Ladies and gentlemen, good day, and welcome to Alembic Pharmaceuticals Limited discussion on company's Q1 unaudited financial results conference call. We have with us today Mr. Pranav Amin, Managing Director; Mr. Shaunak Amin, Managing Director; Mr. R.K. Baheti, Director, Finance and CFO; Mr. Mitanshu Shah, Head Finance; Mr. Jesal Shah, Head Strategy; and Mr. Ajay Kumar Desai, Senior VP, Finance. 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 would now like to hand the conference over to Mr. R.K. Baheti. Thank you, and over to you, sir. Thank you. Good evening, everyone. Thank you all for joining the first quarter results conference call. I'm sure you have got the results by now. Let me briefly take you through the financial numbers. During the quarter, our total revenue grew 18%- INR 1,486 crore, EBITDA is INR 210 crore, which is 14.13% of sales, and grew by 67% before considering non-recurring items in corresponding quarters. Net profit is INR 121 crore. EPS for the quarter is 6.14 per share versus 1.84 per share before non, non-recurring items for previous quarter-- previous corresponding quarter. Interestingly, this year, first quarter, EBITDA and net profit are after charging all expenditure of new plants, that is F2, F3, and F4. Till December 2022 or so, we were capitalizing them as CWIP. The borrowings, at the gross level, at consolidated level, is INR 67 crore versus INR 630 crore in March 2023, and company has about INR 90 crore in cash on hand. March 2023, the number was INR 75 crore. Net-net debt equity is now at 0.11. It will be interesting for all of us to hear from Shaunak and Pranav about their respective business performance. I'm handing it over to Shaunak for India and the business. Shaunak? Okay, my network is not so stable, so in case it drops out, just please continue. From the India business, we grow at 9% to INR 524 crore for the quarter. For Q1, if I look at the external numbers, industry grew by 9% as the IPM, as our external growth is 11%. Performance for speciality- Amin you are not audible. Mr. Amin, your line is not clearly audible. Members of the management, I would request you all to please stay connected while I try and reconnect Mr. Amin, on a different network. Just give me a minute. one minute of grounding. Requesting all participants to please stay connected while we have Mr. Shaunak Amin reconnected. Requesting you all to please stay on the line. We have Mr. Shaunak Amin reconnected. Over to you, sir. Yeah. Okay, for acute industry expected growth of 10%, whereas we reflected a growth of 16%. IT effective industrial 10% growth, Alembic recorded a 19% growth. In cough and cold, Alembic's growth is in line with market growth of 10%, and our animal healthcare continues to perform at outperformance of 11% in Q1. For the quarter, the business did see a bit of softness in the second half of the quarter, partly due to the extended summer months in large parts of the country. Going forward, hopefully, once with the onset of first monsoon, we should see a significant pick-up in momentum going forward. I'll pass it on to Pranav now for the international business. Thank you. The U.S. business grew 6% in rupee terms on a year-on-year basis. Focus is on launching new products in this year and improving efficiencies and execution in the midterm. Importantly, also, is the ex-U.S. formulation as well as the API business have done very well, and we're confident both these will be performing in the coming quarters as well. The R&D expense for us was INR 119 crore, which is approximately 8% of sales in the quarter. As I've mentioned in the past, we've been working on optimizing the R&D costs, and the improvements are on track. We filed 5 ANDAs during the quarter, and cumulative ANDA filings stay at 250. We received 5 approvals in the quarter, and cumulatively have 184 ANDA approvals. We launched 6 products in the quarter, plan to launch over 20 products during the rest of the year. The US FDA has had inspected our old/new oral solid dosage facility at F4 in December. We have now received EIR for the facility and have 2 product approvals from this facility, which gives all our manufacturing facilities have the respective EIRs in place. In terms of revenue, the US generics was flat at INR 390 crore, whereas the ex-US generics grew 46% to INR 266 crore, and the API business grew by 31% to INR 305 crore. I would like to open the floor for question and answers. Thank you. Thank you very much. Ladies and gentlemen, we will now begin the question answer session. Anyone who wishes to ask a question may press star 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star 2. Participants are requested to use handsets while asking your questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of A M Lodha from Samarthee. Please go ahead. Hello, am I audible, sir? Mr. Baheti? Yeah, yeah. Please go ahead. sir, with the... I have got 2 questions, sir. Number 1, research and development expense. It has moderated in this current quarter. Can you update, sir, how much amount we expected to incur during the current year of Y-24? In the past, in the past few calls, I've said that this year our target is to get somewhere around INR 500 crore of R&D, and I think we'll be around that number, maybe even lower. Okay, sir. Another, one your US subsidiary,uncertain, any write-off in this quarter regarding that subsidiary or completely amount has been written off? No, I think no more write-offs. Everything is done. My last question, sir: why tax liability is so low? It is around INR 120, profit before tax is INR 129 crore on consolidated basis, and the current tax is only INR 4 crore. Two things. One is uncertain is no more a subsidiary. It has got merged into company, so it is now a division of Alembic Pharmaceuticals. You'd recall that in March we did an impairment of assets, which would be spread over two years. That's how we get the tax, what you call theoretical expense, and tax provision is low. Can you just give how much tax we expected to pay in 2024 and 2025? Very difficult. No, I mean, that will depend on how much profit I make in the future, so. Okay, thank you. If anything, I will read and, thanks a lot, sir. Thank you. Before we take the next question, I'd like to remind participants, if you wish to ask a question, please press star, then one on your touchtone telephone. The next question is from the line of Damayanti Kerai from HSBC. Please go ahead. Hi, thank you for the opportunity. My question is for Pranav. Pranav, some of your peers are talking about normalized price erosion in the U.S. and then opportunities emerging due to shortage, et cetera. How does Alembic stand here in terms of gaining from such opportunity? Or, like, what are your broader observation on the U.S. pricing opportunity, et cetera, from next few quarters perspective? As you know, historically, we've always Historically, I mean, for the last 6, 7 years that we've been in the U.S. market, we've always done well when there are shortages in the market, and we've been able to capture those opportunities. That fundamental still stays, because inherently our strategy is focused on a very robust supply chain and having compliance at our facilities. If there are shortages, we'd like to take those opportunities. Having said that, the last 3 years we've seen excess supply in the market, and with the buyer consolidation, that has really driven prices down. There is a little bit of improvement over the last quarter, I would say, over the last 3-6 months. Is it, is there still price erosion in the market? Definitely, there is there. I think it depends, molecule to molecule. There were certain segments in the generics which had little lesser erosion. I think we saw some disruptions in some injectables, in some, in some derm and some ophthalmic, which were some interesting opportunities. Of course, our injectable portfolio is still very nascent. We just started launching it. That's where we're seeing some opportunities. Let's see how it goes, but the erosion is still there, and as I mentioned that we are, we are geared up to do well whenever there are shortages in the market. Specifically, do you think the injectables will be interesting from your perspective, since you have new plant and you're, you have just started supplies, et cetera? How much you can achieve, say, in next 2 years or so, from injectables? I think, we're not giving a guidance on the revenue, but injectable is an area that I think there is relatively lesser competition than the orals is. While there are some strong players, but we continue to keep seeing disruptions in the injectable market. Hopefully, it should throw up more opportunities. Like our portfolio is still very small. We only launched five products from both the facilities so far. As we keep launching more products, as we have more breadth in our portfolio, this will help us, and we'll be able to capture more opportunities. Can you remind us how many filings you have done for injectables? Like you said, 5 launches, and in terms of filing, how many have been done so far? ... from both these facilities out, for injectable is out about, 15-25 units is what we have. 15-20, okay. My last question is your other expense strength. Obviously, the first quarter number now reflects full impact of new plants, et cetera. Should we work with this base or we, we can see further expansion in cost in line with which your top line growth, et cetera? We don't expect further expansion in cost. I think, the cost would be, I mean, the base is around these numbers. fourth quarter is base, most likely going ahead. Yeah. Okay, thank you. I'll get back in the queue. Thank you. A reminder to the participants, if you wish to ask a question, please press star then one on your touchtone telephone. The next question is from the line of AM Lodha from Sanmati. Please go ahead. Sir, thank you very much for the follow-up opportunity, sir. I have observed from the results that the API business company is doing very well. There is good growth in API this quarter also, besides last quarter. Whether the company is planning any expansion, any expansion in API, please? Thank you very much, sir. Yes, I think the API has been a focus area for us, and quietly over the last 12 quarters or so, the API business has seen a pretty decent growth. In the past, I've guided for about 10%-15% growth in the API business, and I think we will stand by that. This year, of course, the first quarter was very good. It was very robust. Our strategy is still the same. We first focus on a robust supply chain with compliances in place, and hopefully it will help our partners in the business, and that's what can be done well over there. I think we'll continue with API business as well going forward as well. Any expansion in API side company is planning? We continue to keep doing expansions. Over the last three years, when we did CapEx, we've been continually expanding our facilities. We, as part of our maintenance CapEx, we keep adding more blocks and more and more facilities in the same plants. Okay, sir. My second and last question, sir. Regarding 2 new, 3 new plants which we have installed in the last 2 years, they have capitalized in the current quarter, sir? The commercialization of the 3 new plant has been capitalized. I mean to say the depreciation interest on these 3 new plant has been debited to the profit and loss account? Yes, yes, yes. We have capitalized it. From first quarter, we have depreciation for these three plants already booked in PNL for the current quarter. Okay, sir, the whether production has already product approval has already been commenced by and, and the plant has been approved by USFDA? Yes, we have launched between these two plants, 5 products actually, and commercial production has already started. Thank you very much, sir. Wish you, wish you very good luck, sir, in coming year ahead. Thank you very much, sir. Thank you. Before we take the next question, I'd like to remind participants, if you wish to ask a question, please press star then one on your touchtone telephone. The next question is from the line of Bharat Celly from Equirus Securities. Please go ahead. Yeah, hi. Thanks for the opportunity. I just wanted to, actually, during the last quarter, you mentioned that large part of the costs, costs which were associated with the new plant had already come in fourth quarter. I was under the impression that all the costs were during the fourth quarter and first quarter, the first quarter should have seen a flattish, other expenses as well as employee expenses. Still we are seeing the increase. Can you elaborate what is the difference and what is the cost, were they completely during the fourth quarter? You are right to the extent that from 1st of January onwards, we have not capitalized, we have not done any further capitalization of costs. We have charged it to PNL. As the plants are now getting approvals and products are getting launched, there's some what we call reverting of maintenance costs, utility costs and so on. Obviously, the cost would those costs has gone up a bit. Secondly, it also depends on the cycle of other expenses, promo expenses and all of that. It's very difficult to do a quarter on quarter cost analysis. I mean, one item of cost comes into one quarter and the cost looks big on smaller base. Broadly, I think we are... Now, what we are saying is, we are not further capitalizing any expenses, whether it is of old pharma division, which is now over division or of facility. Everything is getting charged up to PNL. Is it safe to take this as a base cost item now going forward? No, say it again. I didn't get your question. I'm asking, can we take it as a base for the future quarters, this cost? I think that broadly, yes, I mean, some, some variation would always be there. Right. actually, I just want to pick your mind on the lower pricing environment. We have been hearing a lot that there have been a change, a changing pricing environment, whereby, the overall pricing environment could be very softened as compared to the last quarter. So just wanted to get a sense of how you are reading the overall these line items, whether you are seeing that, actually, the prices have started coming down. Have you seen any material change in the overall competition landscape, whereby you are seeing, couple of guys trimming their overall portfolio? Have you seen this yet? No, actually, I've not seen any material change in terms of anyone pruning their portfolio, any fundamental change in the market, so that stays as is. I think the only thing that happened last few months is that there was some regulatory action against some facilities, I think, which has reduced some supply in the market, and that these companies which had these regulatory issues had high market share in some certain products, which has caused the shortages. I think we continue to keep seeing shortages in the U.S. market as per the FDA shortage report, but there is still quite a bit of supply in the market. While in terms of pricing, there is still erosion in the market, and I don't see any change. Is it less than what it was six months back? Yeah, maybe, but it's still there. Is it possible for you to outline that how much was price erosion for an Alendronate this quarter or a quarter-on-quarter, from the quarter-on-quarter perspective? It's very tough to say, you know, because it's each product is different. On certain products, you may have pricing erosion of up to 30%-40%, and certain cases it may be flat, with no new entrants coming in. If I give a figure, then it's not going to be valid because you can't take it, it's not sustain... I mean, it's not, you can't get, it's very product specific. Right. I mean, it seems to be like double digits. Has it come down to a high single digits, mid-single digits, anything like that if you can off of that? It's still double digits. Oh, that, that's great. Thanks a lot. I will get back to you. Thank you. The next question is from the line of Resham Jain from DSP Asset Managers. Please go ahead. Yeah, hi. Good evening, sir. I have 3 questions. First one is in the API business, what kind of growth you are looking for in this year? I think our raw material prices have seen some correction, plus energy costs have some correction. How do you see margin in API? Overall, if you can just help on how do you think API business for this year? The API business, as I said, in the past few calls, I expect this business to grow between 10%-15% year-on-year, and I think we're on track for that. In terms of margins, the margins have been pretty decent in the API business. I think we were not affected much due to the higher price of the raw materials that we saw, and we were covered, and we are pretty okay on that. While what's happening the margins, as the price of the raw materials comes down, so does the expectation of the finished product in the market as we have more competition as well. I think margins, we will maintain. Our API business has got decent margins, and we'll continue maintaining those going forward. Okay. In the domestic business, as you mentioned, season has just started, there has been some delay. How do you see the growth, given that we have built a good sales force also over the last couple of years? Also, there also, if you can guide on the margins, again, given we have seen inflationary situation, in the previous few quarters, which is again, moderating? Yeah, on the India piece, I think that delayed monsoon. I think, it's, it's one of those things that we've been seeing now for the last 5, 6 years, where it changes from year to year. I think it's just a matter of, a delayed onset which kind of slows things down. I don't think from any manpower angle, we have any issues on our active side. We haven't expanded manpower in the current year or the previous year. Oh, sorry, in the current year, we haven't expanded further manpower on the active side, which has an impact of, seasonality, seasonality to it. It's still early, but usually we've seen that a delayed onset usually leads to a prolonged season on the back end. Usually for the last 3 years, we've seen the Q3 has been significantly better in terms of seasonality compared to Q2. I think maybe it's kind of change in the underlying trends. On the margin side, we haven't seen any pressures on the margins, either direction, a pressure or upside, at the moment, and we just continue to see the same levels of margins going forward. Okay. The last one is on overall capital allocation for this year, given that we have limited CapEx. How do you see the overall cash flow being redeployed? We have said that our needed projects are over. We are building a new facility for the domestic business, at Pithampur, Indore, and that will consume some cash. In the first quarter, we also completed one pending line at F3, the Vejalpur plant. That is done and capitalized. Going forward, I think, CapEx will be largely maintenance, maintenance CapEx. This year, our total, CapEx, including the first quarter, will be in the range of INR 400 crore or so. Going forward, probably it will go well. Sir, my question was, how are you thinking about cash redeployment? Are you going to increase the payouts? What, what about are you thinking from the incremental cash generation perspective? As of now, we are borrowing about INR 550-600 crore in this. That gets repaid out after the cash flow which we generate, and thereafter, we will look for more opportunities. Okay. Thank you, sir, and all the best. Thank you. Thank you. The next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead. Sir, thanks for the opportunity. Sir, given the kind of shortages that are happening on the injector side, certain plants having had weather issues. would you like to throw some light in terms of what could be the benefit for us on a, like, for a FY 2024 basis from this current quarter sales of $48 million? It's tough to say on the shortages, how it will impact us and which products. As I said, generally, our strategy as premature, there are shortages, we're in a good position to take it. We have seen a lot of shortages in injectables. As of now, as I said, it's still an early portfolio for us. It's in a nascent stage. We only launched 5 products. As we launch more products, we'll be able to participate in those markets as we go along. It's tough to say how we're gonna move from here onwards. What we are hoping for is this year we'll launch a total of about 20-plus products, and hopefully, that will help start picking up, and as we move along, we'll see more growth coming in the following quarters. Okay. Any clarity on the, as in, just, 10%-15% growth also is still very much possible, right? At least at... We have not given a, a growth guidance, when we don't give a growth guidance. Okay. On the animal health business, now that it's become a reasonable size, if you could just, you know, throw some more light in terms of what the strategy would be to further expand this business. Yeah. On the animal health side, we've seen this tremendous run rate. In the current year, we've expanded, about 200 people in the animal health business, and we created a separate vertical to focus more on, feed products in the animal health care, in the large cattle space. We continue to see very strong traction, and we have some good launches lined up in, you know, the non-antibiotic feed space as well as in terms of probiotics, and in some mainline veterinary products. We're very bullish on this space, and we continue to look at growing it organically as we with the same momentum, and hopefully, pick up some upside on this. Understood. Yeah. Thank you. Thank you. The next question is from the line of Rashmi Shetty from Dolat Capital. Please go ahead. Yeah, thanks for the opportunity. One question on depreciation. You know, we have seen a quarter-on-quarter dip while you are saying that, you know, we have started capitalizing the, all the plant expenses. Just want to know the reason why there is a dip and why that is equal to your earlier quarter amount of depreciation when there used to be capitalization. Rashmi, that is largely on account of, you know, the LLR effect that we had in the previous quarter, which will not continue in this one. That was in last quarter Q4, where we had LLR depreciation. This will be the right base to take it for the full year, right? Yes, yes. Your other income seems to be pretty high, you know, quarter-on-quarter as well as year-on-year also, which we. Does that include any forex income or anything which you want to, you know, explain about it? Yeah, you got it right. Actually, for us, it's an operational income only, but accounting standard classified as, other income, which is forex gain. Okay. Any ballpark number, can you give on the tax rate? Because it is very low this quarter. You know, for the full year, earlier you have guided 17%-18%. Should we model in the same number as of now, or you feel that it should be lower than the, the number which you had guided? In this year, actually, the tax rates are likely to be lower because the impairment expenses, we are going to claim with the deductible next year. Okay. Any ballpark number which you can guide on that bit? It would, it would depend on the total profit and minus the impairment. Like, it's like giving any number profit, giving at this one. Understood. On FY 25, you know, the tax rate would slot up again 17%-18%, right? Sorry, going forward? Yeah, going forward. Yeah, yeah. That will be 30 max. Okay. With the current operational expenses, you know, our EBITDA margin is now in the range of, 13%-14%. In the next few quarters, you know, will it be sustainable, or we do have scope for expansion from the current level? If the sales grow, because fixed overheads are likely to stay at current levels. If the sales grows, which we, we hope will, the margin should expand. Okay. All right, thanks. That's it from my side. Thank you. The next question is from the line of Sandeep Raj from Oculus Capital. Please go ahead. Good evening, sir. I had questions specifically on the injectables. When can we expect a revenue generation from the injectables? It's started already. I think, as I said earlier in the call, we've got launched, about 5 products which are from the injectable facilities, 4 from the onco and 1 from the general injectable. Revenue started, as we launch more products, it'll gradually ramp up as well. ... okay, may I ask how much was the revenue for quarter 1? We haven't given that. We haven't disclosed the breakout, but we don't disclose it facility-wise. Oh, okay. regarding the pricing scenario in U.S., specifically for injectables, how is that doing? I think, it's tough for me to comment because it's still a little early for us. It's, as I mentioned, just the last quarter was the first quarter that we started launching products, and four, five products is not a large enough set to give a, an analysis. I think hopefully by the end of the year, we'll be able to give you a better perspective on injectables as well. Okay, sir. Got it. Perfect. That's all from my side. Thank you. Thank you. The next question is from the line of Bharat Celly from Equirus Securities. Please go ahead. Yeah, hi. Thanks for the follow-up. Just wanted to get a sense on gross margins. We have seen a sharp expansion sequentially. What exactly has led to this? gross margin is a factor of product mix. I think, the margins in our case, actually, we have been maintaining the gross margin more or less over the last few quarters. The margin dependency is more on overheads, because with increase in overheads, the margins are gone down. otherwise, gross margins are, around 70% odd, plus minus two points. Have you seen any softening of raw material prices which could have helped us during this quarter? Not really. I think the raw material cost for us has been fairly steady. Okay, that's helpful. Thank you. Thank you. The next question is from the line of Jenny Shah from JM Financial. Please go ahead. Yeah. Hi, thank you for the opportunity. My question is on the US business. We've been launching new products, from our new facilities. You know, when do we see this business becoming profitable? Any meaningful launches that you would like to call out? This business has always been profitable for us, and we don't really give a disclose vertical-wise profitability. As we go along, hopefully we will have more launches. As I said, we're going to launch 20 products this year in the US. That helps build up. The other thing is we've seen a reduction in R&D spend, which used to be almost INR 600-700 crore, has come down to INR 500 crore this year. That also helps the margins. Right. What is our margin aspiration in 2 to 3 years down the line? Where do we see that heading? Well, actually, again, it's again, it would amount to giving guidance, which currently we are not, because, we still need to test, newer facilities, newer products in the market. Aspirational margins, without really linking it with our current performance, would be that maybe 20%. Is it fair to assume that 1 Q margin would be bottom, and we could see improvement going forward? I think I already responded to this question, that, the overhead, largely remains fixed, and it, should move to get margins, would, get better. Okay, thank you so much. Thank you. The next question is from the line of Nitin Gandhi from Inoquest Advisors. Please go ahead. Yeah, thanks for taking my question. What is the asset turnover plan for injectable facility? Too early at this point in time to really, you know- No, no, no. When you designed the plan, historically, what is the, you know, mindset? I'm not asking what is current expectation. Very difficult to put it in, U.S. environment, because, you know, a product could generate, or give you, like, $100, and same product would sell for $3. It's very difficult, right? Okay. What's the amount, capitalized for injectable facility? For all the three plants put together, it was around INR 2,000 crore, of which pre-op was around INR 1,100 crore. About the impact last year. Okay. Thank you very much. Thank you. A reminder to the participants, if you wish to ask a question, please press star then one on your touchtone telephone. The next question is from the line of Lakshmi Shetty from Dolat Capital. Please go ahead. Yeah, thanks for the opportunity. Just one follow-up question on the U.S. business. Like you said, that the price duration is, you know, still in double digits on an average. Can you just specify or for the patterns, you know, where do we stand? Is it higher than the average price duration for your portfolio, or it is, or the price duration has slowed down in that? you know, as I mentioned, it's very tough to say product specific, how the erosion work moves. Every time you have a new entrant, you have someone trying to take a market share. It's very tough to basically focus extrapolate from that data. This is generally what we've, we've seen across the portfolio is about, it's a double-digit portfolio, it's a double-digit erosion. It's very tough to single out a certain or particular segment. In certain cases, there may be a new entrant who is trying to get more aggressive. In certain cases, there are. It's very tough to give a general answer to it. Thank you, sir. That's it from my side. Thank you so much. Thanks, Lakshmi. Thank you. Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to Miss R.K. Baheti for his closing comments. Thank you and over to you. Thank you very much, everybody, once again, and wish you all the best. We'll see you all in next quarter call. Thank you. Thank you. On behalf of Alembic Pharmaceuticals Limited, we conclude today's conference. Thank you all for joining. You may now disconnect your lines.