FDC Ltd. — Call Transcript 2022

May 30, 2022

“FDC Limited Q 4 & FY22 Earnings Confe r ence Call”

May 27, 2022

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FDC MANAGEMENT TEAM: MR. NANDAN CHANDAVARKAR – JOINT MANAGING DIRECTOR MR. AMEYA CHANDAVARKAR – CEO-INTERNATIONAL BUSINESS & EXECUTIVE DIRECTOR, MR. SANJAY JAIN – CFO MS. VARSHARANI KATRE – COMPANY SECRETARY & COMPLIANCE OFFICER MR. MAYANK TIKKHA – AVP, BUSINESS DEVELOPMENT & COMMERCIAL EXCELLENCE

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Moderator: Ladies a n d gentlemen good day and welcome to FDC Limited Earnings Conference Call for the quarter and year ended 31[st] March, 2022. As a r eminder all participant lines wil l be in the listen-only mode and there will be an op p ortunity for you to ask question s after the brief highlights on the financials from th e management. Should you nee d assistance during the conference call, please signal a n operator by pressing ‘’ then ‘0’ on your touchtone phone. Please note that th i* s conference is being recorded.

I now h a nd the conference over to Ms. Varsharani Katre – C ompany Secretary and Complia n ce Officer of FDC Limited. Thank you and over to y o u madam.

Varsharani Katre:

Good af t ernoon, everyone and welcome to all of you. Glad t o connect with you all for this y ear ended earnings call. We have already dissemina t ed the financial results of fourt h quarter and year ended 31[st] March 22, and the in v estors' presentation as well. N o w I would like to introduce the FDC manageme n t team present in this Earnings Call.

We hav e with us Mr. Nandan Chandavarkar – Joint Managin g Director, Mr. Ameya Chanda v arkar – CEO, International Business & Executive Dir e ctor, Mr. Sanjay Jain - Chief Financial Officer, Mr. Mayank Tikkha – AVP Busi n ess Development and Commercial Excellence.

We will begin the earnings call with the highlights on f i nancial results of the compan y by Mr. Sanjay Jain, CFO followed by an interacti v e Q&A session. There might b e certain forward-looking statements. These statemen t s are subject to certain risks an d uncertainties, since they are based on certain assum p tions and expectations of future events. I would request all the speaker participants to restrict their queries to five min u tes only and avoid repetitive queries to save up on th e time.

With thi s , I shall now handover to Mr. Sanjay Jain – CFO. Sa n jay over to you.

Sanjay Jain:

Thank y o u Varsha. Good afternoon, all. this is Sanjay Jain. I will take you through the fina n cial numbers for the quarter March ‘22 and the year end March ‘22. So, to begin with our revenue performance; on a top line we grew b y 9% on a YOY basis on Marc h ‘22 quarter and at 15% growth on a year-end. This g rowth mainly from our domesti c formulation business which has given a growth o f 18% YOY on March quarter a nd 31% on a year-end basis. This growth mainly dri v en by our large brands like ZIF I , Electral and Enerzal. We are also happy to inform y o u that our both brands ZIFI an d Electral have first time crossed 300 mark as per th e MAT IQVIA data on

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March ‘ 2 2. The growth from the domestic business has been subdued with the export sales, th e de-growth which is around 15% on YOY for the M a rch ‘22 quarter and by 35% on a year-on-year basis at the year end. This is mainly b e cause of the de-growth in our U S business on account of price and lower demand due to the competition.

On the m argin side, more or less the margin remains stable fo r the quarter and for the year end barring around 1.5% impact on the overall gross ma r gin. However, there is a one-of f impact on our gross margin. That is because of the provisioning which we have ma d e towards the COVID related inventory, amounting to Rs. 11.70 crores. The margin is also impacted because of our US business whic h is a highly profitable business . So, that’s why the overall gross margin looks on the lower side as compare d to previous quarter and the previous year.

Going f u rther on the employee cost, the employee cost is mo r e or less stable at 22% to the re v enue. As there are no major expansion to the field barring few additions of the head q uarters. Coming to the EBITDA margin which now s tands at 5% on a YOY for the M arch ‘22 quarter and on 16% for the year end. This b eing on the lower side because o f the lower base of the expenses which was there in the last financial year means M arch ‘21. As you all are aware in the March ‘ 2 1, the first half was complet e ly under lockdown and travel and all were restrictiv e by the government of India. T h at's why the major of the expenses related to the m arketing, traveling and few of o ther administrative overheads were on the lower s ide. Because of these reasons t he expenses were not there in the March ‘21. Beca u se of all these reasons the prof i t before tax and profit after tax as compared to t h e last year March ‘21 quarter a s well as year-end March ‘21 is on the lower sid e . Thank you. Over to Varsha.

Varsharani Katre:

Moderator:

Prithvi Raj:

Sanjay Jain:

Thank y o u Sanjay. Now I request moderator to initiate the Q & A session.

Thank y o u very much ma'am. We will now begin the questi o n-and-answer session. The first question is from the line of Prithvi Raj from Unifi Ca p ital.

My first question is in regard to the line mentioned in a press release with regards to the inve n tory material destruction of one-time effect in Q4 F Y 22. So, can you please elaborat e on that, what is this regarding?

You mu s t be aware; we have launched the COVID related p r oducts in the financial year 20 2 1 ending. This inventory as you are aware that the i nventory is having the short sh e lf life and the sales of these drugs has now been over a period of time

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decreasi n g. So whatever inventory which was lying as on 31[st] March, 2022 amounti n g to Rs. 11.7 crores, we have provided considering t h e shelf life.

Prithvi Raj:

Okay got it. To that amount gross margin has been impacte d and any other reason apart fr o m the impacting the gross margins other than the whatever raw material inflation or solvent plus inflation we are seeing.

Sanjay Jain:

This was the only one-off kind of an item. Apart from this one-off there are inflation a ry increase on the raw material and packing materia l which is to the extent of a 1% t o 1.5% on a quarter and a YOY basis.

Prithvi Raj: Just one question on our OPEX part. We have spoken abou t increase in marketing etc. and w e have seen that number in OPEX. Our OPEX base w hich was pre covid 80 odd cro r es last quarter and last to last quarter we did 95-1 0 0 crores. This quarter despite l ow revenue base, it was 110 crores. So is it fair to u n derstand that large part of it is b e cause increase in marketing spends?

Sanjay Jain: Yes. As I explained, the expenses were not there in the Mar c h ‘21. On incremental basis these numbers look on the higher side. So, I will give jus t the number on the… Prithvi Raj: If we lo o k at QOQ basis from Q3 FY22 to Q4 FY22? Sanjay Jain: On QO Q basis the expenses are more or less in line with that, t he marketing cost. Prithvi Raj: Then what explains 95 to 111 crores increase in cost? Sanjay Jain: Apart fr o m marketing costs which is a normal just about 1.5 crores, there are other costs wi t h respect to the logistic cost, the admin cost, then th e few CSR expenditure which w ere not there in the Q3 were also being there in t h e Q4. All these have mounted to increasing the overall operating expenses as comp a red to Q3 numbers. Prithvi Raj: Just one question on the logistics. Can you explain from FY2 1 to FY22 what was the logistic c osts as a percentage of revenue in FY21 full year and FY22 full year? Sanjay Jain: Logistic costs you want in terms of number or in terms of percentage? Prithvi Raj: Anythin g that is convenient.

Sanjay Jain: Overall l ogistic cost meant put together domestic as well a s exports, this will be somewh e re around 3.5%.

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Prithvi Raj: For FY2 2 , last year what was the number? Sanjay Jain: The sam e was around the 2.5% in the March ‘21.

Prithvi Raj: Got it. Basically, despite decrease in export revenue the numb e r has gone up by 1%?

Sanjay Jain: Yes.

Prithvi Raj: Just no w last question. The exports revenue, so Q3 was I thi n k the worst quarter we have ha d in the last few quarters and there is some growth from Q3 to Q4. What explains that sequential expansion in revenues, is it because o f US or other markets?

Sanjay Jain: From Q 3 to Q4?

Prithvi Raj:

Yes.

Sanjay Jain: Q3 num b er from the export formulation business was 26 crores and it's 30 crores on a Q4 basis. We have some US contribution as well. I would sa y the major shift is not there, m e ans the more or less number for the Q3 and Q4 for export sales are on the same lin e .

Prithvi Raj: Now on the capital allocation part. So, we did this buy b ack in Q4. Now our understa n ding is that it can do almost like after 12 to 15 m o nths. So, in FY23 we might n o t do any buyback. So will we allocate, will we p ayout based on some dividend or will be a very small portion?

Sanjay Jain:

We wou l d not like to comment as of now because it's a b o ard decision. We will come ba c k to you whenever the board decides. From the reg u latory perspective you must be aware that once the buyback has been given, there's a cooling off period of 12 mont h s. Regarding the decision on the buyback or dividen d s, it's a board decision which w i ll be conveyed to you in due course of time wheneve r the board decides.

Moderator: The nex t question is from the line of Aditya Khemka from In C red AMC.

Aditya Khemka:

You mu s t have already taken price increases in the India bu s iness in April. Can we get som e sense as to what is the level of price increases, w e have taken and the NLEM p ortfolio and what is the level of price increases we have taken in the nonNLEM p ortfolio?

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Sanjay Jain: For the N LEM portfolio we have taken a price increase b y 10.7% and wherever possible for the non-NLEM portfolio by 10%.

Aditya Khemka: What w o uld have been the weighted average price increa s e for the entire India portfolio? Sanjay Jain: It could b e anywhere around between 70 to 80 crores on an an n ualized basis. Aditya Khemka: Our Indi a sales is 1000, so 7% to 8%, less than 7% to 8% actu a lly? Sanjay Jain: Yes, so 1 ,300 crores. Aditya Khemka: And 70 to 80 crores is on the 6%, 5% to 6%? Sanjay Jain: Yes. Aditya Khemka: That sounds on the lower side. That means in majority of ou r non-NLEM portfolios we have not taken a price increase.

Sanjay Jain: So, what happens the non-NLEM portfolio, it's not due everyt h ing on the 1[st] of April. It will k e ep getting due on a full year basis. The price increas e we may not get on the 1[st] April for all the portfolio. As and when gets due and as a n d when the 12 months period o v er, we take the price increase. When you calculate the weighted average, mostly i t falls between 7% to 8%.

Aditya Khemka: I unders t and and given the raw material prices where they are now and the price increase that you have taken, do you believe in FY23 we w i ll be able to do better gross m a rgins than we did in FY22 or will it be worth?

Sanjay Jain: So, you a re all aware there are input costs are going up every w here. We are not sure how it will pan out in the next 12 month of period. We have t o wait and watch so that we can give you further guidance on that.

Aditya Khemka: Last question in terms of CAPEX plans, what do we have fo r FY23 and how much do you p l an for FY24 if you have that number?

Sanjay Jain:

We have planned about 120 crores for CAPEX plan for the ne x t financial year.

Aditya Khemka: And nex t year, the year after that?

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Sanjay Jain: As of no w that we have planned for the FY23 only and other m ajor project which we have I think already explained in our previous call, about our A LP 4 which is already budgete d . Aditya Khemka: It's likel y that your 120 crores CAPEX for FY22 will contin u e in FY24 because of the CAP E X.

Sanjay Jain: Yes.

Aditya Khemka: The pla n is more than 200 odd crores right? Sanjay Jain: Yes.

Aditya Khemka: It will b e both years 120, understood. Moderator: The ne x t question is from the line of Jayant Mamania from Care Portfolio Manage m ent.

Jayant Mamania: Good A f ternoon ! In the press release you have written that y o u are going global for Electral a nd you have received registration in several countries. Can you tell us the present g eographic distribution of the Electral sales and w h ich countries we have received registration and what are our future plans and what kind of growth are we expectin g ? Ameya Chandavarkar: So, this is Ameya Chandavarkar. We have been selling El e ctral in Myanmar. So that's on e important market. We have quite ambitious target t h ere. Apart from that in UAE als o we've registered the product. There are few other m arkets. It's a little early now to t alk about specific market and specific sales targets. As and when we start selling a n d once, we start performing in these markets we will keep you all updated. Jayant Mamania: Have yo u planned any marketing budget to launch this produc t globally?

Ameya Chandavarkar: What w e are doing in Myanmar is we are to an extent partner i ng with our distributor there to p romote the product. There is a promotional budget i n Myanmar. Similarly, we will c onsider promotion budgets where it makes sense in t h e other markets. Jayant Mamania: What is o ur present sales beyond India, outside India Electral?

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Ameya Chandavarkar: Right now, so we do not give specific numbers on Electral. A s an ORS category we are selli n g about at least 30 to 40 crores from our export for m ulation business. That includes ORS also, so it goes as a generic and when we partici p ate in tenders. Jayant Mamania: So Q4 m argins were under pressure due to raw material price increase. So how is the present scenario? Sanjay Jain: As I ex p lained the Q4 margins are under pressure mainly b ecause of 2-3 reasons. One is t h e one-off item which I explained on account of C O VID related inventory which h a s impact of close to 2%. Also, the revenue from ou r US business is on the lower si d e. Third is an inflationary increase across the board o n the raw material and the pack i ng material. These are the main three reasons for the lower gross margin for the quar t er. Jayant Mamania: There w a s a plan to spend around 250 crores on office buildin g s, so is that still on? Sanjay Jain: Yes. So t hat is going on. The construction work is going on a t our plot at Oshiwara. So still a t a very early stage. It will take at least 2-2.5 years to c omplete. Jayant Mamania: In next 3 0 months we'll be spending 250 crores on office b u ilding. What would be the size o f the building in terms of square feet? Sanjay Jain: So first o f all, I don't think its 250, it's more or less around 2 0 0 odd crores. It will be about 10 storied building which will be having area of around 1 lakh square feet. Jayant Mamania: The land already belongs to us. This will be spent only on con s truction cost, correct? Sanjay Jain: This 200 crores is only our construction cost including the interior. Jayant Mamania: We hav e around 1000 crores cash in the balance. So can you tell us how we have planned t o use this? Sanjay Jain: So first o f all, I think you are looking at the number of March ‘22 which is not 1000, it's arou n d 850, out of 850 recently you must have received buy-back money also. So, we s p ent close to 170. Now the balance is around 750 odd crores. Jayant Mamania: Is there a ny acquisition on the card? Sanjay Jain: That wil l be communicated to you as and when it's crystallize d anything. Jayant Mamania: Any neg o tiation going on?

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Sanjay Jain: So, we c a n't comment upon on this. Jayant Mamania: Okay. T h ank You. Moderator: The nex t

Moderator: The nex t question is from the line of Neelam Punjabi from Perpetuity Ventures. Neelam Punjabi: My que s tion is in relation to the previous participants q u estion on the export formulat i on business. As I see in Q4 FY22, our export for m ulations was 47 crores versus 37 crores in last quarter. Just wanted to understan d what has driven this growth Q OQ and is this number a base that we can take on w h ich we can grow in the future? Sanjay Jain: Yes. So, the numbers are right. The reason for the de-growth in the Q4 as I explained is mainl y because of our US business. I would say to some e x tent these numbers are affected was a one-off kind of a reason maybe in Q4 also be c ause we were at good healthy n umber in the March of the last year also. So, you ca n take the March ‘21 as a base n u mber for the future growth purpose. Neelam Punjabi: But I wa s trying to understand quarter-on-quarter, the number has gone up from 37 to 47. Wha t has led to this growth quarter-on-quarter? Sanjay Jain: So that's because of our US business only. Neelam Punjabi: Okay go t it. Could you give us an outlook for FY23 in terms o f top line growth in the entire in t ernational business as well as the domestic business ? For domestic business as you k now FY22 was a very strong year for us, 31% YO Y growth which would have been driven by COVID. Are we confident on growing on this base of FY22?

Sanjay Jain: We wou l d not like to comment on this number as of now because it's still very early stage. A l though we have factored in to grow internally but w o uld not be able to give any guid a nce on this number’s perspective.

Neelam Punjabi:

My sec o nd question is on the other expenses. You said th a t we had lower other expense s on account of COVID in FY21. However, if I look a t your pre-COVID run date of o ther expenses, it was around 80 crores on a quarte r ly basis versus in this quarter w e have registered around 111 crores of other exp e nses. So, what is the reason o f this sharp jump in other expense line item?

Sanjay Jain: So first o f all, I would say it's not comparable compared to Q 3 versus Q4 or even if you are c omparing last year Q4 versus this Q4 and numbers m ay vary on a quarter-

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to-quart e r basis. The reason being you are comparing Marc h ‘20 which is 2 years back tha n the March ‘22. Secondly the revenue numbers for the March ‘20 and the March ‘ 2 2 was much higher than March ‘20. Third, all th e expenses which were there in t he March ‘20 are on the related to the revenue numb e rs. I would say like the marketi n g budget or the logistic number or few semi- variable costs which are related to the r e venue. The revenue has gone up in the March ‘ 22. All the operating expendit u res which are variable or the semi-variable costs w i ll naturally increase to that pro p ortion. This is a precise reason for the increase in th e operating expenses in March ‘ 2 2.

Neelam Punjabi:

Sanjay Jain:

Neelam Punjabi:

Sanjay Jain:

Neelam Punjabi:

Mayank Tikkha:

Is it fair to assume that this 110 crores of other expense and 80 crores of staff cost, 190 cror e s for the quarter. So about 750 to 800 crores is the base of fixed expenses that we w ill incur in FY23.

Right.

Lastly, I just wanted to understand, we have a capital working progress of 105 crores. So, what is this in related to?

I just ex p lained, our construction work for our new office at our Oshiwara place is going o n . For which we have paid certain construction co s t and the government premiu m which is to the extent of 60 crores out of this 100 crores and the balance related t o one of our projects at our Waluj plant related to ALP 4 which is total budget i s around 70 odd crores, out of which we have spe n t which is included in CWIB t o the extent of 7 crores and the other items related to t h e few civil expansions which w e have taken up in other plant at Goa, Sinnar and fe w other replacement and upgradat i on budget for all over the plants.

Just last question on my end, in the previous calls we've m entioned that we are confiden t of growing ahead of the Indian pharma market. A r e we still confident on growing ahead of IPM in FY23-24?

So, hi th i s is Mayank, we said this in the last call, we are still i nternally confident but as you m ight have seen there's a lot of corrections happen i ng in the market post COVID and market is behaving in a very uncertain manner . Though internally we have th e confidence but probably we cannot guarantee a n y number or growth prospect i ve because the market is not to be predicted as of now. You might have already g one through the market numbers of April whether i t is AVAX or IQVAI;

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both ha v e shown high negative growths. So, we are still wat c hing. We are working our way s through our portfolio and we'll keep you posted in o u r subsequent calls.

Neelam Punjabi:

Okay. T h at’s helpful. Thank you.

Moderator: The nex t question is from the line of Nikhil Jain from Galaxy I nternational.

Nikhil Jain:

Thank y o u for the opportunity. First, I see that we have provided the breakup of all the key b rands but in some of the brands we seem to be losing market share. So, while w e are growing but we seem to be losing on the market share. Is there any specific r eason for that or any comments on that part?

Mayank Tikkha:

If you'r e referring to our presentation which we uploaded yes, we have lost our market s h are in Enerzal slightly. This is mainly because this m arket is very different than ma y be there are lot of factors into it. This is a very wide category market where lot of pl a yers keep on entering every year. It is not a 100% prescription driven market of energ y drinks. That is the reason why we have lost but t h e domain at which we operate t hat is the doctor fraternity and the chemist business probably we have not lost any m arket share but to be fair we have given you the m a rket dynamics overall. As far a s Electral is concerned which we have maintained our market share and leadersh i p as compared to last year and in Zifi also which is our #1 flagship brand, there also we have maintained our leadership. Enerzal yes, we have lost, we are working our way up. We would try to regain if possible . We are aggressively working on this brand.

Nikhil Jain: Second q uestion was with respect to the US market. We see m to be, we are putting lot of e f forts and energy behind the US market. However, the numbers as we all understa n d are not so consistent because it's a very competit i ve market. So, what is manage m ent’s view and strategy for US market given that w e are going through a partner a nd we don't intend to be there directly present over th e re?

Ameya Chandavarkar: We'll co n tinue to keep registering products so we own the A NDA and continue to partner with the existing partners, maybe new partners . Also, we have not categori c ally said that we don't intend to be there ourselves so I'm not sure where you're g e tting that information from. We are still open to th a t possibility. However right no w we are happy partnering and it's been a very l u crative market for us, particula r ly from the bottom-line perspective. It is a key focus market for us.

Nikhil Jain:

If you'r e not let's say vertically-integrated this time. Nor m al tablet odd products would b e very difficult to sustain in the US market so that is w hat at least I have seen

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with so m e of the big companies. So, while our specialty of ey e drops and ophthalmic products , I think it would be good for us but if you go into g e neric regular products then it's going to be a very competitive market. So that's w here I'm just trying to understa n d that rationale. If we go through partner and t h en in generic me-too products , it is going to be a difficult market.

Ameya Chandavarkar: I compl e tely agree with you. We appreciate what you're sayi n g completely and your point is w ell-taken.

Nikhil Jain:

Ok. Tha n k You. Just one last question . How much is the R& D spend that we did for this year ? If you can break it up for India and the other markets, it would be great if it is possib l e?

Sanjay Jain: R&D ex p enditure is in the range of 2% of our revenue only. O n this time, we will not be able t o give you the break up between India and exports business. But you can drop an e mail, we will provide that information to you.

• Nikhil Jain: So, 2% i s very small in any case and I think India doesn't n eed so much of R&D spends. S o, most of it could be directed towards the US and o ther regulated markets. Ok. Tha n k You.

• Moderator: The nex t question is from the line of Payal Lad from Progressive Shares.

Payal Lad:

• I just w a nted to ask you that as you mentioned there that was a one-off item of Rs. 11.7 cro r es with regards to COVID related inventories. Just c o rrect me if I'm wrong, was a pr o vision created for this quarter or is this amount alrea d y expensed out?

Sanjay Jain:

• I would s ay it’s the one and the same thing. We are carrying t h e inventory of COVID related drugs and inventories as of 31[st] March is a short shelf-life inventory. To have a pruden t accounting we have provided that inventory as a pa r t of provisioning to the inventor y . That's why it’s charged to a P&L.

Payal Lad:

That’s already been expensed out for this quarter?

Sanjay Jain: Yes.

Payal Lad: Additio n ally, so did you see any COVID contributions or fro m your COVID related drugs or is it a fading effect as of now considering the recedin g cases?

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Mayank Tikkha: We laun c hed a couple of drugs but majorly it was Favipiravir w hich we launched and we did get a revenue of approximately Rs. 18 crores odd last year but we don't see a future a n d that is why we have completely withdrawn ours e lves from that market now because the number of cases what are prevalent as o f now in India are not substantial enough to substantiate any direct treatment in the f orm of Favipiravir. So, it is inte r nal call which we have taken from a marketing sta n dpoint. We will not be moving f orward with this any kind of therapy as such.

Payal Lad:

That wo u ld be completely excluding from the Favipiravir sa l es or like any COVID related d r ugs that come up in the near future?

Mayank Tikkha:

Again, f u ture I cannot define. This was a major launch which w e did. Apart from this there we r e couple of very small launches which were not significant but in future we will see how the, as I said the market is very dynamic and newer drugs keeps on coming b ut looking at the current spectrum, we are not taki n g any calls on COVID related p r oducts.

Payal Lad:

So, the e ntire portfolio would contribute roughly about w h at percentage to your sales?

Mayank Tikkha: You are a sking for COVID?

Payal Lad:

Yes.

Mayank Tikkha: Again, t h is is a very broad, COVID was a broad terminolo g y. There were certain drugs th a t I said Favipiravir was a direct treatment to COVID but overall, you might be awar e that many of the antibiotics, co-therapies have also g one up last year during COVID. These were our maybe main stay products which w e are entering. They got a tractio n during COVID because of allied prescriptions whic h doctor was generating during C OVID era. That business completely doesn't get im p acted any which ways with or w ithout COVID.

Payal Lad:

In terms of Favipiravir so are there any backlogs which w e re there since you are saying t h at you would exclude this seeing the scenario or like everything is done and dusted f o r now?

Sanjay Jain: So, ever y thing has been done in March ‘22 quarter itself. Payal Lad: Okay Thank You so much Sir !.

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Moderator: The nex t question is from the line of Niraj Kamtekar from Pro s pero Tree.

Niraj Kamtekar:

I have two-three questions. The first question is related to the medical represen t atives, number of the medical representatives. In t h e current presentation, investor presentation it was given that the 3,200 something numbers of the MR and in the e arlier presentation it was mentioned as 4,000 t h e November month’s presenta t ion, 4,000 medical representatives were mentioned . Why the number has been red u ced from 4,000 to 3,200 numbers?

Mayank Tikkha:

We checked the last presentation but it might be the total fie l d force what we might have me n tioned earlier, there's no reduction, what I can tell y ou. In fact, in the last year, we have expanded in the number of MRs overall beca u se we launched in the month of April our new Nutrica division which we'll be f ocusing on nutritional basket s p ecially the IMS products and also in January w e launched our Zocon division which is also our flagship brand to cater to the der m atological baskets. In fact, we have increased our number by approximately 500 o dd people in the field, that is M Rs. We will definitely check what we have presented in the last presentation. It might be the total field force. Here 3,242 is only the MRs, only the grassroot people w ho are working in the field.

Niraj Kamtekar: The co m pany, in the last two buybacks were at the rate of 47 0 and 450 per share and each bu y back the promoters have participated and naturally t h e respective number of shares a r e accepted for them also and the current market price is at least 40% to 45% discount to the buyback price. In such situation the promoters are not considering the buying t h e shares from the open market. If they have feel tha t there is intrinsic value which is more than the current market price and the buyback was at Rs. 450 or 475. So, what is your comment?

Ameya Chandavarkar: It’s a go o d suggestion.

Niraj Kamtekar:

Any maj o r product range under the pipeline to be launched?

Mayank Tikkha:

As of now we would not like to disclose. Once we launch an y thing very significant, we’ll de f initely inform you in our subsequent interactions.

Niraj Kamtekar:

The En e rzal is more of a soft drink or energy drink pro d uct. Do we have any particula r marketing budget to promote that product? Becaus e you consider that for the laun c hing of these types of products there's no restriction. There must be a tough competit i on from other players also. For us any marketing bu d get or marketing team has been considered?

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Mayank Tikkha: This pr o duct we do agree as I said, that is a very widesp r ead product. A lot of competit i on from FMCG players are also there but we being the prescription driven compan y as of now we have gone through the route of doc t ors and chemists only. There are some efforts which have been made but they are not very significant to take it to the other channels. As of now whatever sales we are generating, it is mainly from ou r doctor prescription support. It is a very scientific ba s ed though we call it an energy d rink but it is a very scientific energy drink with a doctor prescribes in various i n dications. We will see how we can move with this product in future. As far as your b udgeting is concerned, marketing budget is in line wi t h the divisional budget and the overall corporate domestic marketing budget. We d on't have any special allocatio n s for this brand.

Niraj Kamtekar:

The der m at will be the next focus area after the Zifi product a nd ORS then third will be the d e rmatology, so dermat products?

Mayank Tikkha:

We alre a dy were present in the dermatological basket becaus e Zocon is a significant product w hich the market size is almost 51 crores for us. W e are always present in this ther a peutic but what we have done a change is that thes e products were spread out in v a rious divisions. We have consolidated that therap y into one basket. This division though the therapy would be dermatology but the y would be catering to other sp e cialties also wherever the derma products are being used. Just to give you some is gynaec, even GC physician but yes you identifie d it correctly directly, probabl y this will be one of the focus area we will try to g r ow further in times to come.

Niraj Kamtekar: In that d ivision any cosmetic product will be launched ot h er than the prescribed products ? Any cosmetic products fall under the dermat catego r y? Mayank Tikkha: At this j u ncture I will not like to comment on this. As I sai d as we take any steps further, w e will be informing you of any development. Moderator: The nex t question is from the line of Nikhil Jain from Galaxy I nternational.

Nikhil Jain:

One wa s on South African subsidiary. How is that busines s performing? Now we have m a jority and almost complete stake on that so a ny and what is the manage m ent’s outlook and strategy towards that business?

Ameya Chandavarkar: Nikhil w e have hired a new person also there to hit that business and things are starting t o look better than they were the past. Early days righ t now we believe that it will tak e us at least 2 maybe 3 years to turn that business ar o und and over a period

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that enti t y at FDC SA can serve as our head office for the ent i re at least the Southern part of t h at continent. We are quite optimistic about the prosp e cts of that business.

Nikhil Jain:

Another question is on with respect to the export formulatio n s sales. Outside of the US, how much is our export formulation sales and what is the trend over there? What are the m ajor countries outside of US where we actually expo r t our products and any specific t houghts on how do you want to increase that if you'r e planning that?

Sanjay Jain: As of n o w if you look at the quarter March ‘22, 50% of re v enue coming from US business and the rest is spread across the other countries.

Nikhil Jain:

We are c ontinuously registering products in some of these c o untries also including let’s say for example, South Africa?

Ameya Chandavarkar: Yes, abs o lutely.

Moderator: The nex t question is from the line of Neelam Punjabi from Perpetuity Ventures.

Neelam Punjabi:

While I understand that or you all are refraining from giving any quantitative guidanc e but if you can please help us understand that over th e next 2 to 3 years or 5 years w h at pushes the key growth drivers for the FDC? What w ould be the key focus areas for us? Just wanted to understand what is the managem e nt vision for FDC over the next 3 to 5 years, the long-term vision?

Mayank Tikkha: So, I wil l answer that in two parts. When you look at our key g rowth drivers, you are already a ware that we are big into antibiotics. We are contin u ously focusing on our antibioti c portfolio and we are trying to revamp some of the low-end antibiotic therapie s which we are already present for the future. We are trying to create bigger brands o ut of our antibiotic portfolio which we have been already marketing for almost 5 to 7 years. This is one. The another segment which w e are already present, our two b ig brands Electral-Enerzal and these are very buoya n t in today's market. We are defi n itely working our way up and fortifying ourselves as a distinct leader though we enjo y the leadership but we are trying to regain more mar k et share and try to take the volu m es up for these two brands. Apart from the newer interventions what we have do n e, I explained in the last question that we have now c ome up with two more division s in the last financial year. We are definitely focusing on the Nutra basket for the next 3 to 5 years. Our presence was already there but yes, we are going very hard on these therapies now, our definite focus is there on Nutraceutical baskets and the results a r e very encouraging for the first financial year. Apar t from this as I said the second d ivision which we have launched definitely in t h e derma category of

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products . This is one area which we are trying to fortify ou r presence. We already have on e big brand in the form of Zocon, other brands like M y coderm, Cotaryl which are alre a dy there. We definitely will be moving into this c a tegory and try to gain some m a rket share, additional market share in the next cou p le of years. The third category which we are focusing now is the cardio-diabeto ma r ket where again we are present, w e have volume but are not a very significant player a s of now. One division definitel y is focusing on this market. These are couple of bro a d points which we are working on and we are confident in next 2-3 to 5 years prob a bly these categories of products or broader category of products what I said would b e able to drive growth for us. A ny further opportunity which comes our way, we'll d efinitely look into that also.

Neelam Punjabi:

This wa s on the domestic side. If you can just also high l ight our key strategic initiativ e s for the international business as well?

Ameya Chandavarkar: Sure. W h at we are currently doing in international business. I f you look at our base, it's relati v ely low compared to our peers and also as a proporti o n of total revenue, our total int e rnational business is relatively small. There is signif i cant potential for us to grow no t only in the regulated markets such as the US-UK b ut also in many of the other s m aller markets or let's say slightly less regulated mar k ets. We are registering products across the globe. That is a key focus area. Also, wh e rever possible we will start inv e sting in promoting our products in international ma r kets. Earlier we spoke about h o w we're starting to promote Electral in Myanmar. S imilarly, we'll take up specific m arkets. In Kenya also to an extent we are particip a ting in promoting our products through the distributor there. That's how we w ill move forward in internati o nal business. We are quite optimistic that the next 3 t o 5 years we should be able to g r ow meaningfully in international business overall.

Neelam Punjabi:

Lastly o n my end, a couple of years back in the annual report we had mentioned that we acqu i red this brand from GSK EnteroPlus. If you can just give us an update how is that brand doing? Is it picking up right now?

Mayank Tikkha:

We acq u ired this brand 2 years back but unfortunately b e cause of the COVID lockdow n s we couldn't work on that, work our ways through t h at brand. The volumes were pr e tty low but now we have taken that brand very a g gressively and we are looking f orward for milking this brand. Just for your informat i on we have also added couple of more SKUs in this portfolio. We have added the c a psule formulation and we are a l so coming up with the drops for the neonates. We ar e taking this brand very seriousl y and we have taken aggressive targets for the current f inancial year.

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Neelam Punjabi: Does thi s brand has the potential to be among the Top 10 bran d s of the company? Mayank Tikkha: Very di ff icult to say, very early days because our top bran d s already touching Rs. 300 crores what we share. Now this molecule or maybe thi s product, doesn’t have that kin d of potential in the market as of now; as of now w e are talking about. So difficult to comment. I cannot say whether it will be comi n g into the Top 10 but definitel y it is among the top focused brand where we are wor k ing on. Moderator: The nex t question is from the line of Niraj Kamtekar from Pro s pero Tree. Niraj Kamtekar: One of t he dermat product of the Glaxo Zimig cream is e i ther withdrawn or not availabl e in the market. Can company consider to launch su c h product or buy such brands w hich is the famous in the market, particularly the Zim i g cream? Mayank Tikkha: We have to check details. As of now I cannot comment on this. Niraj Kamtekar: Because we have also one of the dermat portfolio. It is not a vailable in the market. Earlier w e have also the EnteroPlus was bought from the Gl a xo; that's why I asked this question? Mayank Tikkha: We'll de f initely check and revert back to you. Niraj Kamtekar: Thank y o u Sir ! Okay. Moderator: As there are no further questions from the participants, I no w hand the conference over to M s. Varsharani Katre, Company Secretary for closing c omments. Over to you ma’am. Varsharani Katre: Thank y o u all for joining this earnings call of FDC and ex p ressing your views. In case if y ou have any concerns, please reach out to us on in v estors@fdcindia.com . Thank y o u again. Over to you moderator. Moderator: Thank y o u. Ladies and gentlemen on behalf FDC Limited that concludes today's earnings call. Thank you for joining us and you may now disc o nnect your lines.

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