Alembic sees India sales recovering from Q1FY21, expects 10-12% growth

After nearly flat domestic sales growth in the December quarter, Alembic Pharmaceuticals says it expects 10-12 per cent growth from the April-June quarter. 

“The first hint of it will be seen in the March (ongoing) quarter, though domestic sales (growth) would be roughly flat this (financial) year,” R K Baheti CFO, said. Its financial results for Q3 showed the US business grew a little over 60 per cent. India sales growth was barely 1 per cent. It needs the latter to grow, at a time when it expects more competition for the US business. 

Domestic sales were hit after the company stopped its discount scheme for institutional sales. “Instead of passing it on to institutions, stockists were found to be pocketing the discounts. We stopped the discounts and that impacted domestic sales. However, it is not the stockist that drives our sales. Hence, this was a one-time hit,” said Baheti. 

Analysts and broking firms tracking Alembic agree with him. Alembic Pharma’s India business revenue grew only 0.8 per cent year-on-year in Q3; those from speciality therapies fell 3.9 per cent, on account of this restructuring of trade practices, said ICICI Securities in a note. “This is expected to normalise from Q1 of FY21 as the base effect kicks in,” it added.

Anand Rathi Share and Stock Brokers speaks similarly, estimating 12-13 per cent growth in FY21 for the India business. “For the first nine months of FY20, domestic formulations (sales) have been flat at Rs 10.8 billion, as the streamlined distribution network had yet to show results. Most of the restructuring is now complete and from FY21 the management expects growth in double-digits,” it said. 

Adding: “Alembic has invested Rs 200 crore in new capacities (Aleor plus oncology and OSDs) aiming to diversify its product range in the US, and improve the quality of its filings. Further, a turnaround in its India base is likely to help maintain double-digit growth for the next few years.” While the India formulations business in Q3 grew only 0.8 per cent from a year before to Rs 368 crore, its global business grew 48 per cent to Rs 664 crore. And, US generics revenue by 61 per cent to Rs 515 crore. The company has posted a 31 per cent rise in pre-tax profit of Rs 276.3 crore in Q3. Total revenue from operations in Q3 grew 19 per cent, to Rs 1,209 crore.

“It was a good quarter for the company, led by strong growth in the international markets. We launched seven products in the US market,” Pranav Amin, managing director, had said.

This financial year should see 15-20 product launches in the US. The firm looks to achieve a similar number next year. “Alembic expects its US base of $200-220 million to double to $400 million in the next couple of years. It expects to launch 17-20 products per annum and its product range is set to expand,” Anand Rathi said.