Capacity Utilization News - Jubilant

JubilantLifeSciences Q22014EarningsCall 29Oct13
Operator
Ladiesandgentlemen,gooddayandwelcometotheJubilantLifeSciencesLimitedQ2andH1FY2014EarningsConferenceCall.
Asareminder,allparticipants'lineswillbeinthelistenonlymodeandtherewillbeanopportunityforyoutoaskquestionsafter
thepresentationconcludes.().Pleasenotethatthisconferenceisbeingrecorded.I'llnowhandtheconferenceovertoMr.Ravi
AgarwalfromJubilantLifeSciences.Thankyouandovertoyou,sir.
RaviAgarwal,HeadInvestorRelations
Hello and a very good evening. I am Ravi Agarwal, Head of Investor Relations at Jubilant Life Sciences. And I extend a warm
welcometoallofyouforourQ2FY'14andH1FY'14earningsconferencecall.WehaveonthecalltodayMr.ShyamS.Bhartia,our
ChairmanandManagingDirectorandMr.HariS.Bhartia,ourCoChairmanandManagingDirector.WealsohaveMr.R.Sankaraiah,
ourExecutiveDirectorFinance.
We will commence with opening comments from Mr. Bhartia on the operating scenario ofkey businessand the outlook for H2 FY
'14. Mr. Sankaraiah will walk you through with the financial performance during the quarter and halfyear ended previous. At the
endofthemanagementpresentationweshallopenthefloorforquestionsandanswers.
Beforeweproceed,Iwouldliketoremindyouthatsomeofthestatementsmadeonthecalltodaycouldbeforwardlookingin
nature and a detailed disclaimer in this regard has been included in the Investor Presentation that has been shared on our
website.
InowinviteMr.Bhartiafirstforhisopeningremarks.
ShyamS.Bhartia,ExecutiveChairmanoftheBoard,ManagingDirector
Thank you, Ravi. Good evening to you all. Jubilant continues to report robust performance. For Q1 for Q2 FY 2014, our income
fromoperationswasat1,436crores.Thisishigher,thisis17%higheronyearonyearbasis.EBITDAinthesameperiodstoodat276
croresgivingusmarginsof19.2%.Revenuesfrominternationalmarketremainanimportantcontributortotheseresults,increasing
21%andgivinga75%sharetooverallrevenues.Theregulatedmarketcontributed60%oftheoverallrevenues.ThesharesofNorth
Americastoodat39%andthatofEuropeandJapanstoodat21%.
ForH12014,I'mpleasedto notethattheincome from operationsstoodatINR2,793 crores, up 13%onyeartoyearbasis.The
correspondingEBITDAandEBITDAmarginstoodatINR518croresand18.5%respectively.
I'll take you through the detail discussions on the performance beginning this pharmaceutical segment. In Q2 FY 2014, it showed
revenues of 691 crores, up 6% yearonyear and giving a share of 48% of the overall revenues. Similarly, in H1 FY 2014, we had
revenuesofINR1,343crores,up4%yearonyear.Revenuesharewasat48%totheoverallrevenues.
TheGenericsbusinessshowedvolumegrowthdrivenbyexistingproductsscalingup.APIbusinesswitnessedstrongvolumegrowth
in key products such as Sartans. There was a decline in Sartan prices due to increased competition postpatent expiry. Prices have
now stabilized and are expected to remain at current levels. Continuous cost reduction through process and yield improvement
resultedinlowercostofproduction,higheroutputandcontinuedhighmarginsinourAPIbusiness.
Wehave28commercialAPIproductsavailableinthemarket.WelaunchedRizatriptaninUSA.Wealsofiledfiveproductsduringthe
quarteracrossUSA,EuropeandAsia.AttheendofSeptember2013,thecompany'sAPIproductspipelinestoodat629fillingsacross
regionsconsidering68cumulativeDMSinUSand30cumulativeCEPsinEurope.
Soliddosesfromformulationshowedanormalizedperformancewithcontinuingvolumeimprovement.Thelowergrowthinsalesis
mainly due to price reduction in the Methylprednisolone and postponement of three product launches in US to H2 FY 2014. We
continuedtomaintainaleadershippositionintheMethylprednisolone,Terazosin,LamotrigineandCyclobenzaprine.
Methylprednisolone prices declined due to entry of a new player in Q1 '14. However, prices have now stabilized. We saw eight
launches mainly Escitalopram in Canada; will pattern as HCTZ in Europe and Amlodipine in Africa and five products in AsiaPacific.
We expect to launch five molecules in US in H2 '14. There 40 commercial products in the market with 16 in North America, 26 in
Europeand16inrestoftheworld.
To give you an idea of the fillings, we have filled Sartan in Europe and saw 26 new fillings in rest of the world across China,
Columbia, Iraq, Malaysia, Myanmar, Peru and Philippines. We expect significant growth in rest of the world markets with new
approvals in Russia, Ukraine, UAE, Canada and Philippines. At the end of Q2, 2014, the company has total 676 filings for
formulationsinvariousregionsoftheworldcomprising:58ANDAsinUSand48DossierfilinginEurope.
Moving to Specialty Pharmaceuticals. We saw new contracts totaling $25 million in Sterile Injectables and OCL business thereby
augmentingthepipelineofordersthatwehave.SterileInjectablesandOCLbusinesswasnegativelyaffectedwithQ1duetoinQ1
FY'14duetoturnaroundinsterileplantimpactedtheproductionlossoffourweekswhichresultedinbusinessshiftintoH22014.
However,noneofthenewbusinessopportunitiesidentifiedforFY2014hadbeenlost.
OrdersinhandforexecutioninH2FY2014is$80million,30%higherthanH1FY2014.Wehaveastrongorderbookof$590
million, up 15% yearonyear. I am happy to share that in Montreal our facility has been recently reaudited and this was
completedsatisfactorily.Wearelookingforwardtovolumelettermatterhasbeenfullyresolvedinthenearterm.
In Radiopharmaceuticals, sales were flat in H1 FY 2014 due to production delays in some of the products. This has now been
resolvedinSeptember'13andproductionisnownormal.AccordingtosalesinH2FY2014areexpectedtobehigherthaninH1FY
2014.
Regarding Rubyfill, we were successfully accelerating the preapproval evaluation for Rubyfill that was included as part of a cGMP,
whichisexpectedbytheendofQ3FY'14.
ThecurrentSPECTcardiologyUSmarketsizeis$70million,whichhasaverygoodgrowthrategoingforward.Wehaveasuperior
productwhichhasbeenfiledunder505(b)(2)andexpectsizablemarketshareinUS.WeexpecttolaunchRubyfillinUS,Canada,
Germany,SwitzerlandandIndiainFY2015.
The Life Science Ingredients segment delivered revenues of INR744 crores within Q3 FY 2014, representing a growth of 30%
yearonyear contribution to overall revenues stood at 52%. In H1 2014, the business increased [ph] 24% to 1,451 crores from
1,172croreslastyear.
During the quarter, the PPES business witnessed very good volume growth and also better price utilization in Pyridine and
derivatives.IncreaseinendproductpriceshavestartedtohavepositiveimpactonthepricesofBetaand3CPs.
MinistryofCommerceRepublicofChinahasimposed24.6%antidumpingdutyonPyridineimportedfromcompanyfordomestic
saleinChina,forwhichthefinalorderisstillawaitedandtheimpactofthesamehasbeenchargedtofinancialresults.
Demandandthepricingremainsveryrobustfor our productsintake.Weareproducingbestinclass quality,receivedfirstorders
from a European agromedia [ph]. Plant at Acetate is yet to stabilize for achieving sizable production levels which lead to lower
revenuecomparedtoplan.
Capacityutilizationislowerduetoequipmentissuesinthefinalpurificationstep,whichisexpectedtoberesolvedbyQ4'14.Due
to lower capacity utilization, we are not able to recover full cost. Expect capacity utilization for FY '14 is about 15%, which will
improvesubstantiallyinFY'15.
In Nutrition Ingredients, we expect full capacity utilization for vitamin B3 by yearend. We saw better vitamin B3 price utilization
duringthequarter.InAnimalNutrition,welaunchedtoxinbinderinIndia.InLifeScienceChemicals,EthylAcetatesawhighersales
inexportmarket,particularlyinEuropeandAfricaandMiddleEastregions.
We continued tapping opportunities for adding two new geographies and currently export to more than 30 countries. We have
deliveredcontinuedgrowthmomentuminrevenueandEBITDAinthefirsthalfandIwouldliketosharetheroadmapasweseeit
inthecomingsixmonths.WehavearobustpipelineinGenericsbusinessasyouallwillknow.Weestimategrowthtocomefrom
newlaunchesandentryintonewgeographies.
AroundthefortnightagoweannouncedthatwehadreceivedANDAapprovalforBupropionHydrochloride.AsperIMS,thecurrent
market size of this product is $580 million per annum. We are looking to launching this product in the present quarter itself. API,
similarlyhasanattractivelaunchinrowinthesecondhalf.SterileInjectablesbusinesshasregisteredseveralnewcontractwinsand
higherutilizationitwilltranslateintogrowth.
LSI segment is seeing volume momentum and that will continue. We're looking at higher utilization levels in vitamins and our
valueaddedproductsinPPES,suchasSymtetand3CP.Pricingofkeyproductisstabilizingandthebenefitsofthatwillstartdoing
intotheperformance.
OperationsideswhichIhaveoutlinedjustnowwillhelptostrengthenthebalancesheet.Wehavetargetedinmindtobringdown
the net debt levels to under 2.5 times of the EBITDA. The restructuring we're carrying out has helped to consolidate the pharma
businessunderourSingaporesubsidiaryandwearelookingatoptionstoraisemoneytobringdownthelevelofindebtedness.
I would like to draw your attention towards fluctuations in foreign exchange rate. resulting in robust impact on the total cost of
import pricing a product. For example, in last six months, the US dollar rupee exchange rate has fluctuated from a high of rupees
68.8 to the dollar, to the low of 53.66 to the dollar. Exchange rate seems now stabilized around 61 levels going forward. The
continuedstabilityintheexchangeratewillhaveapositiveimpactsontheprofitsofthecompany.
I would like to invite Mr. Sankaraiah to continue to the discussions with his thoughts on financial performance of the company.
Thankyou.
R.Sankaraiah,ExecutiveDirectorFinance
Thankyou,Mr.Bhartiaandthankyouallforjoiningthecallontoday.Iwillwalkyouthroughthefinancialhighlights.InQ2FY2014,
ourincomefromoperationstoodatINR1,436crores,giving17%growthyearonyear.Thiswassupportedbyvolumegrowthof11%
andexchangegainof9%fromthemomentoftherupee.TheEBITDAinQ2FY2014stoodat276croresgivingusanEBITDAmargin
of19.2%. The reportedprofit aftertaxstoodatminus INR81 crores, afterexceptional loss of INR150 crores. The normalizedprofit
aftertaxwasINR70crorestranslatingintonormalizedEPSofINR4.37perequityorINR1.
ThePharmaceuticalsbusinessshowedincomefromoperationsofINR691crorefromINR650croreinthesameperiodlastyear.The
contributiontooverallrevenuestoodat48%.TheEBITDAfromthesegmentstoodat175crores,givingEBITDAmarginof25.3%.
TheLifeScienceIngredientssegmentshownincomefromoperationsofINR744crore,up30%overthelastyear.Thecontribution
totheoverallrevenuestoodat52%.TheEBITDAinthesegmentwasINR125croreandtheEBITDAmarginwasat16.8%.
Coming to H1 FY 2014 performance, income from operation was INR2,793 crores; up 13% yearonyear. Volume growth stood at
11%.TheH1FY2014EBITDAwasatINR518crore.TheEBITDAmarginintheperiodstoodat18.5%.Thenormalizedprofitaftertax
wasINR128croreandthecorrespondingnormalizedEPSstoodatINR8.05perequityshareofINR1each.
InH1FY'14,thePharmaceuticalsbusinesshadincomefromoperationof1,343crores,up4%yearonyear.Thecontributiontothe
overallrevenuewasat48%.TheEBITDAwasatINR328crores,givingEBITDAmarginof24.1%.TheLifeScienceIngredientssegment
gaveincomefromoperationsofINR1,451crore,up24%from1,172croreslastyear.Thecontributiontotheoverallrevenuestood
at52%.TheEBITDAinthesegmentwasatINR234croreandtheEBITDAmarginwasat16.1%.
I'll come to discuss on the balance sheet now. As on September 30th, 2013, our net debt stood at 3,911 crores. Out of that,
longterm debt stood at INR2,784 crores and the working capital requirements stood at 1,128 crore. If we adjust the foreign
exchangedeferential,thenthenetdebtstoodat3,541crores,higherby142croressinceJune2013,mainlyduetoworkingcapital
increase.
We are on a healthy growth trajectory and are firmly committed to meet to meeting all our repayment schedule on time
without fail. Our blended rates of interest stood at 5.6% combining the rate of the foreign currency borrowing at 4% and the
rupeeborrowingat12%.TheCapExfortheyearisprojectedatINR250croresandtheproductdevelopmentexpenditureofthe
INR95crores.TheactualspendinH1wasINR121crores;INR80croresforCapExandINR41croresforproductdevelopment.
Withtheobjectiveofconsolidatingthepharmaceuticalbusinessunderoneentityandraisemoneytoreducetheoveralldebtofthe
company, theBoard hasresolved to transfer toits wholly owned subsidiary in Singapore. TheAPI and dosage form businesses of
Jubilant Life Sciences India by way of a slump sale for a lump on a going concern basis and also part of the shares held by the
company directly in US and European subsidiaries to enable the Singapore subsidiary toward 100% of the entire business of
pharmaceuticals.
The consideration for the above transfer of transfer is INR1,145 crore, net of debt of INR583 crores. This is subject to the
shareholders'approvalofthecompanyandanyotherregulatoryapprovals.
JubilantPharmaLimited,Singapore,thewhollyownedsubsidiaryofJubilantLifeSciencesIndiahasreceivedapprovalfromFIPBfor
theabovetransfer.ThiswillenablethecompanytoconsolidateitsAPI,SolidDosageForm,Radiopharmaceuticals,allergenicextract,
SterileInjectablesandointmentandcreamandliquidbusinessesunderoneentitywithSingaporesubsidiary.
Wewouldliketohighlightthepromotersstakeofthecompanyhasincreasedfromincreasedto53.95%asofSeptember
30th,2013comparedtothepreviousquarterof49.04%.
We are looking at the sustained operational improvement to be driven by the product launches and geographic expansion in the
Generics business and higher capacity utilization of the Nutrition Ingredients and Symtet and allied 3CP capacities. Our Sterile
InjectablesandOCLsareshowinghigherutilizationlevelinthelightofordersinhandandthatwillcontributetotheperformanceas
well. We expect an early resolution on the Montreal facility warning letter. We continue to work towards proposed corporate
actionstoraisemoney,toreducetheoveralldebtofthecompanyandgeneratetheoperatingcashflowtodothesame.
Withthosecomments,IwouldrequestthemoderatortoopenthelinesforQ&A,please.
QuestionsAndAnswers
Operator
Thankyouverymuch,sir.Ladiesandgentlemen,we'llnowbeginthequestionandanswersession.().Ourfirstquestionis
fromShubangGaroja[ph]ofSKSCapital&Research.Pleasegoahead.
UnidentifiedParticipant
Hi,goodeveningsir.Thanksfortakingmyquestion.Iwantedtounderstandthisforexlossinlittledetail.So,howmuchis,how
muchofourtotalsalesisinforexasininternational?Andwhatistheimpactofthisrupee,Imean,arewenotgettinganybenefit
ofrupeedepreciation,becausealargepartofoursalesisindollars?
Ourinternationalsalesonanoverallbasisisabout75%ofthetotalsales.
Okay.
Andthisasfarasthedomesticsaleisconcerned,solongasithasadomesticparityandwegettheforexbenefitthereandasfar
asalltheforeignsubsidiarieswhicharethereoutsideIndiaonaccountoftranslationintoIndianrupeesonconsolidation,wegetthe
forexbenefitontheclosingdate.
Okay.
Yeah.
And, so in the presentation, actually I saw that you talked about maintaining the guidance for entire financial year. I may have
missed out your earlierpress releases.So,canyoureiteratewhat wasthe guidanceoftoplinegrowth andmargin forfinancial
year'14?
Forfinancialyear'14wehavenotgivenanyguidance.
No,sointermsofgrowth
Specificallywehavenotgivenanyguidanceforfinancialyear.
Okay.But,whenyousaythatyouexpectabetterH2,howshouldIratethat?
Yeah,theH1resultscomparedtheexpectedH2resultarebetterthanwhatwehavealreadydeliveredsofar.
Okay. And third, you talked about transferring one of your businesses toyour Singapore company. How is it goingto help youto
reduceyouroveralldebtlevel?
If yousee our earlier pressrelease,what we'vementioned is,wewanted to consolidate our entire pharmaceuticalbusinessunder
one entity. Now, it is partly in Jubilant Life Sciences India like API, Dosage Form business, which is in Jubilant Life Sciences India,
whereas,restofthe businesslike,theSterileInjectables,OCL business,Radiopharmaceuticals,AllergenicExtracts areallunderthe
holdingcompanySingapore.
So, what we proposed to do is, moving the API and Dosage Form business from India to its wholly owned subsidiary Singapore,
thereby the entire pharmaceutical business which is as of first half year if you see, 48% of the sales which will come under one
entity.
Okay.
So,whatweproposedtodois,proposedtoraisemoneyinthatentityandacquirethisAPIandDosageFormbusinessfromIndia,
thereby bringing the dollars for that India, because we have mentioned in the speech also that the valuation of the business, for
the API and Dosage Form along with some shareholding is about 1,145 crores, which is along with that, that is a equity infusion
whatSingaporecompanywillinfluenceinIndiaapartfromassumingthedataofanother583crores.
So, basically the dollar loans will move out from India and go to Singapore that will enable the dollar balance sheet intact on
accountoffluctuationwhatweareprovidingasoftodaythemarktomarketthatforeigncurrencytranslationallthosethingswill
getreducedsubstantially.
Right.Andwhenisityes,yes.
Thatisoneobjective.Theotherobjectiveisthat,onceweconsolidatetheentirepharmaceuticalbusinessthenwewantedtoraise
an equity in that business by diluting. So that, we can infuse additional equity into the overall system to reduce the consolidated
debtofthecompany.Thatistheobjective.
Okay.That'sagoodstep,significantpositivestep.AndwhatisthetimeframethatyouhavewithrespecttothisSingapore
listing?
We are already whatever is the required regulatory approval, one of the main regulatory approval which is required is FIPB
approval,becauseitthebrownfieldtransferofbusinessofpharmaceuticaltoawhollyownedsubsidiaryoutsideIndia,weneedan
FIPB approval, which we, which Singapore company has already got it. That is the main approval which is required. Otherwise, we
havetoraisemoneyandcompletethetransaction.Forthat,themainmilestonenowistheshareholders'approval.
Okay.AndonelastquestionifImay.So,youtalkedaboutbringingdownyournetdebttoEBITDA.
Yeah.
Whatisthecurrentratioandhowdoyouplantodothat?
Asoftoday,itisabout3.5timesofEBITDA.So,wewantedtooneis,throughanoperatingcashflow.Thatiswhy,ifyousee,we
havesubstantiallyreducedourcapitalexpenditure.Earlier,wewereplanningaboutmorethan300croreswhichwe'vereducedthe
capitalexpenditureto250croresandasoffirsthalfyearwehaveincurredonly80crores.
Okay.
So,wearehavingaverystrictcontroloncapitalexpenditureinvestment.
SoyourH1CapExisonly80crores?
That'sright.
Okay.
Andapartfromthat,theproductdevelopmentexpenditureofanother41crore.
Okay.
So,wehaveaverystrictcontrolonthecapitalexpendituretogeneratecashandreducethedebtlevel;thatisoneobjective.The
other objective is, raise equity in the Singapore Company and bring that money into India to reduce the debt of the Indian
company.
Okay.Okay,sir.Thankyousomuch.I'llgetbackifIhaveanymore.
Thankyou.
Operator
Thankyou.().OurnextquestionisfromSaionMukherjeeofNomura.Pleasegoahead.
SaionMukherjee,analyst
Thanksfortakingmyquestion.Sir,onethingonCapEx,youmentioned80croreastheCapExforthisthing.So,doyouexpectthis
toincreaseyou'restillstickingto250croresforthefullyear?
No,250croreswehavementioned.WearetryingtodoourlevelbesttokeeptheCapExasminimumaspossible.
Okay.Sir,justisitpossibleforyoutosharethekindofcashflowsyouhavegeneratedinthefirsthalfofthisfiscalyear,thatis
after this 120 odd crores of CapEx where you mentioned that working capital also increased. So, can you just tell us like post
workingcapitalandCapEx,howmuchwouldhavebeenthecashgenerationthiswillallow?
Actually, this first half because of increase in working capital, because of certain specific reasons there was an increase in working
capitalinpharmaceuticalbusiness.SothecashgenerationaftermeetingtheCapExwasnotthere.But,goingforward,wearegoing
tohaveatightercontrolontheworkingcapitalandalsotightercontrolonCapEx,whichweexpecttogeneratecashoutofoperating
incomeandusethatcashtoreducethedebt.
Andsir,whatisthekindnatureofthisworkingcapitalincreaseandwhatisthereasonbehindthis?
No,thisisbecausetherearefewproductsinAPIandDosageFormbusinesswherewearesupposedtolaunchlikeMr.Bhartiahas
mentionedinhisspeech.Wearesupposedtolaunchthreeproductsfourproducts;outofthat,welaunchedonlyoneproductin
H1.So,therewassomeinventorypileuponaccountofthatandalsotherewassomereceivablepileupwhichwasthere.
So which is expected to rather that is as far as receivable is concerned, it is already getting corrected. As far as inventory is
concerned,oncewegettheproductlaunchedinH2,thatinventoryalsoweexpecttoliquidatetherebywe'llgeneratethecashout
ofthat.
Okay,sir.Andsir,finallyonequestiononyourH2performance.So,isitbasically,ifIseethelastseveralquarters,youmustseen
pricingenvironmentasnegative,Imean,pricinghasbeenadragongrowth,right?
That'sright.
Do you think that could change? And if you can, share, like, broadly the pricing trend across key business segment, like what
percentageincreasewehaveseen.
We'vementionedasfarasthemainproduct,whichisMethylprednisolone,lastquarteralsowedidmentionthis,therewasaprice
reductionwhichhashappenedabout20%comparedtothepreviousquarterpreviousyear,whichwe'vesharedinthebeginning
itself,whereasthereispricepressurewhichisexpectedinMethylprednisolone.Thathashappenedbecausethereisanewentrant
inthemarketinQ1.Thereby,thepricehascomedownby20%.
Apartfromthat,inSartans,inAPI,thepricewasunderpressurebecauseoftheproductwhichhasgoneoffpatentbecauseof
which,therewasnewentrantswhichwerethereinthatbusiness.
Andthethirdis,inatorvastatin,therewasapricereductioninDosageFormbusiness,becausetherewasapricereductionin
API. So, that has that was a consequence effect which has happened in the Dosage Form business because of the API
reduction.So,becauseofthat,thesalevalueinDosageFormalsohascomedown.
Going forward, we don't expect further reduction in the Methylprednisolone and in also Sartans. But in Sartans, we continuously
reducing cost and we have done a substantial reduction in our cost and improvement in capacity, which by which we are able to
maintainhighermarginsinourSartanbusiness.
Andsimilarly,incaseofatorvastatin,thepriceswillnotgoingtogofurtherdown.Thepricesaregoingtobestablefromhereon.
SimilarlyinvitaminB3,thepriceswereincreasedinQ3aswementionedlastquarterandthepricesincreaseisstillcontinuing.
AndwehopetohavebetterrealizationinH2.
IfyouseeinLifeScience
And Pyridine business also, again, as we have said the prices are strong. And there is a strong demand for the product and the
priceshavealsogoneupandthatstillremainswhichwestillgoingtoenjoyinH2.
If you see in Life Science Ingredients business, we have shown a growth of 30%. It is mainly, about 20% growth have come on
accountofvolumeandonaccountpriceincreasealsowegotabout10%.
Okay.Okay.
That is mainly because the Pyridine business is doing fine. And also the Nutrition Ingredients business, the price escalation
whichwehavetakenthatiscontinuingandtheNutritionIngredientsbusiness,thecapacityutilizationisgoingverywellandwe
expecttohave100%capacityutilizationbyyearend.
So,overallyouexpectsecondhalfEBITDAmargintobebetterthanwhatyou'vereportedsofar?
Absolutely.
GainsandEBITDAmargin,both.Andwedon'texpectfurtherpricedropinIndiaforourproducts,whichwehavementioned.
Therearethreereasons.One,asfarastheAPIandDosageFormisconcerned,thenewlauncheswhichweexpectthatiswhich
has been moved from H1 to H2, that is expected to get launched. And also new geographies, rest of the world, where we are
enteringintoDosageFormbusinessisyieldingverygoodresults.
And the capacity utilization in Life Science Ingredients, mainly in Pyridine and also in Nutrition Ingredients and acetyl, all three
businesses, the capacity utilization is going up very well. And the Symtet, the capacity as of today is utilized about 10% to 12%.
Overall,theyear,weexpectabout15%forthisyearcomparedtoourearlierprojectionofabout20%,becausestilltheplantisyetto
stabilizetooursatisfaction.So,butnextyearweexpectSymtetalsotogetstabilizedandhaveahighercapacityutilization.
AsfarasthepricingisconcernedinSymtet,thepricinghasimprovedverywellandthequalityoftheproductisalsoverygood.Only
thingis,thestabilityoftheplantwhichwehavetotakecarewhichisbeingaddressedveryvigorously.
Okay.Sir,justonefinalquestiononthisamortizationofforexlossof39crores.Howwhatisthedurationof,tenureofthisloan
overwhichwewillbeamortizingthis?
Thisisbalancewehaveanotherthreeyears.Itisafiveyearloan.Thebalancewehaveanotherthreeyears.
Okay.Thankyou,sir.
Thankyou.
Operator
Thankyou.OurnextquestionisfromAnanthaPadmanabhanofCanaraRobeco.Pleasegoahead.
AnanthaPadmanabhan,Analyst
Hi.Goodevening,sir.
Goodevening.
Could you tell me what would be your net debt at a consorted level after you have completed listing or do you have any specific
targetinmindorapostcompletionofthistransferandlistingofpharmaceuticalbusiness?
Asoftoday,thetotalconsolidatedindollarterms,ifyouseeourpresentationalsowehavegiven,indollarterms,wehaveabout
$582millionindollarterms.Andinrupeeterms,wehaveabout761crores.Thetotalconsolidateddebtofthecompanyisabout
$702million.Weproposetoraiseabout$250millionto$300millionandusethatentiremoneytoreducethedebtofthecompany
onaconsolidatedbasis.
Theentireamountwhichyou'llberaisingwillbeusedtoreducethedebtofthecompany?
That'sright.
Yeah.Andonaseparatedbasis,asof
Like we've mentioned, 1,145 crores, the transfer of businesses, the Singapore company will pay to India that is approximately
equaltoabout$190million.So,thatwillcomeintoIndia,thereby,Indiandebtasoftoday,thedollarIndiandebt,wewillbeina
position to reduce it to about $200 million approximately. That will shift the dollar debt from India to Singapore, thereby,
reducingtheforexfluctuationoftheconsolidatedbasis.
Okay.So,basicallyyour
And also, interest rate also will go down, because rupee rate of interest at present we are paying 12%, which will also be partly
replaced.
Okay.So,afterthetransfer,itistherupeedebtthatwouldmainlybereducing,youmeantosay?
No, partly dollar, partly rupee, but it will be a mix of both. But, both at a cost of debt and also theoverall debt level both will
comedown.
Okay. And post this transition, would the ratio of rupee debt and dollar debt remain the same or would the rupee debt ratio of
rupeedebttototaldebtgoout?
See,thewholeidea,actually,wearedoingthisforexfluctuationaccountingbasedontheaccountingstandardrequirement.
But,itisifyouaskasimplequestion,isitareallossforthecompany,theansweris,simpleno.
Correct.
Thereasonforthatiswehavemorethan$500millionexports.So,ifwedon'ttakethedollardebt,thenweareexposedtomoreof
a rupee exposure, becausethiscompany's international businessis 75% including the exports. So that way, if you see typicallythe
balance sheet of the company is a dollar balance sheet. But, because of the accounting standard requirement since all the dollar
debtistranslatedintorupee,weputthisexchangefluctuation,foreigncurrencytranslationaccountormarktomarket.
Correct.
But,otherways,therupeeis45or52or68,wedon'thaveanymajorissueinsettlingthis,receivingthedollarsandpayingoff
thedollars.
Correct. Okay. So, basically, post this transfer, the total exceptional items which has been causing quite a few quite a bit of
fluctuationinthefinalreportednetprofit,thatwouldreducetoalargerextent?
Absolutelyright,absolutelyright.
Okay.Thatwouldbegood.That'sallfrommyend,sir.
Thankyou.
Operator
Thankyou.OurnextquestionisfromPrafulBohraofNirmalBang.Pleasegoahead.
PrafulBohra,Analyst
Yeah,hi.Thanks.Sir,onthedilutionwhichwillhappeninSingapore,oncethelistinghappens,sirwouldtherebeanyimpactonthe
wouldtherebeanysortofdilutionintheparent,Imean,justformyunderstanding.
No, there will not be any dilution at the parent level. As of today, Singapore company is held 100% by the parent company. The
dilutionwillhappenonaccountofraisingthemoneyatSingaporelevel,whichisa100%subsidiarywillbecomedilutedsubsidiary.
PrafulBohra,Analyst
Okay.And
Attheparentlevel,therewillnotbeanydilution.
PrafulBohra,Analyst
Okay.Andso,Imeanthis,theamountwhichispaid,sorightnow,theentirePharmaceuticalsandtheAPIbusiness,isitinSingapore
orImean,everythingthatpartoftheworkisbeingdone,right?
Yeah.Thatisthere.Onceweraisethemoney,wewantedtocompletethetransactionaftertheshareholderapproval.
Actually,70%isalreadythereinSingapore,30%ofthebusinesswhichisthereinIndiaisbeingtransferred.
AtAPIbusinesses.
APIindustries.
PrafulBohra,Analyst
Okay.Andsir,whatstagesareweinwithregardstothislisting?Imean,arewealreadyfiledfortheTRHforyourwhatstageare
wein?
First,ourobjectiveistoraisealoan,completethetransaction,afterthatraiseequity.Thatistheobjectiveonwhichweareworking.
PrafulBohra,Analyst
Okay.Andthiswouldtakehowmuchtime,theentireprocedure?
Itshouldbe
Ithinksixtosevenmonths'time.
Yeah.
PrafulBohra,Analyst
Sorry?
Sixmonths'time.
PrafulBohra,Analyst
Sixmonthstime.
Aboutthreemonthsfordebtandmaybesubsequentraisingofequitymaybeanotherthreetofourmonthsitdependsupon.
PrafulBohra,Analyst
So,justthreemonthsdebtwouldbeintheSingaporeentity,right?
Correct.
PrafulBohra,Analyst
Okay.Andhavewealreadytieduporarewealreadyinthefinalhavetheyalreadyfinalizedthebankers?
No,weareworkingwiththebankers.We'reworkingwiththebankerstoraisethisdebt.
PrafulBohra,Analyst
Sure.Okay.Andsir,justtoreconfirm,yousaidMethylprednisolonepriceshavefallenby20%yony,right?
That'sright.
PrafulBohra,Analyst
Tilldate.Andyoudonotexpectanymorecompetitiontoenterinhere?
That'sright.
PrafulBohra,Analyst
Okay. And sir, the remaining debt that we are transferring from India to Singapore, so the I mean, just from an accounting
perspective,thiswouldnotbeapartoftheP&LanymoreanditwoulddirectlyflowtotheBarasat,isitright?
That'scorrect.
PrafulBohra,Analyst
Okay,okay.Thankyou.
Thankyou.
Operator
Thankyou.().OurnextquestionisfromKrishnaKiranofICICIDirect.Pleasegoahead.
KrishnaKiran,analyst
Yeah. Thanks for taking my question. Good evening, sir. Sir, one question regarding our Pyridine business. Can you just explain
thatPyridineChinahasimposedantidumpingduty?
Antidumping duty which has been imposed 24.6% on Pyridine imports from India is applicable only for material which has been
importedbyChinafordomesticconsumption.Inourcase,itisabout60%to70%isdomesticconsumption.Whereas,ifthematerial
isusedforreexport,thatisnotapplicable.Sonetnet,wehaveaneffectononlythat60%to70%ofthematerialwhichhasbeen
exportedtoChina.
AttheMinistryofCommerce,whichhasimposedthisantidumpingduty24.6%,whichwaseffectivefromlastquarter,forwhichthis
P&Laccountwhatwehaveproducedasoftodayisfullyaccountingtheeffectofantidumping.
Sir, what I was trying to understand that Pyridine whatever sales which we cloaked during this quarter, which is net impact of
24.6%andincreaseintheprices?
Yes.TheincreaseinpriceshavecompensatedmorethantheantidumpingdutyasoftodayinourP&L.
Okay,sir.Okay.Andsir,secondly,howaboutRubyfill,weareexpectingaroundFY'15launch.So,whichpartofthisyearwouldbe
thislaunchinUSaswellasinIndia?
No,asfarassee,weareveryconfidentweshouldbeinapositiontolaunchinFY'15,whichpartitisverydifficultdependsupon
the clearance by the FDA and all those things, which we cannot comment on. But, the progress is going very well and we the
market size of that product is more in US about $70 million plus Canada and also we expect it is not only in US, we expect the
producttogetlaunchedinCanada,SwitzerlandandinGermanyinFY'15.
Therealsowehavefiledforthe(inaudible).
Sorrysir,Icouldnotgetit.
Wehavefiledtheregistrationoftheproductalreadyinthoselocationsalsowhichweexpecttolaunch.
Okay, okay. Fine. And sir, regarding there is an article two days back in some of the magazine stating that we are going to
expandourformulationcapacitybothinIndiaandabroad.So,butduringthiscallyousaidwewillbespendingonly250crore.Can
youjustclarifymoreonthat?
That 250 crores including expansion of capacity of packaging line in US and also the formulation capacity which we already
expandedinthefirsthalfinourRoorkeefacility.
Okay.So,this250crorewhichisnetofalltheexpansions?
Yeah,afterincludingalltheexpansions,yes.
Okay,okay.And
Itincludesalltheexpansions.
Okay. Fine. And sir, coming back to your pharmacy sorry, pharma segment business, margins were typically slowly it is in the
rangeof24to25andtypicallyweusedtocloakitbeforearoundmore28%,29%.So,nowthepricefallinoneofourkeyproductis
stabilized.Soandgoingahead,we'regoingtolaunchnumberofproductsacrosstheglobe.So,whatkindofmarginimprovement
wecanseeinthepharmacybusiness?
Weshouldexpectintherangeof25to27thatrangeinthepharmaceuticalbusiness.
Okay.Andoverallbusiness,anyguidance,sir,marginguidance?
Overallbusiness,wehavenotgivenguidance.
But,aswehavesaid,H2isgoingtobebetter,muchbetterthanH1.
Okay.Andsir,howmuchpartofyourrawmaterialcostisforex,Imean,theinput?
See,that'sagoodquestion.Wedon'thavethefiguresavailablewithusnow.
If yousee the raw material consumption, it is about 40%. In the 40% to those sales.Out of that, theimportsversus domestic
dependsuponthemainlyitwillvarybasedonwhetherwearebuyingalcoholdomesticallyorimportingfromBrazil.
Okay.
So, it is very difficult to exactly say, whichever see, after computing the net import price versus domestic price, whichever is
better,wegobythat.Itisnotexactlyimportversusthedomestic,thisthing.So,netnet,whicheverismorecostadvantageoustous
forimportofalcoholordomesticpurchase,wedothat.So,thatiswhywearenotabletoexactlyquantify.Forexample,lastyear,if
youtake,itisabout15%isimport,thebalanceisdomestic,likethat.
Okay. Okay. And sir, lastly, just for clarification, during this call,I mean, Ijust wantto check whether Iheard something right or
wrong. We are planning to raise $250 million to $300 million through diluting stake in pharmacy business, is this right sorry,
pharmasegment?
Yeah,inoneofthesubsidiarieswhichisinSingapore.
Okay.Fine,sir.Thanksverymuch.
Thankyou.
Operator
Thankyou.OurnextquestionisfromParasAdenwalaofCapitalPortfolioAdvisors.Pleasegoahead.
ParasAdenwala,Analyst
Yeah.Goodevening.
Goodevening.
Ijusthadaverybroadquestion,largelyonstrategy.ThewaywereallyunderstandLifeSciencesisthefactthatit'sinherentlyare
veryprofitablebusiness,betitthePharmaceuticalsorbeittheLifeSciencesasyoumentioneditintherealsense.But,lookingat
thewayJubilanthaskindofdoneinthelastfourtofiveyears,Ithinktherehasbeenofgradualdecline.So,Ijustwantedtoknow
fromthestrategypointofwhatisthatledtothisdeclineandwhatisitthatwillreallychangethefortuneofthecompany.
See,one ofthereasonwhytheprofitabilityofthe businesshascomedownisbecauseoftwoinvestmentswhat wemadeone in
Niacinamide, which is the raw material for that when we manufacture Pyridine, twothirds is Pyridines, onethirds is the Beta
Picoline, that Beta Picoline earlier we were selling in the market and realizing the cash. But, as a strategic investment, we made
thatwehaveexpandedthecapacityofvitaminB3by10,000tonnes.
So,therewasahugepricepressurewhenourproductwentintothemarket,therewasahugepricepressurewhichwasthere.Last
year, we made a negative EBITDA in that business of about 20%. So, which on account of the strategic investment, we it is
strategicallydecidedtoinvest,becausewehavetherawmaterial,wehavewewantedtodotheforwardintegration,wefeltthat
wearetherightpeopletocontinueinthatbusinessandexpandit.So,thatiswhywehavedonethat.
So,butthisyear,thatsamebusiness,whichwas20%negativeEBITDA,whichhasbecomeorwhichisexpectedtogiveatleast7%to
10%positiveEBITDAbecausewealreadytakenapriceincreasetwotimesinlastyearinQ4onceandthisyearinQ1once.So,that
hasturnedthebusinessfromnegativeEBITDAtopositiveEBITDA.SothatthenthenegativeEBITDAwastherethePyridinebusiness
earlierwhichwasreportingaverygoodprofitabilityhascomedownbecauseofourstrategicinitiativeone.
ThenextistheinitiativewhatwehavetakenforSymtet,whenwewantedtowhenweexpandedthecapacityofPyridines,we
wanted to use that additional capacity of about 8,000 tonnes, which we've expanded for our Symtet business. Because of
nonstabilization of the Symtet plant, it has got delayed for more than about one year three months. Because of that, as of
today,wearenotevencoveringthetotalcostofSymtet.So,wehaveanegativeEBITDAthereasoftoday.
Sinceitisastrategicinvestment,oncetheplantisstabilized,thepriceincreasehasalreadytakenplaceinSymtet,weexpectagood
turnaroundoncetheproductionlevelsareatasizablelevels.So,boththestrategicinvestmentwhatwehavetakenlastthreeyears,
these two investments what we have taken, which is first one Niacinamide which has started turnaround very well and which is
expectedtoaddtotheEBITDAandtheSymtetwhichisexpectednextyearonwardstoaddtotheEBITDAthereby,we'llgobackto
thenormallevelofourEBITDAmarginsofmorethan20%inourLifeScienceIngredientsbusiness.
Theotherpartis,lifescience,overallifyoutalkedaboutLifeSciencesmargin.Inthelast,especiallyifyoulookatit10yearswhenwe
buildthepharmabusiness,butinthelastfiveyears,wehavegonefromIngredienttoActiveIngredientsandfromActiveIngredients
to Dosage Forms. So, we have continuously valueadded and increased margin if you really look at it in the pharma side of the
business.
So, longterm, we haveinvestedinlot of new products whichare now coming for approvalboth inthe specialty sideand in the
solid dosage side. And this will strategically give us much higher returns in the future and increase our margins. So, if you talk
aboutstrategy,wehavegoneintovalueaddedproducts,goneintosizeswhichareglobal,whichisgivingusglobalstatusalsoas
numberoneortwo.
So,Ithinkthat'swhereifyoulookatJubilantLifeSciencesasastrategy,isrightnow.
Intermsofyoursizeofinvestmentsinthetwoareasthatyoumentioned,asapercentagetogrossblock,whatwouldbetheamount
orwhatwouldbethepercentagelike?
Itisabout11%to12%.
This11%to12%investmentingrossblockledtoallthisdeclineinthebusiness?
Yeah.Because,ifyouseethetotalgrossblock,itisabout5,800crores.So,outofthat,thereisahugegoodwillwhichisthere.
Okay.
becauseoftheacquisitions.So,ifyouseeifyouremovethegoodwill,itisabout3,800croreisthenetblockwhichisthereasof
todaywhichwearecarrying.
Okay.So,ofthenetofgoodwill,outofthe3,800crores,youhaveabout500croreswhichcomesinwhichwasdedicatedfor
thistwoinvestments,right?
Yeah.
Yeah.
Okay.Alright.So,withthistwobusinesseskindofturningaround,doyouthinkyoucangobacktoyourreturnoncapitalemployed
thatweenjoyedin2008ofabout18%to19%?
Definitely.
Andinwhatperiodoftime?
ByFY'15,weshouldbethere.
FY'15?
Yeah.
Okay.
'15endweshouldbethere.
That'sa
BecausethewholethingisthatSymtetwhichneedtobestabilized,afterthat,Ithinkwearethere.
Okay.
'15,actuallywementionedthat'15,thatwillbeasizablecapacityutilization.So,weshouldasoftoday,ifyousee,itisintherange
ofabout12%whichisexpectedtogotomaybeanother2%,3%.Intwoyears'time,weshouldbetheretheoldlevelof18%to19%.
Okay.Andwhatpercentageofyourbusinesswouldyousayisvalueaddedandpredictableandhowmuchiskindofcommodity
kindofbusiness?
No,andalsoonemorewhenwetalkedaboutallthisROCEnumbersandallthosethings,itisdefinitelynotaguidance,itis
justanindicative.
Sure.Iappreciatethat.Sure.
Yeah.
But,asacompany,Iamsureyourrecenttarget
Ratherthecompanywishestogettothatlevel,becausewemadetheinvestment,we'vewaitedenoughtimeforharvesting
thatinvestment.So,thatistheobjectiveonwhichwehaveinvested,wewantedtobethere.
Okay. Sure. And whatpercentage of your businessiscommodity kind ofbusiness, where thereis toomuch of price fluctuation
andthereislowpredictability?
LifeScienceChemicalsbusiness,whichisabout1,100crores,1,200croresbusinessiscommodity.Restofthethings,Idon'tthinkitis
acommodity,becauseithasacustomizedrequirementsoritisapharmaceuticaloritisNutritionIngredients.
ButinLifeScienceChemicalsalsoweareleadingplayers,top10producersofbothEthylAcetateandAceticAnhydridein
theworld.
Andyouknow
Andwe'reexportingtomorethan35countries.So,wehaveaveryexcellentpositionindiversemarketbase.
Sure.
Andyou'llbeknowingthateventheAceticAnhydridewhichisusedforparacetamolandaspirinmanufacturingpredominantlyand
EthylAcetatewhichisusedbythepharmaceuticalbusinessesforasasolvent.So,therealsoitisyes,bythenatureofthebusiness,
itiscommodity,butitismoreofaspecializedutilizationwherewearein.
So,withsameamountofcertainty,youcansaythatsinceatleast70%ofyourbusinessispredictable.Youshouldbeabletokindof
seeyourselfintothefutureforthenexttwotothreeyears,right?
Yes.
Okay. All right.You've mentioned aboutthisproductcalled Methylprednisolone, what percentage ofyour business is that in that
product?
See,productwisebusinessinformationwedon'tgive.Eachproductwisehowmuchitcoststhetotalsales,wetrytoavoid
Profitabilitywise,ithasverygoodprofitability.Wehadapriceerosion,butitisalreadystabilized.So,wedon'tseeanymoreprice
erosionthere.
Okay.ButIamsureitmustbemeaningful,becausethatiscertainlyhamperingyourprofitability.
Itisoneofthemainproductsforus.
Okay.
Itisnotthemainproduct,itisoneofthemainproducts.
Okay. And finally, this I am trying to understand the rationale behind your Singapore listing and transfer of business. So, what
you'reactuallytransferringisjust30%ofyourbusinessinIndiatoyourSingaporeentityandyou'regoingtobelistingitoverthere
and you're planning to raise about $150 million to $300 million. So, what is the value that you're ascribing to the pharmaceutical
business?
We'llnotbeinapositiontocommentonthatatall.
We'llnotliketomakeanyspeculativecommentonthat.
Okay. No. Okay, let me just kind of ask you, since I am sure you would have done your research in terms of the valuation of
variouspharmaceuticalcompaniesinSingaporeexchange.So,whatarethenormalmarketcaptosaleskindofmultiplesand
No,wedon'twanttotalkonthatatall.Wecan't.
Isee.Okay.And,lookingatyourdebtlevelsandall,doyouthinkyoucanverycomfortablyraise$250millionto$300million?
Weareverycomfortable,yes.
Butyoudidmentionthatyoubeforeyoudothat,youarelikelytoincreaseyourdebt,you'regoingforsomemoredebtright
now,whichisgoingtobeshortterminnature.Sohowmuchwouldthat
Netdebtwillbesame.
They are not increasing the debt, we are increasing the debt in the Singapore subsidiary and bringing that money to India to
reducetheIndianForeigncurrencydebt
So,consolidated,it'snotreallyincreased?
Itwillnotincreaseatall.
Itwillnotgoup.
Okay.Alright.Ithinkthat'sprettymuchit.Isincerelyhopethatyoucanreallyyou'resuccessfullyinyoureffortsandwecanyou
getthevaluationthatyoureallydeserve.
Thankyouverymuch.
Thankyou.
Operator
Thankyou.Ladiesandgentlemen,thatwasourlastquestion.InowhandthefloorbacktoMr.Bhartiaforclosingcomments.
Thankyouso much.AndIwould liketothankyouallforjoininginthis conferenceandwishyouallaveryhappy Diwali.Thank
you.
Operator
Thank you very much. Ladies and gentlemen, on behalf of Jubilant Life Sciences Limited, that concludes this conference.
Thankyouforjoiningusandyoumaynowdisconnectyourlines.

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