We should be in a position to be net debt free by 2026: VS Mani, Glenmark Pharma

“We have seen about a mid single digit kind of a pricing pressure, a little lower than in the past quarters. But all in all, we feel there is a decent momentum in the US business and going forward we see it doing better,” says VS Mani, Glenmark Pharma

Your US business has seen a good jump on a sequential as well as on a year-on-year basis. What is the outlook in terms of pricing pressure on the base portfolio and what kind of growth do you envisage for your US business?
Our US business has done quite well in the last two quarters. We have seen a turnover in excess of about 100 million. Last quarter we did about 104 million. We had a number of good launches in the US. We also filed almost eight products and we also have had approvals of almost 10. So I think based on these, we see a reasonable growth, at least a mid single digit kind of growth. In terms of the pricing pressure, obviously in the US market, the pricing pressures are always there. We have seen about a mid single digit kind of a pricing pressure, a little lower than in the past quarters. But all in all, we feel there is a decent momentum in the US business and going forward we see it doing better.What is the outlook then, given this optimistic outlook in terms of your EBITDA margins? Can it cross that 19% mark versus what we saw last year at about 18% and what will be the drivers that will push your margins?
So first and foremost at the outset, the Q4 was a decent quarter. In terms of our sales growth, we did about Rs 3370 crores and almost 11.7% growth and EBITDA margin of almost 17.9%. I think the coming year we are quite optimistic about touching about 19-20% based on a couple of things; one obviously is we expect the revenue to grow at about 10-11%.

So that is a key momentum. Secondly, we are also looking at pruning down our R&D cost a little more so bringing it down to around 8-8.5%. We are also working on improving our gross margins also because some of the cost pressures are a little lower as well as obviously working on our cost side.

So all this together with a decent growth in revenue should ensure that we should be closer to the 19-20% that we have guided the Street.

You have always said that the focus is on reducing debt levels. By what amount can we see this coming down in FY24 and what plans regarding getting net debt free?
We had given a plan that we should be net debt free by in about 2026, 3 years from today. So obviously with the robust growth that we are planning of 10-11% and last quarter was obviously vindicated of what we are thinking.

So looking at the robust growth and also on the back of the fact that we had some remediation costs etc. last year, those should be behind us.

Taking all these together and with the good growth that we are looking at and some of our products doing well, I think we should be in a position to kind of looking at zero net debt by 2026.

Today we are having a net debt of about Rs 2900 crores odd. I think 3 years is a good time to look at zero net debt.

What has been the reason for the sharp increase that you have seen in both inventory as well as debtor days and this is both sequentially as well as on a year-on-year comparable basis?
Obviously, inventory last year was a little up as well as in the current year. As you know, across the chain, there have always been some challenges over the last one and a half years because of the inventory situation. The reason was that going forward the supply chain looks at more of safety than to look at just the efficiency.

Obviously, we need to have proper inventory so that we can service the market. So that is one reason why the inventories have gone up. So they have gone up about eight, nine days. I think we broadly will be here. As far as the debtor goes, obviously, this year, especially in the second half, there has been a sharp rise because the growth has come more in the markets where the credit periods are high.

In markets like the rest of the world, EU, etc, they have been higher. India has been a little lower. And also, currency also had a play in that because of the restatement of debtors. So I think going forward in the coming couple of quarters, we see it come off at least by 10 to 15 days. So we should be closer to 100 days. And this is primarily one of the reasons why there was a little sharp uptick in our debt as well in the last quarter. I think in the next couple of quarters, we see it kind of being more, receding down.

What is the reason behind registering a new subsidiary, Glenmark Healthcare? What is your plan over here?
As I just alluded to the fact that we are looking at a robust growth of about 10 to 11%, we will obviously need capacities. So we are evaluating an option of putting a manufacturing company. So that is why we are looking at a 100% subsidiary below Glenmark Pharmaceuticals. So we have registered this subsidiary. We will evaluate and decide whether we go forward or what we plan.

What kind of growth potential are you looking at? What is the game plan for the long haul here for Glenmark Health?
We are looking at at least a 10 to 11% growth over the next couple of years. And we obviously, every year work on a long range plan. If you look at it, we have been growing in our key therapy areas, whether it is respiratory or dermatology or oncology or like cardio, etc.

So across the board, we have been doing quite well. So I think taking that, we feel that we will definitely need more capacities and whether we put it in the existing sites or we look at a new company to do that is something we evaluate.

So at a 10 percent growth, we should be doing well over the next few years. That is the reason why we are looking at capacities.

I see that the India business has seen a decline on a sequential basis. What is the growth that you are targeting for this fiscal for your India business in particular?
Let me respond to this in two ways; one is obviously, if you look at IQVIA MAT even March 23, we have been growing at about 12.3% and we expect to grow at about 13% odd in the coming year as well. So I think as far as the base business goes, the Rx, we are doing quite well. I do not see sort of any concerns there.

It is just that when compared to year to year, if you look at it, we obviously divested some non-co-brands. We also had the impact of anilinium like everybody else in the industry. And obviously also the fact that we also have been looking at some of our hospital and oncology products where we could prune down a bit.

But I think the underlying business is doing quite well. And also, just to add, during the year we had some Covid product sales returns also. So that is behind us. So I think these extraordinary items should be not there. So therefore, I think the underlying growth should be decent.