Granules India cites rising China API and intermediates prices as Q1 driver

By Gareth Macdonald

- Last updated on GMT

Granules India, API, intermediates

Related tags Cost Generally accepted accounting principles

Granules India saw API sales rocket in the fiscal first quarter due – according to the firm – to an efficiency drive and the impact of rising prices in China.

The Hyderabad-based manufacturer posted net sales of INR1.89bn ($34m) for the three months ended June 30, which is an increase of 59 per cent on Q1 in the previous financial year. Similarly, EBITDA and net profit both grew, climbing 47 per cent to INR184m and 100 per cent to INR6.3m, respectively.

Active Pharmaceutical ingredient (API) sales accounted for INR569m of the total revenue, while Granules’ pharmaceutical formulation intermediates (PFI) business brought in INR526m. Finished dosage forms contributed INR496m, up 35 per cent on the comparable period in the previous fiscal year.

Granules spokesman Vijay Ramanavarapu told the API gains were due to improved operational efficiency and increased production capacity for key products.

During the quarter, we crossed 1,000 tons per month (TPM) at our paracetamol API unit. This is a proud accomplishment because as recently as last summer, we were producing 800 TPM.  

In addition, our Jeedimetla API facility also had notable improvements. We’ve increased our metformin and guaifenesin capacity by 50 per cent and 25 per cent respectively over the past one year to 150 and 100 TPM​.”

Ramanavarapu added that the capacity increases were achieved without any capital expenditure, which he said had helped Granules counter rising costs and be more competitive.   

PFI growth

The growth of Granules’ PFI business was helped by efficiency efforts as well, however it also benefited from favourable market dynamics and the rising cost of ingredients sourced in China according to Ramanavarapu.

Due to the increasing cost of APIs from China, customers have realized that it’s more cost effective to procure PFIs from Granules rather than buying Chinese-based APIs and granulating it themselves.

As a result the shift in the Chinese value-proposition, we’ve been able to increase our wallet share with existing customers while having new customers qualify our products. In order to meet short-term demand, we built a 1,200 TPA module to service our customers​.”

China changes

The comments about the rising costs in China echo what Granules said earlier this year​ when it spoke about fluctuating raw materials prices.

This fluctuation continued in the reported quarter according to Ramanavarapu, who said: “Raw materials have continued to increase over the past year. The notable shift over the past 12 months is that companies have recognized China is becoming expensive and is not as competitive.

In the past, companies were willing to tolerate quality and service issues due to low pricing, but the value proposition has narrowed. In certain instances it is more cost effective to procure material from other countries​.” 

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