Laurus Labs Is Ramping Up Capacity For Growth Beyond FY23

Most of the capex for FY22 is for growth in FY23 and beyond, according to Dr Satyanarayana Chava, founder of the Hyderabad-based maker of drug ingredients. Most of it, he said, would be directed towards its non-anti-retroviral business.

“We aren’t worried to invest,” he told BloombergQuint’s Niraj Shah in an interaction, adding the company doesn’t want to depend on acquisitions to fuel growth. “We’re conscious in investment, but we need to deliver what we have committed to our clients and thus capex will continue.”

The company is targeting $1-billion (about Rs 7,300 crore at the current exchange rate) revenue for FY23, driven by non-anti-retroviral and active pharmaceutical ingredients, and custom synthesis segments.

Chava expects FY22 to be a “transformational year” for Laurus Bio, its biotechnology arm, as it will start commercial production from its expanded fermentation facilities. Laurus Labs acquired Bengaluru-based Richcore Lifesciences last year and rebranded it as Laurus Bio.

“We foresee the number of patients using our ARV therapies plateauing by FY25, which will affect growth, but significant growth will come in from its diabetes and cardiovascular segments from then on,” he said.

Growth Drivers

India is trying to gain an advantage in the fermentation segment, and the company's teams have expertise in cell-culture ingredients, but scaling up is difficult here, he said.

“In biology or biotechnology, we have no expertise,” Dr Chava said. “We’re not saying we can do everything. We know our limitations. We know what we don’t know very well. We acquired the talent at Richcore and not the company. We acquired 17,500 litres of fermentation capacity, a 100-member team and committed founders.”

Laurus Bio has entered the recombinant proteins for the food segment, with its current capacity to be utilised for one customer. Following enquiries from other customers, the company will expand capacity of the fermentation facility to one million litres, which will then be expanded to two million litres.

Brokerage View

Motilal Oswal Securities raised the company’s FY22E/FY23E earnings per share estimate by 6%, factoring in benefits from streamlining in its finished dosage forms arm, capacity building in the non-ARV and enzymes segments, and better prospects in the synthesis unit.

Ambit said Laurus Labs’ operating profit is expected to grow at an annualised rate of 21% during FY21-23, with FY23 sales 3% shy of management’s $1-billion target. Market share doubling in its ARV formulations arm and 27% growth in the custom synthesis unit are key growth drivers, the brokerage said.

Watch the full interaction here: