Glenmark Life Sciences will start working on the Greenfield project from November: Dr Yasir Rawjee, MD&CEO

Dr Yasir Rawjee, Managing Director and Chief Executive Officer, Glenmark Life Sciences, talks about listing, Q1FY22 numbers, API business, CDMO business, debt situation and CapEx plan among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:

Q: The company has been listed but people have to say that the listing prices were kept too high and they were not able to earn and IPO euphoria was not seen here. What would you like to say to those investors who invested with the hope to see a huge upside in the stocks?

A: As far as the question related to the investors is concerned, it is a short-term thing and listing gains was not seen here due to many reasons including the market forces. But the pricing was kept good due to which we received a good response in the IPO and we were oversubscribed 45 times. Overall, the response was great. As far as listing goes, it seems that it is a short term because the company has posted good numbers in the first quarter and going forward, the chances are good for our business. The market is a market and I cannot say a lot about it because there are many forces in the market.

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Q: On the result front of Q1FY22, what were the highlights of the quarter and what led to a decline in the margins?

A: We have a distributed business, i.e., three different verticals of which CDMO is a big driver but percentage-wise it is small in our overall business. The biggest driver is generic API, which can be divided into two different parts and they are (i) Regulated markets: Our profitability is high in the regulated markets and comprises two-third of our business and (ii) Emerging Market: the business size is one third and its margin remains low. As far as higher profitability of the previous quarter is concerned, then it happened because the contribution of the CDMO was high and the regulated market also performed well for us. CDMO business has been a bit low in this quarter but a contribution by the regulated markets has been good but the profitability has been a bit low due to the product mix. But if you have a look at the last year, then our EBITDA stood at 31.4% and in this quarter our EBITDA stood at 31.3%.

Q: API is a huge part of your business. Have you seen any issues regarding the supply of the raw material in the API business and going forward, what price trend is visible?

A: There are pressures but for us, Glenmark Life Sciences, the advantage is that our business is very distributed as I told you earlier. At the product level, the distribution of the business is quite good. Now, in the case of solvent, we are seeing a lot of pressure from the solvent side in the previous and this quarters. And, some of the solvents are petroleum-based and due to an increase in the price of petroleum, the solvent prices will be affected but to great extent, solvents are also associated with acetic acid. Due to all these streams, the solvent prices have had a negative impact of around 2-2.50 per cent on our profitability. From the customer service point of view, demand is robust and we saw it in the last quarter and are also in this quarter, we are seeing that a good demand has developed. But from the price point of view, if the variation is not a big one then, we do not pass on it to the customers and keep it stable. From our side we try our best to control and move ahead as increasing or decreasing the prices for the customers every month is not a good thing. It is a relationship business but being distributed we manage the shocks that we get due to the prices.

Q: Talking about the segments. What is your outlook on the CDMO business and what kind of help you received from the COVID-related products in terms of the first quarter numbers? What trajectory will you provide in the context of margins and what will be the margin band by the end of the year?

A: We are targeting a growth of 16-18%, while the EBITDA margin will lie between 30-31% and we posted an EBITDA of 31.4% last year and this year, we have plans to keep it between 30-31%. As far as, CDMO and covid related drugs business is concerned, the pick-up in CDMO business has been slow this year because the customers who are buying CDMO APIs depend on the doctors and patients’ interaction. And, as the interaction between the doctors and customers is going up and COVID has fallen a lot in the US, but slightly moving up, now, so, I can say that if the doctor and patient interaction will increase then there are chances of growth in the business. Overall, CDMO play is good for us and in long term, it is quite good and we expect that in a year or two CDMO’s contribution will increase and reach up to 12-14%. This year, we will face some challenges but we will do better than the last year in CDMO. We grew by around 8% last year and in this quarter, it has been little above 7% but it will improve, its margin profile in good. This year we are expecting to track around 8-10% in CDMO. So, it will be better than this quarter but it depends on the doctor-patient interaction.

Q: You have paid off the debt to the Parent company, so what's the overall debt on books now? Also, tell us about the product pipeline and what are the expansion plans?

A: At this point, we have paid off the debt. When we received the proceeds of the IPO then we paid the debt. Currently, we have more than Rs 100 crore of cash in our books. Our CapEx plan for the year will stand between Rs 100-120 crore because our brownfield expansion is moving at the right place. This is our Dahej facility that has been inspected by the USFDA and here we are increasing our capacity. Currently, the capacity stands at 140 kiloliters and we will increase it up to 300-350 kiloliter and its first phase will be completed by the fourth quarter of this year. It is a four-module plan of which two modules will be completed in the fourth quarter and another two modules will take another six months. So, the entire capacity will be on line. In addition to this, we are bringing a new block of Oncology in Dahej and it will have three modules. We have prepared a detailed plan to increase the oncology pipeline, so to fuel it we are creating this capacity and the first module of Oncology will be completed by the fourth quarter of this year. Besides, we also have a greenfield project and it will be started in November. We have bought 40 acres of land parcel for the purpose in Kolhapur, MIDC, and we will come up with a brand-new greenfield site and it will take around three to four years to complete and we have plans to operationalize its first phase by the fourth quarter of the next year.