Ladies and gentlemen, good day and welcome to the Torrent Pharmaceuticals Limited Q1 FY 2022 earnings conference call. We have with us today Mr. Sanjay Gupta, Executive Director, International Business, Mr. Sudhir Menon, Executive Director and Chief Financial Officer, and Mr. Aman Mehta, Chief Marketing Officer, India Business. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then 0 on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sudhir Menon. Thank you, and over to you, sir. Thank you. Hi. Good evening, everyone, and welcome to Torrent Quarter One FY 2022 earnings call. At the outset, quarter one growth was backed by continued growth momentum in the branded generic markets, mainly India and Brazil. The second wave of pandemic impacted the recovery trends across some of the key markets we operate. Very shortly, in terms of our financial performance during the quarter, revenues were INR 2,134 crores, up by 4% on a year-on-year basis. EBITDA was INR 717 crores, up by 8%. Profit before tax was at INR 484 crores, up by 20%. Net profit after taxes was at INR 330 crores, up by 3%. The company will now start utilizing the MAT credit, which is grouped under deferred tax, as the normal tax will become applicable from this year, before the company gets into the new tax regime of 25%. The tax cash outflow will continue to be 17% for standalone India. I shall now request Aman to provide insights on the India business performance. Thanks, Sudhir. India business revenues at INR 1,093 crores grew by 18% on a year-on-year basis. Growth was driven by strong momentum in top brands across all therapies and was complemented by new launches. As per the AIOCD data set, Torrent's Q1 growth was at 24% versus the market growth of 37%. The market growth includes a high contribution from COVID treatments and a low base from last year. We have launched baricitinib during this quarter and are conducting clinical trials for molnupiravir. Both of these are our licensed products for COVID, and we continue to look for more partnership opportunities to widen the portfolio. Torrent has launched its trade generics division during the quarter with a complementary portfolio to the Rx business. PCPM for the Rx business for the quarter was INR 10 lakhs with an MR strength of 3,600. Torrent continues to focus on brand building and specialty approach and has 16 brands in the top 500 of the IPM, with 11 brands more than INR 100 crore sales. I'll now hand over to Mr. Sanjay Gupta to take us through the international business. Thanks, Aman. Speaking first about Brazil, which is our second-largest branded generic market outside India. Brazil Q1 sales were at BRL 108 million, up by 14%. Growth was aided by strong performance in our generic segment, which now accounts for about 7.5% of our top line. Growth was also helped by new branded generics that were launched. There were two brands launched in 2021, which have contributed to the growth as well as the recent price increases allowed by the authorities from April onwards. As per IMS, Q1 FY 2022 covered market growth was at 11.6%, but Torrent growth was at 9.4%. IMS expects Brazil pharma market to grow at about 10% in 2021, and we expect our growth to be superior to the market growth rate. Moving on to Germany. Germany sales were at EUR 29 million, flattish growth versus last year same period. IMS for the last three months is showing an overall market degrowth of -1% as compared to -4% in 2021. IMS reflections on Torrent show a growth of 15% in the last three months. As the COVID situation improves, we expect the German generics market to return to its long-term growth rate of 3%-4%, with Torrent growth returning to high single digits. On the U.S. side, U.S. sales were at $36 million, down by 24% on a year-on-year basis and down by 3% on a Q1-to-Q basis. Growth continues to be impacted due to lack of new product launches, pending the re-inspection of our facilities and price erosion in the base portfolio. As of June 30th, 54 ANDAs were pending approval with the U.S. FDA and seven tentative approvals were received. I would like to conclude by stating that the branded generic markets led by India and Brazil continue to drive growth backed by our top brands and performance of new launches. We will continue to focus on returning our German and U.S. business back to growth and to further deepen our presence in all our core markets. Operator, we can open the call to questions, please. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking their question. Ladies and gentlemen, we will wait for a moment while the question queue is tenfold. The first question is from the line of Sriram Rajeevan from ICICI Securities. Please go ahead. Yes, thanks for the opportunity. On India business, if you can break it up into the price growth and volume growth, and also some idea on how the chronic and acute business have performed. Sure. AIOCD data shows volume growth at 24%. Out of that, 14% was volume, 6% was price, and 4% was new products. On a broad basis, I think sub-chronic and acute definitely had much higher growth, firstly because it had low base last year, and also there was a significantly higher demand from COVID prescriptions during the quarter. Okay. Got it. 6% is the price growth. Yeah. Secondly, on the other expenses part, this quarter we have seen that it is lower even YoY also, even if you exclude the R&D. What exactly is driving that? Is it because of the lockdown in the first two months of this quarter? How should we look at this number going forward? I think in the last four, five quarters now, more or less it is in the range of INR 350-INR 372. The marketing expenses were certainly, I would say because of the second wave this time, were lower than what we had planned. I don't think there should be too much of an increase from here at the current rate. This should be a pretty representative number in terms of marketing expense for the year. Sudhir, if you'd like to add anything. No, perfect. Okay. We should work with this kind of number going forward also, or will it increase from here? Plus, minus here and there, Sriram. Right. Okay. Got it. That's helpful. Just lastly, one thing, what should be the reported tax rate now this year? Sriram, just to give a background. The government had come out with a new tax regime, right? About 25% for all the companies. Yeah. What it said in that quote is that no exemptions would be available and 25% would be the tax rate for everyone. Okay? The government also gave an option to people that the people who had MAT credits in their books, they can still continue in the old regime so that they can utilize the MAT credits. Once that is done, they can transit into the new tax regime. For us, it's started now. The cash tax would continue to remain at 17%, and the MAT credit utilization will start for the balance. Okay. The effective tax, including deferred tax, would be roughly 30%, 31%, but the cash tax would be roughly 17%, because there will be a MAT credit utilization from the balances coming into the P&L. Right. Got it. That's helpful, sir. Thank you so much. Thank you. The next question is from the line of Neha Manpuria from JPMorgan. Please go ahead. Yes, thanks for taking my question. Sudhir, on the employee cost, given that we had rationalized our MR during last quarter, the quarter-on-quarter increase is primarily because of increments, or just wanted to get a sense there? Largely increments, Neha. Quarter four, if you recollect, I had also said there was a reversal on some provisions to the tune of 7%-8% growth. Okay. Other than that, it's the increment impact which is there. Ideally INR 341 should have been, let's say, INR 350. Okay, understood. Yeah, that's the increment. Sanjay, on Brazil, the quarter-on-quarter decline, it was about BRL 140, close to BRL 110. Is this some inventory correction in the market? If you could give some color on that. Second, on Germany, now that our quality issues have resolved, we were expecting normalization of sales to happen given most of Europe has pretty much opened up. Any reason why we are not being able to ramp it up to the EUR 30+ million level that we were seeing before the quality issue? Sure. Starting with Brazil. Generally, traditionally in Brazil, Q4 sales are always high, and the reason is that the distributors speculate on price increases which take place on the 1st April. It works out pretty much the same way every year. There's usually a precipitous drop in Q1 versus Q4, which is normal. I don't see anything unusual here. We decide on the level of inventories we want to keep in the channel at the end of March, and it does go up. Then by the end of June, it comes back to a normal level. Neha, the appropriate comparison would be year-on-year, not quarter-on-quarter for Brazil because of this phenomenon. For Germany, there are a few things here. I would have liked to see a higher level of sales. What is holding us back from that 30+ level? Firstly, it is the overall market. Last three months, we've seen the market go down by -1% again. I was expecting it to return to growth, but the second wave kind of impacted it in March, April, May, and we had a lower market base. Secondly, what has happened is we have about 10%-12% of our business in the OTC space, which has suffered disproportionately because the sales of this business have actually declined. That has had an impact. What I can say is, going forward, our internal issues are resolved. As the market, I would expect it to come back to the traditional 3%-4% range, and then for us to be in the high single digits, 7%-9% range before the end of the year. Hopefully in the next few quarters, we'll be able to show you numbers in that range. Sudhir, just to add to what you said, the OTC impact is because of the lockdown, right? Quarter two should be better. Sudhir? Yeah. Yeah, absolutely. Okay. Thank you so much. Thank you. The next question is from the line of Angelo Bell, an individual investor. Please go ahead. Yeah. Thank you for this opportunity. I just wanted to have a quick overview of the company that how is it with regards to the U.S. pricing. Is the pricing pressure returning? If so, what are the steps, or how does Torrent Pharma foresee it? Thank you. On the U.S. side, the number one cause of decline in sales has been the pricing pressure that we've been facing. The pricing essentially we face it full blast because we have a relatively mature portfolio. We have not had much launches since March of 2019 when the API issue started. On the mature portfolio, how it works is that there are new competitors that emerge every few months, and then they make competitive bids to your customers, and there's a pricing impact. I would say that for Torrent, we've been seeing high single-digit pricing impact across our portfolio on an annualized basis. All right. Thank you so much. Are there any remediations which are looking forward that it doesn't impact as much, moving forward? Generally, the way to counter the pricing impact is to have new product launches, which is like the oxygen of the U.S. generics market and of the players. Unfortunately, we seem to be a bit, let's say, jammed up on that front. Last few years, we've continued to file. In 2018/2019, I think we filed about 28, in 2019/2020, about 12, and in 2020/2021, about 12. We've been continuing to make new filings in the U.S., and as soon as the facility issues are resolved, we expect to launch about 12- 15 products a year. That would more than compensate for the pricing decline in the base portfolio and lead us back to growth. Thank you so much. Appreciate your response. Good. Thank you. The next question is from the line of Prakash Agarwal from Axis Capital. Please go ahead. Yeah. Hi. Thanks for the opportunity. Good evening. Just missed on the opening remarks on the India outlook as well as gross margin and EBITDA margin outlook. I mean, while India growth is very strong, but gross margins are tad lower. If you could explain that and the outlook as well. Yeah. I'll first take the gross margin question, Prakash. Basically, although the India contribution is higher, there are two key impacts which have happened this quarter versus quarter of last year. One is the export benefit income not being there this quarter versus same quarter previous year. That impact is, I would say, 0.25 kind of a number. The other is the Section 80 benefits are over for us, right? 2020 was the last year. That's again impacting the gross margin by another, I would say, 0.25. Both put together is 0.5, I would say. The other thing, what has happened is although the India share is higher, I think there's a skewness towards the acute portfolio, which I think the concentration is little higher compared to quarter four of last year, same quarter. That has caused a drop in the gross margin, I would say. It's basically the product mix which is driving. Anyway, it should come back in the next quarter, I believe. Okay. The outlook on the India business, sir? If you look at the June data at 1 4%, that was practically with the lowest COVID cases across the country. April, May had a high growth, and June was significantly lower. Depending on the footfall recovery as the country is opening up now substantially pretty much everywhere apart from a few metros and a few states, our view is that double-digit growth for the market should continue even without the COVID drugs going ahead. Okay. Do you think your entry now with the COVID drugs, molnupiravir and the first one, and you were expecting to disclose one more, is there any color to that? Do you think these products have a long runway of growth or these are getting prepared for if at all there's a third wave? How do you think about this pipeline that you are building? Yeah, it would be more for if at all the future wave. That would be where these products will be prescribed the most. It would not be a long-term prescription. Okay. For the long term, in terms of new introductions after dapagliflozin, are there any new introductions around nutrition or preventive healthcare or any other segment which will drive future growth? CNS, we've had a few launches. One from last quarter has done well so far, brivaracetam. That market is picking up quite well. We've also launched perampanel, which is another antiepileptic. CNS has seen a good traction, I would say, of new launches. Apart from that, Baricitinib was already launched this quarter as well. I think this Q1, we had about four new products. We're looking at a few nutritional extensions in the coming quarters as well. The next wave of launches will be after the patent expirations next year. Large launches, I would say. Okay, understood. On exports, I see that Brazil currency after long has reversed. We are still near industry growth. When do we start seeing the higher growth in Brazil, given you just mentioned that 10% industry growth and we expect to outperform that, plus there will be the currency tailwind, which you start or that is unlikely? The currency tailwind is, from what we have seen of the economic forecast done by various banks, et cetera, it seems to be unlikely. The country seems to be fairly stable this year. They're forecasting a GDP growth of about 6% and next year have seen figures in the 3% range. In terms of inflation also, things are pretty stable. All in all, I don't expect the currency to devalue substantially. In terms of growth, I think you will see that growth will come from three or four things. One is, as we had discussed, that we are investing in our generics business. Since last year, we hired seven additional people. We'll be hiring some more people this year to push the generics business, and that has grown quite handsomely and that will continue to grow as we launch more products. The second thing is we benefited from the price increase that took place this year on time, on April 1st. The price increase that was authorized for, it's by category of products, but for the most competitive products, the government authorized a 10% price increase. That will benefit us as many of our products fall into that category. Thirdly, we have new launches which are on the calendar. Last year we launched two new products. One was mirtazapine and the second was bisoprolol. Mirtazapine is already showing a double-digit share in prescriptions and volume. Bisoprolol is mid-single digit, but the goal is to reach double- digits soon. This fiscal year, we will launch about five products. Some of them are quite major products, they would help push that growth rate, much above the market growth rate. That is our expectation. Okay, thank you for the detailed answer. One question on growth expectations. We are seeing India reviving quite a bit. We are seeing Brazil reviving now. Germany, you had couple of quarters back. When do we start seeing double-digit growth? Because U.S. is something which is pulling down our double-digit growth, both in terms of top line and EBITDA growth. When do we see that coming through? Unfortunately, Prakash, we have no position to give any guidance on the U.S. and the main problem there is the FDA. When do they start coming to India? When do they inspect the plants and start approving our new products? We are, from our side, doing whatever we can in terms of filings and getting products from third parties, but that has a limited impact. Last year we launched only two new products, which are both manufacturer third parties. Coming here, if the plants don't get approved, we'll have a single digit number of launches. Okay. Prakash, I'll give you few data points actually, or rather one data point. For this quarter, the U.S. impact on the overall growth is around 7%, right? Because last year, quarter one was roughly $47 million, and it came down to a base of $36 million in quarter four this year, right? That's something which we are maintaining. Assuming, let's say quarter three, come quarter three, the 7% impact should not be there because we are maintaining the same base of $36 million-$37 million, right? Okay. Assuming you have double-digit growth across the other three markets, you can achieve double-digit growth. Correct. Okay, fair enough. Last question for you on cash flow generation for the quarter and any debt repaid. Yeah, we repaid around INR 350 crores approximately. These are refinances or largely from cash flow from operations? From cash flow. Okay, perfect. Great. I'll join that. Thank you. Thank you. The next question is from the line of Shyam Sundar from Goldman Sachs. Please go ahead. Hi. Thank you for taking my question and good evening. In the press release it says you've launched a trade generic division during the quarter. What's the idea here? Is there any outlook that you want to share on this? Yeah, we launched the division in Q1. I think we would want the business to stabilize a bit first before sharing more details. Broadly speaking, it's a complementary portfolio focusing mainly on the acute segment, predominantly acute and some sub-chronic. There's barely any chronic share in the trade generic business. While we would look at having organic launches in this basket, we would also look at shifting some of our prescription brands to the trade generic division at some point where there would be a higher growth potential. These would be molecules or segments where there is a greater consumer recall on self-medication. As of now, I would say it's been a good start, but we'll wait for maybe another quarter or two to comment more on the trajectory. If we were to look at the margin profile for this, would it be very different, you think? In a kind of an umbrella approach, it should kind of season with the entire India business. How should we look at, and maybe the timing of why we started it now? Just curious. The margin profile would be lower than the prescription business for sure. The nature of the business is such that you have to be at that price point plus the channel margin is significantly higher. In terms of the timing, I think this has been something that we've been discussing internally for quite a while, but because of COVID disruptions last year, it wasn't appropriate to launch. It requires a completely new supply chain, new set of distributors. Once that situation stabilized, we started working on this sometime around January, and we ended up launching it this quarter. Got it. Thank you. Second question, just is on the updates of the U.S. from the Levittown facility about some of the oral liquids. Have we done anything yet or is it not material enough for us to see in the numbers? I remember we had a $12 million annual target to kind of get back. I'm just curious what's happening there. So far, we've not started commercializing products. We'll start actually a couple of months with delay. We'll start selling some products in October. You won't see the impact in the numbers. At least in the initial few months, it won't be material enough to move the needle. You're saying it should be a more fiscal 2023 where we will likely see the impact of all these oral liquid launches, okay? Correct. Okay. The last question is on statins. Are we now Sorry, I may have missed the update, but just what's happening on the statin side? Sure. We've launched two statins on the market. Our third one would be launched in this quarter. The top line you will see some impact, but the margin profile on statins is not what it used to be. We will get our fair share on a couple of statins, and those numbers should start coming in the top line from this quarter onwards. Even Q2, you mean, right? Yeah. Got it. Lastly on R&D, I think slightly slower than the run rate you have had. Say I'm speaking QOQ, is it the same, like 6%-7%? Where are we, what are we kind of filing, where is it being directed to? Are we doing anything incrementally in terms of either complex filings? If you can just share some general outlook on the R&D space. Sudhir can comment on the expenditure level, but in terms of filings, because of the filings remain the four core markets, and to the extent possible, we try to have common products. We do common developments across all our geographies, and particularly in expensive areas like oncology. It changes the risk profile of the portfolio, right? If you can leverage your R&D investments across multiple geographies. Our focus is on that. For the U.S., we do products with, I would say, generally complex products. We do a very low single-digit number of simple vanilla oral solids. Generally, we are doing products which require a little bit higher level of investment, a higher level of risk. Overall, the number of INDs would be in the 10-12 range. In the past we've done up till 20, but going forward it'll be more in the 10-1 2 range, with some single digit simple generics. A good example would be dapsone. In April of 2021, we got a tentative approval from the FDA for dapsone, which is an acne product for which we conducted a clinical trial in patients in the U.S. The level of investment was higher than what historically we've been used to doing. The tentative approval speaks well to the fact that we would get approval on that product. You would see more of those kinds, and we are also building a large onco portfolio for all our markets. Onco products are very expensive to develop. They are given the cost of the R&D as well as the cost of the API. We have a new facility outside of Ahmedabad where we will be developing these products across all geographies. Those are the kind of investments we are making right now. Got it. Last question is on EBITDA. I think, EBITDA excluding other income, 32%, this has been higher than what we had talked in the past where we thought there was going to be a trade in terms of margin. One thing, Sudhir, how should we look at this EBITDA percentage? Okay, Shyam. Number one, as a policy, we don't give guidance, but if something was possible to be talked about in a scientific way, we could have done that. Now people are already talking about the third wave, right? Sure. I would still wait for one more quarter to see where the full year can settle. Give me one more quarter, please. Got it. Thank you and all the best. Thank you. Thank you. you. The next question is from the line of Nitin Agarwal from DAM Capital. Please go ahead. Hi. Thank you for taking my question. Aman, just coming back to the trade generic business that we initiated. I mean, it keeps going in contrast to our general philosophy of high growth margin businesses. What is the landscape prompted you or has been prompting you in the past to look at this piece of business going forward in the years? No, I think earlier we had a lot going on, I would say, over the last five years in terms of integration of businesses and mergers for portfolios. I think we consciously stayed away from entering this segment, and it's also reached, I would say, a level where it can add meaningfully to our portfolio now. The size is, I would say, much greater than it was probably five years back. Anyway, our acute portfolio in the Rx business is not very significant. This gives us an opportunity to partake in the acute segment as well. The idea is to expand our overall market and market sharing portfolio across TG trade generics plus branded generics. This is largely going to be around the acute portfolio or acute segment, our Trade Generic business. Yeah. There's barely any chronic sales in this segment because substitution is not very high. Even retail recommendation for chronic products is not very high. This is most conducive for acute and sub-chronic. Okay. At what stage do you see it becoming meaningful for our overall India Business? I would say probably after the first year of launch, so maybe three, four quarters from now. Within the near term, right now we've launched with the first phase of the portfolio. That's about 50, 60 SKUs. That's a long way to go for us to add more products here. Anything between about 3%- 4% of our total India business contribution is what we can look at as a reasonable target in the near term. At some point later, we can see how it's progressing. I would say that would be an immediate target to have. Got it. Thanks. Secondly, on the U.S. business. Whenever the U.S. business starts all over again in terms of new product launches coming through, we are about $150 million give or take right now on that business. The dynamics in the U.S. business, especially the other side, have changed very meaningfully over the last three, four years or something. Relatively speaking, where do you see this business really heading to over in terms of time, over a period of time, so next three to four to five years based on investments you're making and what you see in the market? In terms of the business, we are very small in the U.S. Essentially, I would say that our business is now doing about $35 million-$36 million a quarter. From these levels, I don't expect further declines. I would expect it to be more or less around these numbers in the quarters ahead. New launches would contribute meaningfully to moving the needle upstairs. Medium-term, given that it's a $50 billion market, to do $500 million in U.S. revenue is not something which is outside the realm of possibility, and it's something that we are planning for. We continue to work. After we get through this FDA barrier that we are currently stuck in, we should be able to return to growth with around 10-1 5 new NDAs and new approvals and launches each year. Right. Secondly, in the annual report, there is a fair bit of mention of our innovation or NDA efforts. These efforts are largely targeted towards domestic launches or there is some possibility of some meaningful launches in the export market also from that placement? In the U.S., we're building a small portfolio of 505(b)(2)s. Currently we have three, and we aim to add one to two every year. That's where we are going. Eventually at some point in time, we will have a small promotional activity in the U.S. We are doing this in partnership with some companies which have got more experience in marketing branded products in the U.S. That's the approach. For India, Aman is doing incremental innovation also, and I think there are a few products on the market. Aman, you might like to speak about it. For the NDDs, you mean? Yeah. Yeah, that's our patented nasal spray, which has been launched a few months back. Essentially this is the first of its kind nasal spray for severe pain, where there is a postoperative pain, where there's no other alternate. Right now it's only for use in hospitalized cases. The market itself is not very large, but the product has received very well so far. We hope to capitalize on this launch. Lastly, with tax rate utilization, over what period do we see our existing getting utilized and going back to the 25% tax rate domestic business? Nitin, I think between four to five years. For the next four to five years, we'll be at the 30%-31% reported tax rate. Oh, yes, including the deferred tax. As I said, cash tax is only going to be 17%. Yeah. On a reported basis, 30%-31% for the next four to five years. Yes. Okay. A bulk of our profits are also [in order being constituted itself.] Yes. Got it. Okay. Thank you. Thank you. The next question is from the line of Abdul Kader Kudanwala from Anand Rathi. Please go ahead. Yeah. Hi. Thank you for the opportunity. Just one question from my end. [Ashok], what you mentioned to the earlier participant that the U.S. business would not go below the $35 million, $36 million quarterly even made. Currently, if you look from that point of what would be the quantum of the fixed assets which would be dedicated towards the U.S. and which would be not generating any top line to us? How we see the ramp up to happen once our plant gets approval in the near term. Sudhir, you want to answer that please? Yeah. I think it's a difficult question because all the manufacturing facilities which we have is flexible now and the way it's planned is basically looking at the volumes over the next three to five years on a global basis. I don't know how to respond to that as to what percentage of manufacturing capital is assigned to U.S. There can be some thumb rules of looking at it, right? For example, what is your total CapEx which you have spent in putting up the manufacturing facility, and based on that, what are the volumes which are getting manufactured for the U.S., and then see what extent of the capital can be allocated to the U.S. That could be too theoretical, I would say. Sure. Understood. My next question is on the India business. India, we had a fantastic quarter. As we stand today, could you provide some outlook as how the growth is planning now that the COVID cases are going down and the market is really stabilizing. What is our standpoint now? Yeah. June data is the most recent that we can look at, 14% growth of the market. That may have some element of some COVID drug part of the growth, but not very much. I think going ahead, if you recall even last year, the base started normalizing month- on- month. Our view is that 10% growth between that range should be doable going ahead. Of course, a lot of it will depend on whether or not there is a future wave. As of now, this is what the situation looks like in our view, particularly as most markets have opened up significantly. Sure, [Sudhir]. That was helpful. was helpful. Thank you. Thank you. Next question is from the line of Nilesh Mehta from Research Delta Advisors. Please go ahead. Thank you for the opportunity. My question is more about the strategy. Now that we want to focus on trade generics, is that because we believe that the market is likely to shift in that manner, or it's more opportunistic? I'm just trying to understand how do we see the market, because we are trying to focus on a segment which is not as high margin as we used to otherwise focus on. No, absolutely not. In fact, our view has always been that both segments have their own space to grow. The branded segment will grow, and the trade generics will grow without eating into each other's share. It's just a matter of us getting into, or rather expanding our portfolio reach for some of the acute segments which we haven't really focused on that much, and this gives us a pretty good opportunity to enter. It's not in any way going to affect the branded segment at all for us. In fact, entering in this also we've seen just how difficult it is to really get products substituted, especially in the chronic space. This even gives us more confidence that the branded business is not really at any risk from this. Is this more like a expansion into new therapies? Again, what I'm trying to understand, it's more a Torrent specific strategy or you think the market is likely to shift in favor of trade? No, this is more specific to Torrent because I think we were probably one of the last companies to enter this segment. Most of the other peers are already present in this segment. Okay, got it. The other, actually, the reverse of that is what I understand you're likely to do with U.S. You're trying to focus on 505(b)(2), which is more like branded, so far otherwise U.S. is a generic market. Again, the same question, is it more Torrent specific or you think there's more opportunity in the 505(b)(2) space when it comes to U.S. market than the normal generic space? It's a different profile of business, right? It's not that you're going to place all your eggs into 505(b)(2). If we do 12-15 ANDAs a year, we'll do one to two 505(b)(2), like moving up the learning curve. These products generally can enjoy some periods of exclusivity. The skill set required to succeed is a little different than what we do in our core generics business. I would say it's an evolution of the company towards the branded space, but it's not as if that's the only activity that we would be focused on. It's a complementary activity. Got it. Will we be also developing a sales force for 505(b)(2) that we might be targeting? Initial products, we partnered with a company that has a sales force. We'll be leveraging the partner's field force. I see. Understood. Okay. Thank you very much. This is very helpful. Thank you. The next question is from the line of Bharat Sethi from Ikiru. Please go ahead. Yeah, hi. Thank you for the opportunity. Just wanted to clarify on the tax part. Are we saying that the tax rate is going to be around 30%-31% and cash tax will be around 17%? Is it right, Sudhir? That's right. Yeah. Sir, just on the margin perspective, given that we are saying that our OpEx or the other expenses are going to stay at the current levels. Directionally, how do you see margins to be going forward in the ensuing quarters? Is it going to be something similar to what we have observed this quarter or there could be some smoothness towards downward or upward trend? Just from a trend perspective, I understand you can't provide an absolute margin percentage. I think that's what I answered in one of the questions earlier, saying that I would like to wait for one more quarter before I start looking at it directionally, how the margin will settle for this year. Right. In any case, if let's say there is no COVID wave or if hypothetically if we put it both studies, if you could give that to me. If there was no COVID, the margin could improve by 1% every year. Sure. That's helpful. Thank you. Thank you. The next question is from the line of Anubhav Agarwal from Credit Suisse. Please go ahead. Hi, good evening. Just one clarity on this Trade Generic initiative. Can you just talk about what kind of investments this would require, roughly? I'm not looking for the exact number, but if you can just walk me through. The reason I'm asking this question in context that there is always a overhang on this segment because the channel margins are so high, and the government can clamp down on the margins at any point of time. That's the context I'm asking that what resources are you devoting when you're starting this business? Have you taken a call that basic clamp down from government is not going to come in, and that's why now is the right time to start it? The initial investment while entering this business, there are two ways one can enter. One is by having a large field force attending to retailers, ensuring distribution. The second is just going through a distributor to their maximum ability. That's what we have gone for right now. We don't really have a large field force to begin with. We've got about 20, 25 reps across India who are good for this business. If the business reaches a size large enough to handle a larger field force at some point, that time probably there could be some synergy benefit of having our own field force so that the distribution margin will come down. As of now, that's not the case, and we think this will sustain for at least the next one or two years, and then we can see later on how to take it up forward. The products, are you manufacturing it or these are mostly contract manufactured products? I would think mostly contract manufacturing. Okay, sure. Thank you. Thank you. Ladies and gentlemen, to ask a question, please press star and one now. The next question is from the line of Sriram Rajeevan from ICICI Securities. Please go ahead. Yeah, thanks for the call. Just one thing. I think on the balance sheet, the deferred tax listed is around INR 421 crore. Does that mean that until that is being utilized, I mean, after that only it will be considered as a tax save from the balcony level also? Sriram, you look at the breakup of the deferred tax because when we show it as a deferred tax, it's netted off against deferred tax liabilities as well, specific country. Okay. If you look at the breakup, you'll find net credit at INR 975 crores. Okay. Got it. Which needs to be utilized, yeah. Okay. Got it. Thank you. Thank you. The next question is from the line of Mr. Shankh Dhari from Sixth Street. Please go ahead. Hi, this is Shankh from Sixth Street. My question is again on trade generics. Do you see this kind of thing happening across companies now where each company, wherever they're not present, try to launch new trade generic segments in order to capture that market? The outcome of that would be that there is a generic kind of a price deflation which happens in the industry as more kind of companies try to grow their trade generic business and obviously some focus moves away from the branded side. I would not be able to comment on what competition is looking into. Broadly speaking, this is a completely contrasting portfolio. There is no real overlap where this situation can happen, where pricing can be under pressure for the branded business or branded products. The whole distribution channel is also completely separate for trade generics. There's practically no scope of conflict on that front. That's how this seemed to be an opportunity for us to launch these new products, especially in the acute space, where we felt there was a significant gap in our portfolio. That's why we continue to build on this as well. Okay. Yeah, it is just that the overlap might not be with your portfolio, but it will surely be overlapping with other company's portfolio. As customers move from that branded product to your trade generic product, there is a price deflation which happens for the customers. If everybody starts doing the same as what you are doing, there is an overall price deflation in the market. Yeah. Price will come down. Sorry, just to clarify on that point. There's a very specific segment of therapies where trade generics has a higher share. Most therapies, trade generics is not significant in terms of market share. It should not affect the overall market, even if more people enter the space, more brands enter the space. That segment has always been this competitive in the trade generic segment, most of the other, particularly chronic segment, should not see any impact from this. Okay. Secondly, maybe a bit unrelated to the earnings here, what are your thoughts on the consolidation of the distribution channel? Is it something which could be meaningful, neutral in the years to come down? Consolidation of distribution channel in India, you're referring or? India only, yeah. If you could be a bit more specific about anything. The consolidation of pharmacy, they're trying to consolidate on the distributor side. Is it something which is already meaningful or could become meaningful and are there other kind of players out there competing the same and thereby kind of reducing the bargaining power of pharma companies like yourself? As of now, we've not seen any impact, and we don't really have any direct selling to e-pharmacies. That impact should not be there in our view. All right. Okay. Thank you. Thank you. Participants who wishes to ask a question, please press star and one. There are no further questions from the participants, I would now like to hand the conference over to Mr. Sanjay Gupta for closing comments. Yeah, I think we can conclude the call here. Thank you for participating, and we remain available to answer any further questions. Thank you and good day. Bye-bye. Thank you. On behalf of Torrent Pharmaceuticals Ltd, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.