Akumentis Healthcare posts Rs 340 Cr revenue in FY22; remains profitable

Covid19 pandemic did provide a tailwind for a lucky few pharmaceutical companies in India as several established companies and startups in the segment saw rapid growth in their business. The point in case here is Akumentis Healthcare, an under the radar company which was once backed by venture capital firm Sequoia Capital in 2015. 

Akumentis Healthcare’s operating revenue grew 45.2% to Rs 338.91 crore in FY22 from Rs 233.35 crore in the previous fiscal year (FY21). The Thane-based company offers a variety of products for derma, ortho, gynaecology, critical care, cardiovascular, diabetic and paediatric. And, sale of these products is the only source of income for the company.

During FY22, after accounting for another Rs 3.13 crore as other income, total revenue jumped to Rs 342 crore in FY22, vis a vis  Rs 237 crore in FY21.

Akumentis Healthcare claims that it is among the fastest growing pharmaceuticals firms in India, with its presence across multiple therapeutic areas. As per its website, it has a network of 9 business units, with over 1,600 strong field forces across the country.

Tracking revenue growth, total costs of the company also soared 50.2% to Rs 310 crore in FY22 from Rs 206.4 crore in the preceding fiscal year (FY21). Since the company is in the business of sale of pharmaceuticals products, the cost of materials consumed was the largest cost centre constituting 34% of total expenses which surged 41.6% to Rs 105 crore in FY22.

Employee benefit expenses is the next major expenditure forming 32% of the overall cost. These costs grew 30.8% to Rs 99.58 crore in FY22 from Rs 76.15 crore in FY21.

Moreover, the cost of advertisement and promotion for Akumentis Healthcare grew 2X to Rs 54.55 crore in FY22 from Rs 26.67 crore in FY21. Travelling/conveyance and transportation & distribution expenses grew 77.6% and 52.2% to Rs 22.64 crore and Rs 3.5 crore respectively in FY22.

Thus, the percentage of cost increases outstripped the increase in revenue, resulting in a decline in net profits by 6.4% to Rs 19.57 crore in FY22 from Rs 20.91 crore in FY21.

Akumentis Healthcare maintained ROCE and EBITDA margin at 75.52% and 9.96% respectively in FY22. On a unit economics basis, the company spent Rs 0.91 to earn a single unit of operating revenue.

Interestingly, Akums Drugs & Pharmaceuticals Ltd, the parent company of Akumentis Healthcare, now holds more than 90% stake in the company. It appears that Sequoia exited the company a couple of years after its investment of $19 million in the company in 2015. A VCCirle report also suggested that the VC firm was looking for an early exit during 2017. Private equity firm Quadria Capital also holds stakes in Akumentis's parent company.

Rajaram Samant, who was the co-founder and CEO of Akumentis Healthcare for nearly 10 years, left the company in February 2020. An industry veteran,  Samant had previously worked at three public companies: Ranbaxy, Emcure and Wanbury. Among the three original co-founders, two-  Sandeep Jain and Sanjeev Jain – are still associated with the company which can be seen in the latest shareholding pattern.

Pradeep Patni, who previously worked at Pfizer and Abbott Healthcare, is the CEO of Akumentis Healthcare since October 2020.

Akumentis’s past simply demonstrates the high degree of uncertainty and overruns that are part and parcel of the pharma business in India. Be it regulatory approvals, quality issues, price controls and the broader volatility that has been ongoing on the distribution side, the sector is on an accelerated path to change. Smaller firms like Akumentis can see one good year overshadowed by a bad year very quickly, as scaling up is never linear. With constant pressure to expand the portfolio with winners,  a core strength, be it in picking the right drugs to license, or a manufacturing facility that ranks high on quality and export permits,  or a well-oiled sales machine is needed to make an impact.

Akumentis might have to demonstrate at least a few more quarters of solid performance to carve out its own niche.