Concall Summary: Granules India Ltd Q1FY21

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Business updates

  •  The company is seeing a much stronger demand growth than earlier anticipated
  • Production is happening at 130-140% of last year’s production capacity and expected to fully utilize newer capacities far earlier than anticipated
  • The management has started construction of new facility at existing formulation plant and will spend Rs 250 crores on this plant over the next 18 months with a capacity of 4-5 billion tablets a year
  • The CAPEX will be funded via internal accruals
  • Have completed buyback worth Rs 142 crores at Rs 200/share
  • Expecting profit growth of 30% for the current Fiscal Year
  • Gross margins have moved up from 50% to 59%
  • Aiming to launch 7 newer products from GPI in this Fiscal Year. Also launching two new OTC products in the US market
  • Aiming to reduce debt and working capital cycle over the next Fiscal Year


  • Ashmore Investments
  • MK Ventures
  • Sundaram Family Investment
  • RARE Enterprises
  • GIRIK Capital
  • Vallum Capital
  • IDFC Securities
  • Equirus Securities
  • Dalal & Broacha
  • Centrum Broking
  • Emkay Global
  • Wallfort Financial


  • The impact of COVID will continue in the current quarter and beyond that, it will be difficult to take a call
  • The management doesn’t see the metformin ER recall to impact the financials materially in the current year
  • Looking at increasing the R&D expenses but as a percentage of sales it might come down however looking at filing the major ANDA’s that are in the pipeline
  • The problem with Metformin ER is at the formulation level in the 750 mg
  • There is no substitute for Metformin and thus demand could shift from 750 mg to 500 mg
  • Going forward will be limiting the number of ANDA’s and dossiers being filed and will launch around 7-8 for the year
  • The CAPEX will be more geared towards strengthening backward integration
  • Any CAPEX going forward, the company will be funded only via internal accruals
  • The management has an intention of doing buybacks as and when free cash flow will be available
  • The biggest risk the industry faces today is if the supply chain from China faces a problem due to current calls on the boycott of Chinese goods
  • Have changed the strategy around R&D spending which limits the spending around minimal ANDA’s which are more strategic in nature
  • The management had gone ahead with tender in the buyback because the plan was to reduce pledge at the promoter level
  • It will take a couple of quarters to see revenues from oncology block to be evident in the numbers
  • Around 11% of revenues currently come from GPI and in the next four years expecting revenues from GPI to at least grow fourfold
  • The high market share the company has in the US market is a strong competitive advantage and along with integrated facilities for its formulations is a differentiating factor amongst its competitors
  • A unique manufacturing prowess and history of no adverse regulatory warnings have differentiated the company against its competitors
  • The company will be using the oncology block for CMO/CDMO work and tying up with strategic players who have a frontline presence
  • The management expects the EBITDA margin to sustain at around 23% for the current year
  • Over the next 3-4 years, the contribution from core molecules will come down to 65-70% from the current levels of 85%
  • There is no test for chloro ethylene and it is an impurity present in PAP and in all our paracetamol batches there has been no presence of para chloro acetanilide thus assuming co possible presence of carcinogen in the paracetamol batches
Also Read on FinMedium:  Concall Summary: Rallis India Q4FY20

Image source: Company website

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Karan Sharma

Karan Sharma

The Concall Summary Guy | CFA | Investor
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