Ipca Laboratories Ltd. — Call Transcript 2024

Feb 19, 2024

February 19, 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 Friday, 16[th] February, 2024 to discuss the Company’s Q3 / Nine Months FY24 earnings and business update.

Thanking you

Yours faithfully For Ipca Laboratories Limited

Digitally signed by Harish Pandurang Kamath DN: c=IN, o=Personal, title=1715, pseudonym=585f434c9c014c338904fe5f4cd8762a, Harish Pandurang 2.5.4.20=955479ec580ea690ffd8de8b74071cf6f1ee247da687a7 ae82030a7ae82c443b, postalCode=400063, st=Maharashtra, Kamath serialNumber=72050fb9fadcbc5de6404685117b8355792f5784c7617d9c4cae2a3887d6b809, cn=Harish Pandurang Kamath Date: 2024.02.19 17:49:44 +05'30'

Harish P. Kamath Corporate Counsel & Company Secretary

Encl: a/a

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“Ipc a Laboratories Limited Q3 FY '24 Earnings Conference Call” F ebruary 15, 2024

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MANAGEMENT: MR. AJIT.KUMAR. JAIN –MANAGING DIRECTOR – IPCA LABORATORIES LIMITED MR. HARISH KAMATH – COMPANY CORPORATE COUNSEL – IPCA LABORATORIES LIMITED

MODERATOR: MR. NITIN AGARWAL – DAM CAPITAL ADVISORS LIMITED

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IPCA Lab o ratories Limited F e bruary 15, 2024

Moderator: Ladies and g entlemen, good day, and welcome to the IPCA Laboratories Q3 and FY '24 Earnings Co n ference Call 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 and zero on your touchtone phone. Please, note that this conf e rence is being recorded.

I now hand t h e conference over to Mr. Nitin Agarwal. Thank you, and over t o you, sir.

Nitin Agarwal:

Thanks, Azh a r. Good afternoon, everyone, and very warm welcome to IPC A Lab's Q3 FY '24 post-results e a rnings call, hosted by DAM Capital Advisors Private Limited. On the call today, we have rep r esenting IPCA Management, Mr. A.K. Jain, Joint Managing Director; and Mr Harish Kama t h, Company's Corporate Counsel.

I will hand o v er the call to Mr. Jain to make open comments, and then we'll open the floor for questions. Pl e ase go ahead, sir.

Ajit Kumar Jain:

Thanks, Niti n , and DAM Capital Advisors for organizing this call. Goo d afternoon to all participants, and thanks for taking out time and joining us for Q3 FY ' 2 4 Earnings Call. Today's call a nd discussions and answer given, may include forward-lookin g statements based on our curre n t business expectation that must be viewed in conjunction with the risk that pharmaceutical business faces. Our actual future financial performance ma y differ from what is projected a nd perceived. You may use your own judgment on the inform a tion given during the call.

Our domesti c formulation business has delivered 11% growth for the q u arter, and we are ranked as th e 16th Indian pharma company as late December '23. Market beating growth in both acute a n d chronic therapies are achieved for this quarter. The chron i c market, market growth was 1 1%. IPCA has grown by almost around 15.9%. And on Acut e segment, market growth was 9 .1% and IPCA has achieved around almost around 11.3%. Th i s is as per IQVIA MAT Decem b er 2023.

With two ran g e jump over corresponding period, IPCA is 13th in Acute seg m ent and IPCA has maintained it s rank in the Chronic segment. IPCA's market share has impro v ed to 1.9% MAT December '2 3 as against 1.89% in the December '22. So from 1.89%, it h a s gone to 1.95%. Our export f o rmulation business has given a growth of around 8% for the qu a rter from INR400 crores to aro u nd INR433 crores.

The branded formulation business in ROW declined from INR128 crores t o INR105 crores. This is mainl y due to certain shipment could not go to the CIS market. M y anmar business is impacted bec a use there are issues and licenses are getting delayed for a long p eriod of time.

So without i m port licenses in that country, shipment cannot go. And certai n business of West Africa affect e d for two reasons. One is Red Sea reason and another, some k i nd of slowness in the market al s o. So because of that, the branded business in this quarter is d own. Institutional

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antimalarial b usiness has declined from INR77 crores -- INR277 crores fro m INR83 crores in the same qua r ter last financial year.

Export gener i c business in UK and other market has delivered a growth of around 33% from INR189 cro r es to around INR252 crores. So overall brand, the gene r ic -- the export formulation b usiness has grown by around 8%. API business declined from INR329 crores to around INR2 8 5 crores for this quarter. We continue to face volume decline i n certain API, but pricings are n ow getting stabilized.

On margin fr o nt, on stand-alone basis, EBITDA margin improved by aroun d to 2.78% from -- to around 18 . 55% for the quarter from 15.77% in the corresponding perio d of last financial year. The ma t erial cost to sales ratio also improved by 2.65% for the -- an d also for -- in the current first 9 months of the current year.

So overall, material cost to sales ratio from 34.86%, it has come down to around 32.21%. Both shipping cost s and energy cost prices has moderated as against prevailing p r ices in December '22 last fina n cial year. And we are also witnessing a price stability o n majority of our procurement.

Consolidated EBITDA margin before exchange gain loss or exceptional in c ome has gone up by 1.12% d u ring the quarter. From 15%, it has moved to around 16.1 2 %. Consolidated material cost s to operational income has improved by around 2.39% from 3 6.34% to 33.95% for the quarte r .

Having given the broad numbers, now I request participants to ask questions, if any.

Moderator:

Kunal Dhamesha:

Ajit Kumar Jain:

Thank you v e ry much. We will now begin the question-and-answer session. The first question is from the li n e of Kunal Dhamesha from Macquarie.

So the first o ne on now that we have -- had a full quarter with Uniche m -- what are your updated thou g hts on synergies that we can generate in terms of call it qua n titative synergies over the nex t 2 years? And what are the primary drivers that you see to generate those synergies? A n d then consequently, what that can lead to our total profitabilit y ?

So we are w o rking on lot of things. As we have discussed earlier, like mar k et extensions, the improvement in the processes of APIs and improving the overall productio n s and productivity at the Uniche m and all those and cost reductions and all those kind of things . And also to scale up their prod u ction. So you can witness that the total income in the current y ear and the first -- is almost growing 40% plus. And in this quarter also, overall top line has grown by around 43.6%. So th e ir productivity definitely are improving now.

And as far as -- none of those activities are concerned -- its -- a lot of -- ther e is for everything there are tim e table and it takes a lot of time because regulatory filings and s o many things are involved. So t hat process is going on. And even cost reduction process and everything is going on. It will ta k e some time, but the improvements are seen in the results no w for the Q3. They have achieve d almost around INR38 crores kind of EBITDA number to 8.8 % .

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And the com p any, which was incurring losses has now shown some kind of P BT in the current quarter also, a round -- almost around INR16 crores before the exceptional i ncome. Also they are on right t r ack, and we are confident that because the company will make p rofitable -- as we have discuss e d earlier.

Kunal Dhamesha:

Sir, any qua n titative number as to where their margins -- annual margins c o uld end up in the next 2 years w ith all that we have in place now the entire plan that we have i n place?

Ajit Kumar Jain:

It all depend s on how the journey is actually the -- taken up because ther e are many things where the re g ulatory approvals and all are required. Even if processes are c hanged, processes need to be a g ain refiled, then after approval only they can be, let's say, co m mercialize and all those kind of things are there.

So giving qu a rter-wise numbers and all may not be right now feasible. But y es, what we have talked earlier that INR2,000 crores turnover and INR300 crores kind of 15 % kind of EBITDA margin. That ' s very much achievable. We are very confident, every day a f ter -- then we are looking into a nd seeing the progress, here we feel that we are on the right pa t h here.

Kunal Dhamesha: Sure, sir. An d the second one on the generic business, which has seen a l o t of growth 33% year-on-year. Is there any one-off kind of component? How should we loo k at that business, let's say, next quarter and for the next year? Ajit Kumar Jain: Generic busi n ess, if you look at in last 3 quarters on a continuous basis, that has done the

Generic busi n ess, if you look at in last 3 quarters on a continuous basis, that has done the similar kind o f growth. And in fact, at the beginning of the year, we were l ooking at generic business may not grow that much because of -- we were looking -- we have l ost certain kind of businesses in South Africa, but we are -- in South Africa, also we are gro w ing and we were expecting al m ost around INR40 crores, INR50 crores kind of losses, but w e are looking that, the South Af r ica business is also moving up in current year also. I think in fi r st 9 months, it has grown by al m ost around 12%. So there are no decline.

Europe busi n ess is also going on very well. The Europe has seen good gr o wth in last first 3 quarters in t h e current year. And overall, it's grown from INR240 crores to almost around INR371 cror e s, almost around 54% growth. There are a lot of products w h ich are yet to be launched in U K. So that business will continue to have good growth.

Only concer n is little bit on this Red Sea level and certain customers postpo n ing some kind of shipment and all those kind of things, in the time frame is going to be norm a lized. And in time to come fro m first -- maybe in the first quarter of the next financial year -- some kind of US products wit h shipment and marketing will start. So overall generic busi n ess should -- say should be gr o wing well for us in time to come.

Sure, sir. A n d one more, with your permission. On the US products, can you provide incremental u pdate as to where are we, for the sake that we might do some s hipping, but what could be the potential upside on that shipping that will start in quarter 1? A nd then how are you looking a t the number of products that will start shipping, starting from q uarter 1 FY '25 to end of FY '2 5 ?

Kunal Dhamesha:

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Ajit Kumar Jain: I think overa l l, what we have worked out that there are a lot of products wh e re -- some kind of work needs t o be done with reference to -- because in US, we are coming a f ter a long number of years 201 4 to now. So some kind of processes, the change of API and a ll those, there are some processes where the post approval are required, which has 6 months' t i me and some preapprovals are required. So all those kind of things are there.

But I think, o verall, looking at the -- we feel that almost around 8 products or 9 products can be launched i n the next 12 months. That's what is visible. And thereafter, t h e -- whatever the process upgr a dations or somewhere, the site changes are there and all tho s e things will take time. So -- o v er a period of 2 years, I think it's possible to launch around 1 6 , 17 product kind of number.

So that's how -- its a journey now. There's a lot of revalidations and all thos e need to be taken and all. So it will take some time. It's not that everything can be done toge t her. So it's over a period of tim e -- say, in current year, 7 to 8 products definitely can be launch e d. Yes. Moderator: The next que s tion is from the line of Damayanti Kerai from HSBC. Damayanti Kerai: Sir, my first q uestion is on branded market. So you obviously mentioned s o me regions which has impacte d quarter during -- performance in the quarter. So how should we look at this business to s a y from next 2 to 3 quarters perspective? Ajit Kumar Jain: Overall, see o ur expectation from this business from next financial year co u ld be around 10% kind of grow t h. And current year, it may grow around by 8%, yes. Damayanti Kerai: Okay. But so m e of the challenges which you mentioned, that remains in ne a r term, right? And then maybe i t will take some time for those 2 sectors. Ajit Kumar Jain: Yes. Yes. Bu t in spite of those difficulties, the business could grow around 1 0 %. Damayanti Kerai: 10%? Okay. And sir, you mentioned, say, like Red Sea situation, etcetera. But one of the commentary y ou also mentioned that freight costs are down -- freight cos t s have moderated year-on-year. But I think what we are hearing that logistic costs are going u p , etcetera. So how should we l o ok at your operating cost especially freight, et cera, again, from a near-term perspective? Ajit Kumar Jain: That's -- for f reight cost comment I have given only with reference to that l a st year, what kind of prevailing rates were there compared to that the rates are significantly l ower. And that -- even if it's a little bit the logistic cost goes high, it may not have much of impact on overall profitability a nd all.

Damayanti Kerai: So you don't e xpect much impact from these higher freight costs, etcetera. S h ould we... Ajit Kumar Jain: Only certain European customers are postponing the shipments. But no w let's say, Houthi attacks has c o me down and things may normalize again. That's what -- yes. Yes. Last few days, we hav e not heard any kind of those attacks.

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Damayanti Kerai: Okay, sir. A n d my last question is, can you provide an update on some of the new plant expansion, e t cetera, which you're doing at Dewas, Nagpur, etcetera? An d how soon these plants will st a rt contributing to your numbers?

Ajit Kumar Jain:

Ajit Kumar Jain: Dewas almost around 7 to 8 product commercialization work is going on. S ome products are already filed with European authorities. One product approval has recentl y come. So it may take around 6 months' time for at least 5, 6 product to get approved. So the r eafter, the -- your shipments -- y our production -- regular shipments can start from Dewas plan t . Damayanti Kerai: Okay. And N a gpur?

Ajit Kumar Jain: Nagpur -- co n cerning Nagpur we have not done anything much on the site. We have just got the -- now c o nsent to operate. So first one, intermediate, the planning is g o ing on there, but that's for cap t ive consumption. So nothing we laid on as far as the top lin e is concerned, it's only some ki n d of reduction in the cost and all will happen. Yes.

Damayanti Kerai: Okay. And si r , a clarification on the US business commentary which you al r eady provided. So you're expect i ng that 16 to 17 products can be launched in next 2 years. So that will give you like a good footing in the US business given like your advantage on t h e cost expenses, etcetera, or y o u need to add on like more products to gradually come up in the US market in say, next 3 y e ars?

Ajit Kumar Jain: We have al m ost around basket of around 40 products. So we are expectin g good number of product appr o val to come. So this is from the current list I'm talking whic h is approved list. Yes. So it's b a sically the more number of product approvals will come and w ith that, even the more number of launches will also happen. Moderator: The next que s tion is from the line of Surya Patra from PhillipCapital.

Surya Patra: Yes. Sir, my first question is on the margin profile x of Unichem for this q u arter. If I see that adjusting for the EBITDA margin what we had reported for or what we had indicated for Unichem in t he previous quarter that was part of our number. And this quarter's reported number of U nichem, it looks like that the margin has -- for IPCA has seen a kind of meaningful c o rrection sequentially from almost like 300 basis point kind of i m pact.

Ajit Kumar Jain:

So what is t h is leading to? Is it the operating negative leverage that you' r e seeing out here because your export is seeing some kind of -- so if you can clarify what is that is driving the margin seque n tially weak for our base business. Let's say, ov e rall, if you look at the -- as I talked earlier, that material cos t to sales ratio has improved be c ause more value additions are there. And that improvement is a lmost about 2.6% kind of impr o vement is there on material cost.

And prices a r e more or less 2.78% improvement. So -- and prices are also n ow stabilized. So there are not m uch of fluctuations on my procurement prices and all. And o v erall, more valueadded busin e sses are happening on formulation side, and that's giving t h e better margins overall.

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And as far as the personnel cost is concerned, that's growing around 12 % , which includes around 7% t o 8% kind of normal increments and since we added people i n the field. So the personnel co s t is written on higher side. But our -- overall, if you look at y o ur manufacturing and other ex p enses side, there are hardly any increase. So compared to -- w e have the overall operating inc o me to other expenses, manufacturing -- other expenses, that - - there are also -- there is good amount of reductions is there because overall, that cost has not m oved up.

Surya Patra:

Ajit Kumar Jain:

Y-o-Y that i s correct, sir, what you said. I'm just asking that sequentially it looks like near about 300 ba s is point kind of impact, IPCA's base business would have seen, if I adjust for the Unichem nu m bers. So what -- sequentially, what would be driving or dam p ening the margin, sir?

The margin i m provement will continue as -- let's say, that with the overall g rowth picking up, right now, sa y , in the current quarter growth was low. And from next year o n wards, I think we should be co n tinuously growing by around 10% to 12% kind of growth.

So at that le v el, the margin level will further improve by around 1.5%. An d when we add the US business m argins will -- because capacity utilizations will add. So that also will add to the margin over and above this normal margin. So we feel that overall EBI T DA margins will definitely mo v e by around 2% point plus kind of things. Yes, in next financi a l year.

Surya Patra:

Ajit Kumar Jain:

Okay. Okay. Sir, with your permission, can I just ask about the Unichem a lso here. Because the margin p e rformance for this quarter, what we see sir, here in Unichem i s around 15%-plus or 15% arou n d. So I think it is already reached to your guided level almost nearer to that. So is it fair to beli e ve that the margin expansion, what you have been targeting with the initial kind of corrective m easures. The full benefit of that flown in to Unichem and wh e ther we have seen any of the be n efit of integration for IPCA's base business?

Let's say, ma r gin there are driven by their overall increase in overall reven u e. Let's say, they are growing b y almost around 40% plus in the current year. In this quart e r also, they have grown by ar o und 43%. And improvements in business is there across, w h ether it's our US business, wh e ther there its a Brazilian business, whether it is European bu s iness, except they have suffere d on ROW market business, again, because Myanmar they had good business. So that is impacted and little of the Russia business is impacted.

So -- but -- and even the CRAMS business is also -- the contract manufact u ring business has also done w e ll. So overall -- let's say, the overall productivity there are i m proving and your overall top li n e growth has been good.

Now as far a s margins are concerned in Q3, I think the EBITDA margi n has been around 8.8%. So the y were around 3%, 4% from there. They have come to 8.8%. It's not around 15% because ther e is some kind of exceptional income is there. So that you nee d to exclude. So I think Uniche m in P&L account that has declared separately because that is on sale of this residual shar e s, which they had of Optimus which they have disposed of a nd almost around INR68 crores kind of surplus has come. So that has been shown as exception a l income.

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So overall m a rgin has not reached to what level and what kind of improve m ent, which we are looking in U n ichem, they will take time because processes when they are c o rrected, they need to be filed w ith the regulator, then -- after that, based on that, you need to do the -- take approval.

After regulat o ry approval, you take the -- again, the formulation basis put them on stability after you put the stability, then again, file with regulator, take their approv a l. And then those revised proc e sses become effective in your formulation. So it's a journey, i t cannot happen in over a perio d of 3 to 6 months time. It take a long time. So maybe 1 year , 1.5 years and all those kind of things.

So I would s a y that those kind of improvements will come in time to come. Currently, sir, the margin impr o vements are because in Q3 '22, '23 they had negative margins of around 14.1%. EBITDA wa s that kind of negative margin. So they were in losses almost I t hink third quarter last financial y ear, they had almost around INR60 crores kind of losses was t h ere.

From there, t hey have come to the profit and margins have started impro v ing. So we are -- what we are s eeing is only the improvement in operations, little bit on over h ead side, little on cost side, im p rovement in productivity side and improvement in business. T h at has resulted in some margin. Yes.

Surya Patra:

Ajit Kumar Jain:

Surya Patra:

Ajit Kumar Jain:

Okay. Sure, sir. Sir, My next question...

And that jour n ey will continue -- that journey will continue.

Sure, sir. My next question is on the US business front. So you mentioned that some sort of supply com m encement to US can start-- starting first quarter for FY '25. Bu t knowing the fact that the activ a tion of the dossiers could take a longer time, even the process has to be updated. So this -- the procedural aspect itself will take around 12 month or so. So t h en on what basis that we are s a ying the few of the...

Sir, we have been working almost around 7 products, we need not to do m uch. So that's our updated doss i ers are there. So these 7 products can -- see, currently, I have 21 approval. Out of 7 products ca n go. So that -- in a closed manner these products will be launc h ed. But initially, I think 2 or 3 p roducts -- production is already going on. So there would be somewhere in the first quarter o f the current year. And the launches -- market launch will h appen in the first quarter of cu r rent year. The shipment from here may take early part of the f i rst quarter of next financial yea r .

And the othe r products are -- there are somewhere there are site changes are there, somewhere there are po s t approval are there, somewhere pre-approvals are there. So m ewhere the new processes ne e d to be incorporated. And all those works are there. Plus, w e expect we have almost aroun d a good number of more than 20 more filings which are there, where everything is -- most o f the -- lot of review has already happened and -- in a pha s ed manner, those approvals ca n come. So based on that, I'm telling that around 15 to 1 7 products can be launched ove r a period of 2 years' time.

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Surya Patra: Okay. Okay. Just last one question, sir, from my side. So far as the do m estic formulation performance going ahead is concerned, let's say, FY '25. Obviously, we h a ve seen a doubledigit growth b etter than the industry growth, IPM growth in the current finan c ial year so far.

Sir, knowing the fact that around slightly more than 20% of our portfolio p o ssibility is part of Enelium-bas e d and the limited scope of a price taking price rise there and t h e volume growth trend, what w e are seeing currently. So is it possible to continue double-di g it kind of growth for next year a s well?

Ajit Kumar Jain:

Let's say, Elenium did not impact much in current year also because there w as a good amount of price rise w as there on Elenium, but similar kind of reduction was there few months back because of r e adjustment of prices, and reappraising and all. So on Eleniu m product, in fact, there is hard l y any advantage or even if there is advantage, it's only 1%, 2%. So there was hardly any. M uch of the advantage was not there.

So -- and wh a t we have seen in current year is that your acute portfolio gro w th in the market is low. So it's a very exceptional year. So -- and acute side, the growth shou l d pick up in next financial yea r . And on the chronic side, market has started reporting doubledigit growth now. So overall, w e see that from 11% to 12% growth -- what current level we have, it should be possible to in c rease the overall growth to around 13%, 14% in domestic mar k et.

Moderator:

The next que s tion is from the line of Ajay from [Wealthify 0:29:01].

Ajay:

Yes, sir. So sir, I have a question about our group companies. Since n o ne of our group companies are doing any con calls or giving any guidance. And if you sa y the top lines and bottom line f r om last few quarters are almost stagnant and also into losses. So can you please provide any u pdate around our subsidiary performance like of Krebs and Lyka and Makers Laboratories.

Ajit Kumar Jain:

Makers has n o thing to do with IPCA. IPCA doesn't have any kind of holdin g in Makers. It's an independent c ompany. Then as far as Lyka is concerned, their business gro w th is good. They have -- over a ll, they would be doing better, I think, overall. Their plant is u nder shut down a little bit bec a use of upgradations and all. So that is also getting comple t ed -- your whole renovation p a rt is going to complete in first quarter of the current ye a r and thereafter, validations a n d filings of dossiers and all will happen in the developed mar k et and all. So that journey is go i ng very well.

In spite of al l those kind of things, they have performed reasonably well. A nd they also had almost aroun d 100 people in current year to do the direct marketing of their - - injectables in the market. And t hat business has also now -- they're giving good results to the m now. And in fact, they can add more number of people in next financial year. So overall, we are seeing a good journey for a s far as Lyka is concerned.

As far as Un i chem is concerned from losses, they have started now perfor m ing, and we have already said t h at -- it's possible to achieve almost around INR2,000 crores t u rnover there. And

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significant i m provement in the EBITDA margin from current level. So t h ese are the listed companies.

As far as Kr e bs is concerned, there are good improvement there. The losses are reducing now and some mo r e products validations and all are going on there. Some produ c ts on intermediate side are getti n g approved in our dossier. So once that happens, their volume will also pick up. So we are se e ing good improvement in Krebs also. But it will take time. It's not -- till the time those approv a l comes, even though you have validated process, you can't use those kind of intermediate a nd use those capacities and all.

So those issu e s are there. But overall, let's say, there are overall improveme n t in all operations. Onyx is givi n g good returns, good profitability there. We are the -- Trophic W ellness has done good business on selling the neutraceuticals and their business is also in good profitability overall. So th e re are -- except lets say, somewhere, I think the Bayshore whi c h is a setup which was set up f o r marketing of IPCA product. So now that setup is no longe r required because Unichem wil l be doing the marketing because that's a much bigger setup.

So Bayshore will, overall, maybe -- that business will get overall merge w ith the Unichem business and also their team synchronizations and all that work is going on. And certain costs will there als o will come down. So overall, there are much of -- not much of concerns in that -- associated su b sidiary kind of business.

Moderator:

Ashish:

Ajit Kumar Jain:

The next que s tion is from the line of Ashish from JM Mutual Funds.

Yes. Sir, on t h is API thing, since you have the Dewas facility also coming, b u t globally, there's some price p r essure on the APIs we have heard from some of the channel checks. In terms of our realizatio n , like what products we might have selected for -- from Dew a s versus then and versus now, h ow are the product prices behaved?

As far as Dewas products are concerned, it's only the products are gettin g transferred from Ratlam and R atlam, we are creating the surpluses capacity so that the p r oducts which are required for c aptive consumption for our US business that can be accommo d ated. So it's not a newer kind o f products to be launched and newer products are maybe few. It's more of a site transfer from Ratlam to Dewas and those kind of products are there.

And there ar e -- the price stability is there on those kind of products, excep t sartans where we have seen si g nificant kind of price reduction. But otherwise, the prices ha v e stabilized now. There are no t much concern on as far as the prices of API is concerned cur r ently. From these levels, they a r e not going down.

Ashish:

Yes. Fair en o ugh. Sir, secondly, on the US, since we are in the process of starting up the business. So p rior to the 2013, '14 level, we used to do around $30 million to $40 million in the US business. And there was this one product, Toprol, which is metopr o lol. So all those engagements like used to supply Toprol to AstraZeneca and some other players, I guess. So all those engage m ents will restart or you feel you will have to make a fresh start?

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Ajit Kumar Jain: Let's say, tac t ically all those kind of businesses because -- has completely come -- US related there is no sh i pment of API to any formulators for US in last 10 years. So w e have restarted all those kind of talk that wherever is possible to get those kind of business on c e again. But it's a time-consum i ng thing again because lot of places, our process has also chan g ed. So we need to update those k ind of parties with revised sampling. And then the approvals and all those things are there.

So API bus i ness will be a little slower to start with for US But the API for captive consumption s will come from Ratlam. So Ratlam capacity which is getting f r eed by shifting of products to D ewas will be utilized for the purpose of our captive consumptio n more. And the -- and API business, if you look at -- now from next financial year, we shou l d be able to grow around 10% to 12% year-on-year.

Ashish:

Okay. Fair e n ough. Sir, lastly, on this Unichem, so in terms of liking opera t ional changes like putting our p r ocesses, going for the yield improvement. So where are we in t he overall scheme of things? H a ve we achieved enough kind of success in what we were pl a nning to do with Unichem?

Ajit Kumar Jain:

If you look a t their results of the third quarter and all, they have signi f icantly improved because they were in losses. And now they have come in overall and margi n s has also started improving fr o m minus 14% in Q3 last year, it is now 8.8% kind of margin.

So the operat i ons has started improving, their productivity have started comi n g. Their sales are growing by m ore than 40% in current year. And that is also resulting -- businesses are also improving in various markets like US, Brazil, Europe. everywhere, we are s e eing some kind of business imp r ovements are there.

And they ha v e Goa two their plants, the validation of processes are going on for the bigger products so t h at they have much larger capacity, but the bigger basis they ca n produce. So with that, there co u ld be a further improvement in their overall operation.

As far as pr o cess changes and all those are -- it's a journey. It takes time. That's -- work is happening e v erywhere on market extension, process improvements and all those kind of things. But y o ur pharma industry being regulated, everything need a regulat o ry approval. Once you do a pro c ess, again, go to regulators, file with them, wait for their appro v als. Then give the APIs or inter m ediates to the other formulators, all that. And then they need t o again do -- their processes an d generate stability, file -- give those data to regulator.

And thereaft e r, the fructification happen. Here, most of those improvemen t s are not for sale. It's more for t he captive consumption. So that journey will have to have, an d it will take time. It's a maybe 1-, 1.5-year journey. But I would say that, yes, the journey i s happening as we have envisag e d. There could be some delay here and there, but journey is happening as we have envisag e d.

Ashish:

Just lastly, si r . So 2 years down the line, could this be a 15%, 20% EBITD A margin business? Is that numb e r achievable for Unichem?

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Ajit Kumar Jain: We have gui d ed for 15% kind of EBITDA margin.

Moderator: The next que s tion is from the line of Shiva from Purnartha Investment Advis o rs. Shiva: My first que s tion is with respect to the guidance. I mean if I see our inte r national business, earlier, you s a id it was -- you were expecting a 12% growth but now you j u st said that 8% is what you're expecting in your Q3. Just wanted to understand for the differe n t subsectors, what are the guida n ce? Are you holding in? Or is there any change? Harish Kamath: As Mr. Jain h as said, generic business will continue to grow. There will be some slowness in the API busi n ess for the time being and to some extent, in the ROW bran d ed business. The growth has b e en lower than what we gave projection in the beginning of the y ear. Shiva: So API, you are lowering and international branded you're lowering. The o thers are sticking directly... Harish Kamath: Right. And b o th these business should give reasonable growth in the next financial year. That is what our g uidance is. So from this period on the API business should s tabilize and grow going forwar d . Shiva: Understood. Helpful. And the other thing I just wanted to know, obvi o usly, the generic business, Un i chem's also business is growing very strong. Just wanted -- if y ou could just add some kind of what are the other reasons behind this sudden surge in dema n d? Because at the start, you onl y said that at the start of the year, the generic, you were expec t ing a single digit, but now it is upwards of 25%, 30%. So wanted to understand what change d in this high end? And going a h ead, is it a one-off? Or is it more structural? Harish Kamath: No, no. Lot o f operational changes are also made in the bargain. So thei r productivity has improved. T h eir production capacity has also improved substantially, and t h at has given them benefit in U S business. And they are also commercializing few of the ne w formulation for which, in the past, they have received approval. And few mo r e new products will also get commercialized in the next fina n cial year. So they also have a b a sket of products to be commercialized. So all that is giving b e nefit. And in few products, ma y be because of shortage in the market also, some benefit w o uld have come to them. Shiva: Okay. And w i th respect to your generic, is it more -- because of any shortages or is it... Harish Kamath: They're only i nto generic business. Nothing else. Shiva: Your generic business also saw a very... Harish Kamath: No. My gen e ric business, what has happened? The UK business is growi n g very nicely. In fact, in first 9 months, the growth has been about 100%. European generic business has done very well. S o uth Africa, we were looking for some degrowth, but that h a s also grown. So generic busin e ss, we don't see any concern as far as growth is concerned.

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Shiva:	I just wanted to know, like the next 1 year, you're looking at a very strong growth, like the
	runway of thi s? Or is it -- this year has been a one-off, etcetera?
Harish Kamath:	On a conserva tive basis, we can guide anywhere. between 12% to 15% grow th going forward
	for generic bu siness. Over and above that, whatever business will come out of US will be add
	on.
Shiva:	Understood. Helpful. And just one small question. I wanted to unde rstand your MR
	productivity. So we've seen the last quarter that there was an improvement. S o if you could just
	get -- update the MR productivity? And what is the current strength and the plan for any
	additions goin g ahead?
Ajit Kumar Jain:	Overall, MR productivity is around 4,25,000 currently. We are almost arou nd infilled around
	7,000 medica l reps as of now. We will be adding certain number of peopl e in current year.
	That process is going on. But additional will be not more than 5% increa se in overall field
	force size.
Shiva:	Okay. So last quarter, it was slightly higher, right? It was I think 4,60,000 was -- 4,63,000,
	MR?
Harish Kamath:	Wait. Second quarter is always more productive. Because of seasonality is sues and all. And
	this quarter,b ecause of season not being that conducive, sales are also a lit tle bit lower than
	what we expe cted. If not nothing, nothing abnormal. Second quarter is alway s the best quarter
	in the domesti c branded business.
Ajit Kumar Jain:	On per mans ide, I think we have added almost around INR20,000 produc tivity per man in
	current year.
Shiva:	Understood. And just there's some notification from the government wi th respect to the
	medical profe ssionals kind of antiviral or anything they should be slightly on a conservative
	basis. Did you feel anything on the ground or is it more just a statement from the government.
Harish Kamath:	Pardon. Wed idn't make out what was your question actually.
Shiva:	There were so me rules that the government officials have told the medical representatives to
	be slightly on a conservative basis in prescribing pain or anything with re spect to the acute
	basis. So in th at...
Harish Kamath:	We have nots een any impact, anything like that in the market place. No.
Moderator:	The next ques tion is from the line of Rashmi Shetty from Dolat Capital.
Rashmi Shetty:	Sir, for the pr oducts, which you mentioned, 16 to 7 launches, which we willb e doing in the US
	business. Tha t will be through Unichem. I mean, the sales will be the part ofU nichem or -- and
	will that be in cluded in subsidiary or it will be part of generic business?

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Harish Kamath:

Harish Kamath: Rashmi, earl i er what was happening, I was manufacturing, and I was selling it to my marketing pa r tner, right? We had 2, 3 marketing partners in the US. So on p r ofit sharing basis. Now what will happen, we will manufacture and sell to Unichem US. So sal e s will get booked in my books also and in their books also. In any case, their books wil l get consolidated ultimately wi t h my books. So there is no change because manufacturing IP C A will do -- only they will do selling and distribution there. Rashmi Shetty: Marketing. U n derstood. Harish Kamath: That is corre c t. Right. Rashmi Shetty: Okay. That i s one thing. And secondly, on the India business, if you can giv e little bit color on how your pa i n segment has performed during the quarter, even Zerodol, if you can tell us about the per f ormance. Ajit Kumar Jain: Overall, pain portfolio in current year has grown by around 12%. This qua r ter, pain segment growth is a l i ttle lower at around 8% to 9% kind of thing. But overall, let' s say, therapeuticwise on card i ovascular in current year, we have grown by around 13%. And the antibacterial growth is lo w at around 3%, CMS around 20%, Derma on 19%, urol o gy around 24%, ophthalmolo g y around 17% kind of growth. And others maybe around 8 % , 9%. So overall, that's broadl y the -- here numbers -- in various therapeutical per f ormance -- area performances.. Rashmi Shetty: And your product Zerodol is still contributing significantly and it is growing double digit? Ajit Kumar Jain: Current year, Zerodol growth is around, say, around 8% to 9%. Rashmi Shetty: Okay. At the -- in the range of 8%, 9%. Understood. And one more questio n on this Unichem consolidation. How much would be the amortization that would be reco g nized due to this acquisition? A nnual amortization? Harish Kamath: Rashmi, it i s an investment. There is no amortization. Earlier, what w as happening, all acquisition c o sts used to get capitalized. Now all acquisition cost gets debit e d to P&L. That is why that IN R 40 crores deficit has come in the second quarter. Otherwise, al l is investment. So we purchase s hare and give considerations. So there is nothing to be amortiz e d over a period of time. Moderator: The next que s tion is from the line of Mukherjee Saion from Nomura. Saion Mukherjee: Sir, just one U nichem, your guidance of INR2,000 crores and a 15% EBITD A margin, INR300 crores EBIT D A. What's the time line for that you're looking at? Harish Kamath: FY '26. Saion Mukherjee: And sir, wit h the process changes and market extensions, which is proba b ly slightly longer term, how sh o uld we think about growth in margins for Unichem from a sl i ghtly longer-term perspective?

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Harish Kamath:	Saion as fara s this market expansion and change in sourcing, it's a regulator y business, and it
	will take time . So the margin expansion will continue over a period of tim e. But immediate
	near future,w hatever we can do, that is what guidance we have given over ne xt 2 years.
Saion Mukherjee:	Okay. And si r, any assessment on the US revenues for the next 2 years wit h 15, 17 products
	that you woul d be launching in the market?
Harish Kamath:	It is too early to give any guidance. See, nobody is waiting for your produ ct. Even though I
	have cost com petency, I will have to again relaunch product one by one and go on taking
	market share. There are only 3, 4 customers who matter in this business, you know very well.
	And they are already sourcing those products from a third party. It will takes ome time, but we
	are confident because of our processes in the API. And our cost competency , we will certainly
	do well in the US market vis-a-vis our formulations going forward.
Saion Mukherjee:	Okay. And si r, when you mentioned 13%, 14% kind of a growth in India, what's the -- your
	assessment on how much is price and volume mix in this growth expectations ?
Harish Kamath:	It will be arou nd 4%, 5% price increase and the rest are all volume. This ye ar, the growth has
	been little lo wer because of the seasonality and all, it is slightly below our expectation.
	Otherwise, co mpared to market, we continue to do well. There is no issue.
Moderator:	As there aren o further questions from participants, I would now like to ha nd the conference
	over to the ma nagement for closing comments.
Harish Kamath:	No, nothing.M ost of the issues. We have already discussed. All questions ar e answered. There
	is nothing furt her to add. Thank you very much.
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.
Harish Kamath:	Thank you, ev eryone. Thank you. Bye.

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