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Evolving continuously

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By Pratit Nayan Patel

Table of Contents

Granules India Ltd.

Granules India Limited is a large-scale vertically integrated Company founded in 1991 manufacturing Active Pharmaceutical Ingredient (API), Pharmaceutical Formulation Intermediate (PFI) and Finished Dosage (FD). With a strong presence across all three vertical, the Company has created a leadership position in the off-patent drugs segment along with ensuring a strong presence in ‘first line of defense’ products such as Paracetamol, Ibuprofen, Metformin and Guaifenesin. The Company has a global presence across 60+ countries servicing over 250 customers. With exports comprising over 80 percent of total revenue, Granules is today the preferred supplier for some of the world’s leading pharma branded and generics companies. The Company possesses one of the largest PFI and single site FD facilities in the world. It is also home to one of the World’s largest Paracetamol API facilities. Company is having four operational plants – three located in Hyderabad (Jeedimetla, Bonthapally and Gagillapur) and one in Vizag Pharma City.

Equity capital & dividend

The Company’s equity is Rs25.42 crore while it has Evolving continuously 1huge reserve of around Rs1504.05 crore. Promoters hold 42.90%, FIIs hold 12.77%, other DIIs hold 3.01% while investing public hold 41.32% stake in the company. It has paid 50% interim dividend for FY19 and declared 25% final dividend for FY19.

Financials

Granules India has recorded another quarter of continued growth in revenue and profit in the fiscal 2019 on back of inherent stability of the molecules in its portfolio. The primary revenue growth driver is US formulation business, which complimented in overall improvement in profitability margins compared with same quarter of the previous financial year.

It had reported strong numbers for Q4FY19. Its PAT zoomed 213.32% to Rs64.04 crore against Rs20.44 crore on 21.73% higher sales of Rs613.32 crore fetching an EPS of Rs2.52. The Company has posted excellent numbers for FY19 also. Its PAT zoomed 78.30% to Rs236.41 crore as against Rs132.59 crore in FY18 on 34.72% higher sales of Rs2279.20 crore fetching an EPS of Rs9.30. This year the Company has witnessed improvement in Debt profile, Working Capital cycle, and culmination of major capex implementation phase. The management has assured to leverage these assets to create value for its stakeholders in long term. During the year the Company along with its US subsidiary has filed 12 ANDAs, 2 DIV/F5 and 2 CEPs.

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Our Take

Over the years, Granules has evolved itself from just an API manufacturer to a Company that has a strong presence across the value chain in the pharmaceutical industry. It has successfully established itself as a complete global pharmaceutical player with presence in APIs, PFIs and FD. The Company has adequate focus on top line growth and margins. This has ensured value on the table for all its stakeholders – vendors, customers, employees, the government and shareholders. Currently, the stock is trading at just 12x. Looking at the trend we are quite bullish on GIL. Investors can accumulate this share between Rs110-95 in staggered manner for an upper target of Rs150-160 in next 15 to 18 months. However, they must follow a strict stop loss of Rs85.

Industry Overview

India is among theEvolving continuously 3 leading participants in the global pharmaceutical market accounting for around 3.1 to 3.6% of the global pharmaceutical industry in terms of value, and 10 percent in terms of volume. India’s pharmaceutical export stood at $16.4 billion in 2016-17 and is expected to grow by 30% to reach $20 billion by 2020. India is the second largest contributor to pharmaceutical and biotech workforce in the world and is set to become a major global market by 2020. India exports drugs to more than 200 countries, with the US being the key export market. Exports contribute over 50 percent to the Indian pharmaceutical industry’s turnover. Around 20 percent of exports are accounted for by the generic drugs in terms of volume, which is expected to expand further in the years to come, making India the largest contributor of generic medicines in the world. India’s export of pharmaceutical items reached US$16.64 billion in FY17 and US$6.4 billion between April and September, 2017. This decline was because of price erosion in the U.S. generic market, increased competition, no major contribution from any blockbuster drugs went off-patent and various regulatory issues faced by the Indian pharma companies. The Indian pharmaceuticals industry appears set for a sharp turnaround in fiscal 2019 on the back of strong growth in the overseas market, particularly in regulated markets of the US and the EU, aided by continued healthy growth in the domestic market. Although exports account for 50% of the revenue of the Indian pharmaceuticals industry, its contribution at the EBIDTA level is higher owing to relatively superior realisations from products sold in regulated markets.
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