Ladies and gentlemen, good day and welcome to the Q1 FY25 earnings conference call of Alembic Pharmaceuticals Limited. We have with us today Mr. Pranav Amin, Managing Director; Mr. Shaunak Amin, Managing Director; Mr. R. K. Behati, Director, Finance and CFO; Mr. Ajay Kumar Desai, Senior VP Finance. As a reminder, this conference call is only for analysts and institutional investors. 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 touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. R. K. Behati. Thank you, and over to you, sir. Thanks. Thanks. Good evening, everyone. Thank you all for joining our first quarter results for FY24/25. I'm sure you have received the results. However, let me briefly take you through the numbers. During the quarter, our total revenue grew by 5% to INR 1,562 crores. EBITDA at INR 239 crores is about 15% of sales and grew by 14%. Net profit grew by 12% to INR 135 crores. This comparison is with corresponding quarter of last year. EPS for the quarter is 6.84 per share and versus 6.14 for the previous quarter, previous corresponding quarter. This EPS is for the quarter, not annualized. Our gross borrowing is about INR 589 crores compared to INR 430 crores of March 2024, and we have INR 147 crores cash versus INR 120 crores in March 2024. I will quickly move to the business presentations and will request Shaunak to take you through the India business. Yeah. Hello. Good afternoon, everyone. For the quarter, India branded business grew by 9% to INR 572 crore. We recorded robust growth in our specialty therapies of gastroenterology, gynecology, antidiabetic, ophthalmology, and we performed relatively better than the market in acute therapies. Excessive heat waves in Q1 led to unnatural market disturbances in specific affected geographies, and that was a negative for the business. Animal healthcare business continues to outperform with 23% growth for the quarter, backed by a basket of strong brands driving this outperformance. New launches also continue to do well as a category for us, with some key promising new launches that have happened in Q1. I will now hand over the discussion to Pranav Amin. Thank you, Shaun. Our OSD facility, S1, was inspected recently by the U.S. FDA. I'm happy to say it happened without any observations, underscoring our dedication to compliance and quality. The U.S. business performed quite well and grew 18%. We launched two launches. We had two launches during the quarter. We expect to launch 10 more products during the quarter. The ROW business has a good outlook, and we've grown this business quite well over the last five years. It should return to better growth in the subsequent quarters. The muted growth was an account of constraint of supplies. The API business underperformed as compared to a higher base of last year. We hope to improve the growth in the subsequent quarters as well. R&D expense was 7% of sales at INR 114 crore for the quarter. We filed three ANDAs during the quarter, and the cumulative ANDA filings are at 262. We also received 11 approvals and launched two products in the U.S. during the quarter. As mentioned earlier, we should launch about 10 products in this quarter itself. The US generics grew 18% to INR 461 crore for the quarter, whereas the ex-US generics grew 2% to INR 271 crore for the quarter. The API business degrew by 15% to INR 260 crore for the quarter. With that, I would like to open the floor for Q&A. Hello? Operator? Management. Are you there? Yeah. You can hear us? Yeah. Now we can. Management, could you just read out your name followed by one, two, three? Sorry? Could you just read out your name followed by one, two, three? We're already live. I think we've read the opening statement. It's time for Q&A. Can you just take the line for Q&A? All right. All right. All right. 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. The first question is from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead, sir. Thank you for the opportunity. Am I audible? Yes. Sir, just on U.S., as we see the pace of launches ramping up, and even the first quarter numbers have been better than the quarterly run rates lower earlier quarters. C ould you provide some guidance in terms of what kind of run rate one should expect in FY25? Tushar, so we're not giving a run rate, but we do expect, as I said in the last quarter, at the end of the year, we do expect to grow the US business. I'd like to grow it by about 10%-12%, 10%-15% this year. And I think we'll hold that true, I think, because it's a combination of the competition and the price erosion that we see. The last quarter was quite good. As you know, 18%, it's a good quarter. However, there was some lumpiness in that first quarter, which would not be a recurring basis. But we will launch about 10 products in this quarter, and hopefully, some of the big ones might come also. So let's see how that goes. Understood. This timeline, as far as Selexipag product is concerned, and if you could also highlight in terms of the contours or constraints of the launches? Yeah. So Selexipag, there's still some time off. I think we're the first to file with our we have exclusivity on that. We're a non-NC minus one first to file on that. But there's still time for that. I don't think that launch is until FY 2026 or 2027. So it's still early days. Oh, you want to go up to FY27? I think so. I could just double-check the data. I'll get back to you. I don't have it with me. Okay. For this product, for the API, any use cases? Where is it from a manufacturing standpoint, where does the key lie? Is it more of a formulation that's tricky, or API that's tricky? It's a formulation. It is IP, actually, more than anything. It is an intellectual property in filing the product before anybody else. Understood. That's it from my side. Thank you. Thank you. The next question is from the line of Damayanti Kerai from HSBC. Please go ahead. Hi. Thank you for the opportunity. My question is again on the US. So you mentioned that you would expect it to grow in the coming period. But I just want to understand how suppliers are getting pickup from the new plants, especially for the oral solid plants. Yeah. So I think a lot of the growth still is from the OSD. I think OSD is still the largest part of it. P ickup from the new plants has been quite good. Some of them have done a little better. Some will still take a little bit more time for ramping up. It's been quite successful. Hopefully, by the end of the year, we will see a lot more products coming from these plants. In terms of the ophthalmics, the lines are running very well. The oncologies also, we've picked up some traction. And the general injectable is something that we're working on, especially the prefilled syringes. We may see a few launches by the end of this quarter that should help it. Okay. So very broadly, what are your expectations in terms of sales split between OSD and non-OSD two years from now, very broadly? Oh, we don't give that breakup. But what I can tell you is that going from about 4-5 years back to 100% OSD, gradually the dependence on OSD will come down, and you'll see growth coming from the other sectors. OSD will continue growing as well, but it'll still be more than 50% in the long run as well. Okay. Can you also comment on the U.S. pricing environment? Have you seen any change compared to last few quarters? There's still pricing pressure. I would say double-digit pricing pressure. It's still there. We're still seeing that in the market. Okay. But it's more product-specific, right? Because what we are hearing from other somewhere like mid-single year. And my next question, you mentioned constraint to supply was one of the reasons why we saw less ROW sales this quarter. And if that's the case, how you're planning to resolve this? Yeah. So you're right. I think we have the order book, and the outlook is looking quite good for the U.S. as well as the ROW markets. What has happened is we've faced some constraints in supplies. How we're addressing it is we do have the new formulation facility, F4, that we built a couple of years back. So increasingly moving more products there, and we're ramping that up. And in F1, we're looking at debottlenecking some of the areas where we have constraints. So expect that in another quarter or two, we should be back up to supplies, and ROW business will end up growing in the last couple of quarters of the year. Okay. So maybe a quarter or two, and then you expect growth to come back in this segment. Yeah. Yeah. Absolutely. Absolutely. Okay. And my last question on your margin trajectory. So we have seen a gross margin in the last two quarters remain broadly stable. So should we assume this level to sustain ahead? And also, if you can comment on the R&D expense. You earlier said INR 550 crore-INR 600 crore kind of is the number which you're looking for this fiscal? Yeah. So let's take the R&D first. I think R&D, obviously, the first quarter has just been about INR 112-114 crores. But by the end of this year, it will ramp up a little bit more. So I expect to close at about INR 550 crores or so for this year on the R&D side. As regards to margins, as I said, we do expect that the margins over a 2-3-year period, we expect to go up closer to the 18%-20% kind of ranges. And that'll happen as the new facilities get better utilized, and we've already optimized the R&D. So the quarter-on-quarter, I wouldn't see last quarter was a little more lumpy because we had a few one-time benefits for the EBITDA. But on a year-on-year basis, you will see an improvement in EBITDA margins going forward as well. Okay. And last, if I can, in the new non-OSD plants, your utilization is right now, what, below 30%, or better? Again, it's tough to quantify, but yeah, it's not much right now. A few streams are more, a few streams are less, but that was built for future expansion. It was built for taking up the future capacities, and we're on track for that. We will start debottlenecking that and adding more areas there as well at this point. Okay. Thank you very much for your response. Thank you. Anyone who wishes to ask a question may press star and one on your touch-tone telephone. The next question is from the line of Abdul Qadir Ranwala from ICICI Securities. Please go ahead, sir. Yes. Thank you for the opportunity. So my first question is pertaining to the U.S. business. So out of the 206 products which have been approved, you have launched 149 so far. T he balance, 57 products, would it be fair to assume that this would be mainly oral solids? In terms of the total approvals? No, no. I'm talking about the products which are yet to be launched, those 57 products. Yeah. I think, as I said, we launched about 10 products in this quarter. Roughly half of them, in my opinion, would be oral solid, and the rest would be some of the new areas. Understood. Understood. I n terms of your animal health business in India, so I mean, for the last couple of quarters, we have seen quite a good amount of traction. I n the next 3-4 years, I mean, how do we see this business in terms of the overall contribution to the India business? And if you could throw some light in terms of the segments which are currently working well for us? Yeah. I think in the animal health business, I think we expect to see a continuation of the momentum. As you're aware, we added a new division in the livestock space last financial year, and that's obviously giving us a little more traction and momentum in terms of sales. I think conservatively, we should expect to be in and around the CAGR that we've been generating now for the last three years. We expect that momentum to continue on the India business side of things. In terms of levers that's really driving this business, like I said, some of it could be attributed to manpower expansion. Some of it is through some new launches, as well as, I think, operational execution and discipline, I think, which is more of an India business strategy. So yeah, it's a combo of these three things that's really helping us move. Understood. My final question is on the branded portfolio in India. If I look at one particular slide on the therapeutic performance, your gastrointestinal growth has slowed down a bit as compared to the market growth. Any thoughts or colors here? Sorry, could you repeat that question? So speaking with respect to your gastrointestinal portfolio in India, if we look at one of the slides where you have given a comparison between the company growth of this portfolio versus the market, the growth has been slightly below the market growth. So any thoughts or color you'd like to share which would help us read through those numbers? Yeah. So, I think gastro, I think we don't, it's not a. I mean, like I said, sometimes you just have some little bit of base or maybe a little bit of sub-market segregations where your stakes are a little more. Those markets don't do as well. Overall market doesn't do as well. But I think that gap, I don't think it should be a major concern. I mean, if we accept to be smooth and not going forward. See, broadly, there is no gap. We grew at 12%, and the market growth is also 12.6%. So broadly, we are in line with the market. Got it. Thank you. I'll get back to the machine. Thank you. The next question is from the line of Bhavesh Gandhi from Yes Securities. Please go ahead, sir. Yeah. Thank you for the opportunity. I had one question on the US business. Any update on the approvals that we have got in GHE1, so products like Zolenza, the recycling, and peptide injectable, ICICI Bank, Architect? Any update on these two products, whether they have been launched or they are yet to launch? Thank you. I think we said we launched 2 products in the quarter, and we will launch about 10 in this quarter and some maybe once we take because they're not day-one launches, so they'll all be launched within they must be in a period of time. Okay. Fine. Thank you. Thank you. The next question is a follow-up question from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead, sir. Thanks for the opportunity again. On the API side, I wanted to understand, is it to do with the inventory in the system, or is it more customer-specific? So the API, the lower sales? Yes. So lower sales is due to. I mentioned a couple of quarters back that while the API business over a five-year period has grown quite a lot. I think we had some few customer-level shortfalls in the pickup that they did. I think that is due to various reasons. One business was a little lumpy. That's why it'll come up by the end of the year. The other one is one of the customers had an FDA issue, which is why there was a little lower offtake. And third is there was some pricing pressure that we saw, which we lost some business. So I hope that by the end of the year, the API business will go back up to growth, and I hope that this business will. I expect it to grow by 10% year-on-year after this. Is that FDA issue resolved so that the offtake is back, or it will be subject to inspection? The FDA issue is not at our level. It is at a customer level, and I think it's not resolved as yet. I believe that market share has got transferred to somebody else. Understood. So effectively, sorry to brag on this, but effectively, for us to scale up the business, will we be subject to resolution of FDA issue for the customer, or in which case, will we be able to still the customer will be able to sell more in the market? I think it's just one customer. I believe we'll make that up with other business as we go along. Understood. And so secondly, on the gross margin front, where the share of API business overall, over the last, you may look at year-over-year or a quarter-over-quarter, the share of APIs is being reducing, but the gross margin has been largely stable at least a quarter or a quarter if I think about. Yeah, that's right. And I think I mean, I have said earlier also that we'll be happy with 70% plus kind of margins. So every quarter, it will be some product makes some specific consumption patterns. You can't really on a long-term trend, I think we would continue to be 70% plus. Okay. Thank you. Thanks. Thank you. The next question is from the line of Bharat from Equirius. Please go ahead, sir. Yeah. Hi. Thanks for the opportunity. Sir, I wanted to understand on your launch plan. When are we going to launch in Singapore? Is it going to be towards FY26 May or sometime later? No, I think we're going to be much later. We were not in the first couple of waves, so I think it's just still a good couple of years away from that. Okay. But will it be more of a sizable opportunity for us whenever we launch it? No, no. I think it won't be because we'll be too late to the market. T hat's not a product that will be sizable for us. Is it based on some settlement? Because as far as I know, many companies have settled in such a way that they were going to launch before everyone could come. So before this volume restrictions lifted. So are you seeing one of those who will be getting some volume share? No, I think we were very late on this product. So I think there's a whole bunch of people before us. So our settlement is much later, and I don't expect there'll be much of a market left by the time we get in. Okay. And as we're talking from the perspective of U.S. business, what will be our top four or five product composition in our overall U.S. business? What proportion will be coming from these top five products? So I think we don't over 41% of revenue? Yes. U.S. revenues. Top 5 or top 10. I'm just trying to understand the concentration of the U.S. market. I think the concentration for us has come down from what it used to be back in the days of the Sargents. I don't have the exact figure. I'll send it out to you offline. The top five also keeps changing depending on the opportunity, but I believe the concentration has come down quite a bit. So actually, the reason to ask is because we have talked again about the latest price revision. While last year, we were talking about that price revision had actually been moderating a lot. So what is leading to this sort of price revision for us? What difference do you see in the market? Maybe we sell at higher prices than the others. I don't know. But that's what we're seeing in the market, product to product. Right. And it is across the portfolio, not some specific portfolio, right? See, price erosion is you extrapolated, right? Because few products that will be double-digit, few products will be stable. You haven't lost anything. So it's tough to say. That's why I keep you all asking for price erosion. And when I do see price erosion, I'm seeing double-digit. I'm not seeing single-digit price erosion. And of course, some products, we don't see price erosion. Right. But at the portfolio level, you are seeing double-digit? Yeah. We're seeing price erosion, yeah. Right. And you talked about some lumpy revenue between this quarter. So are you even quantifying the number as well for that? No, we haven't quantified the number. It just happens sometimes. Once in a while, we get a one-time or maybe some supply-based or some third-party supply. We get that once in a quarter. I think every year we get it. Once every few quarters, we get it. It's just led to this. Right. Our overall U.S. business margins would have taken a hit last year because of new facilities. How long do you think it will take for us to turn our overall U.S. business after disrupting for R&D expenses to turn profitable? So the US business has always been profitable for us if you take our R&D business out. It's just that the new facilities right now, new facilities are shared across all our markets. If you add the new facilities in, in spite of that, the generics business is still positive, still profit-making in spite of that. Right. But at a group level, is there any outlook you are looking at in particular time period we will be turning overall profitability? I think that's a major business venture for us. I mean, that becomes a necessary discussion. Sure. Sure. And last one, on the other expenses, we have again seen other expenses shooting up during this quarter. So any number to call out anything there sitting which might be enough? So you would have seen some increase. I mean, the new share is shooting up probably on a QOQ basis, but on a YOY basis, it's like a consistent increase. So some expenses are a little more cyclic than others. Sure. Thank you. That's all. Thank you. The next question is from the line of Gagan Tharija from ASK Investment Managers. Please go ahead, sir. Yeah. Good evening, sir. I think in your introductory comments, you indicated that gross borrowings have gone up from the close of fourth quarter to now. Any explanations there? Is the working capital gone up? Yeah. So a little bit of working capital has gone up. That is to prepare for new launches, which Pranav just mentioned in the U.S. We have to create enough inventory. And also, multiple plants are now in sale. So obviously, the inventory levels at each of these facilities would add up to the increase in inventory. In terms of days, sales inventory would also have gone up other than apart from being in absolute values being up? The number of days also have gone up because the sales will follow. Inventory build-up is preceding the sales happening. But I believe that by end of this financial year, by March 25, it should be back to normal again. Okay. All right. The tax rate also seems to have gone up year-over-year. What could be the full year tax rates and roughly to work with? Full year tax rate to be around 17% on a standalone basis. Depending on the subsidiary companies, profit and the taxes there. Standalone, which is the largest part of the business, that is 17%. Right. If I look at your standalone numbers, there's a very sharp jump in profits, which does not obviously not show up at a consolidated level. Any explanations there? Largely, it is the same reason that we have built up inventory in the U.S. for the new launches. And those products have now, when it gets to the market, it will be sold. I mean, as of now, it's an unrealized profit in standalone books. Okay. All right. And for India, any addition to Salesforce that you have planned this year? And what is the current Salesforce count? No, I think we have done some additions already. We have created divisions and new division in Gianek. We have done new division in Kardiac. We have done no, no. This year? No, no. We have already done. Yeah. It's done. Now, there are no major expansions planned in this year. What's the total sales force count as of today? 1,500 plus. Right. The PCPM would be how much? Sorry? The yield per man would be how much? 3.8 lakh. Right. Thank you. I'll get back in the queue if required. Thanks for taking my questions. Thank you. Thank you. The next question is from the line of Harshad Dhoot from Diamond Asia. Please go ahead, sir. Hi. Thanks a lot for the opportunity. A few questions from my side. First one is on the interest rate. We have received approval on interest. So I just want to understand on the launch timelines and the settlement terms or litigation. How to understand when we can launch this product? Yeah. Hi. So on interest rate, we have settled already with Novartis. I think we're just awaiting the outcome of some of the others, what's going on. So we're on a wait-and-watch mode. Let's see if someone launches, then we'll decide if it makes sense for us to launch based on our settlement. But we've already settled. If the other guy was not able to launch, then by when we can launch at earliest? As for the settlement, it really depends. It's tough to say. But we would wait for somebody else to launch because we can't launch right away. As for the settlement, our launch is later. But if somebody else launches, then we may get an opportunity to launch. So it's just, I think, next couple of days, a couple of hearings going on, and we'll get a better idea in a couple of weeks' time. Okay. Got it. One more thing on this. Is the settlement related to the volumes or how it is? No. It's based on IP. Okay. Okay. Got it. T he other part on the domestic business, excluding the animal health business, what kind of thoughts do you have in mind? Can we outperform the IPM market by 200, 300 basis points, excluding animal health business? Yeah. So I think overall, I think that is objective. I think we've always maintained that the India business, under normal circumstances, over, not on a quarter-to-quarter basis, but over a long-term consistent basis, we expect to outperform the IPM. And I think I've mentioned this in the past that my target is to deliver a few basis points higher than the IPM. Yes, it becomes a bit of a challenge, like it has been in Q1 and some of the quarters of the previous financial year when the RPM and the IPM, there was a big dissonance in terms of growth. I don't want to get into the multiple reasons of why the market grew slowly. But against the normalization of the market, X or any large base, unmanaged base impact, or some extreme external circumstances like climate and such, I think if the RPM is in line, growing in line, I think we expect to outperform the IPM by at least a couple of basis points consistently. Excluding animal health business, right? Yes. Excluding animal health business. Okay. And the last one on the bookkeeping question, again, on the gross margin front, by this year, anyway, we are doing 70% plus from last eight, nine years, right? And this quarter, we were around 75%. Last quarter was also 75%. So I just want the qualitative aspects on that. How should we read the gross margin in terms of mix when US becomes heavy, then it will tilt more upwards or downwards? So just a qualitative statement on that. If it's 70% plus, it's a big range, right? So just more comments on that, sir. As I said, we constantly monitor it, and we'll be happy with anything which is 70%+. It has been between 70%-74%. So for a specific quarter, it depends on our realization, that is, the top line, the cost of material, the consumption pattern, productivity of production, and so on. So I mean, I think we don't get into quarter-to-quarter discussion. Overall, 70%+ is good for us. Okay. In terms of the geographic mix, which can move the margin upwards or which can put pressure on margins, let's say if U.S. becomes heavy, which will be next quarter, then we can see some acceleration in gross margins, or it will be something like flattish? Just want to understand how gross margin is getting impacted by mix. I mean, each of these factors affect gross margins. Price erosion in U.S. will affect the gross margin. Price rise in India will affect the gross margin. Cost increase impacts the gross margin. Any of these things or all of these things can happen or may not happen. Okay. Okay. Thank you, sir. Thanks a lot. Thank you. As there are no further questions, I would now like to hand the conference over to Mr. R.K. Behati for closing comments. Thanks, sir. Thank you, everyone, for joining the call and always pleasure interacting with you. Look forward to seeing you again at our Q2 H1 conference call. Thank you all. Thank you. Ladies and gentlemen, on behalf of Alembic Pharmaceuticals Limited, we conclude this conference. Thank you for joining us, and you may now disconnect your lines.