ET NowET Now talks to Satyanarayana Chava, Founder & CEO of Laurus Labs about their good listing about the expectations of the company for the years ahead. Excerpts...
ET Now: What do you think going ahead for Laurus Labs? People are hopeful on you moving on to about a 15% growth regime starting from FY17. Do you think you can do that this year?
Satyanarayana Chava: As you know, the base is becoming larger and what we can promise our shareholders is that the times ahead very exciting. There are many facilities which have been inaugurated but are not giving any revenue. Once they start giving revenue, the company will have a lot of opportunities to grow, both revenues as well as profits.
ET Now: When you say the company will have opportunities to grow. If you could just quantify that and give us a number that we could look forward to in terms of your FY17 growth, what sort of top line and run rate could you we be staring at?
Satyanarayana Chava: FY17 I am sure our profits will grow significantly from last year. Our revenue will also grow. Out of 1600 gross block that we have, roughly 450 crores gross block is not yielding any revenue. We expect some revenue will come in FY18 so FY18 onwards our growth will be much faster because most of our investments will start generating revenues.
ET Now: As I understand majority of the funds that have been raised are OFS, 300 crores is a fresh issue which I believe will be used for debt reduction. So what would the FY17 or April 2017 debt-equity picture look like? What is the debt profile? What is the target that you have in mind say over the next 18 months?
Satyanarayana Chava: Today at the beginning of this month we had around 950 crore both long term and short term put together. As of today, we have only 750 crore total debt and we expect FY19 we will have free cash and we are not expecting to raise any money from the banks for our growth. Our internal cash generation is good enough to fund our future capex.
ET Now: Just going by your historical performance as well, your FY15 saw margins go to as low as 15% from the average 19 to 21 odd per cent that you have been clocking. What was the reason and would you say that it was only a one-off or do you think something like this in terms of a margin level could be expected in the future as well?
Satyanarayana Chava: If you look at the last five-year average EBITDA margins, we are between 17% and 20% and we also published our six months results now. It is already 22% EBITDA. Our EBITDA is increasing. In FY15, our EBITDA was 17% because we had new units inaugurated but not yielding any revenue. Whatever the preoperative expenditure for our units, we do not capitalise. We expense it out. That was one of the reason and the second reason was there was some supply disruption in South Africa, and third one was we were affected by the cyclone Hudhud in that financial year. So that was one-off. The year later, our EBITDA increased to 20%. In the first six months, we did 22% despite of our heavy focus on R&D and expensing all the preoperative expenses for our units.
ET Now: What do you think going ahead for Laurus Labs? People are hopeful on you moving on to about a 15% growth regime starting from FY17. Do you think you can do that this year?
Satyanarayana Chava: As you know, the base is becoming larger and what we can promise our shareholders is that the times ahead very exciting. There are many facilities which have been inaugurated but are not giving any revenue. Once they start giving revenue, the company will have a lot of opportunities to grow, both revenues as well as profits.
ET Now: When you say the company will have opportunities to grow. If you could just quantify that and give us a number that we could look forward to in terms of your FY17 growth, what sort of top line and run rate could you we be staring at?
Satyanarayana Chava: FY17 I am sure our profits will grow significantly from last year. Our revenue will also grow. Out of 1600 gross block that we have, roughly 450 crores gross block is not yielding any revenue. We expect some revenue will come in FY18 so FY18 onwards our growth will be much faster because most of our investments will start generating revenues.
ET Now: As I understand majority of the funds that have been raised are OFS, 300 crores is a fresh issue which I believe will be used for debt reduction. So what would the FY17 or April 2017 debt-equity picture look like? What is the debt profile? What is the target that you have in mind say over the next 18 months?
Satyanarayana Chava: Today at the beginning of this month we had around 950 crore both long term and short term put together. As of today, we have only 750 crore total debt and we expect FY19 we will have free cash and we are not expecting to raise any money from the banks for our growth. Our internal cash generation is good enough to fund our future capex.
ET Now: Just going by your historical performance as well, your FY15 saw margins go to as low as 15% from the average 19 to 21 odd per cent that you have been clocking. What was the reason and would you say that it was only a one-off or do you think something like this in terms of a margin level could be expected in the future as well?
Satyanarayana Chava: If you look at the last five-year average EBITDA margins, we are between 17% and 20% and we also published our six months results now. It is already 22% EBITDA. Our EBITDA is increasing. In FY15, our EBITDA was 17% because we had new units inaugurated but not yielding any revenue. Whatever the preoperative expenditure for our units, we do not capitalise. We expense it out. That was one of the reason and the second reason was there was some supply disruption in South Africa, and third one was we were affected by the cyclone Hudhud in that financial year. So that was one-off. The year later, our EBITDA increased to 20%. In the first six months, we did 22% despite of our heavy focus on R&D and expensing all the preoperative expenses for our units.
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