00:00 Welcome back. You are watching Earnings Edge on NDTV Profit. Vivek Parthi, who is the management
00:14 of Kaplan Point, I am here by, I am here, we are going to speak about the Q4 FY24 numbers
00:20 with him. Hi Vivek. Hi.
00:25 So Vivek, if you see revenue is up 16% while if you see the net profit, net profit is up
00:32 20% while EBITDA margin is flat year on year. So what stood out for us this quarter?
00:38 Yeah, I think we pride ourselves in being as consistent as possible across all segments.
00:45 And that also goes back to the fact that ours is mostly focused on private market rather
00:52 than institution based. So our unique business model is the fact that we don't have any intermediaries.
00:58 So we either manufacture or outsource a product and we supply it right down to the last mile.
01:03 So nothing specific. Of course, the US business is growing quite well. So apart from that,
01:10 I think nothing specific. It's been consistent growth like what we would like to keep always.
01:15 Well, Vivek, if you see Kaplan is aspired to convert a top line of FY22 to bottom line
01:22 in FY28 as per your annual report. Now, are we expecting more revenue growth going forward
01:30 versus what we have been doing these years? Yeah. So for us as a company, we've been very,
01:37 very focused towards cash flow, bottom line and top line in that particular order. So
01:42 we as you can see, we remain debt free and we've remained debt free for quite some time
01:48 now. In fact, despite investing close to 600 crore in capex over the last five years, we
01:54 still sit on internally approved reserves of more than 900 crores on our balance sheet.
02:00 So that goes to show that we have a very sharp focus towards the cash flow and bottom line
02:05 for the company. I think if you look at peers amongst our size, we are probably better than
02:11 most others in the size segment where we operate in. And despite pressures of increasing our
02:18 top line, we want to make sure that we bite off what we can chew rather than be specifically
02:24 focused only towards the top line. So just to get a sense on numbers, what kind of growth
02:29 are we expecting in near term, say for FY25 and FY26 with the expected EBITDA margins?
02:36 Yeah, I'll answer your second question first. Our EBITDA margins are currently at 34-35%
02:43 numbers which we feel is certainly sustainable. In fact, over mid to longer term, that can
02:50 potentially go up as well. When it comes to what we're expecting in the next couple of
02:55 years, we have three, four levels of growth. Specifically, the US business is one that
03:00 is coming up well. We have our oncology business that is in very nascent stages and also our
03:06 larger market targets such as Mexico and Chile right now that is going to be driving growth
03:12 forward. Having said that, over the next 18 to 20 months, I think we need to be a little
03:18 bit cautious. We need to be a little bit patient because anything in pharmaceuticals, especially
03:23 in semi-regulated markets and regulated markets will take time. So we find a bunch of dossiers,
03:29 especially in Mexico, we find a bunch of dossiers in the oncology segment and also the US starting
03:35 to take shape. I think, you know, 26 and beyond is something that we can really look forward
03:42 to. But for the very short term, I think growth, what we've shown in the last couple of years
03:47 should continue.
03:48 Okay. And Vivek, also, are we entering into value-added products like insulin and biosimilar?
03:56 Yeah. So if you look at our Latin America business specifically, we've been operating
04:01 there since over two decades now. And Kaplan as a brand has been very well established
04:05 on the market. So the platform and distribution network, everything is already in place. Now,
04:10 it'll be important for us to add value-added products such as branded generics, some biosimilars,
04:17 especially on a fill-finish concept, et cetera, because like I said, there is a significant
04:22 amount of trust and goodwill that has been created on Kaplan as a brand. So what we are
04:27 going to add over and above the products that we have in our portfolio would be important.
04:32 I think early stage biosimilars and also some mainstay products like insulin, et cetera,
04:41 would really augment our portfolio going forward.
04:44 Also, we have got good cash on our balance sheet. So any acquisition that you are eyeing
04:49 in future?
04:51 So obviously, we want to make sure that we are prepared for when the right opportunity
04:58 comes along. What is very important for us is the right fit. We have certain segments
05:04 of the market where we're not present right now. That could be distribution in the US,
05:10 that could be something in the domestic market, et cetera. But eventually, it has to be something
05:15 that would be value-accretive to the overall company. And we always like certain amount
05:21 of de-risking when it comes to the business segment of it as well. So we don't want to
05:26 be going to the banks for anything. So we want to try and live within our means. So
05:31 whatever that we're collecting right now, it should put us in a good position should
05:37 anything good comes along in terms of inorganic goods.
05:40 Also, would you please brief us about your Kaplan Sterile business, which is our regulated
05:46 market and US-focused business? So what are your plans there?
05:49 Yeah. So far, I think the growth has been quite commendable, I would say. We were about
05:56 almost zero revenue about four or five years back. Right now, we crossed over 310 crores
06:02 in operating revenue. Early on in our lives, we knew that being a complete CMO might stunt
06:09 our progress going forward. And Kaplan as a company has been built on the foundation
06:14 of being in the front end. So right now, the important part for us to evaluate is how quickly
06:21 we'll be able to come to the market in the US with products of our own. So we're making
06:26 fairly good progress on that front. Almost 30 out of the 50 state licenses has been received
06:33 already. We hope to come to market with our own label product between September to December
06:39 of this year. We're in a unique position in the sense that we have over 22 products that
06:44 are already approved Kaplan Sterile's name. We have another 14 products that are under
06:48 review. So I think we can come to the market with a fairly large portfolio of products,
06:54 very specifically focused towards the hospital segment in the US.
06:57 And about your oncology facility, so what are you expecting there? And how this will
07:03 add to your top line? Yeah. So we have a small oncology business
07:08 already. What we've done in the past is we've outsourced some of these products from other
07:14 manufacturers. Now we have our own entity. We would be focusing on manufacturing most
07:18 of the products in-house. We are also trying to see how best we can integrate backward
07:24 by way of our own API. Again, it goes back to what I said earlier that Kaplan as a brand
07:29 is very well established in emerging markets, especially of Latin America and Africa. And
07:34 oncology as a segment was not available with us back in the day because oncology manufacturing
07:40 needs to be in a dedicated unit as well. So we've already filed a few products in our
07:45 existing markets. We look forward to filing close to 50 products in the larger markets
07:52 of Latin America before the end of the year. So I think in the next 18 months, you will
07:56 start to see the oncology business starting to add to the bottom and top line for us.
08:02 Also, Vivek, my last question to you is, is there a threat that we are seeing right now
08:08 as you know, considering a lot of Chinese businesses are entering into Mexico because
08:12 US is having a lot of trade problems with them? To be honest with you, we've been pro-China
08:19 in terms of our outsourcing piece of it, right? So in the past, since 2005, 2006, when I used
08:26 to be in China myself, we set up a large outsourcing operation from there. And I think if there's
08:32 enough value left on the table between your supplier and yourselves, I think you can have
08:36 a very coordinated relationship. Having said that, I think when it comes to Mexico, we've
08:42 read a little bit on this as well, but we've not really seen this in the pharmaceutical space.
08:48 We've seen this in multiple other industries, but pharmaceuticals per se, I've not seen too
08:53 much of a presence from Mexico in тАУ sorry, from China in Mexico. If anything, I think that
09:00 encourages us to actually tie up with more manufacturers where we can take their product
09:05 to Mexico, because we'd like to believe that we understand the geography and terrain of
09:10 Latin America better than someone that is trying to enter today.
09:13 Well, thank you so much, Vivek, for answering our questions, and all the best for the business.
09:20 Thank you. Thank you very much.
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