‘Our plan will allow us to grow 15% annually over 3-5 years’

What was the rationale behind the demerger, and what benefits do you expect to accrue from it?

When we diversified into financial services, the pharma business was very small. However, as each business grows to a certain scale, a demerger makes it easier to communicate with bankers, shareholders or regulators. For shareholders, investors and fund houses, it’s a fair choice now whether they want to invest in the pharma or the financial services business. So, the demerger makes it clearer for stakeholders and everyone else to understand what we are doing and also for the management to focus on.

What are the challenges being faced, and how do you intend to gain shareholders’ confidence?

The good thing about our business is that we are seeing demand. For each of our business segments, we have differentiated strategies. Now, the big challenge is how to manage short-term volatility, especially for things like exchange rates, energy prices, etc. But eventually, they will ease out, and strong demand will help. Covid forced everyone to focus on a China-plus strategy, whether it is the US or it is India, and we are well positioned to meet that need.

What are your plans and strategies for individual business segments?

Contract manufacturing is 60% of our business, and we are seeing good demand. We are also planning a fair amount of brownfield expansions. About ₹1,200 crore ($150 million) will be invested in the next 12-24 months. We are expanding in all continents, in North America, the UK as well as in India. We are planning for each of the businesses to scale up and utilize the operating leverage to expand margins.

Inorganic expansion has been the strength of your group. What will be the strategy now?

Since 2020, when we took money from Carlyle, we have made five acquisitions, two in pharma solutions contract manufacturing, two in the complex hospitals’ generics, and also in smaller brands. So in each of those, we are putting in capex and also in earlier acquisitions. We are looking at acquisitions in adjacent capabilities for the pharma solution portfolios or brands in complex hospital generics or consumer products. However, valuations have to be right. Our current plan allows us to have organic growth of 15%, while acquisition-led growth will be on top of it. We always keep looking at acquisitions, and that is likely to continue.

What is the company’s outlook on the complex hospital generics business, which was seeing some growth challenges?

When covid happened, everyone was concentrating on covid treatment, so all surgeries stopped, and so did hospital admissions for other ailments. Now we are seeing a good recovery, and we are planning new launches—about 39 of them over the next 18 months. So, that’s how we will also see growth.

What is the strategy for international markets, and what is the impact of currency volatility?

Our biggest market is the US and then Europe and Japan. About 68% of the revenues are from regulated markets. Our manufacturing facilities are all compliant with the manufacturing practices framework of all the regulators.

We do manufacture in the US, as well as Europe, and certain currency pairings have gone a bit off. No one ever thought the dollar and pound would be at parity at a given point. We borrowed money to support our operations abroad and refinanced some of our loans right now. But US loans will be backed by US assets and business. We are not borrowing from abroad to invest in India.

Can you throw some colour on the firm’s growth guidance or margin expansions?

As we are saying, we are looking at 15% organic growth annually over a 3-5 years time frame, and we should be expanding margins to the 20% levels. Overall, I am very excited about the business; it has a lot of potential, and with scale, you will see the operating margins improve.