How profitable is Adar Poonawalla's Serum Institute?

How profitable is Adar Poonawalla's Serum Institute?

At Rs 300, the expected earnings from, let's say, 500 million doses of Covishield stand at about Rs 15,000 crore, which is near three times the total revenue of Serum Institute in FY20

Adar Poonawalla poses with first consignment of Covishield (Photo credit: Twitter) Adar Poonawalla poses with first consignment of Covishield (Photo credit: Twitter)

Vaccine-maker Serum Institute of India has become a household name as Indians scramble to book vaccine slots amid a devastating second wave of coronavirus. While Serum is one of the world's biggest vaccine manufacturers, its name made it to common parlance with the breakout of COVID-19 -- and there is proof to show for it. According to corporate database Capitaline there are 418 Indian companies that posted revenues above Rs 5,000 crore in 2019-20. Out of those, Serum earned the maximum net profit for every rupee of revenue.

While the financial data for the year 2020-21 is yet to be released, the 2019-20 data shows net income of Rs 5,926 crore, and net profit of Rs 2,251 crore. The Adar Poonawalla-helmed company's net margin for the fiscal stood at 41.3 per cent, which according to Capitaline is more than the rest of the companies that posted revenue of Rs 5,000 crore. It means Serum Institute is the most profitable company around.

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The company's income and net profit have followed growth trajectory for many years. The vaccine-maker reported net profit of Rs 1,741.33 crore in FY14; Rs 1,963.89 crore in FY15; Rs 2,179 crore in FY16; Rs 2,057 crore in FY17; Rs 1,912 crore in FY18; Rs 2,252 crore in FY19 and Rs 2,251 crore in FY20. Net income increased from Rs 3,636.2 crore in FY14 to Rs 5,871 crore in FY19 to Rs 5,926 crore in FY20.

The above figures imply Serum was on a strong growth path pre-pandemic, and they are likely to see profit accelerate with the rise in demand of vaccines due to Covid-19. The company is supplying vaccine at Rs 300 per dose to states and Rs 600 per dose to private hospitals. His company slashed the price per dose to states to Rs 300 from Rs 400 earlier after the allegations that SII was indulging in profiteering amid Covid-19 crisis. "As a philanthropic gesture on behalf of @SerumInstIndia, I hereby reduce the price to the states from Rs 400 to Rs 300 per dose, effective immediately; this will save thousands of crores of state funds going forward. This will enable more vaccinations and save countless lives," he had tweeted on April 28.

But the vaccine is already profitable at Rs 150 -- the rate at which Centre procures it. Poonawalla had said in an interview about pricing the vaccine at Rs 150: "It is not that we're not making profits... but we are not making super profits, which is key to re-investing." In another interview with India Today TV, Adar had said the vaccine industry hoped to make a "reasonable profit" to innovate further, ramp up production and earn the revenue that foreign companies do.

He also said the fixing of the price per dose at Rs 150 for the Centre was for a "temporary period of two-three months".

At Rs 300, the expected earnings from, let's say, 500 million doses stand at about Rs 15,000 crore, which is near three times the total revenue of Serum in FY20. An indication of the fortune that awaits Serum in FY21 and FY22 can also be estimated from the FY21 earnings of the US-based leading vaccine maker Pfizer Inc, whose revenue in the financial year 2020-21 grew 203 per cent year-on-year.

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Poonawalla aims to scale up annual manufacturing of Covishield from 1.5 billion to 2.5 billion in the next six months and further to 3 billion by October to meet demand.

Along with the company, the Poonawallas have also seen an exponential growth in wealth. As per the latest Bloomberg Billionaire Index, founder of Serum and Adar's father, Cyrus Poonawalla's wealth has risen around 100 per cent to $16.2 billion. Moreover, Serum is already worth Rs 17,929 crore at the end of FY20, says Prowess IQ data.

The Poonawalla Group is not only limited to vaccine development. Apart from Serum, the group has interests in horse breeding, real estate, aviation and finance. The Poonawalla family also owns real estate worth $522 million and another $500 million in cash. He also owns stud farms, about 250 acres of land and properties and residences in Mumbai and Pune.

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