38-45% EBITDA margin would be a sustainable margin for Supriya Lifescience: Saloni Wagh, Whole-time Director

Saloni Wagh, Whole-time Director, Supriya Lifescience, talks about her journey in the company and the challenges she faced, Q3FY22 numbers, export market, CapEx, capacity utilisation, expansion plans and her outlook on the margin among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:

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Q: What will be your message for the young women who follows you and aspire to achieve something in life?

A: As far as my journey is concerned, since my childhood, our parents have been quite progressive and they have always treated us, my sister and me, equally and never differentiated between us, i.e., there is a difference between boys and you. They educated us with a perspective that we will join the business and I am a PhD myself, so, definitely, they have always encouraged us. The atmosphere we grew up in has had a very positive impact and I think, it is very important for all young women today. That is something that shaped me to join my father's business. Seven years back I joined this company and faced several challenges because the company was big and it was a bit difficult to get people's acceptance as the second generation. It is a technical field and production is something that is quite male-dominated, so, it has been very difficult for me to carve a niche for myself and get acceptance from the people. But I am very proud to say that the way I was able to learn from the shop floor and how the product works, marketing business, development. I started my work from the ground level in every department and I think they have seen my growth after six to seven years I can successfully say that I have earned that respect in my own company. So, I would like to say to the women entrepreneurs' that never be demotivated and if a negative perception is created about you within people then don't get demotivated, be confident, be focused and continue to be on the path or goal that you have decided to achieve that. Create a journey that can inspire other women as well to be in the field.

Q: Supriya Lifescience has posted quite strong numbers for the third quarter of FY22 with around 45% growth in revenue, 50% growth in EBITDA and around 150% rise in the PAT. What led to this rise in profits and do you think that it is sustainable growth?

A: As we have mentioned earlier that the company's focus is more on regulated markets due to which we have seen very good volume scale-up in many of our existing product baskets. We have penetrated into more geographies with these. A lot of opportunities are coming on our way and we are also getting good traction in the products that we have launched because currently Supriya has its exposure in 86 countries and has a 2000+ customer base. So, we have been able to leverage it. I think the same is translating into visible growth. Going forward, we have always said to our investors in the roadshows and media interactions the historical growth the company has seen which is 18-24% growth in terms of revenue will be continued. The fourth quarter will be strong for us, however, the third was not such strong due to seasonality. But the fourth quarter will be very strong. As far as the EBITDA margin is concerned, then we have always promised to have profitability of around 40% and it has proved it historically. We will see the same trend in the future as well in the fourth quarter.

Q: Almost 70% of your revenue comes from exports. Did the ongoing geopolitical tensions due to Russia and Ukraine has had any impact on your export business keeping the raw material and supply in the eye? Also, do you think that there can be an increase in raw material prices? 

A: As of such there is no immediate impact at the moment, there is a negligible impact on our business because our exposure in these countries is very small. As far as raw material is concerned, in the last one week, there has been a surge in crude prices and there is an indication that it will go up more in the future. And whenever there is an increase in crude prices, then the prices of the allied solvent and metals that we use after catalysing them in our processes goes up. But I would like to highlight that Supriya has a strength that it is quite backwards integrated due to which we make almost everything using basic chemicals. So, as a company for us, the impact on our final product will not that high and this is what we are anticipating now. But it is too soon to tell and I think, we should wait and watch the situation and how it progresses in the next 15 days to really understand the impact it will have.

Q: What is the CapEx that the company has done by now and what are your expansion plans and what kind of expansion should be expected for the next one to one and a half years?

A: The CapEx plan is very very aggressive going forward. When we raised the funds through the IPO, at that time, we had a CapEx of around Rs 90 crore but due to the availability of good opportunities, we are anticipating higher CapEx. For the next financial year, we have a CapEx plan of Rs 150 crore and this CapEx is mainly devoted to capacity enhancement, we are adding new production blocks as we can foresee a good scale-up in the existing product portfolio. At the same time, new product launches have been planned for which new capacity is being created. It is also being done for backward integration. At the same time, the company is also leveraging good in the CMO opportunities. I think, we are increasing our capacity for this reason as well. In addition, infrastructural upgrades are there like R&D, quality control lab and ETP, which is very very important because nowadays this is very important in pharma. These upgrades are also planned at our end, so, I think, we will have aggressive CapEx plans this year and next year.  

Q: Update us on the current capacity utilization? Also, tell us about the product pipeline that has been planned for launch in FY23?

A: Capacity utilisation currently stood at almost 72% of the existing capacity due to which we also added a new production block recently and it is running at almost 30% capacity utilisation. The newly added block is expected to take at least another two years to reach its peak. But as the scale-up is good in existing products, so, we have already started the construction of a new block. As far as R&D products are concerned, we are trying to enter into new therapies because we have a goal to de-risk our existing portfolio and make it more robust. So, we have selected chronic diseases products like anti-diabetics and anti-anxiety products. I think, it is too soon to talk about when they will be launched but they will definitely come into our pipeline.

Q: Going forward, what is your outlook for margins and what can be the band in which it will lie?

A: I would say that whatsoever margin growth has been there being driven by penetration into more regulated markets and we have been working on it for the last many years, like getting USFDA and CEPS. A lot of regulatory upgrades were made at our end. So, I feel that going forward, 38-40% EBITDA margin is going to be a sustainable margin for the company because as these matured products will enter into the regulated markets, some new products will be added to it. So, the existing product will turn more robust.