SME Spotlight Interview: Infinium Pharmachem to Pare Down Debt, Stick to Iodine Chemistry


Gujarat-based Infinium Pharmachem is all set to launch its maiden IPO on 31 March on NSE’s Emerge SME platform. The fast-growing company, which specializes in Iodine chemistry and its derivatives, has priced its offer at INR 135 per share and aims to raise as much as INR 25 crore. For more details about the offer, please head to Infinium Pharmachem IPO discussion page.

IPO Central caught up with Mr. Sanjay Patel, Chairman and Managing Director of Infinium Pharmachem to understand the company’s business, competitive advantages and strategic direction. Here are edited excerpts of our discussion.

Sanjay Patel Infinium Pharmachem
Mr. Sanjay Patel, Chairman and Managing Director, Infinium Pharmachem

IPO Central – Please tell us about the origins of the business. How did you chanced up on the idea of starting something in Iodine chemistry?

Sanjay Patel – The idea was to start a business since we were in college management education. Stocking to that thought, we did market surveys to understand what to do and what not to do. We surveyed this industry and found it interesting because of good demand as well as gap in this industry.

We noticed there were so many products which were imported and no one was manufacturing them locally. That was the basic reason that prompted us towards this industry and we started in November 2003.

We started with only two (high-demand) products Potassium Iodide and Sodium Iodide. Considering customers’ requirements & market demand, we kept introducing new Iodine derivatives.

Did you have any background in chemistry? What was the total investment in the business?

We had no formal experience in the business and started as first-generation entrepreneurs. We started with INR 10.5 lakh in 2003 with a very small setup. We were just 3 people working in the beginning but have expanded operations successfully in the last 20 years.

What is Infinium’s competitive advantage?

Innovation and constant focus on research are the reasons behind our continued growth in revenues. Out of our portfolio of 200+ products, hardly 35 – 40 products are in common areas while the remaining products are in niche applications where we are either the only player and among the top manufacturers. As mentioned above, research and development (R&D) has been the pillar of our growth and we spent nearly 1% of our sales revenue on R&D in FY 2022.

Infinium’s profit margins and return ratios have been fantastic in recent years. Do you expect the company’s profitability to remain at current levels?

In my view, PAT of less than 8% is not super normal profit so the current levels are clearly not very high and there is scope for further improvement. We have been consistently profitable for last more than 18 years.

Competition may come up in some products but we plan to continue focus on Iodine business and our goal is to increase new products in our portfolio while sticking to the existing chemistry.

Despite rising sales, the share of exports in Infinium’s total sales has declined in recent years. Is this a sign of slowing down.

Our exports have been growing in absolute numbers and while overseas revenues have declined as the percentage of total revenues, it has been due to domestic sales increasing at a higher rate. We believe it is a positive sign for a business and represents a balanced approach. The Covid-19 pandemic has taught us not to be overly dependent on a single geography.

In FY 2022, exports contributed around 35% to our revenues and domestic sales contributed the remaining 65%. Going forward, our efforts will be towards maintaining this ratio. In line with this, we have earmarked funds to be used for marketing expenses to boost sales in the overseas markets.

Infinium’s capacity utilisation had not been very high (~40% in FY 2021) but the company still went for expansion in FY 2022. What was the thinking behind this expansion?

Recently, we expanded and modernised our entire premises keeping in mind the time duration of next 7-8 years. Since we have just one manufacturing site, we wouldn’t like production to be stopped for expansion in future. The second aspect behind the expansion was to be prepared for a Covid-like situation. Some opportunities come all of a sudden and without any indication so we need to be prepared with capacity to respond to such opportunities and situations.

Factory Side

What are your thoughts about the debt levels which have remained elevated compared to equity?

Our debt/equity ratio (3.24 in FY 2022) is high but it has been greatly beneficial for the growth of the company. During the last 4-5 years, we have grown drastically and debt was necessary to fuel this growth. However, we aim to bring it down and one of the objectives of the IPO is the repayment of high-interest debt. So we expect the trend of declining Debt/Equity ratio to continue. 

Over the next 5 years, we don’t expect our debt/equity ratio to shoot because of capex but it may go up on account of working capital. As far as working capital is concerned, we will be quite happy if the ratio increases because it will go towards boosting our topline.

Disclaimer – The objective behind this interview is to present an unbiased view of the company’s operations, offer details, strengths, weaknesses, financial performance and valuation. Nevertheless, this is not an IPO recommendation to subscribe or avoid and the decision to invest should be based on individual investor’s risk profile. This is not an investment advice and the content is strictly for informational purposes only. Please contact your adviser before making an investment.


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