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00:00We have Satish Wagh, Executive Chairman and Whole Time Director at Supriya Life Sciences
00:04joining in to talk to us about lots of pieces which are moving here including of course CDMO.
00:12Welcome sir, it's a pleasure having you here. Good morning.
00:17Sir, first off on the CDMO business itself, just talk to us about what this will entail,
00:23how quickly will this start to come on stream, grow?
00:30You see yourself seeing the good performance since quarter 1. The EBITDA what we delivered
00:34is 39% and as I promised revenue growth was also 23%. CMO and CDMO projects which we are
00:43currently handling, we definitely take off in a short period. We already have got a lot of
00:51products and lot of things in our hand which we will be concentrating in the next future and we
00:57will do better as far as the markets are concerned in Europe, Latin America and North America.
01:04Well Mr. Wagh, this is Varsha. So as we all know that US Biosecure Act has been passed,
01:10now how this will benefit Supriya as a whole?
01:16See madam, basically Supriya Life Sciences Limited is born for exports. If you say out of 100%,
01:2290% of our production goes in exports and we are already in these markets for exports
01:29more than 28 years. The major share is Europe which is almost 48%. We are slowly penetrating
01:37into US market but we are confident in the near future we will do best in Latin American countries
01:44and US. Mr. Wagh, Mahima also joining in. Talking about the CDMO business,
01:51you have entered into a 10-year contract with a European firm recently. So I want to understand
01:56that are there another partnerships that you are looking for? Are they in your horizon?
02:01And I also want to understand that from a long-term perspective, are you also looking
02:07for such long-term collaboration when it comes to the CMO and CDMO space?
02:13As far as CMO and CDMO space is concerned, we are already working with 3 to 4 companies.
02:19Because of the confidential agreement, I will not be able to discuss anything.
02:23But let me tell you, Supriya's focus is more on the products which are coming all over the world
02:31from China. We are going to crack some products which are exclusively manufactured by 3 to 4
02:39manufacturers in China. Those products will definitely deliver us better results and better
02:46EBITDAs in the next few quarters and the regular ones will definitely come in the whole of the year.
02:55All right. So where does this go, sir, just in terms of opportunity? While you
03:00start to eat into China's market share likely, how quickly are you going to scale this opportunity?
03:08How much is this opportunity going to grow by? What do you do currently? You've spoken about
03:13three contracts that you're working on already. Of course, we're not asking you for specifics,
03:17but just in terms of numbers, how does it shape up for you?
03:22Sir, I will just give you a brief. Amarnath site is a new site which will be starting.
03:27The module is operational by end of September and the total capacity will be roughly around about
03:34300 KL and the Lotte Parshuram, our old site, will have another 1020 KL capacity. You can
03:44understand the capacity is usually increased and these products which we are talking with you,
03:50which is a sustainable EBITDA is there, their products are anesthetic, antibiotic and many more categories.
03:57Understood. And are you confident about holding on to your margin number? Of course,
04:03CDMO is a better margin business technically, but your margins are very healthy,
04:0835 percent plus. Do you expect that kind of margin trajectory to continue even as you continue to
04:14scale and grow? As we told you just now, two expansions which we did. One is at the
04:23basic site, Lotte Parshuram and another is Amarnath. These are all products which are coming
04:29from our R&D, Research and Development Lab and these products are ready for operations. These
04:36are the products which will give better margins, better EBITDAs than even CMO and CDMO projects
04:44because exclusively for these products manufactured in China and there are only three to four
04:51manufacturers, they are taking care of the entire world market. So we are not going to fight with
04:57any manufacturer in India, but we are going to take the business from China and we have seen
05:05people are very much interested in signing the contracts and coming forward for these products.
05:12Well, Mr. Wagh, just stretching a bit on margins, considering that the future growth would be
05:20driven by your new APIs, can we expect some margin pressure? Now, why I'm asking this is
05:26because until the product matures, could we see that pressure on margins for next maybe two years?
05:35It's not like that, madam. See, as I told you, these are exclusively manufactured by China and
05:41today, for last couple of 50 years, I can say China is the only country which is giving all
05:49these APIs to all over the world. We have taken the advantage of that and we have developed our
05:56own process and we are currently talking with all over the world, where in US, Latin America and in
06:03Europe and people have shown interest. They don't want to continue more with the Chinese
06:10manufacturers, but they prefer to go with Indian manufacturers. And Supriya is going to take away
06:18the cream of that product, because there is no competition from India at all. In fact,
06:23the domestic market is also requesting us regularly to feed these products in Indian
06:28markets, but for better margins, we prefer to continue our share, that is 90% exports and 10%
06:35in domestic market. These new APIs, these will be backward integrated?
06:43Fully backward integrated and there won't be any player who will come from India at all,
06:52because this chemistry is a very different chemistry itself and it requires huge investment
06:58and the techniques of the process. Mr. Wagh, we want to understand the
07:04revenue structure overall. Currently, what is the kind of revenue contribution from new products
07:09versus existing products and going forward, how will the revenue mix shape over, let's say,
07:14over two years down the line? Madam, I cannot say anything on numbers
07:20are concerned, but I can definitely tell you that we will do our best because our capacity
07:27at Lotte Parshuram is increasing and at Amarnath also increasing. The new basket which will be
07:34coming will give almost better revenues and better EBITDAs.
07:41But sir, just a thought process over the next three years, how would revenues compound?
07:49Would you double revenues in the next three years? Is that something that we can expect
07:53in terms of steady state? Yes, we can definitely say that.
07:59We will double up and we will double up with our better EBITDAs. See, I always believe
08:07turnover is not important, but the EBITDA margin in the balance sheet is very important
08:13because that gives you most courage and most whatever things are required as far as companies
08:20are concerned. It's a strong balance sheet. Understood. And just very quickly with regard
08:25to CAPEX, you've obviously put up a new facility. Any CAPEX still pending on that facility or you've
08:33pretty much fully incurred all the CAPEX required? And going forward, what are CAPEX plans therefore?
08:41Sir, both the manufacturing sites are concerned. The CAPEX almost 90%, 92% is over.
08:47Got it. The products, the plants are going for qualifications
08:51and they're ready for operation within another 20-25 days. And in the future, there will be
08:58some more CAPEX required because you know CAPEX is the main thing of the industry.
09:03So as the requirement comes, we are ready for the CAPEX also. There is no need for waiting
09:10because I always believe you should have at least three years plan advance with you so that you
09:16understand what are you going to manufacture, how much CAPEX you are going to do, what is your
09:20turnover, what is going to be your EBITDA. That I have really understood in my 39 years of life
09:26and my career with the pharma industry. Got it. Sir, roughly you do 600 crore in terms of
09:32top line. You have a margin currently just a little below 35%. You're expecting top line to
09:39double. You're expecting margins to be around 35-40%. So you'll have nearly 3-400 crore of
09:46cash flow. Of course, currently you have around 200 crore of cash flow. You're debt-free so there's
09:51no interest payout either. So roughly 250 odd to 300 odd crore of cash flow is what you have
09:57coming through. Where are you going to put to use this at least for the immediate year or so?
10:05Sir, for the future, we earlier also have given the statement that we have taken a land
10:10at Patal Ganga MIDC industrial area at Isambay village. There we are going to have, we have
10:16already taken 25 acres of land. The CAPEX has been done. Towards land is 58 crores. That land
10:24we'll be utilizing for our future. All right and you know in your Q1 presentation you had
10:30mentioned that there are 18 APIs which are already submitted under the USDMF. So I want to understand
10:35what is the progress there and what is the kind of expected timeline for further submissions and
10:40approvals going forward? Ma'am, some of them, some of the products, drug master files are on the final
10:46stage. Some might take another six months to one year. But as far as these products are concerned,
10:53so small quantities are already being taken by these manufacturers, the buyers and they are
11:00already putting their trial batches. All right. You've also mentioned that you know you're
11:06expanding into controlled drugs portfolio. So can you give us more details as to what's
11:11happening there? Few products like three, four production control substances we are going to add.
11:18These control substances again I'm telling you are only manufactured by China. They are the
11:25major players as far as manufacturing those products are concerned. These products were
11:31asked by some of our end users in Europe and US and given an assurance, forwarded the advances
11:39also for that, for the R&D is concerned. We have completed and those products will be penetrated
11:45into European markets and US markets. And the basket will be completely full as far as the
11:51control substances are concerned within the next six months to one year. Mr. Mark, your top
11:58three APIs contribute almost 44 percent to your top line. Now, where you want to take this number
12:05say in next two years, considering you've got new APIs coming online?
12:10Madam, my aim is always wherever I'm not present, I should be present in that vicinity.
12:19If you see today Supriya is present in 128 countries. We always have a plan at least to add
12:27five to ten countries more and keep our basket growing.
12:32Also in next three years, where you want to take your CDMO contribution to your top line?
12:41Oh, that I cannot tell you right now, but as far as Supriya is concerned, they will take the maximum
12:47advantage of the site because they have a capacity of 1100 KAD, which is very high.
12:56That entire capacity will be fulfilled within next two to two and a half years, not even three years.
13:01Within two years, we will see that this capacity becomes full. We are confident of that.
13:07Also, this has been history that our H2 has been always bigger than H1. So,
13:14is there any change in the trend or this is likely to continue?
13:18Let's just say, madam, you know, it is sometimes seasonal, but target what we have given to the
13:25market or target which we have designed, we will definitely achieve and we will have our share with
13:32us. Understood, sir. Sir, with regard to new product launches, I want to, you know, zoom in a
13:38little bit into the near term rather than what we've been looking at more, slightly more longer
13:44term-ish. Just in the near term, what's the kind of product pipeline like? You were planning to
13:50launch two products by end of FY25. Are you continuing to stick to those timelines or
13:56is there a change in terms of timelines? The timelines what we have given, before that,
14:02we will be delivering that. Currently, we are increasing our portfolio and anaesthetic segments
14:08and any anti-diabetic segment also. Anti-hypertensive also, we are launching
14:14one product which will be coming only from China's basket.
14:20Okay. And, sir, just last off, with regard to capacity, you've suggested in two to two
14:26and a half years, you will max out capacity at your current plants. So, what then? What's the
14:33next step? Of course, you've acquired land now. When do you start putting up capex there?
14:40See, basically, the land we should have taken, the land is under enrolment clearance with the
14:45Government of Maharashtra. Once the EC comes, we will immediately put up our investments and we
14:51have a definite plan what we will be doing at Isambay village and we will proceed for that.
14:58Understood. And with regard to debt, you are largely a debt-free company.
15:04Will you continue to remain so? Is that the objective?
15:09Sir, I can tell you, I am always telling that debt-free companies should be there
15:14and I made Supriya Lifesign debt-free before going to public also in the share market.
15:19And I will continue to move the same way, a debt-free company,
15:27and whatever accruals we have on those accruals, we keep on expanding.
15:32Also, Mr. Wagh, your Lote Barshuram facility, USFDA was supposed to come for an audit.
15:38Any progress there? So far, madam, there is no news,
15:42but we are ready. Anytime they can definitely come, we are ready for that.
15:46All right. Sir, thank you so much. It has been an absolute pleasure speaking,
15:51you know, really detailed conversation. Thank you for being candid.
15:55Thank you very much for your time and giving me the opportunity.