Medicinal tablets are arranged for a photograph in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

Glenmark’s Saldanha Says Debt Not A Concern, Mulls Stake Sale In Unit 

Glenmark Pharmaceuticals Ltd. said it has a plan to lower its debt and the market shouldn’t be “overly concerned”.

“The street’s concern of debt on Glenmark’s books isn’t valid,” Chairman and Managing Director Glenn Saldanha told BloombergQuint in an interaction. “It’s underestimating the kind of products in the pipeline which will aid growth in the coming quarters.”

To reduce debt, the company is banking on a combination of factors, including product launches, drug approvals from key geographies and a minority stake sale in the active pharmaceutical ingredient business. After the stake sale, debt levels would fall to 1-1.5 times operating profit, he said. “This (debt) won’t be a concern going ahead.”

The drugmaker's debt rose to Rs 3,490 crore as of Sept. 30, according to company filings, due to increased spending on research and development and higher working capital requirements. Its debt to operating profit ratio of around 2 is high among Indian drugmakers, according to Bloomberg. That comes as it faces pricing pressure in the U.S., which contributes over a third to its sales.

Glenmark ended the quarter ended September with its top line and operating profit rising 15 percent and 14 percent, respectively.

Saldanha, admitting that he foresees single-digit revenue growth in the U.S. in the next fiscal, said Glenmark will ramp up specialty business leading to a strong five-six quarters. “The second half of the year has always been strong for us… the trend will continue this year also.”

Watch the interview with Saldanha here.

Key Takeaways

Currency Benefits

  • Will continue to see rupee benefits even in Q3 due to currency hedge.

U.S. Business

  • Dollar move and recently-launched drugs will help company over next two quarters.
  • Expect to see sequential growth in the U.S. markets over the next two quarters.
  • Seeing 10 percent price erosion in base business which won’t subside soon.

Drug Pipeline

  • Mix of exclusive and dermatological products in the pipeline.
  • Advair is currently in development and opportunity is becoming less attractive

India Business

  • India business pipeline will aid revenue of the company.
  • India business will continue to grow for next 2-3 years.

Latin America Business

  • Latin America has not paid off despite the inflows into the countries.
  • No major receivables pending from the market now.
  • Strong pipeline will play out over next few years

Balance Sheet

  • Looking at minority dilution of API business which will aid debt reduction.
  • Net debt at 1-1.50x EBITDA post dilution won’t be a concern.

Way Ahead

  • Low single digit revenue growth expected for FY19 for U.S. markets.
  • Will witness pricing pressure in U.S. markets for next 6-8 quarters.
  • Looking to ramp up specialty business, which will aid U.S. business.