Capitaline

Analyst Meet / AGM 19-Jun-20

Conference Call

Hikal

Current plant capacity utilization is around 80%

Hikal conducted conference call on 19^th June 2020 to discuss the financial results and performance of the company for the quarter ended Mar20. Mr. Sameer Hiremath- Joint Managing Director and the CEO, Mr. Anish Swadi - President, Business Development & Strategy, Mr. Sham Wahalekar – President, Finance & Company Secretary, Mr. Kuldeep Jain - Finance Controller of the company addressed the Concall.
Highlights of the Concall

The company had shut down its operations on 21st Of March 2020 post lockdown announcement by government of India. Being a part of the essential services industry it was able to restart its operations on 5th April 2020 after getting permission from the respective government authorities. It took around 10-15 days to normalize the operations and start producing in holistic manner.

The capacity utilization for the month of April has been low. However, the utilization improved to 60% in May. Currently in June it is operating around 80% utilization across its manufacturing plant

The company currently has approximately 75 to 80% of manpower working at its manufacturing plant units

During the COVID-19 lockdown the company had implemented several cost rationalization and efficiency improvement measures across the company. These include increasing its domestic sourcing of the raw materials as well as investing in increasing of automation, mechanization and implementing industry 4.0 initiative which will lead to improvement in operational efficiency going forward.

Business continues to be robust with no major impact on demand for its products. The company stated that there has been no cancellation of any orders. And it continues to be optimistic for the long term prospects of both its divisions

On the raw material supply side the company faced initially several logistical issues due to restriction and movement of goods, which are now solved to a large extent. However the company is still facing few instances of delay and non availability of some raw materials and it is taking necessary action to mitigate this risk.

The company is de-risking its supply chain by developing domestic sources on raw material wherever possible.

The additional capacity at Bangalore which came on stream in the second half of the last financial year has also started contributing to revenues.

Both sites at Bengaluru and Panoli of the company got recertified by the US FDA last year.

During the year the company has filed three new drug master files in generic business. On the contract manufacturing side it has several products in various stages of development which will fuel its growth for several years

The company has successfully developed the API for Favipiravir at pilot scale and is currently supplying test quantities to clients. Favipiravir is currently in medical trials for the treatment of COVID-19. And clinical trials are currently running all across the world. The company is currently scaling up the product and expect to commercialize the product by September October of this year. There is still a regulatory process involved and it is still early to gauge the demand and the revenue potential

During the year, the company has reduced its gross debt by Rs16 crore from Rs 661 crore on March 31, 2019 to Rs 645 crore as on March 31, 2020. Net debt has also come down from Rs 629 crore on March 31 2019 to Rs 581 crore which is a reduction of Rs 48 crore

The company is continuing its capex plan in both of its segment. During the COVID-19 lockdown, the construction activity was completely stopped. However, with the relaxation in lockdown the company expects to resume construction activities shortly. Currently, the availability of skilled manpower has been a challenge in the ongoing pandemic and it is discussing with various contractors to provide skilled manpower for the long term basis. The company expects to complete the capex by end of FY21

Out of the total capex of Rs 300 crore the company has already spent Rs 158 crore and the balance will be spent in FY21

Crop protection business reported a flattish growth for the year because there was some inventory correction from some of major customers. 80% of revenues in crop protection business come from exports while about 20% come from the domestic business. The company expects growth to come in from next year in crop protection business.

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