MIRA INFORM REPORT

 

                                   

Report Date :

14.03.2011

 

IDENTIFICATION DETAILS

 

Name :

SEQUENT SCIENTIFIC LIMITED

 

 

Registered Office :

116, Vardhman Industrial Complex, L.B.S. Marg, Thane (west), Mumbai – 400601, Maharashtra

 

 

Country :

India

 

 

Financials (as on) :

31.03.2010

 

 

Date of Incorporation :

28.06.1985

 

 

Com. Reg. No.:

036685

 

 

CIN No.:

[Company Identification No.]

L99999MH1985PLC036685

 

 

TAN No.:

[Tax Deduction & Collection Account No.]

PNEP10307D

 

 

PAN No.:

[Permanent Account No.]

AAACV1501G

 

 

Legal Form :

A Public Limited Liability company. The company’s Share are Listed on the Stock Exchange.

 

 

Line of Business :

Manufacturing of active pharmaceutical ingredients (API)

 

RATING & COMMENTS

 

MIRA’s Rating :

Ba (45)

 

RATING

STATUS

PROPOSED CREDIT LINE

 

41-55

Ba

Overall operation is considered normal. Capable to meet normal commitments.

Satisfactory

 

Maximum Credit Limit :

USD 4600000

 

 

Status :

Satisfactory

 

 

Payment Behaviour :

Usually correct

 

 

Litigation :

Clear

 

 

Comments :

Subject is an established company having satisfactory track records. Trade relations are reported as fair. Business is active. Payments are reported to be usually correct and as per commitments.

 

The company can be considered normal for business dealings at usual trade terms and conditions.

 

NOTES:

 

Any query related to this report can be made on e-mail: infodept@mirainform.com while quoting report number, name and date.

 

 

ECGC Country Risk Classification List – April 1, 2010

 

Country Name

Previous Rating

(31.12.2009)

Current Rating

(01.04.2010)

India

A1

A1

 

 

Risk Category

ECGC Classification

Insignificant

 

A1

Low

 

A2

Moderate

 

B1

High

 

B2

Very High

 

C1

Restricted

 

C2

Off-credit

 

D

 

 

 

 

LOCATIONS

 

Registered Office :

116, Vardhman Industrial Complex, L.B.S. Marg, Thane (west), Mumbai – 400601, Maharashtra, India

Tel No :

91-22-21723357 / 21721286

E-Mail :

pidsecretarial@yahoo.co.in

pid@pidrugs.com

 

 

Corporate Office :

Star II, BileKahalli, Bannerghatta Road, Bangalore – 560076, Karnataka, India

 

 

Plant :
  • Plot No. 7, MIDC Engineering Zone, Kalyan Badlapur Road, Ambernath

 

  • W-152, MIDC, Tarapur, Boisar, Dist Thane, Maharashtra.

 

  • B-32, G-2, G-3, MIDC, Mahad, Dist. Raigad.

 

  • A-68, Additional Ambernath, MIDC Indl. Area, Ambernath (East), Dist. Thane.

 

  • Plot No. 150, 151, 136, 141 MIDC, Tarapur, Boisar, Thane

 

  • 120 A & B Industrial Area, Baikampady, New Mangalore

 

  • Plot No. 26, 26B, GIDC Industrial Estate, Panoli, Dist. Bharuch

 

  • A-14, MIDC, Phase I, Dombivali (E), Dist. Thane

 

  • Plot No. 11, KIADB Industrial Area, Centre Jigani, Anekal, Bangalore

 

  • Plot No. SPL 9 & 15 Kumta Industrial Area, Hegde Road, Kumta

 

 

DIRECTORS

As on 31.03.2010

 

Name :

Mr. K. R. Ravishankar

Designation :

Chairman and Managing Director

 

 

Name :

Mr. Joe Thomas

Designation :

Director

 

 

Name :

Mr. Kannan Ramanujam

Designation :

Director

 

 

Name :

Dr. Gopakumar G. Nair

Designation :

Director

 

 

Name :

Dr. Gautam Kumar Das

Designation :

Executive Director

 

 

KEY EXECUTIVES

 

Name :

Mr. Arun Modi

Designation :

Vice President – Research and Development

 

 

Name :

Mr. Ramesh Kumar Pillai

Designation :

Corporate Vice President – RA, QA and Technical Services

 

 

Name :

Mr. Naga Seshaiah Kaliki

Designation :

Vice President – Steriles and Oncology Operations

 

 

Name :

Mr. Parag Shah

Designation :

CEO – Phytopharmaceuticals and Herbal Effects

 

 

Name :

Mr. Ravi Nair

Designation :

Executive Vice President - Human Resources

 

 

Name :

Mr. Kamesh P

Designation :

General Manager - Supply Chain

 

 

Name :

Mr. Kumud Sampath

Designation :

CEO - Analystical Services

 

 

Name :

Mr. Umesh Kapre

Designation :

Executive Vice President - Manufacturing

 

 

Name :

Mr. KR Ravishankar

Designation :

Chairman & Managing Director

 

 

Name :

Mr. Balasubramanian M

Designation :

COO - Commercial

 

 

Name :

Mr. N Rajaraman

Designation :

Vice President – Finance & Accounts

 

 

Name :

Dr. Gautam Kumar Das

Designation :

Executive Director & COO – Technical

 

 

Name :

Mr. Kannan PR

Designation :

Vice President – Corporate Affairs

 

 

MAJOR SHAREHOLDERS / SHAREHOLDING PATTERN

 

(AS ON 31.12.2010)

Names of Shareholders

No. of Shares

Percentage of Holding

(A) Shareholding of Promoter and Promoter Group

 

 

(1) Indian

 

 

Individuals / Hindu Undivided Family

30,000

0.14

Bodies Corporate

15,582,936

71.04

Sub Total

15,612,936

71.18

(2) Foreign

 

 

Total shareholding of Promoter and Promoter Group (A)

15,612,936

71.18

(B) Public Shareholding

 

 

(1) Institutions

 

 

(2) Non-Institutions

 

 

Bodies Corporate

1,798,853

8.20

Individuals

 

 

Individual shareholders holding nominal share capital up to Rs. 0.100 millions

1,190,197

5.43

Individual shareholders holding nominal share capital in excess of Rs. 0.100 millions

1,384,542

6.31

Any Others (Specify)

1,948,663

8.88

Non Resident Indians

39,439

0.18

Clearing Members

19,209

0.09

Directors & their Relatives & Friends

23,348

0.11

Trusts

700,000

3.19

           Foreign Corporate Bodies

1,166,667

5.32

Sub Total

6,322,255

28.82

Total Public shareholding (B)

6,322,255

28.82

Total (A)+(B)

21,935,191

100.00

 

 

BUSINESS DETAILS

 

Line of Business :

Manufacturing of active pharmaceutical ingredients (API)

 

 

PRODUCTION STATUS : As on 31.03.2010

 

Installed Capacity (in MT) = 3.546

 

 

GENERAL INFORMATION

 

No. of Employees :

673 (Approximately)

 

 

Bankers :
  • Bank of India
  • Andhra Bank
  • State Bank of Indore
  • Corporation Bank
  • State Bank of India
  • State Bank of Hyderabad

 

 

Facilities :

Secured Loans

31.03.2010

(Rs. in

Millions)

31.03.2009

(Rs. in

Millions)

1. Long Term Loans

 

 

     a) From Banks

725.400

237.050

     b) From Others

41.240

0.000

2. Short Term Loans

 

 

    a) From Banks

539.480

249.030

Total

1306.120

486.080

 

 

 

Unsecured Loans

31.03.2010

(Rs. in

Millions)

31.03.2009

(Rs. in

Millions)

1. Long Term Loans

 

 

    a) From Banks

48.680

0.000

      b) From others

12.350

0.000

2. Short Term Loans

 

 

    a) From Banks

0.000

5.190

Total

61.030

5.190

 

Notes :

a) Long term loans, other than hire purchase loans and except for loan mentioned under point (b) below, are secured by first pari-passu charge on fixed assets of the Company & second pari-passu charge on current assets of the Company as a collateral.

 

b) Long Term Loan from Bank of India amounting to Rs. 200 Million is secured by a second pari-passu charge on fixed assets of the Company.

 

c) Housing loans & Vehicle loans from Bank(s) are secured by hypothecation of asset acquired there under.

 

d) Long term loans (other than hire purchase loans) due within one year Rs. 150.94 Millions (Previous year Rs.85.21 Millions). Hire purchase loans from banks due within one year Rs 4.4 Millions (Previous year Rs.1.8 Millions)

 

e) Short term loans are secured by a first pari-passu charge on current assets of the Company and a second pari-passu charge on fixed assets of the Company as a collateral.

 

f) Some of the above loans amounting to Rs.1304.13 Millions (Previous year Rs.486.08 Millions)are guaranteed by some of the Directors of the Company in their personal capacities.

 

 

Banking Relations :

--

 

 

Auditors :

 

Name :

Deloitte Haskins and Sells

Chartered Accountant

 

 

Holding Company :

Fraxis Life Sciences Private Limited

 

 

Associates :
  • Elysian Life Sciences Private Limited
  • Elysian Health Care private Limited

 

 

Subsidiaries :
  • SeQuent Global Holdings Limited
  • Sequent European Holdings Limited (step-down subsidiary)
  • Sequent IPCO GmbH (step-down subsidiary)
  • Vedic Elements Private Limited
  • Vedic Fanxipang Pharma Chemic Company Limited,Vitenam (step-down subsidiary)
  • Sequent Research Limited
  • Sanved Research Labs Private Limited
  • Galenica B.V. (subsidiary)
  • Codifar N.V. (wholly owned subsidiary of Galenica B.V.)

 

 

CAPITAL STRUCTURE

 

As on 30.06.2010

 

Authorised Capital :

 

No. of Shares

Type

Value

Amount

 

 

 

 

25000000

Equity Share

Rs.10/- each

Rs.250.000 Millions

 

 

 

 

 

Issued, Subscribed & Paid-up Capital :

 

No. of Shares

Type

Value

Amount

 

 

 

 

21935191

Equity Share

Rs.10/- each

Rs.219.351 Millions

 

Less : Amount receivable from Sequent Scientific Employee Stock option Scheme Trust (Being face Value of 700000 Equity  Shares of Rs,10 each allotted to the Trust)

 

Rs.7.000 Millions

 

Total

 

Rs.212.350 Millions

 

NOTE :-

 

Of the above :-

i)                     10150000 Equity Shares of Rs. 10 each were allotted to the share holders of erstwhile Sequent Scientific limited, consequent to amalgamation with the company.

ii)                   700000 Equity shares of Rs. 10 each were allotted to the Sequent Scientific Employee Stock option Scheme Trust.

 

FINANCIAL DATA

[all figures are in Rupees Millions]

 

ABRIDGED BALANCE SHEET

 

SOURCES OF FUNDS

 

31.03.2010

31.03.2009

31.03.2008

SHAREHOLDERS FUNDS

 

 

 

1] Share Capital

212.350

110.850

110.850

2] Share Application Money

0.000

0.000

0.000

3] Reserves & Surplus

946.290

485.070

425.530

4] (Accumulated Losses)

0.000

0.000

0.000

NETWORTH

1158.640

595.920

536.380

LOAN FUNDS

 

 

 

1] Secured Loans

1306.120

486.080

251.520

2] Unsecured Loans

61.030

5.190

0.000

TOTAL BORROWING

1367.150

491.270

251.520

DEFERRED TAX LIABILITIES

87.460

24.160

19.380

 

 

 

 

TOTAL

2613.250

1111.350

807.280

 

 

 

 

APPLICATION OF FUNDS

 

 

 

 

 

 

 

FIXED ASSETS [Net Block]

1179.490

451.720

381.190

Capital work-in-progress

210.290

28.990

24.160

 

 

 

 

INVESTMENT

453.860

240.820

100.260

DEFERREX TAX ASSETS

0.000

0.000

0.000

 

 

 

 

CURRENT ASSETS, LOANS & ADVANCES

 

 

 

 

Inventories
466.670

218.640

153.670

 

Sundry Debtors
454.740

195.940

213.180

 

Cash & Bank Balances
124.650

39.790

40.140

 

Other Current Assets
0.000

0.000

0.000

 

Loans & Advances
517.380

181.640

111.940

Total Current Assets
1563.440

636.010

518.930

Less : CURRENT LIABILITIES & PROVISIONS
 

 

 

 

Sundry Creditors
549.020

150.360

 

Current Liabilities
29.020

9.460

204.050

 

Provisions
215.790

86.370

13.210

Total Current Liabilities
793.830

246.190

217.260

Net Current Assets
769.610

389.820

301.670

 

 

 

 

MISCELLANEOUS EXPENSES

0.000

0.000

0.000

 

 

 

 

TOTAL

2613.250

1111.350

807.280

 

 

PROFIT & LOSS ACCOUNT

 

 

PARTICULARS

 

31.03.2010

31.03.2009

31.03.2008

 

SALES

 

 

 

 

 

Income

2463.350

1060.620

674.000

 

 

Other Income

72.870

17.920

3.900

 

 

TOTAL                                     (A)

2536.220

1078.540

677.900

 

 

 

 

 

Less

EXPENSES

 

 

 

 

 

Increase/Decrease in Stock

(77.220)

(55.090)

18.600

 

 

Raw Materials Consumed

1114.600

562.560

362.070

 

 

Employee Cost

202.050

87.310

36.080

 

 

Other Expenses

680.570

345.050

190.880

 

 

TOTAL                                     (B)

1920.000

939.830

607.630

 

 

 

 

 

Less

PROFIT BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION (A-B)      (C)

616.220

138.710

70.270

 

 

 

 

 

Less

FINANCIAL EXPENSES                         (D)

187.310

41.930

18.520

 

 

 

 

 

 

PROFIT BEFORE TAX, DEPRECIATION AND AMORTISATION (C-D)                                       (E)

428.910

96.780

51.750

 

 

 

 

 

Less/ Add

DEPRECIATION/ AMORTISATION                     (F)

125.220

41.440

24.340

 

 

 

 

 

 

PROFIT BEFORE TAX (E-F)                               (G)

303.690

55.340

27.410

 

 

 

 

 

Less

TAX                                                                  (H)

95.760

20.160

7.080

 

 

 

 

 

 

PROFIT AFTER TAX (G-H)                                (I)

207.930

35.180

20.330

 

 

 

 

 

Add

PREVIOUS YEARS’ BALANCE BROUGHT FORWARD

153.770

108.030

104.930

 

 

 

 

 

Less

APPROPRIATIONS

 

 

 

 

 

Transfer to General Reserve

15.590

1.000

--

 

 

Dividend

42.470

11.090

--

 

 

Tax on Dividend

7.220

1.880

--

 

BALANCE CARRIED TO THE B/S

296.420

129.240

125.260

 

 

 

 

 

 

EARNINGS IN FOREIGN CURRENCY

 

 

 

 

 

Export Earnings

1059.860

625.610

NA

 

TOTAL EARNINGS

1059.860

1685.470

NA

 

 

 

 

 

 

IMPORTS

 

 

 

 

 

Raw Materials

340.830

251.480

NA

 

TOTAL IMPORTS

340.830

592.310

NA

 

 

 

 

 

 

Earnings Per Share (Rs.)

9.79

3.17

1.83

 

 

QUARTERLY / SUMMARISED RESULTS

 

PARTICULARS

 

30.06.2010

(1st Quarter)

30.09.2010

(2nd Quarter)

31.12.2010

(3rd  Quarter)

Net Sales

627.480

708.040

679.790

Total Expenditure

532.890

587.380

544.050

PBIDT (Excl OI)

94.590

120.660

135.740

Other Income

11.720

27.320

10.620

Operating Profit

106.310

147.980

146.360

Interest

40.960

47.400

56.710

Exceptional Items

0.000

52.480

0.000

PBDT

65.350

153.060

89.650

Depreciation

31.220

49.420

41.500

Profit Before Tax

34.130

103.640

48.150

Tax

7.800

18.100

7.830

Provisions and contingencies

0.000

0.000

0.000

Profit After Tax

26.330

85.540

40.320

Extraordinary Items

0.000

0.000

0.000

Prior Period Expenses

0.000

0.000

0.000

Other Adjustments

0.000

0.000

0.000

Net Profit

26.330

85.540

40.320

 

 

KEY RATIOS

 

PARTICULARS

 

 

31.03.2010

31.03.2009

31.03.2008

PAT / Total Income

(%)
8.20

3.26

2.99

 

 
 

 

 

Net Profit Margin

(PBT/Sales)

(%)
12.33

5.22

4.07

 

 
 

 

 

Return on Total Assets

(PBT/Total Assets}

(%)
11.07

5.09

3.05

 

 
 

 

 

Return on Investment (ROI)

(PBT/Networth)

 
0.26

0.09

0.05

 

 
 

 

 

Debt Equity Ratio

(Total Liability/Networth)

 
1.87

1.24

0.87

 

 
 

 

 

Current Ratio

(Current Asset/Current Liability)

 
1.97

2.58

2.39

 

 

LOCAL AGENCY FURTHER INFORMATION

 

BOARD OF DIRECTORS

 

KR Ravishankar

Chairman and Managing Director

 

Mr. K R Ravishankar has been in the pharmaceutical business for over 20 years. He started as an entrepreneur, and then joined Strides Arcolab Limited as co-promoter in 1991. He was Executive Director of Strides Arcolab Limited till he resigned from the executive post in Dec 2007 (he continues on the Board of Strides Arcolab Limited). He took over as CMD of SeQuent Scientific Limited in January 2008

 

Kannan Ramanujan

Independent Director

 

Mr. Kannan Ramanujam, a Chartered Accountant by qualification has over 24 years of business and professional experience. He is the Promoter, CEO and Managing Director of Emerge Learning Services Limited, a public limited company in learning space. The company offers complete solutions in Education, Training, e-governance and Information management areas. Kannan has been the Director of Everonn Systems India Limited, one of the few listed Education companies in India. He is an Independent Director on the Board.

 

Dr. Gautam Kumar Das

Executive Director

 

Dr. Gautam Kumar Das is an Executive Director on the Board and has over thirty years of in depth experience in the pharmaceutical industry. Dr. Das has extensive experience in RandD, Plant Operations, Project Management, Material Management, Resource Management and Man Management. He has a proven track record in developing several cost effective processes, driving these processes from the laboratory to the plant and increasing productivity of plants. Dr. Das, a Doctorate in Synthetic Organic Chemistry from IIT Kharagpur, has authored several publications on chemical processes. In his immediate previous assignment, Dr. Das was with Orchid Chemicals and Pharmaceuticals Limited, Chennai as President – API.

 

Joe Thomas

Independent Director

 

Mr. Joe Thomas is a Post Graduate in Chemistry, and has served in different capacities at Procter and Gamble and has headed its Marketing Division for South Asia. He worked as President - Strategic Business Development at Strides Arcolab Limited He is currently Managing Director of Bioserve Biotechnologies (India) Private Limited which offers oligo-nucleotide synthesis and other services to the research industry. He is an Independent Director on the Board.

 

Dr. Gopakumar G Nair

Independent Director

 

Dr. Gopakumar Nair is an Independent Director on the Board. With his 40 years experience and knowledge in pharmaceutical and chemical industry at different levels and positions like Director, Chairman and Managing Director, as well as Past-President of Indian Drug Manufacturers’ Association, Dr. Gopakumar Nair had the opportunity to familiarize himself with GATT, WTO, TRIPs and other IP laws over the years. It is with this wealth of experience that Dr. Nair became an IP/ Patent practitioner under the name Gopakumar Nair Associates.

 

 

BUSINESS PERFORMANCE REVIEW

 

The Company crossed Rs. 2 billion mark, posting total revenue of Rs. 2463.35 Millions during 2009-10, up by 132.26 per cent, against Rs. 1060.62 Millions in 2008-09. The Company’s EBIDTA increased nearly five-folds from Rs. 138.71 Millions in 2008-09 to Rs. 673.72 Millions during 2009-10. The EBIDTA margin also doubled from 13 per cent in 2008-09 to 27 per cent in 2009- 10 on account of higher realization, bigger scale and stronger cost control measures. The Company’s PAT (after minority interest) improved nearly five times from Rs. 35.17 Millions in 2008-09 to Rs. 207.93 Millions in 2009-10. On an equity of Rs. 212.35 Millions, the Company’s EPS for the year stood at Rs. 9.79.

 

On consolidated basis, the Company posted a 97.5 per cent increase in the total revenues, from

Rs. 1440.21 Millions in 2008-09 to Rs. 2844.48 Millions in 2009- 10. The Company posted an EBIDTA of Rs. 848.85 Millions against an operating loss of Rs. 9.68 Millions in 2008-09. The PAT for 2009-10 stood at Rs. 374.17 Millions against a net loss of Rs. 146.60 Millions in 2008-09. The Company caters to two major segment- Pharmaceuticals division (consisting API, CRAMS and Veterinary Formulations businesses) accounted for 76.3 per cent of the Company’s revenues while the Specialty chemicals divisions accounted for 23.7 per cent.

 

2009-10 was a year of key developments. The merger of erstwhile SeQuent Scientific Limited with PI Drugs resulted in a bigger entity – both in terms of scale of operations as well as product segment wise. The Company dedicated its efforts towards achieving operational synergies and harnessing the inherent growth potential of each product vertical, under a new name ‘SeQuent Scientific Limited’.

 

With the outbreak of swine-flu epidemic globally, the demand for antiviral drugs catering to the segment shot up substantially. The Company produced active pharmaceutical ingredient Oseltamivir Phosphate, thereby resulting in improved top line. At the same time, the Company also commercialized seven new products, being Praziquantel, Lumefantrin, Warfarin, Ketosulfone, Nifuroxazide, Nitroscanate and s-methoprene.

 

The Company also invested Rs. 210 Millions in modernisation of Mangalore plant (compliant with USFDA standards) and capacity expansion of its Mahad unit during the year. During the year, the Company filed 14 DMFs (Drug Master Files), taking the total DMF filing to 20.

 

OUTLOOK

 

The Company expects further improvement in its performance during 2010-11 owing to culminating effect of the following internal and external factors. It is estimated that drugs worth more than USD 200 bn are expected to go off-patent in the coming 5 years. This provides an attractive opportunity to the API and CRAMS business verticals of the Company. The Company’s pipeline of 20 DMFs is also expected to result in attractive growth opportunity for the Company going forward. Besides, the Company’s consistent investments in capacity and research are also expected to bear rewarding results in the coming years.

 

SHARE CAPITAL

 

The Paid-up Share Capital of the Company increased by Rs. 108.500 Millions during the financial year to Rs. 219.350 Millions as on 31st March, 2010. The increase was on account of the following 1) Vide Court Order dated the 16th day of June 2009, SeQuent Scientific Limited (“Transferor Company”) was amalgamated into the Company in consideration thereof;  the Company allotted seven equity shares for each three equity shares held in the Transferor Company. This resulted in an increase of 10.150 Millions equity shares of Rs. 10 each. 2) The Company allotted 0.7 Millions equity shares of Rs. 10 each to SeQuent Scientific Employee Stock Option Scheme Trust pursuant to a Scheme of ESOP duly approved by the shareholders’ through

postal ballot on the 25th day of March 2008.

 

SUBSIDIARIES

 

After the close of financial year 2009-10, the Company has incorporated three new companies namely M/s SeQuent Anti Biotics Private Limited, M/s SeQuent Oncolytics Private Limited and M/s SeQuent Penems Private Limited to venture into the Penems / Penicillins /Oncology products. Company is in the process of obtaining approval of Karnataka Udyog Mitra to carry on new projects by the said companies. As on March 31, 2010 the Company has the following subsidiaries

 

1. SeQuent Global Holdings Limited

2. SeQuent European Holdings Limited

3. SeQuent IPCO GmbH

4. Vedic Elements Private Limited

5. SeQuent Research Limited

6. Sanved Research Labs Private Limited

7. Vedic Fanxipang Pharma Chemic Company Limited, Vietnam

8. Galenica B.V., Netherland

9. Codifar N.V., Belgium

 

INDUSTRY OVERVIEW

 

Global overview

 

The US$808 billion global pharmaceuticals market (innovator and generics) is classified into regulated and less regulated markets. The regulated markets are primarily governed by stringent government regulations such as intellectual property protection, including product patent recognition as opposed to less regulated markets. Thus the regulated markets provide greater stability in terms of both volumes and prices as the drugs are under patent protection. On the other hand, less regulated markets have lower entry barriers in terms of regulatory requirements and hence they are highly competitive, with industry players primarily competing on the basis of price.

 

USA remains the largest global market with ~40 per cent share followed by Europe with ~32 per cent market share. Further it is estimated that the global pharmaceutical industry is estimated to grow at a CAGR of 6 per cent between CY09-CY14 (see graph below), the industry is expected to cross the US$1 trillion mark within the next few years.

 

Indian Overview

The Indian pharmaceutical sector is positioned favorably and is likely to witness sustainable growth over the medium term owing to favorable macro environment, expiry of several patents in the USA, high growth in the emerging markets combined with a stable pricing environment.

 

Indian Pharmaceutical sector snapshot

Indian pharmaceutical industry is ranked 14th in the world in terms of value (with a share of 1 per cent in global sales) and third in terms of volume (with an 8 per cent share in global sales). India is among the fastest growing markets in the world with its growth rate having nearly doubled between 2001 and 2006.

 

A highly organized sector, the Indian pharmaceutical industry is estimated to be worth US$4.5 bn, growing at about 8 per cent to 9 per cent every year. The Indian pharmaceutical sector produces 20 per cent to 24 per cent of the world’s generic drugs (in terms of value) and ranks significantly high in terms of technology, quality and range of medicines manufactured.

India’s pharmaceutical sector can be classified into three broad market segments namely Contract Research And Manufacturing Services (CRAMS), Formulations, and Active Pharmaceutical Ingredients (APIs).

 

Indian firms manufacture about 60,000 generic brands across 60 therapeutic categories. India is also among the first five leading API manufacturers.

 

Generics

Globally the generics segment is expected to grow to about US$140 bn by 2015. Further healthcare reforms and cost saving initiatives coupled with an estimated US$150 bn valued patent expiry within the next five years is expected to drive this growth.

 

CRAMS

In 2008 the Indian pharmaceutical manufacturing outsourcing market was valued at US$1.1 bn and the segment is growing at thrice the global market rate. In India, API or intermediate sourcing at 64 per cent of total sourcing is more prevalent than formulation sourcing. According to industry estimates the global outsourcing market has grown at a CAGR of 14 per cent till 2009 to US$58 Millions and is expected to register similar growth in 2010 (to approximately US$67 bn in 2010) and beyond. Basically the need among global innovators is to protect their revenues as well as profitability is expected to prosper the global CRAMS industry. The CMO market size is estimated at approximately US$42 bn and CRO market size at approximately US$25 bn for 2010. US and Europe CRAMS industry has traditionally been catering to over 80 per cent of global pharma outsourcing business but they are no longer cost effective like the Indian/Chinese players. Hence, India and China (which put together accounts about 5-6 per cent of global pharma outsourcing business), having emerged as low cost contract research and manufacturing destinations, are believed to grab progressively a major chunk of the upcoming Pharma outsourcing opportunities.

 

Opportunity for Indian CRAMS

According to industry sources the Indian contract manufacturing (CMO) market witnessed a compounded annual growth of 43 per cent till 2009 to approximately US$1.6 bn and the Indian contract research (CRO) market grew at a CAGR of 65 per cent to US$0.6 bn in 2009. Indian CRAMS industry (both contract manufacturing and contract research put together) accounted just about 4 per cent of global CRAMS opportunity in 2009 and is expected to grab 6 per cent in 2010 and 10 per cent in next five years time, which provides enough visibility for Indian CRAMS growth.

 

Advantage India

India is positively poised to capitalize on the emerging opportunities in the global pharmaceutical sector through its proficient contract research and manufacturing services supported by its low cost and world class quality standards proposition. According to a study by Ernst and Young, the total market for clinical research activities in India is expected to touch US$1.5 bn - US$2 bn by 2010. With pharmaceutical majors facing increased pressure on profit margins, spiraling RandD costs and rising overheads, outsourcing of clinical research processes to third parties in developing countries is a viable option. By contracting such work to India, savings of around 40 per cent to 60 per cent is achieved in new drug development.

 

Key complements to sectoral growth

 

India is competitively cost efficient as compared to other countries.

 

Improved technical capability and constant up gradation of technology to manufacture quality products.

 

Government support through initiatives like the PPP model to harness innovation capability with a vision to make India one of the top 5 pharma innovation hubs by 2020.

 

CORPORATE PERFORMANCE REVIEW

 

Background

 

About the company

 

SeQuent Scientific Limited (hereinafter referred to as ‘SeQuent’) is a fast growing pharmaceuticals company having presence in Human and Veterinary segments. Established in 2007, the company has evolved into an integrated player in the pharmaceuticals segment, with footprints in API (Human and Veterinary), Formulations (Veterinary) and CRAMS. Besides, the company is also a leading producer of specialty chemicals. The company has five manufacturing facilities across the country and a stateof- the-art RandD centre in Mangalore. SeQuent is a leading producer of Anthelmentic APIs in the world.

 

The year 2009-10

 

The year 2009-10 was the year of consolidation for SeQuent. Being the first complete operational year post the acquisition of PI Drugs, the company’s key focus was to create a sustainable business model. As a result the company undertook an exercise comprising of initiatives to strengthen its product portfolio, upgrade/modernize and consolidate its units, appointing key personnel across the verticals and creating a growth strategy for the coming years. The company also resumed its identity as ‘SeQuent Scientific Limited’ during the latter half of the year.

 

On the operational front, the company filed 14 DMFs (the highest in a year since inception), taking the total DMFs to 20. This marks the initiation of company’s strategy to create a strong pipeline of promising products for the future. The company commercialized seven new products - Praziquantel, Lumefantrin, Warfarin, Ketosulfone , Nifuroxazide, Nitroscanate and s-methoprene. The year 2009-10 also witnessed one of the worst outbreak of H1N1 virus-induced swine flu disease. This instigated large demand for antiviral drugs the world over. The company was amongst the largest manufacturers of Oseltamivir Phosphate, an active pharmaceutical ingredient used in antiviral drugs to combat Swine-flu.

 

During the year, the company expanded capacities at its Mahad unit and also upgraded its Mangalore unit to meet USFDA standards. Three of the company’s five units are cGMP certified, while two are ISO 9001:2000 certified. The company also received Certificate of Suitability from European Directorate for the Quality of Medicines and Healthcare for Albendazole for its Mahad and Ambernath units. At the same time, its Mangalore site was pre-qualified by WHO Geneva. The company’s Mangalore unit is expected to undergo USFDA compliance audit in 2010-11.

 

OUTLOOK

 

The company has completed its consolidation phase and is ready to exploit strengths in every business vertical. Being a preferred supplier to a globally reputed clientele, the company will foray and strengthen its presence in the marketplace.

 

APIs

 

As a strategy to further strengthen its product profile in Human APIs, the company has announced its expansion plans to set up dedicated units for its foray into highgrowth therapeutic segments like Phyto-Pharmaceutical and Herbal Extract, Oncology, Penems and Penicillins. The estimated budget for the expansion is Rs. 1.5 bn, to be expended in the next three years. In animal health APIs, new products are being developed so as to increase its share in the market both regulated and less regulated.

 

Veterinary Formulations

The company expects a healthy growth in the veterinary formulations business. It is now fairly well settled in the African markets in the segment; it is progressing towards expanding its network in CIS countries and also in India. On the other hand, the company is also expanding its product pipeline to cater to the regulated markets, especially w.r.t. products going off-patent. In this regard, the company’s formulation unit in Ambarnath is undergoing expansion cum modernisation programme to conform to EU/USFDA regulatory standards.

 

Specialty chemicals

The company has been a leading entity in this industry. Owing to its ability to offer customized products and large volumes in polymer additive related products, the company has emerged as a preferred supplier to key players in the industry. Going forward, the company expects strong growth in the segment owing to its ability to develop and manufacture new products.

 

CRAMS and Analytical services

During 2009-10, there were series of developments that took a toll on the global CRAMS industry. These factors included recession-led issues like rationalization of inventory, cut in research spent by global innovators, cancellation and postponement in customs manufacturing decisions on account of big pharma mergers and slowing USFDA approvals. However, despite the hazy near term outlook on account of liquidity pressures being faced by large pharma companies globally, the Indian pharma is expected to grow @ CAGR of 20-25 per cent, boosted by improving mix towards high end research services, biologics and complex technology services.

 

Amidst the opportunities, the company being a growing CRAMS provider and having capability, capacity and competence to undertake and address outsourcing needs in APIs, Drug intermediates and specialty chemicals, is expected to benefit from the industry’s growth in the coming years.

 

Operational highlights

  • 14 DMFs filed
  • Commercialized 7 new products – Praziquantel, Lumefantrin, Warfarin, Ketosulfone, Nifuroxazide, Nitroscanate and S-Methoprene
  • Produced large quantities of Oseltamivir, an active pharmaceutical ingredient used in antiviral drugs to combat Swine-flu
  • Completed capacity expansion at Mahad and up-gradation of Mangalore Plant to USFDA

      standards

  • New subsidiaries created to venture into new therapeutic segments like Phyto-Pharmaceutical and Herbal Extract, Oncology, Penems and Penicillins
  •  

Awards and accreditations

  • Received the Best SME Award from Corporation Bank
  • Received Certificate of Suitability from European Directorate for the Quality of Medicines and Healthcare for Albendazole for the Mahad and Ambernath units

WHO inspection of Mangalore facility completed and the facility is now WHO, Geneva pre-qualified

 

 

UNAUDITED FINANCIAL RESULTS FOR THE QUARTER ENDED 30.06.2010

 

Particulars

 

 

Quarter ended

30.06.2010

(Unaudited)

a) Net Sales / Income from Operations

 

 

627.480

Total Operating Income

 

 

627.480

Expenditure

 

 

 

(a) (Increase)/decrease in Stock in Trade

 

 

(35.900)

(b) Consumption of Raw Materials

 

 

260.730

(c) Purchase of Traded goods

 

 

97.200

(d) Conversion Charges

 

 

24.520

(e) Employee Cost

 

 

58.700

(f) Depreciation

 

 

31.220

(g) Other Expenditure

 

 

127.640

Total Expenditure

 

 

564.110

Profit / (Loss) From Operations before other Income Interest & Exceptional Items

 

 

63.370

Other Income

 

 

11.720

Profit/(Loss) before Interest and Exceptional items

 

 

75.090

Interest

 

 

40.900

Profit / (Loss) after interest before Exceptional items

 

 

34.130

Exceptional items

 

 

0.000

Net Profit/(Loss) from ordinary activities before tax

 

 

34.130

Tax Expenses

 

 

7.800

Net Profit/(Loss) from ordinary activities after tax

 

 

26.330

Extraordinary items

 

 

0.000

Net Profit/(Loss)

 

 

26.330

Paid Up Equity Share Capital ( Face Value of the share Rs.10/- each )

 

 

219.350

Earning per share before extraordinary items

 

 

 

Basic

 

 

1.24

Diluted

 

 

1.24

Earning per share after extraordinary items

 

 

 

Basic

 

 

1.24

Diluted

 

 

1.24

Public Share Holding

 

Number of Shares

 

 

6716659

Percentage of Shareholding

 

 

30.62

Promoters and Promoter group share holding

 

 

 

a) Pledged / Encumbered

 

- Number of Shares

 

 

Nil

- Percentage of share (as a % of the total shareholding of promoter and promoter group)

 

 

NA

- Percentage of shares(as a % of the total share capital of the company)

 

 

NA

b) Non-encumbered

 

- Number of Shares

 

 

15219532

- Percentage of Share (as a % of the total shareholding of promoter and promoter group)

 

 

100.00

 - Percentage of Share (as a % of the total share capital of the company)

 

 

69.98

 

Notes

 

1. The unaudited financial results wore taken on record by the Board or Directors at its meeting held On August 13. 2010.

 

The statutory auditors have performed a limited review of the standalone financial results for the quarter ended as on June 30th 2010

 

2. Exceptional Items for the year ended March 31 2010, consist of management estimate of impairment loss of Rs. 57.6 million in investments made In Galenica BV, where the Company now holds 50.25% In Galenica together with its subsidiary Sequent Global Holdings Limited.

 

3. The company has decided to merge its 100% subsidiary, M/s Vedlc Elements Private Limited with w.e.f. October 1, 2009, which is pending approval of Hon’ble High Court of Karnataka.

 

4. Consequent to the merger of erstwhile Sequent Scientific Limited with the Company, figures for the quarter ended 30 June 2009 have been recasted to give effect to the scheme of amalgamation. These recasted figures are neither audited nor reviewed by the auditors

 

5. Details of investor complaints for tile quarter ended 30th Juno 2010:

 

Unresolved at the beginning of the quarter: Nil

Received during the quarter: Nil

Disposed of during the quarter; Nil

Unresolved at the end of quarter Nil

 

6. Segment Results

The company has identified Pharmaceuticals and Speciality Chemicals as Its business segments, Segments have been identified taking in to account the nature of services, the differing risks and returns, the organizational structure and the internal repotting System.

 

Segment wise Revenue, Results and Capital Employed:

(Rs in Millions)

Particulars

Quarter ended

30.06.2010

(Unaudited)

 

 

Segment Revenue

 

a) Pharmaceuticals

532.050

b) Speciality Chemicals

105.110

Total

637.160

Less Intersegment Revenue

9.680

Add other un allocated Income

 

Net Sates/Income from Operations

627.480

Segment Results

 

Profit or Loss before Tax and Interest from

 

Each Segment

 

a) Pharmaceuticals

64.970

b) Speciality Chemicals

28.670

Total

93.640

 

 

Less (i) Finance Cost

40.960

(ii) other unallocable expenditure net off unallocable income 

18.550

Total Profit Before Tax

34.130

 

 

Capital Employed

 

a) Pharmaceuticals

3410.020

b) Speciality Chemicals

344.500

c) Unallocated

(854.810)

Total

2899.710

 

7. Figures for previous periods may have been regrouped and rearranged, wherever necessary, to conform to the relevant current Period classification.

 

FIXED ASSETS:

 

  • Freehold Land
  • Leasehold Land
  • Land Development
  • Leasehold Property – Development
  • Building
  • Furniture and Fixtures
  • Office Equipment and Computers
  • Plant and Machinery
  • Motor Vehicles
  • Intangible assets

 

ABOUT COMPANY:

 

Proven Ability in Life Sciences

 

Subject is an integrated pharmaceutical company with a global footprint and a proven expertise in pharmaceutical /life science products & services and industrial products. At SeQuent they seek to develop solutions that make a positive difference in the realm of human and animal health care the world over. A difference that is the result of their unwavering commitment towards being the best in what they do. Spurred by a strong belief that is built on their proven ability in life sciences.

 

Since their inception over a decade ago, they have grown from strength to strength with a clear focus on the core values that define us today - knowledge, expertise, talent and strength.

 

The Power of Knowledge, Expertise, Talent and Strength

 

Core Values:

 

Knowledge

They don't believe in obstacles. They see them as opportunities waiting to be unlocked by applying the thorough understanding, knowledge and experience they have gained over a decade.

 

Expertise

With them, quality is a given. Their very growth is a reflection of their core expertise of strong R&D capabilities, state-of-the-art equipment and comprehensive full scale facilities. All of which are employed in developing products that adhere to the most stringent global standards of quality.

 

Talent

Their people are their most important resource and their greatest investment. The SeQuent family is made up of the sharpest minds who share the qualities that the company stands for experience, expertise and enthusiasm.

 

Strength

They pride themselves as a competent and complete solution provider to all their partners. Their strengths give them the flexibility to provide customised solutions while their scalability ensures effortless accommodation of specific, custom requirements in quick time.

 

PRESS RELEASES

SeQuent Scientific to invest Rs.1500 Millions in 3 new therapeutic segments

Bangalore, 3 June 2010: Sequent Scientific Limited (SeQuent), a fast growing active pharmaceutical ingredient company having presence in Human and Veterinary segments and Specialty chemicals, today announced its plans to invest Rs. 1500 Millions in three new therapeutic segments.


The company will be setting-up three new facilities at a Greenfield site in Bangalore, Karnataka for which it has signed a Memorandum of Understanding (MoU) with the Karnataka Government at the Global Investors Meet today. The company's foray into new therapeutic segments will offer high-growth opportunity, in wake of growing demand across these segments. The investments in these new businesses will be made over the next two years.

Commenting on the investments, Mr. K. R. Ravishankar, Chairman and Managing Director, SeQuent, said, "Expansion into the new therapeutic segments will not only enable the company's presence in high-growth high margin segments but would also strengthen its product portfolio. We expect an exponential demand from these segments in the coming years and therefore, we are investing in these segments at present".


The company's revenues for the year ended 31st March 2010 increased by 97.5%, to Rs. 2845 Millions as against Rs. 1440 Millions in FY2009. APIs accounted for 72% of the company's revenues, while Veterinary formulations and Specialty chemicals accounted for 7% and 21% respectively. The company's EBIDTA also improved at Rs. 547 Millions as against an operating loss of Rs. 76 Millions in FY2009. The company's PAT (after minority interest) stood at Rs. 374 Millions against net loss of Rs. 146 Millions during FY2009. On an equity of Rs. 212 Millions, the company's EPS for the year stood at Rs. 17.62. The company also declared a dividend of Rs. 2 (20%) per equity share of Rs. 10 each for the year ending 31st March, 2010.


The stock closed the day at Rs.152, up by Rs.2.05 or 1.37%. The stock hit an intraday high of Rs.154 and low of Rs.150.

The total traded quantity was 10376 compared to 2 week average of 19171.

 

 

 

 

 

 

CMT REPORT (Corruption, Money Laundering & Terrorism]

 

The Public Notice information has been collected from various sources including but not limited to: The Courts, India Prisons Service, Interpol, etc.

 

1]         INFORMATION ON DESIGNATED PARTY

No records exist designating subject or any of its beneficial owners, controlling shareholders or senior officers as terrorist or terrorist organization or whom notice had been received that all financial transactions involving their assets have been blocked or convicted, found guilty or against whom a judgement or order had been entered in a proceedings for violating money-laundering, anti-corruption or bribery or international economic or anti-terrorism sanction laws or whose assets were seized, blocked, frozen or ordered forfeited for violation of money laundering or international anti-terrorism laws.

 

2]         Court Declaration :

No records exist to suggest that subject is or was the subject of any formal or informal allegations, prosecutions or other official proceeding for making any prohibited payments or other improper payments to government officials for engaging in prohibited transactions or with designated parties.

 

3]         Asset Declaration :

No records exist to suggest that the property or assets of the subject are derived from criminal conduct or a prohibited transaction.

 

4]         Record on Financial Crime :

            Charges or conviction registered against subject:                                                              None

 

5]         Records on Violation of Anti-Corruption Laws :

            Charges or investigation registered against subject:                                                          None

 

6]         Records on Int’l Anti-Money Laundering Laws/Standards :

            Charges or investigation registered against subject:                                                          None

 

7]         Criminal Records

No available information exist that suggest that subject or any of its principals have been formally charged or convicted by a competent governmental authority for any financial crime or under any formal investigation by a competent government authority for any violation of anti-corruption laws or international anti-money laundering laws or standard.

 

8]         Affiliation with Government :

No record exists to suggest that any director or indirect owners, controlling shareholders, director, officer or employee of the company is a government official or a family member or close business associate of a Government official.

 

9]         Compensation Package :

Our market survey revealed that the amount of compensation sought by the subject is fair and reasonable and comparable to compensation paid to others for similar services.

 

10]        Press Report :

            No press reports / filings exists on the subject.

 

 

 

 

CORPORATE GOVERNANCE

 

MIRA INFORM as part of its Due Diligence do provide comments on Corporate Governance to identify management and governance. These factors often have been predictive and in some cases have created vulnerabilities to credit deterioration.

 

Our Governance Assessment focuses principally on the interactions between a company’s management, its Board of Directors, Shareholders and other financial stakeholders.

 

CONTRAVENTION

 

Subject is not known to have contravened any existing local laws, regulations or policies that prohibit, restrict or otherwise affect the terms and conditions that could be included in the agreement with the subject.

 

FOREIGN EXCHANGE RATES

 

Currency
Unit

Indian Rupees

US Dollar

1

Rs.45.21

UK Pound

1

Rs.72.55

Euro

1

Rs.62.43

 

 

SCORE & RATING EXPLANATIONS

 

SCORE FACTORS

 

RANGE

POINTS

HISTORY

1~10

5

PAID-UP CAPITAL

1~10

5

OPERATING SCALE

1~10

5

FINANCIAL CONDITION

 

 

--BUSINESS SCALE

1~10

5

--PROFITABILIRY

1~10

5

--LIQUIDITY

1~10

5

--LEVERAGE

1~10

5

--RESERVES

1~10

5

--CREDIT LINES

1~10

5

--MARGINS

-5~5

--

DEMERIT POINTS

 

 

--BANK CHARGES

YES/NO

YES

--LITIGATION

YES/NO

NO

--OTHER ADVERSE INFORMATION

YES/NO

NO

MERIT POINTS

 

 

--SOLE DISTRIBUTORSHIP

YES/NO

NO

--EXPORT ACTIVITIES

YES/NO

YES

--AFFILIATION

YES/NO

NO

--LISTED

YES/NO

YES

--OTHER MERIT FACTORS

YES/NO

YES

TOTAL

 

45

 

This score serves as a reference to assess SC’s credit risk and to set the amount of credit to be extended. It is calculated from a composite of weighted scores obtained from each of the major sections of this report. The assessed factors and their relative weights (as indicated through %) are as follows:

 

Financial condition (40%)            Ownership background (20%)                 Payment record (10%)

Credit history (10%)                    Market trend (10%)                                Operational size (10%)

 

 

RATING EXPLANATIONS

 

 

RATING

STATUS

 

 

PROPOSED CREDIT LINE

>86

Aaa

Possesses an extremely sound financial base with the strongest capability for timely payment of interest and principal sums

 

Unlimited

71-85

Aa

Possesses adequate working capital. No caution needed for credit transaction. It has above average (strong) capability for payment of interest and principal sums

 

Large

56-70

A

Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums

 

Fairly Large

41-55

Ba

Overall operation is considered normal. Capable to meet normal commitments.

 

Satisfactory

26-40

B

Capability to overcome financial difficulties seems comparatively below average.

 

Small

11-25

Ca

Adverse factors are apparent. Repayment of interest and principal sums in default or expected to be in default upon maturity

 

Limited with full security

<10

C

Absolute credit risk exists. Caution needed to be exercised

 

 

Credit not recommended

--

NB

New Business

--

 

 

 

 

PRIVATE & CONFIDENTIAL : This information is provided to you at your request, you having employed MIPL for such purpose. You will use the information as aid only in determining the propriety of giving credit and generally as an aid to your business and for no other purpose. You will hold the information in strict confidence, and shall not reveal it or make it known to the subject persons, firms or corporations or to any other. MIPL does not warrant the correctness of the information as you hold it free of any liability whatsoever. You will be liable to and indemnify MIPL for any loss, damage or expense, occasioned by your breach or non observance of any one, or more of these conditions

This report is issued at your request without any risk and responsibility on the part of MIRA INFORM PRIVATE LIMITED (MIPL) or its officials.