IPCALAB — earnings call

The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.

Prepared remarks

Moderator · Conference Operator

Good evening, ladies and gentlemen.

I'm Kritika, moderator for the conference call.

Welcome to IPCA Laboratories Q1 FY23 earnings call posted by DAM Capital Advisors.

As a reminder, all participants lines will be in 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 * then 0 on your touch-tone telephone.

Please note this conference is recorded.

I would now like to hand over the floor to Mr. Nitin Agarwal of DAM Capital.

Thank you.

And over to you, sir.

Nitin Agarwal Thanks, Kritika.

Hi, good evening, everyone, and a very warm welcome to IPCA labs Q1 FY23

Thank you, sir.

Ladies and gentlemen, we will now begin the question and answer session.

If you have a question, please press * and 1 on your telephone keypad and wait for your turn to ask a question.

If you would like to withdraw your request, you may do so by pressing * and 1 again.

I repeat, ladies and gentlemen, if you have a question, please press * and 1 on your telephone keypad.

We will wait for a moment while the question queue assembles.

First question comes from Surya Pathra from Phillip Capital.

Please go ahead.

Surya Pathra Thanks for this opportunity.

Sir, just a couple of questions.

First of all, let's say the European business cities [inaudible 00:09:38] see a kind of a pressure in terms of growth, largely led by UK.

So, could you give some more colors, like we had registered around 43 odd products in our own name or rather, we're converting those registrations to our own name.

So, what is it to stage of this conversion there and when do we really see the revival of the business in the UK, something on that side?

Ajit Kumar Jain Let’s say, by the current year end, probably we will be more or less, there'll be some decline, but overall, we will be able to recover in the current year itself as against 43 dossiers, because all these dossiers were registered in distributors name.

So, now, we have to get our own registration.

So, practically, up to now, we have launched 6 products only in UK and almost

Thank you, sir.

Next question comes from Prakash Agarwal from Axis Capital.

Please go ahead.

Prakash Agarwal Yeah, thank you sir.

Good afternoon.

Just clarification.

So, your EBITDA margin includes other income, right.

I mean, then only we get 19%.

So adjusted for quality etc., you’re at 17.9%.

Ajit Kumar Jain Yeah, that’s how we calculate.

Prakash Agarwal And the other clarification is, you mentioned that most of the high-cost inventory is largely consumed in this quarter.

And the resultant would be that gross margins would likely to come back to 66-67, or it will have a step function?

Ajit Kumar Jain Gross margin, definitely, costs are coming down.

It's definitely there, but they are not near to the level, which was there earlier here, but let's say you're on domestic market, like say your schedule formulations, now it will be available for whole of the year that price increase and other price increase will also be in the region of almost around 7% in current year.

So, overall, it will have an offsetting effect of that.

So, that also will come in the overall margin calculations.

Thank you.

Next question comes from Chirag Dagli from DSP Mutual Funds.

Please go ahead.

Chirag Dagli Thanks for the opportunity.

Can you comment on your margins in India currently versus pre- COVID level?

Sorry to interrupt sir.

Your voice is too low.

Could you please be louder?

Chirag Dagli Hello.

Is it better now?

There is some electric noise from your line.

Ajit Kumar Jain There is a lot of disturbance, sir Chirag Dagli I’m actually on my handset.

Ajit Kumar Jain No, there is still a lot of disturbance.

Chirag Dagli

Thank you, sir.

Next question comes from Priya Harwani from Perpetual.

Please go ahead.

Priya Harwani Hi.

So, first question is like just a clarification on institutional sales.

In the dimension, there will be some pressure in FY23. So, what the guidance exactly set for FY23?

Ajit Kumar Jain Actually, we are not given very big growth numbers, but unfortunately, looking into the current scenario and sourcing and fund allocation and other things by institutions, we feel there could be some reduction in this business compared to the previous year.

Priya Harwani Okay, okay.

And sir second question is on branded formulation business on export size, so you said there was a decline in business in Russia, Ukraine and Sri Lanka.

So, how's the situation now, like in July or maybe in mid-August?

Ajit Kumar Jain Overall, I think we have guided for current year, that this business will grow almost around 15%, 13 to 15%.

The business in Russia is happening good.

As I have told in earlier, I think we had our I think our Q4 results, that initial period in Russia, the currency fluctuation was very high.

Currency went up to very, very high level.

Ruble was almost around 120 to 125 level.At that

Thank you, Ma’am.

Next question comes from Kunal Dhameja from Macquiry Capital.

Please go ahead.

Kunal Dhameja Thank you for taking my question.

So first one clarity on the EBITDA margin guidance, we said 21%, but is it including the other income, etc. at guidance?

Ajit Kumar Jain

Thank you, sir.

Next question comes from Dino Pathiparamtil from Incred Capital.

Please go ahead.

Dino Pathiparamtil Hi.

Thanks for taking my questions, two quick questions.

Sir any further update on our US business restarting, anything further?

Ajit Kumar Jain As far as the US business is concerned, whatever regulatory content, we’ve already submitted to them, and for all the plants we have made a request for inspection.

They have started now visiting India and probably that inspections have started off the companies now, so I think a lot

Thank you, sir.

So, next question comes from a Kapil Agrawal from Itus Capital.

Please go ahead.

Kapil Agrawal

Thank you, sir.

Next question comes from AbdulkaderPuranwala from Elara Capital.

Please go ahead.

AbdulkaderPuranwala Yeah.

Hi.

Thank you for the opportunity.

So, my first question is on your entire business.

So, what is the total number of [inaudible 00:47:15] do we have right now?

And secondly, did we call out the productivity of these [inaudible 00:47:21] would be at par in the next two years?

Management Team By the end of this current year, more or less we should be having around 6000 sanction pills spent in the market.

AbdulkaderPuranwala Okay.

Yeah.

And so, on the productivity front, you know, by what time could we ask to be productive as the current ones?

Ajit Kumar Jain

Thank you.

Next question comes from Mithesh Shah from Nirmal Bang Securities.

Please go ahead.

Mithesh Shah Yeah.

Thanks for taking my question.

I just want to repeat the same thing about the tax rate.

You said that rate increased from 25 to 27.5% mainly because some of the assets not considered in the depreciation.

Is it right?

Management Team No. Some of the expenses will get the disallowed.

For example, CSR expenses, correct.

So, in your Profit before tax, you are reducing there, but for income tax, you have to add it back because it is a disallowable level expenditure.

Similarly, Mr. Jain said because of the supreme court judgments, certain small recall items, what we use for brand recall and all, those expenses

Thank you.

We are having a follow up question from Kunal Dhameja from Macquarie Capital.

Please go ahead.

Kunal Dhameja Thanks for the opportunity again.

Just one on the daily allowance, you said that daily allowances for medical reps have increased.

So, can you just give some clarity on what was the number before and what is it now?

Ajit Kumar Jain There are various kinds of allowances.

I will not be able to give number, but let's say petroleum cost has moved up.

So, their travel costs have moved up.

So, somewhere, those allowances are gone up, plus all food prices have moved up.

The daily allowances on food and travel have gone up.

Management Team And 6000 people in field so that will definitely put some pressure on cost.

Kunal Dhameja So, can you quantify the allowances as percentage in revenue?

Ajit Kumar Jain Allowances increasedare 10-12%.

Yeah.

Well, there are two kinds of effects.

One is increase in allowances and secondly, increase in field people.

Kunal Dhameja Numbers.

Thank you.

That would be the last question for the day.

I would now like to hand over the floor to Management for closing comments.

Management Team No, madam.

We have answered most of the questions.

There are no further comments from our side.

Thank you.

And thank you all the participants.

Thank you.

Ladies and gentlemen, this concludes your conference for today.

Thank you for your participation and for using Door Sabha’s conference call service.

You may disconnect your lines sir.

Thank you and have a pleasant evening.

Management Team Yeah, thank you all.

Bye

Questions and answers

System · Call Header

post earnings conference call hosted by Dan Capital Advisors.

On the call today, representing IPCA labs, Mr. AK Jain, Joint Managing Director, and Mr. Harish Kamath, Corporate Counsel and Company Secretary.

I'll hand over the call to Mr. Jain to make the opening comments and then we'll open the floor for questions.

Mr. Jain, please go ahead, sir.

Ajit Kumar Jain Thanks Nitin and Dam Capital for organizing this call.

Good afternoon to all participants and thanks for taking our time and joining us for Q1 FY23 earnings call.

Today's earnings call and discussions and answer given may include some forward-looking statements based on our current business expectations.

This must be viewed in conjunction with risks that pharmaceutical business faces or actual future financial performance may differ from what is projected or perceived.

You may use your own judgement on information given during the call.

Domestic formulation business for Q1 FY23 has delivered a growth of around 12% from around Rs.

613 crores to around Rs.

685 crores.

Domestic anti-malarial business has shown a significant decline in Q1 by almost around 68% and business from 39.5 crores last year Q1 is reduced to just around 12.6 crores, so excluding anti-malarial domestic formulation business other therapies have delivered almost around 17% growth during the quarter.This is in spite the WIP base pricing increase on domestic schedule formulation benefit was not fully available during the quarter because we were maintaining around 2 months inventories around that time.

Prices have become effective only from somewhere in June.

We expect the domestic formulations business to grow around 12-13% in current financial year, FY23.