I attended the AGM held today. Here are key takeaways.
Products with process patents are generating roughly 65% of revenues. The exclusivity of a process remains with the co. even if the patent is not granted yet. The co.’s strength is heterogenous catalysts,Mr. Omkar also is a PhD in heterogenous catalysts. Heterogenous catalyst is the X factor used to tweak a product process to derive more yield,the co. thus passes on a good chunk of extra yield to the customer in form of lower costs and keeps some benefit for itself. The products with process patents earn 40% types operating margins. The co. has filed 18 process patents and has received grants for 3,2 earlier and 1 very recently as mentioned by Mr. Omkar. He also mentioned it’s very difficult to estimate the market size of patented products but said its huge. There are 4 criteria that need to be fulfilled to introduce a new product,market size,diversified customer base,backward integration/existing chemical family and ability to file a patent for the same. The co. is looking to reduce dependence on iodine based products. Selenium derivatives and Resolving agents have fat margins among commoditised products. The co. plans to introduce 3 new products,one for Vitamin C,one for Folic Acid and one a Vet API. The co. is expected to get environmental clearance for Chiplun plant very-very soon,after trial runs and commercialisation it will contribute 20-25 crs of sales in the last quarter. Capex for this fiscal will be 40 crs approx. of which most is done,for next year it’s slated to be 30 crs. approx.,plans to take Lasa to 600 MT capacity. The co. is looking to enter veterinary formulations in 15 month’s time,forwardly integrate its API business,it expects to win contracts from existing customers which buy API and outsource formulations,will acquire a readymade facility with all approvals and infrastructure in space. Recognised Sequent Scientific as a competitor,Mr. Omkar said difference between the 2 is that Sequent follows conventional processes while Omkar follows catalytic processes,it’s forte. Plans are in place to reduce WC cycle,iodine supplier from Chile has put up a facility at Nava Sheva due to which capital blocked due to transit time will reduce and co. has consciously tightened credit terms-brought down from 60 days to 30 days,has lost only 10-12% business because of the same. Debt is on books mainly due to a long WC cycle and reduction of same will release capital and also help reduce pledge of shares. Target is to bring WC down from 120 days to 90 days,achievable in a couple of quarters. QIP is taking time because of market conditions and mainly because co. aims to dilute at a higher valuation,QIP might get priority if co. can zero in on an acquisition. Sales growth is expected to be at 30-35% CAGR for next few years.
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