Ladies and gentlemen, good day, and welcome to the Ipca Laboratories Q3 and FY 2024 earnings conference call, hosted by DAM Capital Advisors 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 and zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Nitin Agarwal. Thank you, and over to you, sir.
Thank you, Azhar. Hi, good afternoon, everyone, and a very warm welcome to Ipca Labs Q3 FY 2024 post results earnings call, hosted by DAM Capital Advisors Private Limited. On the call today, we have representing Ipca management, Mr. A.K. Jain, Joint Managing Director, and Mr. Harish Kamath, Corporate Counsel. I will hand over the call to Mr. Jain to make opening comments, and then we'll open the floor for questions. Please go ahead, sir.
Thanks, Nitin, and DAM Capital Advisors for organizing this call. Good afternoon to all participants, and thanks for taking out time and joining us for Q3 FY 2024 earnings call. Today's call and discussions and answer given may include forward-looking statement based on our current business expectations that must be viewed in conjunction with the risk that pharmaceutical business faces. Our actual future financial performance may differ from what is projected and perceived. You may use your own judgment on the information given during the call. Our domestic formulation business has delivered 11% growth for the quarter, and we are ranked as the 16th Indian pharma company as at December 2023. Market-beating growth in both acute and chronic segments therapies are achieved for this quarter.
The chronic market, market growth was 11%, IPCA has grown by almost around 15.9%, and on acute segment, market growth was 9.1%, and IPCA has achieved around, almost around 11.3%. This is as per IQVIA, MAT December 2023. With two rank jump over corresponding period, IPCA is 13th in acute segment, and IPCA has maintained its rank in the chronic segment. IPCA's market share has improved to 1.9%, MAT December 2023, as against 1.89%, in December 2022. So from 1.89, it has grown to 1.95. Our export formulation business has delivered growth of around 8%, for the quarter, from INR 400 crore to around INR 433 crore.
The branded formulation business in ROW declined from INR 128 crore- INR 105 crore. This is mainly due to certain shipment could not go to the CIS market. Myanmar business is impacted because there are issues, and licenses are getting delayed for a long period of time. So, without import license in that country, shipment cannot go. And certain business of West Africa are affected for two reasons. One is Red Sea reason, and another, some kind of slowness in the market also. So, because of that, the branded business in this quarter is down. Institutional anti-malarial business has declined from INR 83 crore- INR 77 crore in the same quarter last financial year.
Export generic business in U.K. and other market has delivered growth of around 33%, from INR 189 crore to around INR 252 crore. So overall brand, the generic, export formulation business has grown by around 8%. API business declined from INR 329 crore to around INR 285 crore for this quarter. So we continue to face volume decline in certain API, but pricings are now getting stabilized. On margin front, the, on standalone basis, EBITDA margin improved by around 2.78% from 15.77% to around 18.55% for the quarter, from fifteen point seven seven percent in the corresponding period of last financial year.
The material cost to sales ratio also improved by 2.65% for the first nine months of the current year. So overall, material cost to sales ratio from 34.86%, it has come down to around 32.21%. Both shipping costs and energy costs prices have moderated as against prevailing prices in December 2022 last financial year. And we are also witnessing a price stability on majority of our procurements. Consolidated EBITDA margin before exchange gain loss or exceptional income has gone up by 1.12% during the quarter. From 15%, it has moved to around 16.12%. Consolidated material costs to operational income has improved by around 2.39% from 36.34% to 33.95% for the quarter. Having given the broad numbers, now I request participants to ask questions. Thank 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 only while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Kunal Dhamesha from Macquarie. Please go ahead.
Hi, good afternoon, sir, and thank you for the opportunity. So the first one on now that we have had a full quarter with Unichem, you know, what are your updated thoughts on synergies that we can generate in terms of, you know, quantitative synergies over the next two years? And, you know, what are the primary drivers that you see, you know, to generate those synergies? And then, consequently, what that can lead to our total profitability?
So, we are working on a lot of things as we have discussed earlier, like, your market extensions, the improvement in the processes of APIs, and improving the overall productions and productivity at the Unichem and all those and cost reductions and all those kind of things, and also to scale up their production. So you can witness that that total income in the current year and the first is almost growing 40%+. And in this quarter also, the overall top line has grown by around 33.6%. So, their productivity definitely are improving now.
As far as a lot of those activities are concerned, it's a lot of, there is for everything there are timetable, and it takes a lot of time because regulatory filings and so many things are involved. So that process is going on, and the even cost reduction process and everything is going on. It will take some time, but the improvements are seen in the results now for the Q3. They have achieved almost around INR 38 crore kind of EBITDA numbers, 8.8%. The company, which was incurring losses, has now shown some kind of PBT in the current quarter, also from almost around INR 16 crore before the exceptional income. So we are on the right track, and we are confident that the company will make profitable, as we have discussed earlier.
Is there any quantitative number as to where their margins, annual margins could end up in the next two years with all that we have, you know, in place now, the entire plan that we have in place?
It all depends on how the journey is being taken up, because there are many things where the regulatory approvals and all are required. Even if processes are changed, processes need to be again refiled. Then after approval only they can be, let's say, commercialized and all those kind of things are there. So giving quarter-wise numbers and all may not be right now feasible. But yes, what we have talked earlier that INR 2,000 crore turnover and INR 300 crore, kind of 15% kind of EBITDA margin, that's very much achievable. We are very confident that every day after we, when we are looking into and seeing the progress, we feel that we are on the right path here.
Sure, sir. The second one on the generic business, which has, you know, seen a lot of growth, 33%, year-on-year. Is there any one-off kind of component? How should we look at that business, let's say, next quarter and probably next year?
Generic business, if you look at in last three quarter on continuous basis, that has done the similar kind of growth. And, in fact, at the beginning of the year, we were looking that generic business may not grow that much because of we had lost certain kind of businesses in South Africa, but in South Africa also, we are growing, and we were expecting almost around INR 40 crore-INR 50 crore kind of losses. But we are looking that the South Africa business is also moving up in current year also, I think in first nine months, it has grown by almost around 12%, so there are no decline. Europe business is also going on very well.
Europe has seen good growth in the last three quarters in the current year, and overall it's grown from INR 240 crore to almost around INR 371 crore, almost around 54% growth. There are a lot of products which are yet to be launched in the U.K. So that business will continue to have good growth. Only concern is little bit on this Red Sea level and certain customers postponing some kind of shipment and all those kind of things till the time freight is going to be normalized. And in time to come from first maybe in first quarter of the next financial year there are some kind of U.S. products with shipment and marketing will start. So all generic business should be growing well for us in time to come.
Sure, sir, and one more, with your permission on the U.S. products. You know, can you provide incremental update as to where are we? You suggested that we might do some shipping, but you know, what would be the potential upside from that shipping that will start in quarter one? And then how are you looking at the number of products that will start shipping, starting from quarter one, FY 2025 to the end of FY 2025?
I think overall, we have worked out that there are a lot of products where some kind of work needs to be done with reference to, because in U.S., we are coming after a long number of years, 2014 to now. So some kind of processes were changed of API and all those. There are some processes where the post-approval are required, which has six months time, and some pre-approvals are required. So all those kind of things are there. But I think overall, looking at, we feel that almost around eight or nine product can be launched in the next 12 months.
That's what is feasible, and thereafter, whatever the process upgradations or somewhere, the site changes are there, and all those things will take time. So, over a period of two years, I think it's possible to launch around 16, 17 product kind of numbers. So, that's how it's a journey now. There's a lot of re-validations and all those need to be taken and all. So, it will take some time. It's not that everything can be done together. So it's over a period of time, but say in current year, seven to eight product definitely can be launched, yeah.
Sure, sir. Thank you, and all the best.
Thank you. The next question is from the line of Damayanti Kerai from HSBC. Please go ahead.
Hi, good afternoon, and thank you for the opportunity. Sir, my first question is on branded markets. So you obviously mentioned some regions which has impacted quarter during performance during the quarter. So how should we look at this business, say, from next two to three quarters perspective?
Overall, see, our expectation from this business from next financial year could be around, around 10% kind of growth, and current year it may grow around by 8%, yeah.
Okay, but, some of the challenges which you mentioned, that remains in near term, right? And then maybe it will take some time for those to settle.
Yes, yes. But in spite of those difficulties, the business could grow around 10%.
10%. Okay. And, sir, you mentioned, say, like, Red Sea situation, etc , but one of the commentary you also mentioned that freight costs are down, or freight costs are moderated year-on-year. But, I think what we are hearing that logistic costs are going up, etc . So how should we look at your operating costs, especially freight, etc , in, again, from near-term perspective?
That freight cost comment I have given only with reference to that last year, what kind of prevailing rates were there. Compared to that, the rates are significantly lower, and even if the logistic cost goes a little bit high, it may not have much of impact on overall profitability now.
You don't expect much impact from these higher freight costs, etc ?
Yeah.
Should we-
Only certain European customers are postponing the shipments, but now let's say Houthi attacks has come down and things may normalize again. That's what. Yeah, yeah. Last few days, we have not heard any kind of those attacks, yeah.
Okay, good. And my last question is, can you provide an update on some of the new plant expansion, etc , which you're doing, say, Dewas, Nagpur, etc , and how soon these plants will start contributing to your numbers?
The Dewas, almost around seven to eight product commercialization work is going on. Some products are already filed with European authorities. One product approval has recently come. So it may take around six months' time for at least five to six products to get approved. So, thereafter, the production for regular shipments can start from Dewas plant.
Okay. And say, like, Nagpur, yeah.
Nagpur concerned, Nagpur, we have not done anything much on the site. We have just got the... We are now concerned to operate. So first one, intermediate product, the planning is going on there, but that's for captive consumption, so nothing will add on as far as the top line is concerned. It's only some kind of reduction in the cost and all will happen.
Okay. And sir, a clarification on the U.S. business commentary, which you earlier provided. So you are expecting that 16-17 products can be launched in next two years.
Yeah.
So that will give you, like, a good footing in the U.S. business, given, like, your advantage on the cost efficiencies, etc ? Or you need to add on, like, more products, to gradually come up in the U.S. market in, say, next three years?
We have almost around the basket of around 40 products. So we, we are expecting good number of product approval to come. So this is from the current list I am talking. This is approval, yeah. So it's basically the more number of product approval will come, and with that, even the more number of launches will also happen.
Okay. Okay, thank you very much for your response.
Thanks.
Thank you very much. The next question is from the line of Surya Patra from Phillip Capital. Please go ahead.
Yeah. Hi. Thank you for this opportunity. Sir, my first question is on the margin profile, ex of Unichem, for this quarter. If I see that, adjusting for the EBITDA margin, what we had reported for, or what we had indicated for Unichem in the previous quarter, that was part of our number, and this quarter's reported number of Unichem. It looks like that, the margin has, for Ipca, has seen a kind of meaningful correction sequentially from almost like, 300 basis point kind of impact. So what is this leading to? Is it the operating negative leverage that is playing out here because your export is seeing some kind? So if you can clarify, what is that is driving the margin sequentially weak for our base business?
Let's say overall, if you look at the, as I had talked earlier, that material cost to sales ratio has improved because more value additions are there, and, that improvement is almost around 2.6% kind of improvement is there in, on material costs. And, prices are more or less, 2.78% improvement. And prices are also now, stabilized, so there are not much of fluctuations on, on my procurement cycles and all. And, overall, more value-added businesses are happening on formulation side, and that's, that's giving the better margins, overall. And, as far as your personal cost is concerned, that's, growing by around 12%, which includes around 7%-8% kind of normal, increments.
Since we added people in the field, the personnel cost is a little on the higher side. But overall, if you look at your manufacturing and other expenses side, there is hardly any increase. Compared to your overall operating income to other, your other expenses, manufacturing, other expenses, that there is also a good amount of reductions because overall that cost has not moved up.
Yeah. See, YoY that is, that is correct, sir, what you said. I'm just asking that sequentially, it looks like, near about 300 basis point kind of impact, Ipca's base business would have seen if I adjust for, the, Unichem numbers. So, what sequentially, what would be driving or dampening the margins, sir?
The margin improvement will continue. As, let's say that, with the overall growth picking up, right now, say, in the current quarter, growth was low, and from next year onwards, I think we should be continuously growing by around 10%-12% kind of growth. So at that level, the margin level will further improve by around 1.5%, and when we add the U.S. business, margins will because capacity utilizations will add. So that also will add to the margin over and above this normal margin.
Okay.
So we feel that overall EBITDA margins will definitely move by around 2 percentage points plus kind of things, yeah, in next financial year.
Okay. Sir, with your permission, can I just ask about Unichem also here? Because, the margin performance, for this quarter, what we see for here in India, it came, around 15%+ or 15% around. So, I think it is already reached to your, guided level, almost nearer to that. So is it fair to believe that, the margin expansion, what you have been targeting with the initial kind of, corrective measures, the full benefit of that flown into, Unichem, and whether we have seen any of the benefit of integration for IPCA's base business?
Let's say margin there is are driven by their overall increase in overall revenue. Let's say they are growing by almost around 40%+ in current year. In this quarter also, they have grown by around 43%. And improvement in business is there across, whether it's U.S. business, whether it's a Brazilian business, whether it is U.K., European business, except they have suffered on ROW market business again, because Myanmar, they had good business, so that is impacted and little of their Russia business is impacted. So but, and even their the CRAMS business is also the contract manufacturing business is also done well. So overall, let's say, the overall productivity there are improving and your the overall top line growth has been good.
Now, as far as margins are concerned, in Q3, I think EBITDA margin has been around 8.8%. So they were around 3%-4%. From there, they have come to 8.8%. It's not around 15%, because there is some kind of exceptional income is there, so that you need to exclude. So and, and that, I think Unichem in P&L account, that, that has declared, separately, because that is, on sale of their residual shares, which they had of, Optimus, which they have disposed of and almost around, around INR 68 crore kind of surplus has come. So that, that has been shown as exceptional income.
So overall margins has not reached to the what level and what, kind of improvement which we are looking in Unichem, they will take time, because p rocesses, when they are corrected, they need to be filed with the regulator. Then, after that, based on that, you need to take approval. After regulator approval, you take the formulation batches again, put them on stability. After you put them on stability, then again file with the regulator, take their approval, and then those revised processes become effective in your formulation.
Okay.
So it's a journey. It cannot happen in over a period of three to four months time.
Okay.
It takes a long time, so maybe one year, one and a half years and all those kind of things. So I would say that those kind of improvements will come in time to come. Okay. Currently, it's the margin improvements are because in last two, three, 2022, 2023, they had negative margins of around 14.1%. EBITDA was t hat kind of negative margins were there, and they were in losses, almost I think last third quarter, last financial year, they had almost around INR 60 crore kind of losses was there.
Correct.
From there, they have come to the profit and margins have started improving. So what we are seeing is only the improvement in operations, little bit on overhead side, little on cost side, improvement in productivity side and improvement in business. That has resulted in some margin.
Okay. Sure, sir.
Yeah.
My next-
The journey will continue. That journey will continue.
Sure, sir. My next question is on the U.S. business front. So you mentioned that some sort of supply commencement to U.S. can start starting first quarter FY 2025.
Yeah.
But knowing the fact that the activation of the dossiers could take a longer time, even the procedure has to be updated. So this, the procedural aspect itself will take around 12 months or so. So then on, on what basis that we are saying the few of the-
We are working almost around seven, seven products we need not to do much.
Okay.
So that's our updated dossiers are there. So these seven products can. So currently I have 21 approvals. Out of these, seven products can go. So that's in a phased manner, these products could be launched. Initially, I think, two or three product production is already going on. So they would be shipped somewhere in the first quarter of the current year. The launches, market launch will happen in first quarter of current year. The shipment from here may take an early part of the first quarter of next financial year.
The other products are, there are somewhere there are slight changes are there, somewhere there are post-approval are there, somewhere pre-approvals are there, somewhere the new processes need to be incorporated. All those works, works are there. Plus, we expect we have almost around a good number of more than 20 more filings which are there, where the everything is, let's say most of a lot of review has already happened, and in a phased manner, those approvals will come. Based on that, I'm telling that around 15-17 products can be launched over a period of two years' time.
Okay. Okay. Just last one question, sir, from my side. So far as the domestic formulation performance, going ahead is concerned, let's say FY 2025, obviously we have seen a double-digit growth, better than the industry growth, IPM growth in the current financial year so far. Knowing the fact that, around slightly more than 20% of our portfolio possibly is part of NLEM base, and the limited scope of a price, taking price rise there and, the volume growth trend, what we are seeing currently. So is it, possible to continue on a double-digit kind of a growth for next year as well?
Let's say NLEM did not impact much in current year also because there was a good amount of price rise was there on NLEM, but similar kind of reduction was there a few months back because of readjustment of prices on reaveraging and all. So on NLEM product, in fact, there is hardly, hardly any advantage or even if there is advantage, it's only 1%-2%. So there was hardly, much of the advantage was not there.
Okay.
So, what we have seen in the current year is that your acute portfolio growth in the market is low, so it's a very exceptional year. So, on acute side, the growth should pick up in next financial year. And on chronic side, market has started reporting double-digit growth now. So overall, we see that from 11%-12% growth what current level we have, it should be possible to increase the overall growth to around 13%-14% in domestic market. Yeah.
Sure, sir. Yeah. Thank you, sir. Wish you all the best.
Thank you. The next question is from the line of Ajay from [Wealthify]. Please go ahead.
Hello, am I audible?
Yeah.
Yes, sir. Thank you for giving me opportunity. So sir, I have a question about our group companies. Since none of our group companies are doing any con calls or giving any guidance, and if you say that top line and bottom line from last few quarters are almost stagnant and also into losses. So, can you please provide any, you know, update around our subsidiary performance, like of CRAMS and Lyka and Makers Laboratories?
Makers has nothing to do with Ipca. Ipca doesn't have any kind of holding in Makers. It's an independent company. Then, as far as Lyka is concerned, their business growth is good. They have, overall, they would be doing better, I think, overall. Their plant is under shut down little bit because of upgradations and all. So that is also getting completed, the whole renovation part is going to complete in first quarter of the current year, and thereafter validations and filings of those areas and all will happen in the developed market and all. So that journey is going very well. In spite of all those kind of things, they have performed reasonably well.
They also hired almost around 100 people in current years to do the direct marketing of their injectables in the market. And that business is also now giving good results to them now. And in fact, they can add more number of people in next financial year. So overall, we are seeing a good journey as far as Lyka is concerned. As far as Unichem is concerned, from losses they have started now performing, and we have already said that it's possible to achieve almost around INR 2,000 crore turnover there, and significant improvement in the EBITDA margin from current level. So these are the listed companies. As far as CRAMS is concerned, there are good improvement there.
The losses are reducing now, and some more products validations and all are going on there. Some products on intermediate side are getting approved in our dosages, so once that happens, their volume will also pick up. So we are seeing good improvement in CRAMS also. But it will take time. It's not till the time those approval comes, even though you have validated process, you can't use those kind of intermediate and use those capacities and all. So those issues are there. But overall, let's say, there are overall improvement in the all operations. Onyx is giving good returns, good profitability is there. The Trophic Wellness has done good business on selling the nutraceuticals, and their business is also in good profitability overall.
So, there are, except let's say, your, somewhere, I think, the Bayshore, which is a setup which was set up for marketing of Ipca product. So now that setup is no longer required because Unichem will be doing the marketing because that's a much bigger setup. So Bayshore will overall, maybe that business will get overall merged with or in the Unichem business and all, so that team synchronizations and all that work is going on, and certain costs will there also come down. So overall, there are not much of concerns in your associated and subsidiary kind of business also.
Thank you, sir. Thank you for updating.
Thank you. The next question is from the line of Ashish from JM Mutual Fund. Please go ahead. Mr. Ashish, your line is open.
Yeah. Am I, am I audible?
Yes.
Yeah, yeah. Yeah. So on this API thing, since we have the Dewas facility also coming, but globally there's some price pressure on the APIs. We have heard from some of the channel checks. In terms of our realization, like, what, what products we might have selected for, from Dewas, versus then and versus now, how are the product prices behaved?
As far as Dewas products are concerned, it's only the, the products are getting transferred from Ratlam, and Ratlam, we are creating the surplus capacity so that, the, products which are required for captive consumption for our U.S. business, that can be accommodated. So it's not a new, newer kind of products to be launched, and newer products are there may be few. It's more of a, site transfer from Ratlam to Dewas, and those kind of products are there. And, there are, the price stability is there on those kind of products, except the, certain where we are seeing significant kind of price reductions, but otherwise, the prices are stabilized now. There are not much concern on as far as the prices of API is concerned currently. From these levels, they are not going down. Yeah.
Fair enough. Also, secondly, on the U.S., since we are in the process of starting up the business, so like, so prior to the 2013- 2014 level, we used to do around $30 million-$40 million in U.S. business, and, there was this one product, Toprol, which was metoprolol. So all those engagements, like we used to supply Toprol to AstraZeneca and some other players, I guess. So all those engagements will restart, or you feel, you'll have to make a fresh start?
Let's say practically all those kind of businesses, because it has completely come, U.S. related, there's no shipment of API to any formulators for U.S. in last 10 years. So we have restarted all those kind of talk, that wherever is possible to get those kind of business once again. But it's a time-consuming thing again because a lot of places, our processes also change, so we need to update those kind of parties with the revised sampling and then the approvals and all those things are there.
So API business will be little slower to start with for U.S. But the API for captive consumptions will come from Ratlam. So Ratlam capacity, which is getting freed by shifting of products to Dewas, will be utilized for the purpose of our capacity consumption more. And API business, if you look at, now for next financial year, we should be able to grow around 10%-12% year-on-year.
Okay. Fair enough. So lastly, on this Unichem, so in terms of making operational changes like, you know, putting our processes, going for the yield improvement, so where are we in the overall scheme of things? Have we achieved enough kind of success in what we were planning to do with Unichem?
If you look at their results in, of, the third quarter and all, so they have significantly improved because they were in losses, and now they have come in, overall, and margins has also started improving from -14% in Q3 last year, it is now 8.8% kind of margin. So operations have started improving, their productivities have started coming. Their sales are growing by more than 40% in current year. And that, that, that is also resulting. Businesses are also improving in various market like, U.S., Brazil, Europe. Everywhere we are seeing some kind of business improvements are there.
They've got to their plants, the validation of processes are going on for the bigger products so that they have much larger capacity, but bigger batches they can produce. So with that, there could be a further improvement in their overall operation. As far as process changes, all those are, it's a journey. It takes time. That work is happening everywhere, on market extension, process improvements, and all those kind of things. But the pharma industry being regulated, everything need a regulatory approval.
Once you do the process, again go to regulators, file with them, wait for their approvals, then give the APIs or intermediates to the other formulators or all that, and then they need to again do their processes and generate stability, file, give those data to regulator, and thereafter the certification happens. Here, most of those improvements are not for sales; it's more for the captive consumption. But so that journey will have to help, and it will take time. It's maybe a one to 1.5-year journey, but I would say that, yes, the journey is happening, as we have emphasized. There could be some delay here and there, but journey is happening as we have emphasized.
Just lastly, so two years down the line, could this be a 15%-20% EBITDA margin business? Is that number achievable for Unichem?
We have guided for 15% kind of EBITDA margins.
Okay, perfect. Thank you so much, and all the best.
Thank you. The next question is from the line of Shiva from Purnartha Investment Advisors . Please go ahead.
Hello, am I audible?
Yes, Shiva, yes.
Yeah. Good evening, team. My first question is with respect to the guidance. I mean, if I see your international business, earlier you said it was, you were expecting a 12% growth, but now you just said that 8% is what you're expecting, and you gave the reason. But I just want to understand for the different sub-sectors, what is your guidance? Are you holding it, or is there any change?
As Mr. Jain has said, generic business will continue to grow. There will be some slowness in the API business for the time being, and to some extent in the ROW branded business. The growth has been lower than what we gave projection in the beginning of the year.
API you are lowering and international branded you're lowering, the others you are sticking to it?
Right. Right. And both these business should give reasonable growth in the next financial year. That is what our guidance is. So from this period on, the API business should stabilize and grow going forward.
Understood. Excellent. And the other thing I just wanted to know, obviously, the generic business and Unichem, is also business is growing very strong. Just wanted, if you could just add some kind of what are the major reasons behind this sudden surge in demand? Because at the start, you only said that at the start of the year, the generic, you was expecting a single digit, but now it is upwards of 25%, 30%. So I wanted to understand what changed in this time, and going ahead, is it a one-off or is it more structural?
No, no. A lot of operational changes are also made in the bargain, so their productivity has improved. Their production capacity has also improved substantially, and that has given them benefit in U.S. business. And they are also commercializing a few of the new formulations for which in the past they have received approval. And a few more new products will also get commercialized in the next financial year. So they also have a basket of products to be commercialized. So all that is giving benefit. And in a few products, maybe because of shortage in the market also, some benefit would have come to them.
Okay, and with respect to your generic, then is it more because of any shortages, or is it?
They are only into generic business, nothing else.
No, your generic business also saw very-
My generic business, what has happened, the U.K. business is growing very nicely. In fact, in first nine months, the growth has been about 100%. European generic business has done very well. South Africa, we were looking for some degrowth, but that has also grown. So generic business, we don't see any concern as far as growth is concerned.
I just wanted to know, like the next one year, you, you're looking at a very strong growth, like the runway of this, or is it this year has been a one-off success?
On a conservative basis, we can guide anywhere between 12%-15% growth, going forward for generic business. Over and above that, whatever business will come out of U.S. will be add on.
Understood. Excellent. Just one small question. I wanted to understand your MR productivity. So, we, we've seen the last quarter that there was an improvement. So if you could just get update the MR productivity and, what is the current strength and your plan for any additions going ahead?
Overall, MR productivity is around INR 425,000 currently. We are almost around, in field, around 7,000 medical reps, as of now. We will be adding certain number of people in current year. That process is going on, but addition will be not more than 5% increase in the overall field force size.
Okay, so last quarter it was slightly higher, right? It was, I think INR 460,000 was what? INR 453,000, if I'm not wrong.
The second, second quarter is always, most productive.
Higher.
Because of seasonality issues and all. And this quarter, because of season not being that conducive, sales are also a little bit lower than what we expected. It's not nothing abnormal. Second quarter is always the best quarter in the domestic branded business.
On permanent side, I think we have added almost around INR 20,000 productivity per month in current year.
Understood. And this, there's some notification from the government with respect to the medical professionals, the kind of antiviral or anything, they should be slightly on a conservative basis. Did you feel anything on the ground, or is it more just statements from the government?
Pardon, pardon, we didn't make out what is your question, actually.
There were some news that the government officials have told the medical representatives to be slightly on a conservative basis when prescribing pain or anything with respect to the acute basis. So in that case, we have-
We have not, we have not seen any impact, anything like that in the market so far.
Okay. Understood. Okay. Thank you, and all the best, sir.
Thank you.
Thank you. Thank you.
Thank you. The next question is from the line of Rashmi Shetty from Dolat Capital. Please go ahead.
Yeah, thanks for the opportunity. Sir, for the products which you mentioned, you know, 16-7 launches, which you will be doing in the U.S. business, you know, that will be through Unichem? And then the sales will be the part of Unichem or, and will that be included in subsidiary or, it will be part of generic business?
Rashmi, earlier what was happening, I was manufacturing and I was selling it to my marketing partner, right? We had two, three marketing partners in the U.S, on profit-sharing basis. Now what will happen, we will manufacture and sell it to Unichem U.S. So sales will get booked in my books also and in their books also. In any case, their books will get consolidated ultimately with my books. So there is no change, you know, because manufacturing, Ipca will do. Only they will do selling and distribution, that's all.
Marketing. Understood.
That is correct, right?
Okay, that is one thing. And second thing, in the India business, if you can give little bit color on how your pain segment has performed during the quarter, even Zerodol, if you can, you know, tell us about the performance.
Overall pain portfolio in current year has grown by around 12%. This quarter, pain segment growth is little lower, at around 8%-9% kind of thing. But, overall, let's say therapeutic-wise on cardiovascular in current year, we have grown by around 13%. In the antibacterials growth is low at around 3%, CNS around 20%, derma around 19%, urology around 24%, ophthalmology around 7%-17% kind of growth, and, others maybe around 8%-9%. So overall, the... That's broadly the year numbers in various therapeutic performance, areas of in-
And your product, Zerodol, is still contributing significantly and it is growing double digits?
Current year, Zerodol growth is around, say around 8%-9%.
Okay, in the range of 8%-9%. Understood. And, you know, one more question on this Unichem consolidation. How much would be the amortization that would be recognized due to this acquisition, annual amortization?
Rashmi, it is a investment, no? There is no amortization. Earlier, what was happening, all acquisition costs used to get capitalized. Now all acquisition costs gets debited to P&L. That is why that INR 40 crore debit has come in the second quarter. Otherwise, all is investment, no? So we purchase share and they give consideration. There is nothing to be amortized over a period of time.
Okay, sir. Thank you. That is very helpful. That's it from my side.
Yeah. Thank you.
Thank you, Rashmi.
Thank you very much. Participants, you may press star and one to ask a question. Next question is from the line of Saion Mukherjee from Nomura. Please go ahead.
Yeah, thanks for taking my question. So just on Unichem, your guidance of INR 2,000 crore and, you know, 15% EBITDA margin, INR 300 crore EBITDA, what's the timeline for that you are looking at?
FY 2026.
Sir, with the, you know, the process changes and market extensions, which is probably slightly longer term, how should we think about, you know, growth and margin for Unichem from a slightly longer term perspective?
Saion, as far as this market expansion and change in sourcing, you know, it's a regulatory business and it will take time. So the margin expansion will continue over a period of time. But immediate, near future, whatever we can do, that is what guidance we have given for next two years.
Okay. And sir, any assessment on the U.S. revenues for the next two years with 15-17 products that you would be launching in the market?
It is too early to give any guidance. See, nobody is waiting for your product. Even though I have cost competency, I will have to again relaunch product one by one and go on taking market share. There are only three, four customers who matter in this business, you know very well. So, they're already sourcing those products from a third party. It will take some time, but we are confident because of our processes in the API and our cost competency, we will certainly do well in the U.S. market, we say, with our formulations going forward.
Okay. Sir, the... You know, when you mentioned 13%-14% kind of a growth in India, what's your assessment on how much is price and volume mix in this growth expectation?
Be around 4%-5% price increase, and the rest are all volume.
Oh, okay. Thank you.
This year, the growth has been little lower because of the seasonality and all. It is slightly below our expectation. Otherwise, compared to market, we continue to do well. There is no issue.
Okay, understood. Thank you.
Thanks. As there are no further questions from participants, I would now like to hand the conference over to the management for closing comments.
No, nothing. Most of the issues we have already discussed. All questions are answered. There is nothing further to add. Thank you very much.
Thank you. On behalf of DAM Capital Advisors Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.
Thank you, everyone. Thank you. Bye.