Granules India to focus on R&D and formulations

Having built a global scale and the capabilities in active pharmaceutical ingredient (API) manufacturing front, Hyderabad-based Granules India is now focusing on research and development (R&D) and formulations, and the new acquisitions are likely to reflect this new thrust in its business strategy.

“We may look at acquiring companies having high technology in formulations manufacturing or with a sizeable formulations portfolio,” C Krishna Prasad, chairman and managing director of Granules told Business Standard.

The company would like to make one-two acquisitions preferably in the US and if it could find a right company in India, according to him. A leader in global supplier of APIs such as paracetamol, metformin, ibuprofen and guaifenesin, the company had recently acquired a small formulations R&D unit in the US through a newly set up American subsidiary, Granules Pharmaceuticals Inc, as it seeks to build R&D and formulations capacities in the US.

ROAD AHEAD

• The company plans to make one-two acquisitions preferably in the US
   
• The company recently acquired a small formulations R&D unit in the US through a newly set up American subsidiary
   
• Granules acquired Auctus Pharma, a local API manufacturing company, for about Rs 120 crore in November 2013
   
• The  company board already approved a plan to raise Rs 250 crore through qualified institutional placement

The company plans to engage 30-40 people in the R&D unit. Apart from APIs, the company supplies pharmaceutical formulation intermediates and finished dosages to its global customers across 60 countries. Granules had reported a topline of Rs 1,200 crore in the year 2014-15, while the management thinks the present API portfolio will help take the revenues to a size of Rs 2,500 crore going forward. The company would bring a set of another 10-20 high-margin APIs, apart from a couple of acquisitions to go beyond the present growth potential, according to Prasad.

In November 2013, Granules acquired Auctus Pharma, a local API manufacturing company, for about Rs 120 crore and this acquisition is expected to start generating profits by the end of the current year. Similarly, its joint venture APIs plant which was set up in collaboration with Belgian company Omnichem at Visakhapatnam had started operations in February and is expected to turn profitable in a year or two. “Every thing, including our plans to build extra capacities, is now on track, We are building some more cash enough to leverage debt for funding the acquisitions,” Granules Chairman Prasad said.

In addition to this, the company board had already approved a plan to raise Rs 250 crore through qualified institutional placement.

Prasad said the company would target future growth strictly in alignment with its ongoing endeavour to improve profitability in business. “We are not taking unnecessary risk for the sake of growth. We don't believe in growth at any cost,” he said, adding all the regulated markets were doing better which was good enough to keep the profitability growing.

The company has spare capacities in tableting and finished dosages enough to meet the additional business needs for the next two years.