Granules India Q2 profit down 51% to Rs 81 crore

Hyderabad: Hyderabad-head quartered pharmaceutical company Granules India Ltd reported a 51 per cent decline in profit after tax (PAT) to Rs 81 crore in July-September quarter (Q2) of financial year 2021-22, from Rs 164 crore in corresponding period previous year. However, the company's revenue from operations increased marginally at 4 per cent to Rs 888 crore in Q2 of FY22 against Rs 858 crore in the same quarter last fiscal.

Its business was unfavourably impacted in the second quarter due to difficulties in procuring raw materials, mainly from China due to Chinese dual energy policy and increased procurement prices for almost all items due to interruptions in supply of materials and increased logistics costs arising out of vessel shortage and port congestion in various part of the world, the company said in a statement.

Gross margin has dropped from 57.9 per cent to 50.9 per cent in the reviewed quarter on account of reduction in margins of all major products especially Paracetamol due to increase in prices of KSM (key starting materials) and increased logistics cost. Price pressure in the US has also resulted in marginal drop in gross margin for core products. The entire loss of gross margin for the current quarter was mainly absorbed by Granules.

The company said, "We expect to pass on some of the increases to our customers from Q3 FY22 onwards. Pharmaceutical Formulation Intermediates (PFI) segment grew 10 per cent, Finished Dosage (FD) grew 18 per cent and, Active Pharmaceutical Ingredients (API) segment down by 25 per cent mainly due to Paracetamol KSM supply disruption during the quarter. Revenue share from other molecules has increased to 19 per cent and revenue share of FD has increased to 57 per cent consistent with our strategy."

Granules India has filed one abbreviated new drug application (ANDA), one European Dossier, one Drug Master File (DMF) in the US and one Certification of Suitability (CEP). Research and development (R&D) expenses has significantly gone up in line with accelerated R&D strategy. The Board of Directors has declared its second interim dividend of 25 paise per equity share of Re 1 each.

Dr Krishna Prasad Chigurupati, CMD of Granules India said, "The last quarter was one of the most challenging quarters that we have witnessed in the recent past. We were unable to pass on our cost increases to our customers. Based on ongoing discussions with customers, we are confident of passing on our price increases substantially from Q3FY22 onwards. We expect that our gross margins will see a recovery and we believe that our performance for the rest of the fiscal will be substantially better."

He adds, "We have been taking all necessary measures to de-risk ourselves from supply chain disruptions and expect to see these efforts bear fruits next fiscal onwards. Due to the current volatile and uncertain environment, we believe that we will not be able to meet our guidance, and it will not be prudent on our part to give any future guidance until the situation becomes stable. All our projects and plans are on track, and I am very confident that the current fiscal will be a one off and not affect our long-term growth strategy and aspirations."