JUBILANT Chairmans Speech

Dear Fellow Shareholders,


We are pleased to announce that the Company has reported highest ever revenue and profits in FY 2017. The differentiated business model focusing on Specialty Pharmaceuticals - Injectables has enabled us to deliver exceptional results and build a strong base for growth in Pharmaceuticals. The Company has generated strong operating cash flow, which enabled reduction of debt and is expected to deliver better results going forward. Our focus is to strengthen the balance sheet, invest in strategic opportunities without increasing debt levels and build strong pipeline or products across our businesses.


India continues to be the fastest growing economy globally and is expected to grow by 7.2% in FY 2017- 18 as per projections of the International Monetary Fund. This growth is expected to further accelerate to above 8% in the medium term due to implementation of structural reforms, including the transformative GST regime under the current government.


According to Evaluate Pharma, the global pharmaceuticals market is expected to grow at 6.3% Compound Annual Growth Rate (CAGR) to US$ 1.12 trillion by 2022. The growth of complex therapeutic areas is projected to outpace the growth of the overall pharmaceutical market, emphasizing the importance of increased R&D in the value chain. Global agriculture, on the other hand, has faced some challenges in the last few years but is likely to see a better demand this year for crop protection chemicals in terms of volume as per a report by Federation of Indian Chambers of Commerce and Industry (FICCI).


Business Objectives


We are an integrated global pharmaceutical and life sciences Company present across the entire pharmaceutical value chain and take pride in our positioning as one-stop-shop in the global pharmaceutical and life sciences industry, supplying products and services to customers in over 100 countries. Our diversified businesses are segmented in three major verticals namely Pharmaceuticals, Life Science Ingredients and Drug Discovery Solutions. Each of these segments is professionally managed by its separate management teams headed by respective CEOs. As a responsible corporate citizen, we are committed to safeguarding the environment and maintaining a triple bottom line approach of sustainability through delivering a high social, environmental and economic performance.


The Pharmaceuticals segment is engaged in manufacture and supply of APIs, Solid Dosage Formulations, Radiopharmaceuticals, Allergy Therapy Products and Contract Manufacturing of Sterile and Non Sterile products through 6 US FDA approved facilities in India, US and Canada. Our success in this segment is based on several key strengths including an innovative product portfolio in specialty injectables with high entry barriers and limited competition, strong R&D capabilities to back a differentiated pipeline of products, global competitive edge due to low cost from vertically integrated operations, market leadership in key products and business segments, de-risked business model with low concentration risk and a consistent track record of regulatory approvals. As of March 31, 2017, the Company has a total of 922 filings across geographies. Of this, 710 filings have been approved while 212 filings are pending approval.


The Life Science Ingredients segment is engaged in Specialty Intermediates, Nutritional Products and Life Science Chemicals through 5 manufacturing facilities in India. In this segment, our strength lies in our integrated business model, strong capabilities in chemistry, low cost of manufacturing through best in class processes and leadership position in key products on a global level.


The Drug Discovery Solutions segment provides proprietary in-house innovation for out-licensing purposes and collaborative research and partnership for Drug Discovery through 3 world class research centers in India and US.


Performance Review


Our strong performance continued in FY 2017 and the Company reported highest ever revenue and profits during the year. The differentiated business model focusing on Specialty Pharmaceuticals - Injectables has enabled us to deliver exceptional results and build a strong base for growth going forward in our Pharmaceuticals business. The Company has generated strong operating cash flow which enabled reduction of debt and is expected to deliver better results going forward. Our focus is to strengthen the Balance Sheet, invest in strategic opportunities without increasing debt levels and build strong pipeline of products across our businesses.


Total Revenue from Operations was the highest ever at Rs, 60,063 million, up 2% Year-on-Year (YoY), with International revenue at Rs, 42,468 million, contributing 71% of the total revenue. Pharmaceuticals revenues were at Rs, 31,167 million, up 8% YoY and contributing 52% to the revenues. Within this segment, Specialty Pharmaceuticals - Injectables displayed a growth of 11% YoY. As emphasised earlier, this growth is a testimony to our strategy and the business model wherein we have been able to build multiple levers of exciting and differentiated businesses which have helped the business deliver robust performance. This has been aptly demonstrated in the consistent growth witnessed in Specialty Pharmaceuticals - Injectables despite strong headwinds in the US Generics business from supply chain consolidation. Life Science Ingredients revenue stood at Rs, 27,076 million and contributed 45% to the revenue. Drug Discovery Solutions revenue improved 45% YoY to Rs, 1,820 million contributing 3% of the revenue.


Earnings before Interest, Tax, Depreciation and Amortization (EBITDA) was 9% higher YoY at record Rs, 13,701 million, translating to margin improvement of 143 basis points at 22.8% as against 21.4% in FY 2016. This was led by the Pharmaceuticals segment which reported EBITDA of Rs, 9,751 million, a growth of 9% YoY with a margin of 31.3% as against the margin of 30.9% achieved last year. The Pharmaceuticals segment now contributes about 68% to the overall EBITDA.


Life Science Ingredients reported EBITDA of Rs, 4,338 million translating to EBITDA margin of 16%, an improvement from 15% in FY 2016. Drug Discovery Solutions EBITDA was at Rs, 258 million translating to EBITDA margin of 14.2%. Depreciation and amortization in FY 2017 was at Rs, 2,914 million as compared to Rs, 3,467 million in FY 2016. Finance cost stood at Rs, 3,411 million, lower by 8% YoY.


Net profit improved by 47% YoY at Rs, 5,756 million as compared to 3,918 million in FY 2016 with an Earnings Per Share (EPS) of Rs, 36.93 as compared to Rs, 25.10 in FY 2016.


From a balance sheet perspective, In FY 2017 the Company repaid Rs, 5,056 million of debt and the net debt stood at Rs, 36,844 million on a constant currency basis.


During the year, Jubilant Pharma Limited (JPL), Singapore, a material wholly owned subsidiary of the Company, raised US$ 300 million of unsecured high yield bonds. In addition, Jubilant Life Sciences Limited (JLL) also raised Rs, 4950 million through non-convertible debentures during the year. The net proceeds of the funds raised have primarily been used to refinance the existing debt of the Company.


Dividend


The Board has proposed a dividend of 300% per equity share of Re. 1 face value for the year which will result in a cash outgo of Rs, 575 million including tax.


Outlook


Jubilant Pharma Limited, through one of its wholly owned subsidiaries, has signed an Asset Purchase Agreement with Triad Isotopes Inc. and its parent, Isotope Holdings, Inc. (“Triad”) to acquire substantially all of the assets which comprise the radiopharmacy business of Triad. The closing of the transaction is subject to customary closing conditions, including contract, regulatory and other approvals. The acquisition will be funded through JPL’s internal accruals and is likely to be earnings accretive. Triad recorded revenues in excess of US$ 225 million in CY 2016 with positive EBITDA and operates the second largest radio pharmacy network in the US.


JPL has resolved that it will evaluate the option of fund raising through an Initial Public Offerings (IPO) by listing in an international stock exchange, including Singapore, in order to strengthen the balance sheet of JPL with a dilution of not more than 15% of equity.


We expect continued robust growth going forward, led by momentum in Specialty Pharmaceuticals - Injectables and Life Science Ingredients. In FY 2018, improvement in revenues and profitability is expected.


Revenue growth in Pharmaceuticals segment is expected on account of growth in existing portfolio of products, new product launches, and ramp up of operations in CMO of Sterile Injectables and Allergy Therapy Products. We expect new product launches and capacity expansions to drive growth in Generics vertical. In the Life Science Ingredients segment, performance is expected to improve on account of better demand, strong price environment, capacity expansion and launch of new products. In the Drug Discovery Solutions segment the growth will be led by addition of new customers and milestone revenues from existing and new out-licensing opportunities. We will continue with our endeavours to reduce debt and to improve key financial ratios.


Conclusion


We would like to conclude by thanking all our valued stakeholders, including our customers, vendors, bankers and shareholders for continuing their support and upholding their confidence and trust in us. We would like to welcome Mr. Pramod Yadav, Mr. Sushil Kumar Roongta, Mr. Vivek Mehra, Mr. Priyavrat Bhartia and Mr. Arjun Bhartia on our Board. We would like to thank Mr. Shyamsundar Bang, who resigned from our Board after superannuation, for his invaluable contribution. We are also deeply grateful to all our employees across geographies for their contribution and sincere commitment to taking this organisation to greater heights.


Wishing you all Very Best for the coming year!


Shyam S Bhartia Hari S Bhartia


Chairman Co-Chairman and Managing Director


June 15, 2017

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