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TRANSCRIPT
Corporate Presentation
February 15, 2019
Aarey Drugs & Pharmaceutical Ltd
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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 thebasis 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 meansof 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 norepresentation or warranty, express or implied, whatsoever, and no reliance shall be placed on, the truth, accuracy, completeness, fairness and reasonableness ofthe 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 liabilityin 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 individuallyand collectively forward-looking statements. Such forward-looking statements are not guarantees of future performance and are subject to known and unknownrisks, uncertainties and assumptions that are difficult to predict. These risks and uncertainties include, but are not limited to, the performance of the Indianeconomy and of the economies of various international markets, the performance of the industry in India and world-wide, competition, the company’s ability tosuccessfully implement its strategy, the Company’s future levels of growth and expansion, technological implementation, changes and advancements, changes inrevenue, 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 thisPresentation. The Company assumes no obligation to update any forward-looking information contained in this Presentation. Any forward-looking statements andprojections made by third parties included in this Presentation are not adopted by the Company and the Company is not responsible for such third party statementsand projections.
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BRIEF PROFILE
Aarey Drugs & Pharmaceuticals Limited, promoted by the
Ghatalia family, is engaged in active pharmaceutical
ingredient (API)/Bulk Drugs manufacturing and offers a range
of products for various industrial applications. The Company is
engaged in trading and manufacturing activities. The
Company is a manufacturer and supplier of pharmaceutical
raw materials, chemicals, pharmaceutical ingredients, API's
drugs, food colors and flavors.
The Company's assortment of pharmaceutical products
includes Metronidazole and Metronidazole Benzoate. Its
products include Monomethyl Urea (MMU, Dimethyl Urea
(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.
After a long hiatus it is reinvesting in its manufacturing
Business
Shareholding Pattern
Market Data
Share Price (INR) 30
Market Capitalization (Rs cr) 72
No. of Shares Outstanding (Cr) 2.34
Face Value (INR) 10
52 week High-Low (INR) 64/26
Promoters,
50.44
FII's, 14.61
Public, 34.95
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KEY MILESTONES
1990Incorporated
1993Public Limited
company
2000Added 5 new products
in trading portfolio
2008Manufacturing plant was setup
2012Achieved 100cr sales
2015Entered into API manufacturing
2016Production of MMU &
DMU
2017Achieved sales of Rs
300 cr plus and ventured into
production of OPNA & BMD
2018Ventured in production
of Mefanamic acid
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THREE PRONGED - BUSINESS MODEL
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.
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.
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.
Manufacturing Contract Manufacturing Trading
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STRATEGIC SHIFT IN FOCUS – TO MANUFACTURING
Manufactuirng, 8.80%
Trading, 91.20%
FY17Manufactuirng,
30.30%
Trading, 69.70%
FY19E
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CURRENT PRODUCTS CONTRIBUTION TO REVENUES(%)
MMU, 11
DMU, 8
Mefanamic Acid, 17
BMD, 11ONCB, 29
DPL & Others, 24
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MANUFACTURING PLANT
APDL has four manufacturing units inTarapur, Maharashtra a notifiedchemical units Hub. Spread over anarea of 85,000sq.ft., the manufacturingunits are designed for manufacturing ofAPIs, intermediates and specialtychemicals.
The company has started re-investingin modernization and de-bottlenecking.
Currently capacity expansion of the4th manufacturing plant is already inprogress.
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KEY CUSTOMERS
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KEY STRENGTHS
Strong Raw materials procurement skills
Strategic shift to value addition
Enough potential to grow with existing
product basket
More than 40-45 chemicals in trading portfolio . Strong customer
relationships, with more than 30 decades experience in industry
Increasing focus on manufacturing,leveraging strengths to do backward
and forward integration
Current utilization at 60-62%With opportunities to further enhance
capacity with de-bottleneckingNo high capex requirement.
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PROFESSIONALLY MANAGED COMPANY
Mihir Ghatalia - Managing Director
Mr. Mihir Ghatalia completed his B.S. in chemical engineering from Virginia Polytechnic Institute & State University in the UnitedStates. 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 anew generation entrepreneur, and his strong academics, skill set and expertise have helped us to roll out manufacturing at theTarapur plant. He has worked in various team including designing, costing, building, maintenance, safety and quality control ofeffluent treatment plants. His ground level expertise, sharp business acumen and visionary leadership have helped us evolve ourbusiness and achieve consistent results.
Mr. Rajesh P. Ghatalia - CFO
Mr. Rajesh P. Ghatalia is the main founder of Aarey Drugs & Pharma Ltd. A textile engineer by education was involved in textile loomsduring his early days. Later, along with his brother Mr. Atul Ghatalia they started trading in chemicals & Solvents and after 10 years ofbusiness, he forayed into a new venture of manufacturing API’s. Started with the manufacturing of Imidazoles, under his leadershipAarey 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 willpowerapart from the go get it attitude have been instrumental in getting us where we stand today.
Parmeshwar Dond - Production HeadMr. Parmeshwar Dond completed his B.Sc (Chemistry) from Shivaji University. He has been in the industry for more than 25 years, hismajor USP lies in the manufacturing bulk drugs, intermediate & API plant, which are important facets for the company. Hisexperience play a key role in making sure that the day to day operations of the organisations is running smoothly and efficiently.
Dr. Vilas Lokhande- R&D HeadDr. Vilas has completed his M. Pharma Ph. D. from Haffkine Institute, Mumbai and has a wide experience in manufacturing and R & Dpharmaceuticals 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 – Quality control Head
Dr. Sanjay Pallav has completed his his Ph. D in Organic chemistry from Haffkine Institute, University of Mumbai. He has over 20 yearsof experience in the field of the API research and development from reputed pharmaceuticals industries such as Arch Pharmalabslimited, Piramal Healthcare Limited, Sarex Overseas &Unichem Laboratories Limited to name a few. His skill set bagged with theabundance of knowledge Mr. Pallav hold key to the further enhancing new product development and also making sure the quality ofthe 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 (Audited)
FY15-16 (Audited)
FY16-17 (Audited)
FY17-18 (Audited)
FY14-15 (Audited)
FY15-16 (Audited)
FY16-17 (Audited)
FY17-18 (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 Assets
0.3 0.0 0.0 0.1
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 and tax
15.5 18.0 -13.8% 58.1 53.6 8.3%
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 existing products
Profitability Growth
•Higher contribution from manufacturing with lower capex
•New product introduction•Higher operating margins &
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) and55% (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) and10% (by value) in US generic Market
304 ANDA approvals from USFDA in 2017
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INDUSTRY DYNAMICS – GROWTH POTENTIAL
-
400
800
1,200
1,600
FY15 FY16 FY17 FY18 FY19E FY20E
Global Pharma Market US$bn
-
10
20
30
40
50
60
FY15 FY16 FY17 FY18 FY19E FY20E
Indian Pharma Market
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INDUSTRY DYNAMICS – INDIAN API MARKET
World, 92%India, 8%
-
5
10
15
FY15 FY16 FY17 FY18 FY19E FY20E
Indian API Market US$bn
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SPECIALITY CHEMICALS INDUSTRY - GROWTH TRENDS
-
400
800
1,200
FY15 FY16 FY17 FY18 FY19E FY20E
Global Specialty Market US$bn
-
10
20
30
40
50
60
FY15 FY16 FY17 FY18 FY19E FY20E
Indian Specialty Market US$bn
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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
Government incentives & support through favorable policies
Availability of raw materials at competitive prices
Strong domestic demand
Skilled manpower available at competitive cost
Manufactuirng infrastructure & investment in R&D
Thank You
For Further Information Please contact-
Mr. Sonal Kumar Shrivastava(M) – 9324748334