Ladies and gentlemen, good day, welcome to the Indoco Remedies Limited Q1 FY 2024 result conference call hosted by JM Financial. As a reminder, all participant lines will be in the listen-only mode, there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on a touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Miss Cyndrella Carvalho from JM Financial. Thank you, over to you, ma'am. Thanks, Vishnu. Good afternoon, everyone. I'm Cyndrella Carvalho. On behalf of JM Financial, I welcome you all on the Q1 of fiscal earnings call of Indoco Remedies. At the outset, I thank the management of Indoco Remedies for giving us this opportunity to host today. I'm looking forward to an insightful interaction on the earnings of the management. Today, from the management team, we have with us Aditi Kare Panandikar, Managing Director; Mr. Sundeep Bambolkar, Joint Managing Director; and Pramod Ghorpade, Chief Financial Officer. I'll now hand over the call to the management for their opening remarks. Thank you. Thank you, Cyndrella. Good afternoon, all participants. I'm Pramod Ghorpade, CFO of Indoco Remedies Limited. We appreciate all for taking off time and joining this call today. Let me draw your attention to the fact that on this call, our discussion will include certain forward-looking statements, which are projections or estimates about our future events. These estimates reflect the management's current expectation of future performance of the company. Please note that these estimates involve several risks and uncertainties that could cause our actual results to differ materially from what is expressed or implied. I request our Managing Director, Miss Aditi Kare Panandikar, for her opening comments. Of course. I thank you everyone for joining us this afternoon. We closed the first quarter of financial year 2023-2024, with a consolidated sale of INR 413 crores, of which domestic formulations business contributed to INR 213 crores. International formulation business contributed to INR 160 crores at the 39% of total sales. API business contributed INR 36 crores, and the remaining INR 5 crores came from contract research and analytical business contributors. Our API business has recorded a 120% growth in the first quarter of this year. The acquisition for the first quarter EBITDA of INR 63 crores, which is a 56% increase. We are continuously working on various strategies to improve revenue and margins in all our business segments. On the domestic front, we are focusing on sales force effectiveness, new product launches, exploring new channels of distribution, and increasing our reach in certain areas which have growth potential. It is worthwhile to mention the following developments in the organization, which has provided a potential impetus to our growth strategy. Number one, the warning letter on plant one was lifted, and we received an EIR from USFDA. We now expect to launch a few more product oral products from this site for the U.S. Number two, our multi-manufacturing site, unit three, received new GMP certification from the Healthcare Quality of Germany, thus enabling us to supply to the EU nations from one more additional and more efficient site. Number three, we have been working on gross margin improvement plan across the organization, across geographies and segments. Last but not the least, as part of our digitalization journey, we have given Apple iPads to our field force to help them convey the message more effectively in the doctor's chamber. We have started an AIML project on machine automation. We are working on a document management system as well as an HRMS system for efficiency and effectiveness of human capital. On the international front, I'm happy to share that Indoco now has a front end in U.S. with the acquisition of FPP or Florida Pharmaceutical Products, a distribution and marketing company. This is all from me. I will now hand over to Mr. Sundeep to share his financial highlights for this quarter. Thank you, thank you, Aditi. Good afternoon, everyone. Hope you all are doing fine. Let me first begin with the business highlights. Net revenues of the company for the first quarter grew by 5% at INR 413.2 crores, compared to INR 394.9 crores for the same quarter last year. EBITDA net sales for the quarter is 15.2% at INR 62.9 crores, compared to 18.1% at INR 71.3 crores. Profit after tax net sales for the quarter is 6.2% at INR 25.7 crores, compared to 9.5% at INR 37.5 crores. Earning per share for the quarter is INR 2.81, compared to INR 4.17 for the same quarter last year. The above numbers are on standalone basis. We have declared results with consolidation, which includes results of subsidiaries. On the Indian pharma industry. The Indian pharma market is valued at INR 51,423 crores and has registered a growth of 8.5% during the first quarter of FY 2023-2024, against similar first quarter for last year. During this quarter, Indoco registered a sale of INR 300 crores, with a growth of 2.8%. In the IPM, Indoco ranks 31st in the first quarter of FY 2024, with a market share of 0.58%. The source is IQVIA, April 2023 to June 2023. Domestic formulation business. Revenues from domestic formulation business for the quarter grew by 6.5% at INR 215 crores, compared to INR 200 crores for the same quarter last year. Major therapeutic segments, namely dermatology, urology, cardiology, ophthalmology, and dermatology, performed well during the quarter as compared to the previous corresponding quarter for the last financial year. On to the international formulation business. Revenues from international formulation business witnessed a big growth of 9.9% at INR 159.7 crores, compared to INR 177.3 crores. Revenues from reg markets de-grew by 9% at INR 134.4 crores, as against INR 147.7 crores. Revenues from U.S. business for the quarter de-grew by 21.1% at INR 61 crores, as against INR 64.9 crores. Revenues from Europe for the quarter grew by 2.1% at INR 79.4 crores, as against INR 77.7 crores. Revenues from South Africa, Australia, New Zealand were at INR 3.8 crores against INR 5 crores, and revenues from emerging markets for the quarter de-grew by 14.7% at INR 25.3 crore against INR 29.6 crore. The API business revenues for the quarter have substantially grown by 169.2% at INR 35.7 crores, as against INR 13.3 crore. Revenues from MSI for CRO and Indoco Analytical Solutions have grown by 12.8% at INR 4.7 crores against INR 2.2 crores. That's all about the business highlights for the first quarter, and I now request the participants to put forth their questions. Thank you. Thank you very much. We will now begin the question- and- answer session. Anyone who wishes to ask a question, you press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are expected to use answers while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question is from the line of Aditya Khemka from InCred Asset Management. Please go ahead. Hi. Thanks for the opportunity and good afternoon, everyone. First question, please, sir, on the OAI that we have, is that only on plant two in Goa, or is that on plant two and three? Good afternoon, Aditya. Plant two and three are part of one OAI number, so as of now it is for both the plants. For both these plants. Okay, ma'am. This FPP acquisition, is it consolidated during this quarter in our numbers or is it not consolidated? We got one month in this quarter, Aditya, so a very small amount of revenue has come in, which is part of the consolidated result. It's been consolidated for a month or so? Yes. Okay. Given that we have an OAI on two and three, and because we will not get approval still, we confirmed this, how do we plan to leverage the SPP acquisition? Would Brinzolamide and Combigan basically be launched to our own front end now that we have it, or will those two just continue to be in partnership with our partners? Aditya, OAI on plant two does not have any impact on current products which are already being supplied to U.S., many of which are our own ANDA. On some products which we have got back from Teva, we are considering actively front-ending them through SPP. We also have a couple of solid organs in U.S. market, which we are currently doing through other partners, which we include. How much time would it take, ma'am, to switch the partner from an external partner to internal? Not more than three to four months. Understood. regarding the OAI again, how much would be the remediation cost we have incurred in this quarter, and how much do we expect to incur for the full year? About INR 4 crore is the remediation cost we incur this quarter. What is the estimate for the full year, ma'am, for this year? About the same for the quarter. About INR 4 crores each quarter. Right. One last question. On the U.S. business, sequentially, our revenue is down despite consolidating for a month of 50. Our revenue is down from INR 71 crores to INR 61 crores. If I remember correctly, we also later launched the larger SP of Brinzolamide, which is supposed to be launched, I think, in April, if I'm not wrong. What explains the decline in revenue in U.S. despite the launch of a very large product like brinzol? I think I just briefly answer this. Maybe details we can take offline in a call with you separately. Roughly, just to tell you the impact of the OAI on U.S. business specifically has been quite simple. We, you know, some of the milestones we were to receive from clients for products made at this site, those have got postponed. Also, there were some, you know, post OAI, you have to communicate with all your customers. It's a regulatory process in which they do risk assessment and then list the product. There has been some supply delay in this quarter. Some of it will come into the next quarter as well. Those are largely the reasons why there was a decline here. For your other questions, I think it is not correct for us to discuss it on this call here. Maybe we can take it later. Sure, ma'am. Thank you. I'll get back to you. Thank you. Our next question is from the line of Deepan Sankara Narayanan, from TrustLine PMS. Please go ahead. Thanks a lot for the opportunity and good afternoon, everyone. Firstly, on the domestic business, what is it, reason for strong growth in dermatological business? Was it due to new product launch, or we have seen market share increase, and do we expect this growth to continue? Hi. Good question. Yes, the increase in market share and robust growth in all the businesses, as well as most of the products in general, is some time this quarter. This is on account of. We have shared, I think, in earlier calls, that we are exploring alternate channels for distribution in India market. There has been a good support through digital media for promotion of some of these products. We have also set up a direct-to-consumer channel for facilitation and in order to make the products better available across counters. I think we are seeing early signs of success through this. Okay, good to know that. Ma'am, also this, anti-infective and respiratory business, sales has reached almost closer to pre-COVID levels. Do we foresee growth in these segments in future? Excluding these two therapies, I think we have delivered a such strong growth in domestic business. Yeah, correct. You know, obviously, anti-infective and respiratory have been the most challenging therapies to predict the performance in the last three or four years. Initially, of course, there was the impact of COVID. After that, there was a huge airway interval they were used in treatment of COVID. After that, some peripheral antibiotics and other acute products were also used to treat the second and third wave of COVID. Doesn't seem to be any kind of normalization, frankly. Your question is true, and I feel this is really and truly a post-COVID. Technically, I think we have given a 10% growth on a pre-COVID year at this point. It doesn't take away the fact that, in a normal year, if the season comes in, we could have done better. This year, as you know, the monsoons have got delayed by almost a month, and therefore, in the first quarter, we see marginally that impact. If due to lesser to its expectations, I feel with the season coming in as it is now, I'm confident we will be able to show growth on these two categories as well. Okay, okay. Also this, urology as a segment are now doing quite well over the past year, 3x. Are we doing anything to prepare or the growth trend could continue well here? We have a very popular brand called Cital, which is a urinary alkalizer, which is used in the summer seasons, by people who are prone to, you know, burning micturition or kidney stones, and technically as a, you know, a treatment option and to prevent the problems in extreme heat conditions. This year we had a long summer, a tough summer, and Cital has done well. In addition to that, we had launched an extension to Cital, a brand called Cital UTI, to be used in urinary tract infections, which has also done exceedingly well. I'm happy to share that these two brands have done very well this quarter, and in fact, have contributed second only to Cyclopam, the main brand of the company, for contribution. We expect both Cital and Cital UTI to do well, but of course, they will have this kind of a seasonal impact and will always do better in the summer seasons rather than the others. Okay. Thank you much, ma'am. Thank you. Our next question is from the line of Mr. Rajat from InCred AMC. Please go ahead. Yeah, hi. Thank you very much. Ma'am, firstly, on your employee-. Mr. Rajat, sorry to interrupt. May we request you to use the handset for optimum audio quality? Thank you. Yeah. Is it better now? Yes, ma'am. Please go ahead. Okay, yeah. Just on the employee expenses, they seem to have shortened up by roughly INR 20 crores on a quarter-over-quarter basis. Just wanted to understand what is this, how is this gone up? Any explanation for that? Yeah. About, INR 3 crores-INR 4 crores is on account of arrears. We had an agreement, which got signed off, at the go side. That is one time. Some of it is on account of, regular increment given during the year. It is becoming a little tougher to, keep people with you, especially because of the high attrition at starting levels and some amount of, salary growth has also been given. Roughly, I think, a base of around INR 85 crores-INR 86 crores is what, should be considered as a regular, employee cost going forward. Okay. INR 4 crores you're saying is a one-time impact? Yeah, yeah. Okay. Ma'am, back to the domestic business again, last quarter, if I remember correctly, you were guiding around 12% to 13% kind of a growth, versus that you have delivered around 6%. As you said, that it was impacted delayed monsoon. Going forward, do you think you will be able to give about 12%, 13% kind of a growth on the overall annual number over the next quarter, or do you think we'll fall short of that? Quite honestly, if you had asked me this end of next quarter, I would have been happier giving you a response, because the biggest quarter is underway for us. If you look at the industry also and its performance, you know, I know you know the ICM numbers, but if you look at our covered markets, they've not fared very well. You know, covered markets have grown at just 6% as ITBI. We are in tandem with the covered markets. Domestic business has grown by more than 6% this quarter. In the, I'm hoping that we will be able to catch up, at least to get to a lower double-digit growth, if not more, for the year. Okay. Ma'am, also HTS, in terms of employee costs, which we should work with going forward incrementally from here? Yeah. We have a limited number of employees at HTS, which requires for our overall operations there. Overall, cost level, which we look for, that is what we are practicing in our divisions and further during positions, it's about $4 million on annual basis. $4 million is an acquisition cost? overall- Operating cost will be around close to $2.5 million. $2.5 million. Is there any cost? Sure. Okay, thanks. That's it from my side. Thank you. Before we take the next question, a reminder to all participants that you may press star then One to ask a question. Our next question is from the line of Abdulkader Puranwala from ICICI Securities. Please go ahead. Hi. Thank you for the opportunity. On the guidance front, I think previously you had guided for around 18% kind of a margin for the FY 2024. Are we regaining those or what is our, you know, margin guidance now? We feel pretty confident that we'll be able to, for the full year, go up to 17.5%. Okay. Okay. In terms of, U.S., so because of the OAI, is this OAI going to impact our allopurinol sales, which is there from plant three? I think, in the side earlier, we expect a sizable, numbers, in terms of revenue coming from that product system. As I said earlier, no running product will get impacted in any way. Additional to plant three supply, with the OAI on plant one, we are able to also get allopurinol manufactured at the other side. In fact, we will get incremental impact on that product sale going forward. All right. Understood. Thank you so much, ma'am, for answering my questions. Thank you. Our next question is from the line of Mitesh Shah from Nirmal Bang Securities. Please go ahead. Thanks for taking my question. Again, I have a question on the U.S. front. Is any of the revenue we lost, I mean, because of this OAI, should be like normalising the growth going forward? I just want to know about the guidance to the U.S. for FY 2024 from you. As I mentioned earlier, as I said, there has been a delay in plotting some sales because some customers did not pick up products right away, post OAI. After that has been resolved. There is a delay, certain amount, surely. Regarding some milestones to be collected, those have got delayed by a couple of quarters. Consequences which overall guidance of US for the whole year, they're going to have to take some amount, look at it again. I feel pretty confident that we will try to do excess of, you know, in the range of INR 200-INR 300. Okay. Thanks. That's it. Thank you. Ladies and gentlemen, a reminder to all participants, you may press star and one to ask a question. Our next question is from the line of Mr. Vishal from Systematix. Please go ahead. Yes, go ahead. Yeah. My question is, in the U.S., do we expect any new launches, and do we also expect Combigan to be relaunched in October as stated earlier? Mr. Vishal? Hello. Yeah, his voice was very faint, I think he was asking about Combigan supply in the next quarter. Is that it? Yeah. I was asking whether we can, whether we expect to supply Combigan in October, as stated in the previous quarter. Yeah. Consequent to this AI, there will be probably some amount of, you know, back and forth with our front-end partner around this. We'll come back to you with the impact on this launch. Your guidance is about INR 380 crores for U.S. in this financial year, and we had INR 50 crores in the first quarter. That implies we hope to do about INR 80 crores, about INR 80 crores in the next three quarters. Yeah. Yeah. What kind of impact ramp up from 50 crores to 80 crores? Would this be existing products or new launches? Both. There will be few new launches from the other side, for Sunloris. There will be a substantial increase in production of currently manufactured products from plant two, as well as Sunloris is being supplied from plant one. The ramp up from 50 to 80 may not happen immediately in Q2. It will be a slow growth. The guidance is for the full year. Probably we'll see that ramp up happening more towards in Q3 and Q4. Yes. In Europe, apart from allopurinol and paracetamol, which are the key products there, do you expect further new launches there? Should we expect a ramp up from the current spending of about INR 80 crores in Europe? Yeah. Hi. In Europe, we have got a number of molecules. I'm not at liberty to disclose all the names of the molecules, but there are at least 1 dozen molecules besides paracetamol, allopurinol, and cetirizine, which we are selling right now. Definitely Europe, annual guidance will be in the range of around INR 375 crore-INR 380 crore. Okay. The Europe trend should also pick up from this quarter? Yes, yes. Okay. On the remediation, would we, how long will it take to do the remediation at for the unison facility? That typically depends on how FDA looks at our strategic proposals that we have sent them. We are also at this time, having constant communication back and forth with FDA, hoping to have a, you know, face-to-face or online call at some point, to clearly understand their position and concern, because with 4 observations, we had not expected an OAI. Given that most of the remediation costs at this stage, to give you a full guidance on how long and what, would be little premature, because we have to first understand what it is that they're looking at. If our assumptions are correct, I think we are looking at at least till end of this year. Okay. Three more quarters. Got it. Okay. I guess one more on emerging markets and API. Emerging markets was quite this quarter, and API was very strong. How should we look at these two businesses for the rest of the year? Will emerging markets drive an API business and sustain the momentum? Yeah. I'll talk about the emerging markets. Q1 of this year was a one-off quarter, emerging markets order book is very strong. We are very, very confident of turning this around. This was a one-off quarter, particularly because we had done extremely well in Q4 of last year. From the second quarter, you'll see a dramatic turnaround in emerging markets. Coming to API sales, definitely sustainable throughout the year. Got it. Okay. Thank you. That is all from my side. Thank you. Our next question is from the line of VP Rajesh from Banyan Capital Advisors. Please go ahead. Hi, thanks for the opportunity. Most of my questions were answered, just to try and understand, what is your revenue guidance for this year, given this, OAI and one of the facilities? Can't hear you? Sorry. Mr. Rajesh, may we request you to use your headset for optimum audio quality, as you're not audible, sir. Sorry, is it better now? Slightly. We'll try and understand what your question is. Yes, please. Okay. I am just asking about the revenue guidance for this year. in light of the OAI that we have received in one of the facilities. That's what I was just trying to interpret. The OAI will have some bearing on the revenues only from U.S. markets and will not impact any other market in any way. I think we already said on the call that we are looking at close to INR 300 crore revenue between INR 280 crore and INR 300 crore to come from U.S. in total. Other than that, no other market gets impacted, U.S. marginally. That's it. Right. I heard that guidance for the year. Yeah. I was just trying to understand for the whole company, are you changing anything else, or if not, you know, what was the original guidance and what is the current guidance? We had not given any guidance this year, especially because we were expecting from the growth perspective, India market to be very profitable. As we have seen this first quarter, India has grown at close to 7%, I think 6.6%. I'm expecting by end of the year to be able to do close to 11%-12% minimum growth on India business. Other than that, Europe, we expect a good robust growth, again, in the lower double digits, at least. API will continue this kind of contribution. That is. I hope that answers your question. Right. Just to clarify the point, you're saying the next will be 11% to 12% for the whole year. Is that right? Yes. Yes, yes. Okay. Thank you. Appreciate it. Bye-bye. Thank you. Ladies and gentlemen, you may press star and one to ask a question. Our next question is from the line of Candice Pereira from Dolat Capital. Please go ahead. Hello. I just had one question regarding the new markets. For this quarter, the growth was quite low, just 2.1%. I just wanted to understand for that. Yeah, hi. This, as I said, was a one-off quarter, and you will see sustained performance of Europe going forward. Because both the Baddi plants have got approval now from EU, besides the U.K. They are free to supply to all the EU countries. That's the first point. Second point is, bite sizes have been enlarged in those two plants. Not only will there be effective good top line growth, but effective profitability because of the increase in bite sizes and efficiency building. Also, the order book for Europe and U.K. is very, very strong. Okay. I just wanted to understand why was just this quarter low? Like, what was the one-off? You're telling me it was a one-off, but what was the one-off? Can we just come back, and look at it? Possibly it was, anything to do with the base of last year. Okay? Okay. All right. Yeah. Thanks. Thank you. A reminder to all participants that you may press star and one to ask a question. Ladies and gentlemen, you may press star and one to ask a question. Our next question is from the line of Mr. Rajat from InCred AMC. Please go ahead. Yeah, thanks for taking my question again. Ma'am, just on the India business again, could you get some sense on how recently launched products are doing especially on the chronic, subchronic, side of the thing? Yeah. I think, Rajat, quarter, we were really rescued by our subchronic and chronic businesses, to be honest. Among the smaller businesses, Ophthalmology, XI division is doing exceedingly well, consistently growing at 11%-12%. The two dental divisions are also growing at higher double digits, 17%, 18%. With your question on new launches, if I could tell you, new introduction contribution to first quarter, we got sales in excess of six and a half crore, which is more than double of new introduction contribution last year, first quarter, which was only 3 crore. On all fronts, other than. May I request the management? Ladies and gentlemen, the management line has been disconnected. Please be connected while we reconnect the management. Ladies and gentlemen, the management line is reconnected. You can go ahead with your question, sir. I think I was replying to your question. I'm not sure how much of it came through, but I think we were on, contribution of new launches, if I'm not mistaken. For the first quarter this year, we have got INR 6.5 crore coming from new launches, as against INR 3 crore in the first quarter last year. Yeah. ma'am, that brings me to my second point. in quarter-on-quarter basis or for last many quarters, we have been either growing at the industry rate or below the industry rate. This is despite the price hikes. we would have retail, new product launches into a chronic therapy. again, we are not above the industry rate, so we would expect Indoco to above the industry rate, given that we already have good product portfolio, good brands in our portfolio. what I'm trying to understand and does it have to do with your productivity or is there a lot of attrition? Or is it that the competition is itself getting very strong and you are not able to. You know what? It's a very long question, so I lost you, actually. What is the question specifically? Thank you for asking you, ma'am, that, for so many quarters, we've been either growing at par with the industry or below the industry rate. This is despite the fact you would have difficult price hikes, with the NLM portfolio. You have forayed into chronic therapies and- No, I think, you know, we are talking of Q1 right now, so I would be happier concentrating on these numbers and what they say. I will have to dig out and go back into all my quarters when I might have not met your expectations. For the quarter one, as I explained, it is only about anti-infective and respiratory. For the industry, these are degrowing by 26 and 25% on quarter-on-quarter basis. Compared to that, we are much more stable. Okay. I hope that answers your question. Yeah. Ma'am, secondly, on your EBITDA margin guidance, you said 70%-80%. You have been factoring the $2 million of incremental cost from the FPP and the INR 16 crore- Everything, everything. Okay. Thanks. That's it. Thank you. Ladies and gentlemen, that was the last question of our question and answer session. I now hand the conference over to the management for closing comments. Thank you, everyone, for joining us this afternoon, and thank you for a very interesting question. All of you have a good weekend ahead. Thank you. Thank you. On behalf of JM Financial, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.