Don't expect any more pricing pressures going forward: Krishna Prasad Chigurupati

"There have been some disruptions in the market for some of the products like what we do and customers are now realising that supply security is more important than price and I am fairly confident it will not be at the same level going forward and in one or two quarters they should really bottom out," says Krishna Prasad Chigurupati, CMD, Granules India.

Just analysing your numbers right now and pricing pressures in the US geography clearly is something that we did see in the quarter gone by what is the way going forward now, do you think these concerns will persist or do you anticipate they would subside?
Pricing pressures have been there for a while and we always thought that bottom up it has been continuing but right now I see positiveness. I see they are close to bottoming out. I do not anticipate any more pricing pressures at least not at the levels we had been experiencing.

There have been some disruptions in the market for some of the products like what we do and customers are now realising that supply security is more important than price and I am fairly confident it will not be at the same level going forward and in one or two quarters they should really bottom out.

We logged on to your conference call as well and you highlighted that there were logistics issues as well when it came to the US geography. What has been the impact of the same?
It is a few million dollars about close to $4 million and not only the $4 million dollars lost in sale and about a 60%-50% or so gross margin lost on them. It is also the failure to supply penalties we had to pay to our customers they said really impacted. If we were able to fulfil our orders the entire scenario would have been different and we would not even be talking about price pressures anymore.

Now with China reopening are you worried about an impact on your supply chain and other dynamics?
Not really. Our supply chains have been quite stable for a long time even though we still continue to buy some products from China. We have alternate sources from across the globe including in India for most of our products. So I do not see the Chinese effect having any problem on our sourcing and I also see that in spite of China opening or whatever is happening in China people are still very concerned and very keen on diversifying their supply chain and we actually see a very positive approach from our customers towards us. I see countries like India will always continue to be preferred compared to the other places.

I am taking a look at your margins. 20.2% is what you delivered in Q3 and that has largely been led by paracetamol. Can you just talk to us about your robust traction in for paracetamol and how you see that growing and what your outlook is on margins, you will maintain 20%?
Paracetamol again is a mix of API, PFI and FDs. FDs we make a very decent margin in the finished dosage and the lowest margin comes from the API and what we are doing right now is we have expanded some of our paracetamol capacity and still continue to expand it in our existing plants. We have some new contracts for APIs and these are moving more towards FDs.

Some of the big brand companies are with us today and as we supply them more and more finished dosages we see the margins improving. I cannot give you a number but the numbers vary and FDs give us decent margins. And again coming back to paracetamol it is not only what we are expanding today, we are very-very gung-ho on certain products. We do like paracetamol and metformin and if you have followed our call yesterday now we are going green.

One of our latest passions and the biggest passions and where we feel we can make a big change to the ecology of the world and build up sustainability is going green and we have plans to make green paracetamol and green metformin and the capacities we are going to set are going to be more than 50% of the world’s requirements.

We see a great requirement of these products and when we have them green, I see the whole world will be waiting to buy from us. In fact, we have already been approached by a few big pharma companies and we see a possibility of entering into MoUs with them at very early stages.

Let us talk a little bit more about that. You know what we have seen in the quarter gone by of course is thanks to the higher paracetamol sales, the US contribution also going up. You are now talking about these key approvals that are in, that you are in touch with leading and global pharmaceutical giants. What can be the contribution and is this what all you have received US FDA approval for?
Yes we have some new customers coming on board because there are concerns with supply security across the world. Right now, the increase in the US market sales is mainly due to API.