Aurobindo Pharma - Conference Call Key Takeaways

Aurobindo Pharma announced its Q2FY14 earnings for the quarter ended 30 September, 2013. As far as revenues are concerned, the consolidated net operating income in Q2FY14 grew by 28% to Rs. 1914 crores on a year on year basis and by 12% to Rs. 1716 crores sequentially over Q1FY14. For the first half, the net operating income was at Rs. 3629 crores against Rs. 2715 crores during the corresponding period last year, thereby growing by 34%. The Gross Sales from Formulations during the quarter and first half have been Rs. 1228 crores and Rs. 2329 crores which were 36% and 49% higher respectively on a year on year basis.

The US Formulations sales have recorded a strong growth of 72% against the corresponding quarter last year at Rs. 731 crores. This growth was primarily driven by gaining market share of our existing product basket including injectable products. Auro-Medics, the company marketing injectable products in USA has grown its sales by 17% sequentially and generated approximately USD 8mn during the quarter. In terms of segmental classification, US formulations contributed 59% to the overall formulations revenue in Q2FY14 against 47% last year, Europe & Rest of World contributed 22% as against 25% as the share of ARV declined to 19% against 28% in Q2FY13. There has been year on year improvement in EBITDA by 620 points. The EBITDA for the quarter is Rs. 438 crores which is 23% of net operating income and has gone up by 75% over Q2FY13.

On the debt front, the majority of the company's debt is denominated in foreign currency. As on September 2013, the total gross debt is at Rs. 3684 crores with cash on hand of Rs. 307 crores and thus net debt of Rs. 3377 crores. Bank working capital borrowing which is perpetual in nature constituted Rs. 2268 crores, short term loans of Rs. 94 crores, sales tax deferment of Rs. 68 crores and foreign currency term loan of Rs. 1254 crores. The borrowing in rupee terms has increased approximately by Rs. 97 crores over March 2013 due to sharp devaluation of rupee even though the borrowing in dollar terms have come down by approximately $65 million. The company repaid US $44 million of debt during the quarter. The growing export revenue offers natural hedge against repayment of foreign currency term loans of US $200 million which is payable over the next four years.

When asked about the strategy for CRAMS, N. Govindaraja said, " As far as CRAMS is concerned, I think we have started seeing some progression in terms of the business from European customers and Japanese customers, and obviously, CRAMS business is a tricky one where we cannot talk much about the customers as well as the product, but we clearly see that one of the products, in fact 2-3 months back it was approved, so the current supplier for the innovator is from Japan. So obviously, we will be considered as a second source and over a period they will move into some quantities from us and it is an interest like that, there are a few opportunities which have come up and it is growing as we had planned."