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00:00 In conversation now with Mr. C. Krishna Prasad, he's Chairman and Managing Director of Granules India.
00:05 They've come out with numbers, which is one, but they've also come out with a guidance,
00:10 which seems to be pretty strong relative to what the street may have expected
00:15 and relative to what they've clocked in in the quarters gone by. Mr. Prasad, good having you.
00:19 Thanks so much for joining in. Just a word on the quarter of the year, because I'm very
00:23 interested in the guidance that you've given, but do tell us, because there's a lot of conversation
00:28 about the Biosecure Act and what it does in FY25. There's a lot of conversation about how formulations
00:34 may have done X, but API business has done something completely different and they kind
00:38 of negate each other as well. How do you map the quarter gone by?
00:42 Quarter gone by was, in my opinion, it's been a great quarter, especially since it's been
00:50 validating our trajectory. FDs have started growing and in the last quarter compared to the
00:56 queue on queue, we had a 41% growth in FDs and that's exactly what we wanted to do. However,
01:03 I cannot just downplay the fact that we got hit by paracetamol sales, which have really gone down.
01:10 That's been due to the excess talking with some of our customers and overcapacity in the market.
01:17 A lot of excess capacity has been created after COVID and prices are at all time low. In fact,
01:24 prices have gone down, sale price have gone down by more than half compared to last year.
01:30 But however, I see some positivity coming back on paracetamol as we go by quarter on quarter.
01:36 But the main growth is going to come from formulations, especially driven by the new launches
01:42 and also the new launches that happened last year, which are gaining a good market share
01:50 and also the launches that will happen during this year. We have about 14 launches lined up
01:55 for this year and we expect all this together along with our products manufactured in our US facility.
02:02 We manufacture a lot of controlled substances there. There we have a very good leadership
02:06 position and all this put together, we expect there will be a good uptake in the quarters to come too.
02:15 Yeah, this is also Samina joining in and I believe the company is also betting big on
02:20 value added products. So new segments in oncology, backward integration.
02:24 Can you tell me how much of this could potentially contribute to your top line in FY25?
02:29 The new launches, which are value added will definitely contribute a bit,
02:36 not a bit, quite a lot. But the backward integration is still taking some time.
02:41 We have some patented technologies, which have been demonstrated at the pilot level
02:48 for APIs and these will be, we are working on building up capacities. We will see these
02:55 capacities come online only in FY26 and for this year I don't think backward integration
03:01 will add anything to it. Value added, can you quantify that for me?
03:05 On the... On the oncology segment, yes, the value added products.
03:12 It's not oncology. On oncology we have about four products, which are all P4s and possibly
03:19 first profiles. We are working on first profile possibilities. That's happening on oncology side,
03:25 where we'll be integrated right from API emulations. We'll be doing everything in-house
03:30 and we'll be using our facility, which has been idle for quite some time. And in addition to that,
03:35 we have many control substances, which we have launched already, which we are planning to launch,
03:40 where these are very high value added products. It's a big move. I won't say it's a move away,
03:46 it's an additional thing to our existing high volume products. And this definitely is going
03:54 to add a lot of value to us as going forward. Mr. Prasad, this, while North America was positive,
04:04 all other geographies, YUI growth wasn't the strongest in quarter four. You have guided to,
04:10 I believe, making a lot of new launches as you were talking to Samina as well,
04:14 particularly in the European region, if I'm not wrong. Does this bolster growth in Europe? Does
04:18 it become a focal area of growth for FY25 for granules? Europe, we had on the formulation side
04:26 about 45% growth in Europe itself. So while the new FDs, which I was always mentioning that we're
04:34 getting approvals, we'll be launching them, have been going very positively. Europe has been a
04:39 predominantly API, PFA market in the past. This is the first time we are going in with FDs into Europe
04:45 and the fall in paracetamol. In the APIs, it's all made mostly paracetamol, API and PFI. That
04:53 hit us badly in Europe and of course, in LATAM and rest of the world too. Okay. The other question
05:00 is operational metrics. This guidance that you've given for 22, 23%, that's relative to what you've
05:07 done. I mean, the exit rates are good, but when I look at the year FY24, then FY25 looks very,
05:14 very strong. So what leads to this? Because of this, is there, I mean, I may have missed it,
05:21 but is there a revenue growth and a path guidance that you also given out for FY25 for the company
05:29 at large? No revenue and path, we don't want to talk about it at this point in time. But definitely,
05:35 we have been clocking 21, 22 in the past too. That's what we said, maintain. It's nothing new
05:40 that we have been doing now. Only last year was a blip. And there were the reasons for that cyber
05:45 attack and paracetamol too. Right. So we've talked about backward integration and the value-added
05:52 products. And of course, the fact that all of this will be, a lot of it will be on stream in FY26.
05:57 What is the, can you quantify the CAPEX over here and how would you look to fund this?
06:02 Funding is always internally cruel. I don't think we'll be taking any debt and there will be,
06:09 if a little extra debt is needed, we'll always not leverage ourselves. Our debt will be less than one.
06:16 And coming to CAPEX altogether, we have got 600 crores lined up for next FY25. And that will be
06:24 split between APIs and formulations and also some key intermediates, which C0 will have a small
06:30 share of this, where we are making DCDA, one of the raw materials for Metformin.
06:34 Okay. So 600 crores for FY25, but I believe you said that, or rather the estimate is that over
06:43 the next four to five years, the CAPEX could be close to about 2000 crores, again, entirely by
06:48 internal accruals, Mr. Prasad. Yes, we do not want to go with a huge debt, except small things,
06:54 as it will be internal accruals. And on the C0 initiative, where we spoke of green chemicals
07:00 and green intermediates and green products, finally, we estimated 200, 2000 crores over a
07:06 period of four to five years. But there we have been very little cautious and frugal. We are going
07:10 in a stage gate manner. Right now, we have a pilot plant where we have demonstrated manufacturing of
07:17 DCDA in a proprietary and patented process. And now that this is getting streamlined,
07:25 we are planning to go in with a commercial plant. So it's going to go stage-wise a little slow,
07:31 but some of the investments will come into APIs with enzymatic processes and differentiated
07:37 processes. Mr. Prasad, final question. Any inorganic moves outbound or inbound in the
07:46 next 12 months? I don't think so. We are very cautious. We don't want to. Yeah, it's all
07:52 focused on organic right now. Okay. Now, the part two of my question would have been that there's a
07:58 lot of, I mean, when we speak to global PE funds, there's a lot of interest from outbound companies
08:04 for taking stakes or buying out firms completely. This has always been a talk in the past for
08:10 granules as well. I wonder if anything on the anvil in the next 12 months? No, no, I definitely
08:15 don't think so. We are at an exciting phase of our life in the company. So many things are
08:20 happening and definitely not. Definitely not. Okay. Okay. All the best for the quarters ahead.
08:26 Thanks for taking the time out and speaking to us.