Thread by @ValueEducator

Legacy player in CDMO sector - #Hikal
A Thread 🧵🧵

Like & Retweet for better reach !

Link of video :

1. Topics covered
2. Company Overview
3. Management
4. Business segments
5. Revenue Split
6. Key Products
7. Business Strategy

8. What makes Hikal Special
9. New Business Verticals
10. Hikal 2.0
11. New Products
12. China Plus One
13. Risks

1. Company Overview:
Hikal is a leading player in the Pharmaceuticals and Agrochemicals industry. The company has a rich history of manufacturing products for the

leading pharma and agrochemical companies of the world
2. Management:
Baba Kalyani, the MD and Chairman of Bharat Forge is the Chairman board. He is a very decorated business leader and has won the Padma Bhushan as well as several other civilian awards in other countries.

Jai Hiremath is the Founder and MD of Hikal.
He is the former President of the Indian Chemical Council (ICC) and the Chairman of the Chemicals Committee of the Federation of Indian Chambers of Commerce and Industry (FICCI). The day to day operations of the company are run by

Sameer Hirmath, Joint MD and CEO.
He has won ‘Business Leader of the Year’ award by the World Federation of Marketing Professionals and World Federation of Human Resources Professionals. So Hikal has a very decorated management team which results in a very strong corporate

governance culture.
3. Business segments:
The company operates in 2 broad segments - Pharmaceuticals and Agrochemicals. Under Pharmaceuticals, they also have an Animal Health division. They manufacture generic APIs and AIs as well as provide CDMO services.

4. Revenue Split:
About 60% of the company's revenues come from the Pharma segment and the remaining 40% comes from the Agrochemicals segment. Under the Pharma segment, 50% of the revenues come from CDMO and the balance 50% comes from their generic portfolio.

Under the Agrochemical business, 70% of the revenues come from CDMO and the remaining 30% comes from generic products.

5. Key Products: The company’s key product in Pharma is Gabapentin, a drug used to treat neuropathic pain and partial seizures.

Hikal is a global leader in Gabapentin and has about 35% market share. Gabapentin makes up about 20% of the company’s revenues. Other major products in Pharma are Venlafaxine, Bupropion and Quetiapine. These 4 drugs together make up 70% of the Pharma segment’s revenues.

Under the Agrochemical segment, Thiabendazole is the company’s leading product. It is one of the oldest products manufactured by the company and Hikal is the world’s largest producer of Thiabendazole. Thiabendazole can be used as a fungicide in crops, antiparasitic in animals

and can also be used in the materials protection industry to protect from mold.

6. Business Strategy: The company traditionally had a very CDMO heavy portfolio. So they decided to increase the share of their generic portfolio to mitigate customer concentration risk.

The company plans to maintain the Pharma CDMO at 50% and the Agrochemical CDMO at 70% in the future.

7. What makes Hikal Special: Hikal has always had a very good relationship with innovators which has greatly benefited their CDMO business in the past

and will continue to benefit it in the future. This is evidenced by the company winning a CDMO contract from a leading Japanese innovator in the Animal Health space. The company serves the top innovators in their respective segments like Merck in Pharma, Syngenta in Agrochem

and Zoetis in Animal Health. The company is also very focused on being technologically superior compared to its competitors

8. New Business Verticals: Hikal has entered into the Animal Health segment and already has 4 of the top 10 players as clients.

They are actively looking to sign more of the top players in the segment and recently won a 10 year deal from a leading Japanese company. The company is also looking to aggressively grow it’s Biocides business - which are essentially dual use chemicals

(eg. can be used in crop protection and paint industry). They are going to be produced using the Agrochemicals assets so they will improve ROCE.

9. Hikal 2.0: The company has outlined 5 key strategic pillars to take the business in a new direction in the future.

10. New Products: The company traditionally has high volume low margin products in it’s portfolio. The company is now developing a portfolio of higher margin products - specifically in the antidiabetics segment.

Some of these products are manufactured using a green enzymatic process. This will increase asset turns and profitability.

11. China Plus One: Post COVID, global pharma companies have understood the need to diversify their supply chain from China.

Global innovators are looking at Indian players with a track record of delivering CDMO services consistently. As this theme plays out, Hikal will be the biggest beneficiary of China plus one due to it’s established relationship with top innovators.

12. Risks: The company is still dependent on China for raw materials. Their plant in Mahad floods almost every year during the monsoon disrupting the agrochemicals business. The Agrochemical business can also be cyclical in nature