API prices expected to stabilise by Q4FY25, says Akums Drugs’ Maheshwari
- API prices have been under pressure over the past few quarters due to weak demand and competition from China in export markets as well as in imports.
Mumbai: Falling active pharmaceutical ingredient (API) prices are expected to stabilise by Q4FY25, a senior executive of Akums Drugs and Pharmaceuticals Ltd said on Monday.
The contract development and manufacturing organisation (CDMO) which works on active pharmaceutical ingredient production as well as generic and branded drug formulations, reported a weak second quarter with revenue falling 12% on the back of softening API prices and weak volume growth.
“Volume was very strong in Q1 with double digit growth but in Q2 given the API prices were a bit unstable, the industry volumes were relatively flat,” Sahil Maheshwari, general manager, Strategy at Akums, told Mint on Monday.
API players have also been struggling with high supply and limited demand, he said. The company marked an 11% decline in volume compared to last quarter. “We expect API prices to normalise in Q4FY25,” Maheshwari said. “By how much and to what extent we'll really have to monitor the first half of the next fiscal,” he added. API prices have been under pressure over the past few quarters due to weak demand and competition from China in export markets as well as in imports.
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Domestic API prices have fallen 15-40% and over 25% in the API exports business this fiscal, according to a September report by credit ratings firm India Ratings and Research (Ind-Ra).
‘Stabilisation likely in second half of FY25’
The report said that price stabilisation is expected in the second half of FY25, although volume growth is expected to stay flat for FY25 as compared to FY24. Akums posted its consolidated financial results for the quarter ending 30 September on Saturday.
It reported a 12% drop in its consolidated revenue year-on-year from ₹1,188 crore in Q2FY24 to ₹1,047 crore in Q2FY25. Prices of key APIs like amoxicillin, cephalosporin, and paracetamol fell, affecting the company’s overall income, Akums’ managing director Sandeep Jain said in an earnings call on Monday.
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“This has also affected order frequency because customers wait for prices to fall before building up inventory,” Jain said. The firm also reported a 28% drop in its adjusted Ebitda from ₹187 crore in Q2FY24 to ₹135 crore in Q2FY25. Ebitda is earnings before interest, tax, depreciation and amortization.
The company reported an adjusted profit after tax (PAT) of ₹67 crore, up 8.9% y-o-y. Meanwhile, Akums is focusing on expanding its research and development in its branded and generics formulations business.
The company spent ₹64 crore in H1FY25 on product R&D and is investing a similar amount in the next two quarters, Jain told Mint. The firm expects income from product development to drive up revenue in the second half of the year. “It will be a little lesser than what we saw in Q2FY24,” Jain said.
“Barring the API price going down, all other parameters have been favourable,” Jain told Mint. Jain said that the company started commercial production at its injectables facility in Q2. The facility, launched earlier this year, is partially operational and will be fully operational by the end of this fiscal year.
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The company in October inked a licensing pact with Canada-based Triple Hair Inc. to develop and market its products in India. “Based on the current timelines, we expect to launch it in the start of 2027,” Maheshwari said.
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Business NewsIndustryAPI prices expected to stabilise by Q4FY25, says Akums Drugs’ Maheshwari
First Published:11 Nov 2024, 10:53 PM IST
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