Guj. Themis Bio.

Gujarat Themis Biosyn Limited delivered robust financial results for Q2 and H1 FY22. Q2 FY22 revenue grew 28.86% YoY to ₹35 crores, with EBITDA (excluding other income) at ₹18.45 crores (up 25.1% YoY) and a strong margin of 52.60%. PAT for the quarter was ₹13.79 crores, increasing 21.5% YoY, yielding a net profit margin of 39.35%. For the first half of FY22, revenue surged 57.46% YoY to ₹67.49 crores, and EBITDA rose 64.84% YoY to ₹35.17 crores, with margins improving by 233 basis points to 52.11%. PAT for H1 FY22 was ₹26.71 crores, up 57.8% YoY.

The significant improvement in realizations and margins is attributed to the company's strategic shift in 2020 from a contract manufacturing (cost-plus basis) to an own manufacturing and sales model (market-price based). This change, implemented after fulfilling all contractual obligations, has provided better access to markets and a competitive advantage. Management emphasized that this shift, rather than specific product mix changes, was the primary driver of margin expansion.

The company announced substantial CAPEX plans exceeding ₹200 crores, to be spread over the next two to three years. This investment aims to double the current fermentation capacity from 450 cubic meters to almost 900 cubic meters, for which EC clearance has already been received. The CAPEX will also include setting up a new R&D facility and CGMP pilot facility. Management expects a pre-tax Return on Investment (ROI) within three to four years from this CAPEX.

Gujarat Themis Biosyn is actively focusing on R&D to develop new fermentation-based products. Currently, six products are in the R&D pipeline. The company envisions commercializing these new products for the Indian and Rest of World markets within approximately two years, and for regulated markets within three years. The strategy is to work on a dozen products to successfully bring six to market, expanding the product portfolio beyond current offerings of Rifa S and Rifamycin O.

Management noted that the fermentation industry in India faced turbulent times previously due to pricing competition from China, leading many companies to exit. However, prices of fermentation products from China have increased, not just during COVID-19, but even before. This shift, combined with a focus on building varied supply chains, makes the sector interesting again. GTBL aims for a mix of import substitution and new product development, rather than solely replacing Chinese imports.

The company recently concluded its strategic partnership with South Korea-based Yuhan Corporation, with Yuhan's stake being bought over by one of the parent group companies. While Yuhan was a long-standing technology partner, the association had reached a point where it offered no further value addition for either party. This decoupling is expected to enable GTBL to better formulate and execute future growth strategies independently.

Management acknowledged an increase in raw material costs, particularly for solvents, but stated that the impact on gross margins is expected to be minimal, around 'a few percentage here and there.' This is because primary raw materials (natural products) have not seen significant price increases. However, a key concern highlighted was the inability to pass on these increased raw material costs to end buyers due to existing contractual terms, meaning the company has to absorb them.