Ladies and gentlemen, good day and welcome to SeQuent Scientific Limited Q1 FY 2024 earnings conference call. 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 a touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Abhishek Singhal. Thank you, and over to you, sir. Thank you. A very good morning, and thank you for joining us today for SeQuent Scientific's earnings conference call for the first quarter ended financial year 2024. Today, we have with us Mr. Rajaram, SeQuent Managing Director, Sharat, Joint Managing Director, and Mr. Rao, CFO, to share the highlights of the business and financials of the quarter. I hope you've gone through our results release and quarterly investor presentation, which have been uploaded on our website as well as stock exchange website. The transcript for this call will be available in a week's time on the company's website. Please note that today's discussion may be forward-looking in nature and must be viewed in relation to the risks pertaining to our business. After the end of this call, in case you have any further questions, please feel free to reach out to the investor relations team. I now hand over the call to Mr. Rajaram to make the opening comments. Thank you, Abhishek. Good morning, everyone. A very warm welcome to everyone for the Quarter one earnings call for the financial year 2023, 2024. Joining me on this call is Mr. Raghavendra Rao, our Chief Financial Officer, and Mr. Sharat Narasapur, the Joint Managing Director. At the last earnings call, I had shared with all of you the steps that we had initiated to reshape our operations to make them more competitive. I'm happy to share that we have made very good progress on various initiatives and are now at a stage which sets us up for steady performance in the balance of the year and thereafter. Before that, let me first provide you a view of the macro environment, which is relevant to us because we operate in multiple markets. Across our markets, we are seeing the pressures of inflation, which despite all efforts of the government, does not seem to be coming down as fast as we would like it to. Consequently, there is a slowing down of demand at a customer level and also some cautiousness in the B2B segments of the industry. We're also seeing currency volatility in some of the emerging markets, which is aggravated by political events. We expect that this will continue in the short term. However, the larger contribution of developed markets to our business will be of great help to us in such a situation. As you know, our industry has two distinct segments, medicines for production animals and medicines for companion animals. Across the world, the production animals business has been impacted by high feed costs due to issues relating to war and other farm-related issues. This in turn has impacted the demand for nutritional additives and medicines. On the other hand, the demand for medicines for companion animals remains intact and is growing as pet adoption, incidence of diseases, and lifespan of pets increases. It is in this context, that is the macroeconomic developments as well as industry trends, that we see the need to adjust quickly and adapt our operations. We are the largest animal health company operating from India, with a presence in over 100 countries in regulated and less regulated markets. Our unique combination, which is a formulations business with a front-end presence in key animal health markets of the world, and at the same time, an established U.S. FDA-approved veterinary API facility, will help us leverage the emerging opportunities. To do that, we have to take some decisive structural action for long-term competitiveness. While Raghav will talk in detail on the quarter financials, let me share some highlights of our overall results and also give you a sense of the direction. Our overall revenues in the quarter have come in lower, declining by 2.4% year-on-year. The formulations business has shown marginal growth overall at 0.7% in this quarter compared to the same quarter last year. We've also seen good growth in some pockets of the formulations business. Our actions in Europe have begun to deliver as the European business returns to growth, in addition to showing an upward trend in margins. The rationalization of the portfolio and discontinuation of manufacturing operations in Germany will begin to impact our results positively going ahead. The formulations business in India has shown strong growth on the back of new products, as well as expansion on the ground force. We do, however, have a specific challenge in Turkey due to the high inflation and devaluation of the currency, which had impacted our results this quarter. We have already initiated strong pricing actions as well as cost containment measures, which will result in margin improvement from the fourth quarter. Turkey is one of the leading markets in the world for animal health, and our company has a strong presence there. We will soon be introducing new products and be prepared for the likely recovery of demand and stability of economic conditions. Coming to our API business, while our API revenues have been subdued due to one-off actions, we have begun to see the initial recovery in margins. The drop in revenue is an outcome of two factors, delayed orders from some long-term customers in regulated markets, as well as the postponement of some shipments to the following quarter due to the revamping of our manufacturing footprint. We expect the run rate of orders in API to stabilize over the next two quarters. Our program for delivering operational excellence in APIs is on course, and we have begun to see a margin improvement already. Our manufacturing footprint has been further optimized with the discontinuation of manufacturing operations in Tarapur. We continue to lay a strong emphasis on conducting regular training, safety audits, and behavioral interventions, which are supported by a fully equipped health infrastructure. During the quarter, we had three customer audits, all of which were successful. Further, our facility at Mahad successfully underwent a WHO Geneva pre-approval inspection. While quarter one has seen a muted performance in sales on account of some re-calendarization as well as transitionary connectivity issues, we expect an acceleration in revenues and margins for the rest of the year. In quarter one, we have also successfully commercialized a new custom generic and obtained a new CEP filing. This takes our aggregate filings to 30 US VMF and 17 CEP filings. We have completed a few significant actions during the last two quarters, which position us well for the rest of the year and beyond. Before I hand over to Raghav, there are two areas I would like to draw your attention to. First, growth. While the recent two quarters have seen mixed and somewhat muted growth in a volatile environment, we need to be focusing on profitable growth. The corrective actions will help us grow on a profitable and sustainable portfolio. The foundation for acceleration has been set. Our filings and pipelines are being fast-tracked, and we are positioning ourselves for a recovery in the macro environment. The second is in the area of profitability. While the EBITDA has come in lower this quarter, it does not adjust for the impact of one-off restructuring, both in API and formulations, which will continue to give us benefits in the coming quarters. Factoring in these benefits, we expect the continuing EBITDA to be in a higher range. With these plans now initiated, and most of them at an advanced stage of completion, we expect to exit the year with double-digit margins and set us up for consistent quality growth in the longer term. I will now hand over to Raghav for more details on the financial performance and come back to you during the Q&A. Over to you, Raghav. Thank you, Raja. Good morning, everyone. I will now briefly update on key financial metrics for Q1 FY 2024. Our total revenue for the quarter is INR 333.2 crores, down 2.4% YOY and 9.1% QOQ. Our formulations business contributed INR 247.8 crores to the top line, with a growth of 0.7% YOY. Our various interventions in Europe, including portfolio restructuring, have helped our European business grow. Europe clocked a revenue of INR 117.2 crores, growth of 2.3% QOQ, and 11.8% YOY. India business clocked a revenue of INR 25.4 crores, which is a 6.9% growth YOY and 19.4% QOQ. Turkey, however, continues to be a challenge, dragging down the overall formulation growth. We also had some headwinds in emerging markets due to USD availability crisis in some of the customer markets. The API business revenue is INR 80.7 crores. Overall gross margins for the quarter is at 41.5% compared to 39.5% in the previous quarter. Because of various interventions in operations that we have been doing, we believe this should come better from here. In spite of inflationary pressures, we have managed to control our operating costs. Our operating expense is at INR 71.3 crore compared to INR 75.1 crore during the previous quarter. Employee cost is at INR 57.8 crore against INR 67 crore in the previous quarter. Q1 EBITDA, excluding stock compensation costs, was INR 9.3 crore and is at 2.8% of revenue for the quarter is INR 0.4 crore. During the period, as part of the overall restructuring drive, the group has revamped the manufacturing and procurement processes at its plants with the object of overall network optimization and cost reduction. The group has also closed its manufacturing facility for discontinuing its operations at Tarapur, Maharashtra, and additionally relocated facilities. In this regard, we have recognized INR 23.5 crores as a non-recurring exceptional item. Other than this, there was INR 2.7 crore hyperinflation-related impact, of course, driven by Turkey. We had an exchange loss of INR 8 crores in the current quarter. It's almost entirely driven by Turkish lira depreciation against USD. Our working capital now stands at INR 366.8 crores as compared to INR 426.1 crores at the end of March. We will continue on further optimizing the working capital. Debt is at INR 367.8 crores against INR 356.1 crores in March. With this, I take a pause. Thank you all for your support, and I request that the forum can be open for questions. Vikas, do you take calls now? Yes. 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 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. Our first question is from the line of Shantanu Maheshwari, who is an investor. Please go ahead. Hi, good morning. We have seen a revival in your formulations business this quarter. What is driving this improvement in the business? Can you please elaborate? Is that the only question you have? I have two more questions. Can you just put all the three questions together so that I can do it together? The next one is the Indian formulation business seems to have grown at a healthy pace sequentially quarter-over-quarter. Should we expect this trend to continue? My final question is, could you tell us a little bit more about the Turkey business situation, and what efforts are we taking to address the challenges over there? Thank you for this. First, on the European formulation business, as you know, we have a business in Spain, which is both manufacturing as well as distribution. Then, of course, in countries like Belgium and Netherlands, and Sweden, we have a distribution business. We have done two kinds of initiatives. The first has been, of course, from a profit improvement program. We have got out of low-end commodity businesses, which were very volatile in terms of margin, and begun focusing our growth resources more on branded as well as on pharma-related products. The second piece over there has been a reduction in the cost structure, where we have simplified it, brought teams together, et cetera. Therefore, the large part of our business, which is really in Spain, which used to be on the lower side of EBITDA, we are now beginning to see 2%-3% kind of improvement, which is beginning to come in in the margins over there. What is also helping is that we have accelerated the growth of a whole range of gut health products, which is easy to sort of extend across multiple markets. It's a portfolio which is growing as well as, of course, reduction of the portfolio in terms of low-margin products. A combination of these two has now created a business which is healthy and profitable and more in line with the market trends. Coming to the specific issue on India. Yes, the Indian formulation business has grown well. We have two parts in this business, products which we manufacture and which we own the licenses for, but we also have a distribution business where we distribute for Zoetis, the products in the cattle range. We have seen these businesses grow for two reasons. One, of course, you must remember that on a like-to-like basis, the previous quarter, which is quarter four, is generally a more muted quarter in the industry. It's the time when the business is a bit slower, so you may see sequentially a better number. At the same time, we've also launched two new products in the market, which have helped us get some additional sales in this quarter. We expect the India formulation business to, on a full year basis, continue to have steady growth. Of course, there will be ups and downs based on seasonality as well as the fact that we are also distributing for our principals. It depends on some of the introductions from them as well. I think on a bit more longer term, the India formulation business is a steady growth business with decent margins. As far as Turkey is concerned, the first thing to remember is that Turkey is a very important market for the animal health industry in general. It is a top 10 market, both for production animals as well as it's a very large market, emerging market for companion animals. What happened in Turkey is there are two, three issues. One, very high inflation, which has begun to impact both consumption and, of course, has also impacted feed costs, which go in for the feed which is required for cattle. As a result of which, farmers and in general, have started going a bit slow in terms of medication or in terms of nutrition elements and additives. Inflation has impacted both the cost for farmers, and it has also to some extent impacted demand. The second piece which will come in is really on the foreign exchange. After the president has been elected very recently, there has been a change towards a more well-known economic policy and a more accepted economic policy because of which the currency has been allowed to be devalued for a while. We are now seeing that also impacting us. There are two actions which we are taking. One is, of course, speedily we have taken price increases so that we take advantage of the fact that there is an opportunity to counter the inflation. The second piece is, of course, that we've also started looking at the basic operating and cost structure to ensure that we are efficient in such a volatile environment. The third area which we are looking at Turkey, which we have been saying before, is that there is an opportunity for us to use Turkey as a base for exports, which hedges in terms of foreign exchange. At the same time, Turkey is also becoming a competitive place. We have a manufacturing plant both for injectables as well as for other animal health medicines. We think that some of the exports which we have to other markets can be done out of Turkey. These three actions should stabilize our business while we expect the market to recover in the short term. Yeah. Got it. Thank you for the detailed answers. Yeah. Thank you. A reminder to all participants, you may press star and one to ask a question. Our next question is from the line of Nikhil Shetty from Nuvama Wealth Management. Please go ahead. Yeah, thanks for the opportunity. Sir, we can see you're doing lots of positive changes in the business on a product side and streamlining business. We understand there are challenges on a demand front, but these recurring one-offs every quarter make us difficult to predict how things are shaping. If you can help us to understand from when do you expect things to start to improve and any guidance on revenue for FY 2024, 2025 and benefit because of Project Pragati in 2024 and 2025? Yes. I think we've had two quarters, which is last quarter and this quarter, where we've had different one-off, which we have had to take in our results. Will this continue? No, I don't expect there to be any large, unless there is a really adverse event, because we have specifically done this in order to restructure our operations. These are not related really much to anything which is a macro issue. Therefore, our expectation is that this will now result in us getting the benefit of both margin improvement, lower costs, starting from the next quarter. We have said earlier that we expect to end the year and we expect to exit the year at double-digit margins on EBITDA for the business. At this stage, given our plans and the way the execution of these projects has happened, we continue to retain that confidence. You should expect that by the end of the year, we should be able to get to double-digit EBITDA margin. Then, of course, going ahead, we do have a plan which should take us to the higher end of teams as far as the EBITDA margins are concerned in the next 2 to 3 years. I think we, at this point of time, remain with that confidence. In terms of what should you sort of look at the EBITDA going ahead, I think if you look at this particular quarter, and specifically, we have shown an EBITDA before stock compensation costs of INR 9.3 crore. There are one-offs which are there. There are a combination of things. There is a benefit which will come from the discontinuation of operations of Tarapur, our API plant, our German operations, which we announced at the end of last quarter, but most of the execution is happening now. Also the fact that we have some one-offs which related to our connectivity issues around API, because we had restructured some of the business. I think we should look more in the region of an equally to INR 9 crore more in the area of what EBITDA would add up. That's really what should be the base with which we continue. Yeah. Sorry, you had another question after that? Yeah. You talked about double-digit margin. Is it a result of price hike we are going to take and apart from the streamlining operation? Are we going to benefit because of the falling chemical prices? There are a few areas in which we are working on the API side in particular. Some of it is because of benefits we will get in the area of procurement. Some of it, which is both, of course, the absolute cost of the product, but also has an issue around some of the actions we are taking to improve our procurement processes, et cetera. You have to remember that there is also a whole impact of portfolio as we begin to drive the portfolio towards higher margins, more towards companion animals and to higher margin products, we should see that also giving us the acceleration in the margin. It's not just coming because of cost takeout, it's also coming because of the shift which we are seeing in our portfolio. We did see a lower contribution of regulated markets this quarter, and that is primarily because some of the key regulated market shipments are more back-ended for us in API, and that mix will also take us to a higher margin profile going ahead. I think you should, as far as the API business is concerned, look at it more on an annualized basis. I think on a full year basis we expect to become competitive and profitable in the second half of the year. That's helpful. Just lastly, just wanted one clarity on INR 21 crore pertains to domain expertise towards revamping of API manufacturing operations. What is that, and can you throw some light on this? Yeah, there is a lot of work which is going on in the manufacturing operations. Whereas we are discontinuing operations at some of the sites like Brahmapur last time or Kharagpur, there is also some work going on in the existing operations or operations that will continue in terms of resetting it for the future. This expense pertaining, this one-time expense rather, pertains to the resetting of the operations at the sites that will continue to help us grow. How much benefit we are going to get because of this? This is all part of the overall umbrella of Project Pragati that we spoke about. Yeah, right. That's enough. Thank you. Thank you. Ladies and gentlemen, you may press star and one to ask a question. Our next question is from the line of Krish Kothari from [ozen] Investor. Please go ahead. Hi. I had a few questions on the API business. This quarter, the API sales has been low at INR 81 crore. Is this the new average, and what should we expect for the rest of the year? Secondly, any new contracts that you have received in your API business which can materially add to your sales? Lastly, can you elaborate more on the Project Pragati and how it will impact the business? Thank you. I'll start with the first piece. No, this is certainly not the resetting of average. I think the API business is something that you should look over a little longer period. We certainly, as we've said, have moved some amount of sales on account of the restructuring that we have done. We expect certainly to average around INR 100 crore in this business. That's more the kind of average at which we should be operating, and we expect to be operating on a full year basis. I think we should begin to see that coming in from next quarter itself. It is a lower sale, but it's something that's a one-off, and then we expect it to continue more in the region of INR 100 crore going ahead. The second question you have is on whether we have had any new contracts. Of course, we keep having new customers coming in for existing products every quarter. In terms of a new arrangement, we are right now, we have commercialized a new product with one of the top animal health companies. This will really fructify into a formal business more after one or two years. At this point of time, it has been commercialized, validated, and we have been approved, and we think that this will also turn out to be a bigger opportunity for us going ahead. There are, of course, a few projects which are currently under discussion, something which we cannot disclose right now on a call. The last portion of your question is on Project Pragati. It's a comprehensive program. It has four or five components. The first is really around the improvement of yields and efficiencies around some of our products, which make the cost of manufacturing lower and also make these products more competitive. The second part of Project Pragati involves the overall cost structure of the operation in terms of the manufacturing footprint, et cetera. The third is in the area of procurement. The fourth part of it is in the area of consumables, raw materials, utilities, et cetera. It's a whole comprehensive program. The last part of it, of course, is on making sure that we are driving the high margin pipeline in this. There are different components to Project Pragati, and each of them sort of manifests itself in different months during the course of the year. That is why it all takes us to the earlier confidence which we have, which is that we will, by the time we complete the implementation of this project, we should be hitting double-digit margins for the company by the exit of this year. Got it. Thanks. Thank you. Ladies and gentlemen, a reminder to all participants, you may press star and one to ask a question. Our next question is from the line of Darshan Shah, who is an investor. Please go ahead, sir. Good morning, sir. Am I audible? Yes, you are audible, Darshan. Thank you. Yes, sir. I have two questions on debt and margins and M&A thing. The first thing is, are you comfortable with the current level of debt, and what is the management target for the same? What's the second question? What is the management target for the debt? Are you jumping on it? It's okay. That's your full question, or is there anything more after that? I like to take the questions together. This is my first question regarding debt. If you're comfortable with the current level of debt, and what is the management target for the same? Maybe I'll ask Raghav to speak to you about this. Yeah. Darshan, we are comfortable. I mean, it is not that we are uncomfortable, but yes, of course, we would like to take the debt further down, or rather improve the overall debt-to-EBITDA ratio. We are working towards that. It's not that we are in any sort of inconvenience or anything like that. We have our hands around it, and we have complete control on it. That can be dealt with. I think that's the first one. Any target you have? We have a target in mind in terms of the debt-to-EBITDA ratio, Darshan. It will definitely trend down towards the end of the year. Okay. Thank you. My second question is, if you could elaborate on any plans for M&A and how do you intend to fund it? We are always on the lookout for assets which are interesting, both in terms of full acquisition, partnerships, licensing, any other kind of arrangement. It's just that we want to make sure that it's aligned with our strategy. We have a couple of focus areas. We are keen on the area of companion animals. We are looking at a few markets only, even though we have a presence everywhere. Some of our focus markets are markets like India. The third piece of it is that it must be something where we can add value to this acquisition, and together it should deliver more than what it can do individually. As far as the nature of funding, et cetera, is concerned, I think any such acquisition for us will need to be very responsible. We're not going to chase any toy as far as M&A is concerned. We don't see an issue of having options of funding. There are things which we can do on our own. At the same time, we have a very strong backing from our lead promoters whenever something is required. If there is an appropriate asset, we will definitely be able to go for it. Okay. Thank you, sir, for your clarification and time. Thank you. Thank you. Ladies and gentlemen, you may press star and one to ask a question. Our next question is from the line of Raj Oza, who is an investor. Please go ahead. Hello. Thank you for the opportunity, and good morning. In this quarter, you have indicated a restructuring cost in addition to what was taken last quarter for Germany. Are we expecting more in the coming period, and when will we begin to see the benefits coming in? This is my first question. Second question is, are there any risks you see that are likely in the next few quarters, and what are we doing to mitigate or manage it? These one-off costs are linked to which we have for reshaping the manufacturing footprint, for improving our margins, for structuring our portfolio of products, et cetera. Therefore, these are not sort of unexpected one-offs. These are part of the plan to do. In that context, we don't expect, based on our current plans, there to be any need for any one-off of this size going ahead. Can we say that we will not get something? There's nothing planned, but we operate in a very volatile market right now, and the economic conditions are such that one can never rule anything out. I can't give you that kind of a guidance. There is no planned one-off in the near future. The second question you have is in terms of are we seeing any risks. I think for us, the risks are largely macro because I think operationally, we are getting to be a strong company in terms of being profitable, in terms of having a portfolio which is going to grow profitably. We have a good pipeline, both in formulations as well as in APIs, which is likely to get commercialized in the next one to two years. All of those things are going on plan. The risks are largely macro because we are operating in multiple countries, and that's the only risk that we see, if there's anything which is economically unexpected anywhere. Although, we have taken a large amount of mitigation actions for that in terms of being prepared for any such situation. Okay. That was really helpful. All the best for the coming quarter. That's it, sir. Thank you. Ladies and gentlemen, that was the last question of our question and answer session. I would now like to hand the conference over to the management for closing comments. Thank you for attending this call, our presentation, of course, now available. I'm really grateful, and all of us, to our employees, our board, and everyone who has been supportive of our journey. We do believe that our plan, which is that of improving the profitability of the company and also directing all our efforts to growth in the coming years will help us in reestablishing our position as an admired company in the animal health space. Yeah. Look forward to meeting you in the next quarter. Thank you. Thank you. On behalf of SeQuent Scientific Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.