Good day, ladies and gentlemen, and welcome to RPG Life Sciences Q2 FY 2023 post results conference call hosted by Spark Limited. 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 then zero on your touch tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Tara Patwa from Spark Limited. Thank you, and over to you, Ma'am. Thank you, Michelle. Good afternoon, everyone. On behalf of Spark Limited, I welcome you all to quarter two FY 2023 conference call of RPG Life Sciences Limited. We are pleased to host the top management of the company. Today we have with us Mr. Yugal Sikri, the managing director, and Mr. Vishal Shah, CFO of the company. We will start the call with initial comments on results, and then we will open the floor for Q&A. Now I hand over the call to the management. Over to you, sir. Good afternoon, good evening. Thank you, Tara. Good afternoon, everyone on the call, and thank you for joining us on this earnings call. Let me first give you a brief on a couple of points, which is market context, our priorities and where are we on them, and brief highlights of our performance. Then we'll move over to questions and answers. In terms of the market, we know that the market is growing at close to about 13% if I look at the IQVIA data. Or 6.6%, sorry, if I look at the IQVIA data. There are a number of areas which are either positive or not so positive impacting the pharma market growth. We have seen the volume growth declining in the pharma market. In fact, the EMG data indicates that we are de-growing the market is de-growing at minus 0.8%. Inflation is high, which is putting pressure on the inputs and logistics cost, etc. There is a significant emphasis on domestic formulations. One can see a spate of acquisitions happening to beef up the domestic formulation business. There is regulatory pressure also mounting because of our significant share from the market perspective on exports. There are certain happenings, certain developments which have happened in the market which you all are aware of. On the positive side, the new product class biologics, biosimilars are gaining acceptance. Their shares are improving. E-commerce is also gaining foothold. Government has put trust on APIs. PLI scheme et cetera is also good for the industry. There are some players who have got into NCE research or even NDAs are being filed. That gives us some snapshot or some positive, some negative on the pharma market. As far as RPG Life Sciences is concerned, RPG Life Sciences is making use of some of the positive developments which have happened in the industry and are also guarding itself against the odds which we are seeing happening at the marketplace. Now, our growth is significantly higher and consistently higher than the pharma market we operate. Now talking about some priorities and some factors of performance. On the people front, who are our major assets to drive our business, we are the only group who has happiness as the theme, and we have a host of initiatives launched with respect to happiness. I'm also happy to share with you that the happiness score, which perhaps we are the only group who measure—which measures the happiness score, our score has significantly improved even versus earlier years. We are also investing a lot on talent development, the development agenda, skill enhancement, et cetera. With respect to costs, thanks to various structural initiatives which we have taken, which includes from backend to the front end. At the backend we have, I shared the last time, we launched the first ever formulation reengineering exercise for our old mature products. We did organizational restructuring. We launched number of small Kaizen projects across the organization to help us identify the cost areas and cost elements which we need to act upon. With the result, we have been able to consistently improve our EBITDA margins, which were somewhere around 9%-10% in FY 2019. Today in H1, you have seen close to about 22%+ as the EBITDA margin, a gain of 12 percentage points in the last 3.5 years. EBITDA improvement, profit improvement has also made our cash situation better. Working capital management, a very prudent working capital management has also helped us to improve our cash situation. We have paid our debt, as we discussed last time, and we are now sitting on some healthy cash with us, which we want to prudently deploy for our growth plans. With respect to communities we operate, as a responsible corporate citizen, we are working on reaching medical care via. You would have heard under the RPG Foundation, we have launched the portable fever clinics in Maharashtra State, and that's being expanded to elsewhere. We are reaching medical care to the communities. We are also working on providing education via our Pehle Akshar initiative, which has trained over 9,000 teachers and over 20-odd lakh students. On the demand front, apart from the fact that now, thanks to COVID roughly being behind us, we have not only resumed our physical customer connect with the doctor, but also, thanks to the pandemic and thanks to a very, very comprehensive anytime, anywhere doctor support initiative, RPG Serv, we have been able to now reach out to over 84,000-plus doctors in the country, and that is adding to our share of voice. That's our traditional share of voice, which is also helping us to improve our demand situation. On the supply front, the factories are working very well. There are issues because of the geopolitical reasons. On the cost front, we are also impacted. Whether the It is the cost of solvents or excipients or APIs or logistics, we are also impacted. Our structural initiatives which we had put in place for cost management or cost optimization have helped us to partially offset the negative impact of the rising input costs. Let me now spend a few minutes on talking about the performance in quarter four and H1. You would have seen we have healthy, consistent above market double-digit revenue growth. On H1 basis it is 19.4% growth. On quarterly QoQ basis it is 4.5% and YOY basis it is close to 20%, 19.7%. Similarly, we have healthy, consistent double-digit profit growth. The EBITDA up by 20.4%, PBT by 25.3% and PAT by 30.2%. On quarterly basis, again, our growth on EBITDA is +6.5%, PBT +7.5%, PAT +9.7%. On YOY basis, +16.8%, +20.9% and +26.8% respectively. Since our profit growth is consistently higher than the revenue growth, it has helped us to improve our margins. I'm happy to share with you that our EBITDA, PBT and PAT, all the three have improved or has maintained the consistent upward trajectory which has been going on quarter after quarter for the last three, four years, has been maintained. The EBITDA has improved from 22.6% to 22.8%. I'm talking about FY 2023 H1. PBT 18.9% to 19.8% and PAT 13.3% to 14-odd%. Now talking about the segmental performance, I'm also happy to share with you that domestic formulation, international formulation, API, all the three business segments we operate have registered healthy double-digit growth. Our domestic formulation business, which contributes about 60%-65% to our turnover, has grown at 19.6%. International formulation, which contributes around 19%, has grown at 25.5%. API, which contributes 16%-17%, is growing at around 10%. Here again, in all the three segments, our EBITDA margins are healthy double-digit now. After becoming a debt-free company, we have, as I mentioned earlier, a cash surplus. We have also added to that cash surplus in the last H1 of this year. Hygiene continues to be under control and in a healthier zone now. Our expiries have moved to, I think, one of the industry's best situations today. New products is our thrust area. We have launched a number of new products across the business units, across the therapy lines, in line with our portfolio modernization or product portfolio transformation strategy. I'm happy to share with you that in the domestic formulation business, the new products launched in the past three years today contribute 28% to our domestic formulation business. We had designed a very comprehensive transformation program for the company, which had six tenets. I'm happy to share with you that all the six tenets, we are very diligently working. We are also measuring quantitatively the performance of the parameters and risk as reviewed at the senior-most level, every quarter. That's about the brief on the quarter and H1. The new products also I mentioned to you. We have three categories of new products in domestic formulations. One was line extensions for the legacy products. I'm happy to share with you that we had identified 25 line extension. We have launched 8 line extensions so far, and they contribute close to over 15% to our sales. A number of new product launches in the specialty business have now contributed about 12% to the domestic formulation business. That's what is actually helping us to ensure that our legacy business, legacy brands are also growing and also our business and the new products contributing to our business performance. This is what is happening on the domestic formulation front. On the international formulation front, the priority was clearly defined. In international formulations, we will expand our footprint in the ROW market. In the regulated market, we'll focus on the niches which we find profitable and where we can consistently generate revenue. These niches are the niches of immunosuppressants, complex generics, and the products needing special manufacturing conditions. In these identified areas, we are working, we are developing our product pipeline also accordingly. For the API business, again, we are working on backward integration of our finished formulations, so both from domestic formulation, international formulation business, plus identifying new products, new customers and new markets to contribute to our business. For the sustainable or accelerated growth of the international formulation API business, we have also worked out plant upgradation plan both for the formulation plant as well as the API plant at Navi Mumbai. The work is going on in full swing as per the plan. I thought, let me share with you in brief about various segments, initiatives and financial performance of the company. Thank you so much for the patient listening. I'm now open to the questions. With me, I have Vishal Shah. He is our CFO. He was there last time as well. Over to you. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone phone. 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 Aditya Khemka from InCred Asset Management. Please go ahead. Hi. Thanks for the opportunity. Hi, Yugal. The first question, what is our total number of MRs today, and how many of these MRs are the hospital channel MRs and how many of them are GP/CP's? Okay. Thanks, Aditya, for joining. In terms of the number of field force, we have over 500 MRs in the country today. They all cover the OPD doctors and in some category like nephrology, also the hospitals and clinics. Actually, they are dedicated to the trade business. Understood. Doctors who call on the MR, sorry, MRs who call on the hospital doctors would be different from MRs who call on the standalone clinics and chambers, right? I mean- That's not the case in our case, Aditya. We have, for example, we have our nephro business. The doctors who are, whether they have their own clinics or OPDs or they have hospital attachments, they are called by the nephro MRs. We don't have a separate team for the hospitals and separate team for the trade doctors because we don't have typical hospital-based product or specific hospital-based products only. Since we have the product which are written by the nephrologists, whether they sit in the hospital or whether they sit in their own clinic outside, hence we have the common MRs. As far as the mass business is concerned, I think we don't have a significant hospital coverage there. They are largely the OB or the trade doctors. Understood. Sir, can you divide your number of MRs into mass and specialty? Yeah. In the mass and specialty, I would have a ratio of 20- 80. 20% for the specialty, 80% for the mass. Got it. Now that helps. Sir, in terms of our MR productivity now, so where do we stand and what is an aspirational target there? Yeah. I'm happy to share with you, Aditya, that the MR productivity has consistently improved. The productivity which was at INR 3.4 lakh for the entire domestic combination business I'm managing, has moved from INR 3.4 lakh to INR 4.2 lakh to INR 5 lakh, and now for H1 it stands at INR 5.5 lakh+. Mm-hmm. Mm-hmm. That's very encouraging. My second question is on the breakup of our domestic revenue growth. We have seen some 20% odd growth. Can you break it up into volume, price and new product introductions, please? Yeah. In terms of the three components of the growth, we have happy news is that the majority of the growth is coming from the volumes, which is 12% plus. You have seen that the industry, we have around -0.8% growth. We have 12% growth coming from the volume, around 5%, 4.5% from the price increases, and remaining coming from the new products. Right. Okay. If I ask you the same question for the API business, Yugal sir, how would you respond to that? Volume and price for APIs. API business, frankly speaking, you know that we are in a generic business. We have old mature molecules, therefore almost entire growth would be volume growth. Whatever we have got in terms of the growth is almost entire because the price increases are very negligible. Very negligible. Understood. Sir, on your presentation you wrote that, while the domestic and the API business helped in the growth in margins, your international formulation business seems to have been flat or lower margins than earlier. Can you comment on that and, you know, how do you plan to sort of foster the margins of the international formulation business? Yeah. You're talking about the international formulation business, right? That's right. Yeah. Okay. See, the international formulation business, as I mentioned to you, the EBITDA margins are much better now. Very good. Healthy double-digit are the margins. Usually the margins are relatively lower because you have the plant depreciation, et cetera, got to get added. In terms of the margins, I consider margins significantly good, and that'll come from the OpEx, and that'll also come from the manufacturing efficiency, though the raw material cost has shown an upward trend. That's on the international formulation business. Sir, are we able to sort of adjust our selling prices in the international formulation business to gain on the gross margin front? As in because our raw material costs are going up, are we able to pass it on to our buyers? Actually, since I mentioned to you, Aditya, it's a generic business and we have mature molecules that has not been the case. Yes, we have reached out to everyone and somewhere we have got some changes, some positive things which have come to us. Has it happened across? No. No. If the gross margins in international formulation business are slightly better compared to the earlier years, largely because of the product mix. Okay. Sir, your earlier year margin, as in your last year FY 2022 margin was close to 68%-69%. You are currently at 65%-66%. If the international formulation margin has improved, which bucket are we seeing a significant decline in margins? Our overall gross margins are down 200-300 basis points YOY. Yeah. See, we have had an impact in the API, and to some extent in domestic formulation. Okay. In domestic formulation, despite the 4.5%-5% price increase that we are seeing, our GMs are still down. Is it? Slightly. Got it. Understood. One last question, then I'll get back in the queue. On the this 4.5% price increase, which is there on the domestic formulation business, that is obviously so far because some of our products would not have yet been eligible for a pricing, given the 12-month period that we need to spend before we take a price increase. By the time we end FY 2023, which is, you know, fourth quarter of FY 2023, we would have been able to take price increases across our product basket in the domestic formulation business. My question to you is, would the gross margin of the domestic business by the end of FY 2023 be better or in line with last year's gross margin? Yeah, I'm keeping my fingers crossed, Aditya. It all depends upon how the input cost pans out. It is a mix of all the things, whether it is solvent, whether it is excipient, whether it is APIs. Except for the aluminum foil, where I do see some softening, and some solvents. Otherwise, the prices are not softening. If things improve, I think we should end up with better margins. If things don't improve, maybe the situation remains the same. Understood. Sir, some of your raw material costs, which are linked to crude, especially solvents, with the sort of marginal decline in crude prices that we are seeing, they must have come off. Are you also facing an inventory issue where, you know, you might have stocked up on some of these raw materials when the prices were higher, and now because you're consuming that raw material, your gross margin is impacted. Now that some of these raw material input costs must have come down, now that you are purchasing them now, that consumption of the raw material that you're purchasing today will happen three months, six months down the road. I mean, I'm just trying to gauge if that is the case, because some of the companies do indicate that that is the case. Aditya, in our case, I think it has been just the other way around. Last year, many of the people had a problem in terms of the gross margin management. We did not. Because of very prudent purchasing, we did. We are not loaded with any of the high price material with us. That is what we have taken in our management, in our procurement management. That is actually not the case, largely I can share that with you. Fair enough. Thank you, Yugal Sikri. I'll get back into the queue. Thank you. Sure. Thank you. A reminder to all the participants to press star and one to ask a question. The next question is from the line of Yogesh Tiwari from Arihant Capital. Please go ahead. Yeah, thank you, sir. Am I audible? Yes, Yogesh, you are audible. My first question basically is, if you can share your thoughts on the current logistics cost compared to, you know, the previous quarter. What would be that trend like on a quarter-on-quarter basis? Yes. Vishal? Vishal, my CFO. Vishal, would you be able to give a snapshot on that logistics cost momentum? Yeah. The logistics cost, if you compare with the last year also, still we are in the high freight cost trajectory. To an extent it has a bit softened, but still if you compare with the pre-COVID period, it is still on a very higher side. Still we are grappling with the high export logistics cost. Yes, sir. Compared to like, the current scenario versus Q2, which just got over, has the logistics cost further reduced? Very marginally it has reduced. Sure. My second question is like since we also have a large international market, we had this case in Africa, where now there were some unfortunate deaths in Gambia. Just want to understand, is there any impact of such events on the business front in those areas? Yogesh, we have no such impact in these markets. First, we are not in that market and this episode or this Maiden Pharmaceuticals's episode has not impacted us. Okay. Nothing like an impact on the brand or, you know, maybe something like that. No impact basically. Yeah. The good thing is that we have a very long relationship with our customers. They are with us, many of the customers are with us for 15, 16 years, so they have seen what kind of company we are, what kind of quality controls we have. In fact, we have received glowing tributes from our customers for quality, for the quality of our dosages, for consistency of supply. Yes, you're right in asking this question because there is a question mark on supply from India. Touch wood for us, since we have longstanding relationship with the customers and we have got a good quality track record, we have not faced these issues, and I don't expect these issues to be faced in near future as well. Lastly, on one question on the API front. What portion of API do we, you know, what percentage do we use internally and what is for external sales, roughly the percentage? Yeah, it's around. It ranges between 15%-20% is domestic, rest is the exports. Okay. 15%-20% would be consumed internally? Capital consumption, yeah. Okay. The rest is for exports. That's right. Oh, thank you very much. Yeah. Thank you. Sure, sure. Thank you. The next question is from the line of Ankit Gupta from Bamboo Capital. Please go ahead. Yeah. Thanks for the opportunity. On international formulation front, sir, you know, we have seen a robust growth during the first half. You know, last year was impacted because of the Malaysia issue. What has been the reason for such volume growth in the international markets, and how do you see the growth in the international formulations going forward? Yes. There are a couple of factors. One is that it is not Malaysia. We have a major presence in Myanmar. So these- Myanmar. Yeah. Myanmar market is back. We have shown good demand coming from the Myanmar market, so that has contributed to this growth. Plus, what has contributed to the growth is our strategy of new products, new customers, and new markets. In terms of the new products, we have had product like Nicorandil, which needs special manufacturing conditions, we export to UK. We also have Sodium valproate complex generic product. The product exports to UK once again. We also have our immunosuppressant basket, Azathioprine, the export for those products. Other immunosuppressant products like Mycophenolate and Tacrolimus export to the ROW markets. That has together helped us to be so far. Also have made some foray into the South Africa and Thailand markets. That has also contributed to the robust growth of 25% odd in the international formulation business. Sure. How do you see this growth panning out for us for the medium term, for next financial year and let's say FY25 as well? I expect the growth to continue to be double digit going forward. How many products do we plan to launch across the markets over the next 2 to 1.5 years? Yeah. In terms of the new products, as I mentioned to you, we have Sodium valproate complex generic. We have our PR prolonged release formulation. We have Nicorandil. We also have propantheline bromide. We also have Sertraline. These are the new products which we have developed and they are being launched and we have done the registration certain markets. They are the ones which will contribute. We have identified certain products which are patent protected products. Of course they are for the long term. Their development work is also kicked off in our R&D lab. We expect all of these to contribute to our growth going forward. Sure. Sir, on the domestic side, you know, the kind of robust performance we have seen over the past two years that has continued even this, in this financial year in the first half. Can you please talk about, you know, how much of the revenue is coming from the new products that we have launched over the past two-and-a-half, three years? Okay. As I mentioned to you, close to around 25%+ contribution is coming from the new products launched since FY 2019. We have launched three categories of the products. We have launched products in the specialty business, which is into the new therapy area of rheumatology. We have also launched products in the mass business, where we have done some launches in chronic portfolio, and we have also launched line extension for our legacy products. Under these three categories of the products, we have got. The contribution all put together is 25%+. Sure. Sir, how many products are in the pipeline to be launched in over the next 2.5 years? Let's say in FY current year, how many have we launched and how many do we plan to launch in the second half? In next financial year, how many products are we launching? Yeah. We have a very healthy new product grid identified in these three segments as I mentioned. The line extension for our legacy 89 products and chronic portfolio, and third is the specialty business in the nephro and the rheuma segment specifically. Number of products, we have about 21-22 line extensions identified for launch, out of which we have launched so far seven or eight line extensions. In terms of the other new products in the chronic space, particularly the cardiovascular metabolic, urology, nephrology, rheumatology and oncology space, we have around 40-plus new products identified, and we have launched around 9-10 products already. Sure, sure. Okay. Thank you and wish you all the best. Thank you. Thank you. Thank you. The next question is from the line of Ankeet Pandya from InCred Asset Management. Please go ahead. Hello. Am I audible? Yeah, Ankit. You can go ahead. Yeah. Hi. Good afternoon, and thank you for the opportunity. I've got three questions. First on the expenses side. The employee cost is good to see from last 1 quarter has been lagging the top line growth for the FY 2022 and even for first half FY 2023. Ankit, I'm not able to hear you. Can you just speak closer to the mic. My question is, the employee cost is for the FY 2022 and first half FY 2023 has been lagging the top-line growth. Any particular reason for this? Is this linked to the workforce or, and of course there's been rationalization of employees also. When will that be over? Yeah, Ankeet, broadly speaking, our employee cost as percentage to sales overall for the company, I can tell you, has come down in the last three to four years. If there are any variations now, they are largely to do with some of the vacancies we had for some time, and those vacancies get filled up at different points in time. Those are the ones which are a little more technical, might be contributing. Else, the employee cost as percentage to sales has, because we have taken some structural measures in organizational optimization from front end to back end has actually, we've been able to optimize those costs. Vishal, would you like to comment on this as well? Yes. I agree with you. Year-over-year, if you see our percentage to sales in employee benefit expenses because of the structural measures what we have taken in the past, that is now the results. As a percentage to sales on a YTD basis also it is substantially lower compared to the same time of last year. Can we expect it to be around 20%-21% for next FY 2023 and 2024, like going forward, around in that range, 20%-21%? Ankit, we would like that to be. The key point which we need to also understand and appreciate is that, RPG Life Sciences has representation in three segments. You are into manufacturing, you are into selling. In manufacturing, you are also exporting the products. All of these functions, whether it is R&D, regulatory, API R&D, formulation R&D, project management, because we are running two projects simultaneously, those costs are there. We are taking those costs positively because we are using all of these resources now to plan for future, whether it is new product grid or whether it is, the project people looking after the new modernization of the two plants which we are undertaking. We would like that to be in the range of 20%-21% or so, but I think that would happen over a period of time when the revenues increase. As a percentage of the revenue, I think these costs will also come down. Fair. On other expenses, how would that be trending going forward in line with your top line or like, you know, you have been taking cost-saving measures. How would that grow? With that also, what will be your EBITDA guidance going forward? Yeah. Ankit, you would have seen the numbers somewhere around 3.5 years back, we used to have 39% OpEx. Today, we are at around 30-31% OpEx. There has been a lot of structural changes which have happened either from the organization standpoint or the processes which have contributed to identifying the cost elements which can be eliminated. Formulation reengineering exercise in the plants, the manufacturing efficiencies enhancement, all of that have contributed. Now, it is not a process which happens once. It is an ongoing process. I expect the cost efficiencies to come further going forward, which should help us to improve our EBITDA margins further. It is also dependent upon what's happening in the input costs because of the geopolitical reasons. How long that lasts, how fast the vendors are able to come back to pre-COVID situation. All of those factors are also important for us. Having said all of this, we have decided to benchmark our EBITDA margins or costs versus the best of the companies in our competitor group and that gives me the confidence that we should be able to improve the EBITDA margins further. The cost element, wherever it is from front end to back end, is being very microscopically seen and the opportunity identification is ongoing. We even use the services of the external consultant to help us identify more cost elements and their suggestions have also come, which are also being implemented. Basis which I can tell you that the if those external elements which are beyond anybody's control, they get softened earlier, we should be able to improve our profit margins further, our EBITDA margins further. Any number that for next 18-24 months that you want to at least like achieve a certain like 23%, 24%, 25% margin? Any like any comments on that, if possible? See, Ankit, the attempt is to move to those levels. I will not be able to give you because I thought that COVID is over and get back the input cost to my normal pre-COVID level. The crude prices came down, but the solvents prices, intermediate prices are still at 20%-40% more than the pre-COVID level. It all depends upon how the situation at the macro pans out. Yes, in principle, or as aspiration, we are pursuing those targets. Cool. Fair enough. Thanks for the elaborate reply. Sir, and one last question on the balance sheet. During this quarter, the debtors has increased. Is it due to maybe the strong growth that we have seen in the international business? Is it linked to that or any other reason, or can we consider this as the new base for debtors? Any comments on that? Actually speaking, the debtors which we had last year were at a very low level because we went out to our customers and requested them that we are making sure that you get the right supplies and therefore help us to get the money from you faster. In fact, our debtor situation even now is amongst the best one. It is certainly slightly higher than the last year, but compared to earlier years, our accounts receivable are much better. Much better. We have, I believe, around 12 days or so. No. It is around 38 days or so. Compared to the previous years, so if you compare. 12%, sorry. 12%. Around 10%. 10%. It was 7% last year, right? Yes. Correct. Correct. Yeah. Before that? It was 15% before that. Right. 5%. 15% to 7% was very unusual, and that was with the special request to some of our big customers. As far as the India market is concerned, you know that we are operating at the best level, which is 30-odd days. In the international formulation, at a special request, we brought it down from 15- 7, which we knew is untenable. Now it is around 10% or so or 12% or so. That's the commentary on the trade receivables. Oh, right. Thank you. That's it from my side. Thank you. Thank you. Participants who want to ask a question may press star and one on their touchtone phone now. The next question is from the line of Nimish Mehta from Research Delta Advisors. Please go ahead. Yeah. I have a more general question, and this is related to the reports that we see in the news, the case is that energy costs in Europe are going through the roof, and hence, we see a lot of the contract manufacturers in Europe, in pharma, you know, finding it difficult to continue manufacturing. Has there been a positive impact of the same on Indian companies or Indian manufacturers, or is it likely to happen? Any thought from that would be very helpful. You are talking about for RPG Life Sciences? Yes, yes. Because we are also in Europe and present in Europe and also new manufacturing. Yeah. Are you seeing any improvement in that or? Yeah. See, as I mentioned to you, our product portfolio is such. We are in the immunosuppressant range, which includes Azathioprine, Mycophenolate, et cetera. We have also got complex generic product like sodium valproate and a product like propantheline bromide, which is a small volume product, but we have the API as well as the formulation both. You know, we also have special product like Nicorandil, which is not such a high volume product, but needs special manufacturing condition. Because of our selection of portfolio, which is with respect to profitable niches, we don't foresee challenges there. Yes, you are right. Europe, a lot of things are happening. As far as RPG Life Sciences is concerned, our niche portfolio, which was part of our strategy, and that strategy was because we thought that we need to have some protected niche available which may not attract large players, but we have a good profitable play there. That's what we are pursuing. That's the basis which I can share with you, that in RPG Life Sciences, we don't see that kind of impact coming. I see. The growth that we are seeing is largely because of the product portfolio, not really because of the macro factors, is what I'm hearing. Absolutely. This is because of the unique portfolio which we have selected. Okay, understood. Actually, you know, last in the last call, I think you mentioned that, you're likely to increase the prices of products in India, you know, because of the high inflation rate that registered. Have we done that, you know, or it is still a work in progress? If I remember correctly, and you can correct me, I think, we were to increase by about 7%-8% in aggregate, you know, value for the India portfolio. Where are we on that? Some update on that would be helpful. Thank you. Yeah, I can only indicate to you that we are taking price increases permitted to us. We have a tight calendar which tracks when the year gets over. We take the price increases accordingly. We have taken the price increases as permitted, which is for the controlled products in the range of 10%. For the controlled products we have the Wholesale Price Index driven, which was, as you know, 10% or so. It depends upon which time of the year that, you know, the price increase is taken, and that's what gets inbuilt into the price increases. Very diligently we take the price increases as permitted to us. I see. I'm just trying to understand. All the price increases that we targeted for this year has already been taken or are there still products which are in the life cycle management that we still will see price increase in this year? Yeah. In case of the new introductions, we decide to take the price as per the competitive situation. For the existing products, as I said, for the decontrolled we have a calendar. At a particular day when the one year gets over, for the next batch we take the price increases. We have taken price increases for all the products, as per the calendar. As far as the new products is concerned, which is a significant contribution now, we take the price increase as per the competitive situation. We don't take the price increases, we fix the prices at the competitive situation. Okay. Understood. Thank you very much. Thank you. There is a follow-up question from the line of Aditya Khemka from InCred Asset Management. Please go ahead. Yeah. Hi, thanks for the follow-up. You were, sir, of the decontrolled products, what percentage of these products would we have already taken price increase, and what percentage of products we are yet to take price increase because of the calendar? Yeah. I won't be able to give you that detail now. Maybe I can share the detail with you later because I haven't that handy detail. I only make sure that the calendar is followed, we don't miss the price increase opportunity. Obviously. Sir, of your legacy brands, which is still a large chunk of your domestic sales, the pricing of your legacy brands compared to your competitor brands, are you like first quartile, second quartile, third quartile, fourth quartile compared to your larger competitors? I'm not talking about the fringe players, but let's say Azathioprine or let's say Naprosyn. Your prices in the market, how do they compare to the other large brands in the same therapy area? Which quartile would you call yourself of? Well, Aditya, our pricing strategy in general is competitive. We do not take a very high prices also, we don't take a lower price also. We look at the price whenever we're launching a new product. We look at the price of the high volume seller, and then we fix the prices accordingly. If I have to say that whether my prices are on the lower side or on the higher side, my prices are in the middle range. For some of the old product, my prices are even little on the higher side. Okay. Doesn't that hinder you from taking this 10% price increase? Because if you're already in the middle or on the higher side, then if you take a 10% price increase and your competitor doesn't take it, then you become relatively more expensive compared to your competitors. What comes into play is the existence in the market for a long time. We have products like Aldactone, products like Naprosyn, products like Tykerb, products like Romilast. These are the products which are there in the market for 30, 40, 50 years. We have a solid prescribing base now for those customers who won't change the prescriptions and brands they're prescribing for years now, for the sake of whether we have taken a 5% price increase or a 7% price increase. That's the case now. Whether we take Azoran, whether we take Naprosyn, whether we take all the brands, Tykerb, which I just narrated to you. We take the advantage of being in the market, being in the buying habit of the doctor for a considerable time. Yeah. Got it, sir. Last question, sir. If you look at RPG's own history, you know, FY 2016 to 2018 we had this cycle of gross margins where FY 2016 RPG gross margins were like 68%, FY 2017 gross margins were 65%, and then FY 2018 the gross margins came back to 67%, and that was, you know, for various reasons. Do you think we are in a similar situation where given that raw material prices do normalize, we will sort of see the dip in margins this year, gross margins I'm talking about this year. Then next year if, you know, everything normalizes, we'll basically be able to go back to the kind of gross margins we were doing in FY 2022. Absolutely. We should be. Right. Most of this hinges on the resolution of the Ukraine-Russia situation or some of it also hinges on what happens in China and the commodity prices in China, crude, coal, thermal power, et cetera? Yeah. I think it's a mix of both factors, but the larger contribution is China. Well, as a contribution. Got it. That, that's it for me, sir. Thank you. Thanks, Ankit. Thank you. The next question is from the line of Kavita Thomas from First Global. Please go ahead. Yes. Hello, sir. Thank you for giving me this opportunity. I just had this question on the domestic formulations growth, where we are mentioning that, you know, our growth has been around 20% compared to 6.6% for the Indian pharmaceutical market. Could you just further break it up in terms of how was the growth in the first quarter and the second quarter and overall, how do we see the growth going forward vis-à-vis the domestic formulations market itself? Yeah. Kavita, I don't have the actual growth handy with me for domestic formulation for Q1, Q2, Q3 separately. We have a YTD growth of 20% and as I remember, I think there is a consistency in the growth. I don't see any slowing down or any unexpected increase happening in the growth quarter versus quarter. I expect going forward in Q3, Q4, the similar growth to be maintained. That's what I expect. However, if you wish those details, Q1, Q2, maybe I'll get the details and maybe share with you separately. Okay, sir. Okay. Sir, one more question on the raw material front, which you have already addressed through various questions. Is there any particular other than the solvents or, you know, are there any particular raw material costs which are actually, you know, not softening at all and are, you know, quite stubborn in terms of, you know, not softening at all? Are there any such raw materials specifically, since we have immunosuppressant as our segment, which is keeping the margins, you know, almost flattish? Yeah. Except solvents and the aluminum foil. The prices are consistently higher. There has been softening on the aluminum foil prices. There's been softening on the solvent prices to some extent. Rest of the, whether it is excipients, whether it is the KSMs or whether it is API, the prices continue to be higher. They are not coming down. We are only hoping against the hope that they should come down. That's the situation overall. Is it again because of these, I mean, increase in fuel prices or electricity prices or, these, what do you say, excipient come from China because of which the prices remain still high or how is it? Like, why are these prices not softening considering that crude oil prices have gradually softened on account of which solvent prices are also coming down. How do we read the situation, sir? Yeah. See the raw materials which are linked to solvents or Brent or the ones which are linked to the metals. I think there has been softening. Even though the levels are still higher compared to what pre-COVID level, but there has been softening. But there are other KSMs which are not directly linked to solvent. Their prices are up for the same reason, whether it's the geopolitical reason or it is China reason, either of the two, or any other reason, but fact of the matter is they're still higher. I expect maybe the contribution is coming because of the Ukraine war. That's why there's a pressure on supply chain or in China, you know what is happening inside China, inside the Chinese economy and Chinese overall political situation. Maybe it's a mix of factors, but the fact remains that the prices are not coming down. As we go along, I expect that the prices should taper off at some point in time. Okay. Still it's commendable that in spite of these pressures you have been able to maintain your margins. You know, that's really commendable. Yeah. Thank you. Thank you so much. See, I was talking about the structural cost efficiency measures like challenging the formulation, challenging the API synthetic process. I think those are very much within our control, and those are the measures which have largely contributed to our whatever change in the margin or the adverse impact which we could mitigate because of those measures. Since they will continue, we expect our margins to be sustainable or further improve. Thank you, sir. Thank you so much for your time. Yeah. Sure. Thank you. Ladies and gentlemen, this would be the last question for today, which is from the line of Mahesh Vyas from UTI AMC. Please go ahead. Sir, just a couple of questions. First is how much of the raw material are we importing from China? Second question is on how are you looking forward for our business from, let's say, from a two to three years point of view, in the sense that what are the risks coming in apart from the inflationary conditions? Yeah. Okay. Maybe exactly how much is the raw material we're importing from China? Vishal, do you have handy that number? Or else we can even if you can share with Mahesh separately. Yeah. We can share it separately. Mahesh will share what percentage of raw materials are imported from China. The second you mentioned, looking forward, inflationary pressures. I expect that the inflationary pressures should taper down, and the input cost should come down. How long it will take, I think it is anybody's guess. At least we have some positive things. As I mentioned, aluminum foil prices are tapering down now and the solvent prices are tapering down, which is impacting our work. We also. This has also triggered to identify additional vendors for the monopoly or duopoly items which we have had. And the companies who are working to develop those particular raw material KSM, in view of the rising opportunity of China plus one. I expect that inflationary pressure should slowly come down. Also we are able to source the raw materials from other vendors who are also into the fray now. We know for sure that there are vendors who are developing a similar API and the excipient, and we are in touch with them. That will also help us to tide over this inflationary times which we talked about. Yeah. Just a follow-up. Are we seeing any risk on our existing portfolio, the product portfolio which we have from near-term, let's say 2-3 years time from origin? Say again, please. I missed that, your question. I mean, are we seeing any risk from any of our product portfolio which we have? Any of our portfolio, are we seeing any risk? That's your question? Yeah, yeah. Any risk involved in our existing portfolio, product portfolio? Yeah. I largely don't see any risk for our portfolio because of the simple reasons that the existing products we have, the existing relationships with our customers and our good servicing of those customers, good quality of the products. I don't see much of a risk. For the new products, I don't see much risk because why we selected the new products, we selected the product belonging to a growing therapy or where the acceptance of the customers or the doctors is improving. And our lifecycle management is ensuring that we get more customers. Just to give you an example, for our existing product like naproxen, we have around 11, 12 line extensions, which is opening up the product for new indications, which is opening the product for new customer segments. For our new products, we have picked up the products from growing therapies like hypertension, diabetes, and we also picked up the products which are newer molecules. We have a range of NAS available to us. They all are new. We have also, thanks to the strategy which we have, we are also thinking of launching certain products to multiple therapy for the different brand names. We have just done that for a NAS called denosumab. I think all of these put together should be able to mitigate any risk which is not seen by us at the moment and capture. I frankly don't see a significant risk. See, we had a risk for immunosuppressant product because of COVID situation because of the doctor wanting immune boosting instead of immune suppression. We had some issues that time. I think we have tided over those going by the robust growth which you have seen in our immunosuppressant basket domestically as well as internationally. Okay, thanks. Thank you. As that was the last question for today, I would now like to hand the conference over to Ms. Tara Patwa for closing comments. Yeah. Thank you, Yugal, sir, Vishal, sir, and Mr. Neeraj for spending your valuable time and now providing this opportunity to host the call. Sir, any closing comments you would like to give? The closing comment I have is, RPG Life Sciences has worked out a very strong strategic framework to ensure sustainable, profitable growth of the company. Of course, our top priority is domestic formulations, where we have five pillars working simultaneously, and that's where we are seeing the growth. They are something to do with product portfolio maximization, strategic asset creation, productivity enhancement, use of digitalization or digitals to increase the share of voice and cost optimization. In case of the international formulations, we have focused on ROW markets on one side. On the other side, we are operating and identifying new niches and new products to beef up our growth for international formulation. For API, we have a strategy of forward integration or backward integration for our domestic formulation and international formulation, and identifying new products, new customers and new markets. We are investing in R&D now, both in the formulations and in the API. We have even identified the patent protected products for our growth. That in a nutshell summarizes our strategy framework, and we continue to pursue those strategic framework going forward for sustainable profitable growth. The organization is getting strengthened to face the challenges of increased growth going forward, both at the top end, at the SCOM level, as well as in the entire organization at the mid and the lower management levels. With that, we are confident that RPG Life Sciences will continue to be in a good growth trajectory. One more point to add. We have so far focused on the organic growth. We are now actively pursuing the inorganic growth opportunities also in the segments where we see huge growth potential and where we see gaps in our portfolio. Thank you so much for the patient listening. It's been pleasure to interact with all of you, and I'll be too happy to answer any questions which have been left unaddressed, couple of them. Any other questions you have, it'll be my pleasure and my team's pleasure to answer those questions. Thank you so much. Thank you. On behalf of Spark Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.