IGI Logo

Venus Remedies Ltd.

Deleveraging product portfolio: Anti-infectives have been the core portfolio for Venus Remedies, with the majority of the sales coming from this segment. The company doesn’t want a concentrated product portfolio and as a result, it is increasing its exposure in other segments like oncology, anticoagulants etc. This could lead to higher margins, as antiinfectives is a highly competitive segment.

On the domestic front, the company has made significant inroads into government institutions and corporates with a focus on tender participation. Its products are registered in 10 institutions and it plans to add 10 more in FY24. Also, recent registration in government medical stores is likely to contribute to the revenue.

The Over-the-counter market in pharma is expected to grow in the high teens over the next 3-4 years. The COVID-19 pandemic has heightened the attention on health and nutrition, especially ensuring adequate immunity and energy levels to address current health concerns. The company launched its first product in the consumer healthcare space, R3SET – a Pain Management solution to capture the growth opportunity in the OTC space. Reset is a holistic pain management solution that ensures maximum efficacy and long-term healing by combining essential oils with nanotechnology. It has fulfilled around 4,000 orders and has the aim to reach about 1lakh customers. The company has collaborated with expert physiotherapists and orthopaedicians to address lifestyle-related issues that give rise to painrelated problems. It aims to introduce a range of disruptive products like gastroenterology, hygiene, stress management, vitamins, and supplements over the next 4-5 years.

Expansion of geographical footprint: The international business primarily focuses on therapeutic segments such as Antibiotics, Anti-coagulants and Oncology. Exports contribute more than 70% of the total revenue of the company with a presence in over 80 countries with niche products like injectables for critical segments like antimicrobial resistance, oncology and anticoagulants. The company has consistently raised its dominance in the markets by securing government tenders with competitive bidding and also through marketing tie-ups with leading pharmaceutical companies globally. Entry into developed countries has been challenging esp. for the small pharma players, therefore the company is focusing on emerging economies like the Middle East and South East Asia region. The company believes that emerging markets will emerge as key growth engines for the future. Going forward, it plans to expand its global presence to 100 countries and file new dossiers in key markets to achieve an overall turnover of Rs.1,000cr by FY26.

Investment in technology and supply chain to pay dividends: Artificial intelligence is used to streamline the drug discovery process, faster production and reduce operational costs. This will enable the company to offer products at a lower cost. The company has launched a Business Intelligence tool, Tableau, which will make it easier for people to explore and manage data and take faster decisions. Also, the company identified the bottlenecks in the manufacturing process and has refurbished the facilities to improve the plant productivity. For a product, Enoxaparin, it installed a robotic line, thereby increasing the capacity by 4x while sustaining the product quality.

Venus Remedies will continue to focus on R&D as a key growth enabler. Venus Medical Research Centre, R&D wing of the company, will continue to nurture intellectual property wealth by consistently developing novel products to address unmet medical needs, particularly in the Anti microbial resistance segment. It is developing a platform technology called Renal Guard which aims to significantly reduce the rapid deterioration in kidney function associated with the use of polymyxin antibiotics. Also, it is working on another platform technology to preserve last-line antibiotics called Stealth Targeted Nanoparticles (STN) to convert crucial IV-(for eg saline fluids) into oral form. This significantly reduces the cost of hospitalization by reducing the duration of the stay in the hospital and also reduces exposure to bacteria caused by the environment in the hospital.

The company has adopted a state of the art technology (Davai aap) to expand the product reach to stockists and retailers directly, creating a unique marketplace, which will result in a supply chain similar to the Amazon model. This will significantly reduce the time taken to reach out to end consumers.

One-time settlement of dues: The company signed for a sale of a novel and patented anti-infective drug, Elores to Cipla Ltd in FY21. The deal includes the transfer of intellectual Property rights such as trademarks, design and know-how related to the brand. The funds from the deal were utilized to deleverage the balance sheet. As a result, the total debt outstanding for the company stands at Rs.42 cr in FY23 as compared to Rs.158 cr in FY20. This has improved the balance sheet significantly with interest coverage at 95x and Debt/Equity at comfortable levels of 0.1x in FY23.

OUTLOOK & VALUATION

The company has paid up its dues and with a clean balance sheet and investments in R&D and new products, it is poised for the next phase of growth. With the strengthening of international presence, change in the product mix and use of technology leading to higher operating efficiency, we forecast Venus Remedies revenue/PAT to grow at 14%/20% CAGR over FY23-26E. At the current market price, the stock is trading at an attractive level of 7.8x P/E on FY26 EPS. Going forward, we expect the company to deliver an EPS of Rs.36.9 in FY26; assigning a target multiple of 10.5x, we arrive at a target price of Rs.388 showcasing an upside potential of 35% from current levels with an investment horizon of 18-24 months.

Please refer disclaimer at https://www.sushilfinance.com/Disclamier/disclaimer
Member : BSE/ NSE/ MSEI. SEBI Registration No.-INZ000165135