Unichem Labs.

Unichem Labs reported a total income from operations of Rs. 342 Crores for Q1 FY17, marking a 9.5% year-on-year growth. EBITDA stood at Rs. 44 Crores, with Net PAT at Rs. 25.8 Crores, impacted by higher deferred tax and a Rs. 7 Crores provision for the Brazilian subsidiary. The domestic formulations business was a key driver, growing by 12% YoY to Rs. 221.54 Crores. This growth was equally contributed by volume and price increases, both around 6%. The NLEM portfolio grew by 3.6%, while the non-NLEM portfolio saw 4.6% growth, with specific 'growth products' expanding by approximately 17%.

The company filed two new ANDAs in Q1 FY17, bringing its total filings to 38, with 21 approvals. Management expects to file another four to six ANDAs this fiscal year. For FY17, US business revenue is projected to be between $40 million and $50 million, with a comfortable 30% odd growth rate targeted for FY18, contingent on new approvals. Exports experienced a sequential decline of Rs. 4-4.5 Crores in Q1, attributed to higher contractual sales in the previous quarter, but are expected to perform 'much better' for the full year due to expanded capacities and US approvals.

Unichem is strategically transitioning its Unienzyme brand, which currently contributes around Rs. 50 Crores internally, to the Over-The-Counter (OTC) market. The company has partnered with a multinational firm for marketing expertise, with the first TV commercial scheduled for August. This move aims to tap into the indigestion market directly, where management believes there is a vacuum for a product like Unienzyme, differentiating it from existing Ayurvedic remedies.

The company is aggressively pursuing its capex program, having spent over Rs. 50 Crores in Q1 FY17, primarily on the Kolhapur unit. This new facility is slated for commercialization in Q1 FY18 and will initially cater to ROW and domestic markets, with future plans for US FDA/UK MHRA approvals. Unichem has earmarked approximately Rs. 200 Crores for capex in FY2017-2018, mainly directed towards the API facility in Kolhapur, alongside maintenance capex and R&D/Biosimilars related costs.

The Brazilian subsidiary continues to face challenges, leading to a provision of Rs. 7 Crores for diminution in Q1 FY17. Management clarified that similar Rs. 7 Crores provisions are expected for the next two quarters, totaling Rs. 21 Crores for the first three quarters of FY17. This conservative accounting policy is reversible if the subsidiary's sales and profitability improve. The total investment in the Brazilian subsidiary is around Rs. 57 Crores, with prior provisions of Rs. 22.5 Crores and Rs. 4.5 Crores.

Employee benefit costs increased in Q1 FY17, which management attributed to the bonus act not being included in Q1 numbers of the previous year and recent hiring at various plants. They clarified that this increase was not due to an expansion of the domestic field force, which had undergone rationalization. The Q4 FY16 employee benefit cost, plus certain add-ons, should be considered the steady run rate going forward^⏳.