Fermenta Biotech declares interim dividend of 100 per cent and announces Backward Integration Project

Fermenta Biotech has announced results for the second quarter and first half of the current financial year, in a challenging global business environment. On a standalone basis for the quarter, the total revenue (including other income) stood at Rs 85.98 crores as against Rs 130.56 crores in Q2FY19. The EBDITA (including other income) came in at Rs 20.82 crores with margins at 24 per cent. The PAT at Rs 32.66 crores as against Rs 27.34 crores in Q2FY19, includes recognition of deferred tax asset of Rs 16.03 crores in the current quarter.

The Board approved an interim dividend of 100 per cent, i.e. Rs 5 per equity share.

The company also announced the opening of a wholly owned subsidiary in Germany to address the demand in the European market and be strategically located closer to customers across the European continent. This subsidiary would also manufacture value-added products like D3 500 Feed grade, D3 100 Food grade, etc. in Europe through third parties. These value-added products would typically be new variants utilising third-party resources in terms of plant, equipment, etc. This will strengthen Fermenta Biotech’s position in terms of quality, reach and tap into new customers without any additional CAPEX.

Commenting on the performance and merger, Krishna Datla, Managing Director, Fermenta Biotech, said, “We are pleased to announce that The National Company Law Tribunal Bench at Mumbai has approved the Scheme of Amalgamation between DIL and Fermenta Biotech. This would bring overall efficiency in the running and management of the business. The merger has further strengthened our balance sheet and cash flows, which has enabled us to retire a significant part of the long-term debt. The company has announced an interim dividend of 100 per cent, and is well-placed to implement and execute appropriate returns to the shareholders, with the bandwidth to undertake organic and inorganic growth plans.”

“As part of our ongoing efforts to be a fully integrated entity in the entire value chain of Vitamin D3 production and products, we are pleased to announce that our multi-synthesis plant at Dahej would start manufacturing cholesterol from wool grease soon. This will bring in self-sufficiency, de-risk us from vagaries as experienced in FY2015, apart from cost savings,” he added.

Revenue during H1FY20 was Rs 170.09 crores as against Rs 214.01 crores in H1FY19. The EBDITA margin was 28.4 per cent in H1FY20 as against 35.3 per cent in H1FY19. Revenues and margins were under pressure due to decline in prices of vitamin D3 animal feed, a major outbreak of African swine fever in several Asian countries effected consumption which also led to the price decline. In addition, the technical issues faced by one of the largest vitamin D3 customers of the company at their production facility, continued to impact the revenue.

In a strategic backward integration move, the Board of Directors have decided to utilise the multi-synthesis plant at Dahej for manufacturing of Cholesterol, a key raw material, from wool grease. Production is expected to commence in Q4 FY20.

Expressing optimism about the future demand, Datla said, “Looking at the demand for vitamin D3 backed by growing awareness, we believe that volumes will continue to grow at 15-20 per cent CAGR over the next five years. We continue to look at avenues to monetise our real estate assets to strengthen our efforts towards transforming from being dependent on vitamin D3 to a multi-vitamin and value-added ingredient based nutraceutical company.”

The National Company Law Tribunal Bench at Mumbai, has approved the Scheme of Amalgamation between the transferee company i.e. DIL and the transferor company i.e. Fermenta Biotech and their respective shareholders. The scheme has become effective from September 26, 2019. The appointed date of the scheme is April 1, 2018. Accordingly, the effect of the scheme has been given in the unaudited consolidated financial results for the quarter and half-year ended September 30, 2019 and the figures for the corresponding previous periods/year have been restated. The name of the amalgamated company has been changed from DIL to Fermenta Biotech.