Ladies and gentlemen, good day, and welcome to Eris Lifesciences Limited Q3 FY 2023 earnings conference call. We have with us on the call today Mr. Amit Bakshi, Chairman and Managing Director, and Mr. V. Krishnakumar, Executive Director and Chief Operating Officer. As a reminder, all participant lines will be in listen-only mode, and there is 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 zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. V. Krishnakumar, Executive Director and Chief Operating Officer. Thank you, and over to you, sir. Thank you. I'm Krishna Kumar, and I wish you all a very happy New Year. Welcome to our earnings call for the third quarter of financial year 23. We've just announced the acquisition of 9 dermatology brands from Glenmark. This deal is in line with our stated intent of building a strong dermatology franchise. We kick-started this process with the acquisition of Oaknet in May 2002. The acquisition of the Glenmark brands will help consolidate our position further, especially in the antifungal and anti-psoriasis segments. The top three brands in the Glenmark portfolio, namely Onabet, Halovate, and Sorvate, are ranked number one in their respective segments. Three other brands from the portfolio, Demelan, Dosetil, and Aceret, are ranked among the top three in their respective segments. Six out of nine brands in the portfolio occupy leadership positions. This portfolio has a revenue base of around INR 85 crores. The purchase consideration is around INR 340 crores. The deal will be financed through borrowings. We expect the transaction to achieve financial closure very soon. Post-deal, the contribution of dermatology therapy to our total revenue will increase from 7.6%-12.7%. Our market share in the dermatology covered market will increase from 2.8%-4.6%. Our dermatology market rank will improve from number 12 to number six. The performance of Oaknet continues to reinforce our ability to create value through M&A. The growth momentum continues in quarter three with revenues of INR 60 crore and an EBITDA margin of 27%. The 9-month revenue is INR 183 crores, of which INR 160 crores has accrued to Eris. The 9-month EBITDA margin of 24% represents an increase of 1,400 basis points from the pre-deal EBITDA margin of 10%. As discussed on the last call, we are driving several value creation initiatives, including realignment of divisional focus with specific product portfolios and doctor specialties, expanding the bandwidth of the senior team, digitizing the promotional effort of the entire field force to enhance productivity, and expansion of dermatologist coverage from 60% to 90% in just three months post-deal. We also continue to drive the investment cycle in the business through the launch of strategic products such as Cosvate GM Plus Plus, PhotoFirst, Dydrogesterone, and FCM Injection. Oaknet is on track to exceed an EBITDA of INR 50 crores in financial year 2023, which is one full year ahead of our expectation at the time of the deal announcement. Switching to the quarter three numbers as per AWACS. Eris delivered a growth of 14.7% in quarter three of this year versus a market growth of 11.6%. For the nine months of financial year 2023, Eris had delivered a growth of 14% versus the market growth of 8.8%. Our flagship cardiometabolic segment accounts for 54% of our revenue. Eris has registered a quarter three growth of 15% in this segment versus the market growth of 10%. In the last 6 quarters, our cardiometabolic business has grown at a 15% CAGR compared to the market growth of 7%, which is a lead of 800 basis points. I'm happy to share with you that within the anti-diabetes segment, the new generation brands in our portfolio, namely the DPP-4 and SGLT2 segments, have registered a CAGR of nearly 50% over the last three years. These therapies will shape the evolution of diabetes treatment in India over the next 10-15 years. We have successfully leveraged our patient care platform and specialist engagement to build a significant early mover advantage in this segment. In December 2022, these therapies accounted for 41% of our oral anti-diabetes revenue. This is nearly double of the 21% contribution we had in December 2019. This growth has been spearheaded firstly by Zomelis, our largest mother brand in this segment, which has crossed a MAT revenue of INR 92 crores and maintains its number one rank among the generics. We've just crossed the third anniversary of the acquisition of Zomelis brand, and this brand has scaled up 9-fold during this period. Gluxit, which is another important brand in this segment, has crossed a MAT revenue of INR 51 crores, and it maintains its number two rank among the generics. Our combination products, Zomelis V and Gluxit S, launched earlier this year, have taken off successfully with leadership positions in their respective segments. Secondly, our three emerging therapies, dermatology, CNS, and women's health, which collectively account for 21% of our total revenue, have achieved critical mass with combined annual revenue of INR 436 crores as per AWACS. This portfolio has registered a growth of 15.7% in Q3 of this year versus a market growth of 12.2%. Over the last 6 quarters, this portfolio has registered a CAGR of 19.4% versus a market growth of 9.9%. This represents a lead of almost 1,000 basis points. Post the Glenmark brands acquisition, the emerging therapies will have a combined revenue base of INR 560 crores and will account for 25% of our revenue. We expect that Eris will continue growing ahead of the market by a significant margin on account of several growth drivers, including new launches in dermatology and cosmetology, strategic launches and consolidation in women's health, expansion of specialist coverage across the board, and current and potential inorganic opportunities. The VMN market, which accounts for 17% of our revenue, seems to have bounced back since quarter 2 with an average growth of 12.6% in the last 2 quarters after a prolonged period of extreme volatility following the first wave of the COVID pandemic in quarter 1 of last financial year. Eris's VMN portfolio has grown at 19.2% in quarter 3 versus a market growth of 12.6%. We hope that the VMN market will gradually stabilize and return to a secular growth mode. The key new products launched in quarter 3 include XGLAR, which is our glargine offering, and Gluxit Trio, which is a combination of sitagliptin, dapagliflozin, and metformin. In the derma space, we have launched Cosvate GM++ and PhotoFirst, an in-licensed brand for the treatment of vitiligo. Coming to the financials. Our standalone operating revenue stood at INR 332 crores for the quarter, which represents a growth of 9% year-on-year. The standalone operating revenue for the 9-month period of this financial year grew by 9% to INR 1,016 crores. Our standalone gross margin in quarter 3 stood at 82.5% versus 82.8% during quarter 3 of last year. Our 9-month gross margin for FY 2023 stands at 81.5% versus 84% during the 9-month period of last year. This is a difference of 260 basis points, which is largely due to the impact of new product launches in this financial year. In line with past experience, we expect that the margin profile of new products will improve as the products scale up. With the addition of 200 MRs at the start of the year, our employee expenses for quarter three have grown by 12.7% year-on-year, and for the nine-month period by 14.3%. Our standalone YPM in quarter three was INR 5 lakhs. Standalone EBITDA for the quarter stood at INR 126 crores. Our standalone EBITDA for the nine months of this financial year stood at INR 394 crores, which represents an EBITDA margin of 38.7%. Standalone net profit for the quarter stood at INR 99.4 crores. Standalone net profit for the nine-month period stood at INR 310 crores, which represents a margin of 30.5%. This includes Oaknet-related impact on treasury income and finance cost. Our consolidated operating revenue for the quarter was INR 423 crores, which represents a growth of 27.4% on the back of a 28% growth delivered in last quarter. The consolidated operating revenue for the nine months ended December 2022 grew by 23.2% to INR 1,282 crores. Consolidated EBITDA for the quarter stood at INR 137 crores, which represents a growth of 12.7%. Consolidated EBITDA for the nine-month period stood at INR 418 crores, which represents an EBITDA margin of 32.6%. This EBITDA margin profile of 32.6% for the nine-month period is in line with our expectations, given that FY 2023 is a year of unprecedented investments, including the launch of our insulin business, amalgamation of the Oaknet acquisition, launch of significant new products across therapies, and commissioning of a new manufacturing facility in Gujarat. We expect our consolidated EBITDA margin to improve from next financial year onwards. Consolidated PAT for the quarter stood at INR 100 crores. Consolidated profit after tax for nine months stood at INR 313 crores, which represents a margin of 24.4%. This is inclusive of all Oaknet related impact on depreciation, treasury income and finance cost. We are presently running trial batches at our Gujarat facility, and we expect to commence full-fledged commercial operations by March 2023. We expect to deliver a consolidated revenue growth of 25%-26% and a consolidated EBITDA growth of 14%-15% in this financial year. These were the highlights for the quarter. We are now happy to open up for questions. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have our first question from the line of Kunal Dhamesha from Macquarie. Please go ahead. Hi. Thank you for taking my question. The first one, the revenue growth guidance. I think we were sticking to 30% till quarter 2 and, you know, with quarter 3 results, we have kind of, you know, lowered our expectation, while the Oaknet is doing better than expected. What are the some of the, you know, pain points in our overall underlying base business, which is not performing in line with our earlier expectations? Look, as we said, there has been a hit of around 250-300 basis points on the gross margin. That always happens when the products, you know, when we have lot of new launches and which over a period of time gets corrected. Second has been 200 people addition in the overall things. From a revenue point of view, you know, there are only two moving parts. One is we missed on Zayo this year, which was around INR 30 crores last year because of, you know, reasons which are known. Last year we had a INR 30 crore sale of Zagon, which was, you know, launched during the second wave of Covid, and we did INR 30 crores in the last year, which we then discontinued. We had a double whammy there. One, not selling that INR 30 crore this year and also getting a lot of stock back. We haven't spoken about this earlier, since you made a point, I just thought I'll tell you, if you remove these two parts, I think, you know, things look far better. Can you just give me what could be the, you know, stock return impact, till now for us? You know, it's in the range of INR 18-20 crores. INR 18 crores-INR 20 crores. Okay. For entire nine months. First nine months. Yeah. Correct. Okay. Also, this is the return. Last year, you see INR 30 crores have been the sales. There have been no sales, and then there had been a return on top of that. The third, but not letting. Let me just complete one thing. It just came to my mind. Look, a lot of growth was dependent on the new product this year. Couple of new products got delayed by 2-3 months than what we expected because of the DCGI permission, which was, which could have always happened. We are still in the midst of a lot of launches in the quarter, in quarter 4 also, which we thought would be over by quarter 3. There is some kind of a, you know, a number which is coming from there. these 2 things are the major tangible, you know, numbers. Sure. Thank you. Basically we sold INR 30 crore, it didn't sell in the end market, that is what is coming back to us, right? Is the way to understand. What happened here, when we were selling, now we actually reached INR 10 crore, during the second wave, right? Mm-hmm. We thought that, you know, even if it wanes down, we will be able to do INR 4, 5 crores. The positioning of the brand was so hard for, you know, Covid that, you know, it didn't fly when Covid went. Okay. We made our inventories thinking that at least INR 5 crores of the sale would retain. You know, we were caught a little bit on surprise because of the positioning being so hard on that. That point of time, you know, Zagon just, you know, it just went through the roof. Our prescription in prescription data, it was unprecedented for a new product to have those many prescription. That was a big letdown. Then looking at what is happening in the market, we thought it is wise to take this hit because, you know, it was going all over the place and we didn't wanted the core business to get little hampered by this. We took a call on this that once the positioning got so stuck to Covid and second, we were finding it little wobbly for the rest of the year. We said, "Okay, let's take this call and, you know, get it back, get it off our shoulders. Okay. Secondly, can you provide any update on our Insulink franchise? What is the revenue for this quarter and EBITDA burn for this quarter or overall nine months? Six crores is the number for this quarter, which is a fair improvement from the last quarter. This is how it is. We might end up this year by doing INR 21-23 crores of sale in the Insulink franchise, and we will burn INR 20-22 crores in this year. Yeah. Kunal, the EBITDA burn in this quarter has come down to INR 4 crores, minus INR 4 crores that is. From six to four. INR 6 crores of top line and -INR 4 crores of EBITDA. Okay. Basically, your revenue has gone up, right? The revenue has gone up, EBITDA burn has gone down. That is the trajectory that, you know, one had envisaged for the business. Yeah. Kunal, what happens is because it is lining a different, you know, sub. That is why probably we take, we'll take it as a new product or a new thing. Otherwise, you know, we feel internally that's the part of the organic growth because, you know, it was started ground up. It's not very important, but just thought to tell you. Insulin is moving well. We did INR 6 crores. We expect between INR 7 crores-INR 8 crores in the last quarter and going in the next year. We think this will be around INR 50 crores of, you know, franchise. Okay. Perfect. Yeah, I'll join back with you. Thank you. Thank you. Thank you. A reminder to participants to press star and one to ask a question. We have a question from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead. Yeah, thanks for the opportunity. Just on this, brand acquisitions. To start with at least, what would be the growth at which these brands have grown, you know, in the past, the ones which are acquired by, from Glenmark? Tushar, there has been no growth in the past. In fact, there has been some kind of degrowth because these were brands, you know, that were seen as non-core by them. That is the reason, you know, you have that trajectory, but you don't have that kind of trajectory here. Okay. Look, these are brands which in our view are substantially big brands. We are sorry we uploaded the presentation very late because we were just stitching it up in the last moment. Once you go through the presentation, you would find that six out of 10 or nine brands which we are acquiring are in the top three, four of that category. These are very solid brands which have been, you know, solidly built, I would say. The largest is Onabet, which is INR 30 crores, then we have a Halovate, which is INR 22 crores. You will have to give us some time. I just told you, we just stitched it together. you know, we are hopeful that, you know, the way the energies which we see in Oaknet, plus on the side, I must tell you that during the last prescription audit, July-October, Oaknet had a 60% growth in prescription from dermatologists alone, which for Oaknet point of view was unprecedented. we think this energy is going to, you know, take this ahead. to give you some kind of an idea, you have to give us some time to sit on the brands and, you know, do that work. maybe next call we will be able to give you a better picture, but the brand seems to be very interesting as of now. Got it, sir. At least this category at an industry level, what would be the growth to consider? Maybe Onabet as a category, HelloVit as a category, if at all, at an industry level, if not at a company level. Tushar, look, this is, you know, we are strengthening our medical dermatology. You remember when Oaknet happened, we told you that we are very fond of medical dermatology because 70% of the patients do go to a dermatologist for medical dermatology, right? While cosmetology seems to be a lot, you know, contemporary and a lot of fun. The reality is that, you know, these two fungal infections, mixed infection and psoriasis remain the major medical problems in dermatology. If you look at these things, we are now in top five in both the fungal infection as well as the steroidal infections, the psoriasis market maybe. These markets have traditionally grown by 9%-10% all along. You know, as usual, yeah, when you buy something new, you want that you should overgrow that. Got it. Finance through borrowing out of INR 340 crores? We picked up the entire, you know, number based on borrowings, Tushar. The entire INR 340 crores is being funded through debt at this point. This is without GST, okay? Yeah. Yeah. This would be at what rate, cost of debt? This is at around 8%. Okay. If you could, while, I don't know if it is too early to ask, but what kind of, you know, profitability or margins one should think about this business in a year or two? Tushar, I think we need to come back to you, as far as a year or 2 perspective is concerned. What I can tell you is that, you know, every time we talk about M&A, we say that when we look at a portfolio, the gross margins, you know, are very important to us. We never look at anything which is less than 70%-75% gross margin. This acquisition is also in line with that philosophy. Yeah. The gross margin we can tell you actually, the gross margins are upward of 78%. Understood. Just one last one. Here the manufacturing aspect and all are, it's, it would be all outsourced, right? That should not be a issue like it has been in case of, let's say, insulin. At least that much we have checked, Tushar. We have done that work. There's no problem there. We have more enough stocks also to keep us going for a, you know, for a reasonable amount of time. We have checked with everything. That is not going to be a problem. Okay. Just one last clarification on a standalone basis is 9% year-on-year growth. Is it all to do with the Zyd and Zayo? If you could throw some light on how Glimisave has performed. Glimisave, I'll have to look at that individually. Kruti Kruti will just help me with the data. Two important points, Tushar. You know, I don't know whether, you know, presentation or not, you've seen the presentation, but one point which K.K. made that the, you know, the DPP-4, which we were just 21% of that market, when the market itself was, you know, touching 35, yeah, 40-43%. We have come a long way. If you look at our major brands, you know, we have come a long way. There has been these two disruptions which I spoke to you, spoke to you about. Beyond that, I don't find a problem. If you go through the market data, through and through the market data, you know, looks good. Now, you know, we are just looking at the possibilities. If we get Zayo back, which might happen, if that happens, you know, there could be some good gains coming from the cardiovascular side also. That's the motto of thing. I can't think of anything which is very important otherwise. Glimisave, I think Kruti will come back to you. Sure. Pardon? Mother brand level Glimisave is 15% growth for the quarter. Mother brand level, 15% growth. Sure. Makes sense. Thanks. Thanks a lot. Thank you. Ladies and gentlemen, to ask a question, please press star and one on your phone now. We have our next question. Give me a moment, please. We have our next question from the line of Tarun Shetty. Please go ahead. Hi, sir. Thank you for the opportunity. I believe the sacubitril/valsartan Sorry to interrupt. Can you use your headphones, please? Can you hear me now? Yes, please go ahead. Yeah, sorry for that. I believe the sacubitril/valsartan category has largely genericized, and many players have started launching. Will you be launching the same in the near term? Man, you need to give us some time. There's a little bit of a tangle, you know? We have a little bit of a tangle there. You know, we just need some time. If everything goes well, of course, we would be launching. We do have, I mean, I'm confident to tell you that we do have a history of the brand doing very well. In fact, if you want to get a little bit of detail, post our launch, almost 70% of the patients which were added to this therapy were added on our brand. Which, you know, which is a good thing. Our brand presence have been quite good, across, through and through. Once, if we are able to launch it sooner, then I think we should be able to get, you know, much of it back and then, you know, plan the other, the other of the task. You're right, it is genericized. We will see that. Man, look, we are used to all this now. Tell me one product that doesn't falls like this, you know? We are used to 50 people launching in the first week and then, you know, climbing our way through. Our track record in diabetes and cardiovascular has been, you know, something which, you could be confident about. Other than that, you know, time will tell. Okay. We'll be following the same trajectory where we'll be partnering the initial launch and then we'll bring it to our own plant. Yeah. That's most of the time that's the case. Okay. Next on the MR side, with the new acquisition, are we looking to add more MRs or we'll be around the 3,000 level? It's a little early. From an Eris point of view, we are well, you know, we are well done, so we don't think Addis would be adding in the next year. You know, incrementally here and there will always happen, but nothing strategic. From an Oaknet point of view, you know, we have to take a hard look. Prima facie, it looks that, you know, we may need to add people, and which will happen in the next financial year whenever it happens. Just could you help me with the current MR count? Exact would be around 3,000. What's the number? INR 2,225 in the standalone. INR 7? You're talking about the consolidated number? Yeah. Yeah. consolidated will be in the vicinity of INR 3,000. Okay. Standalone is INR 2,200. That is right. Okay. Lastly, just on the tax rate, could you help me with for any projections in current year and next two years? Current year next year will remain at similar levels, right? Effective tax rate will be at 9%-10%. For financial year 2025, we've already, you know, shared our guidance that because Guwahati is coming out of the whole arrangement and our Gujarat plant will be producing from March, it will not be substantially scaled up. Financial year 2025, we see a blended tax rate of around 27%-28%. That is a book tax rate. We will still be paying cash tax at MAT. What will happen is we will start using the MAT credit because by the end of financial year 2024, we would have accumulated around INR 340-350 crores of MAT credit. This will start getting utilized from FY 2025 onwards. We believe that the cash tax rate from FY 2025 onwards will continue to be 17% for at least a period of five years. FY 2025 to FY 2030, you will have a cash tax rate of 17%. The book tax will decline from 27% to around 17%-18% during that period. The long term, you know, stable tax rate, as I see it, will be around 17%-18% once this transition is accomplished. Okay. That's it from my side. Thank you. Thank you. Thank you. Thank you. We have our next question from the line of Prakash Agarwal from Axis Capital. Please go ahead. Hi. Good evening. Thank you for the opportunity. Just trying to understand, you know, since we got into insulin and Oaknet, our EBITDA growth is lower than the top line growth and PAT obviously much lower. First question is on the EBITDA growth. Since we are seeing the 3-4 quarters consolidating and with this Denmark asset coming in, is it fair to think that EBITDA growth should start showing better growth versus top line or it should be in line going forward with the top line growth? Yeah. Prakash, I think we've been very transparent on this one. This year, the 32%-33% EBITDA is what we have guided to, and that is where we are ending up. As far as EBITDA margin is concerned, I think it's fair to say that it's kind of bottomed out. Right? Next year onwards we will see EBITDA margins improving, and that automatically implies that EBITDA growth will be better than top line growth. Yes. Can you repeat the last part again, last part? What I said was that at 32.5 to kind of%, EBITDA margins this year have bottomed out. Starting next year we expect to see the EBITDA margins improve, which means that EBITDA growth will be faster than top line growth. Correct. What would be the levers for this EBITDA margin expansion going to, starting fiscal 2024? Sorry, are you asking me what would be the drivers? Yes, sir. Okay. First, an important driver is the insulin EBITDA, which is around minus INR 20 crores this year is what we expect. We expect to get to breakeven next year, right? That is one important driver. The second important driver is Oaknet EBITDA margin has been consistently climbing over the course of the year, as you see. Next year, you know, we are looking at a full year EBITDA margin of Oaknet, which will be very similar to what you see in quarter three or quarter four. That is the second driver. Third important driver is, you know, obviously the acquisitions that we are talking about on this call that has come at a very good gross margin, and we'll have to see how much field force we add there. That math is still pending. We'll have to come back to you on that. Nonetheless, we believe that, you know, it will be EBITDA margin accretive. Last but not the least in the main business, as Amit mentioned, you know, there are A, you know, once this year passes by, the whole Zagon effect goes away. Second is, fingers crossed, but there is a reasonable probability that, you know, we might start seeing something from Zayo. Third is the new products that are launched this year in Eris Lifesciences. They will scale up, they will add to the top line. Once they scale up, we will bring the products in-house, they will add to the bottom line. These are the, you know, most obvious things on the plate that will drive margin growth next year. Correct. Yeah, no, thanks for the elaborate answer. Just on the last part. Eris key launches as of now, Zayo, relaunch, what are these? Sorry, Prakash, can you come again, please? Which are the key brands launched this year, which can be, you know, potentially winners for the next couple of years? Prakash, look, in the 1st year of launch, you know, two parts. One is that the therapy gets adopted slowly and then it increases the rate. 2nd is you don't get full year for all the launches. Sometimes it's six months, eight months, four months, right? Top of the mind numbers, which I could say like, you know, we've launched Zomelis V, which this year would be like INR 70-80 crores. You know, it's like it has built up over. It started with INR 20 lakhs a month, and I think the last I saw was INR 1.9 crores. Going forward, all these multiplication will come. I've seen Gluxit Trio in the same fashion, launch in September. You know, again, launched at INR 20 lakh a month, now showing INR 1 crore-INR 1.2 crores in the chart. When you go to the next year, the consolidation happens both from adding up monthly sales and also by a full year effect. These two things are going to add up. Okay. Okay. Lastly, do we still see some portfolio or therapy gaps, or we are largely done to consolidate for the next 12 months? In which, in what sense you are asking, Prakash? I didn't get you. Which therapy are you referring to, Prakash? Yeah, yeah. I mean, I meant across therapies, are we like more or less done, from the base business side in terms of acquisitions or we see more gaps and, more opportunities across, therapies to acquire? Prakash, you know, we've always maintained that, you know, you might hear more from us. That's, and that will be, you know, something which you will see in a sustainable way over the next years. We maintain that though we have, you know, in this year we have done Oaknet and we have done this deal now. Are we over? The answer is no. Okay, perfect. Very helpful. Thank you so much. Thank you. We have our next question from the line of Kunal Dhamesha from Macquarie Group. Please go ahead. Hi. Thanks for the follow-up. so on the sacubitril/valsartan combo, is it, is the matter subjudice or something, from that court, et cetera, is pending? Tushar, lesser you ask, better it is for us. Kunal, I'm sorry. lesser you ask, better it is for us because, you know, it is still, it's little which we can share with you. I think by the time we meet up again on a call next time, we'll be able to give you complete color on this. Okay, perfect. You know, in response to the last participant's question, we said that we are looking at Oaknet EBITDA margin, which is currently quarter-to-quarter see margin of Oaknet or our overall margin, you know, we can achieve in Oaknet as well. I was talking about the Oaknet EBITDA margin for next year, and what I said is you've seen a quarter-on-quarter progression in terms of how Oaknet margin has progressed. Mm-hmm. There was a question on what would be the drivers of EBITDA expansion next year. Yeah. I listed that out as one of the drivers, because Oaknet EBITDA margin for the next full year will be closer to what you see in quarter three, quarter four for Oaknet. Okay. What is the quarter three margin for Oaknet? I think I missed that when we initially announced the numbers. The quarter three margin for Oaknet has been 27%. 27%. Okay. Perfect. Okay. Perfect. Perfect. You know, I think, from the Gujarat plant perspective, I think, last quarter we said the CapEx, we were planning to do INR 180 crore, out of which we had done INR 150 crore. Is that complete now? The CapEx cycle is by and large done. We have started taking trial batches as I mentioned. As we near to commercialization, there will be, you know, some more CapEx that will be expended. By and large, the CapEx cycle is complete there. I don't think you will see us investing in fixed assets for a long time. Oh, okay. Perfect. You know, the last question on the new acquisition, so what kind of, you know, MR sense the acquisition comes with? This is a pure brands acquisition, so there is no field force that we are taking from Glenmark, and there is no, there is no manufacturing facility or anything of that sort involved. This is the kind of deal that we like to do, which comes with pure brands, which, you know, have a good foundation and which we can take to the next level. As Amit mentioned, you know, Oaknet, which is our vehicle for dermatology, will carry these brands. What kind of field force addition we require in Oaknet for this and when do we require to do that, we'll have some color on that, you know, when we've been able to spend two or three months with these brands, right? By the time we come back to you, again, we should be able to give you some color on this. Okay. What, what's the inventory that we have got, in the INR 340 crore that we are seeing? Yeah, give us some more time, no. Though I have the answer, but it is little tentative, so I don't want to, you know, have egg on the face. Just give us some time, no. I think Kruti can offline tell you in a couple of days' time. Okay, perfect. On the new brand you said EBITDA accretive, so by, would you be comfortable saying or telling the time whether it will be year one, year two? No, in the first year itself. Next year. Okay. Okay. EBITDA margin accretive or EBITDA accretive? EPS accretive. No, it is EBITDA accretive, right? Otherwise, you know, why would we go and buy the brands? Because these are brands which have come at high GCs. Amit gave you a number of 78% plus. We are not, we have not taken field force and there is no manufacturing, right? It is obviously EBITDA accretive, and it will also be EBITDA margin accretive. Okay. EBITDA margin accretive means it would be higher EBITDA margin than our current margin, right? Our starting point is a consolidated EBITDA margin of 32.6% for this year, right? It is going to contribute in our journey for increasing that margin. Perfect. Perfect. Thank you. Thank you so much. Thank you. Ladies and gentlemen, to ask a question, please press star and one on your phone. We have a question from the line of Niharika from Equitas Investment. Please go ahead. Hello. Yeah, hi. My question is regarding Gujarat plant. What kind of products are you planning to manufacture in the plant, and what kind of top line are we looking for this maximum revenue potential? Okay, I'll take your first question. This plant can do oral solids and sterile injectables. The product portfolio for us is predominantly oral solids, as you know. We have some sterile in the portfolio, which were being manufactured by third party, which will come into this plant now. You know, the oral solids business that we are used to, that we will continue manufacturing this plant also. As far as maximum turnover potential is concerned, see, the fixed asset turnover in this business is very high. For example, our Guwahati facility, the gross block is around INR 75 crores, and currently we are doing revenue of around INR 800 crores from this site, right? That is almost like more than 10x. That is something that we should definitely be able to do, if not more. That's why I mentioned that, you know, this plant will hold us in good state for a long time to come. It should also be adding to your margins because, you said that currently you are getting it manufactured from the third party. If you're manufacturing it in-house, it should also add some hundred or some bits to your EBITDA margin. It will, but you will not be able to see it in the near term because, you know, every new facility will have a concept of, you know, capacity utilization building up. Till the capacity utilization of the Gujarat plant builds up to a level where it can, you know, start producing that kind of EBITDA margin, you will be in the transition period. On a dollar to dollar basis, what we found is it is we are always more efficient in manufacturing in-house than sourcing from third party. That effect will come in on day one. Okay. My second question would be, what is the status of liraglutide and glargine as of now? Like, I think, last update was it was in some large phase of trial or something, liraglutide. Some color around this. Yeah. That was a good question. We've got the last patient in for glargine. Last patient in means three more months of data, then putting up things together and then filing. We still maintain that July-September kind of a period. Liraglutide, I don't have a, you know, as good a handle on that. You know, I don't know the last patient count in. You know, as of now, what we are given to understand that both of them will be hitting in three months' time, in a difference of three months. If this is July, then that is October. If I understand it correctly, so in another three months you would have all the data and all the tools in place, and probably next financial year we can see the numbers coming in or? Yeah. Yeah. I'll explain it to you. You know, once the last patient is in, it basically takes three months of clinical data, one month of putting the reports together. The application piece, you know, one, is it's difficult to comment, but, you know, generally a couple of months here and there approval process. Putting all that together, we are looking good by for July and August. Okay. Okay. Understood. Lira, a couple of months behind that. You know, I just add couple of months. That's the idea. Okay. I think recently this glargine came into NPPA, would it affect our margins which we kind of numbered in our books earlier? Not really. Not really. Okay. My last question would be, what is current YTM of your MRs? Because, I think it was three point something. It's INR 5 lakh, it's 5 lakh rupees. Even the new, even with the new MR addition? Yeah, yeah. This is post MR addition. This has basically been the case for quarter two as well as quarter three, INR 5 lakhs. Okay. Also for this glargine, you said that there was some INR 20 crores of sales returns. Have we written it off in our books, or are we carrying it as an inventory? No, no. We have to write it off, no? We have to take the hit in terms of sales reversal, which is the reason why, you know, you see that 9% standalone growth. This is one of the contributing factors. Okay. Okay. That was it from my side. Thank you. Thank you. Thank you. We have our next question from the line of Gagan Thareja from ASK Investment Managers. Please go ahead. Yeah, good evening. Thanks for taking my question. first one is around You're not audible. Can you use your handset, please? Yeah. Is it any better? It is not very clear. Can you hear me now? Now please. Yeah, this is fine. Please go ahead. Hello? Yeah. Am I audible? Go ahead with your question. Yeah. The first question is on the CapEx for the new plant. Can you give us some idea of what the CapEx plus depreciation for the new plant would be in the ballpark? See, the depreciation would be of the tune of INR 9-10 crores per annum. Yeah. On the operating cost, estimated, let me come back to you offline. Any ballpark? I mean, a very rough number would also, you know, suffice just to sort of, you know, get a handle of? See our OpEx at Guwahati is around INR 20-22 crores per annum. You know, I don't expect it to be fundamentally different. As I said, this is an order of magnitude number. Don't hold me to it. We'll come back and clarify this to you offline. Right. I mean, again, you indicated that Guwahati, you have a fixed asset turn of 10. You know, I mean, this is a fairly high number when I compare to a whole host of your peers. I understand, you know. No, it is not. Mm-hmm. The fixed asset turnover is always very high. If you compare apples to apples, which is a pure domestic formulation plant, what happens is the asset turnover in a plant that operates to API, USFDA standards, whether it is API or dosage form, there the fixed asset turnover will struggle to exceed 3-4. When you say you're comparing to our peers, you have to take a plant which does only domestic formulation, and then you will see that the difference does not exist. Okay. Okay. Thanks for that one. On the debt, how should we think of, you know, debt on the books of the company over the next 3-5 years? After funding the Glenmark acquisition, I think at the end of this financial year, we will be at a net debt to EBITDA ratio of around 0.8-0.9. Right. This is something that... Our strategy has been in the case of acquisitions that, you know, we see a good opportunity, we will fund it through debt. You know, since our business is cash generating because the structure of the business doesn't change, it's still going to be an 80% GC plus business. We will continue paying down the debt based on the monthly cash flows. That strategy doesn't change. This is the first time I think, you know, we have hit a situation where we are close to one time debt to EBITDA. What will it be in the future? If there are no further acquisitions, then we'll pay this down over the course of the next financial year, right? We will go to zero debt. What other things might happen on the inorganic side, that is impossible for me to predict. I think overall from a debt to EBITDA perspective, we don't think we'll go beyond the, you know, 1.5x-2x mark in any, in any circumstances. I mean, as of today, if there are no further acquisitions, you believe that the debt can be paid down, in full in the next 12 months? Is that correct? Yeah. At the end of March, we will have around INR 500 crores of debt. It'll be lower than that, but I'm giving you an upper number. If I have no acquisitions in FY 2024, we can pay that down fully. Okay. Right. A final question on glargine. I mean, the prices of glargine will also, I mean, they probably already have come down. I don't know what's the final notified price, but, I think this year, glargine came under price control and further prices would have reduced. In such circumstances, with the price of Lantus, coming down, how do you know, foresee the market developing out? On the price front, look, if I'm right, the major hit, because, you know, it is 70% market share is with Lantus. We anyway were planning to sell at a lower price, which happens to be lower than the price which had come in. That would be a strategy going forward also to sell it, you know, 20%-30% less than the brand leader. If I look at the current numbers, I feel that, you know, it is the Indian companies which are doing better. If you look at the growth in the last quarter, we see that the, you know, the parent, the innovator brand is slowly getting to very low digit of growth, and it is the Indian brands which are picking up. You know, there's a lot of history to it. We have seen that, you know, most of the time when Indian companies come up with generics, they tend to take the market share over a period of time. I don't think there would be something very different this time. Okay. All right. Given the fact that, you know, you plan to price it, whatever, 20%-30% below the innovator, the innovator themselves would now have to comply with a lower price. To that extent, your pricing would also have to move down by the additional amount by which the innovator will come down because of the DPCO. Would that impact the economics for you, from what you would have originally planned or not? No, Gagan. Why? Because we know that to dent this market and generally, once you come out with a generic product, there is a fair expectation to get the prices down. That was anyway a part of plan. Even if this wouldn't have happened, we would, once, you know, once we get the complete hand on everything, the strategy is to sell at a lower price. I think that will, that is what is going to happen with most of the companies. A final question is on, you know, the genericization of the SGLT2 and DPP-4s. Would they also in any manner impact the usage of insulin? Would they delay the usage of insulin because now you have affordable and effective newer generation diabetes control oral solid products available? Gagan, look, I can tell you the global data where all of these products have been available and even the newer products have been available, which have still not hit the Indian market. We always find that between 10%-15% of people do need insulin, and that doesn't change, hasn't changed over a long period of time. What happens is actually somebody who could have got insulin on 40 might get it 45. You know? There might be a delay. Patient who require insulin are the patient who would be requiring insulin. The global data doesn't suggest that the insulin sales have gone down. That's the, you know, sum of all. You concur with the fact that the onset of the usage of insulin, for any given patient might inevitably be delayed because of, you know, better oral solid products available, and therefore, to that extent, the market growth of insulins might be cannibalized or taken up by the oral solids from these two product lines. Gagan, look, couple of things play together. What happens, there are some indications which are cleanly for insulin only. Like for example, it's type one bachas, it is the GDM, the gestational diabetes mellitus, it is the patient who comes. You know, it's a play of these three, four things. While what you are saying is right, that there has been a delay in insulin, which has been, you know, it has happened since the pioglitazone was introduced. It's not something which is new. But at the same point of time, there's a higher incidence of GDM, there's higher incidence of infections wherein for short-term you need insulin. You know, a lot of things play together. When you do a sum total of all these factors, what comes, you know, out is that insulin usage has always been around 8% - 10% of diabetics, and that remains. Okay. On dapagliflozin, I think AstraZeneca has received approval for indication expansion to heart failure for dapagliflozin. From whatever I am able to understand after reading NIH data from NIH data from US, the outcomes of Dapa for heart failure are actually better than sacubitril. If that is the case, especially given that there's a large cohort of diabetics who have heart failure as a comorbid condition, do you see the uptick of dapagliflozin actually improving substantially and it actually taking over some market from sacubitril/valsartan? Look, heart failure is a failing ailment. It's a failing heart, there is no treatment to reverse it. It is just to prevent it where it is. It will always be more the merrier. Since you are talking hardcore science, let me tell you, the new heart failure guidelines are now talking about initiation of five drugs together, and these two are just two of them. There is a beta blocker, there's an ARB, there is a spironolactone. Because the ailment is such where the heart is failing, more is merrier. There's nothing like a replacement. Dapa has been showing very good results. Dapa HF has now come in. It's been some time. Even sacubitril/valsartan has actually, you know, the major change has happened there. Now they were only talking about ejection fraction, which was less than 30. They're saying even preserved ejection fraction should be given, you know, sacubitril/valsartan. All put together, this is one, you know, segment which in India will grow very fast. Dapa and sacubitril/valsartan with beta blockers, spironolactone and the sartan all of them will remain integral. That's what the guideline says. Yeah, I understand. I said I'm looking for. Come back in the queue, sir. Okay. Okay. Thank you. I'll get back to this. Thank you. We have our next question from the line of Harshal Patil from Mirae Asset Capital Markets. Please go ahead. Yeah. Thanks for the opportunity, sir. Just have one question or a clarification required. Sometime back you said that we've got some product launches delayed in FY 2023 because of some regulatory permissions, so they would be pushed on ahead. From that perspective, I just wanted to have your qualitative comments on the new launch momentum going into 2024, 2025. You know, any qualitative comments from your end would be helpful. Yeah. if I get you right, you are asking that, you know, I commented on delays in the new launches because of regulatory issues. Yes. You want some qualitative answer on that. What is the pipeline looking for the next two years? Am I right? Correct, sir. These delays, you know, they do happen in business, so there's nothing much to dwell into that. The only difference that it makes is it hurts the budgeting, which you do at the start of the year and, you know, you are aware of the, of some movements. One thing important, which we didn't speak, you know, during the call, and I'm thankful for you to raise for raising this up. From the last three months, we have started putting applications from our own R&D. Since now we have put three application. One is sitagliptin, which has got approved. We have done the BE/CT and the phase III will start. The 2nd is metoclopramide dapagliflozin, and the 3rd is dapagliflozin with metoprolol. You know it's good to tell you that all three had been approved in the first SEC meeting itself. In two the BE/CT has already been done. The 3rd one, the BE/CT will now happen. We just got the permission a couple of weeks back. That's it. We have around eight such applications to be moved in this year. Okay. Right? This is over and above what, you know, generally is coming in the market. Look, let's do the probability number. You know, when one, two, three, four drugs come out of patent, it is like four into three into two into one. That's how it multiplies. Then add up the SKUs. It just goes to a different level. When Dapa came out, you know, Indian companies didn't make Dapa one. They just, you know, we all combined it with all kind of products, you know, which are all ethical and which are for the good of the patient. This newer SKUs and the newer combination will keep on hitting us. Right now, even 2024 looks very, very busy on the new product side. On top of it, we are hopeful that, you know, most of our eight application which we are planning to move will get success. Finger crossed, I just told you how is the record been for the last three products. These things put together, you know, another gliptin is getting out in August. There's something important getting out in September. All put together, the plate is quite full. Going forward, you would see the new product growth being very, very significant for the market itself and for some good reasons, it is diabetes which is seeing the maximum numbers of launches compared to any other therapy. Followed by cardiovascular, just because of the fact that Dapa has been approved in heart failure and sacubitril/valsartan is coming out. These two things just make it, you know, too many combinations. Right. Right. Yeah. Thanks a lot, sir. That answers the question. Thanks a lot. Thank you. I would now like to hand the conference over to Mr. V. Krishnakumar for closing comments. Over to you, sir. Thank you for your participation in the call. To summarize, we've announced the acquisition of nine dermatology brands with an annual revenue base of around INR 85 crores from Glenmark for a consideration of INR 340 crores. This acquisition will give us a deeper presence in medical dermatology and leapfrog our derma covered market rank from number 12 to number six. The performance of the Oaknet business continues to reinforce our ability to create value through M&A. The business is on track to exceed an EBITDA of INR 50 crores this financial year, which is one full year ahead of our expectation when we went into the deal. We have clear visibility on secular growth in the cardiometabolic segment and our 3 emerging therapies over the next 3 years. We will continue pursuing growth opportunities in these segments through multiple levers, including new products, expansion of doctor coverage, and inorganic expansion. Eris delivered a Q3 consolidated revenue of INR 423 crores with an EBITDA of INR 137 crores and a profit after tax of INR 100 crores. For the nine months ended December 2022, Eris delivered a consolidated revenue of INR 1,282 crores with an EBITDA of INR 418 crores and a profit after tax of INR 313 crores. For the financial year FY 2023, we expect to deliver a consolidated revenue growth of 25%-26% and a consolidated EBITDA growth of 14%-15%. Thank you all, and have a good evening. Thank you. On behalf of Eris Lifesciences Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.