Granules India forecasts better margin and positive trends from the December quarter of FY24

Drug maker Granules India, which posted a significant drop in its net profit in the April-June quarter, is expecting a positive shift in its financial landscape. The company anticipates an improvement in its formulation sales in Europe and the US along with other business developments.

One of India's large paracetamol manufacturers, Granules India announced a 62.4 percent decline in its net profit for the first quarter ending on June 30, 2023, at Rs 47.9 crore. This contrasts with its net profit of Rs 127.5 crore in the corresponding previous quarter, as stated in an official filing.

The company's leadership expressed confidence that its margin will continue to show improvement in the coming quarters. Looking specifically at the third quarter (Q3FY24) and beyond, Granules is optimistic about witnessing a tangible positive trend.

In an interview with CNBC-TV18, Krishna P Chigurupati, CMD of Granules India said that the company is actively evaluating the extent to which the lost business can be recouped following the challenging period.

One of the key issues Chigurupati highlighted was a backlog in the quality system, which has resulted in delays in obtaining clearances. These delays are expected to have an impact on the company's performance in the second quarter (Q2) too, although Chigurupati expressed optimism about a gradual return to normalcy by the third quarter (Q3).

He further elaborated on the company's plan to recover from the setbacks caused by the delays.

“I would say Q3 onwards the margin will be back to normal. There would definitely be some impact on the margin for the whole year. We are trying to see how much of the lost business can be recovered. It definitely looks like some of it is recoverable, but we will know shortly how much we can recover,” Chigurupati said.

Another significant development discussed in the interview was the decline in prices for paracetamol, a core product manufactured by Granules India. He said, “The prices have come down, so did the raw materials. The margins have remained intact, but pricing has come down. However, going forward we expect the destocking of paracetamol with most of our Latin American customers and that would impact paracetamol sales, but to compensate for that our paracetamol formulation sales are increasing in Europe and US. So, overall paracetamol will still contribute a fairly decent number.”

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