Granules Charts Aggressive Growth Story For Next 3 Yrs Focusing On US Generic Biz

Drug maker Granules India has set an ambitious target of achieving over 20 percent revenue and 25 percent net profit growth on annual basis for the next three financial years led by new launches in the US and capacity expansion.

Granules said it had filed 12 abbreviated new drug applications (ANDA) in FY19 and indicated it will file a total of 20-22 ANDAs from both India and Virginia facilities put together over the next two years.

Hyderabad-based Granules makes active pharmaceutical ingredients (API) or bulk drugs, intermediates and finished dosages, and is the world’s leading producer of paracetamol.

The company has built large capacities for paracetamol (pain and fever relief), ibuprofen (pain relief), metformin (anti-diabetes), guaphenesin (cold & cough) and methocarbamol (muscle relaxant) accounting for 86 percent of Granules revenues. The company had recently added Cetrizine and Fexofenadine to the portfolio and is now focusing on complex products.

US generics focus

The drug maker that relied on high volume and low margin products over several years is making a concerted effort to break into the relatively high-margin US formulations market through acquisitions and licensing agreements.

To beat pricing pressure in the US market, the company is focusing on generic drugs where it has built significant backward integration capabilities in the form of active pharmaceutical ingredient (APIs) and intermediates. The company also built a front end sales presence in the US and is increasingly looking at over the counter and prescription markets.

For the US build-up, the company over the years has borrowed heavily to build USFDA compliant facilities and ramp-up ANDA filings through R&D investments. The company guided Rs 150 crore capex in FY20, of which Rs 80 crore is maintenance capex in India and Rs 70 crore to invest in the US facility expansion.

Debt & promoter pledge issues

The company has a net debt of Rs 908 crore of which Rs 537 crore is long-term debt. The management said it intends to repay Rs 50 crore debt in FY20.

Large share pledging by the promoters has remained a concern for investors of Granules. The company said it’s in the process of raising funds to reduce the pledge.

“I did pay back some of my personal debt and reduced the pledge from 60 percent to 43 percent of my shareholding. As already shared with some of you, I’ll be reducing the debt and pledge further in the next 2 months. Before the end of fiscal year ’21, I expect the pledge to be 0,” Krishna Prasad Chigurupati, Chairman and Managing Director of Granules said, in the company’s recent earnings call. – Money Control

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