A 15-20 percent growth over 3-5 years will be reasonable for Neuland Labs, said Joint MD Davuluri Saharsh Rao.
“Three key factors that drive our revenue and profit growth are the pricing of our products, cost of the raw material and the foreign exchange rate because 90 percent of our revenues are from exports. We tend to be a little bit conservative on how we budget this over a 3-5 year horizon and keeping those conservative estimates in mind, we think a 15-20 percent growth rate over a 3-5 year period is reasonable,” Rao told CNBC-TV18.
He added that margins have steadily improved over the last four quarters and the overall size of the business has increased.
“Margins have steadily improved. 4-5 quarters ago we were about 14.5 percent EBITDA, but over the last 4 quarters we have steadily climbed up to 19 percent and it has been in-line with our expectations. This has been a result of two things; one is better business mix and the overall size of the business has been increasing. We are now at Rs 240-250 crore run rate at a quarterly level and that has created a larger company creating better operating leverage. So, we were able to use our assets more efficiently and that has also helped us improve our margins,” he said.
On the CMS business, he said that the ramp up is dependent on the success of innovator drugs which the company caters to. However, he believes that a 35-40 percent contribution of CMS to the overall business is reasonable.
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