Laurus Labs Will Continue To Maintain Margin At 30%, Says CEO
“In four-five years people will think we’re a well diversified company,” CEO Chava said.
Laurus Labs Ltd. is confident it can continue on its high-growth path while maintaining profit margin at 30%, if not more.
Revenue has been growing exceptionally well over the last few financial years and this will only accelerate as the company further expands its formulations and custom synthesis business segments, Satyanarayana Chava, the drugmaker’s founder and chief executive officer, told BloombergQuint’s Niraj Shah in an interview.
We will continue to grow while maintaining margins at 30%.Satyanarayana Chava, CEO, Laurus Labs
The company’s growth took off especially since April when demand for active pharmaceutical ingredients—or raw materials for drugs—from India rose. The API segment account for half of the company’s revenue while formulations and custom synthesis units contribute 40% and 10%, respectively.
Over the next five years, Chava expects APIs to contribute to 40% of the revenue while custom synthesis grows to 20%. To be sure, this doesn’t mean that the API business won’t grow, but the company will focus that much more on custom synthesis.
“Custom synthesis’ beauty is that its margin doesn’t depend on scale of the business,” he said. However, as the segment grows, it will likely pull the overall company’s Ebitda margin up further, he said.
In four-five years people will think we’re a well diversified company.Satyanarayana Chava, CEO, Laurus Labs
India Vs China
The Covid-19 pandemic and other geopolitical developments sparked a conversation among most large domestic and international corporates on the need for an alternative supplier to China. At the same time, the success of India’s pharmaceutical industry encouraged the government to try it in the manufacturing and chemical industries.
This shift will take several years to come to fruition, according to Chava, who said while such a conversation is good to listen to, it’s difficult to practice.
Such a shift will happen only if Indian API makers increase capacity and bring down costs via economies of scale, he said. Once the two countries are at par, buyers might favour Indian suppliers.
However, “we’re a long way to go to compare our capabilities with Chinese capabilities unfortunately”, Chava said.
Watch the full conversation here:
