Sun Pharma's Ebitda Margin Driven By India | NDTV Profit - video Dailymotion

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#SunPharma's margin continues to be driven by India, global specialty sales, says CFO C S Muralidharan.   Watch him in conversation with Monal Sanghvi.   Read: https://bit.ly/3SJFG7R

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00:00 Hello and welcome to NDTV Profit. I am Monal Sanghvi and we're going to discuss India's

00:05 largest drug maker that's come out with its results a day before and Sun Pharma of course

00:12 with its profit up 17% almost and margins coming in at a 27% on the bank of a strong

00:20 show in the US and India markets which make up for a total of 65% of the company's revenue.

00:26 The global speciality sales were up 24% excluding a milestone payment that it received in the

00:32 quarter. Joining us we have Mr. C.S. Murlidharan, the Chief Financial Officer at Sun Pharma

00:39 Limited. Thank you so much for joining us today, sir.

00:43 It's our pleasure.

00:46 So I'm going to pick up from the global speciality which has been attracting a lot of interest

00:53 from investors. I mean that has been the differentiator for Sun Pharma, setting the bar higher than

00:59 most other companies. Currently the segment contributes around 19% to the total revenue.

01:06 So how is this expected to shape up over the next two to three years? Can we expect the

01:10 contribution to go up in terms of revenue and also in terms of the growth rate?

01:14 In terms of the global speciality revenues, if you look at about three to four years before,

01:20 it was constantly about 7% plus or minus. And today for the quarter if you look at overall

01:26 global speciality, it's almost inched up, upwards of 20%, almost there. We have been

01:32 consistently maintaining momentum and focus on this global speciality business and growth

01:38 rates have been ranging between 20% to 25% depending on the market and depending on the

01:44 quarter and the overall seasonal fluctuation. But our continued focus remains on this business

01:51 to grow further across the markets where we participate in this business.

01:56 So can you give us what sort of a contribution should we be looking at from the global speciality

02:01 business in the coming years?

02:05 We are not giving any specific guidance on any specific business segment as such. We

02:09 generally give the overall corporate groups revenue guidance.

02:12 Okay, sir.

02:13 However, we expect this global speciality business will increase as a percentage contribution

02:19 to the overall consulted revenues as we have seen in the past years.

02:24 Sure, sir. Sir, also there's been a couple of issues on product recalls throughout the

02:31 year that we've been hearing of and issues at Halol and Mohali are very well known in

02:39 terms of the USFDA. So would you be looking at setting up alternate facilities to make

02:46 up for these two or by when can we expect a resolution on this front?

02:52 So both on Halol and Mohali we maintain that we are continuously working on the remediation

02:58 process and at this point of time we are not able to commit exact timelines when the complete

03:04 resolution will happen or the re-inspection will happen on these sites.

03:11 Okay, sir. And so what about the product recalls? I mean that's associated with plants. So do

03:16 we see those going down? Are we seeing some moves from transfers?

03:21 Yes, see, we are talking about product recalls?

03:27 Yes, the ones in the US.

03:30 I think product recalls is part of integral to this overall pharmaceutical business and

03:36 we at this point of time would not like to attribute any specific site as such.

03:42 Okay, sir. So there's been a lot of conflict around the Red Sea and there's this talk of

03:49 maybe freight prices going up, raw material costs going up. Are we going to see some pressure

03:55 on the cost front for Sunpharma?

04:00 So as far as the situation of Red Sea, we are continuously monitoring and we also mentioned

04:04 earlier in this call that our primary objective is to ensure continuity of supply chain and

04:10 availability of the medicines to our end customers. For this, if we are to move the channel of

04:17 transport, we will definitely do it. That's what we would like to comment at this point

04:22 of time.

04:23 So there's also a lot of anticipation building around Taro, since you revised the price for

04:32 the minority shareholders. What are your conversations on that front? Because from what I understand,

04:37 this could be the third attempt at acquiring the minority stake. Is it quite positive?

04:43 And if yes, if this were to go through, what would you do with the cash balance that you

04:47 will acquire from Taro?

04:51 So the process is on at this point of time. We have signed a deferred merger agreement

04:57 for acquiring the remaining stake that Sun just now owns. We have given the price of

05:03 $1.43 per share, which is about 48% premium to the unaffected price of May 25, 2023. However,

05:11 the merger agreement which we executed is subject to various closing conditions, including

05:15 shareholders approval. It's better to wait for to cross the finishing line before we

05:21 take up any other matter regarding Taro being a public company.

05:26 Sure, sir. So just trying to understand on the R&D front, what usually is our split between

05:33 the global generics and speciality? How do we allocate our budget? And are we looking

05:41 at any other inorganic opportunities as well?

05:45 So R&D split is approximately 60-40 overall I can say between generics and speciality

05:53 typically and growing more in favour of speciality as we continue to invest further in our global

05:59 speciality revenue, global speciality business as the key core driver. And for the current

06:05 year of course, you would have seen that for the quarter we are about 6.8% sales overall

06:09 R&D investments. And we expect also the full year to be somewhat closer to our lower end

06:16 of guidance of 70% which we had given earlier.

06:21 Okay, sir. So for the allocepia drug that is expected to come out, so by when will it

06:30 come out and how big is the opportunity since the time we made the announcement? We have

06:34 a couple of other competitor drugs also in the market. So how do you see this portfolio

06:40 shaping up?

06:41 So allopathy R&D we have already mentioned that we will launch on approval and the pull

06:52 apart date is of course July 24 which has been already shared and let us wait for the

06:57 approval and then take it forward from there.

07:01 So we will be launching on the timeline, right?

07:04 That's what we have maintained at this point of time.

07:09 So what kind of margins can we expect in the coming year with the India business also?

07:14 So there is a lot of conversation around NLEM seeing some drugs under NLEM seeing some pressure.

07:22 Also the overall, do you expect it, the India business to grow at the IPM levels, do we

07:28 expect to outpace the market? And on an overall basis, how would you guide for Sun Pharma's

07:34 margins in FY25?

07:37 So first taking the India related question, India business in Q3 of course grew about

07:43 11.4% year on year, strong performance across various therapeutic segments and our aim is

07:48 always to perform better than the market. However, it's very important to note that

07:53 the growth is substantially supported by the underlying volume growth as compared to the

07:58 India commercial market where the growth is majorly driven by the price.

08:02 When you come to EBITDA margin, however, we are not guiding for any EBITDA margins. We

08:09 continue to remain focused on cost efficiencies throughout the organisation. After even consolidating

08:16 the expense of newly acquired business like Concert and others, if you look at the last

08:21 8 quarters, our margins have been in the range of 25% to 26% plus. Our key co-drivers with

08:28 global speciality business, India business apart from other business have made them strong

08:32 growth momentum which is also a key factor for the resultant EBITDA margins.

08:36 Thank you so much sir, it was a pleasure speaking to you.

08:40 Thank you so much.

08:40 Thank you.

08:41 Thank you.

08:42 (dramatic music)

08:45 (chime)

Sun Pharma's Ebitda Margin Driven By India | NDTV Profit

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