Jubilant Life Sciences eyes double digit growth this fiscal: MD

In an interview with ET Now, Shyam S Bhartia, Chairman and MD, Jubilant Life Sciences, talks about the company's order book and future strategy. Excerpts:

ET Now: The industry is growing but the Q4 profitability for Jubilant Lifesciences was not all that strong, sales were down, profits were down and margins were down?

Shyam S Bhartia: Yeah. Jubilant Lifesciences is in two important businesses, one is product business and there is a service business. In our product business, the margin was strong but in our service business, setback in our margin was only 10%. So therefore, going forward our product business remains strong, and we expect a substantial increase in our margin in our service business because we have got some new orders, and our cost structure has also been aligned with the market conditions. So with both, we expect a substantial growth in our margin and our service business and also product business is very strong going forward.

ET Now: You are also planning to fund the capex of 500 crores that you have guided for by FY12. How are you planning to do that?

Shyam S Bhartia: We are planning to basically fund the capex through our internal accruals, which is likely to be strong, so internal accruals would fund the capex. After that also, we will have some money to retire our debt, which is already there in our balance sheet.

ET Now: For the current financial year, which is FY12, do you expect Jubilant Lifesciences to report a double digit growth at top line level?

Shyam S Bhartia: Yeah. We would expect a higher level digit growth in the top line and also higher EBITDA growth going forward more than the sales growth because of the expansion in the margins in our service business, which was low in the fourth quarter.
ET Now: According to the Bloomberg consensus, analysts are expecting Jubilant Lifesciences to report a growth of about 15% for the current financial. Are analysts expecting too much?

Shyam S Bhartia: No. According to us, we expect a higher double digit growth, which we expect more than 15% growth for the whole year.

ET Now: What are your current capacity utilisation rates in the products business as well as the services business?

Shyam S Bhartia: Our product business capacity utilisation is strong, and we expect a volume growth in our capacity plus we are adding new capacity. Our Niacinamide plant is being set up at SEZ, 10000 tonnes Niacinamide plant. It is likely to be operative by end June or 1st week of July. We expect our expansion of pyridine and picoline plant, which is advance intermediate should also be implemented in the month of July. So this will further add to our capacity plus our existing capacity utilisation is extremely good.

ET Now: You mentioned that for the current year, you expect your services business to turn around. Why are you confident that your service business will turn around?

Shyam S Bhartia: Because we have a good order flow. Our order booking is very good. Last year we faced problems because of deferment of new orders because of the lot of mergers and acquisitions happening in the pharma sector. So when a merger and acquisition happens, then there is some standby in our order booking, so that has already been completed. So in view of our order booking, we expect a good increase in the margin because of the better capacity utilisation in our service business.

ET Now: What’s the update on the J&J deal?

Shyam S Bhartia: J&J deal is very strong, and J&J business is going very well in our Montreal facility where we manufacture certain non-sterile products for them.

ET Now: So how large is your total business relationship with J&J?

Shyam S Bhartia: J&J business I do not exactly remember but it would be around $15 million.

ET Now: Is that a low margin business or do you think business is capable of generating strong EBITDA and strong profitability for you?

Shyam S Bhartia: Last year the margin was a little lower but this year we expect a good margin in the business.

ET Now: Can I safely interpret that what happened in Q4 for Jubilant Lifesciences was a one-off and going forward the company is committed to report stronger profitability and stronger EBITDA margins?

Shyam S Bhartia: That’s right. It was one-off because of the low margin in our service business. Our product margin was more than 20%, so our product margin remains very strong and service business is likely to increase substantially their margin going forward. Quarter on quarter you will see substantial increase in the service business margins and the product margin business remains very strong.