JB Chemicals will deliver EBITDA margin of 27% in next two quarters: Nikhil Chopra, CEO & Whole Time Director

Nikhil Chopra, CEO & Whole Time Director, JB Chemicals & Pharmaceuticals Ltd, talks about Q2FY22 numbers, expected growth, product pipeline, international business, inorganic growth opportunities, margins and Capex, among others, during an exclusive chat with Zee Business Executive Editor Swati Khandelwal. Edited Excerpts: 

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Q: The company has posted a strong Q2FY22 number in terms of income and profit. What led the growth in this quarter?

A: If you will have a look, when we declared our first-quarter results then we gave guidance that we will deliver a market-beating performance and our EBITDA margin will be in the 26-27% profile. Now, if you will have a look at the second-quarter results then again, we have delivered an overall strong operating performance, which is close to Rs 600 crore. If you have a look at the EBITDA margin by excluding one-time non-recurring cost and non-cash ease of cost, then it stands in the 26% profile. But there is a special reason for the topline that we have delivered is that in our India business has delivered a significant performance in terms of our India's run rate for a month is close to Rs 100 crore, which is market-beating. If you will have a look at the IQVIA figure for October, then we are growing by 27% as compared to market growth of 10%. There are 2-3 special reasons for this and they are: 

(i) Our top brands are delivering a market-beating performance, they are gaining the market share.

(ii) The new products launched by us are also showing very good performance and we are getting good support from the healthcare profession on the front of prescription, majorly in the field of metabolic, diabetes, diuretic, respiratory care, and antibiotics.

So, these are certain things that are helping us. Outside India, our South African and Russian, the home market, has also delivered a good performance.

Q: How has the top 10 brands contributed almost 70% of the total revenue in this quarter. How the growth is visible there? Also, going ahead, do you think that you can replicate the performance or you can better it?

A: It has been a year since the new management came into the company and the transformational and new go-to-market strategy that we adopted has started showing its results. If you will have a look at our top brands namely, Rantac, Cilacar, Metrogyl, Nicardia, then these four brands deliver a quarter-on-quarter market bearing performance, have been doing and will continue to do so. That is the base fundamental to our New Go to Market strategy. Equally, as I have informed earlier that our new products - once upon a time, it was a weak link for JB Chemicals that it does not have prescriptions for new products and now we are getting good prescriptions for the new products and that too in chronic therapy. That also gives us confidence that how we can deliver a market-beating performance in the coming time, i.e. we will deliver better growth than the market performance, and our overall market share should also increase in the coming future.

Q: Update us on the product pipeline for FY22 and what are the new launches we will get to see? Also, throw some light on the Hypertension segment?

A: We have made a strategy and if seen then the chronic portfolio has a 45% contribution to our India business. In the next 2-3 years, the chronic portfolio contribution will be around 60%. For it, we have adopted a strategy as well as have also launched three to four new brands and I have already named them earlier like in the field of metabolism that is diabetes; diuretic which is a chronic therapy; and Lung and respiratory care anti-allergy for lung fibrosis. These are the products that we have launched recently. We have launched 15 brands in India and we will have a strategy in which five brands out of these 15 brands will be made big in the next 18-24 months. 

We are thinking that each brand will provide a revenue of around Rs 15 crore every year in the next 2 years, i.e., we should get a revenue of Rs 100 crore from new brands. We have got plans for it. As far as our pipeline is concerned, we have already identified 8-10 products for the next year. We are looking forward to the ways to manage the lifecycle of the existing brand and launch incremental innovative products. So, this is our strategy in relation to new products. Currently, new products have a contribution of around 4% in our revenue as compared to which was 1.50-2%. If you will look at hypertension then Cilacar (Cilnidipine) is our biggest brand in hypertension and at present, we have Cilnidipine plane molecule, Cilnidipine Telmisartan and Cilnidipine Metoprolol and now are about to launch a Triple Combination. 

We have launched a campaign for the consumers in the overall hypertension market BP Right Karo. We are looking forward to how to get diagnosed hypertension patients as many undiagnosed hypertension patients are present in India at present. So, we are about the run a campaign 'BP Right Karo' which will help us in getting more and more patients diagnosed, so that the doctors can prescribe medication to them. If we have a look at our overall focus on hypertension then our Cilacar is close to 300 crore brand and we are looking forward to the ways to take these brands ahead and deliver a market delivering growth and launch adherence new model so that there is an improvement in the quality of life of the patients and they do not suffer from any other co-morbidities in the world of hypertension. So, this is something that we wish to do for India.

Q: You were talking about the international business and a good performance on the front. Can you please talk in detail about the geographies that are looking stronger and promising and the segments that are showing growth? Also, do you have any plans to add more geographies or markets?

A: In international, outside India, we have two home markets and they are Russia and South Africa. Fortunately, Russia has rebounded in the last two months of the second quarter, so, we are seeing good traction in Russia. We majorly have a portfolio of cough and cold in the country and we are getting good traction there. In the month of September, Russia touched a peak revenue for the year, which is a good sign for us. Even for the next two quarters, we can see that our revenue will grow in Russia and the CIS country. In the case of South Africa - which is the second home market to us - we have gained 10 ranks in the last six months. Today, we are the 15th ranked company and we are growing at 28% as compared to the market growth of 5%. I would also like to add that our company in South Africa is the second-highest volume supplier - for the medicine that the South African government supplies in the public market - of medicine to the South Africa government. 

Our South African business is in the private and public market and we are maintaining balance and looking for ways to grow in the South African market and gain market share as well as improve our EBITDA margin. Outside Russia and South Africa, we have a branded generic market, which is in the world of Latin America, Sub Sahara Africa, Middle East and South-East Asia. We have seen some headwinds in these markets because of overall COVID conditions but within these markets, some markets are giving good revenue like we are getting good traction in Sri Lanka and Mexico, and these markets are our distribution-led model. Out of this ROW market, we have our presence in the US market, where 15 of our ANDAs are approved and we have a run rate of filing one to two abbreviated new drug applications (ANDAs) every year.