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Thursday, March 31, 2011

Stock_for_YOU Unichem Lab's India business to grow in double digit in Q4

Unichem Lab's India business to grow in double digit in Q4


Rakesh Parikh, CFO, Unichem Laboratories
Unichem Labs
BSE | NSE 31/03/11
In an exclusive interview with CNBC-TV18, Rakesh Parikh CFO of Unichem Laboratories says the company's Q4 outlook is on the lines of the Q3 growth and the investments made are likely to reap benefits soon. "The India formulation business is continuing in the same as in Q3. We will wrap up the year with double digit growth."
He also says, "International formulation will show more than 20% growth driven by the US business as well as the emerging markets."
Below is a verbatim transcript of Rakesh Parikh's interview with Latha Venkatesh and Soniya Shenoy. Also watch the accompanying video.
Q: How are the sales doing in the current quarter? What are the projections for FY12?
A: After the Q3 results, the international formulation has also started adding to the domestic sales growth which is there. The company had made lot of investments in the newer divisions and realigning its strategies to get the benefit and to increase our growth rates. These investments, as far as India market is concerned, the Indian domestic formulation market will give us the benefit. In addition, investments were done for our overseas business including our formulations, the US business and the ANDA filing. These have also started yielding the results.
In terms of numbers if you see, we are continuing a double digit growth, one for the company as a whole; secondly the India formulation business is also continuing to do the double digit growth. However, if you see specifically, the international formulations from the Q3 onwards primarily driven by the US business, as well as the emerging markets growth, the company has shown almost 25% growth in the international formulation business.
In Q4, the India formulation business is continuing in the same way what we did the Q3. Hence, we will wrap up the year with double digit growth. India formulation growth will be in double digits, maybe in the lower teens which are already there. International formulation will show more than 20% growth primarily driven by the US business as well as the emerging markets. Going forward, the various investments that we have had in the international formulation will continue to bear fruit. Primarily, the contractual sales business that the company has been working on has started yielding result and we will see the upsides coming in significantly next year onwards.
Q: If you can give some numbers, Q3 your revenues grew by 14% so you gave us a split of the international revenues rising at a faster pace. In FY12, can one expect this to go to the higher teens or by closer to 20%?
A: As far as the company is concerned we are looking at even 20% upwards.
Q: Can you give us some specific details on that and what kind of revenue growth are you expecting?
A: We have seen the Indian market growing in the higher teen to be moderated in the last few months. The company has stepped up its investments to see that we maintain our market share which is there. In addition, the restructuring has been done in the past of the acute segment that will start showing much better results going forward. However, we know that the GST is likely to come and we want to ensure that the company is in place and there are certain efficiencies that we can easily pullout of the working capital and the supply chain.
It is likely that there maybe some moderation in the India formulation growth and it will be done in medium to long-term interest of the company. As a result, the India formulation growth may continue in double digits but at a lower double digit and significant growth will come will be from the international formulation of about 20% and upward since we have seen 25% plus growth from the emerging markets, as well as in US.
Q: You have had to increase your sales force, we have heard about higher level of attrition as well. Give us an idea as to whether the attrition levels have come down and what is the likely expense on sales force in FY12 also likely margins? You slipped from 26% to 20% in the past 12 months, how will it shape up in FY12?
A: Attrition is an industry wide phenomenon and don't think that there is any improvement seen. Like other companies, we are also affected and are taking steps to see what is affecting our growth. However, we have second tier brands or mid brands. The mature brands may not be able to deliver that kind of a high growth but the brands that are accounting for the middle part of our business are showing very high growth.
The focus is on these brands. In addition to that the company also is venturing by adding new divisions. The company has also started the hospital division which will be making sales to the hospital; the gynecology division is there as well. These investments will continue and as a part of accounting policy, the company writes off these investments but they affect the P&L to that extent the margins have come down about 300-400 bps.
Going forward, in FY12 there maybe slight improvement in the margins which we will see because the investments will continue. We are planning for a gynaecology division that will start next year in India formulations and the moderation that we are seeing in the market, the marketing strengths to some extent will continue, especially, the newer people that we have added.


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