Q1 21/22

Jul 27, 2021

Ladies and gentlemen, good day, and welcome to the Torrance Pharmaceuticals Limited Q1 FY 'twenty two Earnings Conference Call. We have with us today Mr. Sanjay Gupta, Executive Director, International Business Mr. Sudhir Menon, Executive Director and Chief Financial Officer and Mr. Armin Mehta, Chief Marketing of our India Business. 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. Please note that this conference is being recorded. I now hand the conference over to Mr. Qudir Menon. Thank you, and over to you, sir. Thank you, and hi. Good evening, everyone, and welcome to Torrent 1 Torrance Quarter 1 FY 'twenty two Earnings Call. At the outset, quarter 1 growth was backed by continued growth momentum in the branded generics markets, mainly India and Brazil. The 2nd wave of pandemic impacted recovery trends across some of the key markets we operate. Very shortly in terms of financial performance during the quarter, revenues were INR 2,134 crores, up by 4% on a year over year basis. EBITDA was INR 7.17 crores, up by 8%. Profit before tax was at INR 4.84 crores, up by 20%. Net profits after taxes was at INR 3.30 crores, up by 3%. The company will now start utilizing the math credit, which is grouped under deferred tax as the normal tax will become applicable from this year before the company gets into the new tax regime of 25%. The tax cash outflow will continue to be 17% for standalone India. I shall now request Aman to provide insights on the India business performance. Thanks, Sudhir. India business revenues at 1093 pearls grew by 18% on a year on year basis. Growth was driven by strong momentum in top brands across all therapies and is complemented by new launches. As per the AICD data set, Torrance Q1 growth was up 24% versus the market growth of 37%. The market growth includes high contribution from COVID treatments and a low base from last year. We have launched daricitinib during this quarter and are conducting clinical trials for monopiravir. Both of these are licensed products for COVID and we continue to look for more partnership opportunities to widen the portfolio. Torrent has launched its trade generics division during the quarter with a complementary portfolio to the RX business. PCPM for the RX business for the quarter was 10 lakhs with an MR strength of 3,600. Torin continues to focus on brand building and specialty approach and has 16 brands in the top 500 of the IPM with 11 brands more than 100 core sales. I'll now hand over to Mr. Sanjay Gupta to take us through the international business. Thanks, Aman. Speaking first about Brazil, which is the largest second largest brand generated market outside India. Brazil Q1 sales were at RIA 108,000,000, up by 14%. Growth was aided by strong performance in our generics segment, which now accounts for about 7.5% of our top line. Growth was also helped by new branded generics that were launched. There were 2 brands launched in 2021, which have contributed to the growth as well as the recent price increases allowed by the authorities from April onwards. So as per IMS Q1 FY 2022 covered market growth was at 11 point 6%, while torrent growth was at 9.4%. IMS expects Brazil pharma market to grow at about 10% in 2021, and we expect our growth to be superior to the market growth rate. Moving on to Germany. Germany sales were at €29,000,000 flattish growth versus last year same period. IMS for the last 3 months is showing an overall market degrowth of minus 1% as compared to minus 4% in 2021. IMS reflections on Torrent show a growth of 15% in the last 3 months. As the COVID situation improves, we expect the German generics market to return to its long term growth rate of 3% to 4% with Torrent growth returning to high single digits. On the U. S. Side, U. S. Sales were at $36,000,000 down by 24% on a year on year basis and down by 3% on a Q on Q basis. Growth continues to be impacted due to lack of new product launches, pending the reinspection of our facilities and price erosion in the base portfolio. As of June 30, 54 handlers were pending approval with the U. S. FDA and 7 tentative approvals were received. I would like to conclude by stating that the branded generic markets led by India and Brazil continue to drive growth, backed by our top brands and performance of new launches. We will continue to focus on returning our German and U. S. Business back to growth and to further deepen our presence in all our core markets. Operator, we can open the call to questions please. Thank you very much. We will now begin the question and answer The first question is from the line of Shriram Rathi from ICBC Securities. Please go ahead. Yes. Thanks for the opportunity. Firstly, on India business, I mean, if you can break it up into the price growth and volume growth and also some idea on the how the chronic and electrical business are performed? Sure. So the ISV data shows tolerance growth at 24%. Out of that, 14% was volume, 6% was price and 4% was new products. And on a broad basis, I think chronic sorry, sub chronic and acute definitely had much higher growth, firstly because it had a low base last year. And also, there was a significantly higher demand from COVID prescriptions during the quarter. Okay, got it. So 6% is the price growth? And secondly, this is on the other expenses part. I mean, this quarter, we have seen that I mean, it is lower even YY also, even if you exclude the R and D. So what exactly is given that? Is it because of the lockdown in the 1st 2 months or this quarter? And how should we look at this number going forward? Because I think from the last 4, 5 quarters now, more or less, it is in the range of 3.50 to 3.74. Marketing expenses were certainly, I would say, because of for a second wave this time, were lower than what we had planned. But I don't think there should be too much of an increase from here at the current rate. So this should be a pretty representative number in terms of marketing expense for the year. Subhuti, if you'd like to add anything? No, no, perfect. Perfect. Okay. So we should work with different vendors going forward also. So we will be increasing the increase in sales. Plus minus here and there, Sreedhar. Right. Okay. Got it. That's helpful. And just lastly, one thing, I mean, what should be the reported tax rate now, I mean, this year? So, Shriya, just to give a background. So the government has come out with a new tax regime, right, about 25% for all the companies. And what it said in that quote is that no exemptions would be available and 25% would be the tax rate for everyone, okay? And the government also gave an option to people that the also gave an option to people that the people who had MAC credits in the book, they can still continue on the old regime so that they can utilize the MAC credit. And once that is done, they can transit into the new tax regime. So for us, it's started now. So the cash tax would continue to remain at 17%, and the mad credit utilization will start for the balance. So the effective tax, including deferred tax, would be roughly 30%, 31%, but the cash tax would be roughly 17% because there will be a MAC credit utilization from the balance sheet coming into the P and L. Right, right. That's helpful. Thank you so much. Thank you. The next question is from the line of Neha Mankuria from JTM. Please go ahead. Yes. Thanks for taking my question. Suneet, on the employee cost, given that we had rationalized our MR during last quarter, the quarter on quarter increase is primarily because of sentiment or just wanted to get a sense there? So largely increments, Neha, but quarter 4, if you recollect, I had also said there was a reversal on some provision to the tune of INR 7 crores. Other than that, there is an incremental impact that we gave. So I believe INR 341 should have been, let's say, INR 350. Okay, understood. Yes, that's the improvement. Okay. And Sandeep, on Brazil, the quarter on quarter decline, it was about BRL140, it's close to BRL110. Is this some inventory correction in the market? Or if you could give some color on that? And second, on Germany, now that our quality issues have resolved, we were expecting normalization of sales to happen given most of Europe has pretty much opened up. Any reason why we are not being able to ramp it up to the €30 plus 1,000,000 level that we have seen before the quality issue? Sure. So starting with Brazil, so generally traditionally in Brazil, Q4 sales are always high. And the reason is that the distributors speculate on price increases which take place on the 1st April. So it works pretty much the same way every year. So there is usually on Q on Q precipitate a drop in Q1 versus Q4, which is normal. So I don't see anything unusual here. We decide on the level of inventories we want to keep in the channel at the end of March and we kind of and it does go up. And then by the end of June, it comes back to a normal level. So, near the appropriate comparison would be year on year, not quarter on quarter for Brazil and because of this phenomenon. For Germany, there are a few things I would have liked to see a higher level of sales. So, what is holding us back from that 30 plus level? Firstly, it is the overall market. Last 3 months, we've seen the market go down by -one percent again. And I was expecting it to return to growth, but secondly, it kind of impacted it in March, April, May and now we had a lower market rate. Secondly, what has happened is we have about 10% to 12% of our business in the OTC space, which has suffered disproportionately because the sales of this business has actually declined. So that has had an impact. What I can say is going forward, our internal issues are resolved. And as the market, I would expect it to come back to the traditional 3% to 4% range and then for us to be in the high single digits, 7% to 9 percent range, this could be end of the year. So hopefully, in the next few quarters, we'll be able to show you numbers in that range. Sanjay, just to add to what you said, the OTC impact is because of the lockdown, right? So quarter sales should be better. The next question is from the line of Angelo Bell, an individual investor. Please go ahead. Yes. Hi. Thanks for this opportunity. I just wanted to have a quick overview of the company that how is it with regards to the U. S. Pricing? Is the pricing pressure returning? And if so, what are the steps or how does Stern Pharma foresee it? Thank you. So on the U. S. Side, the number one cause of defining sales has been the pricing pressure that we've been facing. And the pricing essentially, we face it for glass because we have a relatively mature portfolio. We have not had much launches since March of 2019 when the issue started. So on the mature portfolio, how it works is that there are new competitors that emerge every few months and then they make competitive bids to your customers and there's a pricing impact. So I would say that for Torrent, we've been seeing high single digit pricing impact across our portfolio on an annualized basis. All right. So thank you so much. But are there any remediations that you're looking forward that it doesn't impact us much moving forward? Have you been looking at So generally, the way to counter the pricing impact is to have new product launches, which is like the oxygen or for U. S. Generics market and of the players. Unfortunately, we seem to be a bit, let's say, jammed up on that front. So but last few years, we've continued to file. So in 2018, 2019, I think we filed about 20 NDAs in 2019 2020 about 2012 and 2021 about 2012. So we've been continuous to make new filings in the U. S. And as soon as the facility issues are resolved, we expect to launch about 12 to 15 products a year. And that would more than compensate for the pricing decline in the base portfolio and lead to lead us back to growth. Thank you so much. Appreciate your response. Thank you. The next question is from the line of Prakash Agarwal from Axis Capital. Please go ahead. Yes, hi. Thanks for the opportunity. Good evening. Just missed on the opening remarks on the India outlook as well as gross margin and EBITDA margin outlook. I mean, while India growth is very strong, but gross margins are tad lower, if you could explain that and the outlook is there? Yes. So I'll first take the gross margin question, Surakash. So basically, although the India contribution is higher, there are 2, 3 impacts that have happened this quarter versus quarter of last year. So one is the export benefit income not being there this quarter versus same quarter previous year. That impacted well with 8.25 kind of a number. The other is the second benefits are over for us, right? So 2021 was the last year. So that's again impacting the gross margin by another, let's say, 0.25. So both put together is 0.5, I would say. The other thing what has happened is India although the India share is higher, I think there's a skewness towards the acute portfolio, which I think the concentration was a little higher compared to the quarter 4 or last year or same quarter. And that has caused a drop in the gross margin, I would say. So it's basically the product mix which is driving, but anyway, it should come back in the next quarter, I believe. Okay. So and outlook on the India business, sir? Yes. So if you look at the June data at 14%, that was practically with the lowest COVID cases across the country. So April, May had a high growth and June was significantly lower. So depending on the footfall recovery as the country is opening up now substantially pretty much everywhere apart from a few metros in a few states, are these a double digit growth for the market should continue even without the COVID drugs going ahead. Okay. And do you think your entry now with the COVID drugs, Molnupiravir and the first one and you were expected to disclose one more? So is there any color to that? And do you think these products have long runway of growth or these are like getting prepared for, if at all, there's a 3rd wave? How do you think about this pipeline that you are building? Yes. It would be more for, if at all, the future wave. That would be where these products will be prescribed the most. It will not be a long term prescription. Okay. And for the long term, in terms of new introductions, after DAPA, are there any new introductions around nutrition or preventive healthcare or any other segment which will guide future growth? CNS, we've had a few launches. 1 from last quarter has done well so far, Rivarasitam. So that market is picking up quite well. We've also launched a Theranpanel, which is another anti epileptic. So CNS has seen a good traction, I would say, of new launches. Apart from that, dairy segment was already launched this quarter as well. So I think this Q1, we had about 4 new products. We're looking at a few nutritional extensions in the coming quarters as well. And then the next wave of launches will be after the patent expirations next year, large launches, I would say. Okay, understood. And on exports, I see that Brazil currency after long has reversed. We are still near industry growth. So would we when do we start seeing the higher growth in Brazil given we just mentioned that 10% industry growth and we expect to outperform that, plus there will be the currency tailwind which should start or that is unlikely? So the currency tailwind is, I mean, from what we have seen of the economic forecast done by various banks, etcetera, it seems to be unlikely. So the country seems to be fairly stable this year, forecasting a GDP growth of about 6% and next year, I've seen figures in the 3% range. So in terms of inflation also, things are pretty stable. So all in all, I don't expect the currency to devalue substantially. In terms of growth, I think you will see that growth will come from 3 or 4 things. One is, as we had discussed earlier in the thing in our generics business, so we hired last year, we had 7 additional people. We'll be hiring some more people this year to push the generics business and that has grown quite handsomely and that will continue to grow as we launch more products. The second thing is we benefited from the price increase that took place this year on time on April 1. So the price increase that was authorized for us it's by category of products, but for the most competitive products, the government authorized a 10% price increase. So that will benefit us as many of our products fall into that category. And then thirdly, we have new launches which are on the calendar. So last year, we launched 2 new products. 1 was motezapine and the second was bisoprolol. Modazapine is already showing double digit share in prescriptions and volume and bisoprolol is mid single digit, but the goal is to reach double digits soon. And then this fiscal year, we will launch about 5 products. Some of them are quite major products. And so they would help to push that growth rate much above the market growth rates. So that is our expectation. Okay. Thank you for the detailed answer. And one question on growth expectations. So we have seen India reviving quite a bit. We have seen Brazil reviving now. Germany, you had couple of quarters back. So when do we start seeing double digit growth? Because U. S. Is something which is pulling down our double digit growth more in terms of top line and EBITDA growth. So when do we see that coming through? Unfortunately, Prakash, we have no position to give any guidance on the U. S. And the main problem there is the FDA, when do they start traveling to India, when do they inspect the plants and start approving our new product. We are, from our side, doing whatever we can in terms of filings and getting products from 3rd parties, but that has a limited impact. So last year, we launched only 2 new products, which are both manufactured at 3rd parties. Coming year, if the plans don't get approved, we'll have lower single digit number of launches. Yes. Pratash, I'll give you 3 data points, right? It is another one data point. So this quarter, the U. S. Impact on the overall growth is around 7%, right? I mean, because last year, quarter 1 was roughly $47,000,000 and it came down to a base of $36,000,000 in quarter 4 this year, right? And that's something which we are maintaining. So assuming, let's say, quarter 3, I mean, come quarter 3, the 7% impact should not be there because we are maintaining the same base of 36%, 37%, right? Okay. And assuming you have double digit growth across the other three markets, you can achieve double digit growth. Correct. Okay. Fair enough. And last question for you on cash flow generation for the quarter and any debt prepaid? Yes. We received around INR 350 crores approximately. The refinances are largely from cash flow from operations? From cash flow. Okay, perfect. Great. I'll run that. Thank you. Thank you. The next question is from the line of Shyamshu Anilamathan from Goldman Sachs. Please go ahead. Hi. Thank you for taking my question and good evening. Just one on in the press release, it says you've launched a freight generic division during the quarter. What's the idea here? Is there any outlook that you want to share on this? Yes. We launched the division in Q1. And so I think we would want the business to stabilize a bit first before sharing more details. But broadly speaking, it's a complementary portfolio focusing mainly on the acute segment, predominantly acute and some, sub chronic. There's barely any chronic share in the trade generic business. So while we would look at having organic launches in this basket, we would also look at shifting some of our prescription brands to the trade generic division at some point where there would be a higher growth potential. These would be in molecules or segments where there is a greater consumer recall and self medication. So as of now, I would say it's a good start, but we will wait for maybe another quarter or 2 to comment on the trajectory. And if we were to look at the margin profile for this, would it be very different, you think, or in a kind of an umbrella approach, which should kind of give you the entire India business? How should we look at and maybe the timing of why we started it now? Just curious. Margin profile would be lower than the prescription business for sure. The nature of the business is such that, I mean, you have to be at that price point plus the channel margin is significantly higher. And in terms of the timing, I think this has been something that we've been discussing internally for quite a while. But because of COVID disruptions last year, it wasn't appropriate to launch. It requires a completely new supply chain, new set of distributors. So once that situation stabilized, we started working on this sometime around January, and we ended up launching it this quarter. Got it. Thank you. And second question just is on the updates of the U. S. From the Levittown facility about some of the oral liquids. Have we done anything yet? Or is it not material enough for us to see in the numbers? I remember we had a €12,000,000 annual target to kind of get back. So I'm just curious what's happening there? So far, we have not started commercializing products. It will start actually a couple of months with delay, so they start selling some products in October. But you won't see the impact in the numbers. At least in the initial few months, it won't be material enough to move the needle. So you're saying it should be a more fiscal 2023 where we will likely see the impact of all these over liquid loans, okay? Correct. Okay. And the last question is on Sartan. Are we now back sorry, I missed maybe I missed a bit, but just what's happening on the Sartan side? Sure. So we've launched 2 sartans on the market. 3rd one would be launched in this quarter. The top line, you will see some impact, but the margin profile on sartans is not what it used to be. So we will get our fair share on a couple of statins and those numbers should start coming in the top line from this quarter onwards. You mean Q2, you mean, right? Yes. Got it. Lastly, on R and D, I think slightly slower than the run rate you have had, say, I'm speaking Q on Q, but is it the same, like 6% to 7%? And where are we what are we kind of filing? Where is it being directed to? Are we doing anything incrementally in terms of the complex filings? If you can just share some general outlook on the R and D expense? So, I mean, Suri can comment on the expenditure level. But in terms of filings, because of the Chinese remain the 4 core markets. And to the extent possible, we try to have common products. So do common developments across all our geographies and particularly in expensive areas like oncology or changes the risk profile of the portfolio, right, if you can leverage your R and D investments across multiple geographies. So our focus is on that. For the U. S, we do products with, I would say, generally complex products. So we stop doing or we do a very low single digit number of simple vanilla oral solids. And generally, we are doing products which require a little bit higher level of investment, higher level of risk. And overall, the number of India's would be in the 10% to 12% range. So in the past, we've done up till 20%, but going forward, it will be more in the 10% to 12% range with some single digit simple generic, but majority of the products having so a good example would be DAPSON. So we in April of 2021, we got a tentative approval from the FDA for DAPSON, which is an acne product for which we conducted a clinical trial in patients in the U. S. So the level of investment was higher than what historically we've been used to doing. And the tentative approval speaks well to the fact that we would get approval on that product. So you would see more of those kinds and you're also building a large Onco portfolio for all our markets. So Onco products are very expensive to develop their assets given the cost of the R and D as well as the cost of the API. So we have a new facility outside of Ahmedabad where we will be developing these products for across all geographies. So those are the kind of investments we are making right now. Got it. And last question is on EBITDA. I think EBITDA excluding other income, 32%. This has been higher than what we had talked in the past where we thought there was going to be a fade in terms of margin once we formalize. How should we look at this EBITDA percentage? Shyam, Madhavan, as a policy, we don't give guidance, but if something was possible to be talked about in a scientific way, we could have done that. But now people are already talking about the 3rd wave, right? So I would still wait for 1 more quarter to see where the full year can settle. So give me one more quarter, please. Got it. Thank you and all the best. Thank you. Thank you. The next question is from the line of Nitin Agarwal from JM Capital. Please go ahead. Thanks for taking my question. Aman, just moving back to the trade generic business that we initiated, I mean, it's quite in contrast to our general philosophy of high gross money businesses. So what is the landscape prompted you or has been prompting you in the past to look at this piece of business going forward in the year? No, I think earlier, we had, I mean, a lot going on, I would say, over the last 5 years in terms of integration of businesses and mergers for portfolios. So I think we consciously stayed away from entering this segment. And it's also reached, I would say, a level where it can add meaningfully to our portfolio now. The size is, I would say, much greater than it was probably 5 years back. So and anyway, our acute portfolio in the Rx business is not very significant. So this gives us an opportunity to partake in the acute segment as well. So that's the idea is to expand our overall market and market share in portfolio across TGI Trade Generics plus Radiology Genetics. So this is largely going to be around the acute portfolio or acute segment, yes, our Trade Generics business? Yes, yes. There's barely any chronic sales in this segment because substitution is not very high or even retail recommendation for chronic products is not very high. So this is most conducive for acute and sub chronic. Okay. And at what stage do you see it becoming waiting for our overall year business? I would say probably after the 1st year of launch, so maybe 4 quarters, 3, 4 quarters from now. Within the near term, so right now we've launched with the first phase of the portfolio. That's about 50, 60 SKUs. But that's, I mean, a long way to go for us to add more products here. So anything between about 3% to 4% of our total India business contribution is what we can look at as a reasonable target in the near term. And then at some point later, we can see how it's progressing. But I would say that would be an immediate target to have. Got it. Thanks. And secondly, on the U. S. Business, so whenever the U. S. Business sort of starts on more again, right, in terms of the new product launches coming through, we had about $150,000,000 done with give or take right now on the business. And the dynamics in the U. S. Business, especially the oversight, have changed very recently in the last 3, 4 years. So, I mean, So in terms of the business, right, we are very small in the U. S. So essentially, I would say that our business is now doing about $35,000,000 $36,000,000 a quarter. From these levels, I don't expect further declines. I mean, I would expect it to be more or less around these numbers in the quarters ahead. And then new launches would contribute meaningfully to moving the needle upstairs. Medium term, I mean, given that it's a $50,000,000,000 market to do $500,000,000 in U. S. Revenue, it's not something which is outside the realm of possibility and it's something that we are planning for. And then we continue to work in terms of right. So after we get through this FDA barrier that we are currently stuck in, we should be able to return to growth with around 10 to 15 NDAs and new approvals and launches each year. Right. And secondly, in the Amrapol, there is a fair bit of mention of our innovation R and D efforts. So these F1s are largely not afforded or targeted towards domestic launches or there is some possibility of some meaningful launches in the export market also from that placement? So in the U. S, we're building a small portfolio of 505(2). Currently, we have 3 and we aim to add 1 to 2 every year So that's where we are going. So eventually, at some point in time, we will have a small promotional activity in the U. S. We are doing this in partnership company, which had lot more experience in marketing branded products in the U. S. So that's the approach. And for India, Aman is doing incremental innovation also. And I think there are a few products on the market. So Aman, you might like to speak about it? For the MBBS CV? Yes, yes, yes. Yes, that's the top and middle nasal spray, which has been launched a few months back. And essentially, this is the first of its time nasal spray for severe pain, where there is a post operative pain where there is no other alternate. So right now it's only for use in hospitalized cases. So the market itself is not very large, but the product is, I mean, received very well so far. So we hope to capitalize on this launch. And last one actually, this mattress utilization, over what year do we see our account getting utilized and going back to the 25% taxes with domestic the business? Yes, I think between 4 to 5 years. So for the next 4 to 5 years, we'll be at the 31% reported tax rate? Yes, including the deferred tax. But as I said, cash tax is only going to be 17%. Yes. But on a reported basis, 30 10 or 31 percent for the next 4 to 5 years? Yes. Okay. And okay, because both of our profits are offsetting out of being subsidy itself? Yes. Okay. Thank you. Thank you. The next question is from the line of Abdul Kadir Kodhanwala from Anand Raji. Please go ahead. Hi. Thank you for the opportunity. Just one question from my end. As you've heard you mentioned to the earlier participant that the U. S. Business would have would not go below the $35,000,000 $36,000,000 quarterly run rate. So currently, if you look from that point of, what would be the quantum of the fixed assets, which would be dedicated towards the U. S. And which would be not generating any top line for us? And how do we see the ramp up to happen once your plant gets approval in the near term? Sudhir, you want to answer that, please? Yes, yes. So I think it's a difficult question because all the manufacturing facilities which we have is Kansy Gula and the way planned is basically looking at the volumes over the next 3 to 5 years on a global basis. So I don't know how to respond to that as to what percentage of capital is manufacturing capital is assigned to you. I mean, there can be some humblings of looking at it, right? I mean, for example, what is your total CapEx, which you have spent in putting up the manufacturing facility? And based on that, what are the volumes which are getting manufactured for the U. S. And then see what extent of the capital can be allocated to the U. S. That could be too theoretical, I would say. Sure. So understood. And my next question is on the India business. So India, we had a fantastic quarter. But I mean, as we stand today, could you provide some outlook as how the growth is standing now that the COVID crisis is going down and the market is really stabilizing? So what is the stand point now? Yes. So June data is the most recent that we can look at 14% growth of the market. And that may, as I said, started normalizing 1 point if you recall, even last year, the base started normalizing month on month. So as we said, 10% growth between that range should be doable going ahead. And of course, a lot of it will depend on whether or not there is a future wave. But as of now, this is what the situation looks like in AAVI, particularly as most markets have opened up significantly. Awesome. That was helpful. Thank you. Thank you. Next question is from the line of Nimesh Mehta from Research Delta Advisors. Please go ahead. Yes, thank you for the opportunity. My question is more about the strategy. I mean, now that we've more to focus on trade generics, is that because we believe that the market is likely to shift in that manner or it's more opportunistic, right? I'm just trying to understand how we see the market because we are trying to focus on a segment which is not as high margin as we used to otherwise focus on? No, absolutely not. In fact, as we have always been at both segments have their own space to grow, the branded segment will grow and the trade generics will grow without eating into each other's share. It's just a matter of us getting into rather expanding our portfolio reach for some of the acute segments, which we haven't really focused on that much. And this gives us a pretty good opportunity to enter. So it's not in any way going to affect the branded segment at all for us. And in fact, entering in this also we've seen is how difficult it is to really get products substituted, especially in the chronic space. So this even gives us more confidence that the branded business is not really at any risk on this. So is this more like expansion into new therapies? Or again, what I'm trying to understand, it's more Torrent specific strategy? Or are you seeing the market is likely to shift in the second half? So this is more specific to Torrent because I think we were probably one of the last companies to enter this segment. Most of the other peers are already present in this segment. Okay, got it. And the other actually, the reverse of that is what I understand you're likely to do with U. S. We're trying to focus on 5 0.5(2) which is more like branded so far otherwise U. S. Is a generic market. So again, the same question, I mean, more Torrent specific or you think there's more opportunity in the 505(2) space when it comes to U. S. Market than the normal generic space? It's a different profile of business, right? So it's good to have a so it's not that you're going to place all your eggs into 5. So if you do 12 to 15 nandas a year, we'll do 1 to 2, 5 or 5 to 2, like moving up the learning curve. And these points generally can enjoy some exclusivity. But the skill set required to succeed is a little different than what we do in our core generics business. So I would say it's an evolution of the company towards the branded space, but it's not as if that's the only activity that you would be focused on. It's a complementary activity. Got it. So will we be also developing a sales force for Financially, B2 that we might be targeting? For the initial products, we partnered with a company that has a sales force, leveraging the partner's sales force. I see. Understood. Okay. Thank you very much. This is very helpful. Thank you. The next question is from the line of Bharat Shetty from Expira. Please go ahead. Yes, hi. Thanks for the opportunity. So just wanted to clarify on the tax part. So are we seeing that the tax rate is going to be around 30%, 31% and cash tax will be around 17%. Is it right, understood? That's right, yes. And so just on the margin perspective, so given that we are saying that our Opex or other expenses are going to stay at the current level, so directionally, how do you see margins to be going forward from the ensuing quarters? Is it going to be something similar to what we had referred this quarter? Or there could be some serious growth downward or upward trend? So just from a trend perspective, I understand you can't possibly upshift market usage. So I think that's what I answered in one of the questions earlier saying that I would like to wait for 1 more quarter before I start looking at it directionally, how the margin would settle for this year? Right. But in any case, if let's say there is no COVID there or if hypothetically, we will settle both studies, if you could give that to me? If there was no COVID, the margin could improve by 1% every year. Sure. That's helpful. Thanks, guys. Thank you. The next question is from the line of Anubhav Bhardwala from Credit Suisse. Please go ahead. Yes. Hi. Good evening. Just one clarity on this trade generic initiative. What kind of can you just talk about what kind of investment this would require roughly? I'm not looking for the exact number, but if you can just walk me through. And the reason I'm asking this question in context that there is always overhang on this segment because the channel margin is so high and the government can clamp down on the margins at any point of time. So that's the context I'm asking that what resources are you devoting when you're starting this business? And have you taken a call that Sachik Ramban from government is not going to come in and that's why now is the right time to start it? So the initial investment while entering this business, so there are 2 ways one can enter. 1 is by having a large field force attending to retailers, ensuring distribution. And the second is just going to the distributors to their last magnitude. So that's what we have gone for right now. So we don't really have a large field force to begin with. We've got about 20, 25 reps across India who are good for this business. So if the business reaches us a size large enough to handle a larger field force at some point, that's when probably there could be some synergy benefit of having our own field force, so that the distribution margin will be cut down. But as of now, that's not the case, and we think this will sustain it for at least the next 1 or 2 years. And then we can see later on how to take it up forward. And the products, are you manufacturing it or these are mostly contract manufactured products? I would think mostly contract manufacturing. Okay. Sure. Thank you. Thank you. The next question is from the line of Shiram Rathi from ICICI Securities. Please go ahead. Yes. Thanks for the follow-up. So just one thing, I mean, I think on the balance sheet, the deferred tax is around INR 4.21 crores. So does that mean that until that is being utilized, I mean, after that, slowly, it will be contributed to that effect on the balance sheet. Look at the breakup of the deferred tax because when we show it as a deferred tax, it's netted up against deferred tax liabilities as well, specific to the country. So if you look at the breakup, you'll find mag credit at INR 9.75 crores. Okay, okay. Got you. Which needs to be utilized, yes. Okay, okay. Thank you. Thank you. The next question is from the line of Nishshank Ghatari from Citi. Please go ahead. Hi, this is Patishan from Citi. My question is, trade generation, do you see this trend of that happening across companies now where each company, wherever they are not present, try to launch music trade generic segments, now that they can catch up at market? And the outcome of that would be that there is a generic kind of a price deflation, which happens in the industry as more kind of companies try to grow their trade generics business and obviously some for customers from the branded side? So I would not be able to comment on what competition is looking into. But broadly speaking, this is a completely contrasting portfolio. So there is no real overlap where this situation can happen where pricing can be under pressure for the branded business or branded products. The whole distribution channel is also completely separate for trade. So there's practically no scope of conflict on that front. So and that's how this seemed to be an opportunity for us to launch these new products, especially in the acute space, where we felt a very significant gap in our portfolio. And that's how we continue to build on this as well. Okay. Okay. And if you just said the overlap might not be the gap that will surely be Sorry, just to clarify on that, there's a very specific segment of therapies where trade generics has a higher share. Most therapies, trade generics is not significant in terms of market share. So it should not affect the overall market even if more people enter the space, more brands enter the space. That segment is there's always been this competitive in the trade generic segment and most of the other particularly chronic segment should not see any impact from this. Okay. And secondly, maybe a bit unrelated to the earnings here, but what are your thoughts on the consolidation of the distribution channel? Is it something that's completely meaningful in the rest of the time? Consolidation distribution channel in India, you're referring? India only, yes. If you could be a bit more specific about anything But that's a little bit of pharmacy, you're trying to consolidate on the distributor side. Is it something that you've already meaningful or will become meaningful? And are there other kind of players out there considering the same and thereby kind of reducing the bargaining power of former companies like that? No, as of now, we've not seen any impact. And we don't really have any direct selling to e pharmacies. So that impact should not be there in our view. All right. Okay. Thank you. As there are no further questions from the participants, I would now like to hand the conference over to Mr. Sanjay Gupta for closing Yes. I think we can conclude the call here. Thank you for participating, and we remain available to answer any further questions. Thank you and good day. Bye bye. Thank you. On behalf of Soren Pharma Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.