INDUSTRY STRUCTURE AND DEVELOPMENTS
Gelatin is a colorless, flavorless, semi-transparent, and brittle collagen product. It
is a protein food product generally derived from the several animal sources. It is used in
several applications as a stabilizer, thickener, and gelling agent. Gelatin is normally
graded into categories as per its quality and strength, and the unit is named as bloom.
A greater bloom number signifies a high quality of gelatin. The color of the gelatin
product is depended on the raw material type. The superior quality of gelatin are high
molecular weight compounds and with better gel strength.
The global gelatin market is expected to grow at a steady rate and post a CAGR of more
than 6% and is projected to exceed 480 thousand metric tons by 2022. The increasing demand
for gelatin from cosmetics and personal care applications will drive the growth prospects
for the global gelatin market until the end of 2021. The cosmetic and personal care
industry increasingly uses gelatin as a stabilizing, viscosity controlling, and cleansing
agent. The presence of protein content boosts the preference for the addition of gelatin
in various personal care applications such as face creams, shampoos, body lotions,
lipsticks, face masks, and sunscreens. Due to the high disposable income of the people,
the consumption of cosmetic products is high in various developed as well as developing
countries such as the US, the UK, Australia, Canada, France, China, India, Saudi Arabia,
and Germany, which will consequently fuel market growth.
According to the market research and analysis, Europe was the largest revenue
contributor to the gelatin market during 2016. This is mainly due to the presence of
dominant manufacturers in the region. With the increasing number of applications in food
and beverage products, the sales of gelatin is likely to increase in Europe and this
region will be the major revenue contributor to the market in the coming years as well.
During 2016, the pig skin segment dominated the gelatin market and is expected to
witness significant growth during the estimated period as well. Due to factors such as the
superior quality of gelatin, the short production process, the need for less amount of
water in pre-treatment and extraction, the reduction in water wastage during processing,
and a less-time consuming pre-treatment process, the coming years wil witness a
significant increase in the demand for gelatin derived from pig skin.
Gelatin
Gelatin is derived from collagen which is obtained from various animal sources
including pig skin, bovine hides, cattle bones and fish. This type of animal collagen
helps to swallow tablets and capsules easily. Gelatin is a form of protein derived from
animal sources. This clear and tasteless protein is obtained from the collagen found in
the bones, connective tissue, and skin of pigs, cattle and other animals. In old times,
gelatin was used as a biological adhesive. But with advancing times, the use of gelatin
has changed and diversified. Apart from adhesiveness, gelatin possesses many physical,
chemical and functional properties like crystallization control, water binding, film
forming, thickening and emulsifying properties. Thus, it has found a large area of
application in the food, pharmaceutical, neutraceutical, photographic, cosmetic and
packaging industries.
Besides these, gelatin has also established its utilization in combating osteoporosis
and arthritis. The widening scope of application has provided a lucrative platform for a
swift growth of the global gelatin market which is expected to reach a value of around US$
4.08 billion by 2024. The increasing application of the product in food & beverage and
pharmaceutical applications on account of exhibiting excellent stabilizing characteristics
and good binding features is expected to remain a favorable factor for growth over the
forecast period.
The product is majorly used as a gelling agent in numerous applications including food
& beverage, nutraceuticals, healthcare, personal care, and photography. Increasing
demand for convenience foods in emerging economies including China, India, and Middle East
countries is expected to promote the usage of the product as a functional ingredient in
confectionaries.
Gelatin is also used in the production of a broad range of pharmaceuticals including
wound dressings, blood volume substitutes, and homeostatic sponges. Development of the
pharmaceutical industry in the U.S. and Canada in light of increasing expenditure for
incorporation of latest technologies is expected to have a substantial impact.
Over the past few years, polysaccharides are being increasingly used as an important
constituent in healthcare and food & beverage applications on account of providing
excellent hydrolyzing enzymatic properties. Therefore, industry presence of polysaccharide
is expected to pose a substitutional threat to gelatin market over the next eight years.
Increasing awareness towards microencapsulation in the broad range of applications
including food & beverage and healthcare is expected to open new markets over the next
eight years.
Application Insights
The food and beverage segment dominated the market during 2016 and is likely to
continue its dominance in the coming years as well. The increasing demand for functional
food and beverage products such as confectionery, marshmallows, desserts, bakery products,
dairy products, pet foods, meat packaging, frosted cereals, cream cheese, cupcakes,
candies, pudding, juices, and beverages will be the major factor fueling market growth.
Additionally, the use of gelatin in pet foods and other products such as cakes, cottage
cheese, ice creams, whipped creams, and cheese spread will also propel the growth of the
market in this segment.
Raw Material Insights
Bovine hide-based products are projected to foresee volume growth at 4.9% CAGR from
2016 to 2024. Easy water absorption and significant protein content are expected to
promote the usage of the aforementioned raw material over the projected period.The
increasing popularity of halal foods in food & beverage industry of Middle East
countries is expected to promote the usage of cattle bones as raw materials to produce
gelatin over the forecast period.
Fish skin, horse hair, and sheep covering are other raw materials which are used for
the production of gelatin. Technological advancement for the development of fish gelatin
in China is expected to open new markets over the next eight years.
Function Insights
The increasing importance of emulsifying property in food & beverage industry of
major markets of Germany, UK, and France is expected to promote the usage of gelatin as a
gelling agent over the next eight years. The market is projected to witness growth at a
CAGR of 5.3% from 2016 to 2024, in terms of revenue.
Application growth of pharmaceutical products including tablets and capsules in
emerging markets of China and India owing regulatory support intended for promoting
investments in the healthcare sector is expected to increase the demand for stabilizing
agent. Gelatin also finds use as thickening agents in the photographic industry.
Regional Insights
Europe represents the largest market worldwide, accounting for 41.2% of the global
revenue in 2015. Increasing awareness towards incorporation of nutritional ingredients in
food & beverage industry, particularly in developed economies including Germany, UK,
and France, is expected to have a high impact on the market. Also, the presence of a
robust pharmaceutical manufacturing base in Germany, UK and Belgium is supposed to remain
a favorable factor.
Asia Pacific is forcast to spearhead future growth with the fastest CAGR of 5.0% led by
factors such as growing population and robust food production where gelatin is used widely
as gelling agent, growing spending on appearance maintenance products among the expanding
base of affluent middle class population and the resulting increase in the use of gelatin
in cosmetic formulations, and raising prevalence of osteoarthritis and a parallel increase
in the consumption gelatin suppliments.
Competitive Insights
Key industry participants include PB Gelatin, Nikita AG, Rousselot, Capsugel Inc. and
Sterling. New product development and the establishment of strategic partnerships with
buyers are expected to remain critical success factors over the next eight years.Global
pharmaceutical market are in the midst of major discontinuities. While growth in developed
markets will slow down, emerging markets will become increasingly important in the coming
decade. The Indian Pharmaceutical market, along with markets of China, Brazil and Russia,
will spearhead growth within these markets.
The Indian pharmaceuticals market has characteristics that make it unique. First,
branded generics dominate, making up for 70 to 80 percent of the retail market. Second,
local players have enjoyed a dominant position driven by formulation development
capabilities and early investments. Third, price levels are low, driven by intense
competition.
The Indian pharmaceuticals market is the third largest in terms of volume and
thirteenth largest in terms of value. India is the largest provider of generic drugs
globally with the Indian generics accounting for 20 per cent of global exports in terms of
volume. India enjoys an important position in the global pharmaceuticals sector.
The Indian pharma industry, which is expected to grow over 15 per cent per annum
between 2015 and 2020, will outperform the global pharma industry, which is set to grow at
an annual rate of 5 per cent between the same period. The market is expected to grow to
US$ 55 billion by 2020, thereby emerging as the sixth largest pharmaceutical market
globally by absolute size. Branded generics dominate the pharmaceuticals market,
constituting nearly 80 per cent of the market share (in terms of revenues).
Indias pharmaceutical exports stood at US$ 16.4 billion in 2016-17 and are expected to
grow by 30 per cent over the next three years to reach US$ 20 billion by 2020.
OPPORTUNITIES AND THREATS
• Opportunities:
As the hydrolyzed form of gelatin, collagen is a highly purified protein that can be
easily absorbed in the human body. It is used as an ingredient for nutritional supplements
such as protein bars and drinks, weight loss, beauty products, and overall body health.
This product is easily soluble in hot and cold liquids. It is also perfect where
traditional gelling ability is not required. Our gelatin products have numerous and varied
applications in the Food, Health and Nutritional industries. Gelatin is a natural and
fat-free ingredient that is both high in protein and virtually calorie free. It is
invaluable in the processing of these and many other health products.
The change in the world topography especially in the European countries leading to
increase in the ageing population is expected to ensure a stable growth in the global
demand of gelatin over the coming years. Further the increasing use of gelatin in
Pharmaceutical, Neutraceutical and cosmetic products would add to this stable growth in
global demand. The food and beverage industry continuous to represents one of the largest
consumer of gelatin.
The general growth in health concerns and the increase in the standard of living of the
people leading to greater disposable income has increased the use of dietary supplement
and thereby increases the usage of gelatin based products.
As regards the alternatives that meet some of the gelatin characteristics, none is yet
available that matches all the functions such as gelling, binding, thickening,
stabilizing, film forming, and aerating properties. Thus, no comparable substitute has
been developed till date.
The gelatin has unique characteristics that make it especially useful as a film-forming
agent for encapsulation of liquids and powders. Gelatin capsules offer the unique
advantages of dosage accuracy, ease of swallowing, and appearance. In addition to hard and
soft capsules, gelatins unique physical properties allow for the coating and binding of
the dry components in tablets. Having no toxicity, and the ability to be easily absorbed
by the body, gelatin is an ideal substance to use in medicinal and nutritional
preparations. Gelatin is the excipient of choice to provide an effective delivery system.
As a rich source of protein, Gelatin finds application in numerous end-use sectors
including pharmaceuticals, food and beverage, photographic supplies, cosmetics,
explosives, electroplating, dyes, papermaking and printing, among others. Rising standards
of living, easier access to healthcare services, increase in disposable incomes and
rapidly aging world population represent key factors driving growth in demand for gelatin.
Improving lifestyles in developing economies of India and China are also expected to
promote market expansion. Lack of availability of competitive substitutes in the market
makes gelatin one of the most indispensable feedstock in various end-use industries.
Consumption in the pharmaceutical industry remains high driven by rapidly ageing
demographics, rising incidence of chronic and lifestyle related diseases, and growing
health consciousness. Growing focus on preventive healthcare amidst mounting healthcare
costs represents another important growth driver. Rising popularity of nutraceuticals is
also expected to benefit gelatin consumption in the near term. Gelatin encapsulated
medicines and gelatin-based dietary and health supplements are expected to witness strong
demand in the coming years.
As stated by the new market research report on Gelatin, Europe represents the largest
market worldwide, followed by Asia-Pacific. Asia-Pacific is also forecast to spearhead
growth with the fastest CAGR of 4.9% over the analysis period. Growing GDP, rising
standards of living, increasing disposable income, expanding healthcare access and robust
gelatin demand from end-use industries represent key factors driving growth in the region.
Demand is driven by the worlds aging population, increasing awareness of health
issues, and end-use industries including pharmaceuticals, nutraceuticals, and food and
beverages. Demand in emerging markets such as India and China will also fuel expansion,
along with rising standards of living and the availability of vegetarian gelatin options.
Obstacles to industry growth include consumer concerns regarding the potential health
threat in using products derived from animal body parts. (Global Industry Analysts).
Whereas the pharma industry meets around 70% of the Countrys demand for bulk drugs,
drug intermediates, pharmaceutical formulations, chemicals, tablets, capsules, orals &
injectable. The domestic pharmaceutical market is expected to register a strong double
digit growth of 15% on the back of increasing sales of generic medicines, continued growth
in chronic therapies and a greater penetration in rural markets.
• Threats:
Despite the bright outlook, consumer concerns related to the safety and social aspects
of using products derived from animal body parts continue to haunt industry prospects. The
industry, over the years, has borne the brunt of tightened regulations and legislative
riders governing the use of gelatin in supplements.
In spite of OIE clearance for India as "Negligible risk" country for Bovine
Spongiform Encephalopathy (BSE), the USFDA refusing to acknowledge this rating and place
India in the Undetermined category which could affect export. Sales and realization of
DCP suffered a minor setback.
Environmental regulation continue to become more stricter and strengthen on account of
which there would arise a need for larger capital outlay for achieving revised standard as
well as higher operating cost for the treatment. Raw Material namely crushed bones
availability has been short and thereby prices are at historical highs.
Central Government has also formed a 14 member committee to pursue vegetable grade
capsules leading to uncertainty for pharma grade gelatin manufactured from bones.
PERFORMANCE
The Company is engaged into manufacturing of Gelatin from animal bones. Gelatin is
primarily used in pharmaceuticals industry for making capsule caps and in food industry.
Company has developed world-class technology for gelatin by establishing state-of-the-art
facilities. The Companys plants located at Karakhadi and Ooty employ the latest
innovations in technology for the production of gelatin.
The Company produces pharmaceutical product meeting global quality standards, viz.
Lovastatin (Cholesterol lowering drug) and Oncology/Other Pharmaceutical products.
Sterling, as of today, has highest Lovastatin manufacturing capacity with required
regulatory approvals. The fermentation facility of Masar plant is one of the largest
fermentation facilities in India.
The company has increased its focus on Lovastatin and other Cholesterol lowering drugs
as well as Oncology products which have a very bright future in Domestic &
International Markets.
Brief overview of Pharma and Oncology products manufactured by the Company is as under:
Anticancer Products :
• DOXO Rubicin is an anti-cancer chemotherapy drug and is classified as an
anthracycline antibiotic.
• IDARUBICIN is an anti-cancer (antineoplastic or cytotoxic) chemotherapy drug.
This medication is classified as an anthracyline antitumor antibiotic.
• Daunorubicin is used to treat acute lymphocytic and myelocyticleukemias.
• IMATINIB is a drug used to treat certain cancers.
• EPI Rubicin is an anthracycline drug used for chemotherapy.
Other Products :
• Lovastatin is a cholesterol-lowering agent that belongs to the class of
medications called statins
• DACARBAZINE is used to treat Hodgkin disease and malignant melanoma
• Temozolamide is an oral alkylating agent used for the treatment of Grade IV
astrocytoma
• Simvastatin is a lipid lowering drug used to decrease heart problems in those at
a high risk
OUTLOOK
Along with production of Bone gelatin, the company continues to focus its attention on
Pharmaceutical products, Oncology products and Hydrolised Proteins for its future growth.
The Research and Development activity of the Company intends to have focused and
continuous innovationto secure a sound future. Expansion of the product portfolio and cost
control through long term contracts with suppliers and tightening of expenses continues
for improved margins.
All required certifications in terms of quality obtained by the Company gives the
company better position in the International & Domestic Market. With expected future
growth in pharma sector with the use of gelatin as raw material for manufacture of
capsules, demand constraint will not be there for the Company in coming years.
RISKS AND CONCERNS
Statements in the Managements Discussion and Analysis describing the Companys
projections, estimates, expectations or predictions may be "forward looking
predictions" within the meaning of applicable securities laws and regulations. Actual
results may differ from such estimates, projections, etc., whether expressed or implied.
Factors which would make a significant difference to the Companys operations include
achievement of better quality and good market price in domestic and overseas market,
changes in Government regulations and tax laws, economic conditions affecting
demand/supplies and other environmental factors over which the Company does not have any
control. Stringent regulation/norms required to be followed by slaughter houses for meat
exports to EU countries, increase in cost of power & fuel due to increase in the price
of furnace oil & increase in other fixed/semi variable cost due to overall
inflationary pressure are also the matter of concerns.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The company has adequate internal control systems to ensure that all assets are
safeguarded and protected against loss from unauthorized use or disposition and the
transactions are authorized, recorded and reported correctly. The internal control is
designed to ensure that the financial and other records are reliable for preparing
financial statements. The Company has in place documented procedures covering all
financial and operational functions commensurate with its size and complexity. The Company
has also taken required measures to counter the demand issue viz. improvement in marketing
set up, tightening of credit control, Diversification of products & cost control
measures.
RESEARCH & DEVELOPMENT
R&D facility at the plant is equipped with all modern analytical and process
equipment including HPLCs, GC, GCMS, IR, Spectrophotometer, Autoclave etc. and is under
strict controls & restricted entry
Sterling Biotech undertakes research & development activities at its in-house
R&D centers which look after at specific areas of improvement of product quality,
process improvements, cost effectiveness and elimination of waste in the systems. The
company also carries out R&D work on fermentation products, API and intermediates.
The company has invested significant amount of resources on Research & Development
and has set up a state-of- the-art R&D facility in the name of "Sterling Biotech
Research Centre" at its Masar plant in Vadodara, which is engaged in development of
complex and niche generic active substances for leading generic players from Europe and
other regulated market. For company, the R&D is an integral part of process and
product development.
The Company also has a microbiology laboratory which is equipped with all facility to
handle culture maintenance, inoculums preparation and propagation, in - process batch
analysis, shake flask trials.
QUALITY CERTIFICATIONS
The company continuous to have the following quality certifications in accordance with
its policy to achieve and maintain the highest standards of quality -
| Sr. No. |
Certification |
Purpose |
| 1 |
EDQM (European Directorate for Quality of Medicine) |
This certification denotes that the product is in compliance with the European Union
pharmacopeia. |
| 2 |
IFANCA/MUI |
This certification is required for Halal certification, which certifies that the
gelatin is manufactured using Halal-defined processes and can be used by the Muslim
population. |
| 3 |
KOSHER |
This certifies that the Jewish population can consume Sterlings gelatin and that the
inputs used for gelatin production are in accordance with the religious standards of the
Jewish community. |
| 4 |
HACCP (Hazardous Analysis and Critical - Control Point) |
This certifies the manufacturing process with the highest and most consistent quality
and safety of product. Also ensures the availability of fallback measures in case of
unfortunate events. |
| 5 |
ISO 9001 |
This certification denotes that the production process is in accordance with standards
laid down by the International Standards Organizations. |
| 6 |
ISO 14001 |
This certification signifies that the environment management system is in compliance
with the Environmental Management System Standard. |
OPERATING AND FINANCIAL PERFORMANCE
The highlights of financial performance during the year 2016-17 are as under:
• The company achieved a turnover (including other income) of Rs.40,417 Lacs.
• EBIDTA from operations is 1,655 Lacs.
• The finance cost is Rs.36,980 Lacs leading to Loss before tax of Rs.61,680 Lacs.
• After reducing the deferred tax, the loss after tax is Rs.41,245 Lacs.
• Net worth as at 31st March 2017 stands at Rs.127,609 Lacs.
DEVELOPMENT IN HUMAN RESOURSES MANAGEMENT
Sterling believes that Human Resources always pay a very key role in the future growth
of the company. It recognizes employees as the most valued asset. By providing on job and
off job training, continuous development and learning initiatives for improvement in
professional competencies, the management aims to achieve high standards of human resource
development.
The Company has strength of 801 Employees as on Balance sheet date.
WAY FORWARD
Way forward the company looks forward to improve in marketing set-up to reach to wider
range of customers world-wise, diversify product portfolio of pharma products through
in-house research and to capitalize on the increasing demand. The Company also looks
forward to take corrective actions on the effluent discharge issue and tightening of
quality norms to meet the global standards, putting in place the cost control measures
with the help of better negotiation with the material suppliers, improvement in and
tightening up of cost control system for various semi variable expenses, etc. Various
steps are taken by the Company to reduce its finance Cost and look forward to reduce its
bank loans/debts. The combined effect of all these factors are expected to be favorable
for overall operations of the Company in the next few years.
|
For and on behalf of the Board of Directors |
| Place : Mumbai |
Nitin Sandesara |
Chetan Sandesara |
| Date : May 30, 2017 |
Managing Director |
Jt. Managing Director |
| (DIN:00255496) |
(DIN:00255671) |
+91-9892691696
