Ladies and gentlemen, good day and welcome to JB Pharma's Q1 FY23 earnings conference call as on 5th of August 2022. 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 zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Jason D'Souza, Vice President at JB Pharma. Thank you, and over to you, sir. Thank you. Thank you, Stephen. Welcome to the earnings call of JB Pharma. We have with us today the management of JB Pharma, Mr. Nikhil Chopra, CEO and Whole-time Director, and Mr. Lakshay Kataria, Chief Financial Officer. Mr. Kunal Khanna has taken ill today and as a result is not able to attend this call. Before we begin, I would like to state that some of the statements in today's discussion may be forward-looking in nature and may involve certain risks and uncertainties. A detailed statement in this regard is available on the Q1 FY23 results presentation that has been sent to all of you earlier. I would like to hand over the floor to Mr. Nikhil Chopra to begin the proceedings of the call and give his opening remarks. Over to you. Thanks. Thank you, Jason, and good afternoon and a warm welcome to everyone joining us today for the discussion on the operating and the financial performance for JB Pharmaceuticals during Q1 FY 2023. I shall commence with a review of our first quarter performance and share some thoughts on our business. Later on, our CFO, Mr. Lakshay Kataria, will continue with the financial highlights. After our remarks, we would be glad to engage with all of you over a discussion. Gentlemen, we are all on the call. We are pleased to report a healthy growth in top line, underlined by strong sustained trends in the domestic business and complemented by robust improvement in our international business. It is heartening that we have been able to deliver this performance despite the challenging operating environment. During Q1 FY 2023, revenues on a reported basis increased by 30% year- on- year to INR 785 crore. Domestic formulations delivered good growth and crossed a revenue of 400 crores in a quarter. This is all-time high revenue that we have generated for India business as on today. Organic growth for domestic business was in mid-teens as compared to flat growth as reported in IPM for quarter one. We continue to be the fastest growing company among the top 25 as per IQVIA Med June 2022 data. Our approach on enhancing field force productivity is yielding intended results. Our focus on driving our chronic business. As we nurture our new product launches in the adjacent therapies, our big brands continue to get bigger. Just to give you some perspective, our brands like Metrogyl, Cilacar, Nicardia have each further improved their rankings within top 300. JB Pharmaceuticals has also enhanced its prescription ranking and now stands at number 15 in IPM as per IQVIA. I'm also happy to report that JB's prescription base increased from 2.6 crore prescriptions in quarter 1 FY 2022 to 4.09 crore in quarter 1 FY 2023, growing at 57%. Just to give brief highlights on what has been happening in our inorganic business that we acquired in last six to eight months. The acquired product portfolio from Sanzyme has performed well, whereas in Sporlac, which is a leading brand in Sanzyme, we have seen market share gains. Azmarda represents an extension of our leadership portfolio in the cardiology segment. Heart failure is relatively a new sub-segment and vastly underserved. We are presently in the investment mode for Azmarda and are witnessing good results month-on-month. Our teams on the ground are fully geared up with an end-to-end portfolio from hypertension to the prevention of heart failure. In keeping with our outlined strategy to be present in high potential categories, we have also completed the acquisition of four pediatric brands. On a combined basis, this account for INR 33 crore in sales in FY 2022. This acquisition will provide JB a comprehensive portfolio with well-known brands to cater pediatrics as a specialty. It will increase our market coverage and align with our go-to-market model. Moving along, our international operations have demonstrated a healthy uptick in focus markets. South Africa is showing traction in the generic segment across both public and private market. We are also seeing robust demand in tenders and new launches in private market in South Africa. Russia and CIS has shown a stable demand trend. Given the daily challenges, as all of you are aware, in the geopolitical realities, we continue to have cautious approach, and I'm happy to note that our receivables position is positive. In the CMO segment, we enjoy global leadership in the world of lozenges, more so in herbal and medicated varieties. We have grown the scope of our relationship with our key clients through continued new product development in both lozenges and liquid formulations during quarter one FY 23, as we reported. Happy to share that we could surpass a revenue of INR 100 crore for quarter one FY 2023 in the world of CDMO segment, which is our highest that we have achieved. With a strong order book position, we are in a comfortable position to drive this business further. The CMO business tends to be front-loaded with first two quarters of the financial year performing better than the latter half. We are pleased with the progress that we have made in last two years in transforming our company and business. There's a scope to further improve our share in the domestic market through a combination of better growth in core therapies, whereas we are continuing to support the line extensions and developing new brands. The emphasis on growth is clearly coming across with operating parameters building up as per plans. Our aspiration in domestic market is to make our big brands bigger, focus on both market share and prescription gains for our acquired portfolio and organic portfolio. Targeted focus lifecycle management in existing brands, and pursue new brand launches, which we'll continue to do as committed. There is an exciting opportunity to be had in the international operation as well, where we have selective approach and are focusing on identified geographies as well. In case of international market, we will continue to benefit from consistent execution in the world of CMO segment through new launches as well as adding new partners. Healthy mix between private and public market in South Africa, and continued demand revival in selected ROW markets. As the top line growth accelerates and the business mix enhances, we shall see a transition into maintaining or increasing our EBITDA margins, given our disciplined focus on cost optimization initiatives. That brings me to the conclusion of my remarks, and I would like to call upon now Mr. Lakshay to share his views more on the financial performance for the quarter. Over to you, Lakshay. Thank you, Nikhil. A very good afternoon to all of you, and welcome to our Q1 earnings call. I will now take you through the financial highlights of the quarter. On the revenue front, the domestic business and international business reached new highs during the quarter. The reported revenue growth of 30% comprised of 20% organic growth and the rest coming through the new acquisitions made last quarter and this quarter. The depreciation in rupee vis-à-vis dollar also aided our growth. Overall, for the quarter, the domestic business reported a revenue of INR 418 crores and international business reported a revenue of INR 366 crores, which is a growth both year-on-year and quarter-on-quarter. The gross margin for quarter one came in at close to 63% compared to 64% in the previous year. Excluding Azmarda, gross margins for the business were relatively flat. The gross margins, as you all know, have taken the impact of inflationary pressure in terms of input costs, packing material costs, which have been managed through a slew of cost management and pricing initiatives. The good news is that we've seen softening in certain packing materials like aluminums and also on the international freight costs. Given the continued volatility that we see on the geopolitical and the economic front globally, we continue to monitor the situation, particularly for the fuel suppliers and API prices. Overall, we hope to sustain the gross margin closer to 64% for the fiscal, with a marked improvement coming through in Azmarda margins on the expiry of LOE. Given the high inflation prevailing across the world, we've been trying to maintain our operating margins in the range of 24%-26%, and this quarter's operating margin was in line with our guidance. On the EBITDA front, the Q1 FY 2023 operating EBITDA was at INR 190 crore, including an adjustment for non-cash ESOP charge of INR 17 crore. This, when compared to Q1 FY 2022 operating EBITDA of INR 164 crore, is a growth of 16% year-on-year. During the quarter, the employee expenses, excluding ESOP charges, have increased by 19% on account of the annual increments and the integration of the workforce from acquisitions. Operating expenses have now largely normalized with the normalization of operations post-COVID, booking of operating expenses of acquired businesses, and increase in freight and power and fuel expenses. Depreciation during the quarter was at elevated level due to amortization of acquired brands. The PAT for the quarter came in at INR 105 crore, which saw a year-on-year decline of 12% on account of higher treasury income in the previous year, non-cash ESOP cost, which was not present in the same quarter last year, depreciation of the acquired brands, and financing cost. On the cash flow generation also, I'm happy to report the business continued its strong trajectory. Overall, we ended with a debt of INR 325 crore, which was largely to fund the acquisition of Azmarda. On the cash front, cash and investment front, we ended with cash of over INR 180 crore compared to INR 56 crore last quarter. That's all from my side for now. We would now like to open this forum for an interactive session with all of you, and we'll be happy to respond to your questions. Thank you. Thank you very much, sir. We will now begin the question and answer session. Participants, to ask a question, please press star and one on your touchtone 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 a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Rahul Jeewani from IIFL Securities Limited. Please go ahead. Yeah. Hi, sir, and thanks for taking my question. Now, on the CMO business, we saw very good traction this quarter. If you can just comment on what led to the growth on the CMO business this quarter in terms of which clients and which markets contributed to growth. Then the second part on the CMO business is, you have indicated that the CMO revenue tends to be front-loaded in Q1 of every year. Last year in fiscal 2022, the second half was heavier for the CMO business. Given the growth which you have seen on the CMO business in Q1, what is your outlook for the CMO business for the full fiscal 2023? Yes, Rahul, this is Nikhil Chopra. Overall, we saw that demand coming across all the markets outside India because this CDMO business, what we do is outside India. This was overall more happened because of the upsurge in the because of the cough and cold in which where our major dominant portfolio is. Equally, if you look at quarter four last year, we could see this surge happening, which is continued in quarter one. As I see, because these all businesses we do with all the multinational partners and for them, quarter three of ours is the last quarter for them. The orders for the way we are seeing trajectory this year, that the orders for our CDMO business is more front-loaded. That is what we see, and that is what I commented that we have a robust order book for at least next three to four months. Overall, as the year-end comes and Christmas comes in, there we see overall the demand overall being tepid, and they keep enough stocks to cater the market. Guidance for overall year for CDMO business, the way trajectory we are looking at, and this year this quarter, we could touch INR 100 crore. We will continue to see ±10% demand coming for which we have order book for next three to four months. Overall, the contribution that, Rahul, we have been talking from this business, which was last year 10%, and this year we are seeing this business contribution should be closer on 13%-14% for overall business. That is what I can say at this moment of time. Okay, sir. You are saying that FY 2023, the CDMO business contribution to full year revenues will be around 13%-14%? Yeah. Sure, sir. Sir, second question on the India business. You spoke about the organic growth for our India portfolio being mid-teens%. Yeah. If you can also comment quantitatively on how Sanzyme and Azmarda have grown during the quarter. Because on Sanzyme you have been trying to implement this prescriber overlap as well as geographical synergies which you see between your and Sanzyme portfolio. Anything which you could highlight on the growth trends for both Sanzyme and Azmarda. Overall, both the assets, Rahul, which is a combination of Sanzyme. Let me start with Sanzyme. We are seeing a monthly revenue of around INR 12 crores -13 crores. This is showing a growth of mid-to-high teens%. That is what I can say at this moment of time. The overall plan that we have put in place, with three benefits that we enjoy at JB's compared to Sanzyme as an entity, was more from a prescriber base, more from a geographical footprint and equally lifecycle management. We have started seeing some benefits coming out of geographical footprint and prescriber base. More from lifecycle management, you should see a couple of more products coming into the market in next 2-3 months. That is where we stand from Sanzyme as an entity. Equally, when you look at Azmarda, our monthly run rate is now around close to INR 7 crores -8 crores. That is where we stand. More so, we are in an investment mode, as Lakshay stated. More so in terms of looking at how much more we can get patient pool and more and more patients getting diagnosed because as you are aware, last time also I'd commented that the incidence of heart failure patients in India are close to 10-12 million patients. The treatment today which has been offered is close to around 15%-20% patients are getting treated. The emphasis is how more and more number of patients can get diagnosed with the help of 2D and 3D echo. That is the intention. We have a dedicated teams who are going and promoting this product to cardiologists and physicians. We are seeing good uptake in terms of more and more patients getting diagnosed. The revenue is close to around INR 7 crores -8 crores, which should go up in the coming time. Sure, sir. Just one follow-up on Azmarda. Anything which you could comment on how the market would form out, post the patent expiry in December 2022? Anything which you would have seen in the sitagliptin market, which you can conclude for Azmarda as well? See, there are cases in terms of when you saw what happened with linagliptin and now what you are seeing happening in sitagliptin. There are more than 100 brands in the market. What I would like to point out is that this is a very specialized market, as compared to vildagliptin. Heart failure is a very specialized market. Obviously, we will see more than 50 players coming in. Price erosion will happen, but obviously the brand which stands will have its own value. We are keeping fingers crossed in terms of the overall strategy that we'll put in place when the LOE sets in. Right now what is top on the agenda is to how to at least have critical mass of patients who are getting diagnosed. This is overall more beneficial for the patient community. Post LOE sets in, let us look at in terms of where the price sets in because it will be overall more benefit for the Indian population who will be getting quality medicine at an affordable price. If the overall uptake, which I'm telling that around 15%-20% population today of the potential people who are suffering are getting the treatment, tomorrow it may go up to 30%, 40%. That is what is going to happen. That is what I can say at this moment of time. Sure, sir. Just one last question before I join back the queue. So if we look at the comment that our gross margins are flat ex of Azmarda, then that implies that Azmarda has impacted our gross margins by 150-160 basis points. At least the calculations which I am working with, per my calculations, the impact should have been around 90 basis points. The impact on account of Azmarda seems to be higher on the gross margin side. If you can please explain that. Thank you. Rahul, let me pick that. Yes, you're right. The impact is actually higher, because this was transition period, so you know, we wanted to make sure there is continuity of supply. We had to incur certain extra cost in terms of air freighting, et cetera, and sourcing, which we've done to make sure, you know, during the transition period we do not lose out on the volume. The impact on gross margin is yes, significantly higher than 90 basis points. Going forward, can we expect that the impact would be closer to 100 basis points than on a normalized basis? I think it'll take some more time, as the inventory sort of transitions, as we consume the opening inventory. I think it'll probably be Q3, where you'll see some relief. As we come out of LOE in Q4 is when you will see a significant improvement in the gross margins. Sure, sir. Thank you for answering my questions. Thank you. The next question is from the line of Nikhil Mathur from HDFC Mutual Fund. Please go ahead. Yeah, hi. Good afternoon. So, sir, in the Capital Markets Day that you hosted, you had mentioned that, there's a chance that JB Chemicals margins might take a hit in FY 2023, because of the high cost of procurement for raw material and other stuff, which was towards second half of FY 2022. Since you mentioned that on a Q on Q basis, the gross margin was stable ex of Azmarda, just trying to reconcile, there should have been some bit of gross margin hit, right? Or why hasn't that happened? Yes. Sorry, could you repeat your question? Your question is not clear. What are you asking? I'm asking you, sir, the gross margins are stable on a quarter-on-quarter basis. Yes. In the capital markets day, you had highlighted that JB Chemicals, which we will be working with a higher cost of inventory in FY 2022 because there was a lot of procurement that was done towards second half of FY 2022. Based on that, shouldn't the gross margins come under pressure in this particular financial year, but Q1 we have reported stable gross margin. That is what Lakshay stated earlier that when you see the gross margin which we reported last year was close to 64%. We were at 65% last year. 65%. This quarter if you see our gross margin is close to 63%. There is a 1.5% hit that we see. That is what we will see for next three to four months. Once the LOE expires for Azmarda, overall the gross margins will go up in a significant way and we'll come back to our gross margin trajectory by quarter four. Okay. Sorry, sir, I'm not clear. In 4Q reported 63% gross margin. Nikhil, I think the product mix is very different between Q4 and Q1, and thus that comparison is not apt. Okay. You believe that the impact of higher raw material cost is there in this particular quarter? Right. Right. Yeah, that's what we stated, that higher raw material cost is there in the quarter. Okay. Sir, you also had given us EBITDA margin guidance of 24%-26% for FY 2023. Now that we have done 24% this particular quarter, and we have also mentioned that we are starting to see some things starting to soften now. Can it be assumed that from Q2 onwards, the margin could possibly towards the higher end of this range? See, Nikhil, if you look at our operating EBITDA margin is still 24% plus. The guidance that we have given is a guidance of range between 24%-26%. You will see some quarter 25%, some quarter you will see 26%. We can be back to 24%. That is a rough guidance that we are putting across because you are living in a very volatile world. Please understand the overall geopolitical issues, the currencies, the receivables, all those things have to be put in place. Somewhere we are seeing some tailwinds in terms of the commodity price going down overall, but there are tailwinds in terms of the fuel and gas prices going up. That up and down will happen, and that is how we have guided for the year 24%-26% margin. Got it, sir. For one final question on the acquisitions that the company is undertaking. The pediatric brands from Dr. Reddy's, Z&D. Any synergies that you see with the existing portfolio because on the face of it, the multiples seem to be slightly on the higher end of these acquisitions, but can they be complemented with some higher sales of existing portfolio which can be cross-sell by the same set of medical reps? Nikhil, a very good question. If you look at the four brands that we have acquired from Dr. Reddy's, they now are being promoted by our team, which are 300 people under the division of Nova, who already are promoting respiratory and pediatric products. If you look at what we are trying to do is to position ourselves as a company in the clinic of pediatrician, which will be more getting into the world of gut product promotion, which is a combination of Rantac syrup that we have, Metrogyl syrup that we have, and now we have got Z&D. Equally, we have got a brand which is Pecef, which is antibiotic, which has got a good starting point. This will over a period of time probably will be able to add more color, very initial stages that we are into. You will see probably Q3 onwards, where we'll be able to share more information in terms of how the traction is happening in terms of the acquisition that we did of these four brands. Azmarda, we have a team field force of around 180-200 people who are promoting Azmarda as a brand. We are looking at one or two product addition that we will do over a period of time, within this team, more in the field of cardiology, maybe in the world of arrhythmias. All those synergies will come into place. That is what we are looking forward. Sure, sir. Please help too. Thanks a lot. Thank you. Thank you. Before we take the next question, a reminder to the participants. Anyone who wishes to ask a question may press star and one at this time. The next question is from the line of Anupam Agarwal from Credit Suisse. Please go ahead. Yeah, thank you. Good afternoon. Just a couple of clarities. First, the sales force, incremental, the total including, supervisors, et cetera, has gone from 2,100 to 2,500. The delta 400, Nikhil, you just mentioned Azmarda maybe taking 200, delta. The remaining 200 is all at Sanzyme because I still remember Sanzyme when it came to you, they had about 300, 325 people. Can you just clear the math here? JB as organic, we were having 2,000 people. 300 people are now as a part of team for Sanzyme, and 200 people are a part of team of Azmarda. In totality, we have 2,500 people. Okay. For this acquisition, pediatric acquisition we've done from Dr. Reddy's, what's the payback period you have in mind for that? Generally a payback period is 6 years. That is the stance that we have taken. As you see, what we are trying to do with Sanzyme and Azmarda, obviously the aspirations would be much more higher as compared to what we have committed to the board. We will look at that, how we can get it sub-5 sub-6 years. Okay. The same applies to that, pediatric acquisition as well. You should track us quarter to quarter. You will get to know more in terms of how we are faring. Sure. For this quarter, when we look at the base products for us, some of the larger products like Rantac and Metrogyl, how would they have grown for this quarter? Rough idea. They are growing low double-digit%. That is where we stand because last year if you look at particularly if I have to talk about Rantac as a brand, it was a part of COVID regimen treatment. Today where we stand. We had a very good season for Metrogyl, so we are working now at a very high base of both the products. Low double-digit% growth is what we could achieve for the quarter. When we look at the base business, the organic growth, Cilacar would have grown at about high teens to 20% and the rest of the portfolio, the Rantac, Metrogyl, Nicardia would have grown about low double digit. That's the time framework we can work with? You can look at Rantac, Metrogyl, Nicardia growing at 12%-14%. You can count on Cilacar brand growing at around 14%-16%. Obviously, there are other brands also. There are other 10 potential brands which we never talk about that we have in our kitty, which are in the world of. Just to give you an example, we have a product called Bizfer XT, which is an iron supplement, which is a INR 1 crore brand. Then we have brands like Laxolite, Zecuf syrup. There are many brands where we are seeing very good uptake. Some of the new launches that we have done in the field of respiratory, they are also seeing good traction in terms of prescription. Overall, this is what you can assume, 12%-14% growth for our acute portfolio and close to mid-teen growth for our chronic portfolio. Okay. Next question is on Sanzyme. How strong is seasonality in this portfolio? Is second quarter significantly high for this or one is significantly high for this? You should see the same traction what you saw in quarter one. Probably quarter three onwards, overall, the demand gets little bit overall you will see things going down. What we are trying to do is we are looking at by that time if we have one or two good products in terms of life cycle management that we'll be putting in the market. That is the plan. Now let us see in terms of how much we are successful in getting those products at that time. Rightly so, first half of the year is overall a better demand for probiotics market. Nikhil, how do we look at this molecule, right? If we do a run rate at INR 12 crores -13 crore. Yearly wise, give or take INR 150 crore kind of number we guys can roughly work with for the Sanzyme portfolio. Very much. Just to clarify that when we are talking about 12-13 crores revenue for Sanzyme portfolio, Sporlac is around close to INR 6-7 crores. There are other parts in the portfolio, which is a combination of products for infertility, products for stone management, there are some supplements. Overall, probiotic contributes around 60% and 40% we have rest of the portfolio. You are right in terms of you should see a revenue traction for the year close to around between INR 140-150 crores for the year. Couple of more questions. One is CMO business. Just trying to understand this. You mentioned across markets there was a little higher orders from the customers. Now, at the customer end, is this restocking of the inventory only or the end market sales they are seeing it higher because now you've seen 2 quarters, which is very high demand? Obviously the end customer demand is on the higher side. That started sometime, I think, in mid of last year, quarter four. That we continue to see. Probably the stocking part happens in, for us, calendar year, calendar quarter is quarter two. That is how things happen. If the end customer demand continues to be there, then it should surprise all of us. Nikhil, when you talked about this can be 13%-14%, so like very roughly your revenue this year will be about INR 3,000 crores. That, roughly are you talking about INR 380 crores-INR 400 crores for the CMO business? No, no. We are not talking about INR 380 crore-INR 400 crore for CMO business. See, please understand the overall orders which come, the orders which we procure for our CMO business are more front loaded for H1 part of the calendar. As the festivity and the festive season starts more so Christmas and in western part of the world probably there are holidays for 45 days, 60 days. So that is how they at least look at stocking the products and look at in terms of how they'll be able to meet the demand. Which will start coming for them in quarter one, which is January. This is January onwards. For them January to March is the first quarter, and for us January to March is the last quarter. I don't want to get into any absolute figure on tomorrow what revenue we will do, but the trajectory that we are seeing is we are close to around INR 83 crores, if I'm not wrong, Lakshay, for quarter four. INR 85 crores for quarter four. INR 100 crores for quarter one. We should be close to between these two figures probably in quarter two. Quarter three, I will be able to give more color probably in our quarter two results commentary. Sure. Thank you, Nikhil. Thank you. Thank you. The next question is from the line of Rashmi Sancheti from Dolat Capital. Please go ahead. Yeah, thanks for the opportunity and congratulations on good set of numbers. Just a clarity again on CMO segment. Earlier when you commented, 13%-14% of the overall revenues, that is what the CMO segment would contribute, that basically was not the contribution and was it the growth which you were expecting for FY 2023? Rashmi, I think when you are modeling the CMO business, Nikhil clearly mentioned that in the first half it is a heavier base and in the latter half it is subdued. I guess when you're modeling the CMO business, it's best to look at like a mid-teens growth. That's what I think we are more comfortable with, and that's what we've kind of earlier guided to. Okay. Coming to the domestic business, in the presentation it is mentioned that the overall prescription base has become 4.09 crore. Can you just give a split between the GPs and the specialist prescription in this? How does it look like in Q1 FY 2022? I mean last year. Exact details, Rashmi, I don't have, but Jason can come back to you. Just to give you a rough guidance in terms of the way I see is it would be around 60-65% GP/CP and around 30-35% specialist. This is as of today, right? Yeah. I mean, generally 60%-65% is what we are running now. How does it look like one year back? It would be 5.5 and 5.7% up. It would have been 60%. It would be 70-30. That is. So we don't see. Please understand. If you want exact details, we'll come back to you. The reason why we have given prescription, very strong prescription growth, that clearly shows the kind of work that is happening at the doctor level and clearly shows how primary sales are also will get impacted because of this higher prescription. That's the reason we have indicated those numbers. Okay. All right. Related to the South Africa sales, can you give the figures like, you know, what kind of growth we have seen and how many launches, you know, we have done in this business? In South Africa, it's been upwards of 25% growth during the quarter. Both public and private business continue to do well. Overall, from a new product perspective, sorry, I can't share those details on the call. Private-public ratio would be 50/50 in this quarter also. Yes. Roughly in that zone. Okay. My last question is related to debt. If you can give the figure, you know, for FY 22, between long-term debt and short-term borrowing. End of quarter, we had a debt of about INR 325 crores, of which roughly INR 300 crores was long-term debt, which was taken for acquisition of Azmarda, and balance was working capital. We had a cash and investment of about INR 180 crores plus at the end of the quarter. Okay, sir. All right. Thank you. That's it from my side. Thank you. A reminder to the participants, anyone who wishes to ask a question may press star and one at this time. The next question is from the line of Abdulkader Puranwala from Elara. Please go ahead. Yes. Hi. Thank you for the opportunity. My first question is. Sir, if you can speak closer to the handset, please. Your audio is a bit low. Yeah. Is it better now? Yeah, better, Abdul. Yes, sir. My first question is with regards to Azmarda profitability. You know, when you spoke about the monthly sales of close to INR 78 crore and, on the gross margin level, you know, the entire impact was largely alluded to Azmarda sales. Would it be fair to assume that, you know, currently, at an EBITDA level, this would still not be a major contributor? Yes. In fact, Abdul, we've been guiding all of you that actually we are in an investment mode, you know, particularly till the time the LOE expires. Actually, it's a negative EBITDA from the brand as of now. Right. I mean, from Q4 onwards then, you know, once the LOE expires, I mean, what is the kind of margin we should expect from this product? Overall, I think we should aim for at least a company level of EBITDA. It'll, like Nikhil said, obviously there are moving parts. We need to see, you know, how the pricing, et cetera, pans out. Our minimum aspiration should be that we should do slightly better than the company average EBITDA on this portfolio. My final question was on the MR count. We added close to 400 MRs, 400-500 MRs for these two portfolios that we acquired. For future acquisitions, would you further go to increase your MR count in order to increase your reach, or will this be largely absorbed within this existing field force what you have? It will all depend upon, Abdul, the type of opportunity which comes on the table. For example, let me give example of the four pediatric brands that we acquired. There was no addition of any medical representative on the ground. Equally, for a specialized promotional product in the world of heart failure, you need to have a team because you are already having a revenue of INR 60-70 crore where we will need people to go, and this is a big opportunity. According to me, heart failure is a disease of next decade. It will all, Abdul, depend upon the type of portfolio, which is whether we can fit that portfolio within our existing business or we want to give it, or we see better opportunity in having field force which will give justice to the acquired brands. Understood. Thank you. Wish you all the best. Thank you. Thank you. The next question is from the line of Gagan Thareja from ASK Investment Managers. Please go ahead. Yes. Good afternoon. Am I audible? Sir, if you can speak closer to the device. Your audio is a bit low. Yeah. Is this better? Yes. Yeah. The first question is around sacubitril/valsartan. Dapagliflozin also has an indication expansion for heart failure. NIH data from U.S. actually shows that dapagliflozin has better outcomes than sacubitril. You already have Dapa with you. I was just wondering, you know, what's the thought process or rationale behind going into sacubitril as well? See, dapagliflozin is being promoted by a different team. You are right, absolutely right in terms of dapagliflozin has a role in patients with heart failure. We are not a big player in the world of dapagliflozin, and we are making slow inroads. If you look at sacubitril/valsartan, the product has been there in the US market for last now I think a decade. Jason D'Souza, correct me. It's a $4 billion product for Novartis. It has got lot of studies and supporting evidence in terms of what sacubitril/valsartan brings on the table as compared to dapagliflozin. that is how we have taken a call of looking at the primary therapy in heart failure is going to be sacubitril/valsartan, and dapagliflozin will have its own role. Once the LOE expires, I think you will see not much difference in the price point of both the products. You may see better uptake of sacubitril/valsartan, which has got its own benefit and improvement in the quality of life of the patients who are suffering from heart failure. I understand that. The reason I was asking is because these are possibly very comorbid conditions, both diabetes and heart failure, for a fairly significant chunk of the population, especially in India. From an Indian context, you feel what worked in U.S. would equally work well in India as well? If you look at a product which is a patented product to generate a revenue around INR 500 crores in 4 years of its existence in India, itself talks about the strength of the molecule. There are enough evidence available in Indian population also. When we are going and talking to the top cardiologists of the country, they are very much aligned in terms of the stage 3 and stage 4 patients of heart failure, where they are using sacubitril/valsartan as a starting therapy. At some given time, as the LOE expires and the medicine will become more affordable, you will start seeing acceptance of sacubitril/valsartan in stage 2 part of the journey of the patient also. Sir, on your acquired Sanzyme portfolio, if you could give us a little more, you know, sort of detailed understanding as to how post-acquisition Sporlac and Lobun and some of the other brands are working out and, you know, how you're strategizing around these. Because overall you indicated, you know, they're growing well and be at mid-teens, but is there a difference between how Sporlac has picked up and how Lobun and the others are doing? There was this entire entity of Sanzyme into three clusters. Cluster one is Sporlac and different variants of Sporlac, which is 60% of the revenue, where we have seen market share gain. Quarter one, if you look at Sporlac as a brand, which has grown at 26% as compared to Bifilac and Vizylac, which have grown at around 18%-20%. We are seeing good uptake in terms of prescription for Sporlac. The intention going ahead is what I spoke earlier, that how do we at least encash the JB strength of GP/CP prescriber base, which is today very much giving us benefit for Rantac and Metrogyl as a brand. Equally in next couple of months, you should see some more variants of Sporlac, which will be premium priced to be in the market. That is point number one. Point number two, which I've spoken earlier also, Oxalo and Lobun are class probiotic, high-priced probiotic, more for chronic kidney disease patient, and there we are going to nephrologist. The intentions are how do we generate more scientific data and make this brand bigger. These are brands. These both brands contribute around 15%-20% of the revenue, and we are seeing gradual uptake because JB as a company, we cover all 2,000 nephrologists, and we have got a very good prescription uptake from nephrologists as a specialty for our Cilacar T, Nicardia. So there we enjoy equity. The third part of this business is the business in the world of women's health, more so in the world of infertility, which is once again 15%-20% of the revenue, where we have teams who visit around 1,200 infertility clinics. There we are also on the verge of doing life cycle management in terms of the portfolio gap that we see. That should also see overall uptake. Probably it will take more time because this is a highly intensified competitive market where we have very big players who enjoy better market share. This is what commentary I can give on what we have observed in last 3-4 months of operation of Sanzyme as entity. Thanks, Gagan. Yeah. Thank you. I'll get back in touch. Thank you. Before we take the next question, a reminder to the participants, anyone who wishes to ask a question may press star and one at this time. The next question is from the line of Ashish from IIFL AMC. Please go ahead. Yeah. Thanks for the opportunity. On the CMO business, obviously we have plans to double the scale. Would we be sticking to medical lozenges or you feel there's an opportunity for us to diversify then grow the business accordingly? The entire opportunity on the table for CMO business is twofold. First is how do you widen your portfolio? Earlier also what I have, I have shared that we want to venture into areas like sleep disorders, motion sickness, oral thrush, sexual wellness, aseptic disorders. There are some proof of concepts which we have developed and we have shared with our partners. Please understand, getting into new category of business, and when you get a reference product and you develop the product, you then have to share with your partners. They do their own research, and then they come back depending upon what potential the product has. That is a process which is on. That is point number one, and that as and when happens, we'll be more than happy to share. Equally, the business development work that we are trying to do is to add more partners, because we have enough capacity in terms of the lozenges that we can make and look at working with more partners across the globe, maybe in the eastern part of Europe, some parts of Russia, some parts of Southeast Asia. There are some more partners where dialogues have been on. As and when things proceed, we'll be more than happy to share with all of you. Just to share with you, Reckitt we started for their brand called Strepsils in Australia as a market. Now we are looking at opportunity with Reckitt in Russia, in Southeast Asia. That is how things happen. This business has got its own gestation period that has to be understood. We were fortunate enough that we could see a good uptake because of supposedly more of a seasonal flu type, cough and cold season, which probably has happened in western part of the world where our partners are in Southeast Asia, Australia, New Zealand, Canada, South Africa, Russia, where our partners sell these products. This is what we want to do in the world of CMO, and we have got all the capabilities, and we have got all the capacities. That is where I see that. It's a differentiated entire approach where we can bring enough opportunities on the table and it is. It takes time for any company to get into this scale of having partners whom we have been working for last now two, three decades. Equally, Reckitt also has the capacity to add more partners. Third part is to get into new-age portfolio, because what COVID has taught us that cough and cold will be more seasonal, but immunity, wellness, motion sickness, sleep disorders, these are the new areas where our customers are looking forward if this therapeutic delivery can come in the world of lozenges, which has to be overall low dosage form. To double the scale from, say, INR 250 crores to INR 500 crores, would you need very high investments? Or you feel we already have the facilities at our disposal? We have the capability to manufacture 2 billion lozenges across the year. Right now, our output is close to 1 billion plus. That is where we stand. We have enough capacities. Yeah. Got that. Fair enough. Another question was on these branded markets of Russia, CIS. Obviously, we had plans to launch 2-3 products every year, and obviously on the OTC side and thereon, you know, build on the legacy. But how is the market shaping up currently? Because, you know, the larger distributors control almost around 50% of the market. Given the current construct around Russia, Ukraine, how is this market panning out? The way we've seen, you know, quarter one pan out, it is not the strongest sort of quarter for us because of the seasonality of the portfolio we offer. Usually we start seeing traction towards, you know, July, August. You know, sequentially, we do expect the traction to get better. As far as the new launches are concerned, we are pretty much on track. We haven't sort of made any change to our strategy on that part of our business. Okay. Anything on South African generic market you would like to contribute? Because it's a much less talked about market. I understand it's a smaller proportion of the overall scheme, but still. Like I mentioned, during the quarter, it saw upwards of 25% growth, and both public and private business continue to do well. Our focus there has really been to sort of, you know, scale up that subsidiary and it's pretty much on track. Okay. Yeah. That's helpful. Thank you so much, and all the best. Thank you. Thanks. Thank you. The next question is from the line of Neelam Punjabi from Perpetuity. Please go ahead. Yeah. Thanks for taking my question. I wanted to understand if you can just comment on your Russia business. How has it done during the quarter? Like I mentioned, this is not the strongest quarter for Russia because of the portfolio that we carry. This is usually a bit of a leaner quarter. The demand has held steady year-on-year. I think the business overall hasn't sort of seen any deterioration or headwinds. As we now get into Q2, and as you know, we start gearing for the cough and cold season, et cetera, it should start seeing better traction from this quarter onwards. On the receivables side, also we've seen decent traction in the last quarter. Got it. That's helpful. My second question is on your PAT. If I look at over the last two years, our revenues and EBITDA have grown quite well, but on the PAT level they are largely flat, which is understandable given the ESOP cost, higher depreciation due to acquisitions and loss of treasury income. Going forward, what's the trajectory that we can see in terms of earnings growth? See, let me just explain to you, I think a little bit more conceptually how we look at it as a management team. When we started this journey on acquisitions, we had a cash of about INR 700-odd crore. It was earning us about INR 50 crore a year. We've invested it in a business called Sanzyme, which, you know, we brought a EBITDA of about INR 50 crore a year. We feel that, you know, this INR 50 crore in the next 4-5 years can become 100 crore, right? That's our hypothesis, and that was the whole logic of buying this business. We personally feel that while, yeah, there will be a depreciation hit and, you know, the treasury income has gone away, but we've created a more sustainable, you know, income stream and a cash flow stream for the company. You know, given today's age and world where, you know, our treasuries across the board are struggling with varying yields and, you know, currencies and interest rates moving up and down, I think this whole strategy served us better. That's how we look at it as a management team. To your question on PAT, I think if I look at it from a sequential basis, now ESOP costs are largely stabilizing. You know, as we move into Q2, Q3 of the year, they will sort of become comparable with the base as well, because the base also carries ESOP cost and some of the treasury income also will get normalized. You will start seeing the benefit of EBITDA growth also into PAT growth. I think you have to bear for one or two more quarters and you will sort of start seeing upward trajectory on the PAT as well. Got it. If we look at our ROCEs, you know, they've come down from 42%-22% given the acquisitions. Yes. Do we see this ROCE number going back to the historical levels as the growth from Sanzyme and the acquired portfolio comes in? I think when I look at, you know, 42%, I think I personally feel 42% was coming on a back when probably we were not investing as much into acquisitions and the business, right? A lot of our sort of PAT, et cetera, was being driven by treasury income. Will we go back to 42%? Maybe no. Can we get back to 30%-35% over the next 3-4 years? For sure. I just want to caveat this understanding. This also depends on overall, you know, our M&A strategy and, you know, sort of investments that we may choose to make. That will come and explain to you know, as and when those opportunities arise. With the portfolio we have as of today, can we go back to 30%-35%? For sure. Got it. You've given a guidance of about 22%-26% EBITDA margin this year. Do we start seeing our historical, FY 2021, 27% margin there starting next year? See, very difficult to talk about next year because please understand the guidance that we are giving is on the basis of the volatile world that we are living in. As of right now, we are seeing some tailwinds in the case of commodities, in the case of freights stabilizing. But if you look at still there are pressures in terms of gas, in terms of fuel, in terms of currency volatility, in terms of RMPM procurement for some specific products. So net-net what we are looking at is how overall the EBITDA margins should flow from delivering market-beating growth. That is the intention going ahead. We are building an organization which is more future ready, which is more into progressive portfolio. Never we have launched new products in the world of ROW market. You will see us launching new products in the world of ROW market next year, which are more progressive in nature, which are more in the world of cardiology, diabetology. Those all need investment. Equally, we now have a team of 2,500 people on the ground in terms of if what earlier was spoken, that the payback period has to be sub 6 years, so we have to make the right investment in terms of how do we drive better prescription traction. From 2 crore, if you have gone to 4 crore prescription, one have to aspire for 6 crore prescription in the coming time by making right investment. We are looking organization from a theme of invest to grow. That is what is the intention. Equally huge opportunity in terms of what we are trying to do in the world of CMO business, where there are new proof of concept which are developed, in the entire journey of development. These all things will play as and when things stabilize. Once things stabilize, we'll be able to give better direction in terms of what trajectory of EBITDA margin we are looking at. We plan to do sometime that in quarter three as we see things normalizing. Got it. Just one last question on my end. Given we have acquired Dr. Reddy's like pediatric portfolio, 4 brands, and the current depreciation as of Q1 is INR 26 crore, how much will it go up going forward? The DRL acquisition will not impact too much. The annualized impact of that portfolio will be about INR 5 crore a year. Got it. Thanks a lot for answering my questions. That's it from my end. Thank you. Thank you. Ladies and gentlemen, we take the last question for today from the line of Rahul Jeewani from IIFL Securities Limited. Please go ahead. Hi, sir. Thanks for taking my follow-up. Now this 57% prescription growth which we have indicated for the quarter, does that include Sanzyme and Azmarda as well? And if yes, can you please talk about how our organic prescriptions would have grown? We can come back to you on that data, but this includes Sporlac and Azmarda. That is what I can say at this point in time. Please understand this grows on a low base. That is all. That is how you see 57% growth. The agenda going ahead is what I've spoken, Rahul, earlier also that how do we start getting more and more prescription from the specialist. More so, P by D has also increased in a big way. That is the number of prescriptions we are getting from the same doctor is also showing encouraging and healthy data. We are trying to look at prescription from a view of how do we have a fundamental strong base of prescribers, and more so coming from the specialist because from a GP/CP base, we have got now prescription for Rantac, Metrogyl, Sporlac, which are three big brands in the country. We are looking at that. The new products that we have launched, which should be coming from specialist, which is in the case of cardiology, nephrology, pediatrician, chest physician, from the diabetology. That is the agenda. That is why we wanted to share in terms of we are seeing a uptake in prescription overall and the P by D also is increasing, and we are seeing some uptake in terms of the prescription uptake from the specialist. More data, Jason D'Souza can share with you, probably in a day or so. Rahul, just one point. This is IQVIA data, so if it is there in the base this year, it is also there in the base last year, Sanzyme and the other brands. Okay, this is like-for-like growth for the overall portfolio. Like-for-like. That's correct. Just one follow-up, sir. So on the specialist doctor coverage, what is our doctor coverage on the specialist side as of now in terms of our coverage and how do you see it expanding over the next, let's say 2-3-year period? We don't want to expand. See, Rahul, we are covering close to 3.5 lakh doctors, and I think the specialty coverage would be close to around 1.5 lakh doctors. We have enough doctors that we are covering. Please understand what I was trying to talk earlier, that we are looking at how do we start getting prescriptions from the doctors who are today not supporting us, and how do we start getting prescriptions from the doctors who are already giving us prescription. That is what we want to do. So we don't want to start covering 5 lakh doctors. That is what we don't want to do. What earlier also I've spoken that we don't in short to midterm, we don't have any plans to increase the field force. Basically, the agenda going ahead is how to at least have a motivated, better trained, charged field force on the ground who are doing the right job, getting into the world of digital detailing, getting into the world of detailing progressive portfolio, helping them in terms of how we can get into the world of medico marketing conferences that we can hold and at least come close to the doctor community. Wherever at least we want to play, we want to win. That is what we want. Sure, sir. Thank you for answering my questions. Thank you. I would now like to hand the conference over to the management for their closing comments. Over to you. Thanks very much, Stephen. I think with that we have run out of time, so I would like to thank all the participants who have attended the JB Pharma's Q1 FY 2023 call. With this, we would like to conclude the earnings call. Thank you, everyone. Thank you. Thank you. Ladies and gentlemen, on behalf of JB Pharma, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.