Vimta Labs Ltd (VLL)

Vimta Labs Q3FY23 earnings call highlights.

• Q3 revenues are slightly lower when compared to previous quarters. This is mainly because a few projects are slided into the next quarter, about INR 2 crores to INR 3 crores, and hence slight dip in revenue. We think of this as a small aberration.

• On the operations side, we have successfully completed a US FDA inspection of our clinical research operations. We also went through WHO inspection of our pharma analytical operations.

• Profit before tax for the quarter stands at INR 140.8 million, which is a slight decline of 9% compared to same quarter last year, majorly due to increase in G&A expenses. Overall, our end towards travel business promotion has increased during the quarter. Increase in employee benefit expense commensurate with the increase in revenue from operations and also includes the amortization of ESOP expense of INR 9.4 million during the quarter.

• Coming to segment-wise traction.

  • The food and pharma segments are doing very well, especially food, I think, is progressing very well for us.

  • Electronics testing, we have had very good response from the industry on the variety of industries that we have reached out has been very encouraging for us, and we are quite optimistic on growing the electronics testing division as per our plans.

  • Diagnostics, we lost a little bit of ground last few quarters.

  • Our environment division is doing well.

• Coming to the National Food Laboratory the revenues remain constant. We were expecting the inflow of samples to grow, but the government is taking a lit bit of time

• If you have been following the earnings call, you may recall that I’ve talked about some capacity constraints. So ideally, the new capacities that we are adding now should have been added by now, but for the COVID situation that we experienced a few years ago. So but for that, there is actually no change. we will be adding those extra spaces and capacities by end of 2023, and so that will further help us stay on the target.

• Our estimates for next year is that we will be able to continue a good growth rate that we have experienced in the last couple of years. So that will continue into FY 2024.

• Electronic Testing: The number of customers, we are slowly attaining about 100 some small, some big. We work with large organizations, MNCs, I won’t be able to take any names, but at least 10% to 15% of our clients are very large companies, both MNCs and also large organizations within India. The team is very small as of now. It’s just 8 people.

• Coming to drugs, coming off patent. There is going to be a patent cliff around 2024 to 2025, and this is largely related to large molecules. And we see that in the way our order books are also slowly now changing. Primarily, our business has been focused on small molecules, but we also do have large molecules. and we see the demand for large molecule capability increasing on both the preclinical end and analytical end, and also impacting actually the clinical research.

• The new facility, we hope to finish all the infra work by sometime between October to December. As soon as that is done, we’ll be moving in our equipment at their qualifications, all that will take about another 3 months’ time. So by end of year, we’ll certainly be ready to start operations there any time between January to March of the next year. We won’t need any other approvals. It’s all in the same facility. So not needed.

• Food is doing very well. And in fact, the last 5, 6 years’ food has seen a steady growth. Yearon-year, the growth has been good the number of clientele that we are working and number of projects that we have has been quite satisfying for us. And we think that food will continue this growth even into the next 4, 5 years, comfortably.

• Food in FY24-25 INR 100 crores number is definitely our goal, and I think we are progressing very well towards that goal.

• Diagnostics. We have been able to establish a few good partnerships. We have some HLM/LOM currently being operational. Now these are new cities for us. So we are in the process of setting up our business development and sales activity there. So it will take a little time for us to mature or actually make good progress in these markets. So we hope that will happen in the coming quarters.

• We do have current capabilities to test electrical vehicle components. We are actually doing a few components testing already. And right now, we have one chamber to do these testing. And in the next year, as depending on the demand, we could even add another chamber.

• for the 9 months ended December ’22, we have incurred close to INR 27 crores of capex. Out of this, about INR 22.5 crores we invested in lab equipment.