Ipca Laboratories Ltd. — Call Transcript 2023

Apr 27, 2023

April 27, 2023

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THRU ONLINE FILING

BSE Ltd. Phiroze Jeejeebhoy Towers Dalal Street Mumbai 400 023 Scrip Code – 524494

National Stock Exchange India Limited, Exchange Plaza, C-1, Block-G, Bandra Kurla Complex, Bandra – (East). Mumbai-400051. Scrip Code : IPCALAB

Dear Sirs,

Dear Sirs,

Pursuant to Regulation 30 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, we are enclosing herewith transcript of our Conference Call which was held on Tuesday, 25[th] April, 2023 to discuss our acquisition of 33.38% shareholding in Unichem Laboratories Ltd.

Thanking you

Yours faithfully For Ipca Laboratories Limited

HARISH PANDURANG KAMATH Digitally signed by HARISH PANDURANG KAMATH DN: c=IN, o=PERSONAL, 2.5.4.20=3e5648a57390d9262997da3de9051643bfb87e352b111402af42d207e52e25c6, postalCode=400063, st=Maharashtra, serialNumber=72050fb9fadcbc5de6404685117b8355792f5784c7617d9c4cae2a3887d6b809, cn=HARISH PANDURANG KAMATH Date: 2023.04.27 16:31:02 +05'30' Harish P. Kamath Corporate Counsel & Company Secretary

Encl: a/a

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a Laboratories Limited “Ipc

Corpor a te Announcement Call”

April 25, 2023

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MANAGEMENT: MR. AJIT.KUMAR. JAIN – MANAGING DIRECTOR AND CHIEF FINANCIAL OFFICER – IPCA LABORATORIES LIMITED MR. PRANAY GODHA – MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER – IPCA LABORATORIES LIMITED MR. PRASHANT GODHA – EXECUTIVE DIRECTOR – IPCA LABORATORIES LIMITED MR. HARISH KAMATH – CORPORATE COUNSEL AND COMPANY SECRETARY – IPCA LABORATORIES LIMITED MODERATOR: MR. UTSAV JAIPURIA – DAM CAPITAL ADVISORS LIMITED

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IPCA Lab o ratories Limited April 25, 2023

Moderator:

Ladies and g entlemen, good day and welcome to the Ipca Laboratories L imited Corporate Announceme n t Call hosted by DAM Capital Advisors Limited. As a remin d er, all participant lines will be in the listen-only mode. There will be an opportunity for yo u to ask questions after the pre s entation concludes. Should you need assistance during the c onference, please signal an op e rator by pressing star then zero on your touch tone phone. Pl e ase note that this conference i s being recorded. I now hand the conference over to Mr. U t sav Jaipuria from DAM Capita l . Thank you and over to you, sir.

Utsav Jaipuria:

Thanks Dar w in. Good afternoon everyone and thank you for joining us for t h e conference call with Ipca La b oratories on the acquisition of a 33% stake in Unichem hoste d by DAM Capital Advisors. On the call today, we have the management team of Ipca led by M r. A.K. Jain, Mr. Pranay God h a and Mr. Prashant Godha, Managing Directors, and Mr . Harish Kamath, Corporate C o unsel and Company Secretary. I will now hand over the call t o the management to make their opening comments following which, we will open the floor f o r questions. Over to you, sir.

Ajit Jain: Thank you e v erybody for taking out time and joining us on this conference call. Thanks, Utsav and DAM C a pital for arranging this call at a very short notice. This con call and discussion may includ e some forward-looking statements, based on our busi n ess expectations. Participants m ay use their own judgment before making any decision based o n this call. All of you are now a ware that, the company has entered into SPA to acquire 33.38% of shareholding of Unichem L aboratories for INR1,034 crores.

Additionally, this acquisition has also triggered an open offer for an addi t ional 26% of the company's e q uity capital, aggregating to another INR806 crores, presuming 100% response. These acquis i tion costs will be funded through the company's retained ear n ings. Needless to say, this acq u isition is subject to approval of the Competition Commission o f India and among others. Unic h em has developed an excellent proven track record on regul a tory compliances. This acquisit i on is in line with our stated strategy to enhance our produc t offerings, in the chosen growt h market.

Briefly, the s y nergies on mutual benefit to both the companies out of this a c quisition are, Ipca has a very st r ong API franchises, with backward integration strength, tha t will be immense value to Uni c hem, in scaling up their global generic portfolio and also i n crease the market share with c o st efficiency and competitiveness. Unichem has 76 ANDAs f i ling in US, out of which, 54 A N DAs are registered, 44 products are marketed in United St a tes, few of these products are h aving good market share with further growth potential. Unic h em has also filed around 78 A P I DMFs in US market.

Where, Unic h em is not meaningfully present, Ipca can increase its product offering on those markets thro u gh Unichem's developed generic through market extension s , in markets like Europe, Aus t ralia, New Zealand, where Ipca has very good presence. I p ca will also look forward to m arket, some of the Unichem's branded formulations registere d in various RoW markets. Giv i ng briefly the rationales and strategies of this acquisition, I n o w open the floor for question a nd answer.

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Moderator:

Thank you. W e will now begin the question and answer session. Anyone w h o wishes to ask a question may press star and one on their touchtone telephone. If you wish t o remove yourself from the qu e stion queue, you may press star and two. Participants are requested to use handsets whi l e asking a question. Ladies and gentlemen, we will wait for a moment while the question que u e assembles.

The first question is from the line of Pankaj Tibrewal from Kotak Mutual Fund. Please go ahead.

Pankaj Tibrewal:

Good evenin g everyone. I have a few questions. The first one is on the capital allocation. When I look at the past for the last five years, we have done different s m aller acquisitions. Maybe like B ayshore, Ramdev, Noble, Pisgah and about INR600 crores-I N R650 crores have already been invested. When I look at the execution on those, those have n ot been inspiring and they hav e diluted our return ratios from where it was.

Can you help us understand that, how as investors we should take that conf i dence with such a large amoun t being deployed and any understanding on, what the retur n ratios could be? Because on t h e headline basis, it looks that the company has made losses . Last three years, four years, t h e company has not grown. So can you give us some kind of u nderstanding and how should w e gain confidence on the execution? That's my first question and I'll follow up with one mor e question.

Ajit Jain:

Currently, a l o t of companies are facing headwind in the US and Unichem h a s a fantastic track record on re g ulatory compliances, in the past. Looking at that and looking into the current business envi r onment, it appears that, we should be able to comfortably achi e ve almost around 15% to 17%, kind of growth, in next two years to three years very comfortably. They also have significant ca p acities, which are available for executions and all. And Unich e m has, I do agree that Uniche m has higher overheads.

We will have to look into and more critically, on those and also critically se e that, how can we optimize the o perations and cost optimizations, can be done. As far as thei r API facilities are concerned, a s far as their foundation facilities are concerned, they are exc e llent facilities are there. As far as API facilities are concerned, their scales are smaller today and the operating costs are hig h er because of lower scales and all. With some kind of some modifications and all, it is poss i ble to achieve a significant amount of better output from th e re and reduce the overall opera t ing cost and also the efficiencies can be generated. Detailed work on that has been done by our API team on that account.

Of course, it will require some kind of investment there, but that can be d one on that. With that, the kind of growth, which is expected because of current headwinds a n d also because of all these ope r ational deficiencies, which we can bring on tables. And also we have a lot of backward int e grations and some of those kind of intermediates and all can b e made available to Unichem a t a much lower cost and all, which will also bring in the efficiencies and overall reduction in t he cost of production and that will help Unichem, in terms of overall increasing their profitab i lity.

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Pankaj Tibrewal: Sir, with all d ue regard, can you help us understand, how the returns will b e generated? What is the return e xpectation on this acquisition because almost you will be inve s ting, if open offer goes through successfully, almost more than INR2,000 crores. So on this kin d of a number, the core business which was running well and probably expectation was that, th i s year could have been a stron g year gets diluted. So just wanted to understand that in INR 2 ,000 crores, what kind of a retu r n ratios and what kind of an improvement and profitability, ca n be expected?

Ajit Jain:

Let's say, ov e rall investment if 100% of your acquisition goes to the ope n offer shares are available, the n overall investment will be around INR1,839.5 crores overall o n that. So it's less than around INR2,000 crores. And overall, let's say current expectations of b usiness are good. Their order p ositions are also very good. Their order has started increasi n g from the fourth quarter of th e current financial year and looking at overall, the capacities, w hich are available and utilizatio n s and some of our products can be transferred there and with t h at, we can have a better utilizat i on from the capacities of Unichem.

And of cours e , we'll have to go through their overall detailed operating cost a nd rationalization of operating c ost and all that. That can definitely bring in the returns the r e. And hopefully, over the nex t maybe around a period of two years or so, it's possible t o go to a kind of EBITDA ma r gins of almost around INR300 crores or so on Unichem overall working.

Pankaj Tibrewal:

Okay, that's helpful. The second question is sir, when I look upon m o st of the pharma companies, w hich are listed on the exchanges today, they have a significan t US generic piece and that mar k et is going through its own challenges for the last four year o r five years. Many of the comp a nies are either exiting, writing off their assets, whatever may be the thing. And here, we go a nd acquire a US based company, largely US centric comp a ny, with giving a premium. Ca n you help us understand, the rationale of, where the markets a re ascribing either a negligible o r a negative value?

We are givin g a premium over and above the listed price. What is that, so s p ecial in Unichem apart from th e product portfolio, which is there that, we are paying two and a half times sales on the acquis i tion cost? Just wanted to understand some thought process, wh i ch is there behind it. Thank you.

Ajit Jain:

So overall assets of the company in the books itself, the assets are almost around INR1,400 crores of Un i chem. And if you look at networking capital, there is almo s t around INR950 crores net w o rking capital, is available. So almost around INR2,500 crores, INR2,600 crores, kind of asset s are available with Unichem currently. Of course, their sale s are low, but the business exp e ctations next two years are significantly higher because t h ey have put the additional ca p acity, which can be utilized.

And currentl y , what we are seeing because of all those disturbances, whi c h are there in US market, it's p o ssible to achieve that good turnover from those kind of busi n esses. And on the product side, they have almost around 10 product to 12 products. They ha v e very significant market share in US and that can be further scaled up with further cost effi c iencies, which we will have to b uild on Unichems operations, yes.

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Pankaj Tibrewal:	Okay, I'll fol low up in quick. Just wanted to place on record that, someho w we have been
	negatively su rprised by this large capital allocation for a US asset. I hop e, we deliver and
	execute better onthis. Thank you.
Moderator:	Thank you.T he next question is from the line of Tushar Manudhane fro m Motilal Oswal
	Financial Serv ices.
Tushar Manudhane:	Yes, thanks.T hanks for the opportunity. Sir, just on the product pipeline, atl east on Unichems
	side, ifyou c ould share, it could be the good products for next 12 month to 15 months. And
	secondly, wha t are the products is suitable, we can do site transfer to Unichem from Ipca given
	that, Ipca site has regulatory issues. That's my first question.
Tushar Manudhane:	I'm trying to ask you, if you could share any good product pipeline from Un ichems portfolio,
	which can co me up for approval over the next 12 month to 15 months, whi ch can help grow
	the sales or is it more of a market share gain, from the existing products? A nd secondly, what
	are the produc ts…
Ajit Jain:	Existing prod ucts as well as they are going to launch a few more products fo r which they have
	already got re gistration. So they also have a future pipeline for US busine ss. So around 75
	[products0:1 4:02], ANDAthey have filed, 54 are approved, about 40t hey are currently
	marketing. An other 10 product to 12 products, they will market in due course of time.
Tushar Manudhane:	Right. Anyp roduct under development, which could be niche, where you could have more
	than five play ers in the market?
Ajit Jain:	Most of them are all me-too generic products. There are, I don't think anythi ng first to file and
	such other pro ducts. They are all me-too.
Tushar Manudhane:	And secondly , any products which we can think of transferring from Ipca side to Unichem?
	[inaudible 0:1 4:39].
Ajit Jain:	That possibil ity is always there and vice versa also. Ipca to Unichem,U nichem to Ipca,
	anything can happen. Those possibilities are always there in this equation an d that is also one
	of the synergi es, we looked at.
Tushar Manudhane:	And can youg ive secondly, if you could also share any update on Ipca side fr om US FDA?
Ajit Jain:	Nothing, ther e is status quo. So let us hope, inspection will happen soon an d we are through.
	But as we spe ak, there is status quo. No development.
Tushar Manudhane:	If let's say, the inspection happens also and that is successful, then we will ha ve the capacity of
	Unichem to fi ll as well as Ipca's facility to fill up so, do we have…
Ajit Jain:	But Ipca hasi ts own product range and Unichem has their own product range .
Tushar Manudhane:	Okay, and jus t lastly, out of this current Unichems business to US, the top3 or top 5 products
	business woul d be how much of the US sales?

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Ajit Jain: Maybe top 10 products may be contributing nearly 70%-75% of their business. In which product, they have a very good market share and they say, it can be further s c aled.

Tushar Manudhane: Okay, sir. Th a nk you. Moderator: Thank you. W e have the next question from the line of Chirag Dagli from D SP Mutual Fund. Please go ah e ad Chirag Dagli: Yes, sir. Tha n k you for the opportunity. Sir, I understand the rationale of o r the intent behind trying to scal e up in the US. What I don't get is that, is this, was this absol u tely the best deal possible give n that the market has been in such a big distress, over the last c o uple of years? Could we no t have had any other asset to increase our presence in the US? T he structure of the deal as well, as in we are providing exit to the promoters, that also and w h at is the endgame eventually, t h at structure itself is also slightly inferior versus a clean me r ger. So just your thoughts on b oth these aspects. Was it the absolute best deal? Could we not h ave awaited for a better deal? B ecause It seems like, while the business will scale up, but m aybe there could have been b e tter assets available in the market. Why not just wait till a good deal comes across? Pranay Godha: This is Prana y here. So let me answer that, in one simple sentence that it w a s better than most of the deals t hat, had come on our table in the last five years. And ther e are reasons, the synergies we r e much more than, what we had seen in the past. Then in ad d ition to that, what we were lo o king for was obviously a good compliance and credible t r ack record, with available sp a re capacities and integrated business play, which is very c o re to Ipca's own business phil o sophy, in the generic field. When you look at these three mat t ers, there are very few candidat e s out there that are on the same table. Chirag Dagli: Understood s i r. These synergies could this not have been also struck without putting capital in, as business d e als rather than a more shareholder kind of a deal? Pranay Godha: No again, it's something that we have tried, but we've generally, let's say, n o t been, it's not got encouraging r esults. The simple thing is, again, in the US market space, w here there is cutthroat compe t ition, there is very little space for margin layers, in a way. So e verybody, if there will be multi p le layers through the whole value chain, one cannot remain competitive on a year-on-year basis. And for the kind of products that Ipca will eventually have, when it reenters into th e US space and what Unichem has today, we will always hav e to remain on our toes and cont i nue to work on, focus on margin improvements every time.

Chirag Dagli: Understood. A nd like Mr. Jain said, he talked about INR300 crores EBITDA in two years from now. On tha t , we've paid about 10x EBITDA today, Pranay. It seems a b i t steep. Is there a much larger g ame plan beyond that INR300 crores that we achieve in two y ears? Do you see this entity be i ng like $400 million, $500 million in the US? Because beyond that $300 million, beyond that $ 40 million, $50 million EBITDA, this entity will have to be m uch larger in the US, for your p ayouts to happen?

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Pranay Godha:

Pranay Godha: The aim and the efforts will be put in exactly that direction itself. There is a game plan in place, witho u t getting too much specific, on the exact number or so. We ha v e set ourselves an immediate c h allenge of achieving the INR300 crores. And once we do tha t , we will have to continue to work upwards from there on. Chirag Dagli: Understood. A nd this INR300 crores EBITDA number that you talked ab o ut two years out, does that inc l ude synergy benefits as well or is this just the way busines s , is there a large synergy here ? Pranay Godha: It does inclu d e synergy benefits. Without that, this number would other w ise be a bit of a challenge. Chirag Dagli: Understood. A nd just the last question, was there a number two, I am i m agining that this would have b een a well-bid kind of asset, as in a process would have been d one and you guys won the proc e ss. But what was the number two bid, if you can share? Pranay Godha: I'm not awar e of it. I'm so sorry. Chirag Dagli: Okay, sir. Th a nk you so much. Moderator: Thank you. T he next question is from the line of Prakash Agarwal from A x is Capital. Please go ahead. Prakash Agarwal: Yes, thanks f or the opportunity. Good evening. A couple of clarifications. S o, the first one is on the, the ra t ionale of the business is to gain the portfolio and the facilities for the exports. If you could ju s t help us understand the Ipca capacity utilization in current f a cilities as well as the Unichem s ? Ajit Jain: As far as the facilities, which are in the US currently, their capacity utilizat i ons are very low. Our Pithamp u r plant is utilized around 30%, Piparia plant maybe around 25 % to 30%. So, both the plants’ u t ilizations are low. But once we have US clearance, these cap a cities will be the smaller and w e will have to expand further at existing place only. And cap a cities of Unichem will also be h e lpful. Prakash Agarwal: And Uniche m currently would be at what capacity, sir? Ajit Jain: Unichem, th e y have set up recently and commercialized a new facility at Goa, which is Unichem Go a two. Their capacity to utilizations may be around 20% to 3 0 % right now. So, significant ca p acities are available. And it is much more automated plants with much, very less human interv e ntions practically. Everything, all is recipe based and very goo d plant. Prakash Agarwal: Okay, unders t ood. And secondly, if you're saying INR300 crores in the next two years, we are talking about fiscal ‘26, right? Ajit Jain: Once we hav e management in hand and we start operating things, it's from t h at time. Prakash Agarwal: Okay, but w h at is the top line versus we are looking at INR300 crores?

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Ajit Jain:	Overall, it sho uld be able to, let's say, go to almost around INR1,700 crores , INR1,800 crores
	kind of turnov er maybe in two years' time.
Prakash Agarwal:	Okay. So, but sir, our margins historically, pre-COVID, has been 18% to2 0% with COVID,
	we went all th e way to 25%. And now, this year has been an aberration, bu t we aspire to be
	again a 20%m argin company. Correct me, if I'm wrong. This, after two year s, three years, we
	are still talkin g about 15% and 18% margin. So, a lot of work to be done an d margin dilution
	in the next thr ee years. So?
Ajit Jain:	You are talkin g about Unichem, not Ipca.
Prakash Agarwal:	No, I'm comb ining the two, sir. Now, I'm just combining the two, that int he past, you were
	20% plus ma rgin and in COVID, you went all the way to 25%, now abou t 16%, 17% and
	maybe nexty ear, you'll be back to 18%, 20%. What I'm saying is two ye ars out, you will,
	Unichem, you are still talking about 18% margin. So, there's a long dilution that will play out
	in the next tw o years, three years. Is that correct understanding?
Ajit Jain:	See, Ipca isa lso into branded formulation business in India. So, that margin you can't equate
	with only inte rnational business. So, Unichem is a purely a company, whichi s into generic and
	API business.
Prakash Agarwal:	Yes, no, sir th at's why the rationale of doing such a large deal in the export market, especially
	when the ma rgins and return ratios are so low is, what I'm trying to un derstand. Just for
	capacities?
Ajit Jain:	Yes, there are surplus capacities available there, yes. And very good plants,v ery good asset.
Management:	Plus Prakash, we are also talking, we are into Australia and New Zealand,w e are into Europe,
	Unichem isn ot present in those markets. So, technically, whatever produc ts they are today
	launching, th ey are registered in the US, we can practically bring most of them also into
	Australia and New Zealand, Europe. So, that way, we can also increase ou r product basket,
	product offeri ng, that will definitely add value to our business.
	Plus, we area lso into branded formulation business in 40 odd countries, wh ere thousand odd
	people arem arketing our branded formulation. Unichem also has a lot of registration. They
	sold their only brands for India and Nepal. So, all brand names, all rights for rest of the market,
	they are with them only. So, that opportunity is also available for our RoW br anded team.
Prakash Agarwal:	Understood.
Management:	Whatever oth er synergies we spoke about US and other things, this is also ad d on to that.
Prakash Agarwal:	Okay, perfect . And lastly, on the structure, so after promoter's takeoff 50 %, currently only
	33.38% has b een done as a…?

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Management:	Around 14% odd Dr. Modi family will retain and they will, it is at their	wil l, when they want
	to sell, they want to keep, it is up to them. But management control	pos t takeover matter
	completes, wi ll be in the hands of Ipca.
Prakash Agarwal:	Okay, to start with, it will be part of minority interest and once the open offer concludes, it will
	be consoled,r ight?
Management:	It will be man datory
Harish Kamath:	Yes, both ope n offer and this equation is subject to competition commissio n approval. Once
	the commissio n approval comes, we can acquire equation share from Dr.M odi and balance it
	is up to the pu blic how much they will offer. So, that is altogether a different thing.
Prakash Agarwal:	You can acqu ire the remaining from Dr. Modi? Is that what you said?
Management:	In the current agreement, there is nothing on that.
Prakash Agarwal:	Okay, mightb e a possibility is what you said?
Harish Kamath:	There is nothi ng stated in the agreement, not discussed.
Prakash Agarwal:	Okay, there is no RoFA or nothing like that?
Management:	No, but in th e agreement we are providing, we can increase our stake thr ough preferential
	route and allt hat is always open.
Prakash Agarwal:	Okay, Fair en ough.
Management:	That is we do n't get offer, share in the public offer, we can increase our ho lding through any
	other means.I ncluding preferential issue.
Prakash Agarwal:	Okay, so how to get the majority and the management control is what you are trying to say?
Management:	That is alread y stated in the SPA.
Prakash Agarwal:	Right.
Management:	That will com e irrespective of our holding on 33% also, we will get that.
Prakash Agarwal:	Okay, Thank you, sir and all the best.
Management:	Yes, thanksP rakash.
Moderator:	Thank you.T he next question is from the line of Nikhil Mathur from HD FC Mutual Fund.
	Please go ahe ad.
Nikhil Mathur:	Hi, sir. Good evening. I just wanted to understand a bit more on the valua tion paid for this
	acquisition.C an you explain a bit in detail, what kind of valuation	ben chmarks has the
	company used to evaluate this particular asset? Obviously, on headline numb ers, this valuation

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is difficult to justify the rationale for this acquisition. Maybe on price-to-b o ok, there is some rationale for t his particular acquisition.

But if you a r e really looking at earnings to justify this particular acquisi t ion, what kind of earnings are y ou looking at? Is it two years out, three years or five years o u t? Some color on this will kind of give us some confidence, what kind of profitability, you are envisaging from this business t wo years, three years, five years out?

Harish Kamath: Yes, that Mr. Jain has already explained. On a business of around INR1,800 c rores or so crores in second ye a r after, we took management control, the EBITDA should b e around INR300 crores. I am t a lking only Unichem business. Nikhil Mathur: So, just to u n derstand this INR300 crores number a bit better, if I look at t he past history of Unichem, let's say in FY ‘19, FY ‘20, FY ‘21, the gross margins for this b u siness were pretty robust at 68 % , 69% and 62%, also in one particular year. But still, the com p any wasn't able to generate posi t ive core EBITDA. So, is it entirely overheads, which have t o be normalized in the next two years to achieve this INR300 crores EBITDA or sales growth has to come in to achieve this p articular number? So, if you can bridge the INR300 crores nu m ber split into how much of thi s would be sales driven and how much of this can be pul l ed out from cost rationalizatio n . I think, that will give me [idea 0:29:33]? Harish Kamath: It is three th i ngs. One is sales growth. Second thing is operational effici e ncy improvement through wha t ever contribution, we can do in increasing their efficiency of API facilities. On [inaudible 0: 2 9:49] synergy, both the three things should play for this nu m ber, what we are talking. Nikhil Mathur: Sir, in the fir s t place itself, why are these inefficiencies in this particular business, if you can, at a broad level, kind of help us understand a bit, what is plaguing the broade r business? Ajit Jain: The first thin g is obvious, the capacity utilization. Second thing is API, wh a tever, batch sizes and yield and other things. These are the two basic things. Nikhil Mathur: Okay. Sir, to go from INR1,250 odd crores of revenue to INR1,700 crores, INR1,800 crores over the course of two years, this growth seems pretty steep for a business w hich has only 40 products in t h e US. Any color on how many launches will be done in this t wo year period to drive this gro w th? Harish Kamath: I told they al r eady have 50 plus approval, 40 launches, another 10 products they will launch over the cour s e of time, plus we have also seen their order receipt and order book position and we are confi d ent whatever guidance they have given for at least next finan c ial year, they will achieve. Nikhil Mathur: Okay, okay. A nd finally, sir, Mr. Jain, you have talked about these assets b e ing pretty good. I think Uniche m has had a decent US FDA track record in the past, but what w e have seen over the past five years, six years is that the goalposts of FDA have been c hanging. Certain

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companies which seem to have had very good compliance have found th e mselves in some troubled wat e rs at some point in time.

So what kin d of diligence have you done from your end to kind of establis h that these assets won't suffer f rom any US FDA compliance issues in the coming future? B ecause as far as I remember, I t hink most of the companies have gone through a cycle of no n -compliance, then come out of i t . So I just wanted to understand what kind of diligence, what k i nd of engagement you have do n e with the promoters of the target to kind of establish that the s e assets are pretty good.

Ajit Jain:

Nikhil Mathur:

Ajit Jain:

Nikhil Mathur:

Ajit Jain:

Nikhil Mathur:

Moderator:

Prashant Poddar:

Pranay Godha:

Prashant Poddar:

So, nobody can ever guarantee what will happen in the future. There is no guarantee of what FDA can do i n the future for anyone, for any site on this world. So, other th a n that, I think we have learnt a lot in the last seven years, eight years, and we have used all o f those including some of our , obviously internal and external resources to go through t h e due diligence, especially on the quality culture and the quality practices, on the on-groun d practices of their sites. I think we are generally satisfied and we believe that things will re m ain very much in control.

Okay. So, th e quality system that will be on board, there will be no change d one to that quality system or yo u need to do some… Quality systems always have to be updated as per the current requiremen t s. That's why it's called CGM P . So whenever there is a need, wherever there we wil l see a scope of improvement , we will obviously, every company that has to remain in this s pace will have to be proactive a t least to the best of its intent and expertise. But you are h appy with what will come on board? You are not looking to m a ke much changes to upgrade it a s of now? I mean maybe one year, two years out things might c hange but … As of now as we speak, no, we don't expect to see much changes. Okay, got it. T hank you so much and all the best. Thank you. The next question is from the line of D.R. Rao from ADIA. Plea s e go ahead. Yes. Hello e v eryone. This is Prashant Poddar from ADIA, Prashant and Rao . Sir, first question is, were ther e other bidders for this asset as well? Was this a market on t h e deal or this is a private trans a ction? No, we are n o t aware of any other deal which they will be talking.

Yes, okay. Y e s, Mr. Jain, Mr. Godha sir, I think most of the questions hav e echoed the same sentiment th a t is, that Ipca's own experience and many other Indian compa n ies' experience in the US mar k et has been bad, Ipca's in the last decade actually and m any other Indian companies i n the last three, four years. And now there we would be see i ng some cyclical improvement . There is some talk about cyclical improvement. We have to yet see the fruits of those. But, I m ean, a market which is so dominantly, I would say, positioned for distributors.

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So, two concerns there. One is regulatory. I mean, we understand you ha v e learnt a lot, but could that be a risk? And how do you calculate that when you are putting s u ch a large capital allocation in the same market which has hurt your asset returns in the pas t ? And the second one is your o wn expectation, this INR300 crores EBITDA on an INR1,800 crores turnover. Does this inc l ude the US recovery that we are seeing right now which could be cyclical for all you know?

Ajit Jain: The way we look at it, where there is adversity, there is a bit of an opportunity. Yes, undoubtedly d ue to the obvious market pressures, be it from the buying si d e and or from the supply side f r om India, there has been quite a few disruption and challeng e s. And as we see today, prices are getting kind of more rational and stabilized. We believe t h ere is a scope for companies li k e Unichem and hopefully soon Ipca to make use of this opport u nity. And as long as we remain both compliant and competitive, I think we can achieve these k i nd of numbers. Prashant Poddar: The other q u estion is around this INR1,800 crores kind of turnover. Jus t the 60 products, assuming wh a t Mr. Kamath said, the 60 products, we assume all of them c o me through, even then this IN R 30 crores, INR40 crores per product kind of is quite high. I a m not saying it is bad, I mean we take it with both hands, but these numbers are higher t h an what we have generally obs e rved in Me Too portfolios. Harish Kamath: Sorry, sorry, we are just confused. They are not only in the US, they a r e also into other markets. The y do a lot of formulation business in Brazil. They have some b u siness in the UK. So this INR1,800 crores includes all those businesses. They also have A P I business. All of them are incl u ded in this. It is not only US. Prashant Poddar: So should we assume half of this is US? Harish Kamath: About 60%-65% you can assume. 60% you can assume. Prashant Poddar: So, even the n around $2.5 million is clearly on the higher side. Would yo u also believe that, that it is on t h e higher side, that their product portfolio is generally producing higher value per product as su c h? Harish Kamath: No, today als o eight to 10 of their formulations are giving much, much high e r than the amount what you are talking. I am speaking only US sales. Prashant Poddar: Okay, and th e se are not early stages of competition. Harish Kamath: No, no, older generics. And still there is scope for them to grow their market share. Prashant Poddar: So this, just q uickly understanding this, as Pranay was explaining that this is an opportunity you can use. Is it, I mean, what kind of recovery you are expecting in t h is INR300 crores EBITDA per f ormance? Could it be better if, I mean, is it, if the market g e ts really rational, could it be b e tter than this INR300 crores? Pranay Godha: I would not e xtend myself that far. Let's hope that it gets better. There is a t arget we have set for ourselves. We want to head for it. And we are at this moment, you know , doing everything

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or thinking t h rough this matter as intensively as possible to achieve it. So I w ould not, let's say, bet on it righ t at this very moment.

Prashant Poddar:

So, Pranay, i f we split this into the three businesses, API formulations and t he other countries formulations, you know, if you can give us some, because all the discussio n has been around the US, if yo u can specially explain the strengths in the other markets that U nichem brings to the table, ot h er than just the, you know, registrations, are there, you k n ow, sales teams, branded sales teams, which you can boast about in this transaction?

And one mo r e last question there, in terms of profitability, if we look at INR1,700 crores, INR1,800 cr o res and INR300 crores, it is 16%, 17% kind of margins. U S and these other formulations, which one would be the leader of, margin leader in this calcul a tion of yours? So both these qu e stions, please. That's all from my side. Pranay Godha: Other than US, the other biggest segment is their contract manufacturing, w hich is primarily for Europea n customers. And then there are other markets like Brazil a n d other emerging markets. The API business is again dominant more in the European space an d other, let's call it emerging ma r kets. So, profitability-wise, obviously, after, I would say, stric t ly as a percentage number, the e merging markets always are, from a percentage basis, more p r ofitable. But from a core numb e r point of view, CMO business and Brazil business is no w becoming more profitable tha n before. Prashant Poddar: CMO and Br a zil. Okay. And the CMO has, you know, strategic potential to be growing much larger, is it? O r is it again me too kind of business? Pranay Godha: It is, from a p roduct point of view, yes, it is a me too kind of a business f r om a potential to grow, obvio u sly, because everybody needs a competent and a reliable su p plier. And in that mark, again, Unichem has proved itself, it has great credibility. We kno w in the past from other compet i tors how much it was difficult to compete with them on certai n projects. So, they have a very g ood relationship with some of their key clients and they have a very good track record in ter m s of supply chain. Prashant Poddar: All right. Th a t's all from my side. Thank you very much. All the best. Pranay Godha: Thank you. Moderator: We have th e next participant, Mr. Diresh Pathak from WhiteOak Capital with the next question. Ple a se go ahead. Diresh Pathak: Yes, thank y o u. So, apart from the operating assets, the plants and the filin g s, is there a noncore asset wh i ch you can monetize? Ajit Jain: There is a pr o perty in Jogeshwari, which is, it might be around 10 half acres land and all. So, over a period of time, I think that's one possibility exist to monetize. And apart from that, they have almost a round, close to almost around INR275 crores locked up in G ST because they were followi n g certain method of, let's say, GST refund instead of GST goi n g for rebate. And GST refunds t ake much longer time compared to GST going for rebate syste m . So, it's possible

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to unlock th a t kind of cash maybe over a period of one year time. So, th a t's basically cash available in t he balance sheet of almost around INR275 crores. It's possib l e to take out that entire cash.

Diresh Pathak:

That will hav e to be checked even from the government, right?

Ajit Jain:

Oh, that's b a sically, normally all exporter goes for rebate system that when you export something, y o u prepare in, say, GST invoice and pay the GST out of you r credit. And once your exports a re done, within a period of two months’ time, one and a half m onth, two months’ time, you ge t the refunds. But the GST refund system takes very long ti m e because refund applications, t hen process and all those kind of, it takes some time more th a n a year. So, they have a huge a mount of money which is lying in GST refund amount on whi c h applications are going or som e applications has already gone.

But when w e change the method from your refunds to rebate, the cash wi l l start coming out and with exi s ting money which is locked up in refunds, with that coming i n over a period of one year tim e , almost around close to INR250 crores cash can be generate d from that change itself. And J o geshwari property, almost around INR300 crores, broadly, we h ave not done any kind of valua t ion right now, but looking at the market and three and a half, half acres of land, that should b e the valuation currently. Almost, that's the kind of cash could b e available which can be utilize d for the business.

Diresh Pathak: And sir this I NR1,800 crores revenue, this assumes optimum utilization of the current plants plus the plants which are in CWIP, right and the current filings, right?

Ajit Jain: Yes, because they have already capitalized their Goa plant, which is the l a test capacity they have put up on the foundation site. On CWIP, there is some more asset which is there at Pithampur A P I plant, which is what around INR100 crores are there. But t h at plant will have to be rework e d out because they have not installed any kind of reactors or s ome, it's basically building and other assets are ready, but we will have to use all these kind of chemical engineering m ethods to understand that what kind of rework on their order p rocessing areas to have much b e tter throughput.

Diresh Pathak: So to achiev e that INR1,800 crores, like another INR500 crores from the e x tra revenue from the current run rate, you will need to invest in working capital plus some cap e x. So what is that estimate of e xtra investment that needs to go into to generate the full INR1,800 crores revenue? Ajit Jain: From Uniche m ’s operation itself, because GST refund itself will be a signifi c ant amount which will come ou t . You don't need any kind of additional cash, rather cash will, we'll have to look into the supp l y chain to see that what kind of rationalization can be done o n more particularly on their entir e cash to cash cycle in terms of inventory holdings and in term s of all operations, synchronizin g everything. So that part can also bring out some kind of cash f r om the system.

Diresh Pathak: So would yo u also step up your R&D investments for US now?

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Ajit Jain:

Let's say our strategy policy is very-very clear that we don't want to do a lot of work based on somebody el s e's API. So all the kind of work that needs to be done is only based on our own API. And th e refore, that work is not like say that currently Unichem is spending a large amount of m o ney on R&D. That also will need to be rationalized properly.

So good am o unt of savings can also be generated from there. Becaus e in an integrated company, it's only the product development which will happen only based o n our own internal API and then forward. So it's not that your dozens of NDA needs to be filed and generated and all that becau s e how much competitive you could remain on the outsource A P I and today when the margins a re under pressure [inaudible 0:47:12], operational efficienci e s and all that can come only th r ough your own API. So that's the business philosophy will not c hange here. Diresh Pathak: Okay sir, Th a nk you. Moderator: The next que s tion is from the line of Ritesh Rathod from Nippon India Mutu a l Fund. Please go ahead. Ritesh Rathod: Yes. Hi ever y one. Can you share what's your future plan on the pending sta k e post open offer Would you a c quire that stake or would you have any plans in next three ye a rs to five years of acquiring or w ould this entity be kept as a listed entity? Unichem? Harish Kamath: It will be ke p t as a listed entity. Our SPA is for acquiring 33.38% shareh o lding plus we are making open offer for 26%. If everything comes in the open offer, my hold i ng will be around 60%. Ritesh Rathod: No, I'm talki n g post that given many of your past acquisition, you have kep t a stake not taken until 100%. S o what are your plans over there? Harish Kamath: No, this is a l isted public company. In any case, the public holding has to b e in excess of 25% to remain list e d. So that will continue status. Ritesh Rathod: You don't pl a n to acquire 100%? Harish Kamath: Currently, th e re are no such plans. Ritesh Rathod: Just in one o f the previous questions, since you're acquiring, planning t o acquire 60% at INR1,800 cr o res. So you're overall, you're just getting a proportionate st a ke. If I do a full company val u ation, it's an INR3,000 crores kind of evaluation, which is co m ing in somewhere around $350 million or $370 million whatever the number and for 50, 6 0 ANDAs, it's too much.

I think maybe you need to I don't know what benchmark you have taken for this, but it is coming som e where around $5 million to $7 million kind of a range, whi c h is out of range, maybe you c a n talk about non US, but non US, it's still not, it’s just 40%, 60% is still US. So this is on ve r y extreme in terms of valuations when you move at [inaudi b le 00:49:31] and maybe on th e capacity side when you're saying that you have a USFDA approved facility. How many ti m es this facility has been inspected till date by USFDA since it s tarted?

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Harish Kamath:

First of all, y o u commented 50 ANDA that is not correct. They have about 75 filings plus they also have 7 8 DMFs for API. And these products can be marketed wo r ld over not only necessarily i n US. Their focus was on US in UK and Brazil and some other c ountries. But with our presence in many other markets, there is every scope to commercializ e these products in those market s also. So we are not paying just for 50 ANDAs and they also h ave a lot of other IPs like 78 D M Fs for API, which they have developed and filed.

Ritesh Rathod: But still the r ange is very high is what my point is, even at 70 ANDAs o r 60 ANDAs, the range, the pe r ANDA is excess of $5 million and whatever you want to give for the API, DMF filing. It's ab o ve the range is, what my point is. And can you just answer o n this one? What's the regulated track record of this Unichem plant? How many times they h ave till date been inspected? E v en the last inspection was somewhere pre-COVID. But since t he infection, how many times U S FDA has inspected the plants? Harish Kamath: They have m ultiple plants, not three for API and three for formulation. Out of that two formulation p lant and three API plants are US FDA approved. Multiple ti m es, it is inspected. Some plants a re new, they got approval recently. And all approvals are defi n itely pre-COVID only. Ritesh Rathod: And when w a s the last inspection for all these plants, like formulation…? Management: I said pre-C O VID. Management: 2019, 2020. T he very last inspection amongst the five sites was in 2020. Ritesh Rathod: And given t h e formulation plants are the key ones, so how many time s , those have got inspected? Management: And again, t y pically about two times to three times depending on which plant you talking about. Ritesh Rathod: Okay, you sh o uld rethink on this given most of the investors, what they are e c hoing. Yes, that's my final poin t . Moderator: Thank you. T he next question is from the line of Nikhil Mathur from H D FC Mutual Fund. Please go ah e ad. Nikhil Mathur: Yes, hi. Tha n k you so much for the follow-up. I just have one quick final question. What is Unichem's p o sition today on the fine, that has been imposed by the Europe a n Commission of INR120 cror e s that is sitting as part of contingent liability? And second part to this question is that, have yo u been able to de-risk yourself from this particular penalty, if it goes through? So, this penalty a lso should be taken into consideration, right, when we are talking about the acquisition v a lue? Harish Kamath: This is alread y considered, while calculating. Nikhil Mathur: No, it is yet t o be provided for, right?

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Harish Kamath:	The matter is also yet to be finally settled, still in the court.
Nikhil Mathur:	But are youw orking with the worst case scenario here, that entire INR120 crores has to be
	paid out?
Harish Kamath:	There is a cou rt procedure going on plus there are several other possibilitiesa nd options also.
Nikhil Mathur:	Okay, underst ood. Thank you so much.
Moderator:	Thank you.T he nextquestion is from the line of Vaibhav Badjatya from Ho nesty & Integrity
	Investments.P lease go ahead.
Vaibhav Badjatya:	Hi, sir. Thank s for providing the opportunity. So as one of the earlier partic ipants highlighted
	that the marg in of Unichem business is actually very good as compared to some of the other
	US focusedp layers. So, what is the reason, you will attribute this fact to? What are the
	advantages as Unichem have because of which they are able to generate good gross margin?
Management:	On their peak products, I believe it's their economies, scale economies an d their backward
	integration. It 's a combination of both. And in some cases, it's also because of their, I would
	say, cost comp etitiveness in addition to the above.
Vaibhav Badjatya:	Okay, Got it . And secondly, in terms of because now we will be in ch arge of things at
	Unichem, do you plan any significant management changes there in termso f people, who are
	looking after compliances and any other thing? In marketing or something , do you plan any
	major manage ment changes or mostly the things will be status quo?
Management:	Not at all. Wh atever the team, in the quality and operation side, they've gene rally done a good
	job. Their act ions are speaking louder than words, I would say. So, things wi ll moreor less, be
	business as us ual.
Vaibhav Badjatya:	Okay. And,y ou know, they also have ESOP plan. So, that ESOP will contin ue as it is or there
	will be somec hanges in that ESOP scheme as well?
Harish Kamath:	No, once theE SOP resolution is passed, it is generally valid for ten years. So you can't change
	once the sche me is passed by shareholders to the detriment of the ESOPg rantees. That you
	cannot do.
Vaibhav Badjatya:	Okay, Got it. Understand. And for scaling up to this INR1,800 crores, as you said, willit
	require any ca sh infusion in any scenario from Ipca side or it would be…?
Management:	No, It does no t require.
Vaibhav Badjatya:	And there is no plan as of now to kind of merge Unichem with Ipca, after open offer
	completion,a fter we acquire [inaudible 0:55:50]?
Management:	No, absolutely not. No.
Vaibhav Badjatya:	Okay. Got it. That's it from my side. I will come back in thequeue.

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Moderator:

Thank you. W e have the next question from the line of Surya Patra from PhillipCapital. Please go ahead.

Surya Patra:

Hello. Yes, t hanks for this opportunity. Sir, first question is that, see, o b viously you have guided that t h e Unichem business possibly in two years’ time, likely to achi e ve something like INR1,800 cr o res. But we know that around 70% or slightly more than that o f the business for this currentl y generated is relating to US and Europe. And so we are obv i ously targeting to achieve certa i n growth number on that.

But what is t h e synergetic benefit that, we are targeting for Ipca's portfolio i n US business or in US dent? So obviously there will be some thought process and that is, th a t will be the key rationale be h ind that acquisition. So can you throw some light about t h at? What is your thought proc e ss about taking Ipca portfolio to US market? And how can y o u get or Ipca can get complim e nted by the assets of Unichem?

Management:

So for some o f their core products, even today, we believe they can benefit from Ipca’s cost competency i n terms of the APIs, for their own raw material consumption. A nd I'm over here. I'm being a bit optimistic. I do look that our Ratlam facility, will have a p o sitive outcome by the will of G o d, I would say, in the very near future that, we are trying ver y hard for that too. So with that a ssumption in place, we believe, we can be a very good alter n ative supplier or I would say pr i mary supplier for some of their own raw materials or APIs.

Irrespective o f that, even if we do a tech transfer of our technology on thei r facility, they can get to benefit from the better processes that, we have. Then on the other sid e , we find some of their APIs h a ve better cost competencies, but not adequate scales, which we think, we can provide very easily within our available facilities. So there is going to be q u ite a few give and take happeni n g between the two companies, in order to best utilize not just t h e capacity, but to utilize the co s t competencies also.

Surya Patra:

Okay. Sir is i t possible?

Management: Yes. And of c ourse, in addition, at the cost of being repetitive, Mr. Kamath h ad also mentioned that, we are looking upon their already developed products to be extend e d out, into other regulated ma r kets.

Surya Patra:

Okay. And s ir in terms of the let's say, you have mentioned that, the t o p ten product is generating al m ost 75% of the US revenue. And obviously, that means, they are having a kind of a signific a nt cost advantage or something like that in this. That is why in this cost competitive w orld, they are so successful on those products. So if you can share, what is the level of API i ntegration that they are having, a level of backward integrati o n, to say here for APIs. Are th e y into intermediaries as well?

Ajit Jain:

Most of their products are, except a few products, which they are using AP I from outside, but most of their overall, let's say, your DMFs are from, let's say, stage 2, stage 3, something like that, not too m uch backward integrated. They are from the key penultimate t o the final kind of your API sy n thesis. So there we can add a lot of values to them in terms o f providing further

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backward int e grations in terms of intermediates and some of the sources re p lacement can also be possible. O nce our facility gets the US approval.

Moderator: Sir, sorry to i n terrupt. You're not very audible. The volume for you has gon e low. If you could speak closer t o the mic, it would help. Ajit Jain: Yes. So som e of the APIs are outsourced. Most of their APIs are basical l y from their own backward int e gration site. But most of their synthesis are also from, let's say, from the late stage interm e diates and all. Where Ipca can add value in terms of providi n g them more cost efficient inte r mediates or something like that. And as Pranay ji has already said that some of the intermed i ates, some of the APIs which currently outsource is possib l e to do our track transfers to t h em and produce our products at their site and create furthe r more efficiencies, cost efficienc i es for them. So to further maximize the market share. Surya Patra: Sure. So just last one question. You talked a lot about the cost optimizatio n and also what is the ultimate o utcome at the EBITDA level over next two year time post int e gration. So here I am assuming that let's say integration time would be one year and post t w o years, post that during two y e ar period or in fewer periods that you will be like to achieve t h is INR300 crores kind of numb e r. But for better confidence on this... Ajit Jain: It could be lo n ger also because pharma being a regulated world, API needs t o be done. Device process nee d to be validated. Then again formulation batches need t o be taken. That validations a r e required. So sometime it will go to around one and a half ye a r. So not all APIs are to be do n e that way. Key focus API that kind of program can be pla n ned and could be implemented in a period of around one and a half year time. Surya Patra: Yes, exactly S ir. So particularly this was my point. So hence just to have a better confidence about the co s t optimization. So if I just comparatively see the cost costi n g and the income costing, ther e is a significant difference. So let's say to start with, obvio u sly on the gross margin fund, it could be comparable, but let's say R&D spend itself, it is ki n d of a 10% of the revenues. So if you se e the other expenses, then that is also significantly higher. So t he initial the cost line items th a t could be of some could see some action from your side and could bring in immediate ki n d of a saving. So could you share your focuses on that cost o p timization during the process o f integration? Because otherwise... Ajit Jain: We will hav e to look into their entire overheads and look into the whol e thing and those optimizations will have to be done, because it's not the gross margin, not an issue as far as Unichem is c o ncerned. They have good gross margin, can be further enhanced through further process opti m izations and cost reductions and all that kind of things, more particularly on API side, formula t ion side nothing is possible. Formulation side only you can ha v e higher capacity utilizations a n d [inaudible 01:03:55] margins.

So that's one. But on API side, a lot of those kind of cost optimizations are possible. But immediate w o uld be your cost rationalization itself. As you rightly said, the R&D cost itself is

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very high. T h ere are a lot of other cost, which we will have to go through bu t once we come in management then only we will be able to look into those kind of things a nd then work on them. But ce r tainly there are scopes to rationalize those kind of cost.

Surya Patra: Even if you a r e not having 51% stake post this open offer, can you integrate t his or consolidate this business i nto your customers? Ajit Jain: We will have to follow the law of the land on that. Surya Patra: So majority control in the management will not allow you to consolidate? Harish Kamath: Consolidatio n will happen, whether it is single line consolidation or line by l ine consolidation. That is the o n ly difference. But consolidation will definitely happen. Surya Patra: Okay. Sure sir. Thank you. Harish Kamath: Thank you. Moderator: Thank you. T he next question is from the line of Cyndrella Thomas C arvalho from JM Financial Li m ited. Please go ahead. Cyndrella Carvalho: Thanks for t h e opportunity. Can you help us understand? You were talkin g about integration from an entit y perspective as well as the cost process of having backward int e gration with your filing. So out of the top 10 products, you said 70% is kind of the contributi o n for the US sales from the top 1 0 products. How much is backward integration or the possibili t y? Management: How many o f those products there is backward integration for their scope? Harish Kamath: Okay. Ms. C a rvalho, just to be clear, you are asking how much of the top 1 0 products, what is the percentag e of backward integration? How many are backward integrated ? Cyndrella Carvalho: Correct. Harish Kamath: About 70% o f those. Cyndrella Carvalho: 70% of the top 10 which contributes 70%? Harish Kamath: Yes. Cyndrella Carvalho: Okay. And w hen I look at the nine month performance, the gross margins in the nine months have kind of c ome off. What should be sustainable? Harish Kamath: You are not a udible. Cyndrella Carvalho: Yes, I am sa y ing if I look at the nine month performance of Unichem num b ers, we are seeing gross margin s closer to 59%. And if I look at their annual run rate, they have been around 66% to 67%. So what should be a sustainable run rate that we should look at? An d largely, what has caused this l o wer gross margins in the nine months if you can help us?

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Harish Kamath:	It is to do wit h the product mix, that’s it. So on a normalized basis, you can presume it will be
	anywhere betw een 60% to 65%.
Cyndrella Carvalho:	And sir, in te rms of any USFDA schedules for the CGMP that you might have been aware
	about for thet wo formulation and two API facilities for Unichem that you co uld share with us?
Harish Kamath:	Again, again, your voice is not audible.
Pranay Godha:	Are you askin g if there is any inspection scheduled in the near future?
Cyndrella Carvalho:	Yes, for theC GMP.
Pranay Godha:	Not that we ar e aware of.
Cyndrella Carvalho:	And any signi ficant filings that can trigger that inspection from the facility?
Pranay Godha:	There are filin gs on a regular basis. I do not know how to categorize them as significant. There
	is nothing tha t can be called as a para four for us to file kind of thing. So they are normal
	filings.
Harish Kamath:	And there isn othing to trigger inspection. All their facilities are inspectedb y every regulator
	of the worlda nd they have all the approvals.
Cyndrella Carvalho:	Yes, I was try ing to understand any CGMP schedule is there or anything.
Harish Kamath:	No, nothing.T here are no issues. There are no schedules.
Cyndrella Carvalho:	Okay. Okay. And so in terms of the timeline, how should we look at this deal from a
	consolidatede ntity?
Harish Kamath:	See, CCA app roval, then open offer. Once open offer is completed, then only we get whatever
	control we ge t as per the SBA. So it may be at the best case scenario, maybe four months from
	now.
Cyndrella Carvalho:	Okay. Four to six months is a fair understanding. Thank you so much.
Harish Kamath:	All dependso n when CCA approval will come.
Cyndrella Carvalho:	Okay. Thank you so much.
Moderator:	Thank you.T he next question is from the line of Ashish Thavkar from IIFL AMC. Please go
	ahead.
Ashish Thavkar:	Yes, thanks fo r the opportunity. Sir, in the opening comments, you did men tion about 16% to
	17% growth. So that was for Ipca on an organic basis, right? And then yo u are guiding for
	INR1800 cror es of revenues for Unichem. Is that a right understanding?
Harish Kamath:	No, no. Both growth and revenue, he spoke about Unichem only. We have not spoken
	anything abou t Ipca guidance in this call. We spoke only about Unichem.

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Ashish Thavkar: Okay. Fair e n ough. So INR300 crores EBITDA on an INR1,800 crores to p line. yes. So but still two year s out, it will still be a sub 10% ROCE business. So what are yo u r plans? Is there a certain mindset that you need to take ROCE and bring it to the company lev e l? Some guidance would help.

Harish Kamath:

We are also t elling there are other synergic benefits available to Ipca also. We can take their products in a l l other market where they are not currently operating. There is Australia, New Zealand, ther e is whole of Europe, where we have a very big presence now. So our basket of offering in t h ese markets will increase. They can manufacture and I can market. Both will benefit out o f that. Similarly, I can market their branded formulation in the R o W market also.

Ashish Thavkar: Okay. Got th a t. And are there any certain SEZ facilities based out of SEZ for them? Management: Pardon? Ashish Thavkar: SEZ facility. A re there some tax benefits that? Management: No. Now no b ody has any tax benefit. Everywhere there is sunset now. The r e is no tax benefit now. Ashish Thavkar: Okay. Not ev e n Goa, which is the latest one? Management: Nowhere in I n dia for that matter. Ashish Thavkar: Okay. Yes. F a ir enough. Thank you and all the best. Moderator: Thank you. The next question is from the line of Rahul Jeewani from IIFL. Please go ahead. Rahul Jeewani: Yes, sir. So, s ir, can you comment on the availability of management band w idth for managing

Yes, sir. So, s ir, can you comment on the availability of management band w idth for managing this acquisiti o n? And why I ask that question is because if you see on an or g anic basis as well, we will run several projects across our business. So, be it the 25% that ex p ansion, which we carried out o n the India business this year or the capacity expansion, which w e are doing at the Ratlam and t he Devas API plant of the distribution or the realignment o f the distribution network in U K ?

So, you alrea d y had some of these organic projects ongoing and on top of th a t, this acquisition, that too for a market, which hasn't been a focal point for you for past eight years. So, how is the manage m ent bandwidth, how the management bandwidth will get all o cated in terms of integrating th i s asset?

Pranay Godha:

From a mana g ement bandwidth point of view, thankfully, we can only than k Dr. Modi and his team. They h a ve built an amazing team over there. So, we see practically, n o reason to disturb the top mana g ement and the lower levels. At the same time, even though fro m a business point of view, we w ere not generating any sales, it was pretty obvious for us at least that US will always remai n a market, where we have to get back to and enter as fast as possible. It is the largest generic market and more, so for the kind of products Ipca and Unichem are involved in. So, this was o nly a matter of time for us to enter directly or indirectly, through Unichem.

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Rahul Jeewani:

Rahul Jeewani: Okay, but D r . Modi would not have any say in the game now, given that y ou also indicated that, once th e open offer is through, you will have management control o f the business. So, let's say, in terms of the top management of Ipca, how would you allocate th e time between the various busin e ss segments of yours now? Management: Basically, w h atever projects you have talked about, it look after not by, they are supervised by the top mana g ement, but otherwise they are handled by the operating team. A s far as Unichem is concerned, the team is good. What we need to do is change certain directi o ns, change certain reviews and b uild certain focus. And on the API front, yes,, our interventions will be larger one and we h a ve the competent team to look after that part, so that more op e rating efficiencies can be built u p in that system. I would say that there Ipca will have to intervene. Rahul Jeewani: Sure sir, and j ust a few questions on the structuring of the deal. So, would t h e deal require any approval fro m shareholders of Ipca? Pranay Godha: No, it does n o t require. Rahul Jeewani: Okay, and fo r line by line consolidation, our stake in the entity has to be m o re than 51% only then it will g e t consolidated? Management: That is right. Rahul Jeewani: That's it for m y side sir. Thank you. Moderator: Thank you. T he next question is from the line of Manoj Garg from White O ak Capital. Please go ahead. Manoj Garg: Good evenin g to all of you and thank you very much for taking my question. Moderator: Sir, sorry to i nterrupt, the line for you is sounding muffled and the volume is low. Sir, if you could please u se the handset when you speak. Manoj Garg: Is it better no w ? Moderator: This is much better. Please go ahead. Manoj Garg: Thank you v e ry much. So, just to understand, I think in your opening rem a rks you indicated that this deal will be financed through the internal accruals. Does it mean th a t we don't have to take any debt for this deal? Ajit Jain: Basically, we have a kind of network, so we are utilizing that. And for worki n g capital, we will be utilizing t h e working capital finances. For buying the shares, you can't ha v e borrowing from banks. For o u r normal working capital, we will have some borrowings. Manoj Garg: The second t h ing, while I understand you are given an outlook for the next t w o years and there are scope an d potentials in terms of what we can do with this asset and what it can bring on the table for us. Even, you know, obviously improving the business metrics f or Unichem. But when I think from an investor's perspective or even at your perspective, h o w do you see the

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	payback perio d of this acquisition? And I'm thinking of maybe more known assets of INR250
	crores, INR30 0 crores of office building available in Jogeshwari, kind of, you know, refund
	from the gov ernment of India with regard to GST. So let's say that en terprise value of
	INR2,500 cro res, INR2,600 crores, what could be the payback period for us?
Ajit Jain:	We have talk ed about a lot of things which Ipca will do with their product range in terms of
	extending the market reach of those products. And right now, we have notm ade any of those
	kind of calcul ations. So right now, it's difficult to say that what would be th e payback. Right
	now, we have indicated that once we are in the management, what is possibl e in over a period
	of two years’ time. But as the market extensions and all those things are done , the scenario will
	further change . So right now, those calculations are not done.
Manoj Garg:	Sorry to push you just a little further on this, sir. And given the way we have operated the
	assets in thep ast with 20% plus kind of ROCE, ROE, do you think that ove r time, we should
	expect the sim ilar kind of returns even from these assets also?
Ajit Jain:	It all depend s on what kind of things overall comes out once we do all those kind of
	integrationsa nd market extensions. So right now, I'm not commenting on tha t part yet.
Manoj Garg:	And just a las t question, sir. We, at least in the last annual report, there isa CWIP of around
	INR490 crore s. So if I include in the net block of INR900 crores, so the to tal gross block or
	total block wo uld be available at around INR1,300 crores, INR1,400 croresk ind of numbers.
Ajit Jain:	Yes, that isco rrect.
Manoj Garg:	So on that bl ock, sir, what could be the peak potential revenue which wec an generate from
	these facilitie s? Obviously, it depends upon the kind of product which you file and all those
	things. But ju st as a ballpark number?
Harish Kamath:	Yes, out of th at, the Goa facility just commercialized, Manoj.
Manoj Garg:	Yes, so, Mr.K amath, just a question is that what could be the peak potential revenues from all
	the assets whi ch they have built out and available to us now?
Ajit Jain:	Practically, it can go up to maybe around INR2,700, INR2,800 crores.
Manoj Garg:	Oh, okay. Tha nk you very much and wish you all the best, sir.
Ajit Jain:	Thank you, th ank you, thank you so much.
Moderator:	Thank you.L adies and gentlemen, that was the last question for today. Iw ould now like to
	hand the conf erence over to the management for closing comments. Over toy ou, sir.
Ajit Jain:	Thank you, th ank you all for joining this con call. Thank you.
Moderator:	Thank you.O n behalf of DAM Capital Advisors Limited, that concludes this conference.
	Thank you for joining us. You may now disconnect your lines.

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