capacity utilization news_jubilant

8/12/2019 Capacity Utilization News_Jubilant

1/23

JubilantLifeSciences Q22014EarningsCall 29Oct13

Operator

Ladiesandgentlemen,gooddayandwelcometotheJubilantLifeSciencesLimitedQ2andH1FY2014EarningsConferenceCall.

Asareminder,allparticipants'lineswillbeinthelistenonlymodeandtherewillbeanopportunityforyoutoaskquestionsafter

thepresentationconcludes.().Pleasenotethatthisconferenceisbeingrecorded.I'llnowhandtheconferenceovertoMr.Ravi

AgarwalfromJubilantLifeSciences.Thankyouandovertoyou,sir.

RaviAgarwal,Head InvestorRelations

Hello and a very good evening. I am Ravi Agarwal,Head of Investor Relations at Jubilant Life Sciences.And I extend awarm

welcometoallofyouforourQ2FY'14andH1FY'14earningsconferencecall.WehaveonthecalltodayMr.ShyamS.Bhartia,our

Chairmanand

Managing

Director

and

Mr.

Hari

S.

Bhartia,

our

Co

Chairman

and

Managing

Director.

We

also

have

Mr.

R.

Sankaraiah,

ourExecutiveDirector Finance.

WewillcommencewithopeningcommentsfromMr.BhartiaontheoperatingscenarioofkeybusinessandtheoutlookforH2FY

'14.Mr.Sankaraiahwillwalkyouthroughwiththefinancialperformanceduringthequarterandhalfyearendedprevious.Atthe

endofthemanagementpresentationweshallopenthefloorforquestionsandanswers.

Beforeweproceed,Iwouldliketoremindyouthatsomeofthestatementsmadeonthecalltodaycouldbeforwardlookingin

nature and adetaileddisclaimer in this regardhasbeen included in the InvestorPresentation that has been shared onour

website.

InowinviteMr.Bhartiafirstforhisopeningremarks.

ShyamS.

Bhartia,

Executive

Chairman

of

the

Board,

Managing

Director

Thankyou,Ravi.Goodeveningtoyouall. Jubilantcontinuestoreportrobustperformance.ForQ1 forQ2FY2014,our income

fromoperationswasat1,436crores.Thisishigher,thisis17%higheronyearonyearbasis.EBITDAinthesameperiodstoodat276

croresgivingusmarginsof19.2%.Revenuesfrominternationalmarketremainanimportantcontributortotheseresults,increasing

21%andgivinga75%sharetooverallrevenues.Theregulatedmarketcontributed60%oftheoverallrevenues.ThesharesofNorth

Americastoodat39%andthatofEuropeandJapanstoodat21%.

ForH12014,I'mpleasedtonotethattheincomefromoperationsstoodatINR2,793crores,up13%onyeartoyearbasis.The

correspondingEBITDAandEBITDAmarginstoodatINR518croresand18.5%respectively.

I'lltakeyouthroughthedetaildiscussionsontheperformancebeginning thispharmaceuticalsegment. InQ2FY2014, itshowed

revenuesof691crores,up6%yearonyearandgivinga shareof48%of theoverall revenues.Similarly, inH1FY2014,wehad

revenuesofINR1,343crores,up4%yearonyear.Revenuesharewasat48%totheoverallrevenues.

TheGenericsbusinessshowedvolumegrowthdrivenbyexistingproductsscalingup.APIbusinesswitnessedstrongvolumegrowth

inkeyproductssuchasSartans.Therewasadecline inSartanpricesdueto increasedcompetitionpostpatentexpiry.Priceshave

now stabilizedandareexpected to remainat current levels.Continuouscost reduction throughprocessandyield improvement

resultedinlowercostofproduction,higheroutputandcontinuedhighmarginsinourAPIbusiness.

Wehave28commercialAPIproductsavailableinthemarket.WelaunchedRizatriptaninUSA.Wealsofiledfiveproductsduringthe

quarteracrossUSA,EuropeandAsia.AttheendofSeptember2013,thecompany'sAPIproductspipelinestoodat629fillingsacross

regionsconsidering68cumulativeDMSinUSand30cumulativeCEPsinEurope.

Soliddosesfromformulationshowedanormalizedperformancewithcontinuingvolumeimprovement.Thelowergrowthinsalesis

mainlydue toprice reduction intheMethylprednisoloneandpostponementofthreeproduct launches inUS toH2FY2014.We

continuedtomaintainaleadershippositionintheMethylprednisolone,Terazosin,LamotrigineandCyclobenzaprine.

Methylprednisoloneprices

declined

due

to

entry

of

anew

player

in

Q1

'14.

However,

prices

have

now

stabilized.

We

saw

eight

launchesmainlyEscitalopram inCanada;willpatternasHCTZ inEuropeandAmlodipine inAfricaandfiveproducts inAsiaPacific.


2/23

Weexpectto launchfivemolecules inUS inH2 '14.There40commercialproducts inthemarketwith16 inNorthAmerica,26 in

Europeand16inrestoftheworld.

To give you an idea of the fillings,wehave filled Sartan in Europe and saw 26 new fillings in restof theworld acrossChina,

Columbia, Iraq,Malaysia,Myanmar,PeruandPhilippines.Weexpect significantgrowth in restof theworldmarketswithnew

approvals in Russia, Ukraine, UAE, Canada and Philippines. At the end of Q2, 2014, the company has total 676 filings for

formulationsinvariousregionsoftheworldcomprising:58ANDAsinUSand48DossierfilinginEurope.

Moving toSpecialtyPharmaceuticals. We sawnewcontracts totaling$25million inSterile InjectablesandOCLbusiness thereby

augmentingthepipelineofordersthatwehave.SterileInjectablesandOCLbusinesswasnegativelyaffectedwithQ1dueto inQ1

FY'14duetoturnaroundinsterileplant impactedtheproductionlossoffourweekswhichresultedinbusinessshiftintoH22014.

However,noneofthenewbusinessopportunitiesidentifiedforFY2014hadbeenlost.

OrdersinhandforexecutioninH2FY2014is$80million,30%higherthanH1FY2014.Wehaveastrongorderbookof$590

million,up 15% yearonyear. I amhappy to share that inMontreal our facility hasbeen recently reaudited and thiswas

completedsatisfactorily.Wearelookingforwardtovolumelettermatterhasbeenfullyresolvedinthenearterm.

InRadiopharmaceuticals, saleswere flat inH1 FY2014 due toproductiondelays in someof theproducts. This hasnowbeen

resolvedinSeptember'13andproductionisnownormal.AccordingtosalesinH2FY2014areexpectedtobehigherthaninH1FY

2014.

RegardingRubyfill,

we

were

successfully

accelerating

the

preapproval

evaluation

for

Rubyfill

that

was

included

as

part

of

acGMP,

whichisexpectedbytheendofQ3FY'14.

ThecurrentSPECTcardiologyUSmarketsizeis$70million,whichhasaverygoodgrowthrategoingforward.Wehaveasuperior

productwhichhasbeenfiledunder505(b)(2)andexpectsizablemarketshareinUS.WeexpecttolaunchRubyfillinUS,Canada,

Germany,SwitzerlandandIndiainFY2015.

The Life Science Ingredients segment delivered revenues of INR744 croreswithinQ3 FY 2014, representing a growth of 30%

yearonyear contribution tooverall revenues stoodat52%. InH12014, thebusiness increased [ph]24% to1,451crores from

1,172croreslastyear.

During the quarter, the PPES business witnessed very good volume growth and also better price utilization in Pyridine and

derivatives.IncreaseinendproductpriceshavestartedtohavepositiveimpactonthepricesofBetaand3CPs.

Ministryof

Commerce

Republic

of

China

has

imposed

24.6%

anti

dumping

duty

on

Pyridine

imported

from

company

for

domestic

saleinChina,forwhichthefinalorderisstillawaitedandtheimpactofthesamehasbeenchargedtofinancialresults.

Demandandthepricingremainsveryrobustforourproductsintake.Weareproducingbestinclassquality,receivedfirstorders

fromaEuropeanagromedia [ph].PlantatAcetate isyet tostabilize forachievingsizableproduction levelswhich lead to lower

revenuecomparedtoplan.

Capacityutilizationislowerduetoequipmentissuesinthefinalpurificationstep,whichisexpectedtoberesolvedbyQ4'14.Due

to lowercapacityutilization,wearenotable to recover fullcost.Expectcapacityutilization forFY '14 isabout15%,whichwill

improvesubstantiallyinFY'15.

InNutrition Ingredients,weexpect fullcapacityutilization forvitaminB3byyearend.WesawbettervitaminB3priceutilization

duringthequarter.InAnimalNutrition,welaunchedtoxinbinderinIndia.InLifeScienceChemicals,EthylAcetatesawhighersales

inexportmarket,particularlyinEuropeandAfricaandMiddleEastregions.

Wecontinuedtappingopportunities foradding twonewgeographiesandcurrentlyexport tomore than30countries.Wehave

deliveredcontinuedgrowthmomentuminrevenueandEBITDAinthefirsthalfandIwouldliketosharetheroadmapasweseeit

inthecomingsixmonths.WehavearobustpipelineinGenericsbusinessasyouallwillknow.Weestimategrowthtocomefrom

newlaunchesandentryintonewgeographies.

AroundthefortnightagoweannouncedthatwehadreceivedANDAapprovalforBupropionHydrochloride.AsperIMS,thecurrent

marketsizeofthisproduct is$580millionperannum.Weare lookingto launchingthisproduct inthepresentquarter itself.API,

similarlyhasanattractivelaunchinrowinthesecondhalf.SterileInjectablesbusinesshasregisteredseveralnewcontractwinsand

higherutilizationitwilltranslateintogrowth.

LSI segment is seeing volumemomentumand thatwill continue.We're lookingathigherutilization levels in vitamins andour

valueaddedproductsinPPES,suchasSymtetand3CP.Pricingofkeyproductisstabilizingandthebenefitsofthatwillstartdoing

intotheperformance.

OperationsideswhichIhaveoutlinedjustnowwillhelptostrengthenthebalancesheet.Wehavetargetedinmindtobringdown


3/23

thenetdebt levelstounder2.5timesoftheEBITDA.Therestructuringwe'recarryingouthashelpedtoconsolidatethepharma

businessunderourSingaporesubsidiaryandwearelookingatoptionstoraisemoneytobringdownthelevelofindebtedness.

Iwould like todrawyourattention towards fluctuations in foreignexchange rate. resulting in robust impacton the totalcostof

importpricingaproduct.Forexample, in lastsixmonths,theUSdollarrupeeexchangeratehasfluctuatedfromahighofrupees

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.

Iwould liketo inviteMr.Sankaraiahtocontinuetothediscussionswithhisthoughtsonfinancialperformanceofthecompany.

Thankyou.

R.Sankaraiah,ExecutiveDirector Finance

Thankyou,Mr.Bhartiaandthankyouallforjoiningthecallontoday.Iwillwalkyouthroughthefinancialhighlights.InQ2FY2014,

ourincomefromoperationstoodatINR1,436crores,giving17%growthyearonyear.Thiswassupportedbyvolumegrowthof11%

andexchangegainof9%fromthemomentoftherupee.TheEBITDAinQ2FY2014stoodat276croresgivingusanEBITDAmargin

of19.2%.ThereportedprofitaftertaxstoodatminusINR81crores,afterexceptional lossofINR150crores.Thenormalizedprofit

aftertaxwasINR70crorestranslatingintonormalizedEPSofINR4.37perequityorINR1.

ThePharmaceuticalsbusinessshowedincomefromoperationsofINR691crorefromINR650croreinthesameperiodlastyear.The

contributionto

overall

revenue

stood

at

48%.

The

EBITDA

from

the

segment

stood

at

175

crores,

giving

EBITDA

margin

of

25.3%.

TheLifeScienceIngredientssegmentshownincomefromoperationsofINR744crore,up30%overthelastyear.Thecontribution

totheoverallrevenuestoodat52%.TheEBITDAinthesegmentwasINR125croreandtheEBITDAmarginwasat16.8%.

ComingtoH1FY2014performance, incomefromoperationwasINR2,793crores;up13%yearonyear.Volumegrowthstoodat

11%.TheH1FY2014EBITDAwasatINR518crore.TheEBITDAmarginintheperiodstoodat18.5%.Thenormalizedprofitaftertax

wasINR128croreandthecorrespondingnormalizedEPSstoodatINR8.05perequityshareofINR1each.

InH1FY'14,thePharmaceuticals businesshadincomefromoperationof1,343crores,up4%yearonyear.Thecontributiontothe

overallrevenuewasat48%.TheEBITDAwasatINR328crores,givingEBITDAmarginof24.1%.TheLifeScienceIngredientssegment

gaveincomefromoperationsofINR1,451crore,up24%from1,172croreslastyear.Thecontributiontotheoverallrevenuestood

at52%.TheEBITDAinthesegmentwasatINR234croreandtheEBITDAmarginwasat16.1%.

I'llcome

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 theworking capital requirements stood at 1,128 crore. Ifwe adjust the foreign

exchangedeferential,thenthenetdebtstoodat3,541crores,higherby142croressinceJune2013,mainlyduetoworkingcapital

increase.

We areon ahealthy growth trajectoryand are firmly committed tomeet tomeeting allour repayment scheduleon time

without fail.Ourblended ratesof interest stoodat5.6%combining the rateof the foreigncurrencyborrowingat4%and the

rupeeborrowingat12%.TheCapExfortheyearisprojectedatINR250croresandtheproductdevelopmentexpenditureofthe

INR95crores.TheactualspendinH1wasINR121crores;INR80croresforCapExandINR41croresforproductdevelopment.

Withtheobjectiveofconsolidatingthepharmaceuticalbusinessunderoneentityandraisemoneytoreducetheoveralldebtofthe

company,theBoardhasresolvedtotransferto itswhollyownedsubsidiary inSingapore.TheAPIanddosageformbusinessesof

JubilantLifeSciences Indiabywayofaslumpsalefora lump onagoingconcernbasisandalsopartofthesharesheldbythe

companydirectly

in

US

and

European

subsidiaries

to

enable

the

Singapore

subsidiary

toward

100%

of

the

entire

business

of

pharmaceuticals.

The consideration for the above transferof transfer is INR1,145 crore, netofdebtof INR583 crores. This is subject to the

shareholders'approvalofthecompanyandanyotherregulatoryapprovals.

JubilantPharmaLimited,Singapore,thewhollyownedsubsidiaryofJubilantLifeSciencesIndiahasreceivedapprovalfromFIPBfor

theabovetransfer.ThiswillenablethecompanytoconsolidateitsAPI,SolidDosageForm,Radiopharmaceuticals,allergenicextract,

SterileInjectablesandointmentandcreamandliquidbusinessesunderoneentitywithSingaporesubsidiary.

Wewouldliketohighlightthepromotersstakeofthecompanyhasincreasedfrom increasedto53.95%asofSeptember

30th,2013comparedtothepreviousquarterof49.04%.

Weare lookingatthesustainedoperational improvementtobedrivenbytheproduct launchesandgeographicexpansion inthe

Genericsbusiness

and

higher

capacity

utilization

of

the

Nutrition

Ingredients

and

Symtet

and

allied

3CP

capacities.

Our

Sterile

InjectablesandOCLsareshowinghigherutilizationlevelinthelightofordersinhandandthatwillcontributetotheperformanceas

well.We expect an early resolution on theMontreal facilitywarning letter.We continue towork towards proposed corporate


4/23

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.


Andthis asfarasthedomesticsaleisconcerned,solongasithasadomesticparityandwegettheforexbenefitthereandasfar

asall

the

foreign

subsidiaries

which

are

there

outside

India

on

account

of

translation

into

Indian

rupees

on

consolidation,

we

get

the

forexbenefitontheclosingdate.


Okay.


Yeah.


And,so inthepresentation,actuallyIsawthatyoutalkedaboutmaintainingtheguidanceforentirefinancialyear.Imayhave

missedoutyourearlierpressreleases.So,canyoureiteratewhatwastheguidanceoftoplinegrowthandmarginforfinancial

year'14?


Forfinancialyear'14wehavenotgivenanyguidance.


No,sointermsofgrowth


5/23


Specificallywehavenotgivenanyguidanceforfinancialyear.


Okay.But,whenyousaythatyouexpectabetterH2,howshouldIratethat?


Yeah,theH1resultscompared theexpectedH2resultarebetterthanwhatwehavealreadydeliveredsofar.


Okay.Andthird,youtalkedabouttransferringoneofyourbusinessestoyourSingaporecompany.How is itgoingtohelpyouto

reduceyouroveralldebtlevel?


Ifyouseeourearlierpressrelease,whatwe'vementionedis,wewantedtoconsolidateourentirepharmaceutical businessunder

oneentity.Now, it ispartly in JubilantLifeSciences India likeAPI,DosageFormbusiness,which is in JubilantLifeSciences India,

whereas,restofthebusinesslike,theSterileInjectables,OCLbusiness,Radiopharmaceuticals,AllergenicExtractsareallunderthe

holdingcompanySingapore.

So,whatweproposedtodo is,movingtheAPIandDosageFormbusiness from India to itswhollyownedsubsidiarySingapore,

therebytheentirepharmaceutical businesswhich isasof firsthalfyear ifyousee,48%ofthesaleswhichwillcomeunderone

entity.


Okay.


So,whatweproposedtodois,proposedtoraisemoneyinthatentityandacquirethisAPIandDosageFormbusinessfromIndia,

therebybringingthedollarsforthatIndia,becausewehavementioned inthespeechalsothatthevaluationofthebusiness,for

theAPIandDosageFormalongwithsomeshareholding isabout1,145crores,which isalongwiththat,that isaequity infusion

whatSingaporecompanywillinfluenceinIndiaapartfromassumingthedataofanother583crores.

So,basically thedollar loanswillmoveout from Indiaandgo to Singapore thatwill enable thedollarbalance sheet intacton

accountoffluctuationwhatweareprovidingasoftodaythemarktomarketthatforeigncurrencytranslationallthosethingswill

get

reduced

substantially.


Right.Andwhenisit yes,yes.


Thatisoneobjective.Theotherobjectiveisthat,onceweconsolidatetheentirepharmaceutical businessthenwewantedtoraise

anequity inthatbusinessbydiluting.Sothat,wecan infuseadditionalequity intotheoverallsystemtoreducetheconsolidated

debtofthecompany.Thatistheobjective.



6/23

Okay.That'sagoodstep,significantpositivestep.AndwhatisthetimeframethatyouhavewithrespecttothisSingapore

listing?


We are already whatever is the required regulatory approval, one of themain regulatory approvalwhich is required is FIPB

approval,becauseitthebrownfieldtransferofbusinessofpharmaceuticaltoawhollyownedsubsidiaryoutsideIndia,weneedanFIPBapproval,whichwe,whichSingaporecompanyhasalreadygot it.That isthemainapprovalwhich isrequired.Otherwise,we

havetoraisemoneyandcompletethetransaction.Forthat,themainmilestonenowistheshareholders'approval.


Okay.AndonelastquestionifImay.So,youtalkedaboutbringingdownyournetdebttoEBITDA.


Yeah.


Whatisthecurrentratioandhowdoyouplantodothat?


Asoftoday,itisabout3.5timesofEBITDA.So,wewantedto oneis,throughanoperatingcashflow.Thatiswhy,ifyousee,we

havesubstantiallyreducedourcapitalexpenditure.Earlier,wewereplanningaboutmorethan300croreswhichwe'vereducedthe

capitalexpenditureto250croresandasoffirsthalfyearwehaveincurredonly80crores.


Okay.


So,wearehavingaverystrictcontroloncapitalexpenditureinvestment.


SoyourH1CapExisonly80crores?


That'sright.


Okay.


Andapartfromthat,theproductdevelopmentexpenditureofanother41crore.


7/23


Okay.


So,wehaveaverystrictcontrolonthecapitalexpendituretogeneratecashandreducethedebtlevel;thatisoneobjective.Theother objective is, raise equity in the Singapore Company and bring thatmoney into India to reduce the debt of the Indian

company.


Okay.Okay,sir.Thankyousomuch.I'llgetbackifIhaveanymore.

R.Sankaraiah,ExecutiveDirector FinanceThankyou.

Operator

Thankyou.().OurnextquestionisfromSaionMukherjeeofNomura.Pleasegoahead.

SaionMukherjee,analyst

Thanksfortakingmyquestion.Sir,onethingonCapEx,youmentioned80croreastheCapExforthisthing.So,doyouexpectthis

toincreaseyou'restillstickingto250croresforthefullyear?


No,250

crores

we

have

mentioned.

We

are

trying

to

do

our

level

best

to

keep

the

CapEx

as

minimum

as

possible.


Okay.Sir,just isitpossibleforyoutosharethekindofcashflowsyouhavegeneratedinthefirsthalfofthisfiscalyear,thatis

after this120oddcroresofCapExwhereyoumentioned thatworkingcapitalalso increased.So,canyoujust tellus likepost

workingcapitalandCapEx,howmuchwouldhavebeenthecashgenerationthiswillallow?


Actually,thisfirsthalfbecauseof increase inworkingcapital,becauseofcertainspecificreasonstherewasan increase inworking

capitalin

pharmaceutical

business.

So

the

cash

generation

after

meeting

the

CapEx

was

not

there.

But,

going

forward,

we

are

going

tohaveatightercontrolontheworkingcapitalandalsotightercontrolonCapEx,whichweexpecttogeneratecashoutofoperating

incomeandusethatcashtoreducethedebt.


Andsir,whatisthekindnatureofthisworkingcapitalincreaseandwhatisthereasonbehindthis?


No,thisisbecausetherearefewproductsinAPIandDosageFormbusinesswherewearesupposedtolaunchlikeMr.Bhartiahas

mentionedinhisspeech.Wearesupposedtolaunchthreeproducts fourproducts;outofthat,welaunchedonlyoneproductin

H1.So,

there

was

some

inventory

pile

up

on

account

of

that

and

also

there

was

some

receivable

pile

up

which

was

there.


8/23

Sowhich is expected to rather that is as far as receivable is concerned, it isalready getting corrected.As far as inventory is

concerned,oncewegettheproductlaunchedinH2,thatinventoryalsoweexpecttoliquidatetherebywe'llgeneratethecashout

ofthat.


Okay,sir.Andsir,finallyonequestiononyourH2performance.So,isit basically,ifIseethelastseveralquarters,youmustseenpricingenvironmentasnegative,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, likewhat

percentageincreasewehaveseen.

R.Sankaraiah,

Executive

Director

Finance

We'vementionedasfarasthemainproduct,whichisMethylprednisolone,lastquarteralsowedidmentionthis,therewasaprice

reductionwhichhashappenedabout20%comparedtothepreviousquarter previousyear,whichwe'vesharedinthebeginning

itself,whereasthereispricepressurewhichisexpectedinMethylprednisolone.Thathashappenedbecausethereisanewentrant

inthemarketinQ1.Thereby,thepricehascomedownby20%.

Apartfromthat,inSartans,inAPI,thepricewasunderpressurebecauseoftheproductwhichhasgoneoffpatentbecauseof

which,therewasnewentrantswhichwerethereinthatbusiness.

Andthethirdis,inatorvastatin,therewasapricereductioninDosageFormbusiness,becausetherewasapricereductionin

API.So, thathas thatwasa consequenceeffectwhichhashappened in theDosageFormbusinessbecauseof theAPI

reduction.So,becauseofthat,thesalevalueinDosageFormalsohascomedown.

ShyamS.Bhartia,ExecutiveChairmanoftheBoard,ManagingDirector

Going forward,wedon'texpectfurtherreduction intheMethylprednisoloneand inalsoSartans.But inSartans,wecontinuously

reducingcostandwehavedoneasubstantialreduction inourcostand improvement incapacity,which bywhichweareableto

maintainhighermarginsinourSartanbusiness.

Andsimilarly,incaseofatorvastatin,thepriceswillnotgoingtogofurtherdown.Thepricesaregoingtobestablefromhereon.

SimilarlyinvitaminB3,thepriceswereincreasedinQ3aswementionedlastquarterandthepricesincreaseisstillcontinuing.

AndwehopetohavebetterrealizationinH2.


IfyouseeinLifeScience


AndPyridinebusinessalso,again,aswehavesaidthepricesarestrong.Andthere isastrongdemandfortheproductandthe

priceshavealsogoneupandthatstillremains whichwestillgoingtoenjoyinH2.


Ifyousee inLifeScience Ingredientsbusiness,wehaveshownagrowthof30%. It ismainly,about20%growthhavecomeon

accountofvolumeandonaccountpriceincreasealsowegotabout10%.

SaionMukherjee,

analyst


9/23

Okay.Okay.


That ismainlybecause thePyridinebusiness isdoing fine.Andalso theNutrition Ingredientsbusiness, thepriceescalation

whichwehavetakenthatiscontinuingandtheNutritionIngredientsbusiness,thecapacityutilizationisgoingverywellandwe

expecttohave100%capacityutilizationbyyearend.


So,overallyouexpectsecondhalfEBITDAmargintobebetterthanwhatyou'vereportedsofar?


Absolutely.

ShyamS.

Bhartia,

Executive

Chairman

of

the

Board,

Managing

Director

GainsandEBITDAmargin,both.Andwedon'texpectfurtherpricedropinIndiaforourproducts,whichwehavementioned.


Therearethreereasons.One,asfarastheAPIandDosageFormisconcerned,thenewlauncheswhichweexpectthatis which

hasbeenmoved fromH1 toH2, that isexpected toget launched.Andalsonewgeographies, restof theworld,whereweare

enteringintoDosageFormbusinessisyieldingverygoodresults.

And the capacityutilization in LifeScience Ingredients,mainly inPyridine and also inNutrition Ingredients and acetyl, all three

businesses, thecapacityutilization isgoingupverywell.And theSymtet, thecapacityasof today isutilizedabout10% to12%.

Overall,theyear,weexpectabout15%forthisyearcomparedtoourearlierprojectionofabout20%,becausestilltheplantisyetto

stabilizeto

our

satisfaction.

So,

but

next

year

we

expect

Symtet

also

to

get

stabilized

and

have

ahigher

capacity

utilization.

AsfarasthepricingisconcernedinSymtet,thepricinghasimprovedverywellandthequalityoftheproductisalsoverygood.Only

thingis,thestabilityoftheplantwhichwehavetotakecarewhichisbeingaddressedveryvigorously.


Okay.Sir,justonefinalquestiononthisamortizationofforexlossof39crores.How whatisthedurationof,tenureofthisloan

overwhichwewillbeamortizingthis?


Thisis

balance

we

have

another

three

years.

It

is

afive

year

loan.

The

balance

we

have

another

three

years.


Okay.Thankyou,sir.


Thankyou.

Operator

Thank

you.

Our

next

question

is

from

Anantha

Padmanabhan

of

Canara

Robeco.

Please

go

ahead.


10/23

AnanthaPadmanabhan,Analyst

Hi.Goodevening,sir.


Goodevening.


Couldyoutellmewhatwouldbeyournetdebtataconsorted levelafteryouhavecompleted listingordoyouhaveanyspecific

targetinmindorapostcompletionofthistransferandlistingofpharmaceutical business?


Asoftoday,thetotalconsolidatedindollarterms,ifyouseeourpresentationalsowehavegiven,indollarterms,wehaveabout

$582millionindollarterms.Andinrupeeterms,wehaveabout761crores.Thetotalconsolidateddebtofthecompany isabout

$702million.

We

propose

to

raise

about

$250

million

to

$300

million

and

use

that

entire

money

to

reduce

the

debt

of

the

company

onaconsolidatedbasis.


Theentireamountwhichyou'llberaisingwillbeusedtoreducethedebtofthecompany?


That'sright.

ShyamS.

Bhartia,

Executive

Chairman

of

the

Board,

Managing

Director

Yeah.Andonaseparatedbasis,asof

R.Sankaraiah,ExecutiveDirector FinanceLikewe'vementioned,1,145crores,thetransferofbusinesses,theSingaporecompanywillpayto Indiathat isapproximately

equaltoabout$190million.So,thatwillcomeintoIndia,thereby,Indiandebtasoftoday,thedollarIndiandebt,wewillbeina

position to reduce it to about $200million approximately. Thatwill shift the dollar debt from India to Singapore, thereby,

reducingtheforexfluctuationoftheconsolidatedbasis.


Okay.So,basicallyyour


Andalso, interestratealsowillgodown,becauserupeerateof interestatpresentwearepaying12%,whichwillalsobepartly

replaced.


Okay.So,afterthetransfer,itistherupeedebtthatwouldmainlybereducing,youmeantosay?



11/23

No,partlydollar,partlyrupee,but itwillbeamixofboth.But,bothatacostofdebtandalsotheoveralldebtlevelbothwill

comedown.


Okay.Andpostthistransition,would theratioofrupeedebtanddollardebtremainthesameorwouldtherupeedebt ratioof

rupeedebttototaldebtgoout?


See,thewholeidea,actually,wearedoingthisforexfluctuationaccountingbasedontheaccountingstandardrequirement.

But,itis ifyouaskasimplequestion,isitareallossforthecompany,theansweris,simpleno.


Correct.


Thereasonforthatiswehavemorethan$500millionexports.So,ifwedon'ttakethedollardebt,thenweareexposedtomoreof

arupeeexposure,becausethiscompany's internationalbusinessis75% includingtheexports.Sothatway, ifyouseetypicallythe

balancesheetofthecompany isadollarbalancesheet.But,becauseoftheaccountingstandardrequirementsinceallthedollar

debtistranslatedintorupee,weputthisexchangefluctuation,foreigncurrencytranslationaccountormarktomarket.


Correct.


But,otherways,therupeeis45or52or68,wedon'thaveanymajorissueinsettlingthis,receivingthedollarsandpayingoffthedollars.


Correct.Okay. So,basically,post this transfer, the total exceptional itemswhichhas been causing quite a few quite abit of

fluctuationinthefinalreportednetprofit,thatwouldreducetoalargerextent?


Absolutelyright,absolutelyright.


Okay.Thatwouldbegood.That'sallfrommyend,sir.


Thankyou.

Operator

Thankyou.

Our

next

question

is

from

Praful

Bohra

of

Nirmal

Bang.

Please

go

ahead.


12/23

PrafulBohra,Analyst

Yeah,hi.Thanks.Sir,onthedilutionwhichwillhappeninSingapore,oncethelistinghappens,sirwouldtherebeanyimpactonthe

wouldtherebeanysortofdilutionintheparent,Imean,justformyunderstanding.

R.Sankaraiah,

Executive

Director

Finance

No, therewillnotbeanydilutionattheparent level.Asof today,Singaporecompany isheld100%bytheparentcompany.The

dilutionwillhappenonaccountofraisingthemoneyatSingaporelevel,whichisa100%subsidiarywillbecomedilutedsubsidiary.

PrafulBohra,Analyst

Okay.And


Attheparentlevel,therewillnotbeanydilution.

PrafulBohra,

Analyst

Okay.Andso,Imeanthis,theamountwhichispaid,sorightnow,theentirePharmaceuticals andtheAPIbusiness,isitinSingapore

orImean,everythingthatpartoftheworkisbeingdone,right?


Yeah.Thatisthere.Onceweraisethemoney,wewantedtocompletethetransactionaftertheshareholderapproval.


Actually,70%isalreadythereinSingapore,30%ofthebusinesswhichisthereinIndiaisbeingtransferred.


AtAPIbusinesses.


APIindustries.

PrafulBohra,Analyst

Okay.Andsir,whatstagesarewein withregardstothislisting?Imean,arewealreadyfiledfortheTRHforyourwhatstagearewein?


First,ourobjectiveistoraisealoan,completethetransaction,afterthatraiseequity.Thatistheobjectiveonwhichweareworking.

PrafulBohra,Analyst

Okay.Andthiswouldtakehowmuchtime,theentireprocedure?



13/23

Itshouldbe

ShyamS.Bhartia,ExecutiveChairmanoftheBoard,ManagingDirectorIthinksixtosevenmonths'time.

R.Sankaraiah,

Executive

Director

Finance

Yeah.

PrafulBohra,Analyst

Sorry?


Sixmonths'time.

PrafulBohra,Analyst

Sixmonthstime.


Aboutthreemonthsfordebtandmaybesubsequentraisingofequitymaybeanotherthreetofourmonthsitdependsupon.

PrafulBohra,Analyst

So,just

three

months

debt

would

be

in

the

Singapore

entity,

right?


Correct.

PrafulBohra,Analyst

Okay.Andhavewealreadytieduporarewealreadyinthefinal havetheyalreadyfinalizedthebankers?


No,weareworkingwiththebankers.We'reworkingwiththebankerstoraisethisdebt.

PrafulBohra,Analyst

Sure.Okay.Andsir,justtoreconfirm,yousaidMethylprednisolonepriceshavefallenby20%yony,right?

R.Sankaraiah,ExecutiveDirector FinanceThat'sright.

Praful

Bohra,

Analyst

Tilldate.Andyoudonotexpectanymorecompetitiontoenterinhere?


14/23


That'sright.

PrafulBohra,Analyst

Okay.Andsir, the remainingdebt thatweare transferring from India toSingapore, so the Imean,just fromanaccountingperspective,thiswouldnotbeapartoftheP&LanymoreanditwoulddirectlyflowtotheBarasat,isitright?


That'scorrect.

PrafulBohra,Analyst

Okay,okay.Thankyou.


Thankyou.

Operator

Thankyou.().OurnextquestionisfromKrishnaKiranofICICIDirect.Pleasegoahead.

KrishnaKiran,analyst

Yeah.Thanksfortakingmyquestion.Goodevening,sir.Sir,onequestionregardingourPyridinebusiness.Canyoujustexplain

thatPyridine

China

has

imposed

anti

dumping

duty?


Antidumpingdutywhichhasbeen imposed24.6%onPyridine imports from India isapplicableonly formaterialwhichhasbeen

importedbyChinafordomesticconsumption.Inourcase,itisabout60%to70%isdomesticconsumption.Whereas,ifthematerial

isusedforreexport,thatisnotapplicable.Sonetnet,wehaveaneffectononlythat60%to70%ofthematerialwhichhasbeen

exportedtoChina.

AttheMinistryofCommerce,whichhasimposedthisantidumpingduty24.6%,whichwaseffectivefromlastquarter,forwhichthis

P&Laccountwhatwehaveproducedasoftodayisfullyaccountingtheeffectofantidumping.


Sir,what IwastryingtounderstandthatPyridinewhateversaleswhichwecloakedduringthisquarter,which isnet impactof

24.6%andincreaseintheprices?


Yes.TheincreaseinpriceshavecompensatedmorethantheantidumpingdutyasoftodayinourP&L.


Okay,sir.Okay.Andsir,secondly,howaboutRubyfill,weareexpectingaroundFY'15 launch.So,whichpartofthisyearwouldbe

thislaunchinUSaswellasinIndia?


15/23


No,asfaras see,weareveryconfidentweshouldbeinapositiontolaunchinFY'15,whichpartitisverydifficultdependsupon

theclearanceby theFDAandall those things,whichwecannotcommenton.But, theprogress isgoingverywellandwe the

marketsizeof thatproduct ismore inUSabout$70millionplusCanadaandalsoweexpect it isnotonly inUS,weexpect the

producttogetlaunchedinCanada,SwitzerlandandinGermanyinFY'15.


Therealsowehavefiledforthe(inaudible).


Sorrysir,Icouldnotgetit.


Wehave

filed

the

registration

of

the

product

already

in

those

locations

also

which

we

expect

to

launch.


Okay,okay.Fine.And sir, regarding there isanarticle twodaysback in someof themagazinestating thatwearegoing 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.

KrishnaKiran,analystOkay.So,this250crorewhichisnetofalltheexpansions?


Yeah,afterincludingalltheexpansions,yes.


Okay,okay.

And


Itincludesalltheexpansions.


Okay.Fine.Andsir,comingbacktoyourpharmacy sorry,pharmasegmentbusiness,marginsweretypicallyslowly it is inthe

rangeof24to25andtypicallyweusedtocloakitbeforearoundmore28%,29%.So,nowthepricefallinoneofourkeyproductis

stabilized.Soand goingahead,we'regoingtolaunchnumberofproductsacrosstheglobe.So,whatkindofmarginimprovement

wecanseeinthepharmacybusiness?


16/23


Weshouldexpectintherangeof25to27thatrangeinthepharmaceuticalbusiness.


Okay.Andoverallbusiness,anyguidance,sir,marginguidance?


Overallbusiness,wehavenotgivenguidance.


But,aswehavesaid,H2isgoingtobebetter,muchbetterthanH1.

KrishnaKiran,

analyst

Okay.Andsir,howmuchpartofyourrawmaterialcostisforex,Imean,theinput?


See,that'sagoodquestion.Wedon'thavethefiguresavailablewithusnow.


Ifyouseetherawmaterialconsumption, itisabout40%.Inthe 40%tothosesales.Outofthat,theimportsversusdomestic

dependsuponthe mainlyitwillvarybasedonwhetherwearebuyingalcoholdomesticallyorimportingfromBrazil.


Okay.


So, it is verydifficult toexactly say,whichever see,after computing thenet importprice versusdomesticprice,whichever is

better,wegobythat.Itisnotexactlyimportversusthedomestic,thisthing.So,netnet,whicheverismorecostadvantageoustous

forimportofalcoholordomesticpurchase,wedothat.So,thatiswhywearenotabletoexactlyquantify.Forexample,lastyear,if

youtake,itisabout15%isimport,thebalanceisdomestic,likethat.


Okay.Okay.Andsir, lastly,justforclarification,duringthiscall,Imean,IjustwanttocheckwhetherIheardsomethingrightor

wrong.Weareplanningtoraise$250millionto$300millionthroughdilutingstake inpharmacybusiness, isthisright sorry,

pharmasegment?


Yeah,inoneofthesubsidiarieswhichisinSingapore.

Krishna

Kiran,

analyst

Okay.Fine,sir.Thanksverymuch.


17/23


18/23

soliddosageside.Andthiswillstrategicallygiveusmuchhigherreturns inthe futureand increaseourmargins.So, ifyou talk

aboutstrategy,wehavegoneintovalueaddedproducts,goneintosizeswhichareglobal,whichisgivingusglobalstatusalsoas

numberoneortwo.

So,Ithinkthat'swhereifyoulookatJubilantLifeSciencesasastrategy,isrightnow.

ParasAdenwala,

Analyst

Intermsofyoursizeofinvestmentsinthetwoareasthatyoumentioned,asapercentagetogrossblock,whatwouldbetheamount

orwhatwouldbethepercentagelike?


Itisabout11%to12%.

ParasAdenwala,Analyst

This11%to12%investmentingrossblockledtoallthisdeclineinthebusiness?


Yeah.Because,ifyouseethetotalgrossblock,itisabout5,800crores.So,outofthat,thereisahugegoodwillwhichisthere.


Okay.


becauseoftheacquisitions.So,ifyousee ifyouremovethegoodwill,itisabout3,800croreisthenetblockwhichisthereasof

todaywhichwearecarrying.


Okay.So,ofthenetofgoodwill,outofthe3,800crores,youhaveabout500croreswhichcomesin whichwasdedicatedfor

thistwoinvestments,right?


Yeah.


Yeah.

ParasAdenwala,AnalystOkay.Alright.So,withthistwobusinesseskindofturningaround,doyouthinkyoucangobacktoyourreturnoncapitalemployed

thatweenjoyedin2008ofabout18%to19%?


Definitely.


19/23


Andinwhatperiodoftime?


ByFY'15,weshouldbethere.


FY'15?


Yeah.

ParasAdenwala,

Analyst

Okay.


'15endweshouldbethere.


That'sa


Because thewholethingisthatSymtetwhichneedtobestabilized,afterthat,Ithinkwearethere.


Okay.

R.Sankaraiah,ExecutiveDirector Finance'15,actuallywementionedthat'15,thatwillbeasizablecapacityutilization.So,weshould asoftoday,ifyousee,itisintherange

ofabout12%whichisexpectedtogotomaybeanother2%,3%.Intwoyears'time,weshouldbetheretheoldlevelof18%to19%.


Okay.Andwhatpercentageofyourbusinesswouldyousayisvalueaddedandpredictableandhowmuchiskindofcommodity

kindofbusiness?


No,andalsoonemore whenwetalkedaboutallthisROCEnumbersandallthosethings,itisdefinitelynotaguidance,itis

justanindicative.

ParasAdenwala,

Analyst


20/23

Sure.Iappreciatethat.Sure.


Yeah.


But,asacompany,Iamsureyourrecenttarget


Ratherthecompanywishestogettothatlevel,becausewemadetheinvestment,we'vewaitedenoughtimeforharvesting

thatinvestment.So,thatistheobjectiveonwhichwehaveinvested,wewantedtobethere.


Okay.Sure.Andwhatpercentageofyourbusiness iscommoditykindofbusiness,wherethereistoomuchofpricefluctuationandthereislowpredictability?


LifeScienceChemicalsbusiness,whichisabout1,100crores,1,200croresbusinessiscommodity.Restofthethings,Idon'tthinkitis

acommodity,becauseithasacustomizedrequirementsoritisapharmaceutical oritisNutritionIngredients.


ButinLifeScienceChemicalsalsoweareleadingplayers,top10producersofbothEthylAcetateandAceticAnhydridein

theworld.


Andyouknow


Andwe'reexportingtomorethan35countries.So,wehaveaveryexcellentpositionindiversemarketbase.


Sure.


Andyou'llbeknowingthateventheAceticAnhydridewhichisusedforparacetamolandaspirinmanufacturingpredominantlyand

EthylAcetatewhichisusedbythepharmaceuticalbusinessesforasasolvent.So,therealsoitisyes,bythenatureofthebusiness,

itiscommodity,butitismoreofaspecializedutilizationwherewearein.


So,withsameamountofcertainty,youcansaythatsinceatleast70%ofyourbusinessispredictable.Youshouldbeabletokindof

seeyourselfintothefutureforthenexttwotothreeyears,right?


21/23


Yes.


Okay.Allright.You'vementionedaboutthisproductcalledMethylprednisolone,whatpercentageofyourbusiness isthat inthatproduct?


See,productwisebusinessinformationwedon'tgive.Eachproductwisehowmuchitcoststhetotalsales,wetrytoavoid


Profitabilitywise,ithasverygoodprofitability.Wehadapriceerosion,butitisalreadystabilized.So,wedon'tseeanymoreprice

erosionthere.

ParasAdenwala,AnalystOkay.ButIamsureitmustbemeaningful,becausethatiscertainlyhamperingyourprofitability.


Itisoneofthemainproductsforus.


Okay.


Itisnotthemainproduct,itisoneofthemainproducts.


Okay.And finally, this Iam trying tounderstand the rationalebehindyourSingapore listingand transferofbusiness.So,what

you'reactuallytransferringisjust30%ofyourbusinessinIndiatoyourSingaporeentityandyou'regoingtobelistingitoverthere

andyou'replanningtoraiseabout$150millionto$300million.So,what isthevaluethatyou'reascribingtothepharmaceutical

business?


We'llnotbeinapositiontocommentonthatatall.


We'llnotliketomakeanyspeculativecommentonthat.


Okay.No.

Okay,

let

me

just

kind

of

ask

you,

since

Iam

sure

you

would

have

done

your

research

in

terms

of

the

valuation

of

variouspharmaceuticalcompaniesinSingaporeexchange.So,whatarethenormalmarketcaptosaleskindofmultiplesand


22/23


No,wedon'twanttotalkonthatatall.Wecan't.


Isee.Okay.And,lookingatyourdebtlevelsandall,doyouthinkyoucanverycomfortablyraise$250millionto$300million?

R.Sankaraiah,ExecutiveDirector FinanceWeareverycomfortable,yes.


Butyoudidmentionthatyou beforeyoudothat,youarelikelytoincreaseyourdebt,you'regoingforsomemoredebtright

now,whichisgoingtobeshortterminnature.Sohowmuchwouldthat

ShyamS.

Bhartia,

Executive

Chairman

of

the

Board,

Managing

Director

Netdebtwillbesame.


Theyarenot increasingthedebt,weare increasingthedebt intheSingaporesubsidiaryandbringingthatmoneyto Indiato

reducetheIndianForeigncurrencydebt


So,consolidated,it'snotreallyincreased?


Itwillnotincreaseatall.


Itwillnotgoup.


Okay.Alright.

Ithink

that's

pretty

much

it.

Isincerely

hope

that

you

can

really

you're

successfully

in

your

efforts

and

we

can

you

getthevaluationthatyoureallydeserve.


Thankyouverymuch.


Thankyou.

Operator


23/23

Thankyou.Ladiesandgentlemen,thatwasourlastquestion.InowhandthefloorbacktoMr.Bhartiaforclosingcomments.


Thankyousomuch.AndIwould liketothankyouallforjoininginthisconferenceandwishyouallaveryhappyDiwali.Thank

you.

Operator

Thankyouverymuch.Ladiesandgentlemen,onbehalfof JubilantLifeSciencesLimited, thatconcludes thisconference.

Thankyouforjoiningusandyoumaynowdisconnectyourlines.

capacity utilization news_jubilant

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