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Granules India Limited Investment Snapshot :- Slide #3
3.) Strong Pricing Power :- Despite being a API dominant company where the business is commoditized the
company has been able t command strong pricing power due to the quality and service .
4.) Pass on higher raw material cost :- The company enters into a 3-5 year contracts with major customers
which also enables the company to pass on any increase n raw material cost.
5) No adverse FDA Issues :- The companies plants had been recently inspected by USFDA and no issues had
cropped up.
6.) Presence in key markets :- Company has been predominantly an export player and is present in key
markets across Europe, US etc which has enabled the company to grow faster.
7.) Increasing share of Formulations:- Company although was a API player is focusing on formulations
development from Auctus API s which would enhance share of formulations.
8) Increasing manufacturing capacity:- The company has expanded its PFI capacity from 9840 TPA to
14,400 TPA and its formulations capacity from 6bn to 18bn per annum which will drive growth .
9.) Management/ Corporate Governance :- The company has a good management and adhere to strong
corporate governance norms. The company is run professionally by a team of professionals who have a
strong understanding of the business and have a strong vision about its business.
10.) Compelling Valuations :- In spite of so many advantages, the company is quoting at very attractive
Valuations. The company is quoting at 16X its trailing FY14 Earnings which is reasonable for the Quality of
this stock which has a strong operating performance and provides revenue visibility.
Indian pharma companies are capitalizing on export opportunities in regulated and semi-regulated markets.
The Ministry of Commerce targets to export USD25 billion worth of pharmaceuticals in 2016. Indian drugs
are exported to more than 200 countries in the world, with the US as the key market .
I dia is the o ld s la gest p o ide of ge e i edi i es; the ou t
cent of global generic drug exports in terms of volumes.
s ge e i d ugs a ou t fo
pe
In terms of value, exports of pharmaceutical products increased at a CAGR of 26.1 per cent to USD10.1
billion during FY0613.
Anti-infective drugs command the largest share (16 per cent) in the Indian pharma market .
The cardiovascular segment represents 13 per cent of the market share; its contribution is likely to rise due
to the growing number of cardiac cases in India .
Top five segments contribute nearly 57 per cent to the total drugs consumption
Though Anti-infective drugs continue to hold the largest share the growing number of life style diseases
due to busy schedules leading t lesser time for health related issues is likely to result in the cardiovascular
segment commanding the largest share in the medium term.
Company Snapshot
GIL has built healthy operations across the pharmaceutical value chain with presence in APIs, PFIs and
formulations.
GIL is supported by long-term partnerships, it has emerged as the preferred vertically-integrated
manufacturer for customers, globally.
GIL the past few years, it has successfully transformed its business model from low- margin APIs through
medium-margin PFIs to high margin formulations.
GILs transformation was possible by investment in creating the requisite capacities, product-development
apa ilities a d a age e t s e phasis o i p o i g the usi ess i .
Plant Locations
GIL has 7manufacturing facilities, six located in Andhra Pradesh, including one that is under construction
through its CRAMS JV. Besides, it has another facility in China, which is an ibuprofen API JV.
GIL is a vertically integrated pharmaceutical company and offers all three components of value chain
namely APIs, Pharmaceutical Formulation Intermediates (PFIs or granules) and finished dosages thus
giving the customer flexibility and choice.
PFI is an intermediate between API and finished dosage and has the largest PFI facility in the world with
6MT batch size located at Gagilapur and Jedimetla near Hyderabad
GIL offers end-to-e d solutio s to pha a euti al a ufa tu e s e ui e e ts. B
company, pharma manufacturers can save time and resources.
u i g PFIs f o
the
GIL has developed expertise in regulatory filing and also helps its customers in filing ANDAs and dossiers
with US FDA and other regulatory agencies.
JV s a d A uisitio s to d i e g o th
i Fe
4, addi g
GIL entered into a JV with Ajinomoto Omnichem to supply high-value APIs and intermediates would be a
sustainable revenue stream with higher-than-current margins of Granules.
GIL s fo us o fo
value chain.
ulatio s de elop e t f o
GIL management expects the Auctus acquisition and the Omnichem joint venture would bring in more than
10% revenue in FY17.
GIL is a vertically integrated pharmaceutical company and offers all three components of value chain
namely APIs, Pharmaceutical Formulation Intermediates (PFIs or granules) and finished dosages thus
giving the customer flexibility and choice.
PFI is an intermediate between API and finished dosage and has the largest PFI facility in the world with
6MT batch size located at Gagilapur and Jedimetla near Hyderabad
GIL offers end-to-e d solutio s to pha a euti al a ufa tu e s e ui e e ts. B
company, pharma manufacturers can save time and resources.
u i g PFIs f o
the
GIL has developed expertise in regulatory filing and also helps its customers in filing ANDAs and dossiers
with US FDA and other regulatory agencies.
has added
These products have a potential market size of $37bn (Rs2,220bn) as which is substantial and is a good
strategic long term bet.
The company is likely to enhance its revenues with these additional offerings to its existing and new
Customers.
With this acquisition GIL has good potential to earn through exports which acts a natural hedge as its 40%
cost from imported raw materials and expenses for overseas subsidiaries help to minimize forex
fluctuations.
GIL s paracetamol facility is the o ld s largest single API production line by volume. Currently,
paracetamol is the highest revenue earner for GIL which contributed 42% to FY14 revenues..
The company has reduced its dependence on paracetamol over the past four years as its revenues have
come down to 42% in FY14 from 53% in FY11.
GIL s API a ufa tu i g fa ilit at Bonthapally for paracetamol passed US FDA inspection without attracting
483 observation which is expected to boost exports to US which will improve margins.
GIL has entered into formula based pricing contracts for its key customers which protects its margins in
cash steep rise in raw material cost.
GIL derives ~75% of its revenues from regulated markets. For FY14, N. America, Europe and L. America
o t i uted 74% to the o pa s e e ues.
The contribution from regulated markets is expected to further improve with additional product offerings
from APL and increased
requirements from its existing customers
GIL s st o g p ese e i the egulated a ket o e the past th ee ea s i di ates that e e ues f o N.
America grew to 30% in FY14 from 23% in FY12
GIL has developed customers for formulations in regulated markets and has entered into long-term supply
arrangements with them.
GIL recently expanded its PFI capacity from 9,840 tpa to 14,400 tpa, and its formulations capacity from 6bn
to 18bn tablets per annum..
GIL has the largest PFI facility in the world with 6MT batch size at Gagillapur near Hyderabad. Global
pharma companies benefit from the use of PFIs since they result in considerable time and cost savings.
requirements from its existing customers
GIL s PFI seg e t egiste ed 4% e e ue CAG o e FY -14, contributing 29% to revenue in FY14. Of this,
exports constituted 96%, domestic sales the rest.
GIL s capex help it maintain growth momentum and expand margin over the next 2-3 years because of faster
growth in the high-margin businesses and higher capacity utilization.
GIL a part of its strategy to improve its business mix, the company started manufacturing formulations in
FY10 meaningfully, recording 74.3% revenue growth in this segment over FY10-14 driven by product
approvals by customers and regulatory authorities.
GIL offers various finished dosage formats: tablets, caplets and press-fit capsules in bulk, blister packs and
bottles. It is the only Indian pharmaceutical to manufacture press-fit dosages rapid-release tablets and one
of the few in India to manufacture bi-layered tablets.
requirements from its existing customers
GIL s production of formulations increased ~67% over FY12-14. Metformin is the largest product in
formulations for Granules and contributed 69.5% to FY14 formulations sales
GIL s Formulations contributed ~32% to overall revenue, and 100% of formulations are exported against 8%
four years ago
GIL is a vertically integrated pharmaceutical company and offers all three components of value chain
namely APIs, Pharmaceutical Formulation Intermediates (PFIs or granules) and finished dosages thus
giving the customer flexibility and choice.
PFI is an intermediate between API and finished dosage and has the largest PFI facility in the world with
6MT batch size located at Gagilapur and Jedimetla near Hyderabad
GIL offers end-to-e d solutio s to pha a euti al a ufa tu e s e ui e e ts. B
company, pharma manufacturers can save time and resources.
u i g PFIs f o
the
GIL has developed expertise in regulatory filing and also helps its customers in filing ANDAs and dossiers
with US FDA and other regulatory agencies.
FY13
FY14
FY15E
FY16E
764
1096
1388
15
43
27
690
964
1166
% Chg
19
40
21
EBITDA
74
132
222
% Chg
Total Expenditure
EBITDA Margins(%)
10
12
16
Interest
18
20
33
Depreciation
23
30
42
PBT
46
112
51
66 GIL s
PAT
33
75
101
EPS
16.18
37.09
49.80
63.60
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