Aarti Drugs caps strong year with Q4 growth

Aarti Drugs Q4 FY21 results

Aarti Drugs, one of the biggest manufacturers of ingredients for the pharmaceuticals industry in India, reported a strong performance for the fourth quarter and full year 2020-21.

All three of the Mumbai-based company’s business divisions — APIs or pharmaceutical ingredients, formulations or medicines, and specialty chemicals — contributed to a strong peformance, resulting in an 11% year-on-year jump in revenue to Rs 502 cr for the fourth quarter. For the full year, revenue growth was even higher at 19.5% to Rs 2,159 cr.

Thanks to increased operating leverage, the company’s margins expanded throughout, resulting in a 25% increase in pre-tax profit to Rs 65.3 crore for the fourth quarter, and a 104% increase in full-year pretax profit to Rs 369 cr. Q4 net profit, however, fell due to higher taxes.

The company said the improved margins were the result of higher volumes, greater operational efficiency/leverage and better price realizations in the API segment.

All three segments contributed to the performance, with the API or active pharmaceutical ingredients business registering an 9% jump in revenue to Rs 392 cr for the fourth quarter and an 18% jump for the full year to Rs 1,705 cr.

The formulations division saw a 22% increase in revenue during the fourth quarter to Rs 62 cr, while the specialty chemicals division saw a 25% jump to Rs 48 cr. The formulations business did even better for the whole year, with revenue up 37% at Rs 285 cr.

Adhish Patil, the company’s chief financial officer, attributed the growth in the API segment to a pick up in volumes.

“On a full year basis, the API segment delivered a growth of 18.3%, which was driven by a strong volume growth, better realisations and improved product mix. We expect this positive momentum to accelerate in FY 2021-22 based on the incremental capacities which would be available in FY22,” he added.

Within the API segment, the antibiotic therapeutic category contributed around 44%, antiprotozoal around 15%, anti-inflammatory around 12%, anti-diabetic around 10%, antifungal around 6 % and the rest contributed around 13%. Anti-inflammatory segment share to the total API revenue increased mainly on the account of Nimesulide, Diclofenac Sodium and Celecoxib.

Within the API segment, 65.4% of the revenues came from the domestic market and 34.6% from the exports market for FY21. Domestic revenue grew approximately by 15.4% and exports by around 20.6%.

The company said that around 10% of the growth in the API segment was driven by volume growth due to “good demand across multiple therapies”.

On the formulations side, Patil highlighed higher volumes and robust exports demand as the key growth contributors.

“With the improvement in our operating leverage, process efficiencies and better realizations in sales, our EBITDA margins showed a meaningful improvement at 20.5% for FY21,” he said.

The company’s profitability was helped by lower expenses by way of interest, which was partly due to the repayment of debt using the cash generated by its operations during the year. The total finance cost came down by 31.9% YoY to ₹ 23.0 crores.

The company incurred a capex of Rs 88 crores in FY21 and is planning to invest around Rs 550 crores into greenfield expansions over the next 3 years.

Gross debt stood at ₹ 344 crores and of which ₹187 crores was a term loan.

“Our net debt to equity ratio improved to 0.38x from 0.6x in FY20. However, our leverage is expected to increase by some extent in the coming few quarters as we continue to ramp up our capex plan in greenfield and brownfield projects,” the CFO added.

Patil also said Aarti Drugs is on track of growing the contribution from lifestyle & chronic therapeutic areas and reducing share from acute therapies from the API business segment.

“We have a robust pipeline of products under development and under pipeline for API, Intermediates and Finished Dosages, with more focus on anti-fungal, anti-diabetic and anti-coagulant.”

The company is also in the process of commissioning a new production line for new anti-diabteic product launches.

In addition, brownfield expansion of one of the antibiotic products would also be
completed shortly, he promised.