In This Article:
Release Date: January 24, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Granules India Ltd (BOM:532482) has implemented a comprehensive remediation plan following the US FDA inspection, with 90% of corrective actions completed.
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The company has resumed operations and dispatches in October after ensuring no product contamination or patient safety concerns.
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Granules India Ltd (BOM:532482) is expanding its product portfolio, with new launches from its GP I facility in the US and a focus on the ADHD, oncology, and anti-diabetic segments.
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The new formulation facility at Jon Valley has commenced commercial dispatches, with phase two expected to be commissioned by Q4 FY25.
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The company reported a gross margin improvement to 61.7% in Q3 FY25, up from 57% in Q3 FY24, driven by profitable sales growth of finished dosages.
Negative Points
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The US FDA inspection resulted in six form 483 observations, leading to a temporary pause in manufacturing and distribution.
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The OOA I classification may impact the review of pending submissions for approval of new products.
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Granules India Ltd (BOM:532482) experienced a decline in revenue to INR7,377 million in Q3 FY25 from INR11,556 million in Q3 FY24.
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The company incurred increased costs due to professional fees and failure to supply penalties related to the US FDA inspection.
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There is uncertainty regarding the timeline for the US FDA's reinspection, which could delay new product approvals and launches.
Q & A Highlights
Q: With almost 90% of remediation implemented, can you guide us on new approvals or launches expected and their impact on FY25 revenue? A: Dr. Krishna Prasad, Chairman and Managing Director, stated that while remediation efforts are ongoing, new approvals are contingent on the status of the Official Action Indicated (OAI) classification. Growth will primarily come from existing products and increased market share in Europe and the US. The company aims to maintain a CAGR of 20% despite current challenges.
Q: There has been a sharp increase in European sales quarter-on-quarter. Can you comment on this? A: Dr. Krishna Prasad explained that the increase is due to a previous dip in sales. Overall, Europe is not performing as well as expected due to capacity constraints, with most capacity allocated to the US market.
Q: Can you quantify the costs related to remediation and failure to supply penalties? Will these costs recur in the next quarters? A: Mukesh Surana, Chief Financial Officer, mentioned that the total cost, including consultancy fees and failure to supply penalties, was approximately $3 million. About 50% of these costs may recur in the next quarter.