IOL CHEMICALS
Overview
IOL Chemicals & Pharmaceuticals is engaged in the manufacturing and selling of APIs / bulk drugs and specialty chemicals. The company caters to both domestic and international market.
Some of the APIs produced are ibuprofen, metformin hydrochloride, lamotrigine, fenofibrate, and clopidogrel bi sulphate for use in various therapeutic categories, including pain management, anti-diabetic, anti-hypertensive, anti-convulsant, anti-cholesterol, anti-platelet, etc. It also provides specialty industrial chemicals, which include ethyl acetate, iso butyl benzene, acetyl chloride etc.
Industry overview
INDUSTRY STRUCTURE AND DEVELOPMENT Global Economy Overview None of us would have imagined while welcoming dawn of the year 2020 that it will bring us face to face with a catastrophic event of such a magnitude. The raging COVID-19 pandemic is wreaking havoc worldwide bringing economy after economy down to its knees.
The pandemic has exposed the vulnerabilities of economies of the world, irrespective of level of their development. The world is staring down the barrel of an uncertain future. Foremost requirement of the present times is to protect lives and to build infrastructure to enable health care systems to discharge their responsibilities ethically and efficiently. Mammoth isolation facilities are required for isolating patients with due sensitivity to their age, gender, comorbidities etc. strict lockdowns, bringing economic activities to grinding halt, were imposed by the Governments worldwide to contain the virus. . The health crisis, therefore, is having a severe impact on economic activities and as a result the global economy is projected to contract sharply by 5.2% in 2020-21, much worse than 2008–09 financial crises.
Indian Pharmaceutical Industry Indian pharmaceutical industry supplies over 50 per cent of global demand for various vaccines and it caters to 40 per cent of generic demand in the US and 25 per cent of all medicine in UK. India contributes the second largest share of pharmaceutical and biotech workforce in the world. India’s domestic pharmaceutical market turnover reached ` 1.4 lakh crore (US$ 20.03 billion) in 2019, growing 9.8 per cent from ` 1.29 lakh crore (US$ 18.12 billion) in 2018. Further, affordable medicines under the Pradhan Mantri Bhartiya Janaushadhi Pariyojana (PMBJP) have led to savings of ` 1,000 crore (US$ 143.08 million) for Indian citizens in FY19. With 71 per cent market share, generic drugs form the largest segment of the Indian pharmaceutical sector. Based on moving annual turnover, Anti-Infective (13.6 per cent), Cardiac (12.4 per cent), Gastro Intestinal (11.5 per cent) had the biggest market share in the Indian pharma market in 2018. During December 2019, on moving annual total (MAT) basis, industry growth was at 9.8 per cent, with price growth at 5.3 per cent, new product growth at 2.7 per cent while volume growth at two per cent year on year. Indian drugs are exported to more than 200 countries of the world, with the US being the key market.
Generic drugs account for 20 per cent of global exports in terms of volume, making the country the largest provider of generic medicines globally and it is expected to expand even further in coming years. Pharmaceutical exports from India, which include bulk drugs, intermediates, drug formulations, biological, surgical, Ayush & herbal products reached US$ 19.14 billion in FY19 and US$ 13.69 billion in FY20 (up to January 2020). The exports are expected to reach US$ 20 billion by 2020. In FY18, 31 per cent of these exports from India went to the US.
Healthcare sector witnessed private equity investment of US$ 1.1 billion with 27 deals in first half of 2019. Medical devices industry in India is growing 15.2 per cent annually and is expected to reach US$ 8.16 billion by 2020 and touch US$ 25 billion mark by 2025.
Indian Chemical Industry
Indian chemical industry is one of oldest industry and is the sixth largest producer of chemicals globally and the third largest producer in Asia in terms of output. It contributes to a lot of other sectors by supplying products and raw materials. Among the most diversified industrial sectors, chemicals cover an array of more than 70,000 commercial products. Basic chemicals and their related products (petrochemicals, fertilisers, paints, varnishes, glass, perfumes, toiletries, pharmaceuticals, etc.) constitute a significant part of the Indian economy.
The country ranks third globally in the production of agro chemicals and contributes around 16 per cent to the global dyestuff and dye intermediates productions. Total export of chemicals which include dyes and dye intermediates, organic and inorganic chemicals, stood at US$ 19.09 billion during the year 2018-19 and stood at US$ 15.67 billion during FY20 (till January 2020 provisional). The US, the UAE, the UK, Bangladesh and Saudi Arabia are the leading importers of cosmetics, toiletries and essential oils. During April 2019-January 2020, export of dyes increased 9.12 per cent y-o-y to US$ 2.27 billion. During the period, export of essential oils increased 22.33 per cent to US$ 171.79 million, cosmetics and toiletries increased 5.62 per cent to US$ 1,444.15 million, while castor oil export stood at US$ 769.05 million. Export of inorganic, organic and agro chemicals stood at US$ 863.38 million, US$ 7.14 billion and US$ 2.83 billion between April 2019-January 2020, respectively.
The chemicals sector is expected to double to US$ 300 billion by 2025, clocking an annual growth rate of 15-20 per cent. To achieve this, the Government is working on a draft chemical policy that will focus on meeting the rising demand for chemicals and reduce imports. (Source: Basic Chemicals, Cosmetics & Dyes Export Promotion Council Department for Promotion of Industry and Internal Trade (DPIIT) and www.ibef.org) However, the current pandemic has also impacted Chemical Industry adversely in India and facing challenges due to Covid-19. India exports around 34% of its petrochemical production to China, from where the pandemic originated, as a result the exports has taken a hit and, finding new markets would be a challenge. Apart from exports, India is also reliant on China for its critical chemical raw material imports.
Business Segment Performance and outlook
Company is one of the leading APls / bulk drugs Company and is a significant player in the field of specialty chemicals with world class facilities. The Company is a manufacturer and global supplier of APIs such as Ibuprofen, Metformin, Clopidogrel, Pantoprazole and Fenofibrate and other APIs and has significant presence across major therapeutic categories. Demand for APIs is showing continuous increase due to growing incidences of lifestyle diseases, rising demand for affordable healthcare delivery systems. Specialty Industrial Chemicals segment of the Company includes manufacturing of Ethyl Acetate, Iso Butyl Benzene (IBB), Mono Chloro Acetic Acid (MCA) and Acetyl Chloride. Ethyl acetate have application in diverse important industries like pharmaceuticals, ink industry, flexible packaging, adhesives, surface coatings, flavours, paints & lamination and essences etc. The demand for the product is driven by a wide range of end use industries. The Company has its manufacturing unit situated at Village: Fatehgarh Chhanna, District: Barnala, Punjab. The Company’s R&D Centre approved by Department of Scientific and Industrial Research (DSIR) is equipped with advanced and analytical instruments and having a captive co-generation unit with capacity of 17 MW to meet power requirements is located at works. The Company have an excellent team of technical and commercial professionals with expertise in pharmaceutical and chemical manufacturing and marketing.
A. Profit and Loss Account Revenue Total income has increased to ` 1910.49 crore during the year under review as compared to ` 1695.70 crore during the previous year. Revenue of Ibuprofen, Iso Butyl Benzene and Acetyl Chloride has increased during the current year. Sales revenue of new products in Bulk Drugs segment (i.e. Metformin, Pantoprazole, Ursodeoxycholic Acid (UDCA), Lamotrigine, Fenofibrate and Clopidogrel) has also increased. Segmental Revenue Bulk drugs segment contributed about 64% of total revenue for the financial year 2020 against 66% contribution in financial year 2019. The Chemicals Segment contributed about 36% to total revenue in financial year 2020 against 34% in financial year 2019 due to increase in capacity utilization of Ethyl Acetate and increase in sale of Iso Butyl Benzene and Acetyl chloride. EBIDTA EBITDA of the company has increased to ` 589.90 crore during year under review from ` 420.02 crore during the previous year on account of optimum utilization of resources and increase in yield resulting to a higher operating profit margins. Net Profit after tax The Company has earned a profit after tax of ` 361.29 crore in the year under review against profits after tax of ` 236.70 crore during the previous year. Optimum level of operations, increase in revenue and margins, decline in financial cost resulted in higher profits during the current year.
Financial Snapshot
Reserves and Surplus Reserves and surplus at the end of the year under review stood at ` 756.65 crore as against ` 417.45 crore at the end of previous year. The reserve and surplus increases with the increase in the retained earnings i.e. profits after tax net of dividend to shareholders declared and distributed during the year.
Our View
Looking at the past performance of the company we see it as a long term defensive bet for your portfolio and is focusing on company’s penetration and increasing demand in ethyl acetate could result in better outlook for coming quarters.
