Highlights of the Concall

• Net Sales increased 11% on a y-o-y basis in Q2FY'14 to Rs. 307 crore but down 11% on a q-o-q basis. Net Sales in Q2FY'14 was driven by the growth in the Healthcare segment. This was led by continued ramp up of a key CMO account in the API business and consolidation of Vivimed Alathur in the Contract FDF segment. Specialty Chemicals segment declined due to the strategic portfolio rationalization initiative. During the quarter, the Company reduced volumes of less profitable imaging chemical products

• EBITDA decreased 3% y-o-y but increased 7% q-o-q to Rs. 52.4 crore and margins stood at 17% lower than 19.5% in Q2FY'13. However EBITDA margin improved on a q-o-q basis by 285 bps to 17.0% driven by improved profitability in the Specialty Chemical business. This is despite the profitability in the Healthcare segment being impacted by prolonged wait for regulatory approvals in the FDF business and some product specific issues in the API business

• Net Profit decreased 35.9% y-o-y to Rs. 16.4 crore and margins stood at 5.3% compared to 9.3% in Q2FY'13 and 5.8% in Q1FY'14.

• Finance cost increased due to higher working capital utilization and an increase in long term loans at the standalone level

• Effective Tax Rate (ETR) declined due to deferred tax asset created in the API business which reduced the overall ETR at the consolidated level

• Healthcare formed 67.6% of Q2FY14 sales

• Process improvements shall start to deliver results in FY'15 for the current API product portfolio leveraging on Indian R&D

• Contract FDF have experienced push back due to prolonged wait for regulatory approval. Audit completed in Sept 2013. This situation is expected to correct itself in the current quarter and result in meaningful contribution in the second half of the year

• Acquisition of the US FDA approved FDF plant has opened the regulated market gateway, two ANDA's and in-house API manufacturing has driven the domestic FDF to the next level

• Skin Care: Increased market share and higher allocation with existing clients; opportunities in newer markets in Latam. New product introduction and sampling remain core focus for H2 FY2014

• Hair Care: Encouraging volume growth in the Middle East. Increased client penetration and new opportunities in one Latam market. A new Hair Dye project in Southern Europe under progress

• In the process of adding two new in-marketing initiatives to the distribution vertical

• Identified certain new peptide products to be developed

• Increased market share in Asia and Middle East, and received approval for three new products for preservatives

• Decline in the segment revenues due to a strategic defocus on the imaging chemicals business (decreased from 57.0% in Q1 FY2014 to 5.2% in Q2 FY2014)

• Photochromic Dyes growth in line with expectation

"This quarter has been very eventful for us with the recent acquisition of the Alathur SOD facility from Actavis. Integration and consolidation of businesses across all verticals remain one of our highest priorities. Vivimed continues to make investments in strengthening our R&D base in India across healthcare and specialty chemicals segments. In the Healthcare business, we are positioning ourselves to capitalize our capabilities as an integrated player with a differentiated focus on R&D. In the Specialty Chemicals business, Vivimed is focused on successful execution of the recent order wins even as we invest in new products.

Despite near term challenges, we are confident that with our investments towards a differentiated product pipeline, continued focus on client mining and consistent regulatory track record will hold us in a good stead to deliver long term growth and sustainable profitability."