Ladies and gentlemen, good day, welcome to Mankind Pharma's Q1 FY 2024 Earnings Conference Call, hosted by Kotak Institutional Equities. 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 your touch-tone phone. Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Alankar Garude from Kotak Institutional Equities. Thank you, over to you, sir. Good morning and good afternoon, everyone. On behalf of Kotak Institutional Equities, I would like to welcome you all to the first quarter FY 2024 earnings conference call of Mankind Pharma. I would now like to hand over the call to Mr. Ravi Aggarwal, Head of Investor Relations, to introduce the senior management and take the discussion forward. Over to you, Ravi. Yeah. Hi. Thanks, Alankar. Good afternoon, everybody. I thank you again for being with us today on our Q1 FY 2024 earnings conference call. On the call today, we have Mr. Rajeev Juneja, Vice Chairman and Managing Director, Mr. Sheetal Arora, CEO and Whole- Time Director, Mr. Arjun Juneja, Chief Operating Officer, Dr. Sanjay Koul, Chief Marketing Officer, and Mr. Ashutosh Dhawan, Chief Financial Officer. We'll begin with opening comments from Mr. Juneja, providing an overview of the quarter. This will be followed by comments from on the business performance, followed by Mr. Ashutosh, who will share some key thoughts on the financial aspects of our performance. There will be an opportunity at the end of the opening remarks to get your queries addressed by the management. Before we commence the call today, I would like to remind you that some of the statements made on the call today could be forward-looking in nature. A detailed disclaimer in this regard has been included in the press release that has been shared on our website. I now invite Mr. Juneja to share his comments. Thank you, Ravi, good afternoon, everyone, and welcome to our quarter one earnings call. Let me start by saying that we started this year with a healthy note, with a strong double-digit growth in sales and profitability. If you look at our key financial parameters, the revenue grew by 18% year-on-year during the quarter, with the domestic business growing at 14% year-on-year. EBITDA grew 43% year-on-year to INR 660 crore with a margin of 25.6%, an increase of 4.5% as compared to quarter one last year. PAT grew by 66% year-on-year to INR 494 crore. Our pharma segment maintained its outperformance against the IPM, with the secondary sales growth at 12.5% as against IPM growth of 8.5%. I'm happy to share that our Chronic segment share stood at 36% during this quarter, as compared to 34% last year. This is the highest Chronic share we have achieved in our business, and to just put in perspective, Chronic share in FY 2018 was around 28%. In fact, you'll be pleased to know that as per IQVIA, the Cardiovascular segment has replaced Anti-Infective to become our largest segment in our mix in this quarter. This is a testament of our commitment to increasing our presence in more profitable chronic therapy area. These segments have a strong growth profile, given the rising prevalence of chronic diseases due to lifestyle changes and rising income level in India. This will require a more top-down approach, which focus on widening our footprints in metro and Class 1 cities. I will specifically mention our campaign to promote DMF quality medicines in India, have been truly disruptive, and we have seen outstanding response to this initiative. We already have more than 100 SKUs within this initiative currently, and we are rapidly expanding our product offering with this very important service of country. In our Consumer Healthcare segment, we maintained a dominant brand leadership in respective categories, with four of our brands ranked number one in their categories. The secondary sales have been very, very healthy across most new brands, and we expect the full year growth in this business to be the similar level versus last year. On the R&D front, our successful launch of Biodirostrong reiterates our commitment to being a science-based company. We are focusing on product innovation, novel drug delivery system, strategic partnership with innovators to strengthen our product offering that will give us competitive edge. I would like to conclude by re-emphasizing our strategic priorities going ahead. We'll continue to remain domestic focused, I will again say, domestic focused, with emphasis on volume-led growth through our affordability proposition. We'll continue to garner dominant leadership position in identifying white spaces in key chronic therapies through in-house R&D, acquisitions, in licensed products. Finally, we'll continue to aggressively invest in marketing to create and support our dominant brand leadership across pharma and consumer business. If I just sum up my whole commentary, I will say that certain points you must need to really understand, that Mankind is focusing only in India, number one. Number second, we are a mass consumer coverage, 5 lakh doctors we cover. Important point to note that our volume growth, which is 4.3% versus IPM growth, which is just 1.4%. We're quite good in that. Chronic share of Mankind has come to 36% versus 34% last year. Cardiac share, specifically, I'll say, in Mankind, is 13.8% versus industry's 12.6%. Of course, for the first time, Cardiac has outperformed our Anti-Infective segment. Market share of Mankind has grown 4.4% from 4.2%. Certain things, I mean, certain initiatives we have taken, that basically one is that, we have launched more than 100 SKUs in DMF, which would be very disruptive in the market. Seeing the threat of branded generic in the market, we just want to create a different kind of a category, which is called DMF rate. Who, who does not want to have international quality medicines at Mankind prices? Whatever is available in most developed countries should be in India. That basically is our focus. In our new initiatives, we have launched insulin, insulin, and in just two, three months' time, 7,000 patients basically have come on our insulin, Nobeglar. In, whether it's a CNS, we are focusing a lot in respiratory. I mean, if you remember very well that we took Combi, Combihale from Dr. Reddy. That's giving us a 30% growth. If you talk about Daffy, we took from Dr. Reddy, again, 30% growth. These are growing phenomenal. Our Transplant business is also growing at a 66% this quarter, first quarter. Panacea growth in the first quarter is 22%. Secondary growth, I'm talking about. Primary is even better. We reiterate that we always outperform IPM. Our EBITDA margin would be in the range of 24%-26%. This is what is the summary. Now let me hand over to Sheetal. Good morning. Thank you, Rajeev. Welcome to today's investor call. I am delighted to provide you an update on our domestic business, with a specific focus on our Consumer Healthcare segment. Let's begin with our domestic business revenue, which reached INR 2,419 crore in the first quarter of financial year 2024, reflecting an year-on-year growth of 14%. According to IQVIA, our secondary sales growth for the quarter was 12.5%, outperforming the industry's 8.5% growth by 1.5 x. It's worth noting that our historic annual growth performance has consistently been 1.3x-1.4 x the industry growth rate. Additionally, IQVIA reports that while we maintained our market rank of fourth in value terms, our market share increased to 4.4% in Q1, FY 2024, from 4.2% in Q1, FY 2023. When we consider CVM, we find we have maintained our second position during the quarter by value. I'm also happy to share that Panacea revenues show the healthy growth of 22% year-on-year during the quarter, as indicated by IQVIA. The price and volume growth metrics show we continue to significantly outperform the IPM as far as volume growth is concerned. According to IQVIA, Mankind volume growth for this quarter was 4.3%, as compared to IPM growth of 1.4%. This represents an outperformance of 3.2 x. This success can be attributed to our wide distribution network, large field force, and strong presence among more than 500,000 doctors, making us the industry leader. We firmly believe that volume-led growth reflects the superior quality of our sales, since it is driven by prescriptions and is therefore more sustainable. Our prescription share reflects this well, 15.4% during this quarter, as compared to 15.1% at the same time last year. In fact, our subscriber penetration has also increased from approximately 81% in quarter one, financial year 2023, to around 83% in this quarter. I'm delighted to share the remarkable progress in our business strategy, particularly in expanding our presence in Chronic segment. This quarter has been exceptional. Our Chronic share is now at all-time high of 36% within the company. Significantly, our Chronic business has experienced a phenomenal growth of 17% this quarter, outperforming the IPM growth of 10% by an impressive 1.7 times. In our Consumer Healthcare business, we proudly announce that we achieved revenues of INR 208 crore in the 1st quarter of financial year 2024, representing a growth of 8% year-on-year and 37% quarter-on-quarter. Our three brands, Prega News, HealthOK and Manforce, have witnessed substantial growth in secondary sales with a remarkable year-on-year increase of 30%, 23%, and 11% respectively during this period. Over the longer term, our compounded annual growth rate has been strong 22% from financial year 2021-2023. We are confident of sustaining strong growth in this segment as we surge ahead. These achievements are testament to our team's dedicated efforts and the effectiveness of our approach. With our team passion, commitment, and customer-centric approach, I am confident that we will continue to thrive and achieve new milestone in coming quarters. We look forward to our customers' continued trust in our product and affirm our dedication to improve their life. Now I will hand over to Ashutosh Ji, who will provide further insight into our finances. Thank you so much. Sure. Thank you, Sheetal Ji. A very good afternoon, I would like to thank everyone for taking out time and joining us on this quarterly earnings call. I hope all of you would have received our financial results and the press release. Let me give you a brief on the financial highlights for the performance during Q1 FY 2024. The revenue from operations increased by 18% year-on-year basis to INR 2,579 cr, as compared to INR 2,180 cr in the previous period last year. EBITDA has shown a growth of 43% year-on-year basis to INR 660 crores, with the margins of 25.6%, as compared to INR 460 cr, with margins of 21.1% last year in the same period. There is an increase in the margin of 4.5%. This increase of 4.5% is largely driven by 2.8% increase in the gross margins from selective price increases, which we have taken in the previous quarters, stable API prices, and the favorable sales mix changes. The gross margins are now at around 68.2% level, as compared to 65.4% in Q1 last year, and these margins were 67.2 in Q4 FY 2023. The R&D expenses for the quarter was at 2.1% of sales, which has been within the range of 2%-2.5%, which we had communicated in our last interactions. The depreciation and amortization expense for the quarter were at INR 87 crore, as against INR 78 crore last year in the same quarter. Our tax rate for this quarter was at 20.9%, as compared to 21.6% in FY 2023. The PAT for the quarter was at INR 494 crore, representing a growth of 66% year-on-year basis and 68% on quarter-on-quarter basis, with diluted EPS of 12.1 per share of INR 1 paisa. The cash EPS, that is the EPS adjusted for non-cash items like depreciation and amortization, was at INR 14.3. On a trailing 12 months period, our net working capital days were at 39 days as compared to 45 in FY 2023. The CapEx, including capital work in progress, was at INR 111 crore in Q1 FY 2024. The cash flow from operations has shown a significant increase to INR 488 crore, as compared to the negative INR 161 crore in Q1 FY 2023. The company has a healthy net cash position of INR 1,727 crore, as compared to INR 1,366 crore as at March 31st, 2023. The return on capital employed ex cash basis and return on equity ex cash basis has shown an increase to 28% and 25%, respectively, on 12 months trailing basis, as compared to 25% and 23%, respectively, in FY 2023. For FY 2024, we expect to incur INR 550- INR 600 crore in the CapEx. The EBITDA margins are expected to be in the range of 24%-26%, as mentioned in our previous interactions. With this, I would like to conclude our opening remarks, and we will now be happy to address any questions that may have, please. Over to you. Thank you very much. Ladies and gentlemen, we will now begin the question-and-answer session. Anyone who wishes to ask a question may press star then 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. The first question is from the line of Kunal Dhamesha from Macquarie. Please go ahead. Thank you for the opportunity, congratulations on the fantastic set of numbers. The first question on our profitability guidance, where we have guided for 24%-26% for this year. Would you be able to provide, you know, some guidance, let's say, two year, three year down the line where we see? Obviously, we are growing very fast in the Chronic therapies, generally, that is where a lot of delta in terms of how profitability could happen. Any color there would be helpful. Okay. Yeah, thanks, Kunal, for the question. As we mentioned, that the guidance is 24%-26%, and there are operating leverages which are available, and we are quite hopeful that going forward, we should be able to maintain and increase our EBITDA margins from the existing levels. Sure. Would you provide some color as to, you know, obviously, the, we have pricing lever, et cetera. But let's say, between pricing, you know, operating leverage, which could be the, you know, driver, which could be the major driver for us, let's say not, not for FY 2024, but beyond FY 2024. Kunal, there is increased focus on the Chronic business, as we mentioned. As you're aware, that Chronic business has higher gross margins. As and when the share of the Chronic business continues to increase and it is outperforming the IPM, we expect the gross margins to go up from the current levels. At the same time, we've launched about 10-12 new divisions in the last couple of years, where their productivity is less than the average productivity of the established divisions or maintained. There we expect the operating leverage to improve upon, which will enhance our margins further. Kunal, I'm sure you said, if you see historically, in financial year 2022, our Chronic share was 32%. Now, in the 1st quarter, it is 48%. There's a jump of 4% on Chronic share. Definitely going forward, it will outperform the market and EBITDA margin will grow. Sure. Any Mr. Kunal Dharmesh, I'm so sorry to interrupt. Requesting you to please speak a bit louder, as the management can't hear you well. Sure, sure. so just to follow up on that, you know, we have been telling that our Chronic could grow, you know, very fast. I think, you know, we have done that in the past. Let's say over two, three years, would you have any internal aspiration as to increase our Chronic to certain level as a business mix? What basically is aspiration? Aspiration is to become the most admired, most respected institution. I mean, that's it. We basically believe in good karma, good working, and we've always done in the past as well. Rest is in front of you. It's always good to have good people, good leadership, good processes, right products. When you mix up all these three things, four things, I mean, good things really happen. Sure, sir. Thank you. My, you know, last question is on the MR side. How many people would we have employed right now? I think earlier we used to give that in presentation, or I might have missed it. Kunal, this is Dr. Sanjay Koul. We have a MR count of, around 11,000. That, excluding the managers, 11,000 plus. Okay. It excludes the managers, and, that's the number we have at present. Sure. I have more question. The exact head count for the quarter for the MR is 15,400, which includes the managers as well as the MRs. Okay, perfect. Perfect. I have more questions. I'll join back later. Thank you. Thank you. Before we take the next question, I'd like to remind participants to please limit your question to three per participant. You may rejoin the queue for a follow-up. The next question is from the line of Amit Kadam from Canara Robeco Mutual Fund. Please go ahead. Yeah, thank you for giving me this opportunity, sir. My first question is. A bit loud. Hello? Hello. Yeah, please be a bit louder. We can't hear you. Okay. I'll try once again. Thanks for giving me this opportunity. The first question is on the Consumer business. This quarter, we clocked 8% kind of a growth. Historical growth has been quite higher than this. Can you throw some light on this? How do we look this segment growing ahead? What has led to that 8% thing? Was it some, like, a high base of last year, something like that? Amit, I mean, we always believe that everything has to really happen annually or two year, three years, like. Quarter to quarter, it's very premature. I mean, having said this, last year, first quarter base was very, very high. Last to last year, it was a negative kind of a quarter, and last year, we, we had a growth of 25%. That's one reason. We are very confident that whole year we'll be doing as we have done in the past. We're very sure about this. Our major products, main products are performing very good. The growth is around 18%. How do we see this? If you look at the secondary sales for the, for the consumer business, that has fared very well. That has been more than the industry average. It's only the primary sales which is, which is reflecting lower because of the high base. On secondary sale basis, all the key brands, they have done fairly well. Right. Do you want to guide something on this? Like, based on your historical growth rate, which should we, for the year, be upwards of 20%? Amit, we can't hear you very well. You have to be a bit loud. Sir, I am asking you, like, can you guide something for this year, like based on our historical run rate, like, for this effort? Same like what we did last year. Okay. Approximately same like that, like last year. That's the guidance. It was last year. Okay. We, we will be, we will be similar to those levels of last year. Yeah which was 17% last year. Sir, second question is on the working capital. We saw a remarkable improvement there, almost like, we have dropped to now 40 days. What has led to that particular thing, and how do we see this thing, going ahead for the full year? Historically, if you see that, our, our working capital days have been closer to 40 days. We have been able to bring it down to our historical levels. For the last year and the year before, there was a spike because of supply chain and other issues. Now we are back to our, our historical level of 40 days. We have been able to bring down inventory back to our, our normal levels, historical levels. Okay, great. Just third question is on the... You touched upon insulin and, and you are early success into it. Can you just throw some light on what kind of opportunity, what kind of, maybe, maybe sales, what we can garner in this particular market, and what kind of opportunity what we can see in this particular segment? Yeah, that's it. We launched this insulin, I mean, only in the month of May, right? These are very initial days, but every, every month, we are adding around approximately 2,000 patients. In an insulin business, the number of patients you add, that becomes your revenue going forward. If you compare with other companies, adding 2,000 patients every month, it looks quite good to us. How do we see this thing going ahead? Like, the way we have- Quite good. Yeah. We already have said that our focus is towards Chronic side. Anywhere we get a possibility towards Chronic side, we go for it. We, as you can see yourself, that, Chronic share is continuously increasing. We are quite optimistic, that, we'll do quite good in this. More opportunities will come in different collaborations as well. Okay. Thank you, sir. All the best. Thank you. Reminder to the participants to please limit your question to three per participant. The next question is from the line of Nikhil Mathur from HDFC Mutual Fund. Please go ahead. Hi, good afternoon, sir. Am I audible? Yeah. Yes, sir, you are. Okay, sure. The question I have is that the Exports business has seen a dramatic jump on a Y-on-Y basis, from INR 51 crores, the company is now at INR 160 crores. Can you highlight what has driven this? As we mentioned in the past also, that, we continue to file differentiated products into the U.S. These differentiated products bring us some good opportunities. Having said that, our focus continues to always be on the Indian domestic market, and we'll continue to leverage that. Sir, does the jump has anything to do with the shortage scenario that we are seeing in the U.S. because of various reasons? Does it have any role to play here? It's not because of the shortage scenario, it's just because of the differentiated products that we filed. As we mentioned, there are certain ophthalmics, injectables, and certain products which are backed our own API, which is leading to this phenomena. Okay. You see this run rate maintaining for the ensuing quarters, and the same can be extrapolated to coming years as well. I mean, growth should be built on what the run rate is in this particular quarter. Is that how we should look at it? It's very difficult to predict the U.S. market, like this because you know how volatile it is. It will be very difficult for us to predict how the runway would look like. I mean. Having said that, there will be a few months of opportunities that we see going forward. Right. Sir, just final question tied to this. Sorry to harp on it a bit more. Now we are looking at Exports at around 6% of total sales versus 2% last quarter. Although there can be quarter-on-quarter variation, so I, I, I am not trying to replicate the same mix for the coming quarters as well. Would you like to give some medium-term guidance as to what kind of Exports to domestic revenue mix we are looking at, let's say, three years out, five years out? I mean, while the Export business is growing, but the revenues from the domestic business would contribute more than 90% going forward. Right. Got it. One final question, sir. The growth has been pretty strong in domestic despite various secondary agencies reporting data, which was looking a bit underwhelming. Then I think the season picks up in 2Q itself. Can it be safe to say that 2Q is likely to be better than 1Q, and the agencies were not properly able to capture the data? Would you like to call out what, what's the reason there? If I understood you correctly, Q2 always is a bigger quarter in comparison to the first quarter. It is solely because of outbreak of basically infections in quarter two. It is always a bigger quarter in comparison to the first quarter. Okay. Got it. Thank you so much, sir. Thank you. The next question is from the line of Harsh Bhatia from Bandhan AMC. Please go ahead. Yeah, good afternoon. Thank you. I hope I'm audible. Not audible. Requesting you to please speak a bit louder, sir. Yeah. Is this better? Yes, sir. Yeah. Just to expand a little bit on the human insulin product, the Nobeglar, I just want to understand the go-to-market strategy as a whole. Repeat again, we missed the first part. Yeah. Just to understand a little bit more on the human insulin product, the Nobeglar, that you launched in May. Just to understand a little bit better in terms of the go-to-market strategy, the pricing aspect, because there's a little bit more concentrated market as a whole, because we have MNCs operating at that level, right? Maybe your views on how you're looking at the market. I understand that it's just been three or four months since the launch period, but maybe a little bit more color would be helpful. See, even from last number of years, our aspiration was and is to become a leader in Chronic side, whether it's a cardiac side or diabetes side or respiratory side or anywhere. Anywhere there is a lifestyle disease problems, we are supposed to be there, because that gives us consistency, more profitability, and whatever number of prescription you add, that gives you growth. Keeping the same in mind, we have launched, and it's basically insulin glar- glargine, not the regular insulin. That insulin, basically, we have launched. As the name, I mean, as, as our penetration in the bigger cities, top most doctors, I'll not say bigger cities, top of the top doctors, is increasing, the response is coming very good. This initial response. We all know that India is the epicenter of diabetes. We feel that we should be very, very strong here. Keeping the same in mind that, we took this Panacea because they have product like Glizides. That's one reason. Also on the insulin front, we are also conducting clinical trials on the Aspart. Those trials, we expect them to be over in the next 10-12 months. We're looking forward to launch the Aspart version also next year. Sure. And the 7,000 patients would be a blended mix of metro, non-metro, or the primary orientation would be from non-metro as of now? It's always a mix. Always a mix. I mean, I will definitely say that more towards metro side. Sure. On Panacea Biotec, are we giving out the current quarter run rate? We have given out the growth rate number. At the time of acquisition, the annualized run rate was somewhere around INR 200 crore-INR 250 crore. What would be the current run rate, quarter run rate? In the current year, please. So if you talk about Q1, as per IQVIA, the secondary number is INR 75 crore for Q1. Sure. That's helpful. Thank you. Thank you. Thank you. The next question is from the line of Bansi Desai from JP Morgan. Please go ahead. Thank you for taking my questions, and congrats on good set of numbers. My first question is, you know, on the impact of, you know, ban on our brand, Codistar, you know, which we had in the month of June. If you can just call out what could be the potential impact there, and did we see any write-offs pertaining to that brand in this quarter? What we have done basically, we are building a portfolio in dry cough with a very, very innovative product that we acquired from Panacea. We have already launched Dextromethorphan and combination in adults, in pediatrics, and also we have basically acquired a very innovative orally disintegrating tablet from Panacea last year, and that also is a game changer. We are promoting very aggressively these prescription-driven brands to doctors, and we believe in the coming months, this business is going to grow substantially. Just to close the loop on this, with regard to the write-off, it has been negligible in this quarter. It's less than INR 10 million. Okay. Fair to assume that a large part of this brand revenues should be kind of, you know, recouped with sales growth in other brands? in the long run, yes. Okay. My second question is, you know, Rajeev, you've spoken about, you know, having this DMF grade APIs. So what is the longer term plan here? Do you see this increase materially going forward, you know, as a percentage of our sales? Do we see more and more APIs, which are of this quality? And if that's the case, how should we think about, you know, cost of manufacturing these? Till now, we have introduced 101 products in DMF. Our objective is to introduce 15-20 brands every quarter. That is what we intend to do, and these products are mainly from semi-chronic and chronic therapy areas. I hope I answered your query. Oh, got it. My last question is, you know, on, you know, the utilization of cash that we are going to accumulate, you know, over the next few years. You know, we are generating almost INR 2,000 crore+ of cash from operations, while, you know, our CapEx needs are, you know, closer to INR 500-600 crore per annum. How should we think about, you know, deploying this excess cash that we generate over the years? Yeah. At this stage, we would like to be a bit conservative with regard to the cash aspect. The first priority is that wherever any good opportunities are available with regard to M&A piece, definitely we will be utilizing the cash towards that. CapEx also around INR 500-INR 600 crore is what we are planning for this year, we will take a view in the next few quarters with regard to the dividend payout as well. Okay, on the M&A bit, would you be open to acquire brands in the Consumer Healthcare space as well to grow that business? Two sides, [audio distortion], we are absolutely open. One is consumer side, the second is Chronic side. Two places we're very, very open. We have said in the past as well. Okay, noted. Thanks a lot. Thank you. A reminder to the participants, if you wish to ask a question, please press star then one on your touch-tone telephone. The next question is from the line of Neha Manpuria from Bank of America. Please go ahead. Yeah, thanks for taking my question. You know, just going back on the Export number, I see in the presentation that we have mentioned there is certain one-off opportunities, you know, to the U.S.. Is this what you're referring to in terms of this continuing for a couple of more months or quarters? Or is this truly one-off, and if you could quantify that, if it's meaningful? It'll be difficult for us to quantify these numbers, but yeah, I mean, this will continue for the next few months. Understood. That's helpful. Second, you know, if I were to look at our cost, you know, both on employee and other expenses, you know, we seem to have seen a fair, you know, fair bit of increase quarter-on-quarter. In the employee cost, you know, do we have any one-off, you know, I mean, non-recurring payout, et cetera, during this quarter? Therefore, what is the normalized level we should be assuming? Similarly, you know, on, on the other expense, what's the level of spend that we are looking to, you know, incur as we focus on expanding Chronic and the Consumer Healthcare business, you know, with the growth aspiration that we have? Okay. With regard to the employee cost, if we compare, so we have added close to on a year-on-year basis, if you compare, so we have added close to around 1,000 people. Having said that, the MR addition has been less than 5%. That's part one. With regard to the one-off, we have launched the ESOP scheme, so in this quarter, there is an impact of ESOP cost, which has come in as compared to the, to the previous quarters. Yeah. With regard to the other expenses, you have seen a spike because we are investing into new, new businesses as well. That's also getting reflected in this, in the other expense portion. Sir, on the other expense side, as a percentage of revenue, what would you consider as being, you know, you know, given the investments that we have planned, what, what would be an ideal level of, you know, investment from another expenses perspective? Just to... Instead of getting into a quarter-on-quarter, EBITDA... No, for an annual, sir. We have given a broad, we have given a broad guidance that our EBITDA margins will be in the range of 24%-26%. So we will be able to maintain our costs within that, within that, range, so that we are able to maintain that margin of 24%-26%. Understood, sir. Thank you so much. Yeah. Yeah. Thank you. A reminder to the participants, if you wish to ask a question, please press star then one on your touch-tone telephone. The next question is from the line of Rahul Jeewani from IIFL Securities. Please go ahead. Hi, sir. Thanks for taking my question. Sir, can you talk a bit about the seasonality which you typically see in your India business? While Q2, Q3 could be stronger quarters for us, but do you, do you see a significant sequential decline in fourth quarter? Mr. Rahul, this is Sanjay Koul. In the last five years, our Chronic contribution has, if you talk about, talking about Mankind, it has increased from 28%-25%. With increasing contribution of Chronic in the next five to six years, impact of seasonality will be reduced to some extent. Having said that, if you ask me this year, yes, there will be definitely some impact of seasonality on quarter-to-quarter basis. Quarters two is always going to have a more impact of seasonality as compared to quarter three and four. If you look at our track record, I mean, first six months are always 51%-52%, versus second six months are 48%-49%. That is, that is how we maintain it. If you just see as a whole year, first six months, 51%, 52%, and rest is last six months, last six months. That is how we are doing for last couple of years. Sure. Sure, sir. That seasonality would imply that our second half margins also would tend to be on the lower side, versus the first half margins. Yeah, as a Chronic sales increases, I mean, that impact goes down. It will be in proportion to the, to the sales seasonality part. But, but, having said that, since the Chronic portion is increasing, so therefore, this seasonality impact is also weaning away. Sure, sure, sir. Also in the second quarter, the sales of the infectives go up, where the gross margins are lower, whereas in the latter half of the year, the sale of Chronic products is more, so it doesn't have a negative impact on the gross margins and the profitability as a whole. Sure, sir. Just on the gross margins, can you talk about the differential in gross margins between the domestic and Export business? Why I ask that question, had our Export business not grown to the extent which it did during the quarter, would our gross margins would have been higher, given that the Chronic revenue share has also increased to 36%? Rahul, we have shown, shown a betterment in the gross margins, so there has been an improvement of 2.8% over the, over the last year. I was referring to quarter on quarter that adjusted for the COVID provisions of last quarter. If you see, our gross margins have remained broadly flat quarter on quarter, despite some sort of an incipient Chronic revenue share. Would Export business be a lower gross margin business for us? If you can quantify, what is that differential? Directionally, yes, Export business do have a lower gross margin as compared to the, to the domestic margin, or if you compare it to the Chronic margin. As we said, that the focus is on the, on the domestic piece, and to structure the business in a manner, and we are confident of maintaining the gross margin around 68% level. That should give you the, the confidence that whatever is the, the mix changes, on an overall basis, we are confident of maintaining it to be around 68%. Also to reiterate that more than 90% of the revenues would come and still come from the domestic business. The margins of the Export business become insignificant and don't have an erosion effect on the domestic business margins. Sure, sir. The last question from my end would be on the ESOP scheme, which you referred to. Can you quantify the cost which you will have to incur, as in which you have incurred this quarter, and what you need to incur over the next two to three-year period? That we can share with you after the call. Oh, sure. Sure. Thank you. Thank you. The next question is from the line of Kunal Dhamesha from Macquarie. Please go ahead. Thank you for the opportunity again. So the question on our, our, you know, campaign on the DMF grade, you know, quality, you know, how that campaign has kind of, you know, moved for us? What is the response from the healthcare practitioner? Are we seeing whatever new product launches we have done, you know, probably is there a metric that you would track that, you know, growth in these products are 2x or 3x or whatever that be, versus the normal product launches? Any, any color there would be helpful. Kunal, very, very interesting question, that's my favorite side. We are very, very sure that going forward in coming years, DMF will disrupt the pharmaceutical market. Who doesn't want to have international quality purity, 99% plus purity drugs at an Indian price, and forget Indian prices, maintained prices. We, this basically helps our marketing team a lot in penetrating, entering topmost doctors' chambers. Again, I mean, Sanjay has already mentioned that first target basically is what? Going for Chronic and Semi-Chronic products. We are very hopeful, and it has also been mentioned that every quarter we wish to launch 15 - 20 new DMF SKUs. You can imagine yourself, how bullish are we? We are getting fantastic response. We ran a campaign on Burj, Burj Khalifa, that really shows our seriousness for this DMF, that really shows our conviction in DMF. What we see in future, that on one side, branded generic means DMF brands in coming years. That's the kind of a confidence we have got. Sure, sure. Sir, I, I understand that, you know, at this point, since you have just launched the campaign, but, would you kind of, you know, at some point, would you start sharing, probably, you know, the uptake or the, you know, revenue from that bucket? I think that would help us understand, you know, the, the impact, in a much better way. Kunal, I think these are still early days on the DMF. We just started with the campaign- Sure. We are in the process of launching newer products, more and more products every quarter. I think at an appropriate time, we'll take a call, if we wish to disclose the revenue separately or not. Sure. If I can add, right now, we are the first company to launch DMF product in India. Even the most of the doctors are not knowing what DMF is. A lot of marketing campaign we are doing, so in a time to come, when the awareness will come, people will know, our customers will know, then definitely the impact would be huge, because awareness is important right now about DMF. Just to add to this, it will be very difficult to quantify this as well, because some of the old brands or SKUs, they get converted into DMF. Already they have sales. How much incremental is coming because of this particular action? That is difficult to quantify or break it into, into that, because there are multiple factors which go for the increase in the sales. Yeah. Well, thank you. That was again, my next question, because, you know, Sanjay sir said that we are in the process of launching 15-20 DMF grade products every quarter. My question was, you know, probably how many of that would be our existing products and how many could be the new products? Not on a quarterly basis, probably a yearly basis, two-year basis. See, it will be 80%-85% our existing range being getting converted into DMF and new products in Chronic and Semi-Chronic, we will surely bring in DMF. That will be around 10%-15%. Perfect. Thank you, sir. Thank you. The next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead. Yeah, thanks for the opportunity. Sir, just on this Dydrogesterone plant, as it's been highlighted, that it would be commercialized in 1st of FY 2024, the operational cost is more or less there in this quarter itself, in terms of expenses? No, currently we have it's forming part of capital work in progress, so of the Udaipur plant. Okay. How much this will get added as in the coming quarters? In terms of CapEx spend, till now, we have spent around INR 310 crore on the Udaipur plant, which will be getting depreciated in the subsequent quarters, in fact. From this quarter, we are hopeful that the commercialization and the capitalization will be getting completed, so it will be coming in the depreciation. Yeah. On the operational cost side, sir? On the operational cost side, the plant where Dydrogesterone is being currently manufactured, it will be transferred to the new plant in Udaipur, so we don't see a significant rise in the OpEx cost. Rather, it will be, it will, it will be beneficial on the, on the gross margin or the cost of goods sold. Understood. So this quarter would have had some impact of these, lower prices of, on account of analium as well, correct? No, no. I mean, as you are aware, Mankind, from a portfolio of the products, we are the least affected in terms of the Anthelium products, so the impact is very minimal. Understood. Given that this dihydro OpEx is not going to be significant, while this could add for sales, your Exports is, in which case, ramping up, given that Tokyo is going to be much better, as it has been historically. If I sum up these things, 24%-26% EBITDA margin guidance seems to be conservative. Any comment on this? We are already at 25.6% EBITDA margin for first quarter. I'm sorry, Kunal. I think, the reason here is that, you know, because of the seasonality impact of Q2 going up and the sales of Anti-Infectives rising, and which have slightly lower gross margins, and then, the Chronic sales increasing in the second half of this year, I think we would like to be consistent with our gross margins as the guidance which we've given. Okay, sir. Thank you. That's it from my side. Thank you. The next question is from the line of Nithya from Bernstein. Please go ahead. Yeah, hi. Thank you for the opportunity. Just a couple of questions for me. One, bookkeeping question: so when you talk about DMF grade, are you referring to U.S. DMF grade? Are you referring to specifications as laid down by the U.S. FDA? The second is, U.S. DMF grade API, I'm sure, are more expensive. Are you looking at the new products therefore being margin dilutive? Sorry, we missed the last part of your question. The question is, U.S. DMF grade API is more expensive than, let's say, a non-U.S. DMF grade API, and therefore, is your incremental sales therefore margin dilutive for you, and to what extent? What we are referring to here is the U.S. DMF and the European CEP grade APIs. Yes, the cost of these APIs is slightly higher than the cost of the non-DMF grade. In certain products, there is a decline in the gross margins by 1 or 2 percentage points, but we are compensating for that decline by way of price increase, which the government allows to the tune of 10% year on year. There are also certain products which we are manufacturing in-house, the APIs, and filing the DMFs of those products. I would say there is not much of a cost impact on the DMF grade products that we are using. Thank you so much. Thank you. The next question is from the line of Neelam Punjabi from Perpetuity Investment. Please go ahead. Thanks for the opportunity. From the previous participant's question on Dydrogesterone. Please be louder. We didn't hear you. Sure. Is my voice more clear now? Yeah. My question is on the Dydrogesterone API. Could you please highlight what's the potential of Dydrogesterone globally in terms of, you know, capacities, in terms of tons, and what is the annual capacity of Dydrogesterone that we are putting out? We have a capacity of Dydrogesterone of manufacturing 400-500 kg per month, so that would be approximately 4.5-5 metric tons annually. The demand for Dydrogesterone globally is somewhere around 4 - 4.5 metric ton. This demand is increasing because this molecule is growing across the globe. As and when new entrants are also launching, the market size is increasing, which we've seen in India itself. Got it. Our capacity of 400 - 500 kilo per month is on the expanded capacity, right? Correct. The current capacity that we have, I mean, the infrastructure that we have, is capable of going up to 400 - 500 kilos a month. Our current capacity is in the range of 200, 250 kilos per month. Understood. That's helpful. Thank you. Thank you. A reminder to the participants, if you wish to ask a question, please press star then one on your touch-tone telephone. The next question is from the line of Alankar Garude from Kotak Institutional Equities. Please go ahead. Yeah, hi. First question is, has there been any impact of the FDC ban on Codistar in this quarter? I think this question has already been asked, Alankar, but there has been no impact as such on the Codistar ban. I mean, we are negating the impact of Codistar by launching newer products in the similar segment under the brand of Codistar itself, in the form of dextromethorphan and also the, the tablet that we acquired from Panacea. We see in the next few months, this impact will get negated. I understood. The second question is, can you talk a bit about the trade generics business? I mean, how seriously are we approaching this particular vertical? How big is it for us right now? What's our approach? Momin, we're quite serious in this. Our trade generic will be doing around. Last year it did how much? INR 200. INR 200 crore. Hopefully this will do around INR 250 crore-INR 260 crore this year. We have a long-term reason for launching that product, that, going forward, can be shipped to some products which become used to customers' habit to bring in our Rotich side. That's a basically more intangible long-term plan. Have we invested in, in terms of any field force, dedicated to this? Or the numbers are quite small at the moment. Yeah, absolutely. It's close to around 200, which are sales force for this business. Understood. Thanks, that's it from my side. Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference back to the management for their closing comments. Yeah, thank you everyone for joining us on the conference call. We really appreciate you taking out time for our earnings call, and we look forward to interacting with you going ahead as well. Thank you. Thank you. On behalf of Kotak Institutional Equities, we conclude today's conference. Thank you all for joining. You may now disconnect your lines.