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Q&A: T S Rangan, Group chief financial officer, Strides Arcolab

'We are bullish on the prospects of BT'

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Debasis Mohapatra Chennai
Last Updated : Jan 20 2013 | 1:49 AM IST

Mid-size pharmaceutical company, Strides Arcolab expects to clock a 25 per cent growth in revenue in the current calendar year on the back of high growth from its specialties business. It also sees biologics as the next growth area after acquisition of biotechnology firm, Inbiopro recently. T S Rangan, group chief financial officer of Strides Arcolab discussed with Debasis Mohapatra the future growth prospects along with concerns of the company.

Which are the factors that have contributed to the growth in profitability in the last calendar year?
Growth in profitability is attributed to new product launches in the regulated market in specialties segment. Further, sound licensing income has also contributed towards the bottom line. We have received around Rs 362 crore from licensing deals with our foreign partners in 2010, which is a 72 per cent rise over 2009 period. Our extended collaboration with Pfizer for US and extended geographies like Europe, Japan, Australia and New Zealand have also contributed to the growth. Sound sales numbers from Austalasia region is another factor behind this growth.

What is the net debt of the company as of now against previous year? & What is the debt,equity ratio as of now?
Net debt of the company stood at Rs 1051.5 crore by end of December, 2010, which includes FCCB(Foreign Currency Convertible Bonds) repayment obligations. The debt was around Rs 1010 crore in 2009 period. As far as debt, equity ratio is concerned, we are at a comfortable level of 1.30 by December, 2010 against 1.64 per cent in the corresponding period last year.

What was your interest charges for this calendar year? How do you see it in 2011?
Interest charges for the calendar year was at Rs 146.6 crore, which was 8.3 per cent of the total revenue of the company during this period. Going ahead, interest obligation is expected to be lower due to strong cash flow from various verticals. After meeting all our obligations and investment towards future growth, we do expect interest charges to be around six per cent of the total revenue in the current calendar year for which the company has done its debt restructuring.

How do you see the growth prospects of the company in the current calender year? Which verticals will be major area of focus for the company?
Growth prospects for the company is bright and that is being reflected in our guidance for 2011. We expect our specialties business to grow by 45 per cent in 2011 with a operating profit margin range of 28-30 per cent. Similarly, our pharma business is expected to grow by 12 per cent with a operating profit range of 13-15 per cent.

Major focus areas of our operation will be specialties in which we have already entered into bio-similar market. This entry also has given us a three year head start over others.

What are the challenges before the company in sustaining the present growth momentum? Are they regulatory, financial or others....
Major challenge will come from receiving regulatory approvals as the industry is strongly controlled by regulatory authorities. So, all future growth as indicated will depend on timely regulatory approvals. As per our estimates, commencement of commercial supplies to US market from new sterile complex in Bangalore by second half of 2011 will be crucial to realise the milestones for the current calendar year.

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Strides acquired a Bangalore based biotechnology firm, Inbiopro recently. What is the game plan of the company in the biotechnology space?
We are bullish on the growth prospects of biotechnology industry in the global market. Our recent acquisition of Inbiopro has marked our entry in to the biologics. Inbiopro has a pipeline of eight products with a market value of around $28 billion. These products are expected to be commercialised in 2013.

What was the amount of license payment in 2010? & How much of it has been utilised towards acquisition repayment?
We have received close to $100 million on account of licensing deal in 2010. Out of this net proceeds, $47 million was used to redeem FCCB bonds. Around $35 million was received in the last week of the year and is sitting as cash in the balance sheet. Remaining amount has been utilised for operations and repayment of high cost debt.

Are you mulling to raise more funds for further business growth?
As of the balance sheet date, we have around $34 million of outstanding obligations . However, we have enough cash in the balance sheet to take care of this obligation.

Going ahead, our guidance reflects strong performance in the current calendar year which will take care of our all future investments.

Any update on pledging of shares by promoters...
Pledging of shares by promoters have come down to 13.85 per cent by end of December, 2010 from 17.15 per cent in the corresponding period last year.

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First Published: Feb 28 2011 | 12:45 AM IST

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