Ipca Laboratories Ltd. — Call Transcript 2024

Jun 3, 2024

June 3, 2024

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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,

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 held on Thursday, 30[th] May, 2024 to discuss the Company’s Q4 and FY24 earnings and business update.

Thanking you

Yours faithfully For Ipca Laboratories Limited Harish Digitally signed by Harish Pandurang Kamath DN: c=IN, o=Personal, title=1715, pseudonym=585f434c9c014c338904fe5f4cd8762a, 2.5.4.20=955479ec580ea690ffd8de8b74071cf6f 1ee247da687a7ae82030a7ae82c443b, Pandurang postalCode=400063, st=Maharashtra, serialNumber=72050fb9fadcbc5de6404685117 b8355792f5784c7617d9c4cae2a3887d6b809, Kamath cn=Harish Pandurang Kamath Date: 2024.06.03 16:54:17 +05'30'

Harish P. Kamath Corporate Counsel & Company Secretary

Encl: a/a

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“I Laboratories Limited pca Q4 FY '24 Earnings Conference Call” May 30, 2024

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MANAGEMENT: MR. AJIT KUMAR JAIN – MANAGING DIRECTOR AND CHIEF FINANCIAL OFFICER – IPCA LABORATORIES LIMITED MR. HARISH KAMATH – CORPORATE COUNSEL AND COMPANY SECRETARY – IPCA LABORATORIES LIMITED

MODERATOR: MR. NITIN AGARWAL - DAM CAPITAL ADVISORS LIMITED

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IPCA Lab o ratories Limited May 30, 2024

Moderator:

Ladies and g e ntlemen, good day, and welcome to the Q4 FY '24 Earnings C onference Call of Ipca Laborat o ries Limited hosted by DAM Capital Advisors Limited. A s a reminder, all participant li n es will be in the listen-only mode and there will be an opportu n ity for you to ask questions aft e r the presentation concludes. Should you need assistance dur i ng the conference call, please s i gnal an operator by pressing star, then zero on your touch-t o ne phone. Please note that this conference is being recorded.

I now hand t h e conference over to Mr. Nitin Agarwal from DAM Capital A dvisors Limited. Thank you a n d over to you, sir.

Nitin Agarwal:

Thank you, M ichelle. Hi. Good afternoon, everyone, and a very warm welcome to Ipca Labs' Q4 F '24 Ear n ings Call hosted by DAM Capital Advisors Private Limited. On the call today we have repr e senting Ipca Labs, Mr. A.K. Jain, Managing Director; and M r . Harish Kamath, Corporate C o unsel and Company Secretary.

I hand over t h e call to Mr. Jain to make the opening comments and then w e'll open the floor for questions. Please go ahead, sir.

Ajit Kumar Jain:

Thank you. T hank you Nitin and DAM Capital Advisors for organizin g this call. Good afternoon to all participants, and thanks for taking out time and joining u s for Q4 FY '24 Earnings Cal l . Today's call and discussions and answer given, may inclu d e some forwardlooking stat e ments based on our current business expectations that m u st be viewed in conjunction w ith risk that pharmaceutical industry faces.

Our actual fu t ure financial performance may differ from what is projected a n d perceived. You may use you r own judgment on the information given during the call. Do m estic formulation business has delivered a growth of around 13% for the quarter. And for w h ole of the year, it delivered ar o und 12% kind of growth. And Ipca continue to remai n a 16th ranked pharmaceutical company as per IQVIA in Indian pharmaceutical market.

In Q4, as pe r IQVIA, we have beaten both on chronic and acute therapies. Overall, IPM has grown by ar o und 6% in this quarter, whereas IQVIA has recorded our g r owth at 15%. On Acute segme n t, market has grown by 3%, and we have -- IQVIA has recor d ed our growth as around 11%. And on Chronic, the market has grown by around 10% and ou r growth is around 12%. And ov e rall, for the last 12 months on a net basis, we have delivered a growth of around 13% as per IQVIA as against 8% for IPM. So we have been continuousl y beating as far as domestic ma r ket is concerned, the overall market growth.

Overall, our m arket share as per the mid March 2024, has improved to 2.0 4 % from 1.88% at March '23. L a st few years, our focus has been more on cities, and that has s t arted delivering -- the top cities and that has started delivering results. Ipca has achieved a gro w th of around 16% in top 6 metr o s as against market growth of around 8%.

Ipca emerge d as the fastest-growing country in top 25 players as per IP M as per the midMarch 2024. As far as export formulation business is concerned, for t h e quarter, it has

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delivered around 9% growth. And overall formulation business for the y e ar has reached to around INR1,775 crores from a business around INR1,659 crores, with a growth of around 8%.

In spite of g e neric export growth of around 22% for the year to around I N R981 crores from INR801 cror e s, overall growth is lower because of challenges we have faced in branded promotional m arket like Russia and West Africa and decline in institutional g eneric business in the last finan c ial year.

As far as ma r gins are concerned, the stand-alone margin for the quarter is - - EBITDA margin is around 18.5% as against 11.29% that recorded in previous financial y ear in the fourth quarter. For f ull financial year, the EBITDA margin is achieved at around 19.29% as against 16.22% in F Y '23. And consolidated EBITDA margins are at around 14.98 % for Q4 as against 11.29% for Q 4 FY '23.

And consolidated EBITDA margin for the year is around 16.72% for FY '2 4 as against 15.3% in FY '24. M a terial cost to sales ratio stand-alone basis has improved to ar o und 32.08% from 35.58% in F Y '23. And we are witnessing a price stability for majority of ou r procurement.

As far as the guidance for 2025 is concerned -- FY '25 is concerned, we ex p ect a stand-alone business gro w th of around 10.5% to 11% for FY '25. We expect that our EBITDA margins will further i m prove from 19.29% to 20.5% to 21%. Our consolidated b u siness to grow at around 14% t o 14.25% for FY '25 and consolidated EBITDA to improve fu r ther from 16.72% to around 18 % for the financial year 2025.

Having given all these numbers, I now request participants to ask questions.

Moderator:

Kunal Dhamesha:

Moderator:

Kunal Dhamesha:

Ajit Kumar Jain:

Thank you v ery much sir. The first question is from the line of Kuna l Dhamesha from Macquarie. P l ease go ahead.

The first que s tion on our own U.S. plants are kind of cleared. How is that bu s iness shaping up? And have yo u started filing new ANDAs...

Sorry to inter r upt, sir, your voice is not clear. May I request you to use your h andset?

So how is o u r own U.S. business shaping up? And have we started filing ANDAs from our own plant as o f now? And do we expect an 18% EBITDA margin guidance? Are we expecting our R&D ex p enses to go up?

Overall, let's say, that as far as U.S. is concerned, we have not started so far filing the ANDAs from our pla n ts because it will take -- we had -- nothing we had in the pip e line for U.S. And pipeline is n o w building. So people are working now in R&D and thereaft e r, buyback shares will be taken. Stability will take a lot of time, 6 to 7 months time and then da t a compilation.

So it will tak e some time before we start filing as far as U.S. is concerned. As far as R&D is concerned, b o th companies put together are spending almost around INR250 crores on R&D, which will tr a nslate into -- for ourselves and Unichem put together. And t hat translates into

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around 3.25 % to 3.5% kind of expenditure to sales. And more or less, t h is number would remain in thi s particular range only as far as R&D is concerned. And the - - sorry, what was your next qu e stion?

Kunal Dhamesha:

Ajit Kumar Jain:

So our U.S. - - our own U.S. dynamic sales, how has that shaped up post the p lant clearance? Let's say, po s t plant clearance, a lot of work was to be done as far as -- be c ause we were not there for a lo n g period of time. Somewhere the IP status changed, somewh e re our vendor had changed, so m ewhere the processes have changed, also API has changed a n d all that. So that needs to be u p dated in all these kind of ANDAs and so all those activity was going on. And now fin a lly, I think last few days back, first shipment has gone of one product and second product is in pipeline. And more products will be the shipment would start now. And a lot of the places w h ere the IP status -- sorry, USP status -- where pharmaco status has changed, a lot of works are e ven going on right now.

So that all t h e ANDAs are fully updated and then business starts. So ho p efully, I think in current year, m aybe around 6 to 7 products will be launched and that will be launched by the -- as the progre s s happens during the year. So as far as sales are concerned, i t does not include any sales as f a r as U.S. is concerned.

Kunal Dhamesha:

Ajit Kumar Jain:

Okay. And w h ile we have provided the outlook on a consolidated basis of ar o und 14% top line growth, but c a n you provide more details on the business segment-wise gro w th, let's say, API, domestic AP I , export API and the generic business, et cetera?

Let's say, on a stand-alone basis, domestic business is expected to grow ar o und 12%. Export generics will also have a similar kind of growth. The promotional market w i ll have some kind of lower gro w th because of some issue being faced at -- because of currenc i es depreciation in Russia and al s o West African market, there are some certain challenges ther e .

So there will be a little lower growth on that. And institutional business w ill deliver around 14% kind of g rowth. And we expect around 7% to 8% business growth in A P I side. So overall, Ipca, that sh o uld be around 11.5% -- 11% to 11.5% kind of growth woul d be there, yes. So that's the sta n d-alone number.

And on a co n solidated basis, the growth is coming a little higher because l a st year, I think on consolidation, Unichem was acquired in our second quarter. So consolidatio n is -- even second quarter number was not full. August, yes, it was August number was there. So second quarter number was a lso not full.

So overall, t h at effect is also there in that. And overall, I think we should be almost around considering o ur business growth and Unichem's business growth, and ove r all, we should be almost arou n d, I think sales-wise, may be around INR9,000 crores, and EBITDA overall consolidation may reach to almost around INR1,600 crores plus kind of EB I TDA. So that will translate into that kind of number of 18%, 18.5% kind of overall.

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Kunal Dhamesha: And sir, just one last, if I may. When we say the INR1,600 crores, apart f rom, let's say, the acquisition a d dition, the synergy number that we had at around INR200 cro r es synergies, how much of that w ould be factored into the INR1,600 crores?

Ajit Kumar Jain:

If you look a t Unichem, I think last financial year, they had -- I think EBIT D A was minus by around INR4 5 crores. From there, they have achieved an EBITDA of INR1 0 0 crores. So there is a almost a r ound INR145 crores, say, in the current year once after -- fo r the whole of the year.

And as far a s the changes are concerned, whatever the low-hanging fruits a re there, like say, material buyi n g and somewhere rationalization, somewhere utility cost ratio n alizations and all those are ma y be production efficiency improvement and all. These are the o nly factors so far has come in t he EBITDA margin and a lot of other things which we are lo o king at, like, say, sourcing cha n ges from, let's say, from outside purchase to some of the APIs o f Ipca and market extensions a n d those all work -- are all work in progress. API cost red u ction is also work in progress because you need to do the stab i lity and thereafter filings and t h en approvals and all. So those has not started to come in th e overall EBITDA numbers righ t now. Moderator: Ladies and g entlemen, the line for the management has been disconne c ted. Kindly stay connected w h ile we try to reconnect. Ladies and gentlemen, thank you for patiently holding, the managem e nt's line has been reconnected. Over to you, sir. Ajit Kumar Jain: So I would s a y that we are confident in whatever we had talked around ac q uisition time and all. We are c onfident that all those things will be achieved. And better t h an that would be achieved, yes. Moderator: The next qu e stion is from the line of Surya Narayan Patra from PhillipCa p ital India Private Limited. Surya Patra: Sir, my first q uestion is about our -- although you have given the guidance f o r the current year. How should w e see, sir, in fact, the overall growth for the integrated operations? So whether the benefit o f integration has started flowing in or what portion of the integr a tion benefit is yet to come in? A nd let's say, in terms of the growth, while the domestic is one of the largest earnings con t ributor for us, and it's been consistently delivering double- d igit growth since many years. But from yo u r -- what should be the real earning driver for us, whether it i s some uptick that we should se e in our export activities now after seeing some kind of a mode r ation in the recent past, just like -- or what should really drive the earning momentum qualitati v ely from here for our next 2 y e ars? If you can give some long-term oriented viewpoint then that will be really helpful.

As far as in t egrations are concerned, let's say, it's not a merger. It's -- both are separate companies a n d both are run as a separate companies, and Unichem as Mana g ing Director, and

Ajit Kumar Jain:

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he runs that company. Integration benefits, whatever coming is relati n g to -- basically procurement is one area where integration reliefs we are getting the adv a ntage. Significant advantages ar e coming in that because our buying efficiencies are mu c h higher because volumes are m uch higher.

So those adv a ntages are definitely coming there. As far as the other areas a r e concerned, let's say, whateve r work both the companies are doing and there are some duplic a tions for there. So those duplica t ions are now avoided. So it's -- that unnecessary cost of bot h the organizations were incurrin g . That is no longer there. So that's another benefit that's c oming. Third is because of o ur expertise and utilities and also there are utility cost re d uctions and their operational e f ficiency on production side is also building up, so that's anothe r advantage which is coming fro m integration.

And Ipca is a lso able to extend some kind of expertise to them on cost red u ctions and all put together, bot h the companies and teams are working to reduce the cost of A P I, which was one of our major concerns for there. But getting the benefit will take some ti m e because it's -- again, everyt h ing is regulatory -- regulated process and work is happening to reduce the costs and subseque n tly approvals and all.

So it will ma y before some time -- it will take some time before those kind of approvals comes in. As far as synergies of procurement from Ipca of lower-cost API for them, it's again a process beca u se they have started doing the R&D work and put in stability u ntil the stability is all over and t hey go back to the regulators and take the approval of that s ource. Until such time, sources are added in their master files and all, they can't procure. So i t's still to take the effect. So tha t effect will also take some more time.

Surya Patra:

Ajit Kumar Jain:

Okay. About the export outlook, if you can give some sense and which ma r ket that you think can be meani n gful? And also U.S., as you are saying that, okay, it will see a kind of a gradual ramp up on l y, but at least benefiting from the Unichem acquisition o r leveraging the Unichem's pr e sence, we want to at least penetrate faster, quicker for APIs at least to start with. On the expor t outlook front, if you can give some sense and if you can give some more clarity also about yo u r key markets.

So bigger an d bigger benefit of integrations will come of Unichem portf o lio when we start putting all th e se Unichem's product in various markets like Europe, Austr a lia, New Zealand, Canada, Sou t h Africa, all those markets when we start putting those prod u cts. So that's the process curre n tly going on.

A lot of wor k s are going on, on repeat bios and compiling all those kind o f dossiers and all those that w o rk is going on. So till the time that work is over, it's -- eve r y project is being monitored an d there are time lines for that. But it takes time. It is not that ov e rnight, those kind of work can be done. So that the bigger benefit of that will come once , let's say, if cost portfolio of a r ound 40, 50 formulations, and there portfolio of around 80 ki n d of formulations in generic m a rkets. So all those becomes a significant size of number of pro d ucts for the other markets. So t h at is the work which is currently work in progress.

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And that wil l give a larger integration benefit because even though Unichem is present in Europe, they are only marketing 5, 6 products whereas their U.S. marke t is more than 80 products. An d currently, they are also selling a good number of products out of that, more than 50 products. So it's an integration that's going to be the key drivers an d on that, we are working, but i t will take time to -- because everything is regulated, and it ha s to be done in that particular fas h ion.

Surya Patra:

Ajit Kumar Jain:

Surya Patra:

Ajit Kumar Jain:

Okay. So the n , sir, the 15% kind of a margin guidance for Unichem, what w e had given, it is kind of a bac k -ended only, let's say, FY '26 or '27, like that.

No, I have n ot given any guidelines for Unichem. I have said consolidat i on guidelines are given. Unich e m will still take some time. I said that, yes, we are on a path, whatever we have talked. So I h ave said that from INR50 crores of minus EBITDA, they have reached to around INR100 cror e s in current year. And we expect them to reach to almost aro u nd INR225 crores in current ye a r with all those kind of efficiencies what we are talking. Bu t that will still not capture a lot o f those things which we are currently talking, which are in pr o gress. That's what I'm saying.

Okay. Just l a st one question that since it is the full year results perfor m ance that we are discussing. I f you can give some sense about your key subsidiaries also bec a use we have seen some impair m ent charge also relating to the credit that we have booked in this quarter. So how should we t h ink all our investment into various core or noncore subs i diaries, and their performance f or the current year?

Let's say, wh a t subsidies we have is one is Onyx Pharmaceuticals, which is t h ere at U.K. That's delivering all these -- the development of new manufacturing processes an d all those kind of solid state c h emistry now. So that subsidy is doing very well. I think thei r turnover may be around GBP 1 5 million to GBP16 million, and they are a profitable compa n y on a continuous basis.

Second subsi d y in India is Trophic Wellness, they market the nutraceuticals a nd they have also delivered go o d profit in current year and they are in profit. Third subsidiar y what we have is Bayshore. N o w with Unichem coming in Bayshore was created only to mar k et Ipca's product. And now si n ce Unichem is a bigger setup, so the relevance of that an d they were only marketing ce r tain kind of products, which we are sourcing from some of the suppliers like from Bangla d esh and some from India and all that.

So it was a v ery small operations and it had its own cost. So Bayshore is o ne which will be now -- by an d large, the entire operations will happen through, not through B ayshore it's going to be from. U nichem's -- Ipca's product will also be distributed in U.S. thr o ugh Unichem and also whateve r was being done from Bayshore, that will also get transferre d to Unichem. So that's how int e gration will happen.

And another subsidiary that we have is Pisgah, that subsidy we have cr e ated -- subsidiary company we have created for CRAMS business in U.S. because we ha v e very successful business ope r ating from U.K. in the name of Onyx. So it was an extension o f that because right

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now, no serv i ces are being -- hardly there is any service to the U.S. compa n y. It's all services being done b y Onyx from -- to the European companies are there. So that is w hat we wanted to extend there.

And some ki n d of, let's say, low volume and high value kind of API product i on that very small manufacturin g facilities are there of certain narcotic products and all that ki n d of things. Onyx also has may b e 2, 3 new commercial API on their pipeline and developmen t of new drugs. So that once the volume pick up, those kind of -- once they are launched in the m arket and all, the U.S. production may happen at Pisgah and certain other narcotic products a r e right now under development at Pisgah. So Pisgah has some small losses currently. With the CRAMS business building up, t h at will be not there.

We have 2 a ssociated companies. One is Avik. Avik is a steroid business and they're also delivering pr o fit. The only company where we have not been able to still c o me in the green is our Krebs th a t's fermentation operations. This company was producing simv a statin and there -- we have intr o duced some of our products like Serratiopeptidase because we have a large amount of ou r own captive consumptions and all.

So they have started producing that and -- but still, they have very large c a pacities and very large capacit y fermenters. So we are looking for some kind of -- the other o pportunity is also there in term s of contract manufacturing and all. So far, it has not happen e d, but we've seen progress to u t ilize their unutilized capacities, which are there on fermentatio n side.

And as far as they have certain chemical blocks, which are being currently u tilized. And those blocks are o n the breakeven plus they are making profit. But on ferment a tion side, we still have loss an d it may take some maybe 1.5 years' time before we start m aking profit from Krebs operations.

Moderator:

Chirag Dagli:

Ajit Kumar Jain:

The next que s tion is from the line of Chirag Dagli from DSP Mutual Fund.

Sir, can you indicate in your guidance of INR9,000 crores, how are you b aking in the U.S. scale up? An d just a little more color around the U.S. scale up over the next 3 years?

Let's say, we had almost around -- Ipca's around 18 products were approve d I think in the last few months, and I think we have received almost around -- current mon t h itself, we have received around 4 approvals. And prior to date, I think 3 or 4 approvals has come.

So almost ar o und 18 plus around 8 -- 7 or 8 approvals has already come. S o that's the overall number we h a ve. And then there are balance filings are there. So once tho s e approval comes in. So right n ow, it's now whatever updations are required in those existin g files in terms of change in th e processes or change in the pharmacopeial status and all that, t hat work is going on right now.

And at least a round 6 to 7 products will be launched out of those kind of ap p roved products in current finan c ial year. And once all those updations are happened, then I t h ink next year, the

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bigger ramp-up would happen because all those products will be comm e rcialized in next financial yea r . Chirag Dagli: So FY '26, y o u should not only see the full impact of the 6 to 7 launches in '25, but also more launches? Ajit Kumar Jain: Yes, yes. Yes. Chirag Dagli: Sir, these 25 t hat you have or 26 that you have as approved products, all of them should be in the market o v er 3 years. Is that how we should think about it? Ajit Kumar Jain: Yes, that's tr u e. Maybe a few out of that may not be viable now. So -- but t here are very few because mos t of them are from our own API source. It's not an outsourc e d API. So -- but maybe there a re a few maybe -- may or may not be market area. Chirag Dagli: Understood. A nd sir, can you also give some color around margins in the A P I and the exports business? So m e very basic math suggests that these are businesses which a r e still in the early teens kind o f margins? Does that make sense? And how have these beh a ved over the last maybe 3 years? Moderator: Sir, I'm sorry , the management line has been disconnected. Kindly stay con n ected. I will try to reconnect th e m, yes. Ladies and gentlemen, thank you for patiently holdin g . The line for the management h as been reconnected. Over to you, sir. Harish Kamath: Chirag? Chirag Dagli: Sir, do you w a nt me to repeat the question? Ajit Kumar Jain: No, no, no. I think there is some problem in connectivity off and on, th e lines are getting disconnected. Yes, Chirag? Chirag Dagli: Sir, do you w a nt me to repeat the question? Harish Kamath: Yes, yes, ple a se. Chirag Dagli: Sir, I was as k ing on the segmental, how should we think about margins in t h e exports and API business, ex p ort formulations and API business at least over the last 3 years. And going forward, how are you thinking about these business margins? Harish Kamath: Chirag, with this raw material prices now stabilizing, we are very confiden t our margins will improve goin g forward, 100 to 150 basis points next 2, 3 years. That is what i s our guidance. Chirag Dagli: 100 to -- ove r the next 3 years is what you're saying, sir? Harish Kamath: Every year, 1 0 0 to 150 basis points. Chirag Dagli: Over the nex t 3 years, okay. Understood.

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Harish Kamath: Our aim is to reach ultimately to that level of around 24%, 25% over the nex t 6, 7 years. Chirag Dagli: Understood, sir. And sir, over the last 3 years, have the margins for t h ese -- both these businesses c o me down substantially, that understanding is right? Harish Kamath: There was al s o a lot of fluctuation in the material cost. That was the primar y reason. Even this year also, the margin improvement is basically on account of lower material costs, plus control over the ove r head expenses, nothing else. Plus contribution from formula t ion business as a ratio of total business was higher where value addition is more. These are t he 3 basic things, which added t o this margin expansion. Moderator: The next que s tion is from the line of Bino Pathiparampil from Elara Capital. Bino Pathiparampil: Clarification o n the margin, sir, if I heard right, you have given a more cons o l EBITDA margin guidance of 18% for FY '25, correct? Ajit Kumar Jain: Yes. Harish Kamath: Yes. Bino Pathiparampil: Okay. And y ou also told -- has answered to one of the questions that U n ichem should do around INR2 2 5 crores of EBITDA in FY '25? Ajit Kumar Jain: Yes. Bino Pathiparampil: To roughly c a lculate, the INR225 crores is Unichem has to do, its EBITDA margin should go from around 6 % last year to around 9.5%, 10% this year. So the entire EBI T DA margin at the consol level i ncreasing from FY '24 to '25 seems to be coming from Uni c hem. There is no significant i m provement, I can see in the rest of Ipca. Am I reading it correct ? Ajit Kumar Jain: No. Ipca's, b a sically, EBITDA margins in current year is 19.29%. From the r e, it will move to around 20.5 % to 21%, yes. That's what we said. Bino Pathiparampil: There are als o some improvements. Understood, sir. And second, sir, on the top line guidance, I heard 2 nu m bers. One is a 14% top line growth and other is INR9,000 cro r es number, which is correct or t h ere is some difference between these two? Harish Kamath: Bino, what h appened actually in the consolidated results of FY '24, Unic h em consolidation was only fro m August onwards. So in the financial year '25 whole year c onsolidation will happen. So t o my top line, whatever is there, about INR2,000 crores of Unichem top line consolidated w ill also get added. Bino Pathiparampil: Understood. S o the reported number will be 14% growth on the consol nu m ber? Or will it be INR9,000 cr o res? Harish Kamath: 14% growth o n consol number, yes. And on a stand-alone number, around 1 0 .5% to 11%. Moderator: The next que s tion is from the line of Kunal Dhamesha from Macquarie.

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Kunal Dhamesha: Sir, the EBIT D A margin guidance of around 18%, does that include the othe r income?

Harish Kamath:	No, no. Now we have stopped including other income in our EBITDA. Wh atever calculation
	we have prese nted in the press conference, it is excluding other income -- pr ess release, sorry,
	it is excluding other income.
Kunal Dhamesha:	Okay. So 18% excluding other income.
Harish Kamath:	Yes. We have excluded other income. We have also excluded exchange gain s. What we made
	this year abou t INR20 crores, that also we have excluded.
Kunal Dhamesha:	And for Unic hem, the EBITDA margin improvement, is it largely a functio n of new product
	launches, if ye s, how many products?
Harish Kamath:	No, no thatM r. Jain has already explained, whatever low-hanging fruits are there that we are
	capturing. Th e other work is ongoing. The benefit will come perhapsm aybe start getting
	benefits from the next financial year. Launch and source change and all tha t will take a little
	bit more time whereas all other work, which can be done fast, like integra tion of purchases,
	raw material costs, utility costs, a little bit improvement in the operational efficiency of their
	API facilities . All this has only contributed whatever incremental EBITDA , the Unichem is
	seeing, last fin ancial year also and the current financial year also.
Kunal Dhamesha:	But there wi ll be growth as well, right? INR1,700 crores revenue for Unichem, we are
	expecting it to be around INR2,000 crores?
Harish Kamath:	That is right. Current year expected -- yes.
Kunal Dhamesha:	So how many product launches are we factoring in for Unichem? And what i s the price erosion
	that we are ba king in for the Unichem's U.S. business?
Harish Kamath:	Unichem, thei r gross margin has been steady. There is no change. More or le ss, their pricing is
	also on a stab ilized basis, hardly any changes happening. So they will laun ch maybe current
	year 5 to 6 for mulations in the U.S. market.
Kunal Dhamesha:	Okay. And a nything on the capex front for this year at a consol level,w hat would be our
	outlook?
Harish Kamath:	Maybe around INR300 crores to INR350 crores, including our normal, whate ver capex.
Kunal Dhamesha:	Total shouldb e INR350 crores or total should be somewhere around INR500 crores?
Harish Kamath:	Yes, on a con solidated basis, that is right.
Kunal Dhamesha:	Okay. And si r, our U.S. facilities, Silvassa, Pithampur, what is the currentu tilization level or
	maybe what i s the current EBITDA drag that they are putting for us at a cons ole level?
Harish Kamath:	Maybe aroun d INR50 crores, INR60 crores drag. Silvassa has already start ed manufacturing
	for the U.S.m arket. In fact, 2 formulations are already shipped to U.S. int he current month.

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Another 2, 3 products are under commercialization. And Pithampur facility, we are also using for other ma r kets like Australia and New Zealand, Europe and all, wher e current capacity utilization m a y be around 35%, yes.

Kunal Dhamesha: And then on e last question. If let's say, the raw material prices were to m o ve adversely, if it starts increas i ng, shall it positively impact our API business? Or you don't se e this one-off... Harish Kamath: See, what was happening, any incremental raw material cost, we used to pass on. But unfortunately, the situation was not so in the last 2 financial years because of stocking and other situation. But hopefully, going forward, everything should get nor m alized. So I don't think from h e re on, anything adverse will happen as far as the material cost i s concerned. Ajit Kumar Jain: By and large , prices are stable at market, and I think we are not witnessing any kind of major change in an y kind of procurement prices. Minor change here and there ma y happen, but that will not impa c t right now. So more or less, it's a very steady kind of pricings are there coming. Kunal Dhamesha: But this raw m aterial pricing cycle has also impacted our API pricing as w e ll, right? Our API prices have a l so come down in the last couple of years, API business prices, like realization in API business . Ajit Kumar Jain: Not all. Only a few. Harish Kamath: The major i m pact in the API business was because of a single product , Losartan, where currently there is a stability sale price also and raw material price also. Kunal Dhamesha: And at some point, we had also put a continuous manufacturing facility for s artan, how is that doing? Harish Kamath: No, it was n o t for sartan, for some intermediate, that work is progressing. It will be a slow progress. Yo u can't expect miracle over there. Things are happening, but it is slow. Moderator: The next qu e stion is from the line of Tushar Manudhane from Motila l Oswal Financial Services. Tushar Manudhane: Sir, just on t he India domestic formulation, the top 16 metros forms w h at percent of the domestic for m ulation sales for us? Ajit Kumar Jain: The metro-w i se sales, we don't capture and separately monitor it. It's -- b asically, what we monitor is I Q VIA numbers that -- how they are reporting the overall nu m bers because we tabulate the n umbers based on the reps territory wise, we don't tabulate as p er the metro, and that's not ho w we see the numbers.

But what we h ave done in the last few years is that we have more focus on m etro side, increase depending o n the overall number of doctors practicing there. We have increa s ed the strength of our field forc e in metro cities. And that's what I said that, that has started re s ulting in giving a higher growt h . So IQVIA has captured almost around 16% growth for u s in 6 large metro

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cities. And a s against market was growing in those are around 8%. So metr o s are now driving the business f or us.

Tushar Manudhane: So at least on the field force side, if you could share how many are dedicated for metro cities? Ajit Kumar Jain: Division wis e , it's a different number. I don't... Harish Kamath: Tushar, we h a ve 21 market divisions. Tushar Manudhane: No, no, no, d i vision-wise, sir, our overall field force metro, non-metro... Harish Kamath: Division has p resence in all metro cities. Tushar Manudhane: Okay. And w hat's your outlook at the industry growth for, say, next 12 to 24 months for domestic for m ulation? Industry-wise, you already shared your revenue g r owth just on the industry leve l . Ajit Kumar Jain: The industry is currently, I think setting challenges on Acute segment, Ac u te growth are not very robust and also because of all those kind of significant amount of heat and the temperature i s rising everywhere and all. So that is also resulting in the over a ll lower growth in the market b e cause people are not venturing out and all those kind of thing s . So -- but over a longer period of time, we are not seeing such kind of numbers for Acute seg m ent. So over a p e riod of time, Acute should revive. Chronic has already revived and Chronic markets are growing very well. So overall, it's on only the Acute segment, w h ere certain issues are there. A n d once the Acute segment revive, overall market may start growing again by around 10% to 12% and currently 7% to 8% kind of growths are there in the m arket. Tushar Manudhane: Understood. S o that's helpful. Ajit Kumar Jain: [inaudible 0: 4 1:11] it should be go to around 14%, yes. Tushar Manudhane: Sorry, sir, I m issed your statement. Ajit Kumar Jain: If markets st a rt growing by around 10% to 11% kind of thing, our growth i n domestic market, then we'll sta r t giving around 14% kind of growth. Tushar Manudhane: Understood. A nd for fourth quarter or for full year, if you could also share price volume and new launches for Ipca? Harish Kamath: Pardon, Tush a r? Tushar Manudhane: Sir, price vol u me and new launches growth for Ipca? Harish Kamath: See, current y ear wholesale price index, you also know, Tushar, there is n o price increase as far as the pr o ducts which are under NLEM. So otherwise, the normal 4%, 5%, 6% price increase, ma y be another 5%, 6% volume growth. I'm telling non-NLEM an d plus new product introduction, another 2%.

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Tushar Manudhane: Understood. A nd secondly, sir, any further clarity in terms of the inspection a t Unichem side, I guess they have been inspected last in 2020. Harish Kamath: Nothing. Onl y one plant got inspected and without any 483, they have clea r ed the inspection. Beyond that t h ere are no other plants got inspected. Only one facility got rei n spected. Moderator: The next que s tion is from the line of Jayant, an individual investor. Ladies a nd gentlemen, the current participant is not answering. And that was the last question. I woul d now like to hand the conference over to the management for closing comments. Over to you, sir. Harish Kamath: Michelle, un l ess there is anybody else asking questions, I don't think th e re is any further comments w e want to make. So you can -- one more time you can ask if a n ybody is there in the question q ueue, anything, nothing? Moderator: Sir, nobody i s there in the queue. Harish Kamath: Okay. Then w e can close, Michelle. Moderator: Thank you s o much, sir. Harish Kamath: Thank you, a l l. Moderator: Thank you, s ir. Ladies and gentlemen, on behalf of DAM Capital Advi s ors Limited, that concludes th i s conference. We thank you for joining us and you may no w disconnect your lines. Thank y ou.

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