Ladies and gentlemen, good day, and welcome to the Q2 FY24 Earnings Conference Call of Mankind Pharma Limited, hosted by Kotak Institutional Equities. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Alankar Garude from Kotak Institutional Equities. Thank you, and over to you, Mr. Garude.
Hi, good morning and good afternoon, everyone. On behalf of Kotak Institutional Equities, I would like to welcome you all to the second quarter FY 2024 Earnings Conference Call of Mankind Pharma. I would now like to hand over the call to Mr. Abhishek Agarwal, Head of Investor Relations, to introduce the senior management and take the discussion forward. Over to you, Abhishek.
Thank you, Alankar. Good afternoon, everybody, and a very warm, warm welcome to our Q2 FY 2024 Earnings Conference Call. On the call today, we have Mr. Rajeev Juneja, Vice Chairman and Managing Director, Mr. Sheetal Arora, Chief Executive Officer and Whole-Time Director, Mr. Arjun Juneja, Chief Operating Officer, Dr. Sanjay Koul, Chief Marketing Officer, Mr. Ashutosh Dhawan, Chief Financial Officer, and Mr. Prakash Agarwal, President, Strategy. So we'll begin with our opening comments with Mr. Rajeev Juneja, providing an overview of the quarter, followed by comments from Mr. Sheetal Arora, the business. Ashutosh Dhawan will also share key financial highlights, and then we'll leave the forum open for Q&A.
I hope you had a chance to access the investor pack shared yesterday, and however, I'd like to re-emphasize on the fact that certain statements made during today's call may pertain to future expectations and plans. A comprehensive disclaimer regarding these forward-looking statements can be found in our investor presentation and the press release uploaded on our website. Now, I would like to invite Rajeev, sir, to share his comments.
Thank you, Abhishek, and good afternoon, everyone. A very, very warm welcome to our second quarter 2024 earnings call. Today I'll walk you through the overall performance of Mankind and our vision on how we intend to grow in future. Let me start with the overview. In this quarter, we have reported steady performance as our revenue grew by 12% year-on-year during the quarter. EBITDA grew by 15% year-on-year to INR 686 crore, with a margin of 25.3% and grew by 21% year-on-year to INR 511 crore. Our domestic business grew at 7% year-on-year, at par with IPM growth versus our performance earlier, due to delayed acute, we all know this.
According to IQVIA, Mankind's secondary sales growth was 5% for the quarter, which is at par with IPM covered market growth. Mankind has lately started, this is a very important point, supplying to modern trade and e-commerce channels and has witnessed robust, fantastic growth. Although, we understand that IQVIA does not capture this data in their reports. Our chronic segment share increased to 34% in quarter two, 2024, as compared to 32% in last year, versus 28% in 2018. We continue to see higher growth in chronic as compared to IPM. We remain committed to increasing our presence in chronic therapeutic areas and as they present stronger growth opportunities, given the rising prevalence of chronic diseases due to lifestyle changes and rising income levels in India.
We are rapidly increasing, expanding our product offerings with this very important initiatives towards the well-being of people in the country. This reiterates our vision of providing international quality API products at affordable prices, which is accessible by everyone. In our, consumer health segment, we maintain dominant brand leadership in the respective categories, with our four of our brands rank one in the categories. We are consistently performing better in all the products categories, whilst maintaining our dominant market share. We are confident that this segment will continue to deliver healthy growth, thereby further expanding our market share.
On the R&D front, we remain committed towards consistent product innovation, novel drug delivery system and strategic partnership with our investors, to strengthen our products' offerings. Our successful launching of Dydrogesterone reiterates our commitment to being a science-based company. I am delighted to share that we have recently commissioned India's first fully integrated facility catering to Dydrogesterone at Udaipur, Rajasthan, this quarter, which will further bolster our position. I'm glad that our past strategy has been very respect
I'm sorry to interrupt, sir. Sir, your audio is not clear, so may, can I connect you back? There is a slight static on the line.
Yes, please.
Thank you, sir. Ladies and gentlemen, in the meanwhile, when I connect the management, please hold the line. Ladies and gentlemen, thank you for patiently holding. The management's line has been reconnected. Over to you, sir.
On the R&D front, we remain committed toward consistent product innovation, newer drug delivery system, and strategic partnership with innovators to strengthen our product offerings. Our successful launching of DiarhoJect® reiterates our commitment to being a science-based company. I'm delighted to share that we have recently commissioned India's first fully integrated facility tracking to DiarhoJect®, Rajasthan, during the quarter, which will further bolster our position. I'm glad that our past strategic choices in various aspects of our business are showing success, and we have a strong confidence in our ability to consistently surpass the industry growth in future as well.
We'll persistently strive to attain leadership position in recognized wide spaces, specifically in key chronic therapies, by means of in-house research and development, acquisition, as well as inclusion of externally licensed products. Furthermore, we are committed to maintain our established brand dominance in both our pharmaceuticals and consumer business. With this, I'll hand over to Sheetal, who will provide more details on our business performance.
Thank you, Rajeevji. Welcome to today's investor call. I am pleased to provide you with an update on our domestic operations and consumer healthcare segment. Let's begin with our domestic business revenue, which reached INR 2,529 crore in the second quarter of the financial year 2024, reflecting a year-on-year growth of 7%. This quarter, our growth was impacted by the delayed acute season, affecting not only anti-infectives, but also related sub-therapies like respiratory, cough, cold, gastro, whitening, and more. Additionally, regulatory restrictions on certain products and a rise in competition in DiarhoJect® have had an adverse effect in our quarterly performance. As you may be aware that our acute products conclude 66% of our sales, compared to 63% in IPM, hence delayed acute season has adversely impacted our overall quarterly performance.
Our chronic business registered a growth of 10% this quarter, outperforming the IPM chronic growth by 1.1 times and IPM CVM chronic growth by 1.4 times. With our focused approach, we achieved year-on-year increase of 150 basis points in our chronic share to reach 34% in quarter two, financial year 2024. In contrast, IPM chronic share increased by only seventy basis points to 31% in the same period. We are seeing signs of recovery in acute segment from September 2022 to 2023 onwards, and noticing visible growth in September and October 2023. And the same is evident in our max September 2023 performance, wherein our secondary sales have registered a growth of 13.1% versus IPM growth of 10.3%.
Additionally, on QOQ basis, we have maintained our market share of 4.4% in quarter two, financial year 2024, and our market rank of four in value terms and prescription rank of 1 during the quarter. Our higher prescription share reflects the superior quality and deep penetration of our products. In fact, our prescriber penetration has also increased from approximately 81% in quarter two, financial year 2023, to around 83% in this quarter. I am happy to share that Panacea revenues continues to show a healthy growth of 30% during the quarter. In our consumer healthcare business, we generated revenue of INR 193 crore in quarter two, financial year 2024, indicating modest growth of 2% year-on-year basis, due to initiatives taken towards optimization of channel inventory and implementation of IT tool aimed at facilitating stockist consolidation.
However, all our key brands have demonstrated healthy growth across various brand categories and continue to maintain their market share, as evidenced by mid-teen growth in secondary sales. We are in the process of launching multiple products with substantial growth potential, and focus is to transition more and more products from RX to OTX to OTC. We are confident in sustaining strong growth in this segment as we move ahead. Thanks to our team's dedication, passion, and customer-focused approach, I am fully confident that we will not only thrive, but also reach significant milestone in upcoming quarters.
We eagerly anticipate the continued trust of our customers in our products, and wish to emphasize our unwavering commitment to enhancing their quality of life. Before I will hand over to our Ashutosh Ji, CFO of the company, I will highlight some points. Despite a modest growth in Q2, year-on-year, our EBITDA margin. EBITDA has grown to 15%. Gross margin has increased to 270 basis points. Sunita revenue has grown 30%. Chronic share has increased by 150 basis points. Mid-September 2023, we have once again outperformed IPM by 1.3 times. Now I will hand over to Ashutosh Dhawan, who will provide further insight into our financials. Thank you so much.
Thanks, Sheetal Ji . A very good afternoon, and I thank everyone for taking out time in joining us on this quarterly earnings call. I hope all of you would have received our financial results and the press release. Let me give you a brief of the financial highlights of the performance during quarter two FY 2024. The revenue from operations have increased by 12% year-on-year basis to INR 2,708 crore, as compared to INR 2,425 crore in the previous period last year. EBITDA has grown by 15% year-on-year basis to INR 686 crore, with margin of 25.3%, as compared to INR 594 crore, with margins of 24.5% during last year in the same period. There is an increase in margins of 0.8%.
This increase of 0.8% is largely driven by a 2.7% increase in gross margins from selective price increases taken in the previous quarters, stable API prices, and favorable sales mix changes. The gross margin are now at around 69.5% level, as compared to 66.8% in quarter two, FY 2023. However, this gross margin expansion has been offset by increase in employee cost by 0.6%, and the balances on account of increased advertisement campaigns and other expenses. R&D expense for the quarter was at 1.9% of sales, which is lower than R&D spend of 2.2% of sales, as incurred during financial year 2023. The depreciation and amortization expenses for the quarter increased to INR 96 crore as against INR 79 crore last year.
This is on account of higher capitalization during the latter half of FY 2023, along with commissioning of Udaipur plant, which has been capitalized within this quarter. Our effective tax rate for this quarter was at 20.3%, as compared to 21.6% in financial year 2023. PAT for the quarter was at INR 511 crore, representing a growth of 21% year-on-year basis, and 3% on quarter-on-quarter basis, with diluted EPS of INR 12.5 per share of INR 1 paid. The cash EPS, that is the EPS adjusted for non-cash items like depreciation and amortization, was at INR 14.9. Our net working capital days were at 44 days, as compared to 45 days in financial year 2023.
The CapEx, including capital work in progress, was at INR 114 crore in quarter two, financial year 2024, and cash flow from operations were at INR 481 crore. The company has a healthy net cash position of INR 259 crore as at 30th September 2023, versus INR 1,366 crore as at 31st March 2023. The return on capital employed, excluding cash, increased to 28% on twelve-month trailing basis, as compared to 25% in financial year 2023. The return on equity, ROE, ex cash, increased to 24% on twelve-month trailing basis, as compared to 23% in financial year 2023.
For financial year 2024, we expect to incur INR 550-600 crore in the CapEx. EBITDA margins are expected to be in the range of 24%-26%, as mentioned in our previous interactions. With this, I would like to conclude our opening remarks, and we will be happy to address any questions that you may have, please. Over to you, Abhishek.
Thank you very much, sir.
Sorry, sir. Thank you.
Thank you, sir. We will now begin the question and answer session. Anyone who wishes to ask questions, may please press star and one on their touchtone phone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking your question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, to ask questions, you may please press star and one. We will take the first question from the line of Kunal Dhamesha from Macquarie. Please go ahead.
Yeah, thank you for the opportunity, sir. First one on the other expenses, which have increased meaningfully on a QOQ and year-on-year basis, and you also alluded that there were some advertisement campaign expenses. But how should we look at for future quarter? Are these level of expenses going to sustain or, you know, the campaigns are going to be seasonal and should come down?
Okay, so, as we mentioned that the spike in the other expenses on quarter-on-quarter basis, as well as, if you compare it to the last year, it's primarily driven on account of, the advertisement campaign, which we carried out, especially in this quarter. So we expect these, these campaign and these expenses to normalize in the H2. I would also like to draw your attention that, we have given the guidance of, having the EBITDA margin in the range of 24%-26%. Currently, if you look at for H1, our EBITDA margins, so they are at, 25.5%.
So, shouldn't then the margin margin guidance be little bit higher, because even with the higher, we are, you know, running about 25%, and if the other expenses go down in second half, shouldn't the margin, you know, guidance be more, or should be higher?
So you have a point. If you look at the H2, it is normally softer as compared to H1. If you look at our H2 of FY 2023, we reported the EBITDA margin close to 21% or so. Currently, in H1, we are 25.5, and given that, if we take a base of 21, which we reported last year, H2, and our gross margin has improved by 2.3%, so and, so we expect that to the, on 21, that 2.3% add, plus some rationalization on the, on the other expenses, so we expect it to be in the range of 24%-26%.
Sure. Thank you for that. And, sir, one more question on trade receivables, which have almost kind of doubled from the March level in the September. So any particular reason for that?
So if you see the March sales, so trade receivable is the factor of what is that particular month's sale has been. So if you look at our March month sale, so that is lower as compared to the sale which has been registered in the current September month.
Okay. And,
Yeah.
Did exports also play a role here?
Exports, yeah, exports also have a bit higher trade receivable, if we compare it to the domestic sales. So that has also marginally contributed towards an increase in the trade receivables.
So basically, what has happened is, I mean, if you see the last quarter numbers of previous year, so always the fourth quarter numbers in terms of sales are softer. So if you, once you see the trade receivables of that quarter, they always tend to be on the lower side. Whereas, Q2 numbers are much higher than the Q4 numbers of last year. That's why there is a jump in this, trade receivables. However, there is an increase in the export sales, but that has contributed very marginally to these increased receivables.
Sure. Thank you. The last question, probably for Rajeevji. Now that we have almost around INR 2,200 crore cash, you know, so what is our capital deployment priorities? And, have we given a thought to the dividend policy? Where are we on that?
Thank you, Kunal, for a good question. The point basically was, we just want to preserve the cash, keeping future opportunities in mind. We feel that we are in the process of having something in near future, near to, I mean, long-term vision. So we want to keep that. If we are unable, then we'll think of going for dividend. But any given time, we are always very optimistic because, being an aggressive company, with having cash in our hand, we'd like to have a mindset bent towards acquisition side. Apart from that, whatever, I mean, other expenses are required for your expansion in terms of office and factories and R&D, that is there. So that's the point of view here.
Sure, sir. Thank you. I have more questions. I'll get back in queue.
Thank you. We'll take the next question from the line of Neha Manpuria from Bank of America. Please go ahead.
Yeah, thanks for taking my question. My first question is on the, you know, OTC business. Sheetalji, I think you mentioned that, you know, there is obviously optimization of inventory and certain IT tools that we've implemented. So is that all done? Should we start assuming, the growth improves from the next quarter onwards? And also in the OTC, is there some seasonality? Because if I look at your numbers last year, it seemed like first half seems to do much better than the second half, or that's not the case?
So, let me answer this question. I mean, first of all, OTC is very, very dear to us. I mean, this is one particular division which has given a lot of name and fame to Mankind. Whatever people know about Mankind, even yesterday, somebody said that Manforce, Mankind has given this much kind of a extra profit. So we have built this company from scratch. And if you look at this last three years, 2021-2023, our CAGR is 17%. We have always grown very, very fast. And we are in the process of... And one more thing I just want to add here, the productivity of people, sales efficiency of people have increased around 30% in last three years.
Efficiency and productivity of our sales force for the last three years has increased by 30%. So we are in the process of adding few more products, a bit more adding few more people. For example, certain products are one product we acquired from Panacea named Nimulid. We are in the process of launching that product. This will be launched next month. Health OK has come from OTX to OTC. We want to just work more on that. So we want to have one more division in this OTC side. So when you start doing something like this, you just go for recheck everything. So when Sheetal talked about number of things, so being a modern company, I mean, certain IT systems have been put, certain stockists reconciliation has taken place, consolidation has taken place.
Apart from this, we are going for premiumization of products to increase the margins in this side. So when you do, do that, certain things really happen, and we just want to just maintain market hygiene in that. So going forward, we expect A, around the single digit growth this year, and hopefully from January onward, the process of increasing making it two divisions and launching more aggressively OTC Mankind will yield better growth in future, next year.
That's helpful, sir. And on the, you know, the domestic formulation business, you know, chronic, we are doing pretty well from the numbers that you've indicated. The acute part, you know, is it from your, the commentary, it seems that part of the acute season, you know, which wasn't captured in second quarter, will probably come through in the third quarter. Therefore, on a full year basis, you know, we, we won't be, you know, as weak as we are, you know, we've seen the quarter be. Is that a fair assessment, or do you think this season is a lost season, and therefore, now the focus is in terms of maintaining the chronic growth rate or growth momentum that we are seeing?
If you ask the last three, four years, we are living in a very different world. I mean, even season has become very, very dynamic. Look at, during this COVID time, acute segments have sold more, second time, chronic sold more. One year it was, the better growth in acute, second year it was better in, chronic side. You're absolutely wrong, absolutely right. We are absolutely right when we say, quite confident in saying so, that, there is a shift in the, season. I mean, even right now, the last month is, very good. If I say so, the growth is fantastic, around 25%, the last month sale. So, that really give, give us confidence that, we'll do what we basically, I mean, projecting in our, initial commentary.
If I can add?
Sure.
Can I add t his is Sanjay Koul, good afternoon. So, when you talk about acute segment, it majorly involves anti-infectives, anti-allergics, and cough syrups, which we saw during the season, when we had season of viral infections. So, what has happened, if you look at the growth of these three segments consolidated in July over last year, last year growth was, and of the last year, July growth was 11, this year July growth was -5. Last year, August growth was 12, this year, August growth was -2. Last year, September growth was 1%, this year, September growth was 12%. So this clearly shows that season came late in the month of September.
One more thing we need to understand, when we talk about anti-infectives, anti-allergics, and cough syrups, so along with these, there are allied therapies which also get prescribed during, under the same prescription. These include vitamins, minerals, and nutrients, as well as GI drugs. Overall, there was an impact on acute segment, more so, in Mankind case, because, anti-infectives, anti-allergics, cough syrups contribute 24% of our overall sales, versus 17% of industry.
And if I can add to it, if you see our net performance of number 23, we have reached a growth of 13.1%.
Yeah.
Versus IPM growth of 10.3%.
Understood. And Ashutosh, sir, on the gross margin expansion that we have seen, how much of this is, let's say, the export benefit, which you've mentioned several times, that is only for probably for a few quarters and therefore goes away? And also the fact that acute was weak. I mean, should this be at a more normalized level of what we saw in the first quarter? Or, you know, is the, you know, 69.5%-70% that we're seeing, you know, sort of sustainable?
As per the earlier guidance which was given, it should be upward of 68%. If you look at the expansion in gross margin year-on-year of 0.7, broadly, it is a factor of increase in the cost, the price element, which is the combination of sale price increase as well as the rationalization of the API cost. So both put together has given us a benefit of close to around 2% or so, and the balance has been towards the sales mix, favorable sales mix, which has contributed to the balance difference.
Okay, so we are still maintaining the 68-ish, 68 plus %, you know, profile.
It will be upward also.
That's not being moved.
So it's basically not one-off because of export business.
Yeah.
This is mostly because of the domestic business and because of the price increases and the reduction in the few years.
Understood. Okay, thank you so much.
Thank you. The next question is from the line of Chintan Seth from Girik Capital. Please go ahead.
Thank you, management, for the opportunity. Couple of questions. If you can talk about, you know, the discontinuation of few products, what is the impact on our sales during the quarter? Add to it, what are our plans, you know, in terms of new product launches, going forward? You mentioned one of the products in the OTC are planning from the Panacea basket. If you can talk about that, you know, in terms of what is the pipeline we are expected to see over the next 12 months or so?
Are you talking about the product which was discontinued because of restrictions?
Yes. Yes. The press release mentioned that the low, you know, softness in acute is also one of the reasons, because of few products getting discontinued.
Yeah.
If you can talk about what is the impact and what is the reason-
Sure.
whether those products will come back, in our stable or not?
Sure. So what we have done. So, as such, if you ask me, we started having the sales of those products captured in the month of September only. So in September only, which was the first month, we reached to 50% target, 50% of what we were doing. And, since I have the data of October as well, so we are 80% of what we were doing with the earlier composition. Because we expanded by launching different SKUs, which are allowed, which are not restricted, and we have reached as per number of bottles sold and value concerned, 80% of what we were doing earlier. Having said that, there will be some erosion of price erosion.
Let me explain on this. There is one product, it is Codistar. So we have changed the formula of that, and we hope that by the end of the year, we'll reach around 70% what we were doing. That's the number one answer the product. I mean, when you say discontinuation, it's not discontinuation, it's basically, I mean, changing the, because certain restrictions came, so we changed the formula. And we reached to, this year only, 70% to what we were doing last year. This answer number one. What was your second question?
Second question was the pipeline on the new products, yes.
Yes. Yeah, yeah, relaunching. We're talking about this Mininistrie. We'll be launching Mininistrie, this, this month only, in the month of November only. We are just finalizing the, whatever is to be required to bring some kind of a USP in the product. We have done so. And I just reiterated that, again, I can reiterate that OTC is a more, I mean, dear kind of a, division to us. So we are just working on this, company only, expanding on this in such a manner that, we become more, we will maintain the same kind of aggression, more dominance in more new products like Health OK. We shifted from our, OTX to OTC. We want to just work on it. We want to launch this Mininistrie. And also, why this, infrastructure we are developing?
Because in future we feel if some acquisition happens, which will happen, hopefully, I mean, then we have everything ready for that.
Sure. Last question on the competition you highlighted during the earlier comment in the domestic, you know, formulation. If you can speak about what you are sensing in that segment and elaborate on it.
The question again, can you please repeat?
Competition in digestive.
Competition in Digesta.
So, we have leadership position as per prescriptions are concerned, still have the leadership position, and that is strong. Of course, because of competition, we have lost a little bit of share, but we already have plans in place where we'll be coming up with some very, very innovative basically line extensions. First time in India that is going to give us edge and which will be very difficult to replicate by other players in the market. So we believe that in the coming 6 months to 1 year we will be doing much better ahead of the competition because of those new SKUs, which will be first time in India.
Sure. That's all from me. Thank you. And all the best.
Thank you. A reminder to all the participants, anyone who wishes to ask questions, may please press star and one. We'll take the next question from the line of Dheeresh Pathak from WhiteOak Capital. Please go ahead.
Yeah. Thank you for taking my question. I'm referring to slide 14 of the presentation. I hope I'm audible now. Hello?
Yes.
I hope I'm audible now.
Yes.
Great. Thank you for taking my question. I'm listening to slide 14 and slide 15 of the deck. I'm just trying to understand this better
Excuse me, sir. Would you mind if I'll ask you to use your handset, please? Your audio is very low on this.
I am using the handset. Is it better than speaker?
Sir, can you just increase the volume a little bit? Because it's too low.
Okay. Is this better? Hello.
Yes. Please continue.
Okay.
Yes, Dheeresh, go on.
Sir, please proceed with your question. Sir, may we request you to kindly rejoin the queue. We'll move on to the next question, which is from the line of Rashmi Shetty from Dolat Capital. Please go ahead.
Yeah. Thanks for the opportunity. Am I audible?
Yes, ma'am.
Okay. First question related to other expenses. What I want to understand is that, all your, you know, new expenses, which is coming from the Udaipur plant, is already been extended in Q2, or it is going to increase from Q3, Q4 onwards?
Yeah, so there will be some education, specifically from either, from the other instances.
I'm sorry to interrupt. Sir, your audio is not clear.
Okay. So, Rashmi, if I've understood your correction, your question correctly, you want to understand that what will be the impact of Udaipur plant expenses. Yeah?
Yeah, correct.
Correct. So, so in this quarter, Udaipur plant expenses, because we have done the capitalization during the quarter, so that impact is not there. But in the overall EBITDA, it will be value additive because there will be reclass from the COGS to the other expenses with regard to the Udaipur plant expenses.
Okay, sir.
Yeah.
Related to consumer health segment, you know, you mentioned that you will be doing some launches, from January month. If you can just give more color on it, you know, whether there would be a line extension of our major brands or, you know, it will, like, you know, or you will be launching completely new category to cater it. Related to consumer segment only, if you can also give more color on, you know, what is our rural and urban split?
So let me start with this, that whenever we think of OTC, we are very, very careful. So we will be launching, like as I mentioned, Mimulene, which we acquired from Panacea. It's quite a known name, and that's one reason we are coming in rubric in this. This is one. The second basically is what? We have one product, Health OK, which we shifted from our OTX to OTC division. We want to just launch few more variant in that, more line extension to that, and aggressively want to promote that. That is second. And third, basically, is what? We said that we just want to create this infrastructure in advance so that in future, acquisition will happen, because we have time and again said that we are looking for chronic side and consumer OTC side products to acquire. For that sake, we are doing it.
And so, sir, this year I understand that the growth will be impacted in FY 2024, but in FY 2025 and 2026, how should we look at the consumer segment growth? Will it come back to the mid-teen sort of growth?
Yeah, but I mean, we feel, I mean, the kind of growth we were doing in the past, is we'll reach to that. I mean, if I say that, I mean, double digit and onwards.
Understood. And sir, on the export side, how many quarters more we will see this one-off opportunity coming in? And, whether this one-off opportunity is coming from one product or several products, and is it arising from the shortage opportunity, if you can give some color on these things?
So this one-off opportunity, I mean, we feel that this one-off opportunity will last for about. It's very difficult to predict when others launch this product. But it's coming from one single product. But however, we have certain other new launches in pipeline, and we have been significantly doing so in the last quarter to compensate for one-off opportunity.
Overall, how do we see export market growth?
The overall export market growth would be double digits, like, mid-teen.
This you're saying excluding one-off opportunity?
Correct.
Got it, sir. Lastly, one question related to the U.S. market, if you can give your total number of products that has been commercialized till date.
Total number of products that have been commercialized so far are around 25 products.
25 products. Okay, sir, thank you. That's it from my side.
Thank you. The next question is from the line of Dheeresh Pathak from WhiteOak Capital. Please go ahead. Mr. Pathak, kindly proceed with your question. I have unmuted your line.
Hello. I hope I'm audible now.
Yes, sir. Please proceed.
Okay, sorry about that. So, I'm referring to slide 14 and slide 15 of the deck. And, if I look at slide 15, what we're showing is that, in acute for Q2, market grew at 7%, and we grew at 5, 4.9%, due to underperformance in Gastro and VMN. So if you can explain that, I don't know if you already explained it, but please explain that, why in acute it is lower than the market? And even in chronic, slide 14, we are showing only 1.1x growth of the chronic, you know, outperformance, versus if you see, we've had much higher, you know, multiplier growth versus the market chronic growth rate. Why this quarter, both on the chronic side, the outperformance is lower, and on the acute side, in Gastro and VMN, and in overall, why we have done lower than the market?
So, when we talked about the acute segment, which has tremendous, where there is tremendous impact of seasonality, we were referring to anti-infectives, anti-allergy, and cough syrup. We generally depend upon the season. When I say season, it is viral infections, right? So, the problem with Mankind, the issue with acute segment in Mankind is this contribution of these three therapy areas is around 24%, versus 17% of IPM. Now, having said that, the season came in September only, and I explained just 15 minutes back only. It is very well explained if you look at the last year's growth pattern of these three segments in July, August, September, versus this year, July over September.
Last year, growth was 11, 12, and 1% respectively for July over September, and this year it was... I'm talking about IPM. This year it was -5, -2, and 12%. So that clearly shows that, there was very strong season in the month of September, but July, August were not having the same seasonal impact, where anti-infectives, anti-allergy, and cough syrups sell more. Now, this was point number one. Point number two was, there are some allied therapies which also get prescribed along with these three therapies, such as GI, vitamin, minerals, and nutrients. So, these segments also got affected because of delayed seasons. So that was, our,
Sir, that explanation I understood, but what I'm not able to understand, sir, is that this delay of the season or the season impact is going to impact the market also, right? But if you are showing this data correctly, maybe there is some issue with the data, because here we are showing market in gastro grew 8.4, we grew only 5.3. VMN market grew 6.9, we grew 2.3. Whereas in anti-infective, we've done better, more than two times the growth of the market. So either we are not showing like to like, so this is maybe not the covered market growth is what you're trying to show. Is that the right interpretation? Because the season impact would have impacted the market also, right?
Absolutely. But you have to take into cognizance the fact that, contribution of these three segments, these three therapy areas for Mankind is 24%, whereas for IPM it is 17%. So it will have less impact on IPM vis-a-vis Mankind. That is what I was trying to convey.
Okay.
So for Mankind, these three segments contribute 24% of total sales. For IPM, these three segments contribute 17%. So that is why impact is more in Mankind in comparison to IPM. There is one more part which you need to take into basically consideration. That is, when we compare with IPM, IPM anti-infectives include injectable drugs. Now, injectables contribute 40% of total anti-infective portfolio in IPM. For Mankind, it is less than 1%. So injectables saw good growth. If I look at the CVM growth, then in anti-infective orals, in my CVM, we are having 2% growth, whereas volume of anti-infective is having a big growth.
If you see the chart on the same page, anti-infective IPM growth is 1.7% versus Mankind growth of anti-infective is 3.5%.
So that's what I'm saying. So it will be better, as my feedback would be, that in this slide, next time when you show if you, instead of showing the IPM, if you show the covered market growth rate of the IPM, where you will make like-to-like adjustments, like you just explained, that'll be a better representation to understand how you've done versus the market. And if you can also explain, sir, on slide 14, that why the outperformance on chronic side is not what we are typically used to seeing. Like, we are used to seeing 1.4, 1.5 times the growth of the market.
So for chronic also, let me take you through from Q1. So please, look at chronic from Q1 lens, then Q2 and H1. Q1, IPM has grown by 10.4%, Mankind has grown by 17.3%. Q2, IPM has grown by 9.1%, Mankind has grown by 9.8%. Now, please take into consideration last year. Last year also, IPM was 11.3%, and Mankind was 11.3%, the same growth. I'm talking last year, Q2.
Understood. Yeah.
Mankind is 9.8, IPM is 9.1%. Last year, same quarter, second quarter IPM grew by 11.3%, Mankind grew by 11.3%. Having said that, the variance in case of Mankind increased in second quarter by 1.5% versus 0.6% in case of IPM. And if you look at H1, then IPM grew by 9.8% and Mankind grew by 13.4%. So one quarter cannot give basically the complete picture, so we have to look at H1, we have to look at 12 months. That gives a better understanding and picture of the performance. One quarter, basically, I show you quarter this year of chronic versus quarter last year, pretty similar. Last year also, IPM and Mankind behaved similarly. This year also, IPM and Mankind in Q2 behaved similarly.
Understood. Okay, this is very useful. Sir, the one last clarification, this dydrogesterone molecule, you include in chronic or you include in acute?
Acute.
Acute. Understood. Thank you.
Thank you.
Thank you. The next question is on the line of Rahul Jeewani from IIFL Securities Limited. Please go ahead.
Yeah. Hi, sir, thanks for taking my question. Sir, can you please explain this quarter-on-quarter improvement, which we have seen in gross margins, and, particularly given the fact that our chronic revenue share declined during the quarter sequentially? So one to our chronic revenue share was 36%, which came down to 34%. But despite that, we have seen an expansion in gross margins on a sequential basis. So, so is our price increases largely a contributor to that, quarter-on-quarter gross, gross margin improvement?
So yeah, Rahul, so as you mentioned, yes, there is an increase of 2.7% in gross margin quarter-on-quarter. And if you look at the breakup of this 2.7%, around 2% is the factor of price. So price is the combination of the sale price increase, what we have taken in the previous quarter, and some rationalization on the, on the cost front as well. And the balance is towards the favorable mix, which has driven that portion. And chronic is one factor, and the acute also, some of the products have a good margin, so there the mix has been better, so which has given us the sales mix beneficial of around 0.7% or so.
Sir, this 2.7, which you are referring to, is on a YoY basis, and I'm asking on a sequential basis, that sequentially, also our gross margins have improved despite a lower chronic share. So, what is the driver of that sequential gross margin improvement?
Basically, the main driver of the gross margin quarter-on-quarter is the price increases and the rationalization of API pricing. We have increased-
Okay.
Taken price increase in certain products and which has come, as per, what the regulatory system allows us. So that has increased the gross margins quarter-on-quarter.
So Q1, it was not full reflection. Q2, there is a full reflection. That's one. And also, anti-infective, it is softer growth, but it's chronic. So if you see, chronic is 34%, so that also gives you a little extra gross margin. So it's a factor of both.
Sure, sir. Can you follow the rep number for the quarter and our productivity?
What number, sorry?
The sales rep number.
Sales rep, MR.
MR.
It largely remains the same. Around 12,000 is the field rep, around 3,000 is the managers, so around 15,000 is the total number. Yeah, so 15,563 is the precise number, yeah, which is comprising of both the field force as well as the managers, the consolidated number.
And the-
If you compare it to the last quarter, yeah, so there is hardly any increase. Last quarter was also INR 15,350.
Okay, sure. On this export business, while you indicated that the one-off opportunity might sustain for some period, but on this high base of FY 2024, do you think that you will still see growth on the export business in FY 20 25, or would we see a decline going into next year?
As I said before, we are, there are several products which we filed. Those products will get approval in due course, and we are already launching these products in different quarters in the past. So we see a mid-teen kind of a growth going forward.
So, on a reported basis as well, you are pointing to a mid-teen growth next year?
Correct.
Okay. Thank you, sir. That's it from my side.
Thank you. We'll take the next question from the line of Kunal Dhamesha from Macquarie. Please go ahead.
Thank you for the opportunity again, sir. So on the M&A front, you know, let's say if we do some deal, what would be our comfort in terms of leverage? I mean, while we have strong cash flow, but are we kind of looking for a bigger targets, or would it be more tactical, then what would be our comfort level with the leverage?
We are a very conservative company. I mean, leverage really, I mean, we basically try to, I mean, not go for, I mean, honestly, not very big we will ever go. Major would be, I mean, the kind of a company we can chew and swallow. Again, on the lines of chronic, on the lines of, consumer side, that's also a point. Plus, we should really add something of value in Mankind, that we should not have those products. That's also very, very important. Why do you want to just bring something which duplicate your products? We cannibalize our own products. So we just try to see everything and keeping them in future opportunities in mind as well.
Sure, sir. Second one on the prescriber penetration, which has increased for us on a year-on-year basis to now 82.7%. Now, within that increase, what type of doctor it is coming from? You know, is it general physician, specialist, super specialist?
So, if you look at this increase in prescriber concentration, so we launched single specialty divisions in the last one and a half years. We have 10 of these single specialty divisions. So, it is because of these single specialty divisions, we have been able to add more consultants in the areas of oncology, cardiology, dermatology, neurology.
Respiratory.
Respiratory. So, the addition is this prescriber base increasing is skewed towards consultants, and it is not family physician, but other than family physicians.
Okay. Okay. And last one on the advertisement campaign that we are running for the DMF grade API quality, what are some of the internal metrics that we are tracking, you know, for the success of that campaign? And what are benefits that we have realized till now, and what are we expecting?
These are, I mean, very intensive and long-term strategies. Somehow just to bring world-class kind of a products to Indians, for Indian society. So that's the point. We always believe in long-term things rather than short-term things, and it's quite important for us. And in near future, we are seeing a good traction in the products we have brought in DMF side.
Sure. Perfect. Thank you.
Thank you. We'll take the next question from the line of Madhu Prashant, an individual investor. Please go ahead.
Hello, am I audible?
Yes.
My question is, the acquisition you are doing, is it on the basis of debt or it is fully cash?
You're not audible. Can you repeat?
Hello, am I audible?
Yeah.
Yeah. My question is, the acquisition you are taking, is it on the debt or is it fully cash?
So we are not taking on any acquisition right now. I mean, we are t here is various opportunities that we are evaluating. So once something satisfies, we will go forward with it, but it will be mostly our own funded.
Okay. If we, if I say, you believe in debt free, is it okay to say that?
Yes. Debt free. Yes. Yeah. We are net cash company with about INR 2,000+ crore of cash balance.
Okay. In future, is there anything that you believe to take a debt, in a long term as well as in a short term?
So these are futuristic statements. If we take any acquisition, we'll come back to you.
Okay. Recently, the newspaper, I saw an increasing in non-communicable disease. Is there any focus of Mankind Pharma on that?
So focus is on increasing the chronic share, as we already have a large acute share, so increasing focus in chronic and consumer business.
Okay. And my last question is, as Pfizer has, Viagra kind of thing, is Mankind Pharma also focusing on that?
We already have Manforce, similar like, man, we are there.
Okay. Any new segment for a future perspective?
We'll come back to you. Next question, please.
Thank you. Ladies and gentlemen, due to time constraint, that was the last question. On behalf of Kotak Institutional Equities, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you, members of the management.
Thank you.
Thank you.