Jubilant Life Sciences in recovery mode

June quarter Result  HERE

Following Report published in Business Standard on 4 August 2015 


Bhartia family-promoted pharma company Jubilant Life Sciences is on a revival path. Having settled most of the issues raised by drug regulators, the company is now eyeing a growth in revenue and profitability on account of improved margins, new launches and expansion of markets.

“The business is showing signs of recovery. We expect a strong recovery in FY16 in the top line and bottom line. Our revenue growth is expected to be driven by the pharmaceuticals segment. Our life science ingredients segment is expected to deliver better results due to improved operational efficiency, higher profitability and growth in nutritional products and fine ingredients businesses,” said Chairman Shyam S Bhartia in an investor call in May. The company clocked sales of Rs 5,826 crore in the last financial year, with Rs 40 crore loss, almost half the revenues coming from the pharma and the rest from the life sciences business.

The stock price was trading at Rs 170 when Bhartia addressed the investors. Since then, it has appreciated 64 per cent, touching a fresh 52-week high almost every day for the past few days. It touched a 52-week high of Rs 278 on Tuesday and closed the day at Rs 266.60. “We have a 'buy' rating on the stock. There has been an improvement in the business. The company has successfully addressed issues of the US FDA (Food and Drugs Authority) warning letters in its two overseas manufacturing facilities. It has taken a price increase in some segments,” said Saion Mukh-erjee, health care analyst at Nomura Securities. Other brokerages likePrabhudas Lilladher also have a ‘buy’ rating on Jubilant.

The company received warning letters from the US FDA for its two plants in Quebec (Canada) and Spokane (US) in February 2013 and November 2013, respectively. This has led to comprehensive remediation measures, especially in Spokane, which was shut for three-four months. The plants also took longer than expected time to stabilise after-remediation and impacted productivity in the contract manufacturing business. The business is normalising and the company has also set up a second production line at Spokane that will lead to higher revenue.

Apart from beefing up its operations, the company has successfully refinanced debt. It had net debt of Rs 4,396 crore as of March 31, of which Rs 3,165 crore is a long-term debt and the rest working capital loans. Loans that were falling due in FY15 and FY16 have been refinanced, with a new maturity period of five to seven years.

Prabhudas Lilladher’s Surajit Pal said in a report last month that the achievement of milestones in key business verticals will narrow the high discount at which the company is being valued vis-a-vis  peers. It upgraded its recommendation from ‘accumulate’ in a May report to ‘buy’ in July. “With the completion of majority of correction measures and addressing concerns, the company is expected to improve revenues in business verticals, which have been the key reasons for its worst sales growth and operating margin in FY15,” said Pal in the report.

The company’s Roorkee facility was successfully inspected by US FDA recently. Exports to Japan have also resumed in Q4 of last year post-receipt of approval from regulatory authority. It launches new products like Solifenacin in Europe and Valsartan in US, besides many others in emerging markets.




Disc: Holding shares in Jubilant Life