"The company's focus for launched products will continue to be on capturing areasonable size of the market and maintain the same for a sustained period. You will behappy to note that the initial strategy of the company is falling in place."
I write this letter to you as the second wave of the global pandemic has unfolded andwe still remain uncertain about when the pandemic will be behind us. These are difficulttimes for all of us over the world. I hope all of you are safe and I pray that very soonwe will overcome this pandemic.
The past year posed several challenges for all of us owing to disruptions in themacro-economic situations procurement logistics and closure of activities owing tostate-wise or country-wise lockdown situations. Despite these challenges I am pleased toannounce that your company has delivered a stellar performance with high revenue growthand a healthy profit margin. The company's performance was broad-based across segments andgeographies. This was possible only due to the unwavering commitment of our colleagues andthe resilience of our business model. The company will continue to deliver on itscommitted goals on the back of these strong pillars.
Over the years the company's focus was mainly to take its API and PFI centric businessto an end to end integrated predictable and sustainable producer of its own formulationproducts mainly for US market and create a sizeable basket of products in multipletherapeutic areas to establish brand value of Granules as a formulation player. Thecompany's focus for launched products will continue to be on capturing a reasonable sizeof the market and maintain the same for a sustained period. You will be happy to note thatthe initial strategy of the company is falling in place. Let me summarise the strategiesthat the company will continue to follow:
i) Continue to attempt Cost leadership and operational efficiencies by integrationoperational excellence regulatory focus and added ESG focus for all molecules.
ii) Increase the pace of own ANDA filing through accelerated R&D strategy andacquiring ANDA's and launch more products in the US market.
iii) Exploring opportunities of expanding its existing and new products into newgeographies to run its growth engine.
iv) Looking for differentiated approaches to gain competitive advantage on existingproducts and finding out new areas of expansion to support its growth strategy.
v) Adopting forward looking demand planning to invest on facilities to cater to itsgrowth story through internal accrual.
vi) Leveraging Enterprise Risk Management approach to ensure that all the existingrisks to the business are identified and mitigated through a project management approachand support the growth engine to become viable and predictable.
Your company recorded a strong growth of 25% YoY with income from operationsincreasing from Rs.2599 Cr in FY2020 to Rs.3238 Cr in FY2021. EBITDA stood at Rs.855 Cra growth of 63% YoY. EBITDA margins stood at 26%. PAT at Rs.549 Cr a growth of 64%. Inline with its expansion strategy sizeable contribution from launch of new products andincreased contributions from its existing products played a crucial role in deliveringthis growth. This was also coupled with increased market penetration through its existingproducts which not only helped the company in growth but also compensated for the severalchallenges posed by the global pandemic like shortage of raw material supplies increasein logistics costs amount spent on safety of employees on account of COVID-19 and lowerutilization of capacities in Paracetamol etc. Your company was able to deliver a healthyprofit margin owing to higher volumes increased operational efficiencies and focus onproduct rationalization.
I would also like to highlight some key metrics from the Balance Sheet which reiteratesthe company's focus on reducing debt. The company continue to deliver healthy financialratios with its Net Debt to EBITDA ratio reduced to 0.7 times as compared to 1.2 times inthe previous year. Cash-to cash cycle increased marginally to 117 days as the companyconsciously built up inventories to fuel its new launches amidst the second wave of theCOVID-19 crisis. Efficient working capital management with high focus on inventory andreceivable management will continue to be a strategic focus area for the company.
Operating cash flows were at Rs.432 Crs and Free cash flows were at Rs.161 Crs aftermeeting capex needed for future business. Total Cash outflow on capex during the year wasRs.271 Crs which was completely funded by internal accruals.
The company plans to invest Rs.1000 Cr towards its manufacturing facilities over thenext three years. This investment is largely towards new finished dosage plant the newMUPS facility and expansion of the API facility. While making these investment decisionsdue weightage has been given to future demand its readiness to get regulatory approvalsand making available trained work force.
Your company has invested about Rs.100 Cr in R&D over the past year. The companywill continue to be selective about the new products that is introduced into our pipelineand ensure to generate good value for our sustained future. The company remains focused onits strategy of investing mainly on large volume to medium volume products whilebalancing its portfolio with some low volume and high value products such as controlledsubstances and niche molecules for development at GPI. About 70% of our R&D spend isexpected to be towards large volume vertically integrated products and 30% towards thenew products developed at GPI.
The company's dedicated R&D team is committed in developing products with processefficiencies to create a diverse range of cost-effective product offerings. The focus onresearch drives the company's aim of becoming a cost effective and vertically integratedpharmaceutical player with an unique value proposition for all its stakeholders.
In line with the focus on integration GCH the company's consumer health divisionwill carry forward our goal on the retail front. It will allow the company to workdirectly with the end customer and provide more innovative solutions in the next phase ofits growth. The company is on the right track with investments in these areas and I amexcited as we expect to see high growth in the OTC business. Your company continue to growits existing business to different geographies and expand presence in those through ownANDA's/dossiers or through partners.
The year coming by poses interesting opportunities for us. While fulfilling on ourcommitments to our stakeholders we remain confident of delivering timely launches of newproducts optimizing cost through operational efficiencies continued focus on cashconservation working capital management better capacity utilization and rationalizingour R&D portfolio. Ensuring employee safety is of paramount interest to us. During thecurrent financial year your company had spent additional Rs.30 Crs towards employeebenefits and employee safety to fight against COVID-19. The company will continue to do soin the coming year also until the pandemic is under control. We assure you that we willput forth our utmost efforts to enhance stakeholder value through sustainable growthstrategies and ESG focus.
I once again pray for the good health and safety of all as we traverse our journeytogether for the upcoming year.
Krishna Prasad Chigurupati
Chairman & Managing Director.