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00:00 I am joined by Mr. Yugal Sikri who is the MD of the company.
00:04 Welcome to the show Mr. Sikri.
00:05 Thank you so much Varsha.
00:08 So Mr. Sikri I noticed that in last two years if you see during the same quarter you reported
00:15 the revenue growth in double digit. However, this quarter if you see the growth has been in
00:21 single digit. Could you just let us know the reason for the same and going forward what is
00:26 the trajectory?
00:28 Okay so give me a couple of minutes just to give you a little bit of background so that
00:33 you can appreciate that part better. RPG Life Sciences is into the three kinds of businesses.
00:40 We are domestic formulation, international formulations and API. Domestic formulation
00:45 is two-third and remaining 33 percent comes from the international formulations and API.
00:51 Now the fourth quarter which we have the fourth quarter has the least saliency in the business.
01:01 This is part of industry, this is part of our product portfolio, this is part of the seasonality
01:08 which we have. So that's why the fourth quarter is always relatively a lower contributing quarter.
01:15 Almost there's a difference of 20 percent when I compare to the earlier three quarters.
01:20 So that's the point number one. This year growth in the fourth quarter is apparently a bit muted
01:31 because of certain customer or product specific reasons but what is very very critical for this
01:39 two-third contributing business which is domestic formulation business, our secondary growths are
01:44 very very robust. In the fourth quarter market has grown at 6.5 percent. Our growth as reported by
01:53 the third party with the IMS data or IQIA data which we call them has reported 19 percent growth
02:00 for us in the same. So which indicates that those two or three transient issues which we had with
02:06 certain product for seasonality and we had a larger base last year because of certain development that
02:14 point in time. Our fundamentals of growth continues to be the same. Our revenue growth is consistently
02:21 higher than the market for the past five years and so is the case going on quarter on quarter basis
02:28 now. Number one. Number two, our margins are continuously higher every year for the last five
02:34 years from 10 percent margin we are at 23.3 percent. Even this year you would have seen our
02:41 margin growth is 26 percent on EBITDA, 29 percent on PBT and 28 percent on PAT. In terms of the
02:49 volume, sorry, profit volume in terms of the margins there is a increase of the 230 basis
02:57 point, 240 basis points in all the indices, EBITDA, PBT and PAT. Our cash flow is the record high 127
03:09 crore after paying off capex of 51 crore. So in terms of the new products, I'm talking domestic
03:16 formulation only, in terms of the new product, new products contribute 30 percent to our sales.
03:21 In terms of big brand building, we have a brand called Neprosyn which was 18 crore five years back
03:28 today this year has clocked in 74 crore registering a growth of 21 percent and we expect this brand to
03:35 become a 100 crore brand. We have another portfolio called Immunosuppressant which was
03:39 half five years back today it will be across 70 crore. This is another portfolio we are going to
03:46 build it to a 100 crore portfolio going forwards and this is all possible because of two strategies
03:53 we have in terms of product portfolio. One is the life cycle management of our textbook iconic
04:00 brands and the second one is enter into chronic and specialty therapies put together these have
04:07 contributed 30 percent. The second very important point in case of the domestic formulation business
04:12 is productivity. Our sales for productivity which was 3.4 lakh five years back last year it was five
04:17 lakhs this year it has crossed 5.8 lakhs and therefore productivity improvement, new product
04:25 contribution, sales hygiene improvement, I think all three are contributing to revenue growth as
04:31 well as the margin growth. In margin growth we have a story on both COGS and OPEX and both of
04:38 them are contributing to the EBITDA margin improvement. Why we have consistent improvement
04:43 is also because this is our structural story we have done some fundamental interventions in the
04:48 operations of the company and that is what has helped us to consistently improve our margins.
04:55 I hope it answers your question on a broad basis. Yeah sure well Mr. Sikri your domestic formulation
05:03 business is around 66 percent of your portfolio and you want to increase your revenue contribution
05:08 from you know other segments like API and international formulation. So with all this
05:14 what is the revenue growth you are expecting let's say for next three years?
05:19 Okay so in terms of the revenue our next obvious target is thousand crore
05:28 and that growth will come from all the three businesses. Large contributor so far has been
05:36 the domestic business because that's what we focused five years back. Now we have IF,
05:41 international formulation, API both will contribute because we did two interventions.
05:46 One we have modernized our age older decades old plan by investing 140 crore on the CAPEX and we
05:53 are building our R&D pipeline with set up a state of our R&D departments in formulations and API.
06:00 They are working to make sure that the product pipeline also comes up as the infrastructure
06:08 is getting modernized. So both of these business international formulation API will also contribute
06:14 leading to our aspiration of reaching to thousand crore mark SAP. So my last question to you would
06:23 be are you introducing some high margin products which will actually increase your margins going
06:30 forward? Yeah I think very very important point you raised. Yes our focus is on picking up a
06:39 product portfolio which is inherently having high margin. Three things on the export side.
06:45 One is we are focusing on our major product portfolio called immunosuppressant which
06:51 inherently has a better margin. Number two we have identified low volume product with some
06:58 product competitiveness with some kind of product differentiation. Example we have what we call as
07:04 complex generic that's the second. Third one is you picked up those products which have some
07:11 manufacturing complexities low volume so that it doesn't attract the attention of the biggies and
07:20 all of these three segments are relatively high profit margin business in the international side
07:26 on the domestic side on the India side. Yeah our strategy is to go for products which are non-DPCO
07:36 and the products which have better margins which are chronic and specialty products
07:43 and 30 contribution which I'm talking about comes largely from these product portfolio and that
07:48 product mix also has helped us to improve our margin and continue to help us to improve our
07:53 margin based on the product strategy which we have worked out. Well thank you so much Mr. Sikri
07:59 for joining us and all the best for your business. Thank you so much.