Q2 has been a comeback quarter for us in EMs: Stides Shasun

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In an interview to CNBC-TV18, Shashank Sinha, Group CEO of Strides Shasun spoke about the results and his outlook for the company. Below is the verbatim transcript of Shashank Sinha’s interview to Ekta Batra. Q: Could you come in on the earnings before interest, taxes, depreciation and amortisation (EBITDA) guidance that you have provided Rs 450-475 crore for the second half of the fiscal. Can you tell us what that implies in terms of a growth on a year-on-year (Y-o-Y) on sequential basis for the next two quarters and maybe a margin picture as well? A: We can talk about the EBITDA guidance. We have had, as you know, a good quarter. However, with all the inorganic transactions now having been integrated, so that part of our business on ongoing basis is quite steady. We have achieved the closure of all our transactions, the businesses are well integrated and therefore, on a steady base we have decided to give a guidance more in terms of giving a sense of the scale of our operations as we get into an important second half of the fiscal year. So, that seemed the rational for us to give our investors and our share holders a sense of the scale of our operations and now we are on a steady base to be able to do that. Q: I am just looking at your breakup on a Y-o-Y basis. Your regulated markets have shown a 94 percent growth. I assume that there is an integration of your inorganic acquisitions which is a part of that Rs 463 odd crore that you have managed to achieve in your global pharmaceutical business? A: A big piece of that. You are absolutely right. There is an inorganic activity within that. Our Australia business, which is the significant part here, was not in the same period last year or for maybe just one month of the same period last year. So, it is including inorganic growth. Q: Emerging markets including Africa, how exactly has that done this quarter and what is your guidance on the same? A: We are not guiding on individual businesses, but as we mentioned in our earnings release, this has been a comeback quarter for us in emerging markets, within which particularly if you talk about Africa, despite all the macroeconomic, political currency related headwinds, our business has now tracked extremely well. We have invested a couple of quarters in course correction. We have our strategy in place in Africa and as we have said earlier as well, we have a very strong footprint in 28 countries in Africa. However, what we needed to correct was that the inventories have become higher than we would have desired. So, over the last two quarters we have taken steps to focus more on secondary sales, so more on sell-out and now, our inventory levels are exactly at the level at which we would desire them to be. So, our primary sales are actually built on actual consumer demand. We are not increasing any inventory in the pipeline. Q: I just want to come in on two parts. The Pharmaceuticals Services and Active Ingredients (PSAI) business which has seen a decline of 37 percent this quarter, what resulted in that? It is even a 25 percent decline sequentially. A: When we talk about PSAI business, mainly we would like to talk about active pharmaceutical ingredient (API) business. As you know, the API business is the business that we integrated when we merged with the Shasun Group. During this quarter, we took significant steps to improve the quality of the API business which generally tends to be more of a commodity lower margin type of business. So, obviously, one of the theses for the merger was that we are going to take strategic initiative to upgrade the business in terms of the value deliver and the value chain and the margin improvement, but alongside that, there was a requirement to revamp the facilities. Of course, we have rationalised the product mix. This quarter particularly, we had temporary suspension of production at two of our facilities in Puducherry and Cuddalore for a significant upgrade of infrastructure. Again, it is our ongoing programme of investing in upgrading the API business – that has been completed and both plant are back in operation in full swing.