"As we navigate through challenging times we continue to streamline internalefforts and initiatives that emphasise operational efficiency to drive earnings andposition the business to best capture expected improvements in our end markets."
Mr Santosh Varalwar talks about what lies ahead period not just from the perspectiveof business Fiscal 2016-17 will remain in memory as memorablegrowth but also from theviewpoint of creating robust enablers that promise to accelerate the growth momentum as wego forward. Business growth was particularly important for 2016-17 as it instilledshareholder confidence in the management's ability to draw more from less given thereality that we sold part of our specialty chemical business in 2015-16 and the brandedformulation piece (ophthalmology therapy) in early 2016-17. What was immensely satisfyingthat even as our topline moved up only marginally about 9% over the previous yearthe bottomline leapfrogged by more than 150%.
What is even more heartening is that even as performance improved we prudentlydeployed the sales proceeds to strengthen the organisation and the business model.
Have set the business on a firm footing we set out to strengthen our existing growthlevers and create new one which would facilitate in catalysing business progression overthe coming years. API vertical: We believe that our strong market positioning in the APIsegment has enabled us to gain significant traction from both new as well as existingcustomers for the API-CDMO operations as well as the generic pipeline. Going forward thevertical promises to be an important growth catalyst for interesting things are expectedto unfurl especially from our Mexico unit. Most of our new products filings are due tocome out from this unit which are coming up for expiry in the next 36 months or so. Theseare largely high-value DMFs which have already generated significant commercial interest.
In our API-CDMO operations certain clients are innovator companies. A couple of theirprojects are close to getting into scale up mode. Once this happens we should probablysee better numbers emerging from this particular business. Besides increasing regulatoryconcerns makes UQUIFA the preferred choice especially across US and European markets.
Our operating units (Spain and Mexico) have cleared regulatory clearances - without anyqualifications. This strengthens customer confidence in our ability to sustain delivery ofquality material. Case in point is the recent USFDA audit at our Sant Celoni Spain whichwas successfully completed with Zero' 483 observations. To cater to the increaseddemand which we believe will gain momentum in each year over the medium term we areinvesting about Euro 5 million to de-bottleneck capacities and improve man-machineproductivity at these units.
Formulations: It is a common principle that when you set for yourself a high goal youneed to focus all your energies on that journey. So it is with our formulations piece forwe envision ourselves as becoming a strong player in the global CDMO space and in the USmarkets (the world's largest pharmaceutical market). In keeping with this focus we exitedfrom the branded formulations in ophthalmology - Klar Sehen Pvt Ltd our wholly-ownedsubsidiary sold certain products along with their associated trademarks to OrdainHealthcare Global Pvt Ltd for a consideration of C73 crore.
For the US market focus we continued to remain in investment mode and look forward tobuilding a competitive product basket. As a first step we increased our product basketfrom 3 products to 5 products for the US markets. In addition we are working on 10-12 newproducts which will go off patent from 2018 onwards.
From a strategic perspective we signed a joint venture agreement with Strides Shasunwhich is aimed at bringing scale to our presence in the US FDF market; this joint JVbrings together an optimum mix of our manufacturing strength product developmentcapability and Strides Shasun's front-end presence and marketing expertise. This webelieve will emerges as the flagship business and profitability driver over the comingyears as we hope to initiate start generating returns from assets we created over therecent past.
Specialty Chemicals: Despite the sale of assets and products to Clariant this businessgrew at a healthy pace from the existing product basket and our profitability (EBITmargin) jumped even higher. I would like to believe that this is the success of ourstrategy of exiting commodity products within the specialty chemicals portfolio and focuson the niche product segment which we have retained namely photochromics hair dyes andsome specialty intermediates. Going forward we expect this business to gain furthermomentum. My optimism stems from the following realities The hair dye business is growingat about 10-15% year-on-year at a global level a trend which is expected to sustain overthe coming year
The photochromic segment is seeing a healthy uptick in demand in recent times due tothe launch of certain interesting products namely fast fading dyes. These are new fastfading photochromic chemicals which have generated significant interest across the globefrom major players from Japan the US and Europe. We are working on launching our in-housedeveloped and patented products in the current year are in active discussion with users ofthese products. This then will result in a healthy uptick in business growth andprofitability as the photochromic segment is really our high-margin vertical.
In a nutshell
I believe our strategy of focusing our resources (time knowledge capital and finances)into the pharmaceutical is a right move. With our focus on the CMO business (in APIs andFDFs) and strengthening our presence in regulated markets for generics (API and FDFs) wehope to significantly ramp up revenues over the coming years.
For the Speciality Chemical business which we have retained it is a very interestingbusiness and I am confident that the team will work towards improving business margins bystrengthening business relations with existing customers and adding more verticals in thenext near future. I am particularly excited about our prospects over next few years. Foras product offtake gains momentum over the coming years returns from our investmentswould improve significantly.
|Santosh Varalwar |
|Managing Director |