j b chemicals pharmaceuticals ltd share price Management discussions


FY 21-22 was a good year for the Indian pharmaceutical industry. Demand witnessed growth due to Post pandemic normalization and surge in demand for COVID-19 related medicines. The domestic formulations industry sales was at ~INR 185,498 crores (IQVIA, March, MAT 2022) recording growth of 18% in value and 11% in volumes. The market was heavily impacted by the second covid wave which hit the country with the covid portfolio products sales spurting during that period which resulted in Respiratory and anti-infective segment registering the highest growth across therapies. International/Export business was a mixed bag. Some markets saw macro-economic challenges and the US market was impacted by price erosion but overall business witnessed growth. Overall the industry saw pressure on operating margins led by increase in input costs, freight costs and normalization of operating expenses post covid.


Domestic Business:

The Company is engaged in only one segment viz. pharmaceuticals.

During the year under review, the domestic pharma market continued to grow at a healthy pace. As per IMS MAT Mar 22 data, the industry growth rate was at 18%. The Company registered growth at 29 % for the same period and thus emerged the fastest growing Company among the top 25 in the market. It is also important to note that the Company had limited benefit from its COVID portfolio and thus the underlying growth continued to remain strong.

For the year under review, the domestic formulations business recorded revenue of INR 1,173 crores as compared to INR 892 crores for the previous financial year registering growth of 32 %.

During the year, the Company focussed on its five-pronged strategy.

1. Realigned Go-To-Market(GTM) model to drive productivity

During the year under review, the Company introduced a new GTM model which focussed on increasing productivity and enhancing focus on key brands. The strategy is beginning to pay dividends with pcpm (per capita per month) increasing to Rs 5.6 lakhs per medical representative from Rs 4.4 lakhs per medical rep in FY

2021 increasing by 27 %. The Company is now ranked among the top 25 in IPM and ranked #15 by prescription. During the year under review, the Company moved several ranks in the industry. All 5 brands in the top 300 continue to grow well and maintain its leadership position in the covered market. In segments where the Company has strong presence, it outperformed the overall segment growth. As per IMS MAT Mar 22 data, while the overall cardiology segment grew by 10.5 %, the Company grew at 29.4%; in Gastro-Intestinal while the overall segment grew by 17.4 %, the Company grew by 22.2 % and in the anti-parasitic segment where metrogyl is present grew by 14.3 % whereas the Company grew by 28.7 %.

2. Increasing Contribution from Chronic Therapies

The Company has been consistently increasing its contribution from chronic therapies over the past several years. As per IQVIA

MAT 2018, the Companys revenue from chronic therapies as a percentage to overall domestic sales was 46 %. This has increased to 50 % as per IQVIA MAT Mar 22 data. This was possible due to the lifecycle management of major brands and launches in Heart failure, Diabetes and Nephrology segment. With the acquisition of Azmarda, we are focusing on increasing our contribution from Chronic therapies.

3. Making Big Brands Bigger

All the five focussed brands continue to perform well in their respective categories. Rantac (anti-peptic ulcerant), with market share of 41 % in its category was ranked # 45 among the top 300 and grew by 19% as per IMS MAT 22 data. Cilacar (Calcium Channel Blocker) with market share of 51 % in its category was ranked # 52 among the top 300 and grew by 19% as per IMS

MAT 22 data. Metrogyl (amoebicide) with market share of 79 % in its category was ranked # 194 among the top 300 and grew by 27% as per IMS MAT 22 data. Cilacar T (calcium channel blocker/angiotensin receptor blocker) with market share of 38 % in its category was ranked # 203 among the top 300 and grew by 61% as per IMS MAT 22 data. Nicardia (calcium channel blocker) with market share of 89% in its category was ranked # 240 among the top 300 and grew by 25% as per IMS MAT 22 data. The re-aligned GTM model backed with life cycle management /brand line extensions has resulted in market- beating performance.

4. Accelerating Growth through New Launches

The Company has begun to focus on introducing new products in the market. During the year under review, the domestic business launched 17 products (excluding line extensions) as against only

5 launches in FY21. These new introductions now contribute ~4.0% of the total domestic sales for the year under review. Notable introductions during the year include JBTor (Torsemide), Dapacose (Dapaglifozin), Nintabid (Nintedanib) amongst others.

5. Acquisition-led growth, via strong brand franchises

One of the pillars of the strategy has been acquisition-led growth. The objective was to judiciously deploy capital and free cash flow from the business in value-accretive brands and franchises which can further strengthen the India business. During the past twelve months, the Company completed two major acquisitions (Brands from Sanzyme and Azmarda), thus foraying into the fast-growing Probiotics segment and the niche Heart Failure segment. The brands acquired from Sanzyme offers entry into the nascent opportunity of probiotics in India which is witnessing double digit growth. The portfolio also offers geographic costs & distribution synergies, along with prescriber overlap. Sporlac, which is among the top 3 brands in the probiotics segment has significant opportunity to grow through line -extensions. Azmarda marks the Companys expansion in the cardiac segment with its entry into the niche fast growing heart failure segment. Sacubitril+Valsartan which belongs to the ARNI class is the highest growth segment in cardiology, with a 3-year CAGR as less than of 35%+. There is significant 25% of the estimated 15-20 Mn Heart Failure patients are on this therapy.

International business:

The Company operates distinct operating models across multiple international businesses with direct presence in Russia and South Africa as well as distributor relationships in the U.S. and a large number of markets across Asia, Africa and Latin America. The Company also has a leading global position in the contract manufacturing (CMO) market driven by marquee client relationships. These businesses are backed by wide-ranging manufacturing capabilities that offer substantial headroom for growth. Overall, the Companys international business derives strong visibility from its wide geographical presence, increased focus on ANDA filings, new product introductions in home markets of Russia and South Africa, focus on contract manufacturing business backed by state-of-the-art manufacturing facilities that are approved by regulatory bodies such as US FDA, TGA Australia, EU GMP, SAHPRA South Africa, MoH-Russia, Ukraine (PICs), MoH Japan with a wide range of products across injectables, solids and semi-solids.

During the year under review, the Companys international business recorded revenue of INR 1,236 crores as compared to INR 1,127 crore recording growth of 10 %. The Companys overall International formulations business during the year under review was INR 892 crores; the CMO business was INR 253 crores and the API business was INR 91 crores.

The South Africa business continues to record growth in both public and private markets and is now ranked among the top 15 companies in the country. The Russia/CIS region continue to see stable demand despite being affected by currency fluctuations and volatility. The ROW markets bounced back in the fourth quarter and thus delivered good overall growth for the year under review. In the US, the key molecules viz. Glipizide and Carbamazepine, continue to retain market share. We continue to progress on ANDA filings integration. The cost-plus business model in the US will ensure that our capital investment is limited, and our returns are sustainable. The supply chain disruptions and higher freight costs remain a challenge. Freight costs increased significantly for all key markets and shipments were affected for most of the year under review.

The CMO business provides a great opportunity for growth. The organsiation is currently ranked among the top 5 manufacturers of lozenges globally and boasts of some big consumer health/ FMCG companies. The CMO business recorded good growth in the year under review.


The global macro-economic conditions remain fragile and inflation is the rise across the world. We have seen significant during the year under review. Despite the challenging operating environment, we remain positive about the demand outlook. The India business will continue to remain market-beating and we will continue to strengthen our pillar brands. We also intent to scale up the recently acquired brands. On the international business we expect growth in demand. However, the geo-political & economic scenario across the world is evolving and this could lead to some headwinds. We continue to focus on building our product portfolio, building new customer relationships and leverage our manufacturing capability to mitigate the headwinds.


The Company does not perceive any risks or concerns other than those that are common to the industry such as regulatory risks, exchange risk, cyber risks and other commercial and business-related risks.


The Company has an adequate system of internal controls, which ensures that its assets are protected from loss and unauthorized use as well as business affairs are carried out in accordance with established procedures. These systems of internal controls also ensure that transactions are carried out based on authority and are recorded and reported in line with generally accepted accounting principles. The

Company also has a system of regular internal audit carried out by competent professionals retained by the Company. The internal audit programme is approved by the Audit Committee, and findings of the internal auditor are placed before the Audit Committee and the Board at regular interval. The internal control system is adequate keeping in view size and nature of the Companys business.


Consolidated financial performance of the Company with respect to operational performance for the financial year ended on March 31,

2022 is as under:

Parameter 2021-22 2020-21 Growth
(INR in crores) (INR in crores) (%)
Revenue from operations 2,424.24 2,042.52 18.69
Total income 2,463.47 2,154.90 14.32
Reported EBITDA 543.46 560.41 (3.12)
Operating EBITDA (excl ESOP Cost) 606.11 560.41 8.16
Profit before tax and exceptional item 504.90 596.89 (15.41)
Profit after tax 386.04 448.52 (13.93)

During the year under review, the Company recorded revenue growth of 19%. The domestic business grew by 32 % while the international business grew at 10% for the year under review. While the reported EBITDA declined by 3 % to INR 543.46 crores , the Operating EBITDA (excl ESOP cost) increased by 8 % to INR 606.12 crores despite significant cost pressures during the year under review. PAT development was impacted due to non-cash ESOP charge, lower treasury income and one-off other income in the prior financial year.

Standalone financial performance year ended on March 31, 2022 is as under:

Parameter 2021-22 2020-21 Growth
(INR in crores) (INR in crores) (%)
Revenue from operations 2,189.88 1,892.00 15.74
Total income 2,228.49 2,003.88 11.21
Reported EBITDA 508.91 556.37 (8.53)
Operating EBITDA (excl ESOP Cost) 569.84 556.37 2.42
Profit before tax and exceptional item 471.29 593.71 (25.98)
Profit after tax 361.00 447.08 (19.25)


There has been no material development on human resources and industrial relations front. The relationship with employees and workers continued to be cordial at all levels. As on March 2022, permanent employees strength and temporary employees strength was 4,340 and 680 respectively.


The key financial ratio for 2021-to the immediately preceding financial explanation in cases where the change is 25% or more is as under: a) Debtors Turnover ratio: Net Sales/Average account receivables This ratio for the year was 5.13 (times) as against 5.56 (times) in the previous year. b) Inventory Turnover ratio: Cost of Goods sold/Average inventory This ratio for the year was 2.23 (times) as against 2.26 (times) in the previous year.

c) Interest Coverage ratio: EBITDA/Interest Payment This ratio for the year was 106.13 (times) as against 77.39 (times) in the previous year. The Company has a healthy interest coverage ratio in absolute terms. The coverage increased by 28.74% on account of finance costs reducing from 7.24 crores to 5.12 crores. d) Current Ratio: Current assets/Current liabilities of the Company for the financial This ratio for the year was 3.32 (times) as against 4.50 (times) in the previous year. This ratio reduced due to redemption of mutual fund investments for acquisitions of trademarks during the year. e) Debt-Equity ratio: Borrowings/Total Shareholders Equity This ratio for the year was 0.026:1 (times) as against 0.025:1(times) in the previous year. f) Operating Profit Margin: EBITDA (excl ESOP charge)/Sales Operating profit margin for the year was 25.00% as against 27.43% in the previous year The operating margin was lower due to escalation in inputs costs, freight costs and normalisation of operating expenses post pandemic. g) Net Profit Margin: Net Profit/Net Sales Net profit margin for the year was 15.92% as against 21.96% in the previous year. This ratio declined by 6.04% due to the ESOP charges, lower treasury income and one-off other income in the prior financial year.

The ratio for the previous year has been re-stated wherever necessary to make it comparable to current year calculation.


Return on Equity during the year was 15.33% as against 18.56% in the previous year The ROE was impacted due to ESOP charges, lower andchangesthereinas compared treasury income and one-off other income in the prior financial year along with detailed

For and on behalf of the Board of Directors
Ranjit Shahani
Place : Mumbai
Date : May 26, 2022