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Shasun Chemicals expects 25% profit growth over nxt 3 yrs
Vimal Kumar, Joint MD, Shasun Chemicals said that their five-year contract with Eli Lilly, for Eli to exclusively purchase Nizatidine from Shasun, expired in March 2007. He added that, as Eli Lilly had sold their brand, going forward, the company will have to directly contact and deal with the people who have purchased the brand.
According to Kumar, their CRAMS, or Contract Research And Manufacturing Services, business post the acquisition of the UK-based Rhodia will turn around this year and post profitability on its own without the help of capital reserves. “We took over a loss making company and we turned around in the first year itself in the fourth quarter,” Kumar added.
Excerpts of CNBC-TV18’s exclusive interview with Vimal Kumar:
Q: The key component at this point in time, your product Eli Lilly, the five-year contract has not been renewed. What is a status on the product and are you going to be looking at bidding for new ones?
A: This five-year contract we had entered into with Eli Lilly for exclusive purchase from us of Nizatidine, expired in March 2007. In the meantime Eli Lilly had started selling the brand worldwide and Japan happened to the biggest market for this product. The Japanese customer now is looking at splitting the orders and that’s how the situation is today.
Q: Your request for renewal of the contract has been completely declined or are you looking at some sort of development on that front?
A: Eli Lilly has sold their brands worldwide and they have now come out of this product fully. Shasun has to now contact the people who have purchased the brand. Going forward, we will have to deal directly with those customers of Eli Lilly or those buyers of the brand worldwide.
Q: In FY08 how much will Nizatidine account for as a percentage of your total revenue, and how much do you see sales declining by as a result of this contract expiry?
A: On a rough estimate we did about Rs 77 crore last year. We estimate this to be in the range of Rs 25-30 crore this year.
Q: Your sales overall will decline by how much as a result of the expiry of this contract?
A: Overall, we are looking at improvement or growth in numbers; we are looking at a 15% overall growth in topline.
Q: Specifically in regards to your CRAMS business after you acquired Rhodia could you tell us how much percentage of revenues and what sort of margins would you operate at in this business for FY08?
A: Having acquired Rhodia’s business in the UK, our CRAMS contribution went up substantially. Earlier we were at 10% of the gross revenues, it went upto 43% last year and major chunk being contributed by the UK operations. Overall, we see still about 20-25% growth this year on the CRAMS side.
UK operation is going to turn around this year with posting profitably on it’s own for the first time in the history of last seven-eight years. We took over a loss making company and we turned around in the first year itself in the fourth quarter. This year it will be posting it’s profitability on it’s own without the help of the capital reserve.