Aarey Drugs & Pharmaceutical Ltd

Corporate Presentation
February 15, 2019
DISCLAIMER

This presentation and the accompanying slides (the “Presentation”), which have been prepared by Aarey Drugs & Pharmaceuticals Limited (Aarey, the “Company”)
solely for information purposes and do not constitute any offer, recommendation or invitation to purchase or subscribe for any securities, and shall not form the
basis or be relied on in connection with any contract or binding commitment what so ever. No offering of securities of the Company will be made except by means
of a statutory offering document containing detailed information about the Company.
This Presentation has been prepared by the Company based on information and data which the Company considers reliable, but the Company makes no
representation or warranty, express or implied, whatsoever, and no reliance shall be placed on, the truth, accuracy, completeness, fairness and reasonableness of
the contents of this Presentation. This Presentation may not be all inclusive and may not contain all of the information that you may consider material. Any liability
in respect of the contents of, or any omission from, this Presentation is expressly excluded.
Certain matters discussed in this Presentation may contain statements regarding the Company’s market opportunity and business prospects that are individually
and collectively forward-looking statements. Such forward-looking statements are not guarantees of future performance and are subject to known and unknown
risks, uncertainties and assumptions that are difficult to predict. These risks and uncertainties include, but are not limited to, the performance of the Indian
economy and of the economies of various international markets, the performance of the industry in India and world-wide, competition, the company’s ability to
successfully implement its strategy, the Company’s future levels of growth and expansion, technological implementation, changes and advancements, changes in
revenue, income or cash flows, the Company’s market preferences and its exposure to market risks, as well as other risks.
The Company’s actual results, levels of activity, performance or achievements could differ materially and adversely from results expressed in or implied by this
Presentation. The Company assumes no obligation to update any forward-looking information contained in this Presentation. Any forward-looking statements and
projections made by third parties included in this Presentation are not adopted by the Company and the Company is not responsible for such third party statements
and projections.

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BRIEF PROFILE
Market Data
Aarey Drugs & Pharmaceuticals Limited, promoted by the
Ghatalia family, is engaged in active pharmaceutical Share Price (INR) 30
ingredient (API)/Bulk Drugs manufacturing and offers a range
Market Capitalization (Rs cr) 72
of products for various industrial applications. The Company is
engaged in trading and manufacturing activities. The No. of Shares Outstanding (Cr) 2.34
Company is a manufacturer and supplier of pharmaceutical
raw materials, chemicals, pharmaceutical ingredients, API's Face Value (INR) 10
drugs, food colors and flavors.
52 week High-Low (INR) 64/26
The Company's assortment of pharmaceutical products
includes Metronidazole and Metronidazole Benzoate. Its
products include Monomethyl Urea (MMU, Dimethyl Urea Shareholding Pattern
(DMU), Theobromine (THB), Theophylline (THP). Its other
businesses include trading aromatics chemical, chemical
acid, chlor alkalis, industrial alcohols, industrial ketones, glycols
and glycol ethers, fiber intermediates, industrial amines,
acetates and esters, chlorinated solvents, industrial
intermediates and industrial chemicals.
Public, 34.95
After a long hiatus it is reinvesting in its manufacturing
Promoters,
Business 50.44

FII's, 14.61

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KEY MILESTONES

1990 2000 2012 2016 2018

Incorporated Added 5 new products Achieved 100cr sales Production of MMU & Ventured in production
in trading portfolio DMU of Mefanamic acid

1993 2008 2015 2017

Public Limited Manufacturing Entered into API Achieved sales of Rs
company plant was setup manufacturing 300 cr plus and
ventured into
production of OPNA
& BMD

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THREE PRONGED - BUSINESS MODEL
Manufacturing
Restarted its manufacturing
business in 2015-2016,
currently has 3 products in its
basket, and strong pipeline of 5-
6 products to be launched over
next 2-3years.
Contract Manufacturing
Has leveraged its low cost
manufacturing capability and
knowledge of chemistry to
introduce 2 products in the
market and doing contract
manufacturing for exclusive
clients.
Trading
Over the years the company has
leveraged its knowledge and
expertise in chemicals to
expand its products range in its
trading basket. Thus raw
material procurement has
become a key strength for the
company.
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STRATEGIC SHIFT IN FOCUS – TO MANUFACTURING

FY19E
FY17
Manufactuirng, Manufactuirng,
8.80% 30.30%

Trading,
Trading, 69.70%
91.20%

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CURRENT PRODUCTS CONTRIBUTION TO REVENUES(%)

MMU, 11

DPL & Others, 24

DMU, 8

Mefanamic Acid, 17

ONCB, 29
BMD, 11

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 MANUFACTURING PLANT

APDL has four manufacturing units in

Tarapur, Maharashtra a notified
chemical units Hub. Spread over an
area of 85,000sq.ft., the manufacturing
units are designed for manufacturing of
APIs, intermediates and specialty
chemicals.
The company has started re-investing
in modernization and de-bottlenecking.
Currently capacity expansion of the
4th manufacturing plant is already in
progress.

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KEY CUSTOMERS

9
KEY STRENGTHS

Strong Raw materials

procurement skills More than 40-45 chemicals in trading
portfolio . Strong customer
relationships, with more than 30
decades experience in industry

Current utilization at 60-62%

Increasing focus on manufacturing,
With opportunities to further enhance
leveraging strengths to do backward
capacity with de-bottlenecking
and forward integration
No high capex requirement.

Enough potential to Strategic shift to

grow with existing value addition
product basket
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PROFESSIONALLY MANAGED COMPANY
Mihir Ghatalia - Managing Director
Mr. Rajesh P. Ghatalia - CFO
Parmeshwar Dond - Production Head
Dr. Vilas Lokhande- R&D Head
Dr. Sanjay Pallav – Quality control Head
Mr. Mihir Ghatalia completed his B.S. in chemical engineering from Virginia Polytechnic Institute & State University in the United
States. Initially he has worked as a consultant for 2 years with French based, The Renoir Group; which specializes in management &
industrial projects. Thereafter he started leading the management of our Company and now supervises its routine operations. He is a
new generation entrepreneur, and his strong academics, skill set and expertise have helped us to roll out manufacturing at the
Tarapur plant. He has worked in various team including designing, costing, building, maintenance, safety and quality control of
effluent treatment plants. His ground level expertise, sharp business acumen and visionary leadership have helped us evolve our
business and achieve consistent results.
Mr. Rajesh P. Ghatalia is the main founder of Aarey Drugs & Pharma Ltd. A textile engineer by education was involved in textile looms
during his early days. Later, along with his brother Mr. Atul Ghatalia they started trading in chemicals & Solvents and after 10 years of
business, he forayed into a new venture of manufacturing API’s. Started with the manufacturing of Imidazoles, under his leadership
Aarey Drugs flourished and has exports to different corners of the world. Apart from being a hands on first generation entrepreneur,
his sharp business acumen and astute financial skills have been a major driving force behind the company & his strong willpower
apart from the go get it attitude have been instrumental in getting us where we stand today.
Mr. Parmeshwar Dond completed his B.Sc (Chemistry) from Shivaji University. He has been in the industry for more than 25 years, his
major USP lies in the manufacturing bulk drugs, intermediate & API plant, which are important facets for the company. His
experience play a key role in making sure that the day to day operations of the organisations is running smoothly and efficiently.
Dr. Vilas has completed his M. Pharma Ph. D. from Haffkine Institute, Mumbai and has a wide experience in manufacturing and R & D
pharmaceuticals and intermediates since the last 25 years. He has served a number of multinationals and reputed Indian companies.
Now he is using all his experience towards development of World Class API’s and intermediates at our Tarapur unit
Dr. Sanjay Pallav has completed his his Ph. D in Organic chemistry from Haffkine Institute, University of Mumbai. He has over 20 years
of experience in the field of the API research and development from reputed pharmaceuticals industries such as Arch Pharmalabs
limited, Piramal Healthcare Limited, Sarex Overseas &Unichem Laboratories Limited to name a few. His skill set bagged with the
abundance of knowledge Mr. Pallav hold key to the further enhancing new product development and also making sure the quality of
the product is maintained as per the industry norms.
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FINANCIAL STATEMENTS – PROFIT & LOSS ACCOUNT

Value (Rs in mn) FY2015 FY2016 FY2017 FY2018

Net Sales 2134 2460 3960 3493

Other Income 26 31 33 32

Total Income 2160 2492 3993 3525

Expenditure 2121 2450 3864 3417

Operating Profit 39 42 129 108

Interest 15 17 43 19

Depreciation & Amortization 11 6 6 7

Profit Before Tax 14 18 80 82

Tax 3 5 21 20

Profit After Tax 11 13 59 62

EPS 0.7 0.8 3.3 2.6

FV 10.0 10.0 10.0 10.0

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BALANCE SHEET NUMBERS
LIABILITIES Rs. In Mn ASSETS Rs. In Mn
FY14-15 FY15-16 FY16-17 FY17-18 FY14-15 FY15-16 FY16-17 FY17-18
(Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited)
Shareholder’s Funds 354.1 367.0 503.6 802.4 Non- Current Assets 63.6 82.9 125.9 125.0

Share Capital 168.1 168.1 180.8 233.8

Reserves & Surplus 185.9 198.8 316.1 545.5 a)Tangible Assets 58.9 78.5 121.5 120.5

Share Warrants 0.0 0.0 6.7 23.2 Non Current Investments 4.4 4.4 4.4 4.4
Other Non Current
0.3 0.0 0.0 0.1
Assets
Total Debt 110.2 145.4 103.9 32.4

Long Term Debt 0.0 0.9 0.7 0.6 Current Assets 1085.9 1167.1 1306.8 1572.9

Short Term Debt 110.2 144.5 103.2 31.8 Current Investments 0.0 0.0 0.0 0.0

Trade Payables 671.4 719.5 745.5 775.8 Inventories 41.7 20.8 52.1 147.7

Other Current Liabilities 2.8 6.3 46.4 42.6 Trade Receivables 667.1 724.8 818.6 953.0

Short Term Provisions 10.9 11.9 33.2 31.8 Cash and Bank 1.7 16.2 10.4 33.9

Deffered Tax Liabilities 0.0 0.0 0.0 13.0 Loans and Advances 15.9 19.9 27.4 0.2

Other Current Assets 359.4 385.4 398.3 438.0

Total Liabilities 1149.5 1250.0 1432.7 1697.9 Total Assets 1149.5 1250.0 1432.7 1697.9

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Q3 &9M FY18-19, PERFORMANCE HIGHLIGHT
Value (Rs in mn) Q3FY18-19 Q3FY17-18 YoY (%) 9MFY18-19 9MFY17-18 YoY (%)
Net Sales 784.4 895.6 -12.4% 2,174.3 2,325.1 -6.5%
Other Income 7.3 3.4 116.8% 25.2 15.1 67.2%
Total Income 791.7 899.0 -11.9% 2,199.5 2,340.1 -6.0%
Expenditure 764.5 873.1 -12.4% 2,120.2 2,268.9 -6.6%
Operating Profit 27.2 25.8 5.3% 79.2 71.2 11.3%
Operating Margin 3.47% 2.89% 3.64% 3.06%
Interest 9.8 6.3 56.4% 15.7 12.6 25.2%
Gross Profit 17.4 19.6 -11.1% 63.5 58.7 8.3%
Depreciation 1.8 1.5 21.0% 5.5 5.1 7.9%
Profit before Extraordinary items
15.5 18.0 -13.8% 58.1 53.6 8.3%
and tax
Tax - - - - - -
Profit before Extraordinary items 15.5 18.0 -13.8% 58.1 53.6 8.3%
Extraordinary Items - - - - - -
OCI (net of tax) - - - - - -
Net Profit 15.5 18.0 -13.8% 58.1 53.6 8.3%
EPS 0.66 0.90 -26.7% 2.48 2.67 -7.1%
Face Value (in Rs) 10.00 10.00 10.00 10.00

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DRIVERS FOR FUTURE GROWTH

• Increase in utilization with • Higher contribution from

existing products manufacturing with lower capex

Profitability
Growth

• Higher operating margins &

• New product introduction
Stronger bottom-line growth

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INDUSTRY DYNAMICS – GLOBAL & INDIAN PHARMA MARKETS
 Global Pharma Market to grow at a CAGR of 4.5+%
over 2015-20E
 Generic Pharma spend growth at a CAGR of 8%;
higher Branded Pharma growth
 Generic Market accounts for 9-11% (by value) and
55% (by volume) in Global Pharma Market
 55 New FDA approvals in 2017
 Indian Pharma Market to expand at a CAGR of 22.4%
over 2015–20E to reach US$ 55 billion
 Indian Generic Market Growth at a CAGR of 16.3%
over 2015-20E
 India generic export accounts for 30% (by volume) and
10% (by value) in US generic Market
 304 ANDA approvals from USFDA in 2017
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INDUSTRY DYNAMICS – GROWTH POTENTIAL
Global Pharma Market US$bn Indian Pharma Market
1,600 60

50

1,200

40

800 30

20

400

10

- -
FY15 FY16 FY17 FY18 FY19E FY20E FY15 FY16 FY17 FY18 FY19E FY20E

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INDUSTRY DYNAMICS – INDIAN API MARKET
Indian API Market US$bn
15

10

World, 92%
India, 8%

-
FY15 FY16 FY17 FY18 FY19E FY20E

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SPECIALITY CHEMICALS INDUSTRY - GROWTH TRENDS

Global Specialty Market US$bn Indian Specialty Market US$bn

1,200 60

50

800 40

30

400 20

10

- -
FY15 FY16 FY17 FY18 FY19E FY20E FY15 FY16 FY17 FY18 FY19E FY20E

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DRIVERS FOR HELATHCARE INDUSTRY
Rising need For Healthcare
 Ageing Population: the aged population (60
years or above) will rise from 8.9% in 2015
to 12.5% in 2030
 Increasing chronic disease: The common
chronic diseases (lasting for more than three
months) affecting India with cardiovascular
disease, diabetes and cancers. NCD deaths
to account for 60% of death; rising to 52 mn
in 2030 from 38mn in 2015
Healthcare Spend & Financing
 Rising Healthcare Spend: Healthcare
expenses rose to US$118 per head from
US$76.1 per head
 Health Insurance: Rising disposable income
and government initiative will flourish
primary healthcare and disease
management
Opportunity Size Is Big
 It is estimated that drugs worth US$40bn in
US and US$25bn in Europe will be going off-
patent in next 5 years. This is expected to be
the major export booster for the generics
and API Industries based out of India.
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CHINESE THREAT IS DIMINISHING

● Overdependence on China - API imports account for

32% of API domestic consumption, of which 57-60% is
imported from China

● Recently the prices in the Chines market are on rise

and due to environmental concerns more than 1.5
lakh small companies have closed down; resulting in
shortage of supply

● India emerges as the only alternative and reliable

sources for global as well as domestic pharma majors

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INDIA OFFERS ITS OWN POSITIVES

Availability of raw materials at

Skilled manpower available at competitive cost
competitive prices

Government incentives & support through favorable policies

Manufactuirng infrastructure & investment in R&D Strong domestic demand

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 Thank You

For Further Information Please contact-

Mr. Sonal Kumar Shrivastava

(M) – 9324748334
sonalkumar@kirinadvisors.com