enantiomers, in UN
Latin it's (S) Ketamine. But (S) Ketamine is being repurposed for depression and treatment
resistant depression so on and so forth. For example, FDA approval for Spravato in 2019 as well
as a few other clinical trials are underway. So, the chemistry is pretty much out there. But I'm
trying to understand if there's been a favorable shift in pricing for (S) Ketamine because of this
may be due to some demand supply gap. Like for example, sizable difference in cost for capilar
versus spravato, so what used to be off label is now getting formalized. Could it be we are getting
this benefit of mental disorder repurposing leading to shortage of s-ketamine market and that in
turn leading to pricing benefits?
Shireesh Ambhaikar:
The volumes are not there yet of (S) Ketamine, in the US as a competition to Spravato some
generic companies are working with us, but it is too early to say about how the pricing will
evolve on that. We are working with some companies in the development phase.
Keshav Kumar:
Okay, so just to invert this question, from 2016 and 17 to now and also from last year to this
year we have seen sizable jump in our revenues, what's been the change in per kg. prices?
Shireesh Ambhaikar:
As of now, these are stable over the last few years.
Keshav Kumar:
Okay, so the growth has come largely because of volumes.
Shireesh Ambhaikar:
Yes.
Moderator:
The next question is from the line of Nishant Sabnis from Sabnis Finances. Please go ahead.
Page 6 of 19
Nishant Sabnis:
Supriya Lifescience Ltd. August 16, 2022 I just had a quick question on the margin profile of the company. I mean the raw material prices
have subsided a bit. What's your view on the margin profile going forward, if you can give some
guidance or any information directionally also that will be really helpful?
Ashish Nayak:
We have been stating this earlier and that's something which Dr. Shireesh has stated in his
speech. Almost 70% of the revenue which has been generated is for products which are backward
integrated. Which means that we start with the basic key starting material. We have been having
a very close eye on the pricing for our raw materials. As far as the key starting materials are
concerned, we have not seen any major jump in the prices. Yes, the prices for solvents have gone
up thanks to the war, but again, they have come down now and as such if you look upon it the
pricing for the solvents, the impact on the final costing for the product is not much. As such,
there has not been any major impact on my costing for the products and so even our debt in the
solvent cost won't have major impact. As far the key starting materials are concerned, as I stated
earlier, they have been almost constant. No major changes.
Moderator:
The next question is from the line of Yogesh Tiwari from Arihant Capital. Please go ahead.
Yogesh Tiwari:
I had a question on the regional revenue. It looks like that the proportion of revenue from Asia
has declined. Just wanted to understand if you can share if it is related to the lockdown in China
and how do you actually export to that country if you can share?
Ashish Nayak:
It is a factor of the product-mix. Some of the products and this is a cyclical thing, it's a seasonal
thing. Some of the products do exceedingly well in some quarters. This particular year we have
done exceedingly well in the European, Latin as well as in the American markets, North
America. Yes, Asia, if you look upon it, there has been a marginal decline, almost 24%. So yes,
that is there.
Yogesh Tiwari:
This is related to the China lockdown?
Ashish Nayak:
Some aspect of it is on account of the China lockdown, yes, but not the entire impact it's because
of China.
Yogesh Tiwari:
Okay, just to understand, do you export through the Shanghai port and what were the steps taken
by the company in a lockdown in China?
Ashish Nayak:
In a lockdown, if you look upon it, since the ports have been shut down, we have not been able
to export much. Whatever we have been able to export our small consignments and nothing
major as of now, but we are expecting the ports to open up and things are slowly getting back
normal. That's the information that we have got. So going back, we expect things normalize. In
any case, any consignment if we are not able to ship them in this particular quarter, they spill
over in the next quarter. As far as the financial year is concerned, we are well on track in terms
of what our positions there.
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Yogesh Tiwari:
Supriya Lifescience Ltd. August 16, 2022 Lastly, on the Europe and this US revenue mix, it looks like that the contribution of Europe on
a percentage basis has come down while that of North America has increased. If you can share
any product introduced?
Ashish Nayak:
I am looking at Q1 FY22 versus Q1 FY23. Q1 FY22 contribution from Europe was 10%, which
has gone up to 20% on a higher top line. Definitely Europe has in fact, in terms of absolute value,
the turnover has almost gone up by five times. We did about Rs. 11 crores in FY21-22 as against
Rs. 50 crores in this quarter. There has been an increase. As far as North America is concerned
again, we have been able to do higher sales over there. Some of the products which are there, I
mean, the therapies that we are into anesthesia these are products which have been doing good.
Yes, so we have been able to increase the contribution from these geographics.
Yogesh Tiwari:
Any new product or any new launches in North America because the contribution is increased
so just wanted to understand that?
Ashish Nayak:
No, it's higher penetration of the same existing product into the American market.
Moderator:
The next question is from the line of Siddharth Purohit from InvesQ Investment Advisors. Please
go ahead.
Siddharth Purohit:
Our other cost has been relatively on a higher side and if I look at even on quarter on quarter on
absolute medicine. So how should we look at it? Would it be a function of the absolute amount
of top line that we do or was there any one off maybe regulatory cost involved in this also?
Ashish Nayak:
You are referring to other expenses in P&L, right?
Siddharth Purohit:
Yes.
Ashish Nayak:
So, if I compare it with Q1 FY22, where we had a total of Rs. 135 million in Q1 FY22, it has
Rs. 224 million. But if I compare it with Q4 FY22, we did about Rs. 223 million. It's almost at
par with what we did in Q4 FY22. If you are comparing it with Q1 FY22, keep in mind that, that
was the quarter in which the fourth manufacturing block was operational. So that was one plus
we have also increased by debottlenecking the capacity for our existing blocks as well. Yes, with
that, some of the other expenses mainly contributed by power, I would say. The power costs
have gone up, obviously because the new block has got operation and it's a much bigger block
as compared to the earlier 3 blocks. That's the main reason. Going ahead, we do not see any
major spike until the next 2 blocks start getting operation.
Siddharth Purohit:
In a steady state basis, what should be the normal run rate as a percentage to sales? There will
be multiple overheads I believe, but except the one-off cost that you said.
Ashish Nayak:
It would be at par with what you're seeing in this quarter because in the last two quarters, the
other expenses have remained constant in absolute terms.
Siddharth Purohit:
There was no regulatory like filing cost and all that involved in that what you are saying?
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Ashish Nayak:
Supriya Lifescience Ltd. August 16, 2022 These are routine recurring costs which keep on happening. If there was something in the last
quarter, it could be that in this quarter as well, like lab expenses, power expenses, power has
been a major contributor, but other expenses are there which have gone up with the fourth block
getting operations, but nothing one off or major amount in this.
Moderator:
The next question is from the line of Rajdeep Singh from ASK Investment Managers. Please go
ahead.
Rajdeep Singh:
You said the growth in Europe was higher in terms of absolute also and in terms of percentage
share as well. I just wanted to know, in terms of demand, are you seeing increased demand from
your end customers who are looking to take you as an alternate source of suppliers because of
the China lock down or maybe Russia, Ukraine crisis? What is the sense?
Ashish Nayak:
If you look upon it, we have been in the European market for the last almost 4 to 5 years and
every year we have been able to penetrate and become the first source for some of our customers.
With that, we have been able to get much larger share from competitors who are there. So that's
the main reason.
Rajdeep Singh:
But this is, as usual business, nothing?
Ashish Nayak:
It is as usual business and I hope it continues the way it is.
Rajdeep Singh:
Hope for the good. Lastly, if you can help me corroborate your capacity expansion because you
say 810 KL will come by Q1 FY24, today your capacity is 547 KL, correct?
Ashish Nayak:
Yes, correct.
Rajdeep Singh:
So, the difference is 263 KL, right. You're saying block E is 350 KL and 70 is Ambernath. How
do you correlate this?
Ashish Nayak:
So, the block E is being constructed to move activities from an older block which would later be
decommissioned, which is approximately 150 m³.
Rajdeep Singh:
Okay that is why you say this 340KL will replace an old block of 145 KL.
Ashish Nayak:
Correct.
Rajdeep Singh:
Okay. So, this is one, 70 KL is over and above this, right?
Shireesh Ambhaikar:
That is over and above, it's at the site in Ambernath. It is going to be a manufacturing block
attached to the new R&D center for scale-ups and commercialization.
Rajdeep Singh:
Okay. And by Q2 FY23 the block which will be available is for backward integration, correct?
Page 9 of 19
Ashish Nayak:
Supriya Lifescience Ltd. August 16, 2022 Q2 FY23 no new block will be available. That is the R&D building with new labs for quality,
warehouse, the three activities mainly quality control labs, quality assurance, R&D and finished
goods warehouses. That one will get operational in this quarter.
Rajdeep Singh:
Okay. Because sir, was to understand that in one of your slides you are saying your capacity
utilization is 70% which was 47% in FY22 on increased capacity and in the subsequent slides
you are saying that it is running at full capacity. So, is 70% the optimum capacity? So, for
incremental volume growth when is your capacity expected to come online? Just connecting the
dots.
Shireesh Ambhaikar:
70% is the maximum utilization and it depends on how you calculate. We don't calculate the in-
between cleaning hours. The facilities are mainly multipurpose in nature. So, there is cleaning
happening between campaigns. So, 70% is the optimum.
Rajdeep Singh:
I was just reading from your presentation slides where you're saying 70% and then in subsequent
slide, you're saying it is currently being fully utilized.
Shireesh Ambhaikar:
70% is full capacity. That's what I would say.
Ashish Nayak:
70% is full capacity utilization because this is a multi-product facility, than if I manufacture a
given product, I can reach 100%, if I manufacture only a single product. But since there are
multiple products which keep on happening and as Dr. Shireesh said, we run campaigns where
in a given campaign we run, let's say, ‘x’ number of licensed product, depending upon the orders
in hand. And once the campaign is completed, we move over and switch over to the next product.
Now, this switchover takes time because the equipment has to be cleaned up and only after that
we can start the next product. So, because of this switch over there is a time which is lost. So, as
a result of that we consider that 70% is somewhere around reaching the peak capacity, and
increase is maximum up to another 3% to 4% points. But beyond that we won't be able to
manufacture because it's multi product.
Rajdeep Singh:
Okay. So, incremental volume growth in subsequent quarters will be through debottlenecking,
is that fair understanding?
Ashish Nayak:
Yes, there is a lot of debottlenecking which is currently going on at the site so that is also going
to increase the volumes.
Rajdeep Singh:
Fair. And sir, you are saying that out of your (+) 1200 customers how much would you be
supplying to distributors and how much would be through end client? Customers in previous
quarters it was (+) 1300.
Ashish Nayak:
So that keeps on changing quarter-on-quarter depending upon the product and depending upon
the geographies that these products get into. But for distributors versus direct sales, I would say
is somewhere around 46% to 48% would be through distributors and the balance amount is direct
sales.
Page 10 of 19
Rajdeep Singh:
Supriya Lifescience Ltd. August 16, 2022 Okay. One last question for Ashish sir, how is the working capital behaved this quarter since
there is so much of disruption on the supply side inventory stocking.
Ashish Nayak:
We have continued to increase the inventory levels. So, the working capital is high at this point
of time as well. We are just keeping our ears and eyes open. As things normalize of war, situation
comes under control and whichever geographies there is a lockdown, once those start opening
up slowly will normalize the stock level. But yes, as things stand today, we are at a higher
working capital and inventory levels as well. The receivable amount has come down very well.
But the inventory levels are still on a higher side. But that’s a conscious call that we have taken.
I mean had it not been so, then we would not have been able to increase our top line 35% last
full financial year and almost same rate even in this year, we would not have been able to reach
that 32% in this year, this quarter I am saying. That’s a call which we have taken consciously
considering the volatility and the turbulent times that we are living.
Rajdeep Singh:
I got it. Thank you and all the best.
Moderator:
Thank you. The next question is from the line of Naresh Vaswani from Sameeksha Capital.
Please go ahead.
Naresh Vaswani:
Was there any revenue which got deferred in the Q2 and if yes, what would be the quantum of
that?
Ashish Nayak:
You meant Q4 or Q1?
Naresh Vaswani:
From Q1 to Q2.
Ashish Nayak:
FY23 you are saying.
Naresh Vaswani:
Yes. In this quarter I'm asking was there any shipment which has got deferred and would come
into Q2?
Ashish Nayak:
There have been a few shipments which we had planned towards the last week of June which
have got deferred and we have been able to make your shipments in this quarter.
Naresh Vaswani:
Okay. And in terms of your opening remarks regarding the progress in the CMO, CDMO
molecules, wanted to understand what is the nature of these molecules? Are these patented or
generic? And also, what is the value addition which we are providing to the customers? Or why
would the customers come to Supriya Lifescience for these molecules?
Shireesh Ambhaikar:
These are generic molecules and, of course, there are newer applications of generic molecules
that are also coming up. To answer your question why the customers are coming to Supriya, in
one specific case, it is because of our capability to do those kinds of processes that has worked
well, and we are at a stage with that customer where we are likely to get orders for commercial
quantities, I would say. So, it's a mix of, I would say old generic and some new applications of
the generics at the moment. In the future the mix could change.
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Naresh Vaswani:
Supriya Lifescience Ltd. August 16, 2022 Sure. And we had got the CEP for Salbutamol. So, have we started the supplies in Europe for
that?
Ashish Nayak:
It's in progress.
Naresh Vaswani:
Okay. So, this year it will pick up in the subsequent quarters, right?
Shireesh Ambhaikar:
We expect so.
Naresh Vaswani:
Okay. And one last question. So, this quarter we have done 31% revenue growth. Would it be
fair to say that for the full year we will maintain that sort of run rate for revenue growth?
Ashish Nayak:
Historically, if you look upon it, for the last four to five years we have grown at a CAGR of
almost 24%-25%. We are confident on maintaining that run rate. But at the same time, having
said that, there are a lot of opportunities like what Dr. Shireesh said, some of those opportunities
we are able to commercialize that's much better.
Naresh Vaswani:
Sure sir. All the best.
Moderator:
Thank you. The next question is from the line of Tejas Mehta from Omkara Capital. Please go
ahead.
Tejas Mehta:
Just once again coming back to the capacity utilization in the inventory levels, can you quantify
the value of this inventory and it’s lying on the balance sheet today that we manufacture also
you will be sold subsequently.
Ashish Nayak:
Just give me a minute. The total inventory which is lying in the balance sheet as on date was
about Rs. 100 crores.
Tejas Mehta:
So, of this how much will be the finished goods inventory of these 100 crores?
Ashish Nayak:
About Rs. 24 crores.
Tejas Mehta:
Okay, because I'm just trying to understand, trying to relate the two things. You said 70%
utilization we achieved in the first quarter, but the revenue of the finished goods inventory looks
pretty low. Just about Rs. 135 crores. So, I'm trying to understand the numbers. How do we read
these numbers?
Ashish Nayak:
Again, let us understand that what you're seeing over here is just the cost of those finished
products. When we are considering the revenue, obviously there's a margin which would come
into that. So, every product has a different margin structure. So, that’s where it is. And I'm also
sitting on Rs. 32 crores worth of work in progress. So, my total almost finished and work-in-
progress stock, finished stock is about Rs. 56-57 crores.
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Tejas Mehta:
Supriya Lifescience Ltd. August 16, 2022 Okay, got it. And how does the product basket mix change quarter-to-quarter? Because I believe
it varies quite frequently from Q-o-Q?
Ashish Nayak:
The seasonality is in the cough and cold segment mainly.
Tejas Mehta:
Okay. Because I'm trying to understand that probably some quarters there will be higher VAP,
value added products or let’s say higher margin products, so high priced products may be
dominating and some quarters like first quarter the other low value added or let’s say low margin
products must be dominating. That’s what I'm trying to understand because when you're talking
about 25% growth for the full year, it's kind of a number of about Rs. 550 crores add over the
next three quarters. So, what would be driving that considering that we are already at 70%
utilization of the capacity?
Ashish Nayak:
It depends upon the products that are manufactured, and it depends upon the orders in hand.
There are some products which get manufactured start to end in, let's say, one day. There are
some products which may take about seven to eight days. For a multi-product facility, it is very
difficult to…with that same 70% I can almost double my revenue as well. I can do half the
revenue as well. Depends upon the product and the production cycle for that product. So, it's a
bit complex, but we manage it on the basis of our experience in this field and a bit of information
with regard to the orders in hand.
Tejas Mehta:
Okay, got it. And in terms of the revenue share from the developed markets, where do you want
to be, say by FY24-25? Currently we're at 42% of the revenue. Where do we want to be in the
next couple of years?
Ashish Nayak:
If you look at the trend, it has gone up from almost 33%, from almost zero to 33%. Last year,
for the full year we did (+) 50%, this quarter we are at 44% odd. The higher the better. That's
what the target is. So, try and understand, for the next couple of years we are seeing a lot of our
existing products which till now we are selling in the semi regulated markets. Some of them
already got registered, some of them are in the process of getting registered. So, the next couple
of years once they get registered and we start selling them in the regulated markets, the share is
going to go up. That's how I look upon it. As to what it's going to be. Only time will tell, but it's
going to better than what we have right now, that's for sure.
Tejas Mehta:
All right. Okay, got it. Thank you so much.
Moderator:
Thank you. The next question is from the line of the Tushar Bohra from MK Ventures. Please
go ahead.
Tushar Bohra:
Thanks for the opportunity and congratulations to the management for a good show YoY Sir,
just a couple of points. First, you mentioned just in the previous question that few of the existing
products should start selling in regulated markets. So, if you can help us understand better either
with the exact names or maybe if not qualitative some quantitative data, how many products are
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Supriya Lifescience Ltd. August 16, 2022 we talking from the existing market that will move up, which products if you can give specifics
and timelines as well.
Ashish Nayak:
We won't be able to give the specific names of the products. But these are in the allergy segment
and cough and cold segment. That's where we are seeing increasing requirements from the
regulated markets. If you ask me to give a number, these are about four products.
Tushar Bohra:
And this should happen in this financial year, we should start seeing revenue, or have you already
started seeing revenue?
Shireesh Ambhaikar:
In some cases, we have to do a submission of a drug master file of something that is already
available for the other markets. So, it's a submission of the drug master file, approval of that and
we are working with customers along with them to do the submission. So, the horizon could be
18 months to 24 months to achieve significant volumes on these four products that we're talking
about.
Tushar Bohra:
We have not yet started booking revenue, let's say from markets like US, Europe for this
product?
Shireesh Ambhaikar:
No.
Tushar Bohra:
Anything that will come in FY23, sir, from any of our existing product basket?
Shireesh Ambhaikar:
Not in FY23. These are the early supplies that are happening for validation quantities for the
customers.
Tushar Bohra:
Got it, sir. Second, if you can help understand, the CMO CDMO opportunities slightly better. I
think you mentioned in one of the previous responses that one product you may be close to
signing off a commercial something. If you can share more qualitative inputs on the entire
pipeline.
Shireesh Ambhaikar:
So, on two products we are at a stage where I said that we are just waiting for the purchase orders
for the supply of first commercial quantities which will help the customers perform production
scale batches and their submissions. That's the clear progress on two products. And on quite a
few others, we are in the lab. In some products, the lab samples have been given, the lab samples
are under assessment. In a case or to the lab samples are okay and we've been asked to move on
with the next stages. So, this is how it is progressing. There are about 7-8 projects active like
that at various stages.
Tushar Bohra:
And anything that you would deem substantial compared to your current revenue size that
hopefully we would have more inputs on a near term, maybe some announcements related to
that or some more qualitative details available, say by next con call?
Shireesh Ambhaikar:
We expect some of these to contribute significantly. That's our effort, that's all I can say.
Otherwise, we wouldn't pursue these opportunities.
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Tushar Bohra:
Supriya Lifescience Ltd. August 16, 2022 Sir, the anti-anesthetic product, which is one of our top three products, you mentioned that there's
been a major revenue jump in this quarter. I think the segment as a whole gone from Rs. 10
crores to more than 50. The share of Europe has gone from about Rs. 8 crores to 24-25. So, we
can expect that the penetration of anti-anesthetics has gone beyond Europe, say some of the other
regulated markets also in this quarter?
Ashish Nayak:
This quarter has been good and if you look upon it, even the quarter before that, we did good in
this particular therapy and going ahead we are confident that we will be able to maintain a good
growth in that particular geography. Plus, we are also looking at other regulated markets for the
same product. Initial stages as of now, but as and when it starts getting converted, that would
also be adding a huge value.
Shireesh Ambhaikar:
This has been Europe centric. We are seeing interest from US now.
Tushar Bohra:
Any supplies in this quarter Q1 to US actually?
Shireesh Ambhaikar:
Just the initial quantities for qualifications.
Tushar Bohra:
And sir, it would be fair to assume that the kind of traction we've seen in this product or this
segment in Q1, we should be able to maintain this kind of…so there is clearly no one-off element
and we should be able to maintain the momentum through the year without getting into specifics
quarter by quarter, but overall basis we should see a substantial growth from this product
category?
Ashish Nayak:
We will see a substantial growth, we will see a good growth as far as this particular therapy is
concerned, we are confident about it.
Tushar Bohra:
Just one clarification one of the previous responses, we did about Rs. 530 crores revenue FY22.
Historically we have managed to grow revenues at about 24%-25% CAGR, safe to say close to
double in revenues over a three-year time frame. Is there a reason why we are not comfortable
with that kind of a run rate? When we say that we will hit Rs. 1000 crores by FY2627, is it just
something that are we being conservative.
Ashish Nayak:
We are being conservative. It's always better to under declare and over deliver, that's what we
believe. We did that in the last financial year which was the first financial year for Supriya after
getting listed. So, that's been our thought process and we'll continue with that. So, whatever we
say we believe that we should over deliver on that. So, that's where it is. And as I said along with
that, that there are a few projects which are big budgets and if we are able to deliver that, not if,
it's only question of when, once we are able to deliver that, that would definitely be an upside to
what we have just projected.
Tushar Bohra:
Would it be fair to take your revenue CAGR number as a better indicator of possibilities? Say,
next three years we should be able to maintain maybe a 24-25, whatever, in that vicinity run rate.
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Supriya Lifescience Ltd. August 16, 2022 Should we take that as a better indicator of execution capabilities rather than going by a specific
number?
Ashish Nayak:
Yes, you can look upon it that way. Historically that's what we have done, and the upside now
is that over there we are sitting on limited products, there were other products but not major in
the regulated markets. Now over the next two to three years we are going to see a lot of our
existing products into regulated markets. Plus, you have the new products that have been rolled
out, the capacities are going up and the CMO, CDMO opportunities which are there in the offing,
so, all these factors taken together we are very positive, and we should be able to do better than
what we are saying, that's what we strongly believe. But anyway, keeping our fingers crossed
and trying our best to reach there.
Satish Wagh:
And I think Tushar, the one market which we are not discussing, recently I visited Brazil which
is Latin America which is also now gearing up the new standards like the GMP, etc., have been
started implementing by this market. Current source is only China one source. Now they have
to qualify second source with GMP certificates, etc., by 2023 March so the procedure is already
started on.
Tushar Bohra:
Great to hear, sir. So, is that possibly could emerge as a big market for us?
Satish Wagh:
See, Latin America is also one of the biggest markets for us and it is also increasing in a larger
way because as I told you current source is one and people have decided. The country rules and
regulations have changed. The country itself has decided for the second source and second
source whoever is going to be qualified will be with the GMP certifications and the approvals
of the products by filing the drug master files. So, this is another thing which another 6-7 months
you will see in this market a good trend of exports.
Tushar Bohra:
Fantastic, sir. That's very useful. Qualitatively one last question on the anesthetic product in US.
Sir, are we also working with innovators for some of these new clinical trials for new indications
like gaming addiction and COVID related depression, etc., or anything around that?
Shireesh Ambhaikar:
Sorry, to say anything on that. I understand the question, but we cannot talk much about it at the
moment.
Tushar Bohra:
But safe to say that we would definitely be a relevant company when it comes for innovators to
look at for API supplies given our capabilities and scale?
Shireesh Ambhaikar:
That's our aspiration.
Tushar Bohra:
Got it, sir. Thank you so much. I'll join back in the queue.
Moderator:
Thank you. The next question is from the line of Aashish Upganlawar from InvesQ Investment
Advisors. Please go ahead.
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Aashish Upganlawar:
Supriya Lifescience Ltd. August 16, 2022 Sir, in the previous comments that you made, I mean the range of revenue growth when we say
Rs. 1000 crores in the five years it would be say 14%-15% CAGR. And then we talk about 24%-
25%. So, the band is quite huge, and you would probably have certain aspirations of growth and
the execution capability probably would be somewhere in mid, is that what one should expect
from Supriya? Because yours is a uni listed company that's why it's a question from us, how do
you think in terms of your execution and possibilities that you see for your business overall?
Ashish Nayak:
We've got a professional team over here and it’s well led by the promoters. We have got more
than 35 years of experience. We have done exceedingly well in the last four to five years. We
have been able to register products in the regulated markets. Multiple USFDA approvals, three
times earlier USFDA approved and other authorities as well. So, we are very confident that
whatever capacities we are building up and what our new products that are being rolled out and
whatever new geographies we are getting into or making efforts to get into, we'll definitely be
able to convert. Yes, as Tushar stated earlier, we are being conservative when I give you the
percentage and in absolute value terms, we are being conservative. If we are able to achieve that
we would be very happy, and I think we should be able to overachieve that. But anyway, let us
not get quoted for that. So, it's always better to under declare and over deliver.
Aashish Upganlawar:
Okay. With the kind of developments that you mentioned in terms of CMO, CDMO that might
be there, or you going to regulated markets or increasing share of regulated markets and stuff.
The margins at least are pretty good in terms of the 41%. So how do we see these? I mean, one
can expect these to sustain or what is the band that one should look at for Supriya that way given
the mix and geography and everything that keeps over a period of time.
Ashish Nayak:
I will maintain what I said in the earlier earnings call as well and I stated that while, yes, the
existing products which are getting into the regulated markets the margins would be higher. At
the same time there are new products which are getting rolled out into semi-regulated markets
where the margins are lower. Plus, we are also adding up capacities. When we add capacities,
typically it takes about 1-1.5 years for any plant or manufacturing block to reach its peak
capacity. So, till that point of time the revenues which are generated are not commensurate with
the expenses that have been incurred or the overheads that are being incurred. That would be
always the push and pull of all these factors. But yes, what I can assure you is going ahead you
would be maintaining healthy EBITDA margins and healthy profitability. Yes, that's for sure.
Aashish Upganlawar:
So, healthy would mean upwards of 35% generally?
Ashish Nayak:
Let me not be quoted on that. I'm saying historically, if you look upon it last year in the worst of
years, we still managed this (+) 40%. So, I won't give a number to that but yes, I can assure you
that it's going to be definitely healthy, yes.
Aashish Upganlawar:
Okay. And lastly, is it possible to share the overall working capital cycle in terms of number of
days or however you want to just help us with? Because this is not a quarter where we get the
balance sheets of companies but just in case you could.
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Ashish Nayak:
Supriya Lifescience Ltd. August 16, 2022 Well, these are not audited. I don't know whether I can give it but Yes, working capital in terms
of number of days is roughly around 6-6.5 months as of now. That's why we know but that's
primarily because of the inventory levels being higher, and we have consciously taken a call to
increase the inventory levels. That’s how it is.
Aashish Upganlawar:
Okay, so this would stay at 130 odd days for now, for this year?
Ashish Nayak:
No, I'm saying the working capital in number of days is about 200 odd days, so that’s about 6-
6.5. And we are just waiting and watching. As all the companies and all the industries are
currently, we're just waiting for things to normalized on the war front, on the COVID front and
whatever other issues that are there currently. Once things normalize, obviously we'll take a call
to reduce inventory levels. But till that point of time, we cannot let non availability of inventory
or raw materials being a reason to not supply to our customers. Try and understand we have been
dealing with these customers for more than two decades in some cases, more than three decades
in some cases. And these are large formulations players, multinational. So, that production cycle
depends upon our delivery. So, any slippage on that means their production cycle goes for a toss.
We cannot afford to do that. We need to maintain our good relations with them. So that's the
reason.
Aashish Upganlawar:
Okay. And you're saying mostly it is only the inventory days and the other parts the payables
are…
Ashish Nayak:
The receivables has come down to a great extent, but the inventory levels, yes, are high currently
and that's a function of it.
Aashish Upganlawar:
Sure. Thank you.
Moderator:
Thank you. The next question is from the line of Devang Shah from Investsavvy. Please go
ahead.
Devang Shah:
Actually, my question was on the margin front, but that has been actually already answered by
the management to earlier participants. So, no questions furthermore, thank you.
Moderator:
Thank you. The next question is from the line of Keshav Kumar from RakSan Investors. Please
go ahead.
Keshav Kumar:
Sir, you spoke about (S) Ketamine pricing. So, could you help understand if the market stays
fairly under supplied? I mean, if you could talk a bit about the demand supply dynamics. And
also, if you could elaborate a bit on the clinical supplies part of it.
Ashish Nayak:
Sorry, can you repeat your question please? Couldn’t hear well.
Keshav Kumar:
Am I audible now?
Ashish Nayak:
Yes.
Page 18 of 19
Keshav Kumar:
Supriya Lifescience Ltd. August 16, 2022 Sir, you mentioned about (S) Ketamine pricing it has been stable for the last few years. So, is
the market under supplied? If you could talk about the demand supply dynamics.
Ashish Nayak:
The pricing is stable. The approved drug which is there on the market is with the innovator. The
generics has not yet appeared. The genericization has not happened yet. It's in development
phases.
Keshav Kumar:
Sir, but that's for the mental disorder part, right? But for the anesthetic and the analgesic part?
Ashish Nayak:
The other volumes are steady and growing in some markets, volumes are growing, pricing is
stable.
Keshav Kumar:
Okay. So, just taking your internal view on (S) Ketamine versus the racemic one in terms of the
kind of stability it can see as per you over the next five to seven years, the new indications and
also the usual demand.
Ashish Nayak:
We're not aware of that. In the other isomer, some early-stage clinical work is going on right
now, the (R) Isomer.
Keshav Kumar:
So, for anesthetic and analgesic in US it's (S) Ketamine that is used or it's Ketamine
hydrochloride that is racemic one?
Ashish Nayak:
(S) Ketamine hydrochloride.
Keshav Kumar:
Okay. Alright sir got it. Thank you. That's all from me.
Moderator:
Thank you. Ladies and gentlemen, this was the last question for today. I would now hand the
conference over to Dr. Satish Wagh for closing comments.
Satish Wagh:
Good afternoon. I personally thank all the participants who got connected with Supriya
Lifescience. I'm quite confident that Shireesh Ambhaikar, our CEO and Ashish Nayak, CFO,
have given the information which was required by all the investors. If you still have anything
and any information is required, do not hesitate to send an email to us and definitely we will
come back to you, and we'll answer you. Thank you very much for your time. I promise you that
we will definitely do our best and deliver the good results to all the investors. Thank you.
Ashish Nayak:
Thanks a lot. Really appreciate this.
Shireesh Ambhaikar:
Thanks a lot, Orient Capital team also. Thank you.
Moderator:
Thank you. On behalf of Supriya Lifesciences Ltd., that concludes this conference. Thank you
for joining us and you may now disconnect your lines.
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