Key Highlights

Around 90% of income comes from royalties, from out licensing the patented products and infringement claims for patents and rest from the manufacturing of water soluble films (WSF) in Ankleshwar plant.

The recent demonetisation will not have any major affect on company's business.

Management has divided its 30 patents into 5 broad categories of security, health & hygiene, printing, bio-degradable and detergents. Each line of patent business has a scope to generate more than Rs 500 crore of revenue streams in 5 years if it gets commercialized.

There has been a delay in finding the human talent which the company was anticipating and thus the delay on commercializing the patents. The company is in continuous talks and discussion with various FMCG and Pharmaceutical companies worldwide for developing the products for the end consumers using the patents.

The company continues to be market leader in water soluble films. WSF production capacity of the company is around 400 tonnes and utilization is 100%. The company has spent around Rs 25 crore to increase the capacity to 1,000 tonnes, which got commercialized in Sep'16 quarter. The capacity addition will cater to the security and health and hygiene segments, niche and high-margin markets.

The company supplies its WSF from Ankleshwar plant to various industries such as Agrochemicals, Embroidery, Detergents, Soap Film, Laundry Bags, Capsule Package, Fish Bait, Toilet, Blocks, Edible Film based Pharma Films, Dyes, Cement Additives, Enzymes for Bio Toilets etc.

Monosole US, which is the largest player in WSF business, works more on a seal belts model which is a high volume model while Arrow works on a detachable liner model which provides it flexibility and can work on small quantities like 50 kg compared to say starting range of around 10 tons for Monosol. This gives Arrow more flexibility to do R&D and to go on seal belt model post confirmations.

The company will monetize the patents going forward. It will balance it out, with some patents for commercializing.

The company has entered an agreement with Proquima wherein it will supply the WSF to Proquima for manufacturing the active ingredients in form of capsules. More details on revenue and the deal will be shared by the year end.

During Sep'16 quarter, there were some onetime prior period expenditure and higher employee costs and lower infringement revenues, which hurt the margins and profitability. Management expects the margins and profitability to return in Dec'16 quarter.

Overall, management aims to clock revenue growth of around 15-18% in FY'18.