Santosh Varalwar, CEO & Managing Director, Vivimed Labs Ltd, had a stint of working experience as Merchant Navy Officer in Shipping Corporation of India (SCI). This employment opportunity helped him acquire a deep sense of understanding in maritime trade with a global exposure. With this experience and exposure, he embarked into the highly successful entrepreneurial journey by conceptualizing and consistently growing Vivimed business segments. Under his stewardship, the company got listed in the stock exchanges in 2005.
Vivimed Labs Ltd, established in 1989, is a diversified global company with a unique portfolio of products in Specialty Chemicals and Pharmaceuticals. Vivimed has gradually increased its portfolio of offerings through product innovations at its Research & Development Center. Some of its reputed clientele includes Unilever, P&G, L’Oreal, ISP, Novartis, Merck, Cipla, Astra Zeneca, BDF, AVON and others. The Product offerings comprises Hair care, Skincare, Oral Care, Antimicrobials & Preservatives, Photo Imaging Chemicals & Photo Chromic, Specialized Formulations such as Opthalamic, Anti Ulcer, Antehelminth and other health care segments.
Replying to Anil Mascarenhas of IIFL, Santosh Varalwar says, “With focus on R&D, Vivimed consistently strives to develop newer molecules in the niche segments like Osteoarthiritis, Antipsychotic, Dermitology and Oncology.”
Give us a brief overview of your business.
With the existing Infrastructure and facilities, Vivimed Labs already has its significant presence in the Pharmaceutical Formulations manufacturing and marketing in the domestic markets. The Pharmaceutical Formulations are also formulated in CIS countries, Ukraine and Russia. Vivimed is an approved vendor of the different Pharmaceutical healthcare products in the various public sector institutions and a few major private institutions. With the integration of UQUIFA, the company stands in an opportune time to offer its various specialties and APIs as a Finished Dosage Form (FDF).
With focus on R&D, the company consistently strives to develop newer molecules in the niche segments like Osteoarthiritis, Antipsychotic, Dermitology and Oncology.
With a strong reach, its marquee clients in the Home & Personal Care Segments, the company is poised for a higher market growth with its current products to the existing and the newer business houses. In the skin care segment, the company has developed and formulated products of greater acceptance to multinational clients such as Unilever & BDF. There has been growing demand in the Haricare segment with products such as Cationic Guar Gums.
With different MNCs making strong market presence with their products in Indian markets, Vivimed has been able to increase market share in the products like ZPTO, Anti-dandruff, and various fashion Hair colors and Hair Dyes.
Comment about your global presence. Brief us on your manufacturing facilities.
Vivimed is a diversified global company with a unique portfolio of products in Specialty Chemicals and Pharmaceuticals with exports accounting for more than 50% of its revenues.
In the specialty chemicals space, Vivimed is a global supplier of active ingredients for a comprehensive and diverse range of home and personal care products, as well as industrial products such as photo-chromic dyes, imaging chemicals, preservatives, and antimicrobials. Vivimed has a wide international presence in both developed and emerging markets, with its products sold in more than 50 countries. Vivimed supplies its products to reputed global MNCs like Unilever, L’Oreal, Procter & Gamble, ISP, Microban, Thomas Swan & Co, Corning etc. More than half of Vivimed’s specialty chemicals revenues come from sales outside India.
In pharmaceuticals, Vivimed is increasing its opportunity in creating a value-add model that transition from APIs to various formulations and new drug delivery systems. The objective is to translate the customer relationships into a more holistic and comprehensive model which enables the Company to capture and retain profit from value-add at every step. Vivimed is preferred by large global players as a collaborative research and supply chain partner in drug discovery / delivery in various segments like oncology, antipsychotic and anti-ulcerants. Vivimed has also forayed into formulation exports to Russia / other CIS countries. It has established a sales team in Africa and is entering research-based formulations in different therapeutic segments. It has made product registrations for key therapeutic areas like oncology and tuberculosis and obtained key certifications for its manufacturing facilities and products.
Additionally, Vivimed has recently acquired a 75-year-old manufacturer of APIs and Intermediaries, Uquifa, based out of Barcelona, Spain. Uquifa has products in over 15 therapeutic classes distributed across 70 countries and over 100 customers and is a Supplier to the Top 10 generic pharmaceuticals players in the world and also has strong relationships with leading innovator companies.
Vivimed is headquartered out of Hyderabad, and has 4 overseas support offices in Huddersfield - UK, New Jersey – USA, Barcelona – Spain, Guangzhou - China. It operates out of 9 manufacturing facilities, 6 of which are spread across India, and 3 overseas manufacturing facilities, 2 in Spain and 1 in Mexico.
Additionally, the company has 3 R&D facilities, 1 domestic and 2 overseas. The company employs around 1500 professionals across the world.
What are your plans for expanding into the fast-emerging and highly demanding sector of Printable Electronics and Organic Semiconductors?
The products in these segments are in the earlier stage of development.
What is the product pipeline under development?
Our R&D center is currently engaged in the Research of new chemical moieties. It will not be appropriate to disclose any further information on this IP.
What are the new product launches?
With the new acquisition of ONL & KSL, a market study is under way to introduce a few formulations in new segments of Orthopedics, Neurology and Dermatology.
A new molecule which finds its application in the Anti-ageing segment is being developed at our R&D centre and is currently undergoing its product stability testing.
Brief us about your financials?
Vivimed has maintained a healthy and stable financial performance. Revenue has grown 5 times at a CAGR of 44% from Rs. 790mn in FY 06 to Rs. 4,160mn in FY 11. Net Profit has risen 5 times at a CAGR of 35% from Rs. 93mn in FY06 to Rs. 488mn in FY11. EPS has risen around 4 times at a CAGR of 30% from Rs. 12.77 in FY 06 to Rs. 47.7 in FY11. In FY 11 Income was up 21% YoY at Rs. 4,160mn, EBITDA was up 22% YoY to Rs. 861mn, Net Profit was up 57% at Rs. 488mn with an ROE of 28% and ROCE of 17%.
What is the revenue break-up from various segments?
FY11 Total Income was Rs. 4,160mn. Revenue breakup between Specialty Chemicals and Pharmaceuticals division was Rs. 3,163mn and Rs. 997mn respectively.
What are your capex plans?
Vivimed has set up its own sector-specific Special Economic Zone (SEZ) in Srikakulam District, AP, which will help the company to support its growing demand from the export markets and also from upcoming industries for manufacture of specialty chemicals as well as APIs. Vivimed has received in principle approval from the authorities and has acquired the 327 acres of land for this project. Total cost of the project is expected to be around Rs. 1,200mn and it is expected to be fully commissioned in FY2015.
The company is also setting up a Pharmaceutical formulation plant in Chouttuppal, Andhra Pradesh, to be utilised for manufacturing tablets and capsules in accordance with USFDA and cGMP standards. Land acquisition for this facility has been completed and initial activities such as obtaining approvals, fencing the land, etc., are in progress. Total cost of this project is expected to be around Rs. 400mn and it is expected to be fully commissioned in FY2014.
Additionally, to cater to the growing global demand for specialty chemicals, Vivimed has acquired additional land acreage in both Bidar and Bonthapally manufacturing facilities and is expanding these facilities. Vivimed is also undergoing de-bottlenecking and upgrading to cGMP standards of its pharmaceutical manufacturing facility at Jeedimetla. Total project cost of these three expansions is around Rs. 300mn, which are expected to be completed by first half of FY2013.
Are you planning any further acquisitions?
At this point of time, Vivimed has successfully made 3 acquisitions in 2011 which will significantly increase our presence across the pharmaceutical value chain and Management’s strategy and approach from here on is to, integrate these acquisitions, reduce costs by achieving manufacturing synergies and expand sales and profitability by increasing market and client penetration. The company may not be contemplating any further acquisitions unless and until it finds any suitable synergistic deal in times ahead.
What is the current debt and cash level?
As of September 30, 2011 debt was Rs. 3,607mn and Cash and Bank Balances were Rs. 1,006mn.
What is the shareholding pattern. Any more PE funding?
As of December, 2011 the shareholding pattern was as follows:
Vivimed does not plan to go for any more fundraising in the near future from Private Equity players or any other primary or secondary market avenues.
What is the mix between Specialty chemicals and pharma?
In FY11, the sales mix between Specialty chemicals and pharmaceuticals was around 75:25. Beginning
FY13 both the segments are likely to contribute equally to the revenue generation.
How have your earlier acquisitions like Uquifa played out?
Vivimed had acquired James Robinson Ltd based out of UK in 2008. James Robinson was a global supplier of hair dye chemicals, photochromic dyes, imaging chemicals, and intermediates to reputed clients like P&G, L’Oreal and Henkel. Vivimed acquired this company in order to increase its presence in the global specialty chemicals market. Integration strategies involved process and Technology transfer to Vivimed, enhanced product range to current customers, and cost benefits of manufacturing JR products in India. Post acquisition, Vivimed helped this business achieve sales and profit growth, increase customer penetration and also achieve seamless integration of process and personnel. The successful integration of this acquisition led to the company doing further acquisitions in 2011 of Uquifa, Octtantis Nobel and Klar Sehen.
Vivimed acquired Uquifa in December 2011 for $55mn. Uquifa is a 75-year-old manufacturer of Active Pharmaceutical Ingredients (APIs) and intermediates for the pharmaceutical Industry that is headquartered in Barcelona, Spain. It Operates 3 USFDA approved manufacturing sites, 2 in Spain and 1 in Mexico that operate under cGMP conditions. Uquifa is a well-known API manufacturer of generic and off-patent APIs with over 47 Type II DMFs filed with US FDA, more than 150 active DMFs worldwide & over 20 Certificates of Suitability (COS). It has products in over 15 therapeutic classes distributed across 70 countries and over 100 customers. The top 10 generic pharmaceuticals players in the world are Uquifa customers and Uquifa has long standing relationships with host of other major generic pharma players and some of the leading innovators. Uquifa also has a strong franchise in anti-ulcer products with 40% of its sales coming from the anti-ulcer segment. Uquifa reported revenues of US$ 98.33 million and EBITDA of US$ 13.74 mn for the year 2010 and had net assets of $65 mn as of June 30, 2011. The key benefits that Vivimed hopes to get from this acquisition are:
Tell us about the other acquisitions too.
Vivimed has done two other comparatively smaller acquisitions in India in 2011 to increase its foothold in the branded formulations space. Vivimed acquired 100% equity stake in Klar Sehen Pvt. Ltd., a 30 year old Kolkata based Pharmaceutical company with strong marketing presence in North East, Bihar and Andhra Pradesh for INR 240mn. Klar Sehen operates in a niche ophthalmic segment and owns about 50 trademarks and some very well known brands such as Renicol, Lysicon-V, Care Tears, Dexacort etc, in eye care segment. In a research conducted by C-Marc (India) Pvt Ltd for the period Nov-Feb 2011, Klar Sehen for its wide range of Ophthalmic products had bagged an All India corporate standing rank of No. 1 in the East Zone and bagged a rank of No. 5 in India (in Indian, Dist HQ & Extra- Urban and rural markets).
The company has cGMP compliant manufacturing facilities at Kolkata, Hyderabad and also has arrangements to manufacture some of its products in Uttaranchal. The company employs over 150 medical sales professionals. Vivimed also acquired 60% stake in Octtantis Nobel Labs Pvt Ltd, based out of Hyderabad for INR 50mn. Octtantis is a well-established marketing company with rich experience in the ethical promotion of finished dosage forms in the Pharmaceutical and Nutraceutical segments. It has a diverse portfolio of branded products which are widely accepted by medical practitioners. Octtantis has a presence in Andhra Pradesh, Bihar, Jharkhand and entire North-East with a field marketing force of over 125. Its product portfolio consists of Nutraceuticals especially for women and children, enzyme preparations, ßÀ-lactams, heamatinics, anti-oxidants, cough expectorants, and multivitamins and a number of new products to be launched shortly.
What is the update on your investments in a SEZ in Andhra Pradesh.
We have purchased land up to 310 acres. For the Pharma SEZ, we have invested about Rs. 470mn for the land & development expenses and we will be investing further about Rs. 800mn during the first phase. This is likely to be implemented within 12 to 18 months. The Public hearing has been successful completed and rest of the approval process is in line for obtaining final clearance.
What is your message to shareholders
The company has a balanced growth strategy with a good product pipeline as well as R&D to back up the targeted performance and ensure that the growth objectives are realized in the manner that they are been projected. We are also confident of ensuring sustained returns to the Shareholders by the way of Dividend payouts as well as by way of value / wealth maximization.