Ladies and gentlemen, good day, and welcome to the Marksans Pharma Q4 FY 2023 earnings conference call, hosted by Ambit Capital. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Prashant Nair from Ambit Capital. Thank you, and over to you, sir. Thank you, Ryan. Good afternoon, everyone, and thank you for dialing in. I am Prashant Nair, Healthcare Analyst at Ambit Capital. I would like to thank the Marksans Pharma management for giving us the opportunity to host this call. From the company today, we have with us Mr. Mark Saldanha, Founder, Chairman, and Managing Director, and Mr. Jitendra Sharma, Chief Financial Officer. I will now hand over the call to Mark for opening remarks and to take it forward. Over to you, Mark. Thank you, Prashant. Welcome, everyone, and thank you for joining us in our Q4 FY 2023 and FY 2023 earnings conference call. We appreciate your continuous interest and support for the company. We are delighted to report a great year of performance, which exceeded our FY 2023 guidance of INR 1,800 crores in revenue. Our performance was led by intense focus on execution, driving market share in various products and SKUs. We saw strong growth across all our markets. Our EBITDA margin improved for the quarter based on normalization in freight cost and cost optimization initiatives that we had undertaken. We observed improved market conditions in the quarter, with stability in price erosion for our Rx products. This year has been a relatively busy year for us, which accounted for several key developments for the company, enabling shareholder value creation. This included the completion of the Teva Pharma acquisition, the OrbiMed warrant conversion, the share buyback. Now additionally, we have announced a dividend of INR 0.5, which is 50% of the equity of INR 1, each face value for the financial year of 2022-2023. We have appointed Mrs. Shailaja Vardhan as our new woman independent director in the company, further strengthening and broadening our board. One of our key focus areas for the next financial year is going to be the integration of our newly acquired manufacturing plant from Teva, where we plan to obviously increase the capacity and launch new delivery segment dosage forms. We expect a meaningful revenue contribution from this plant to start from Q3 of FY 2024. We continue our focus on revenue growth by growing SKUs and existing retailers, products, and key markets. We also aim to launch new high-margin products in the year to come, enter new geographies, add new customers, capture growth opportunities in the OTC segment. We continue to take steps for backward integration on operational efficiencies. Marksans has consistently maintained a net cash balance sheet for the last five years. We aim to maintain a strong balance sheet with a disciplined growth approach over the coming years. We remain confident of the performance in the coming quarters, while adhere to the best of the equity and governance practice. With this, I'd like to turn it over to Jitendra, who will update you on the financial, then we can start our Q&A. Thank you, sir. Starting with Q4 of FY 2023 performance, our operating revenue was INR 486 crores and increase of 16.3%, compared with INR 418 crores last year. The U.S. and North America was at INR 193.5 crores, representing a 12.8% increase year-on-year basis. U.K. and E.U. formulation market grew by 33.1% year-on-year to INR 206.3 crores. Australia and New Zealand formulation market recorded revenue of INR 63.4 crores. The rest of the world saw an 11.8% increase in sales to INR 22.8 crores in Q4 of FY 2023. Gross profit was at INR 242.1 crores, up 17.3% year-on-year. Gross margin increased by 40 basis points from 49.4 to 49.8 in Q4 of FY 2023. The raw material prices have started to normalize. However, the company is yet to see the full benefit of it. EBITDA for the quarter was at INR 109.5 crores, an increase of 72.1% year-on-year. EBITDA margin increased by 730 basis points, from 15.2% in Q4 of FY 2022 to 22.5% in Q4 of FY 2023, on account of the normalization of freight expenses and cost optimization initiatives. Profit after tax was at INR 82.7 crores, compared to INR 29.7 crores in Q4 of FY 2022, a growth of 178.9%. EPS for the quarter was at INR 2, with almost 185% growth on a year-on-year basis. Taking you through the full year FY 2023 performance. Operating revenue was at INR 1,852 crores in FY 2023, up 24.2% year-on-year. The gross profit for the year increased by 20.3% to INR 930.8 crores. The gross margin was at 50.3%. EBITDA for FY 2023 increased by 31% year-on-year to INR 339 crores. The EBITDA margin increased by 100 basis points from 17.4%- 18.3% in FY23. The cash generation from operation was at INR 237 crores. For FY 2023, PAT grew by 42% year-on-year basis to INR 265 crores. The earnings per share grew by 42% to INR 6.4 per share. In FY 2023, the free cash flow was INR 183.8 crore. The CapEx incurred during the year was INR 53.6 crore, and we spent INR 29.5 crore in R&D, which amounts to 1.6% of the sales. We continue to remain debt-free. We had a total of INR 715 crore of cash as of 31st March, 2023, which we plan to utilize for CapEx and funding our inorganic growth strategies. With this, I would like to open the floor to question and answers. Thank you very much. Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star 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. Our first question comes from the line of Agastya Dave with CAO Capital. Please go ahead. Thank you very much for the opportunity. Mark, I must congratulate you. Amazing execution. Congratulations. Great work this quarter. My questions to you are basically follow up on something that we discussed last quarter. You had mentioned three major levers for margins going forward. One was the high cost raw material prices coming down, then the channel and the freight cost and the internal improvements. Now, my understanding was that the freight reduction would have contributed to 100 basis points of margin improvement this quarter. You guys, quarter-on-quarter, have reported a much, much bigger jump. Can you help me reconcile? In the opening statement, you have also mentioned that the RM prices, while coming down, have not benefited you at all. Can you please help us reconcile the margins between Q3 and Q4? I mean, see, the RM prices have been dropping down, but it's not that we have, we have been able to capitalize it for the full year. Right. Definitely, we did see a better improvement in Q4 compared to Q3. Again, this basically revolves around the inventory being held at different levels, at different, you know, plants, at different in-processes. The freight has seen a steep decline, you know, on a month-to-month basis, so it's just a bit, it's just a matter of timing. Again, we definitely saw a better quarter compared to the previous quarters, where these were concerned. Even the RM actually in April, we are seeing better pricing than what we had seen in the, in the last quarter. There are. Because obviously, when your inventory depletes, your new pricing comes into play, the raw material and your, you know, your purchase comes into play. That is where the dynamics basically changes from time. Definitely for the financial year, we could not capitalize it for the full 12 months, because obviously we didn't see the prices prevailing at that at this level for the full 12 months. We saw an improvement happening in the third quarter. It was much better in the fourth quarter. Our inventory, which was there, reduced because obviously due to all the supply challenges, we had to hold a high inventory. Once the inventory started depleting, we started gaining on the new cost of goods or new cost of raw material that came into play. You mentioned in Q3 that you guys were sitting on six months of total inventory, different for different locations and different products. What is this number down to now? The six months of high-cost inventory. Yeah, it's almost over. Some of the places and some of the items we have already started with new cost. I must tell you that the cost of Q4, what machinery we got in Q4 and what we are getting in Q1 of this financial year, which is starting from April. Yeah. That's further improved. There has been. It's a continuous process of improvement. I do believe that it is coming to a rock bottom in terms of pricing. Uh- I do believe this year will be much better where pricing is concerned or raw material pricing is a concern. Nice. Nice. One other question, which is on the inorganic side. Any progress? You were last quarter, you were saying you were evaluating two deals. Any progress there? Any likelihood that we'll see some announcement this quarter? Not this quarter, definitely not this quarter. We are, it's a continuous process. We evaluate, we do the, we go under due diligence, we find out that, you know, that, then we do find out that, maybe it's not the right deal for us. Sometimes the valuations don't fit in. Nothing, nothing where, concrete, where, we are far away from pen to paper. We do, we are in dialogue with a couple of potential targets, but nothing concrete at all. Great. sir, I may have a couple of more questions. I'll go back into queue and come back. Thank you very much, sir. All the best for next quarter. Thank you. Thank you. Our next question comes from Viraj Mahadevia with An Investor. Please go ahead. Hi, Mark, Jitendra. Fantastic numbers. Congratulations for you staying on course through the difficult last year. My question was regarding your opening remark about the launch of new products. Can you give us a flavor of the nature of new products you're looking to launch from your R&D stable, which are going to push up margins overall? In a normalized freight, raw material environment, do you think 25% margins are achievable in 2024 or FY 2025? Let me address your first question. Obviously, our product launches are something which obviously it's not something that we start today and launch tomorrow. These are items where we have been working on, and where we file for, I mean, maybe 12 months earlier. We do see some approvals coming in the digestive range of items. We do see some approvals coming in the pain segment. We are expecting quite a few approvals in our U.K. in our U.K. plant and our U.K. manufacturing facilities. We are seeing potential approvals- what is different about these products, Mark? What is different? Is it extended release? Is it- Products in U.K., you are looking at antidepressant, cardiovascular items, some Rx and a mix of OTC. Out- Here in India also, then for the U.S. market, we are looking at a bunch of pain and digestive in OTC and some in Rx items in cough and cold also. Right. What would cause- It's a basket of items, Viraj. Right. What would lead to the higher margins? Sorry, I. The higher margins, we are looking at, basically, obviously, better cost of goods, raw materials, better product mix that is going to come into play with new approvals coming in. These are factors that we are playing on. In terms of obviously leveraging, new cost of material, is always great news. This will always, this will also come with some challenges of pricing pressure, you know, in terms of new price challenges that will happen in the market, because raw material prices have really declined dramatically out there. We do see us capitalizing on this raw material, the freight, the packaging material cost that has come down, you know, petroleum item are impacted with oil pricing. Everything has improved. We are very hopeful for a better financial year this year compared to last year. Right. My second question, Mark, is regarding your cash balances and something I've repeatedly asked. Congratulations on completing the buyback last year. I'm sure you're very pleased, both from a shareholder and owner perspective, at the price at which it was done. You have about INR 715 crores of cash on your books. You're generating about INR 200+ crores of free cash flow annually. Even if you set aside INR 200 crores for the Teva acquisition, plus debottlenecking and another INR 400 odd crores, potentially for one or two acquisitions, you'd still have another INR 50-INR 100 crores incremental left. Would you consider another buyback down the line? Your share is still not fairly valued. Obviously, you've improved and come a long way since your last buyback. That would add further to investor confidence. I think this is going to be an every year process, and we have now defined the process of free cash flow and how we have to deploy the free cash flow in terms of dividend and buyback. We will basically, I mean, this year itself, we have, like I said, we have done a buyback as well as improved on our dividend ratio. If you look at it, one third of the free cash flow we have deployed onto either into both categories or any one of the categories we have to explore on that. Right. You think potentially INR 50-INR 70 crores could come back to shareholders in terms of combination of dividend and/or buyback? Yeah, it's a one third of free cash flow. That's what we try to adopt. Excellent. Thank you. All the very best. Look forward to 2024 and 2025. Thank you very much. Thank you. Thank you. Our next question comes from Hiral Nandu with Kalpvruksh Capital. Please go ahead. Thank you. Thank you for the opportunity. Congratulations, Mark, for the great set of numbers. Just to understand on the EBITDA margin, as we had promised earlier, or you have guided further, that we will keep growing, and it is seen on that path. We are now 22.5% EBITDA. In going forward, how much is sustainable and growth, as, I think the earlier question was also same line, that 25% or at least 22.5% margin sustainable in the future? Are we on the same target top line of INR 2,000+ crore in the years to come? Yeah. I mean, we are very confident. You know, in all my earlier conference calls, we had set out a benchmark of INR 2,000 crores, and we're pretty much around there. Now we no longer talk of INR 2,000 crores, we talk beyond INR 2,000 crores, so we are confident of surpassing that benchmark. Now we are setting up a new benchmark, a new milestone for us, and that we are planning to achieve in the coming years. We are excited to hear the new benchmark, actually. I mean, because, you know, there is visibility. Obviously, we do believe INR 2,000 crores will be crossed. Now we are aiming for higher ground, higher new heights, let's put it this way. We have a visibility, and we do see us growing in the next three years or so. That's where I do believe, at least from a revenue point of view, you know, we have surpassed our expectations, like I mentioned, you know, in this year itself, and we do plan in the coming years. From a bottom line point of view, obviously, we are working hard in terms of EBITDA. It's very fluid, but it always, I believe it's going to be always better, than the previous because of all these improvements of, you know, of raw materials, freight, everything coming into play. You see that this raw material and the freight price now being settled and more or less can remain constant in the future, right? For the next couple of quarters, so that this margin is sustainable that way. If some guidance or some thought process on the Teva facility, that what kind of revenue we see in this coming year, financial year 2024. Well, like I said, in, we do see, I mean, there will be a gestation time. We have just acquired, we have just moved into Teva somewhere in April. You know, there will be some gestation time for integration, for expansion of capacity, everything. We do see revenue generation coming from the Q3 of this year. Then obviously, we do see a full-fledged revenue generation happening maybe in the Q4 or Q1 of the next year, Q1 is more realistically. Where, we do believe that the amount of investment that we have done, it will be probably equivalent to or at par or bigger than our present facility in Goa. Super. Super. All the very best, and congratulations once again. Thank you. Thank you very much. Thank you. Thank you. Our next question comes from the line of Darshil Jhaveri with Crown Capital. Please go ahead. Good evening, sir, thank you so much for taking my question. Firstly, sir, congratulations on great set of results. Sir, I just wanted to ask about, we were talking about going beyond INR 2,000 crore revenue. That would be for FY 2024, correct, sir? With what would be the potential of combining our new product launch and Teva maybe for FY 2025 or something? You know, we could have, like, some sort of, you know, what we could see as our combined that. Will the Teva facility impact our EBITDA margins? Because, you know, we are, you know, setting up a new facility, you know, setting up the process of integration of new facility. From a short-term point of view, if you're talking of a quarter or two, definitely integration takes time, takes money, so there's a cost implication out there. From a medium to long-term point of view, the return on investment and, you know, there's a lot of gain from the pain that we take in the short term. I do believe the Teva facility is going to add tremendous value and basically is going to fuel our growth and service our front ends globally. I think there is no other shorter cut or a shorter way to actually overcome that. We are basically burning the candle at both ends. We are working extremely hard to ensure the gestation time is as short as possible, where that is concerned. Okay, sir. Sir, if I may just for FY 2024, can we think about, you know, INR 2,000 crore plus revenue with around 22% margin? Would that be a fair assumption? I can say, we are quite confident of breaching the INR 2,000 crore. That's not a problem. The margin part of it, I would not want to speculate right now. We are optimistic that the margin, our EBITDA will be better than what it is, what it was for the year ending. Oh, okay, sir. That helps a lot. Sorry, sir, but, can I just about the Teva facility? What kind of, you know, peak revenue or how that we could, you know, maybe expect, maybe FY 25, because I understand there is a gestation period or something, you know, any something ballpark figure or something that would just be ahead, future? I think, from a revenue point of view, again, we don't want to give a short-term outlook on a revenue basis. We normally talk of our objectives of setting new goals and new heights. We have plans in place to achieve our new milestone. We no longer talk of INR 3,000 crores, but it's great that you still remember INR 3,000 crores. But we have set a new high target for the company, a new objective, new goal. But I do believe in terms of volumes, we are looking at 5 billion plus tablets or pills to come out of Teva for 2025. Oh, okay. That helps a lot. Congratulations once again, the great set of results. Thank you, sir. Thank you. Thank you. Our next question comes from the line of Manoj Matthew Jacob, an investor. Please go ahead. Hello. Congratulations, Mark and Jitendra. Thank you. My question is, what about the DMF? Have you filed the DMF? You said you will be filing DMF for the molecule. Matthew, we are working on it. We are working on five items, five products, five molecules. We are hoping that our DMF will be filed sometime in the month of September 2023. You know, obviously, we're just going through the entire process of stability, profiling, impurities. There's a lot of chemistry that is involved in all that, we are optimistic that we should see the light in terms of the filing part. You still stick to contract manufacturers, not to own the backward integration? Yes. We still stick to contract manufacturing. One question, sir. Teva alone, the next financial year, how much will it be? INR 1,000 crores or INR 2,000 crores? I didn't get what you are asking. Could you repeat? No, I'm talking Teva facility alone. Teva facility alone. Teva. Teva facility, okay. Like I said, I can't give a number to it, you know, because we don't give a forward-looking view. I can give you what we are aiming in terms of the capacity that we are looking at, 5- 6 billion tablets coming out of that facility. Not $8 billion? Well, it will go to INR 8 billion, but it's a stepping stone. You know, we want... It's not like, I wish it was like a Ferrari, where you know, you start from zero to 100 in four seconds, but it did not happen that way. We are investing a lot. In the first year, after the, I mean, after the first year, we do believe we will touch between INR 5 billion-INR 6 billion, and then we will be aiming for INR 8 billion. Okay. You will be looking into inorganic growth because you sit on a good amount of cash. Well, that's a part of our business model that we always pursue, but if history has to say something about us, we are very choosy in how we go about doing our inorganic strategies and how we acquire companies. We have to see the synergy and obviously, it has to be, you know, value driven for our shareholders. It's easier said than done, but we are exploring, we are in dialogue. You know, we've gone through due diligence of over two companies in the last 8 months. We do explore that possibility, but nothing concrete today to report on that. Okay. Okay, that's good news. The last question. Yeah, there was some news that in Madhya Pradesh, you have allotted some piece of land. Is that true? Are you building something over there? Yeah, Indore. That was Indore. Yes. We were awarded land, but now our focus has gone to this new facility, Teva, that we acquired, because that came a bit later on. Presently, we are pursuing the Teva plant. We've got our hands full, and like I mentioned in my opening statement, that's our priority number one, because that will ensure, you know, our objectives being hit and our growth plan being appealed. If you look at your financials, it seems that you bought the Teva plant for 56 crores, and you will be putting in another 200 crores to expand capacity. Am I right? Yes. INR 200 crores includes the acquisition cost. Okay. Now 200 - 56. That's how we should read it? Yeah. Okay, thank you, Mark, and congratulations. Thank you. Thank you. Ladies and gentlemen, if you wish to ask a question, please press star then one. Our next question comes from Vignesh Iyer with Sequent Investments. Please go ahead. Congratulations, sir, on strong set of numbers, and thank you for the opportunity. Little more, related to your other expenses, you know, for this quarter and for the quarter ended December. Just to get an understanding, as in your other expenses, in quarter three was around INR 101 crore, and which is INR 72 crores in this quarter. Just wanted to understand if this is one-time savings, in quarter four, or was it more to do with one-time expenses in the earlier quarter? What is, or what is the exact nature that we have managed to save, a good chunk despite having the growth in revenue? mainly, of course, you know, this reduction has come from freight, because in terms of if you see the product mix, you know, most of our products are volume-driven products. Our freight cost, like, you know, has gone as high, you know, as 15%, like, you know, of the revenue number, you know, when the freight rates were at peak. You know, just for your better understanding, for U.S., reefer containers, like, you know, at pre-COVID level, the freight rates were in the range of $3,000 per container, which have gone up to $12,500 per container, and now it has come down again back to $3,000 per container. Similarly, for U.K. also, the freight rates have gone up to almost $9,000 per container, which has now come down to almost $2,000 per container. So we have, it's most, good amount of saving there. There is no one-off as such, because freight, like, you know, in coming quarters, we believe, these are the normal levels. We have gone to almost pre-COVID levels of freight rates. Hopefully, like, you know, we see, you know, better numbers. We have taken a lot of measures in terms of the cost optimization also. There are some reclassification, which we have done in our other expenses, and that also resulted into bit of lower other expenses in totality. Sir, if my understanding is correct, subject to the freight doesn't go up from here, no, we will, we'll be saving that amount of cost, right? For this amount of sales that we're doing. A good part of that, yes. Fair enough. Secondly, coming to this new acquisition that you have done in Teva facility, just to understand, if I have to put a blended, margin profile for the products that are going to come from the Teva facility, would it be more or less on lines with what the company is making now? Yeah, that'd be fair enough to say. Obviously, we will always try to improve on the margins, but it's too early to mention on the improvement part of it. I think it'll be fair to say that it will be a blended mix of what we are getting today. Okay, because just to get the understanding, because you've got a huge chunk of cash with you. Just to understand, what is the process by the management to actually identify any company? Is there a metrics in place like a good IRR or ROC that you expect the company to make out of such acquisition? I mean, if I could just, if we could, as an investor, get an idea behind, apart from the product profile, obviously, which is more on the technical side of it, but on the financial side, if we could get some understanding of what is the management thought process behind. We have got a good chunk of money even after this acquisition. Obviously, when acquisitions are different types of acquisitions, when you look at an asset, I think the gestation time is going to be how fast we can jump, optimize that, those, the output or desired output that we are looking for. If we hit this objective, then return on investment relatively is very fast. Obviously, we do calculate all this into an acquisition that we go into. When it's related to more into company, into different geographies and all, it becomes a bit. Integration takes a bit longer and return on investment takes a bit longer, because we are looking for different objectives and different milestones to be hit and different growth trajectories to be hit. There, obviously, the dynamics and the, even the valuation becomes different when you look at company versus you look at a facility. Facility is always looked as either an asset or a liability. Company will always look with more sentiments and emotions attached to it, and valuations and multiples of PEs are going to play. Yeah, it is right. I mean, I don't deny on that part of it, financially, at least, I mean, as the management would be deciding on acquiring a company which probably has like 3.5, 4x of fixed asset turnover or a 15%, 20% of ROC at least, right? If you have got any specific metric that you could share with us, that, okay, we don't pick up a company if it is below this, because at this ROC level, it doesn't make sense to actually put money in the company. No, I think we evaluate it on case-to-case basis. We don't have a metrics defined in paper that way. We do have, obviously, we have a board of directors. We, we brainstorm, we evaluate it. We do consider, we do try to see how fast we can, how fast the ROC will take place. If it is too long, then we have to let go of it. Okay. Just last question from my side. I just wanted to understand, we closed this year with on a consolidated basis with a tax rate of 21%. Will it be at this level only, or we'll be moving to probably something like 25% again in next year? It will increase a bit because from this year onwards, the U.K. corporate tax rates have increased from 20%-25%. We believe the effective tax rates from this year onwards should go to around 23%. Okay. Okay. Okay, sir. Thank you. That's all from my side. All the best. Thank you. Thank you. Our next question comes from the line of Anupam Agarwal with Lucky Investment Managers. Please go ahead. Thank you so much for the opportunity. Congratulations team on the numbers. My first question is on the Teva plant. I understand Q3 of this year is when you're looking to commercialize. Can you help us understand the annual OpEx cost that will start flowing through from the next year with respect to Teva plant? Well, the OpEx cost will depend on the level of activity and the capacity utilization we will have from the plant. Right now we are in the investing mode. You know, we don't have much of, you know, OpEx out there, but definitely we are investing a lot in CapEx. The current costs, like, you know, are not that high, and but definitely it will increase in coming quarters. Our objective here is to ensure that we start generating revenue as early as possible, and we believe that we will achieve, like, you know, a break-even kind of scenario by Q3 of this financial year, so far as Teva facility is concerned. You mean EBITDA break-even by Q3 of 2024? At a profit level. I mean to say, at profit level, not EBITDA. Understood. Understood. Yeah, at a profit level. You just mentioned to the earlier participant that, blended company level, both are at a similar margins as what Marksans records currently. Not able to reconcile the math. Yeah, that was with regard to the product mix, what we were talking about. The EBITDA which our the existing plant product mix generates, like, you know, we will have similar level of EBITDA with the products which we are going to get manufactured at Teva plant. All right. Have we already started trending some costs with respect to the Teva plant, already in the Q3, Q4 numbers? It will start from Q1. It will start from Q1. All right. At 5 billion capacity with first adding year 1, what will be the OpEx cost for the plant on an annual basis? Well, I can give you just offhand numbers. It will be anything between INR 50 - INR-60 crore per annum. Understood. That's all. Thank you. Second question with respect to the new products. You mentioned they're coming in digestive and pain segments and antidepressant and a mix of Rx and OTC. Just to get a color on how the product mix will shape up from the Teva plant, is it similar to what we do currently, or is it going to be meaningfully changing from there? More or less in the first year, it is going to be very similar. Then as and when we start filing some products from the Teva plant, the product mix will change out. The revenue mix from that plant is also going to look similar, U.S. and U.K. largely, or? It will be more European-driven, but I do believe eventually it will balance it out to U.S. and Europe. U.S. and Europe. Understood. Just lastly from my end, just wanted to understand that actually I know, Alembic has come in and have converted the warrants. Any support you have received from them in terms of customer engagements, in terms of penetrating deeper in existing markets or getting into new markets? Some sense if you can give as to what financially, we understand you've got the support, but otherwise, if you can help us understand what is the role Alembic is playing in terms of getting more business to us. Yeah, I mean, they are actively involved in dialogue. They are They are also helping us in identifying M&As. They are on the board. They basically, all the M&As we get also, we have, they have insight, they have market intelligence on various continents and countries where they give us good inputs on potential targets that we identify and the background checks. I think, our, their value addition is tremendous, number one, on the board, on the corporate governance point of view. Obviously on, in M&A, they are very actively helping us on ground there. Day-to-day running of operation, obviously, we do most of the day-to-day operation. You know, they do actively participate in our meetings that we have every fortnight or once a month. Whenever we do have board meetings, they are quite active on that. I believe, like, being here, Alembic, you know, showed interest in investing in Marksans Pharma. Last one year, have you seen anything in numbers financially helping us, show better numbers? I think their role is a little different. From an investor basis, we are not here to run the company, so we do run the company. Mm-hmm. Their role is more onto adding value onto the board and onto the direction that we would that we plan to take the support structure that they actually offer. Obviously, the wealth of knowledge that is there in this industry as well as in M&As. We do actually we do lean towards them. There, you know, whenever we do come across an M&A or when. Sometimes they have honestly recommended quite a few M&As, and they actually approach company M&As for us, saying if we have potential targets there, because they have better connectivity and better bandwidth of approaching our clients. They have been very instrumental. M&As is a very important part of our business model that has evolved our company over the period of years. I do believe they will add tremendous value where that is concerned. Right. Lastly, if I may, sir, out of INR 200, we've invested INR 57, so balance INR 143. Will that entire INR 143 flow through in FY 2024 as CapEx and over and above, our current business, what is the CapEx there? In the Teva plant, we have already, since starting from April, we've started really spending money because like I said, we are trying to compress the gestation time as fast as possible, and we are on a good machine. We are trying to increase capacity, we are trying to integrate. Substantial part of that money will go in this financial year, in the current financial year, which is going on. With the other facilities, the normal CapEx just goes year-on-year in terms of upgradation of machines or breakdowns or engineering novels that we keep working on. That's a normal process, which pretty much in every plant witnesses on a yearly basis. Right. INR 150 crore-INR 200 crore each year for next two years. Is that understanding right? More or less. Okay. Got it. Thank you so much, and wish you all the best, sir. Thank you. Thank you. Our next question comes from Yogesh Tiwari with Aryan Capital Markets. Please go ahead. Yeah. Yeah, good afternoon, sir. Thanks for the question. Thanks for the opportunity, and congratulations for the result. Thank you. My first question is on the employee costs. On a quarter-on-quarter basis, the employee cost has declined. What would be the reason for it? think it is just that, like, you know, some bonus payments normally, which happens in the like in the initial quarters and towards the end, like, you know, it normalizes. I think it is that which has basically resulted in a bit lower employee cost. It will get covered, like, you know, in in the first two quarters of the current year Basically, it was related to some bonus component? Yeah, the incentives and bonuses, which are normally being paid, in Q1 and Q2. Sure, sir. In terms of the U.S. business, like, what would be the price erosion for the fourth quarter, and what would be the current status like, how is the pricing environment now versus Q4? In the first quarter of this financial year, obviously there is a stability in terms of pricing. You know, whenever raw materials change, pricing erodes so fast, it's never encouraging because it creates panic and even the front end, you know, witnesses that price erosion to some extent. I do believe this year is there will be a stability. I don't see prescription products which are highly volatile. We are witnessing now pricing stability happening. That is a good news. We don't see any further price erosion happening where that is concerned. In the rest of the industry, it's just a normal trend, which nature of the beast that I would put it at. Sir, directionally, like Q1, the current quarter, the price erosion is less than Q4. Can we assume that? Yes. We can assume that. It is in the range of a single, low digit? Yeah. Okay, sure. In terms of U.S. business, sir, our proportion of OTC has improved significantly from about 55% to about 74%, 75%. How will it impact our business in the U.S., our margins increasing? What would be the impact like? I don't see an impact. I see a positive because we are gaining market share value. Operational leverage will kick in with better revenue coming in. Distribution will get more economical and cheaper revenue products to the same destination. I do see trade cost optimization happening. I do see operational expenses being optimized and leverage being kick start there, kicking in there. I do see a benefit happening only from that angle. Thank you. Sir, can we assume that because of the increase in the proportion of OTC products in the U.S., that might be one of the factors why our other expense and freight cost is also reduced drastically in the quarter? To some extent, yes. To some extent, yes. We will be able to maintain that low freight cost because of the increase in this proportion? Yes. Sure, sir. In terms of the U.K. business, we have seen quite a strong growth of like 33% on a YoY basis. What would be the key drivers for that, such a strong growth? Because other regions, still they are in a band, but U.K. and Europe is doing extremely well. What would be the key drivers for it? ... new product launches happening in, we are very aggressively launching new products. We are also obviously taking market share. It's as company matures, the product basket matures, you get better market share, you get better position. Definitely, with new products coming in, you'll see a better product mix and better profitability will happen. Sure, sir. In terms of the, you know, as you told in the commentary that, we will be looking at some inorganic opportunities. Any target segments, what would be the target segments for the inorganic opportunity? Well, I can't say target the segments, but I can tell you geographies we are still exploring are Europe. We look at opportunities in Europe, we look at opportunities in India. You know, we are exploring different geographies. Sure. Like, we have about INR 700 crore of cash, what would be, like, the ticket size of that acquisition? Approximately, what would be the range like? We don't define that. We are more keen on looking at qualitative part of the acquisition than, you know, the quantitative part. We do look at number one, you know, there has to be a synergy and there has to be a value addition and what we can get onto the table. Based on that, we are open to different ticket sizes, but we don't go with a mindset that we need to acquire something very big or acquire something very small. Sure, sir. In terms of the outlook for FY 2024, this Teva facility would be coming about in Q3 of this year. We grew by about 24% approximately in this FY 2023. This Teva facility coming in mid of 2024. Can we do better than the growth we had in FY 2023? Can we assume that with the new facilities coming? Well, we are expecting to grow, that's for certain. Yeah, I mean, our bench, we got INR 2,000 crores, and we are positioned for that. Definitely growth will happen, but the full optimization of the Teva facility, we will basically see it in the next financial year, like I mentioned, in the Q1 of 2025, you know? You will see return happening, you'll see sales revenue being generated in Q3 2024, and that will add, you know, that will add to our growth because obviously any additional revenue that comes in is going to add to your growth story. Sure, sir. Just, in terms of approximate quantification, because of the new facility and other initiative which we took, so we will be able to more than 20% in this current financial year, facilitated by our, the other initiatives? It's tough to give a number right now or a percentage right now, but like I said, when you talk of Q3 of 2024, basically people saw half the year or more than half the year is already over, yeah. It's not gonna be like, well, if numbers could add up that easily, then next day you will ask me, "Can we do 40% growth?" It does not work that way. Definitely we plan to maintain our growth level for this year, too. Sure, sir. Lastly, sir, of all modeling purpose, what would be the sustainable operating margins in the long term for us? Can you repeat the question again, please? What would be the range of sustainable operating margins, EBITDA margins for our company in the long term? We have achieved 18% EBITDA margin during March 2023. It is a bit difficult to, you know, give forecast, you know, but we expect to maintain, you know, at least this margin at this level. Probably improve slightly. Obviously, we are aiming, we want to touch the 20 levels, but we have to work hard on that. Sure, sir, that is very helpful. That's all from my side. Thank you. Thank you. Our next question comes from the line of Pravit Chaudhary with Green Portfolio. Please go ahead. Pravit, your line is unmuted. You could please ask your question. Since there is no response, we move on to our next question, which is from the line of Shikhar Mundra with Vivog Commercial Ltd.. Please go ahead. Hi, sir. Congrats on a good set of numbers. What would you say is our existing capacity utilization for the Goa, U.K. and U.S. facilities? You're talking of the present facility or the Teva, including the Teva? No, excluding Teva. We are at 70% utilization. All right. How much do we plan to invest in API manufacturing for the top 10 molecules? I didn't get you. You're asking how much do we plan to invest or how much do we plan? Yes. API molecule for the top- We are Right now, we are targeting the top five molecules to file our DMF. It may go between five-seven items that we would file DMF. We'll probably be looking at an investment around INR 20 odd crores, INR 20-30 odd crores. We are basically going through a CDMO approach. Okay. Basically, our investment here will be mainly in filing DMF, in the product development and in filing the DMF. We believe that we will spend somewhere around, say, INR 5 crore-INR 7 crore per month. Okay. What would be the potential cost saving for these, like, these top five molecules contribute how much to our revenues, and what would you expect the cost savings due to the Teva integration? The top five molecules, the fact that they talk of top five molecules, will probably contribute, maybe 30%. Of the, in terms of the price reduction. Yeah. In terms of the overall margins, like, you know, we can expect our, you know, gross margins to improve by anything between 300 to 500 basis points. That's only pertaining to these five molecules or on a company level? On five molecules. All right. One question for the Teva facility. If you have acquired the whole facilities for 56 crore, how come are you spending extra 144 crores to get it ready? What are we exactly spending this on? For capacity enhancements and, obviously, the capacity is very small, so we are increasing it to our expectation. The facility is big, but the capacity is small. What is the current capacity? Because we plan to make it 8 billion, so what is, like, the current capacity in terms of units? I think it's less than $2 billion. All right. All right. Do we have some manufacturing agreement with Teva in place to supply them some of the medicines from this facility? We have for 12 months. 12 months. How much would be the potential in terms of billion units? I didn't get you. How much would be the potential in terms of units? Yeah, to Teva, the sales to Teva. It will obviously come from the present capacity only. This is not from our increased capacity. They will be consuming it from their present capacity that is already installed. All right. That agreement is for this financial year, FY 2024? Yeah, for this financial year, for 12 months. All right. This EBITDA margin, which has occurred, so how much, like, EBITDA margin expansion, which has occurred from quarter three to quarter four, how much would you say it is due to a change in product mix and how much from the savings in freight cost? I think expansion comes from the raw material and freight cost. Product mix that is a continuous process that takes place. We will see a better impact of the product mix in this financial year. All right. If the freight costs remain as it is, this EBITDA is definitely sustainable, would you say that? We can even do better than this, like, with the improvement in product mix. I'm hoping for better. All right. Got it. Thank you and best of luck. Thank you. Thank you. Our next question comes from Vishal with Systematix. Please go ahead. Hi, good evening. Thanks for the opportunity. Sir, would you like to speak about the drivers that would help you in FY 2024 in terms of performance, whether it would be new product launches or probably any specific opportunity that you are looking at in FY 2024? FY 2024 obviously is on two grounds. One is continuing the momentum that we have set out in 2023. I think a substantial amount of that momentum happened in the last half of the year. That itself, if it carries forward, will help us achieve our objectives. Obviously, a better profitability where we obviously are hoping for the best in terms of pricing and raw material sustainability pricing and freight, which I do see is basically now stabilizing and is hit a rock bottom. Obviously last but not the least, you know, commercializing, integrating our Teva facility, which we are expecting some decent amount of revenue generation happening in the last half of the year. Sir, when you say integration, I mean, you mean, the backward integration with your own API? No, no. Teva, we are talking about obviously, integration in terms of our products. We still need to do a lot of site variations out there. We still need to get licenses into Teva. It's not that, you know, we are not inheriting any product licenses from Teva. It's not something that we are inheriting. It's only facility. It's one thing expanding the operation in terms of capacity, but it's another thing of trying to say, okay, these are the products that we need to introduce into Teva, and for that, we need USP approvals or, you know, site variation approvals to basically take place so that we can actually produce this product somewhere. With Teva cost starting to hit into your P&L, will that dilute your margins in the near term? There will be some short-term pains before there will be before you see gains. Definitely, there will be while we are investing in in the short term, in first three - six months, there may be some short-term pains, but we are expecting some of these gains to come out of that. ... fundamental improvement that you're seeing in Europe in terms of either competitors exiting, helping you gain market share or better pricing. Any such trends in Europe or in the US? Nothing, nothing that is visible right now. Okay. Do you overall, do you see an improvement in the environment, the competitive environment and pricing environment? I see an improvement in our performance beyond that. Right. I mean, yeah, the environment is what it is for the last 10 years, it's gonna be always the same. ibuprofen contribution, can you call out the number during the quarter? Well, it is a part of our pain. It is a part of our largest portfolio that product that we have that we enjoy market share. The exact number on the molecule, I don't have it readily available with me right now. The backward integration will happen this year with your own API? Yes. Second half? Second half. We are hoping for filing maybe in September or October. Yes. You mean you can, start selling with your own API, or it'll take time post that, once you file? It will take time because once the DMF is filed, we'll be also filing our for our own license to be incorporated in our own license. It is, it may take, you know, another two to four months, but at least the first step will be, we would have crossed the first step. Understand. Thank you very much. Thank you. Ladies and gentlemen, a request, please restrict yourselves to one question per participant. Our next question comes from the line of Sachin Kasera with Svan Investment. Please go ahead. Hello, good evening, and congrats for a good set of numbers. I had two small questions. One is on the margin. In the presentation you have mentioned that you want to increase the share of R&D from 1.5%- 4%-5%. There's also mentioned that our aspiration is to reach, like, 25% margin. Which means that we need to expand our margins by, like, you know, 900 to 1,000 basis points, part of which will be reinvested in R&D and part will be retaining. One, this looks like a very ambitious number from the current 18% that we reported this year. First, if you could elaborate, secondly, will this expansion be primarily driven by gross margins, or do you see significant benefits coming from, let's say, things like trade savings or maybe operating leverage, or some other cost-saving initiatives, if you could dwell on that? Well, it's gonna come from both, I mean, from all fronts, basically. It cannot come from a single front. Like I mentioned, the margin contribution will also happen because of product mix that we are looking at. Which again, is a part of, you know, new product launches, which is a part of R&D contribution, which basically, you know, gives rise to new launches that happen on a quarterly basis, on a yearly basis. Product mix is going to play a critical part for any company to evolve from point A to point B. Then again, you know, it's a cumulative thing of, it's a cumulative effort of every department and every area to save, to add value onto the bottom line. You know, whether it might be raw materials or freight and, you know, operating leverage, operation, costs. We look at every small thing, you know? Distribution costs, everything, like that stuff. On R&D, we are talking of, like, almost tripling as a percentage of sales. That's too, also on a growing revenue target. What exactly are we trying to do? This looks like a very, very significant increase in the overall R&D spend. What are we gonna do in terms of the, you know, number of filings, or is it gonna significantly more point of the complexity of the product? This looks like a multiple increase in the overall R&D spend in the next two, three years. Yeah, I do believe, you know, now that we've evolved to a point, for us to go to aim at new heights, we have put a lot of emphasis onto R&D. We are looking at various segments, delivery dosage, complex molecules, clinical molecules which may need some clinical studies. All these obviously, we do believe our costs going up. Historically, we avoided or we basically restrained from going into such complexities because it's high risk, high gain strategy. We, you know, we were very conservative with our outlook and our cash flow. Although we will continue operating the same way, but now we have the bandwidth to expand, we have the chemistry behind us, and we have the financial capabilities to basically explore a couple of molecules that, you know, may cost more than what we historically paid. Sure. Just one clarification on the EBITDA margins. You mentioned that you expect to sustain them or even slightly better. You are referring to the full-year margins, or you are referring to the Q4 margins? Because, you know, the full-year and the Q4 numbers. Full year. We are talking of full year only, because quarter to quarter, you know, you'll always have these variations, but we'd like to be known for our full-year performance. Sure. Thank you. Thank you. Our next question comes from the line of Anupam Agarwal with Lucky Investment Managers. Please go ahead. Thank you for the follow-up. I just had a question on your presentation slide, where you mentioned the number of filings and products that are in the pipeline. Across markets, we have about 92 products in U.K., Europe, U.S., and ROW, where we, you know, either are awaiting approval or plan to launch in the next two years. Can you help us identify the overall size of these molecules? What is the opportunity? What is the number of how many players are there in each of these products, or if you can just give some color, please. That will take more than few couple of minutes when we talk of such a wide basket of products. We have been very selective based on our strengths, our product portfolio. We aren't the only players in quite a few of them. Obviously, there are other players these are, not first to file. At the same time, there are certain molecules in that basket which are very niche, and basically, where we believe, you know, other players are more restricted than, you know, than other molecules that we basically that you would normally see. That's where we are, you know, we basically have identified molecules very strategically, where we feel which will evolve both our capabilities, our strength and marketing distribution, and at the same time, in terms of number of players. Like you rightly said, there are a lot of molecules in the filing, a lot of products in our in our launch items, so it's difficult to go through one by one. Not one by one, but overall, if you can help us understand what is the market size, we are looking at? I mean, some of them go into $1 billion, but that has no relevance because again, you know, it again depends on number of players and the market share that you can take from that particular molecule. The molecule may have a $1 billion-dollar market size or about $1.5 billion, $2 billion, but then you have the brand, you have the generic, and from the generic, you have number of players out there. Mm-hmm. Right. secondly, and the last one, are we shifting any products from our current facility to the new plant of Teva, or is it completely new range, new set of products there? We will be shifting certain products so that we can start commercial operations. New products, new product filings will see light only in 2025, FY 2025 mid. Any percentage, or number of molecules, you can help us with what we are shifting to new plant? It's gonna be a small basket right now. It's not. Small basket, okay. It's small. I see. Thank you. Thank you so much, that's all from me. Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments. Thank you all for participating in our questions, and thank you for all the support and the good wishes. Be safe, and hope to talk to you soon again next quarter. Take care. Cheers. Thank you. On behalf of Ambit Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.