- #JSWSteel's MD & CEO Jayant Acharya decodes Q3 results
- #PrestigeGroup's Irfan Razack on expectations from interim budget
Niraj Shah and Tamanna Inamdar speak to companies' management. #NDTVProfitLive
- #PrestigeGroup's Irfan Razack on expectations from interim budget
Niraj Shah and Tamanna Inamdar speak to companies' management. #NDTVProfitLive
Category
📺
TVTranscript
00:00 And that is what we'll request Mr. Acharya to talk to us about.
00:04 Good evening, Mr. Acharya.
00:05 Thanks for taking the time out.
00:06 I hope all is well.
00:08 Could you sum up the quarter and the calendar year as well, because it was marked by a slowdown
00:15 of one of the key markets in the global commodity space, that is India, but also marked by some
00:20 interesting expansion plans that companies like yours have put in forth.
00:26 Indeed, you've brought down the CapEx target or CapEx amount for FY24 by a couple of thousand
00:33 crores.
00:34 Yeah.
00:35 So, thank you, Dheeraj.
00:36 Happy to be here.
00:37 I think if you look back at the year 2023, globally, it went better than what we expected
00:46 in terms of all those marginal 2.7% versus world growth of 3%.
00:54 I think the US has done better than what was originally expected.
00:57 They have averted an recession.
01:00 We see broad-based improvement on the inflation side across regions.
01:07 So therefore, the interest rates are likely to correct.
01:11 And that's a view from most of the central banks as we go into 2024.
01:16 And that should be positive, basically, from consumption, construction, infrastructure,
01:23 and manufacturing space.
01:26 If you look at China, China has had some difficult period last year.
01:31 The property sector has been weak.
01:34 However, they could balance it with the growth in other sectors, infrastructure, manufacturing.
01:40 Their automotive especially has done very well.
01:42 And that could balance some of the drop in the property sector.
01:50 We see some targeted stimulus in China.
01:52 They've already done targeted stimulus of 1 trillion in October.
01:56 We are hearing that there will be a targeted policy action in the first half of this year
02:01 as well to support and recover the economy.
02:06 That should be positive for the world at large.
02:08 If you look at the steel space, China has a subdued demand.
02:13 The production was flattish year on year.
02:16 The China demand was subdued.
02:18 So therefore, the exports went up into the world.
02:22 And that did cause some turbulence in the international markets.
02:27 Having said that, we see that now, with raw material prices having gone up, the margins
02:34 are restrained in China as well.
02:36 So we see international prices have moved up in the last few weeks.
02:40 And it has moved up in China as well.
02:42 So we expect that there will be some moderation in export.
02:48 There will be some improvement in the domestic demand as we go along.
02:53 India has done well in the economic growth story.
02:57 Our momentum continues to be strong in excess of 7% growth this year and expected to grow
03:04 at about 6.3%, 6.4% next year as well.
03:08 The fastest among the major economies in the world.
03:11 We see a concerted action on public capex holding up in the next year as well.
03:18 Manufacturing in India and make in India focus has paid good dividends.
03:24 We see movement in energy transition doing well.
03:26 Automotive is doing well.
03:28 So therefore, an all-around India story is at play.
03:32 And we see that that will be very good for steel consumption overall in the country at
03:39 large.
03:40 In the shorter term, there has been some stress because of imports which have come into India
03:46 in large numbers in the quarter 3.
03:49 And that has caused some kind of strain in the market.
03:54 But with better global prices now, we expect that the India prices in the coming months
03:59 will also improve.
04:02 But be that as it may, could the threat of imports still stay or does it still stay large,
04:09 Mr. Acharya?
04:10 Does it impact the India ops in a meaningful way?
04:14 So if I were to look at the positive today, let me start with the challenge.
04:19 I think in the month of October, November and the quarter of October, December at large,
04:24 we saw higher imports.
04:25 The imports into the country were at about 2.6 million tons and our exports fell.
04:31 So imports grew by 16% quarter on quarter and the exports fell by 16% quarter on quarter.
04:38 And that created a net import scenario of 1.2 million tons in India.
04:43 Having said that, from the last few weeks, we have seen prices globally have moved up
04:48 actually from December onwards.
04:50 And that has opened an export window.
04:53 And with some price corrections which have taken place in November, December, I think
04:58 the domestic prices are now at near parity to imports.
05:02 So therefore, in quarter four, as we see today, your export volumes from India will go up.
05:07 The imports are likely to be limited and a strong, seasonally stronger quarter should
05:14 augur well for demand at large in India.
05:18 Okay.
05:19 And just one quick follow up there.
05:21 By and large, as things stand currently, and who is to say what's happened three months
05:25 out, but is the input cost largely balancing out the fall in the selling price, if you
05:37 will, impacted due to the imports or are there some pressures that you foresee in Q4?
05:45 So in Q3, we had a higher cost of raw material, both from iron ore and coking coal perspective.
05:54 Coking coal, our cost increased by $20-21 and iron ore prices also went up.
06:03 So that did put pressure on the budget.
06:07 While the MSR went up to some extent, but we did see a drop of about close to 475-480
06:16 rupees per ton in terms of quarter on quarter drop in budget.
06:20 However, going into quarter four, we see that the coking coal and iron ore prices remain
06:26 elevated.
06:27 So therefore, they will put some pressure on the budget.
06:32 But we see better volumes on the back of stronger exports from India.
06:37 Since global prices have gone up, the price realization as well as the export volumes
06:40 are increasing.
06:43 The imports will get limited.
06:45 We expect that prices in the subsequent months in this quarter in the domestic market could
06:50 also improve.
06:51 So that should augur well for increase in volumes, which will and also a better balance
06:57 I would say between mix export domestic and the product mix, which will partly offset
07:03 the increase in the cost.
07:05 It's actually the other way around.
07:06 I was asking you exactly the opposite and it's actually the other way around, wherein
07:09 the costs are higher, but you believe maybe higher volumes and a better product mix could
07:14 help you offset some of these costs as well.
07:17 That aspect on Capex, you've largely been confident around, and I'm not saying you're
07:22 not right now, but you've largely been confident around the Capex that you're putting up year
07:27 after year.
07:28 Is this the planned Capex maybe lower by 2000 crores this year?
07:32 Is it more a factor of timing as opposed to intent?
07:37 Part one of my question is that.
07:38 And part two, any updates on Capex as well as fundraise for the Capex?
07:47 So on the Capex, Nilesh, we are on track.
07:50 Our expansion projects are on track.
07:53 In the quarter three, we spent more than 5,200 crores in the quarter.
07:59 Our overall Capex for nine months is about 13,250 crores.
08:05 So by and large on track.
08:08 We expect about 18,000 crores overall Capex.
08:12 It's mostly just a timing issue.
08:16 So therefore, I think our expansion projects and everything is getting funded in appropriately.
08:23 From the fundraise for the next year, we are looking at raising 2000 crores through NCDs.
08:33 And we are taking some enabling approvals in the board to raise some funds to refinance
08:39 some of the debts as and when it may become necessary in terms of rupee loans in India.
08:46 Got it.
08:47 You mentioned about the manufacturing, at least the government Capex and the global
08:52 interest.
08:53 Now my question is, over the next 18 months as some of your major capacities or the next
08:57 24 months as some of the capacities come on stream, get commission, so on and so forth,
09:01 do you expect the confluence of government Capex remaining steady or maybe coming lower,
09:06 who knows, due to FISC consolidation, but balanced out by the higher private Capex in
09:13 India and higher interest in manufacturing on the global side as well to show up?
09:19 Could that happen?
09:20 You recently were at the World Economic Forum as well.
09:23 Give us a sense of how do you see the India interest and what could it mean for steel
09:27 demand for calendar year '24, arguably the next 24 months?
09:34 So I think from a medium perspective, India looks very good.
09:40 The remaining years of this decade should be very good for India economically.
09:47 The growth trajectory is going to support steel consumption in India very well.
09:51 And therefore, we remain very positive on our capacity expansions in India.
09:57 While in the World Economic Forum at Davos, I also was happy to see that five states were
10:04 represented very strongly by the senior ministers of the government and central ministers were
10:11 there as well.
10:12 There was a positive, I would say positive feel about investing in India by many global
10:21 companies as they see a growing market in India in the coming years.
10:26 Our Capex story therefore remains on track.
10:29 We are completing our project at Vijayanagar expansion of 5 million tonne.
10:35 Our phase two expansions in BPSL in Jharsuguda are also getting completed in this quarter.
10:42 We are directionally on our track to achieve about close to 37 million tonnes by FY25 in
10:52 India.
10:53 And we will continue to look at brownfield investments to go up to 50 million tonnes
10:58 as we indicated last time during the course of this decade.
11:03 Specific cost of investment in brownfield is lower and we will focus on Vijayanagar
11:08 Dolvi and Jharsuguda in our journey of brownfield expansions.
11:14 Any change in the timeline, as earlier envisaged, when it comes to any of these Capex plans
11:20 coming on stream, Mr. Acharya?
11:22 No, Neeraj.
11:23 We do not see any change in the timelines.
11:27 What we have to keep in mind that 6 to 7 million tonnes of additional capacity will come into
11:33 play in the next year, partly going into production because of ramp up in the next year.
11:40 But that will generate additional volumes and additional EBITDA for the company.
11:47 And we are quite confident that we will be able to fund the Capex growth plans which
11:52 we have undertaken in this decade.
11:54 Okay.
11:55 Mr. Acharya, one final question.
11:56 I see a lot of people who are tracking this space, not necessarily as Excel analysts,
12:03 but talking about how just the capacities coming on stream for you or for some of the
12:09 others, but let's take you as an example, being a prime indicator of one, the business
12:14 confidence, but two, the quantum of growth that could come in Seteris Paribus, of course.
12:19 I am just trying to understand, as you were setting up these capacities, is there also
12:24 this belief about utilization levels because of the growth in India and the global interest
12:29 and therefore could growth for JSW Steel be commensurate to these capacities coming on
12:38 stream?
12:39 Because usually it would be a factor of capacities coming on stream, but also the ramping up
12:44 of the capacity utilization levels happening slowly and being unpredictable.
12:49 Could it be a bit more predictable this time around?
12:53 If you are understanding what I am trying to ask you.
12:55 You are talking about overall capacities in India coming?
13:00 Yes, please.
13:01 Okay.
13:02 So, I think if you really look at a slightly longer scenario as we maybe discussed last
13:10 time, we are looking at a production and a demand, let's say in excess of 200 million
13:17 tons by the end of this decade, which means today, this year, we will end maybe close
13:24 to 134, 35 million tons of demand in India, which would mean maybe an incremental demand
13:31 of 65 to 75 million tons of steel in the remaining seven years to go up to FI31.
13:39 That is something which is very much doable.
13:43 If you look at a 10 million tons of incremental number, I think even if you get an 8% growth,
13:50 our belief is that 8 to 10% growth in the medium term is a very doable thing.
13:54 We should be generating anywhere between 12 to 15 million tons incremental demand in India
14:00 every year.
14:03 The capacity capacities in India are such that they are focusing more on the domestic
14:08 demand and that is what these numbers also mean.
14:13 Our exports from India will probably be less of direct steel and more of engineering exports
14:19 as we develop our engineering capabilities and look at the supply chain rebalancing from
14:25 China to other countries, including India.
14:28 So good opportunities in the medium term, we do not see in the next few years capacity
14:36 expansion as a bottleneck.
14:38 Actually, it is a need to look at the economic growth in India.
14:42 Got it.
14:43 Mr. Acharya, we leave it at that.
14:45 Thanks so much for taking the time out and all the best for the year ahead.
14:48 Much appreciate your time.
14:49 Thank you very much, Neenu.
14:51 All the best.
14:52 Thank you.
14:53 And viewers, thanks for tuning in.
14:53 [END]
14:54 1
14:54 1
14:55 1
14:56 1
14:57 1
14:58 1
14:59 1
15:00 2
15:01 2
15:02 3
15:03 4
15:04 5
15:05 6
15:06 7
15:07 8
15:08 9
15:09 10
15:10 11
15:11 12
15:12 13
15:13 14
15:14 15
15:15 16
15:16 17
15:17 18
15:18 19
15:19 20
15:20 21
15:21 22
15:22 23
15:23 24
15:24 25
15:25 26
15:26 27
15:27 28
15:28 29
15:29 30
15:30 31
15:31 32
15:32 33
15:33 34
15:34 35
15:35 36
15:36 37
15:37 38
15:38 39
15:39 40
15:40 41
15:41 42
15:42 43
15:43 44
15:44 45
15:45 46
15:46 47
15:47 48
15:48 49
15:49 50
15:50 51
15:51 52
15:52 53
15:53 54
15:54 55
15:55 56
15:56 57
15:57 58
15:58 59
15:59 60
16:00 61
16:01 62
16:02 63
16:03 64
16:04 65
16:05 66
16:06 67
16:07 68
16:08 69
16:09 70
16:10 71
16:11 72
16:12 73
16:13 74
16:14 75
16:15 76
16:16 77
16:17 78
16:18 79
16:19 80
16:20 81
16:21 82
16:22 83
16:23 84
16:24 85
16:25 86
16:26 87
16:27 88
16:28 89
16:29 90
16:30 91
16:31 92
16:32 93
16:33 94
16:34 95
16:35 96
16:36 97
16:37 98
16:38 99
16:39 100
16:40 111
16:41 12
16:42 13
16:43 14
16:44 15
16:45 16
16:46 17
16:47 18
16:48 19
16:49 20
16:50 21
16:51 22
16:52 23
16:53 24
16:54 25
16:55 26
16:56 27
16:57 28
16:58 29
16:59 30
17:00 31
17:01 32
17:02 33
17:03 34
17:04 35
17:05 36
17:06 37
17:07 38
17:08 39
17:09 40
17:10 41
17:11 42
17:12 43
17:13 44
17:14 45
17:15 46
17:16 47
17:17 48
17:18 49
17:19 50
17:20 51
17:21 52
17:22 53
17:23 54
17:24 55
17:25 56
17:26 57
17:27 58
17:28 59
17:29 60
17:30 63
17:31 64
17:32 65
17:33 66
17:34 67
17:35 68
17:36 69
17:37 70
17:38 71
17:39 72
17:40 73
17:41 74
17:42 75
17:43 76
17:44 77
17:45 78
17:46 79
17:47 80
17:48 81
17:49 82
17:50 83
17:51 84
17:52 85
17:53 86
17:54 87
17:55 89
17:56 90
17:57 91
17:58 92
17:59 93
18:00 94
18:01 95
18:02 96
18:03 97
18:04 98
18:05 99
18:06 100
18:07 12
18:08 13
18:09 14
18:10 15
18:11 16
18:12 17
18:13 18
18:14 19
18:15 20
18:16 21
18:17 22
18:18 23
18:19 24
18:20 25
18:21 26
18:22 27
18:23 28
18:24 29
18:25 30
18:26 31
18:27 32
18:28 33
18:29 34
18:30 35
18:31 36
18:32 37
18:33 38
18:34 39
18:35 40
18:36 41
18:37 42
18:38 43
18:39 44
18:40 45
18:41 46
18:42 47
18:43 48
18:44 49
18:45 50
18:46 51
18:47 52
18:48 53
18:49 54
18:50 55
18:51 56
18:52 57
18:53 58
18:54 59
18:55 60
18:56 61
18:57 62
18:58 63
18:59 64
19:00 65
19:01 66
19:02 67
19:03 68
19:04 69
19:05 70
19:06 71
19:07 72
19:08 73
19:09 74
19:10 75
19:11 76
19:12 77
19:13 78
19:14 79
19:15 80
19:16 81
19:17 82
19:18 83
19:19 84
19:20 85
19:21 96
19:22 97
19:23 98
19:24 99
19:25 100
19:26 12
19:27 13
19:28 14
19:29 15
19:30 16
19:31 17
19:32 18
19:33 19
19:34 20
19:35 21
19:36 22
19:37 23
19:38 24
19:39 25
19:40 26
19:41 27
19:42 28
19:43 29
19:44 30
19:45 31
19:46 32
19:47 33
19:48 34
19:49 35
19:50 36
19:51 37
19:52 38
19:53 39
19:54 40
19:55 41
19:56 42
19:57 43
19:58 44
19:59 45
20:00 46
20:01 47
20:02 48
20:03 49
20:04 50
20:05 51
20:06 52
20:07 53
20:08 54
20:09 55
20:10 56
20:11 57
20:12 58
20:13 59
20:14 60
20:15 61
20:16 62
20:17 63
20:18 64
20:19 65
20:20 66
20:21 67
20:22 68
20:23 69
20:24 70
20:25 71
20:26 72
20:27 73
20:28 74
20:29 75
20:30 76
20:31 77
20:32 78
20:33 79
20:34 80
20:35 81
20:36 82
20:37 83
20:38 84
20:39 85
20:40 86
20:41 87
20:42 88
20:43 89
20:44 90
20:45 91
20:46 92
20:47 93
20:48 94
20:49 95
20:50 96
20:51 97
20:52 98
20:53 99
20:54 100
20:55 101
20:56 102
20:57 103
20:58 104
20:59 105
21:00 106
21:01 107
21:02 108
21:03 109
21:04 100
21:05 110
21:06 111
21:07 112
21:08 113
21:09 114
21:10 114
21:11 115
21:12 116
21:13 117
21:14 118
21:15 119
21:16 119
21:17 and that will spur up the entire construction for smaller homes,
21:23 and that's where the actual need is.
21:25 And I believe if that is addressed, it will be a big thing for the housing industry,
21:30 and for the home buyers and for the people who really aspire to have a home,
21:34 and it will definitely fructify the dream of housing for all,
21:40 which is the Prime Minister's vision and mission.
21:45 And I think that should get done.
21:48 I just want to come to you on the bit about affordable housing, Mr. Razak,
21:52 because the affordable housing scheme, which saw an interest subvention
21:58 as the incentive for people to go for it, it was quite an ambitious scheme.
22:06 But if you look at how things have played out on ground,
22:08 in terms of where the sales are coming in, where the demand is coming in,
22:12 it's not necessarily in the affordable housing segment.
22:16 You've seen the luxury segment and the more premium segments firing up.
22:19 What do you think needs to be done to incentivize affordable housing
22:24 from the developer end for the sector as well as the end buyer?
22:29 That's absolutely a valid question and a valid thinking.
22:34 You see now, while the industry, the premium and luxury housing has kicked off,
22:40 and there's a fairly substantial demand,
22:43 that does not mean that the affordable housing, that there's no demand.
22:47 That there is a demand, there is a need, if you look at it.
22:50 Every citizen of this country has a right to have a home with a habitable condition,
22:57 with running water, with electricity and great environment.
23:02 And I think the only, I mean, the government bodies can do only this much and no more.
23:07 It is the private developers that need to sort of chip in and do whatever they are doing.
23:14 Yes, they are in business.
23:15 They will maybe make lesser profits.
23:18 That really does not matter.
23:19 But the support of the government is required in terms of the tax structure,
23:24 because you see, there are many components on the structure.
23:28 Like I told you, there is a GST, then there is this time duty.
23:33 And of course, you have many other approval costs.
23:39 Now, if all this can be simplified, and of course, you see,
23:43 the developer itself has to pay income tax.
23:46 So if that can be simplified and for affordable housing up to a particular size,
23:50 it was there in the past.
23:52 If it can be restored, that will really, really spur up the construction,
23:56 especially in this scenario where the markets are really good.
24:01 I believe there'll be a lot more built for the people who really need that home.
24:05 Yeah.
24:06 In terms of stressed assets within the real estate sector,
24:12 since we're having our conversation from an industry perspective, Mr. Razak,
24:16 I know you can't talk about your company right now in the silent period,
24:19 so I'll avoid doing that.
24:20 But in terms of the policy push and the government view to handle stressed assets
24:28 in the real estate sector,
24:30 how far do you think we've come on that and where do we need to go?
24:34 Because the whole host of half-built homes and stranded customers has eased.
24:41 Maybe there's hope for future projects, but what about what is stagnant in the system?
24:48 I think it's an ongoing process.
24:50 There's no solution or one-time solution for this.
24:54 And currently, the stressed assets are getting...
24:58 In fact, there is consolidation in the industry.
25:02 Many developers were started somewhere and could not continue
25:06 and now looking at other developers to help them to get them out.
25:10 And the policy itself is pretty good.
25:12 You see, you have this scheme by SBI for stressed assets where projects are stuck.
25:20 And I think they are getting funding,
25:22 the developers who want to sincerely finish those projects.
25:25 So I think basically, there has to be sincerity
25:31 and we have to balance our need with our greed.
25:33 And if we can do that, and if our only focus and our only vision and mission
25:39 is to see that we've started something, we've promised the customer something,
25:42 we need to deliver and we need to deliver on time.
25:45 We need to deliver on the quality that we've promised.
25:48 I think nothing can go wrong in this industry.
25:50 If we are trying to do 100 things and do nothing,
25:53 that's where the whole problem had come.
25:55 But people have learned.
25:56 I think people have understood that this is not an easy game.
26:01 This is not something that's going to...
26:04 It's not a short-term business.
26:07 It is a long-term business and you have to have consistency.
26:10 Once there is consistency, once there is focus,
26:14 I believe that the real estate industry will continue to do well.
26:20 You know, you're right.
26:21 We should not talk about 100 things.
26:22 Let's just talk about three things, Mr. Ramzakh.
26:24 As I wrap up this conversation,
26:26 what are the top three things you would like to see in the budget
26:30 which will actually give a boost to housing for all
26:34 and as a result, spur volumes for the industry?
26:38 Would number one be maybe easing up the definition
26:41 of what accounts for affordable housing and increasing the incentives there?
26:46 You know, in the budget, I really...
26:49 I'm not sure whether anything can happen,
26:51 but this should be like a long-term policy.
26:54 If you ask me what is my expectation from the budget, it is nil.
26:59 But if you ask me what really needs to be done,
27:02 I believe that, as I told you, the input credit on GST has to be restored.
27:08 And then the second thing is ATIB has to be brought in for affordable homes
27:13 and a subsidy for the home buyer on the interest rate itself.
27:18 This will help them to at least acquire a home under their name.
27:23 Yes, real estate, what happens is, over a period of time,
27:27 there's inflation and the prices go up.
27:30 And if that home buyer bought it as an affordable home
27:34 and at the end of the day gets a higher-priced home,
27:37 that is their luck.
27:39 And I don't think we should deny that,
27:41 and that at least we are enabling people
27:43 and creating wealth for people who didn't have it.
27:46 Absolutely. Thank you so much, Mr. Irfan Razaq, for speaking with us.
27:50 The real estate sector often gets overlooked
27:53 in terms of what it contributes to the economy and to the GDP.
27:57 Definitely a big push expected there in the upcoming budget.
28:01 We'll take a very short break at this point,
28:03 but on the other side, a special conversation with Vallabh Bhansali,
28:07 founder and chairman of Enam Holdings,
28:09 in our series India Unstoppable.
28:12 Stay tuned for that.
28:14 (MUSIC)
28:19 (MUSIC)
28:24 (MUSIC)
28:29 (MUSIC)
28:34 (MUSIC)
28:39 (MUSIC)
28:44 (MUSIC)
28:49 (MUSIC)
28:54 (MUSIC)
28:59 (MUSIC)
29:04 (MUSIC)
29:09 (MUSIC)
29:14 (MUSIC)
29:19 (MUSIC)
29:24 (MUSIC)
29:29 (MUSIC)
29:34 (MUSIC)
29:39 (MUSIC)
29:44 (MUSIC)
29:49 (MUSIC)
29:54 (MUSIC)
29:59 (MUSIC)
30:04 (MUSIC)
30:09 (SPEAKING IN HINDI)
30:15 (SPEAKING IN HINDI)
30:20 Vallabh Bhansali, one of the most credible, reliable,
30:36 and sought-after voices for anything you need to know.
30:39 Welcome, Vallabh sir. Thank you so much for your time.
30:42 Thank you for your very kind word, Niyati.
30:44 Wonderful.
30:45 Thank you, sir.
30:46 (SPEAKING IN HINDI)
30:48 (SPEAKING IN HINDI)
30:50 (SPEAKING IN HINDI)
30:55 (SPEAKING IN HINDI)
30:56 What is markets watching now?
30:58 (SPEAKING IN HINDI)
31:03 (SPEAKING IN HINDI)
31:08 (SPEAKING IN HINDI)
31:11 it still feels like the government is coming back, and should come back with a good majority.
31:17 And let's assume that the result of election is a little less than what you expected.
31:24 The companies at which they are in a hurry,
31:28 are making investments after a ten-year investment holiday,
31:32 foreigners are making investments, the result of that is going to be out.
31:37 So, the government has basically, what is called a building block,
31:42 it is the bottom of the pyramid, the bottom of the pyramid is tackled by gas, water, stove, food,
31:48 and the income that is filled by giving all this, the disposable income will increase as it increases,
31:52 per capita income will increase.
31:54 So, the consumption basket that is limited here,
31:57 this is gradually called the flattening of the curve, that the middle class will keep on rising,
32:03 this is going to keep on going, so our demand will slow down dramatically,
32:07 there is no such ease.
32:09 So, we have said to say election, but those who have been watching India for 50 years,
32:18 so how many elections are going to come in the next 20-25 years,
32:21 so elections will come and go, as far as our policies and companies are concerned,
32:26 I think we are going in the right direction.
32:29 So, do you think that foundation has been built for the next 25-30 years?
32:36 The base is gradually being built, in 1991, first it was built in 5 years,
32:41 then it was built during the time of Vajpayee ji, so this base is being built.
32:45 But, if we do Asana daily, and take a 15-day leave, then it has an effect.
32:52 100%
32:53 So, there will be a benefit of your structure, but there will be a reduction in your fitness.
32:57 For this, we cannot sleep, we cannot relax at all, we will have to move forward continuously.
33:04 But, what about the thing which is not in our control,
33:08 the outcome of the election is not in anyone's control, so we do not worry about it.
33:12 We see that the companies are running well, they are in our hands,
33:15 do not keep yourself dependent, they are in our hands.
33:18 I will say one more thing, the right to dream that he has,
33:22 is that he who wakes up the next day and runs at double speed,
33:26 who does not just dream,
33:28 And he also works hard for it.
33:30 The country needs it a lot right now, that it learns from China in every field.
33:36 How much cotton grows in its fields, how much grain grows,
33:41 what is the productivity of its steel factory,
33:44 what is the productivity of its assembly, how much we are behind.
33:48 Every Indian, when he wakes up in the morning,
33:52 why am I behind China, why am I behind China,
33:56 I should learn it by being its teacher.
33:58 The day this feeling will come, no one can stop us.
34:02 Because at one time, we were like this, we have to become like this again.
34:06 But, in the midst of global uncertainty,
34:09 the rise and fall of oil prices, inflation, what is the big worry?
34:13 Because our demand is very strong, consumption, and there is no disposable income.
34:19 So, it is natural to put pressure on it, because the population is so big.
34:23 A small country does not have so much difficulty.
34:26 So, this danger is going to remain for us.
34:29 Our Reserve Bank policy is fine, the 4% target.
34:33 But because supply is easing, and people get food and drink,
34:39 whose inflation is very sensitive,
34:42 I do not believe that the rest of the risk is due to inflation.
34:48 And India has managed it very well, the Reserve Bank has managed it very well.
34:52 So, I am satisfied with that, as far as I can see, I do not find it a big risk.
34:58 Okay. So, in the midst of all this,
35:01 our valuations of the markets, when you are telling that you are not feeling overstretched,
35:07 is what you were saying?
35:09 I do not see the market in such detail.
35:12 The mid-caps and small caps, there is a stretch in them.
35:16 Because they do not run, they run at high speed, so they run a little more,
35:20 so their valuations go back and forth.
35:22 Large caps, I think, are still fine.
35:26 So, the banks are in the mode of correction,
35:29 so the multiples of the banks have come down.
35:32 So, the big sector, 35-40% of our country's financial sector,
35:36 the valuation of the financial sector is not outlandish yet.
35:40 Similarly, the valuations of big companies are not outlandish.
35:44 Their performance is continuously improving.
35:47 So, in general, the valuations, on the market as a whole, are not very stupid.
35:52 But, okay, this price is quite close to perfection.
35:56 Its growth potential slows down a little.
35:59 But those who take shares for 5-10 years,
36:02 they have to do only one thing in India for the next 25 years, as far as I can see,
36:07 that increase or decrease their cash level.
36:10 If it increases rapidly, increase the cash level a little.
36:13 If it decreases, increase the cash level.
36:15 That's all they have to do. Keep the rest of the shares.
36:17 You spoke about the consumption theme, sir,
36:19 that it will increase, the demand will increase.
36:22 Are there any other pockets on which you would like to draw the attention of investors?
36:27 So, like the manufacturing sector,
36:30 the manufacturing sector has to increase a lot.
36:33 Because there was a huge gap.
36:35 The goal of our policy,
36:39 product nation, branding,
36:41 it will not happen without manufacturing.
36:44 The support that manufacturing should get from the government,
36:47 it is about to get from the PIL etc.
36:50 And many other policies will come under it.
36:53 So, the manufacturing sector,
36:55 in India, all the sectors are running one after the other, rotational.
36:59 So, I think that
37:02 you can invest in any sector by looking at the low valuation.
37:07 Okay, sir.
37:08 You spoke about skill sets.
37:11 You are the director of Flame University.
37:14 We have a problem that there is a gap between skilled labour and human resource.
37:19 How do we fill that gap?
37:21 How to bridge that gap?
37:23 So, there is a huge job crisis.
37:25 So, we have low skilled jobs.
37:27 Because a low skilled person takes time to become high skilled
37:30 and he does not become one.
37:32 This is a global problem.
37:34 Secondly, the high skilled jobs and gaps,
37:38 to fill them, for higher education,
37:41 the government has increased the IITs and IIMs,
37:44 but we have to increase it many times.
37:46 Not with one flame, we need 100 flames.
37:49 It is such a big need.
37:51 There is a flame at one level,
37:53 and at another level, there are skilled organisations.
37:57 In olden days, ITI was very popular.
37:59 Now, there are many polytechnics.
38:01 And how to motivate the public to study for that?
38:06 So, the pressure of their livelihood at home will be less,
38:09 then the child will study.
38:11 Otherwise, it becomes very necessary for him to work.
38:13 That is why he studies and thinks,
38:15 "I have to join a job in 14 years, so I don't like studying."
38:19 So, we have to solve the problem of livelihood.
38:21 The government is doing it very well.
38:23 That the mother does not have to go to fill water, etc.
38:26 That we will buy you from the farm.
38:28 So, many problems are solved by the farmers.
38:31 So, we will need agri-reform,
38:33 we will need livelihood reform.
38:35 The government has improved their basic amenities a lot.
38:37 But we will have to improve more.
38:39 This is not a one day job.
38:41 This will take 10 days, 10 years,
38:43 for a government like Modi.
38:45 For other people, it will take 25-30 years
38:47 to bring the lower level up.
38:49 And if we do land reform and judicial reform,
38:53 then indirectly, it will be very beneficial for this sector
38:56 because it will be very beneficial for the livelihood.
38:59 Sir, you are repeatedly emphasizing agri-reform.
39:02 How crucial is that?
39:04 I mean, you explain it to us.
39:06 Because in the next 20-30 years,
39:08 agri-reform and judicial reform will be very critical.
39:12 Absolutely.
39:14 If I do a job and if I have a dispute,
39:17 and if there is no solution to the dispute,
39:19 then what is the benefit?
39:21 Today, Vodafone,
39:23 a company like Vodafone got shut down
39:25 because of some reason.
39:27 It took so many years to decide on it.
39:29 They don't know what to do.
39:31 So, it is difficult.
39:33 Judicial reform is there.
39:35 Agri-reform is there in our country
39:37 where so many people work,
39:39 and are connected to it.
39:41 And we have the opportunity to make the world a farm.
39:44 We can make the world a farm by increasing the productivity of the farm.
39:47 We grow so many things that are surplus.
39:49 We grow so many things that have a great export potential.
39:53 For example, fruits and vegetables and flowers
39:56 are 11% of China's economy.
39:58 We don't even have 3-4% of it.
40:01 And as soon as we do that,
40:03 the farmer's income doubles, triples, quadruples.
40:05 So, why should we work systematically?
40:07 To do that, we need a water system.
40:10 My NGO works in water. It is a big project.
40:14 So, we have to work strategically.
40:18 Last year, Modi announced a big water scheme.
40:24 So, we have to do agriculture.
40:27 There is no other choice.
40:29 Wow! Thank you so much, Vallabh sir.
40:31 You have spoken about self-knowledge so much.
40:33 I am sure the confidence you are talking about
40:35 will be very much unleashed.
40:37 Thank you so much for your time.
40:39 You have explained to us in such a well-crafted manner.
40:44 Thank you so much for that.
40:46 I hope you enjoyed it as much as I did.
40:49 Thank you so much viewers for tuning in.
40:51 [Music]
40:59 [Music]
41:09 [Music]
41:19 [Music]
41:29 [Music]
41:39 [Music]
41:49 [Music]
41:59 [Music]
42:09 [Music]
42:19 [Music]
42:29 [Music]
42:39 [Music]
42:49 [Music]
42:59 [Music]
43:05 [Music]
43:13 Sanjeev is a business in focus.
43:16 You saw the numbers earlier last week.
43:19 The revenue numbers and the bottom line numbers are flattish,
43:24 single digits if you will.
43:25 The bottom line number also almost very flattish.
43:28 The other aspect was the guidance that they brought down
43:33 slightly from mid-teens to lower double digits.
43:36 Jonathan Hunt joins in to talk about that
43:38 and a couple of comments that I read in the press release
43:41 and about the quarter as well.
43:42 Jonathan, good having you.
43:43 Thanks so much for joining in.
43:44 I know we discussed about two months ago
43:49 that variations can happen in a quarter,
43:52 in two quarters, in half years,
43:54 but over a five-year period the things look okay.
43:57 But since we are talking at the end of the quarter,
43:59 I want to understand what went into the quarter
44:01 for the growth rate to taper off a little bit
44:03 from the double digit numbers that you've shown thus far
44:07 in the half year and why this cut in guidance as well.
44:10 Yeah, no, I think that's fair actually at the quarter end
44:14 is to sort of unpack some of the moving parts in the quarter.
44:17 Overall, I'd say though the fundamentals have not changed.
44:20 It's a good industry to be in.
44:22 There's some real opportunities for the medium to long term.
44:25 So the fundamentals are intact.
44:27 What we're working through as are just about all of our peers
44:31 in the industry in general is an impact that we're seeing
44:35 in one segment of the industry,
44:37 namely the US biotech segment.
44:40 It's slowed down quite a lot through the year.
44:43 It actually hit us a little bit later than it hit many.
44:46 Other people saw it in their numbers earlier in the year.
44:49 Ours has been very much in the second half of the year.
44:53 And it reflects some of the macroeconomics
44:55 we're all adjusting to.
44:56 Interest rates have gone up globally over the last year or so.
45:00 Capital post the pandemic is moving
45:03 in many different directions.
45:05 And there's been a real slowdown in the new capital formation
45:09 into those startup biotech companies in the US.
45:13 Now that's part of our business.
45:15 It's not all of our business.
45:17 So outside of that, if you look at big biotech, big pharma,
45:21 they're not relying on the capital markets for their funding.
45:24 They're pretty self-sustaining.
45:26 They deploy their own capital.
45:28 That bit of our business and that bit of the market
45:30 is going along pretty well.
45:33 And the fundamentals are very much intact.
45:35 And you can see that in our numbers.
45:36 That's where the growth has come from this quarter.
45:40 The other thing I would say is this quarter is not really a surprise.
45:43 It's very much in line with the expectations
45:46 and the narrative that we had at the half year.
45:49 We thought the third quarter would slow a bit,
45:52 coming through our research services business,
45:54 driven by those capital market factors in US biotech.
45:59 And we thought that we would see in our development
46:02 and manufacturing businesses and then customer segments
46:05 like large pharma, animal health, and other regions of the world
46:09 out of the US, Europe, and Asia,
46:11 all of those would continue growing quite nicely.
46:14 That's pretty much what's happened.
46:16 Adjustment on the guidance is just us looking out to the year end.
46:20 A bit more of the softness was in this quarter,
46:23 and I think that just is going to slow the exit rate to the year.
46:27 But it's a factor that I expect to work through,
46:30 and it'll take maybe a couple of quarters, maybe three,
46:33 and we should be through it.
46:35 We'll be back to that good growth environment on the research side
46:39 that matches the good growth environment we're seeing today
46:42 in development and manufacturing.
46:45 Jonathan, there was a note which suggested that your exposure
46:50 to medium and small biopharma firms is generally about 15% to 20%,
46:56 and that may face the revenue growth pressures for a better part of 2024.
47:02 Now, just trying to understand, I heard you say that these pressures,
47:05 they're not all of your business which you highlighted,
47:07 but I heard you say that this will probably last for a couple of quarters
47:10 or three quarters.
47:11 Do you expect for now as things stand there is pressure?
47:14 It may change towards the latter half of the calendar.
47:17 Is that your belief or assessment?
47:20 That's pretty much the comment I just gave, yeah.
47:24 Is it two quarters? Is it three quarters?
47:27 I'd also say it's not a firm-specific issue.
47:29 This is not a question for Syngene.
47:31 This is a question actually what's going on globally in the biotech sector
47:36 and also for all of our peers.
47:38 Very, very well discussed.
47:40 Read across the market, read across the CEO commentary in the U.S.,
47:44 Europe, Asia, in the research services and into the CDMO sector.
47:49 We're all pretty much saying the same thing.
47:51 There's a bit of a feed-through from the rate of new capital formation in biotech.
47:55 It's slowing bits of the industry.
47:57 We're all coping with it.
47:59 But the other parts, the big pharma, big biotech, and then in our case,
48:03 also the animal health industry, pretty much unaffected,
48:07 and it's business as usual there with some good growth
48:10 and some good growth opportunities.
48:13 Just wondering because, I mean, another firm which has had a bit of a pushback
48:19 from the animal health CDMO side as well.
48:21 I heard you use that term twice.
48:23 So you reckon that there is a bit of an uncertainty around that vertical
48:27 individually as well, and could it last for longer?
48:30 Is there any--?
48:31 No, no, no.
48:32 Maybe I misspoke or not being clear.
48:35 Just the opposite.
48:36 I'm saying big pharma, big biotech, animal health--
48:39 It's true.
48:40 --are all going along very nicely and we're making real progress in those segments.
48:45 Okay.
48:46 Because the same note that I said the other thing from also says that
48:50 could there be-- and this is what I want to ask you--
48:53 that could there be challenges for large pharma companies in the U.S. in 2024
48:58 because there could be increased risk of additional measures on drug pricing
49:02 in an election year?
49:03 Is this something that happens?
49:04 Any thoughts here, Jonathan?
49:06 I think unlikely in an election year precisely because everybody's eye line
49:12 is going to shift to who wins the presidential election
49:16 and then what comes in terms of their policies beyond that.
49:20 So I think you can kick that down the road a little bit.
49:24 So no, I'm not sensing any real concerns coming out of that.
49:28 What happens after that, but call in the U.S. election cycle,
49:32 is not something I'm going to try and do.
49:34 Yeah, yeah, completely understandable.
49:37 Jonathan, what happens in a period like this?
49:40 I mean, do you still-- because you would maintain some of the overheads,
49:44 costs, et cetera, because of the lower revenue numbers,
49:47 do margins come under pressure or do you have the ability to kind of
49:51 pull out some levers to manage operational metric?
49:54 Always. I'm going to be a little pedantic.
49:56 Not lower revenue numbers, lower growth.
49:58 Lower growth, yeah, sorry.
50:00 Top line still grow at 10%, 9%.
50:03 There are many parts of the world and many parts of the global economy
50:07 where 9% growth is considered to be a particularly strong performance.
50:12 Now, as a firm, we're used to doing more than that.
50:15 But yeah, it's still giving lots of opportunities.
50:18 I think that's just day-to-day management.
50:20 I wouldn't call that out.
50:22 Looking after your cost base, finding efficiencies,
50:25 we should be doing that every day anyway,
50:27 whether we're growing at 20%, 15% or 10%,
50:30 you still have to be very careful with shareholders' money
50:34 and look for efficiencies.
50:36 Okay. What stood out well, Jonathan?
50:39 We've spoken about the issue that is probably staying.
50:44 What was the positive highlight for the quarter for you?
50:48 Good operational delivery.
50:50 I think from a strategic perspective and fundamentals,
50:55 I was looking at it this morning.
50:58 We took the decision really about five years ago
51:02 to sort of create this twin-engine strategy,
51:05 both research services but also development manufacturing.
51:09 We've doubled the size of our development manufacturing business
51:13 through those five years.
51:15 We're now at 40% of the overall company's revenue comes from that CDMO sector
51:21 when you put all the elements of it together,
51:23 and it's experiencing pretty good growth.
51:25 So that's a strategy going from ideation into implementation.
51:30 Now, we're ambitious to do more.
51:32 That's why we invested in the quarter in the acquisition of the Stellis facility.
51:37 That gives us headroom for growth over the next five years,
51:41 the next strategic cycle, as it were.
51:44 But I'm pretty happy if I come out of the early birdie, as it were, of a quarter
51:49 and look at the overall shape of the business,
51:52 Syngene's now both a CRO research services business and a CDMO,
51:57 and that CDMO's finding its place in the market and doing well.
52:01 So you mentioned with regards to the Stellis facility that you expect it to be ready
52:06 for operations in the second half of Scalia '25.
52:10 So arguably the last quarter of the calendar is when you might start to see
52:14 some benefits out of that facility, safe to assume.
52:16 Yeah.
52:17 That's the plan.
52:19 Open for business, we've got some client work already starting to queue up
52:23 to go in there.
52:25 But that strategy, that facility, that's bought for a long-term growth ambition.
52:31 That's not about what we can do in the first quarter of operations.
52:34 Yeah, of course.
52:35 Point well taken.
52:37 Just one more thing, because we're talking about growth here,
52:42 the last quarter--and I know you mentioned that it is growth,
52:47 it's just lower growth, but the last quarter of the previous year
52:51 now also has Zoetis revenues embedded in it.
52:55 So therefore the base effect being higher would also impact growth in quarter four,
53:00 and could that be other reason why this slight lowering from mid-teens
53:04 to lower double digits?
53:06 Yeah, mathematically you're correct.
53:08 The year-over-year comparison on the quarter will be a little bit suppressed
53:12 because of the strong growth in the year-ago period driven by one business
53:19 driver, the Zoetis contract.
53:21 Sequentially, if you go third quarter to fourth quarter,
53:24 we expect the usual sort of step-up.
53:27 Our fourth quarter is normally our biggest and busiest of the year.
53:30 I expect in an absolute sense the fourth quarter to have higher revenue
53:35 than the third quarter.
53:36 And then if you look at the year-over-year fourth quarter growth rates,
53:40 of course you've got that base effect to account for.
53:43 I think you've got the math spot on.
53:45 Okay.
53:46 Yeah, I'm just trying to put two and two together.
53:48 One final question because I know I understand I have a paucity of time
53:51 to talk to you this time around unlike the previous times,
53:53 but you would have been asked about this Mangalore API ramp-up.
53:58 We spoke about it as well, and you were hopeful of things working up
54:01 sooner rather than later.
54:02 What's the status there?
54:04 Yeah, nothing's changed.
54:07 Same strategic intent, actually to some extent.
54:10 The comment I made earlier around progress we're making in the CDMO business,
54:15 doubling that over the five-year period, that's all wrapped up in that strategy.
54:20 It's not a site-specific strategy.
54:23 It's a CDMO work we do in Bangalore, Mangalore,
54:26 it's small molecules and large molecules.
54:29 And when you put those all together, I think we're making reasonable progress.
54:33 Fair call.
54:34 Okay, I understand I have to thank you right now because you're a busy schedule.
54:38 But, Jonathan, lovely talking to you.
54:41 All the best for the quarters ahead, and may this situation become
54:46 or turn favorable sooner rather than later.
54:49 Thank you.
54:50 All right, and viewers, thanks for tuning in.
54:51 [MUSIC]
55:01 [END]
55:04 [END]
55:07 [END]
55:10 [END]
55:13 [END]
55:16 [END]
55:19 [END]
55:22 [END]
55:25 [END]
55:28 [END]
55:31 [END]
55:34 [END]
55:37 [END]
55:40 [END]
55:43 [END]
55:46 [END]
55:49 [END]
55:52 [END]
55:55 [END]
55:58 [END]
56:01 [END]
56:05 [END]
56:08 [END]
56:11 [END]
56:14 [END]
56:17 [END]
56:21 [END]
56:24 [END]
56:27 [END]
56:30 [END]
56:33 [END]
56:36 [END]
56:39 [END]
56:42 [END]
56:45 [END]
56:48 [END]
56:51 [END]
56:54 [END]
56:57 [END]
57:00 [END]
57:03 [END]
57:06 [END]
57:09 [END]
57:12 [END]
57:15 [END]
57:18 [END]
57:21 [END]
57:24 [END]
57:27 [END]
57:30 [END]
57:33 [END]
57:36 [END]
57:39 [END]
57:42 [END]
57:45 [END]
57:48 [END]
57:52 [END]
57:55 [END]
57:58 [END]
58:02 [END]
58:05 (upbeat music)
58:07 (upbeat music)