Strides Shasun to hive off API unit as separate business

Q1 profits up 148% to Rs 26.4 crore on growth in sales in higher margin regulated markets

Pharma company Strides Shasun said on Wednesday it would hive off its commodity focused active pharmaceuticals ingredients (API) manufacturing unit as a separate business that would emerge as a supplier to global pharma firms.

Strides has retained those APIs capacity that it requires for captive use while setting up a separate company for manufacturing low-margin APIs such as Ibuprofen, Gabapentin and Ranitidine.

“With the new set of regulatory and statutory compliance, the commodity API business will need its own leadership team and strategy. To achieve its strategic objectives, the business will be carved out as a 100 per cent subsidiary,” the company stated. Strides also said it had completed the acquisition of 51 per cent in Australia's Generic Partner Holdings, which it had announced in February. Strides posted a 148 per cent growth in the first quarter profits to Rs 26.4 crore as sales of drugs doubled in its higher-margin regulated markets. Revenue grew 41.32 per cent to Rs 907.66 crore, while operating margins — calculated as sales less expenses —  expanded 200 basis points due to increased focus on regulated markets such as the US and Australia.

Strides Shasun had reported profits of Rs 10.62 crore on revenue of Rs 642.26 crore in the April-June 2015 quarter.

“Our regulated markets business and institutional business continue to track well and have delivered another strong quarterly performance. Integration of inorganics in emerging markets has taken longer than we anticipated. All the acquired businesses are now integrated and we believe emerging markets will return to normal growth in the near future,” said Arun Kumar, executive vice-chairman and managing director. “The commodity API business continues to put pressure on margins with cost of compliance going up. We are focused on improving the quality of our businesses and have taken various initiatives that will start bearing results in the second half of the financial year.”

The Strides Shasun stock closed Rs 52.6 a share, or 4.69 per cent from the previous close, lower at Rs 1,059.05 on Wednesday on the BSE.