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00:00My colleague spoke with the management of Acams Drugs and Pharma
00:03about the company's growth plans and what lies ahead. Listen in.
00:08The way our EBITDA, first let me tell you how the company's EBITDA has been
00:13and I'm going to talk about adjusted EBITDA. So we did an adjusted EBITDA of 130 crores
00:19compared to 108 crores adjusted EBITDA last year. Now coming back to your question of the put
00:25When we got into an investment agreement with Quadria, our private equity partner,
00:30there was a buyback clause in case we were not able to do an IPO or secondary didn't happen.
00:36We had to buy that back. So as per accounting standard, we have to recognize this as a debt
00:42and based on the discounted cash flow, a fair market valuation is derived,
00:48which is removed from the net worth. And every time there is an increase
00:52in the value of the company, it impacts the P&L. So that is why probably that put liability has
00:58been coming since the time we've had a private equity partner. The cumulative impact was of 1361
01:07crores, which in this quarter has been added back to our net worth and our EBITDA and profitability
01:14probably going forward from this quarter will not have that adjustment in our books. So largely
01:21that's on the put liability. We've had very strong pat margins also from 37 crores. We moved to 57
01:28crores. We've released working capital and our net debt is reduced by 205 crores. Our cash flows
01:36and free cash flows have been positive for the quarter. So also in the revenue side, we see
01:43that growth of around 5%. Now you have been growing at 15% CAGR in last few years. Now,
01:50will you be seeing this growth going forward? Is this growth sustainable?
01:58So, you know, we, Sadeep ji. No, please, please go ahead. So, you know, we, our endeavor was to
02:06see that, you know, the growth is sustained and that's how it's been in the historic past.
02:11But because of the softening of the prices of APIs and our business model is in the same way.
02:21So I think our volume has gone up by 14% while there is a negative price variance. So there is
02:28a dip, but for the future to sustain 15% given the way the pharma industry is, I don't think
02:35I'll be able to comment, but I request Sadeep ji to see if he can probably correct me where
02:40I think I need to be. Achieving that 15% because of the dip in the price,
02:50we couldn't get this during this quarter. And we are making all efforts in terms of,
02:57say, development of new products because the revenue generally comes from the new products
03:02with new margins as well. We are developing so many new products, which are there in pipeline,
03:08400 scientists are working day and night to develop new products.
03:14Okay, so this 15% growth is sustainable?
03:19It had been sustainable in the past few years.
03:23All right, understood. Also, Mr. Sandeep, the margin in CDMO industry stands at varies between,
03:29you know, 15 to 25% and your peers that you mentioned in the RHP had a bit of margin of
03:3616 to 20 to 25%. Now, I know that we cannot compare AECOM directly to these players, but
03:44our EBITDA margins have been around 12 to 13%. Now, is this because you are
03:49mainly focusing on India business? I mean, where do you want to take this margins to?
03:56Hey, we are mostly into, we are an India focused CDMO player and we make sure that our clients
04:02should get their margin as well and we don't charge them too much. As far as the product mix
04:08is concerned, we are making around 4,000 different kinds of formulations, including
04:13all kinds of doses forms and it depends on the product mix as well, the margin.
04:20All right, so now let's talk about your segment. So, I wanted to know the growth that you are
04:26expecting in CDMO because CDMO business margin, the margin in CDMO business is around 14 to 15%
04:34for you. What's the outlook for margins specifically when it comes to CDMO?
04:41It always depends on the product mix and the seasonability as well because we are not aware
04:46that say what kind of product mix we are going to get in the near future. So, that's why these
04:53margins are not very much predictable, but in the past we could achieve those margins.
04:59All right, and the outlook on the API business, can you bring back the API business the way the
05:06other segments are performing? See, we cannot compare this API business with the other segments,
05:13but API presently we are making loss and but we have achieved a lot many say in terms of
05:20business efficiency, in terms of cost of goods, in terms of process improvements in the past year
05:27and that's why say earlier this loss was around 23% EBIT loss. Now we could achieve around 17%
05:35EBIT loss, even the cost of goods has been increased drastically and the price of formula
05:41for API has also been a dip in the market, but still we could achieve this around 5%, 6%
05:49gain in this EBIT margin. Understood. Now, let's talk about your branded generic
05:57segment. So, good show when it comes to margins. Now, what are your plans there currently what 16%
06:03is the revenue contribution from this segment and are this 10% margins that you did in Q1,
06:10are this margins sustainable? See, our generic business is of having three components,
06:19one is export business, one is branded marketing and one is trade generic.
06:24We are building efficiency in terms of this trade generic and that's how this we could achieve this
06:31margin and it has been in the past years as well, buying this trade generic and now we are specifically
06:39making sure that there should not be too much of losses in the trade generic business. Okay,
06:46now coming to your export business, it contributes around 4% to 5% to your business if I'm not wrong
06:52and in next two to three years, what is your target? I mean, are you expecting a double digit
07:01number when it comes to export in next two to three years?
07:04See, as two of our plans has recently been approved from European GMP body and few of the
07:12dozers has also been in the process of filing in Europe as well as we are already approved in around
07:1860 countries. We are very much hopeful that we should get good business from all those countries
07:25including some regulated countries as well. Okay, and also you do have a plan to set up
07:31a greenfield manufacturing unit when it comes to in Jammu and Kashmir for your pharmaceuticals and
07:38the other dedicated unit is for nutraceuticals. So, tell us about that, what is the revenue
07:43potential, what is the capex that you are expecting?
07:47See, we are having a plan of around putting up 250 crores rupees in two units, one is for
07:55nutraceutical and one is for pharma formulations and it will be within around two years of the
08:04time because the government of India is giving us a good scheme for GST, that's why we want to go
08:18there. And at the peak capacity, what is the revenue potential that this plan can generate?
08:28See, it will be a futuristic kind of statement but yes, say as presently we are running at around 40
08:36to 45 percent of our total capacities and from there we will be in the same position to achieve
08:42those kind of capacity utilization. Understood and Mr. Sandeep, you just said that you have
08:50two plans which are European GMP approved, any plans on the US side?
08:56No, presently we don't have any plan to go into US and we don't plan to go in US for the next
09:04one year as well.