Ladies and gentlemen, good day, and welcome to the Indoco Remedies Limited Q2 FY 2024 Earnings Call hosted by Dolat Capital. 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 this conference, please signal an operator by pressing star and then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Rashmi Sancheti from Dolat Capital. Thank you. Over to you, ma'am. Thank you, Tobin. Good afternoon, everyone. I, Rashmi Sancheti, on behalf of Dolat Capital, welcome you all on the FY 2024 earnings call of Indoco Remedies. I would like to thank the management of Indoco Remedies for giving us this opportunity to host the call. Today, from the management team, we have with us Ms. Aditi Kare Panandikar, Managing Director, Mr. Sundeep V. Bambolkar, Joint MD, and Mr. Pramod Ghorpade, CFO. I now hand over the call to the management for their opening remarks. Over to you, sir. Thank you, Rashmi. Good afternoon, everyone. Thank you for 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 expectations of the 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. Indoco does not undertake any obligation to publicly update any forward-looking statement, whether as a result of new confirmation, future events, or otherwise. Over to you, ma'am, for your opening comments. Yeah. Good afternoon, everyone, and thank you for joining us today. We closed the Q2 of FY 2023/2024 at a consolidated scale of INR 465 crore, of which domestic formulation business has contributed INR 228 crore. International formulation business has contributed INR 195 crore. API business has contributed INR 36 crore and shown a growth of 95.6% over the same period last year. The remaining INR 6 crore have come from contract research and analytical business, which are the small service businesses of the company. For the Q2, we have recorded an EBITDA of INR 72.4 crore. Before we start the call, I would like to update all members regarding an update that we have just sent to the stock exchange. A PAI, or Pre-Approval Inspection, was conducted at Goa Plant One for two ANDAs. The inspection was conducted between 12th to 18th October. At the closure of this audit late last evening, four Form 483s have been issued for the plant. Our plant quality assurance and corporate compliance teams are will be working very closely with the FDA to resolve any queries that they may have regarding quality issues at the site. Now, to come back to today's call. At our organization, we have been continuously adopting new technologies, aiming for higher productivity in a systematic manner, and therefore, aiming for volume and value growth. Some of those worth mentioning are, at our Baddi Unit One formulation site, we have received a GMP certification from EU health authorities in July 2023. This certification is a testimony to the fact that we are committed to remain CGMP compliant and ensure supplying quality products to our customers and patients across the globe. Our Verna plant has undergone expansion recently to accommodate volume demand from emerging and Indian markets. Our API facility at Patalganga has been upgraded recently to include a larger quality control laboratory facility. At our CRO in Hyderabad, a new business of pharmacovigilance is being contemplated. Various IT-related projects are being undertaken with a broader roadmap spanning HR, operations, sales, and GMP-related quality assurance, concerns. This is being done at various manufacturing sites. Across many of our sites also, projects are underway to increase batch size, improve yield, and overall bring down overheads, specifically those involving human capital. These initiatives will eventually improve efficiency at our sites and make our products more competitive. With all the process improvements underway, expansion programs, both green and brown fields, under execution at many of our sites, new product launches, and continuous increase in our ANDA filing endeavors, the organization is rightly positioned to achieve its targets going ahead. This is from me. I will now hand over to Mr. Sundeep, who will take you through the financial highlights of quarter two. 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 Q2, FY 2023-2024, grew by 15% at INR 465 crores, compared to INR 405 crores. In the first half of the year, revenues grew by 9.9% at INR 878 crores, as against INR 799.5 crores. EBITDA to net sales for the quarter is 15.6% at INR 72 crores, compared to 21.7% at INR 87.8 crores. EBITDA to net sales for the first half is at 15.4% at INR 135.3 crores, compared to 19.9% at INR 159 crore. Profit after tax to net sales for the quarter is 7.1% at INR 32.9 crores, compared to 12% at INR 48.7 crore. Back to net sales for the first half is 6.7% at INR 58.6 crore, compared to 10.8% at INR 86.2 crore. Earnings per share for the quarter is 3.60, compared to 5.39 for the same quarter last year. EPS for the first half is 6.41, compared to 9.56. Above numbers are on standalone basis. We have declared results with consolidation, which includes results of subsidiaries. Indian pharma market is valued at INR 55,718 crore, registering a growth of 7% during the Q2 of FY 2023-24, as against similar Q2 of last year. In the IPM, Indoco ranks third position in the Q2 with a market share of 0.61%. The source is IQVIA, July, August 2023. Domestic formulation business, revenues from this business for the quarter grew by 9.4% at INR 228 crore, as against INR 208.5 crore. For the first half, revenues grew by 8% at INR 441 crore, as against INR 408 crore. Major therapeutic segments, namely cardiology, ophthalmology, vitamin, and dermatology, performed well during the quarter as compared to same quarter last year. Now, on the international formulations business front, revenues from international formulation business with just growth of 11.9% at INR 195 crore, compared to INR 174 crore same quarter last year. For the first half, revenues grew by 0.9% at INR 354 crore, as against INR 351 crore. Revenues from reg markets for the quarter grew by 1.2% at INR 149.5 crore, against INR 147.6 crore. For the first half, revenues did grow by 3.9% at INR 283.9 crore, against INR 295.3 crore. Revenues from U.S. business for the quarter grew by 17.5% at INR 81.4 crore, as against INR 69.3 crore. For the first half, revenues did grow by 1.2% at INR 132.6 crore, against INR 134.2 crore. Revenues from Europe have grown by 15% at INR 63 crore, as against INR 74.7 crore. For the first half, revenues did grow by 6% at INR 143 crore, against INR 152 crore. Revenues from South Africa, Australia, New Zealand are at INR 4.7 crore against 3.7 crore, and for the first half, at INR 8.5 crore against 8.7. Revenues from emerging markets for the quarter grew by 71.6% at INR 45.4 crore, as against INR 26.5 crore. For the first half, revenues grew by 26.1% at INR 70.7 crore, against INR 56.1 crore. Coming to APIs, the business for the quarter has grown by 95.6%, at INR 35.8 crore against INR 18.3 crore. For the first half, revenues have grown by 127% at INR 71.5 crore, against INR 31.6 crore. Revenues from other business, such as AnaCipher for CRO and Indoco Analytical Solutions, for the quarter grew by 73.6% to INR 6.4 crore against 3.7 crore, and for the half year, by 41% at INR 11.2 crore, as against INR 7.9 crore. That's all about the business highlights for the Q2, and I now request all the participants to put up their questions. Thank you. Thank you. 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, you are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment for the question queue assembled. The first question is from the line of Deepan Sankara Narayanan from Trustline PMS. Please go ahead. Good evening, everyone. Firstly, from my side, management had guided for domestic business for 11%-12% for FY 2024. So if by going by that, H2, we need to grow by 15%-16%. So are we confident of achieving this kind of growth in domestic business in H2? Yes. Okay. So mainly this growth will come from this dermatology division, no? Not necessarily. For the current quarter, our subchronic therapies, specifically stomatological, ophthalmics, and some others have done very well. This is simply because, Q2, which is otherwise a season quarter, the season impact did not come in because of rains which came late. So to some extent, the products which otherwise do well in the season, infective, anti-cold, respiratory, they will also pick up in current Q3 because of the push forward of season. And therefore, I expect the second half of the year to give a growth of minimum 15%. Okay. Okay. And also in terms of Europe business, we were expecting from INR 90 crore to INR 95 crore, nearly INR 100 crore, but we are doing around INR 20 crore currently. So what is the reason for the change, and are we expecting strong growth now from here on? Yeah. One of our products which we supply to U.K. got heavily overstocked during COVID and the following years, and as a result, the orders for the last three months have been, very, very minimum, practically zero. But, the situation will improve from now onwards. We have started receiving orders once again. So that was one of the main reasons for, this setback. Okay. So we are still holding that INR 380 crore-INR 400 crore kind of Europe business for this year? Yes, INR 375-INR 380, definitely, and we may do better. Okay. Okay. And lastly, from my side, so what are the margin drivers we are looking at to improve the margin from here on to 17%-18% for FY 2024? Yeah. So, if you have seen the performance this quarter, you must have seen the cost of goods. We have shown good improvement. We've also shown a sustained or marginal drop in employee cost as percentage to sale. So, fundamentally, things are on the right track. There have been some additional one-time or, you know, short-term expenses which have come in other expenditure, because of which our margins have got impacted this quarter. Otherwise, we would have definitely shown a much better performance. When these y ou know, these are shorter-term kind of expenses. I would not call them one-off. They're definitely not perennial. So therefore, we believe that the margins will improve. Also, as you might have heard in my opening remarks, there are a lot of initiatives being undertaken to actually bring down the cost, cost of operations across all our sites. So I feel very confident that going ahead, we'll be able to, deliver better margins. Okay, ma'am. Can you quantify this one-time increase in that other expenses you are referring to? Yeah. Rather than quantify, I can tell you the nature of those expenses. As you know, we got a OAI, you know, to for Goa Plant Two earlier this few months ago. And after that, we started six months ago, actually, we started remediation action. So there are some costs of remediation. There are also certain costs which have come at the site to improve certain equipment layouts, you know, and so you would have seen plant machinery repairs having gone up this quarter. Okay. Thanks a lot, Aditi. Thank you. Thank you. Ladies and gentlemen, if you wish to ask a question, please press star and one. The next question is from the line of Sudarshan Padmanabhan from JM Financial PMS. Please go ahead. Yeah. Yes, ma'am, I'm just continuing, you know, from the previous participant on the remediation cost, and given that we are looking at around 17%, that was initially looking at in terms of run rate for this year. Given that we have some kind of, you know, I would say not necessarily one-off in this quarter, but because of the spend towards situation, one, is there a change in your guidance, and how do we see the margins in the second half and the spend towards remediation and some of these costs, you know, this is rationalized? So in the Q2 this year, a couple of things are going to happen. A, we expect international formulations to do much better than it did in the first half. Also, a lot of the seasonal products in India business, their incremental sales did not come in in future the way it was expected. So we do expect that in the second half, our margins will be much better, helping us come close to our guidance. Believe that in the first half, and probably when we made the guidance or gave the guidance, the remedial cost and their impact may not have been fully understood. But every endeavor will be done for us to try and match the 17%. Would there be more, ma'am, I mean, on the remediation side? How much would it be in contrast to this process? We expect for one more quarter to have some impact on the remediation. Sure. Madam, looking at the U.S. business, it looks like, you know, this quarter has been pretty strong. Now, just to understand, you know, was there a constant contribution in terms of profit sharing in this quarter? I mean, if you can quantify it, it would be great, but just to understand, going forward, should we see the similar run rate continue, or what is the kind of run rate like that? So in terms of value, yes, we are confident of continuing this kind of top-line deliverance on US numbers and even better. Regarding profit share, et cetera, I think you may, you will agree that with our customers there are several confidentialities, so we don't feel free to discuss this thing now in the call. But yes, since our model is of cost and profit share, our model is of a certain amount of dossiers to be sold. There will always be some amount of dossier income or profit share in our US sales element. But in this quarter, was it much higher than usual, ma'am? Not really. Sure. And one more question from my side is, you know, if I look at the balance sheet, we have, you know, higher cash, but we've also, you know, taken higher long-term loans. I mean, interestingly, now, you know, are we looking at any kind of M&A? Then why should, you know, we take loans and cash that has been made here? Is it M&A or is it just a portion of, you know, we are planning it? Yeah. So, if you see, the cash, one is about certainly investments, you know, we have made. While our capex, if you see over a period of last year and this year, and certain investments, strategic investments, which are, you know, investment into U.S., we have implemented something on the, you know, other side. So, we have taken a ECB, basically, to cover up the, you know, certain cash requirements for the acquisition. Okay. Yeah. See, the drawdown of the ECB temporarily is for usage or for future requirements. So temporarily, you may be seeing some cash on hand. Sure. And if you are looking at M&A, what would be our priority, I mean, in terms of, you know, filling up the gap? We can't hear you. There's a lot of noise in the background. Can you repeat that? Ma'am. So if we are looking at M&A, what is the priority that we would be looking at? I mean, would it... You know, will it be filling up an India brand? Would it be looking at more of, you know, assets towards the international market? I don't think we said we are doing any M&A, but we are always looking for one, to be very honest. So, regarding M&A, you mean acquisition. So in India, we've always been scouting for good brands, and internationally, we are keen to look at good facilities, but neither comes cheap and neither is available, to be honest. Ma'am, one final question before I join the queue is, you know, you mentioned that, you know, it has been interesting on the top line side. You know, if I look at, we have built, you know, whatever the investments that have to be made and whatever that has to be done in terms of investments towards the growth that will be made. Can you talk a little bit more in terms of, you know, what is driving this growth? You know, are we seeing more, you know, prescriptions coming in from specialists as compared to that of, you know, GPs in this segment? So some color on this and where do we see this proportion of segment in this? Yeah. No, thank you for that question. You know, we are ranked twentieth among in the industry when it comes to the number of prescriptions we generate. You'd be surprised that we are a couple of ranks above Glenmark as well, for the absolute number of prescriptions we generated. At the same time, we are ranked thirtieth when it comes to our achievement in rupee terms in the market. That simply means that the percentage of acute contribution to our total top line is skewed very heavily in our case, compared to many other companies. We do generate prescriptions, but typically they are for one strip of microbiome, one strip of Febrex Plus, amongst other things. Going forward, this category of chronic that has been developed by us, that is prescriptions coming from other than general practitioner, as in pediatrician, ENT, you know, ophthalmologist, dentist, gynecologist. These are called mass specialists, and when they write acute products, they write the product for a longer time usage, because beyond, you know, treating symptoms, they actually want to treat causes as well. So that has been the orientation of the organization to have a better contribution come from other than general practitioners and from mass specialists. And we see that reflected in the performance, especially in the last two years, when because of COVID, at times, acute did very badly and other times it did very well. But returns coming from categories such as... Dermatological cosmetics are quite stable throughout, and that gives a good indication of the kind of work we are doing in the specialty market. And we believe because of this going forward, you know, we will be able to de-risk ourselves from the 30% order contribution we have to top line, 30%-40% that comes from anti-infectives and respiratory. I hope that answered your question. One final question, if I can raise one. You know, with respect to, you know, the European market, which has probably seen a temporary decline in this quarter. This constant clarity, given that the part of this is, you know, tender from AOK, and of course, a part of this is also volume on that. Would that be a right assumption, that there might be variance between this quarter, but you have a fair amount of stability in terms of the full year delivery? So as I think you mentioned earlier on- Yeah, yeah, yeah. It will get a catch-up somehow. Yes, yes. There's good, good visibility for orders ahead. This was a little bit unanticipated by us as well as the front-end client. Okay? Thanks a lot. Thank you. Participants, if you wish to ask a question, you may please press star and one. We have the next question from the line of Rashmi Sancheti from Dolat Capital. Please go ahead. Yeah, thanks for the opportunity. So one question is that, you know, since you have lost the order in the European business, and we do have a good order visibility, what kind of guidance would you give for the Europe business this year? Because earlier we were anticipating that, you know, we will be able to do around 18%-19% of growth in Europe. Yeah, Rashmi, we have not lost any orders. It's just that this fast-moving product was overstocked for a continuous thing, you know, by our front-end partner, in anticipation that it would be flying off the shelves, which did not happen from July, August, September and October. Now, we have started receiving orders, which will be manufactured in November and dispatched in December. So we have not lost any tender or any orders. It's just overstocking. Okay. Just to clarify, the AOK tender is going on properly. Just out of abundance precaution, I said that we would do somewhere around INR 375 crore. Okay. In the U.S. business of INR 81 crore, have we recognized any profit share this quarter? Yeah, there is always some element. But from the brinzolamide and all, what we were anticipating, has that come in, if you can quantify? And if you can see that in quarter three, quarter four, will that be sustainable? I will answer the second part first. Yes, in quarter three and four, it will be sustainable. On the first question, as I said earlier, because of certain strategic confidentialities with our front-end customers, we are not, not now free anymore to disclose numbers on this. Got you, ma'am. And what is the R&D guidance? Because, you know, in first half, you all have done around 5.5% of sales as you have spent as an R&D expenses. So, any particular guidance if you can give for the entire year? It will be around the same, Rashmi, 5%-5.5%. Okay. My next question is related to debt. You know, whatever debt we have taken up, is there any repayment schedule or, you know, for next 2-3 years, the debt, more or less, number would remain same? So, Rashmi, we have just a term loan, which is repayable of around quarterly basis. So this particular year, in second half, we have repayment close to about INR 24 crore. Next two years in the range of about INR 55 crore-INR 50 crore each year. Okay. Okay. So debt would be reduced by that extent? Yes. Okay. And, in terms of the domestic business, you know, while we can understand that, you know, we have not shown growth in anti-infective and, respiratory segment, but I'm also seeing that, you know, there is no growth in anti-diabetes and pain management. So if you can explain, you know, what is the reason for that, and how can we ensure that, you know, in next two quarters, you know, from there the growth is even, you know, around 14%-15%? Yeah. So, on pain and specifically, Rashmi, you might be aware that I've never spoken of pain as a therapy area of focus for any of our divisions. So if pain has done well for us, it is probably because of a portfolio which is being supplied by our institution division, which caters to, you know, armed forces, railways, ESI and those. It just gets reclassified under therapy is doing well or not. It is not specifically from any of our ethical divisions. Okay? Okay. Yeah. Finally, on the EBITDA margin front, you know, you said that, you know, there will be one more quarter where we will be seeing this remediation cost coming up. And in the first half, you have done around 14.6%. So, you know, to achieve around your guidance number, you know, we will have to do around 20% EBITDA margin in second half. So is that achievable or you feel that, you know, it is a bit challenging given the remediation expenses and R&D and everything, will be high? So, Rashmi, we are, we have strategized to do the kind of, value sales which can allow us to do those percentage margins. But of course, there are always challenges. So I specifically said we will be trying to achieve the 17%. Okay. Okay, ma'am. Thanks for that system I said. Thank you. Ladies and gentlemen, if you wish to ask a question, you may please press star and one. Participants, you may press star and one if you wish to ask a question. To ask a question, ladies and gentlemen, you may press star and one at this time. As we have no further questions, I would now like to hand the conference over to management for closing comments. Over to you, ma'am. Yeah. Thank you, everyone, for your active participation, and have a good weekend. Thank you very much. Thank you. Thank you. On behalf of Dolat Capital, this concludes this conference. Thank you all for joining us. You may now disconnect your lines.