Ladies and gentlemen, good day, and welcome to the Marksans Pharma Q1 FY 2025 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 the star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Nitin Agarwal from DAM Capital Advisors. Thank you, and over to you, sir.
Thanks, Steve. Hi, good afternoon, everyone. A very warm welcome to Marksans Pharma's Q1 FY 2025 earnings call, hosted by DAM Capital Advisors Limited. On the call today, we are representing Marksans Pharma management, Mr. Mark Saldanha, Founder, Chairman, and Managing Director, and Mr. Jitendra Sharma, Chief Financial Officer. I will hand over the call to Mark to make the opening comments, and then we open the floor for questions. So, Mark, please go ahead.
Thank you, Nitin. Welcome, everyone, and thank you for joining us in our Q1 FY 2025 Earnings Conference Call. We appreciate your continuous interest and support for the company. I'm delighted to announce a strong start to the year, driven primarily by our increased market share and with our existing customers and some new product launches. This quarter, we faced a mixed demand scenario in the U.S. region. However, based on historical trends, we anticipate the upcoming quarters to be far better. Pricing pressure on our Rx products remains stable. U.S. is a strategic focus area for growth, and we are well positioned to capitalize on the opportunity that lies in this market.
Our gross margin for the quarter expanded by 443.2 basis points year-on-year and 386 basis points quarter-on-quarter, primarily due to the reduced raw material price, raw material pricing and the depletion of old high cost inventory. Favorable product mix also boosted our margins. However, we continue to face elevated freight costs, mainly due to the ongoing, Red Sea crisis, container shortages, and port congestions. Regarding our newly acquired manufacturing facility, we are on track with scaling operations and have commenced our product supply to few regions. We expect substantial revenue contribution from this facility in the upcoming quarters. Looking ahead, we are committed to growing our business in a sustained manner. Our, our goal, our next goal is to reach INR 3,000 crores of revenue within the next two years.
Our focus on growing the business, launching new products, and enhancing supplies from our new facility will be instrumental in achieving this target. As a part of our commitment to a strong board oversight, I'm pleased to announce the reappointment of Mr. Varddhman Jain as a full-time director for a further term of two years, Mr. Mohanty as a non-executive independent director for a term of five years. Our board comprises of five eminent independent directors, who are instrumental in driving our company forward. With this, I'd like to turn it over to Jitendra to update you on the financials.
Thank you, sir. For Q1 of FY 2025, our operating revenue was INR 590.6 crores, an increase of 18.1% compared to INR 500 crores in the same quarter last year. The U.S. and North America was at INR 251 crores, representing 29.8% increase year-on-year basis. U.K. and EU formulation markets grew by 11.3% year-on-year to INR 251.5 crores. On account of volume growth, incremental market share from the existing customers and contribution from new launches. Australia and New Zealand formulation market recorded revenue of INR 65.6 crores, a 12% increase year-on-year basis. The rest of the world recorded sales of INR 22.7 crores in Q1 of FY 2025.
Gross profit was at INR 329 crore, up 27.8% year-on-year. Gross margin increased by 420 basis points from 51.5% to 55.7% in Q1 of FY 2025. EBITDA for the quarter was at INR 128.4 crore, an increase of 26% year-on-year, and an increase of 17.1% on quarter-on-quarter basis. The EBITDA margin for the quarter was 21.7%. This improvement is attributed to a higher gross margin and our continuous efforts towards enhancing operational efficiency. However, trade costs continued to rise during the quarter. Profit after tax was at INR 89.1 crore, compared to INR 70.4 crore in Q1 of FY 2024, an increase of 26.4%. EPS for the quarter was INR 2.
In Q1 of FY 2025, the cash from operation is at INR 43.45 crores, and free cash flow is at INR 14.3 crores. The Capex incurred during the period was INR 31 crores. The investment is in line with our plan for scaling the acquired manufacturing unit in Goa, and we spent-
...with INR 12 crore in the R&D, which amounted to 2% of the sales. We continue to remain debt-free and had a total of roughly INR 691 crore of cash as of June 31, 2024. With this, I would like to open the floor to questions and answers. Thank you very much.
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 telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset 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 Adityap al from MSA Capital Partners. Please go ahead.
Hello, am I audible?
Yes, you're audible.
Thank you. Congrats on the great numbers. A couple of quick questions. So now that our efforts in the backward integration have been successful and we've successfully tied up with CDMO partner also, so can I say that a floor for our gross margin has been set, that the gross margins cannot decrease below a certain level, even if the API prices in the near future go up? And what could-- what would be that level, if so?
So, obviously, we are talking, when we talk of the scenario where, API prices go up, obviously, if, if it is chemical prices, integrated prices going up, we are not immune to, that escalation because most of it originates out of China. But what we can, what we can avoid is, like I mentioned in the past, we can avoid, the exploiters, you know, raw material, manufacturers exploiting the situation and increasing the prices beyond the cost of, inactives or the, intermediates that basically, prices that go up. So, so from that angle, we will obviously, we, we should be able to sustain, our, our profitability, but at the same time, there would be a cost increase.
But what we would secure ourselves is with raw material supplies and availability of raw material and at a competitive price when, as and when the prices are escalated by other manufacturers.
Understood, understood. And the gross margin that we reported this quarter, which has seen a sharp uptick of 420 basis points, do you think this is sustainable? Obviously, assuming that overall API prices also remain where they are, and there's no sharp increase or geopolitical risk. So do you think that this is sustainable going forward?
So the quarter-on-quarter was 386 basis points. But I think it is sustainable, but barring the geopolitical situation that continues to evolve, you know, on a daily basis, we do see freight pricing challenges happening. We are hoping it's not going to be for long, but as on today, freight is again creeping up. Yet not to historic highs, but it is creeping up. But I do believe we'll be able to sustain these numbers.
Understood. And sir, the European and U.K. region, even though we've reported a good growth, YoY, there's been a slowdown, that the growth has been slowed. So from 22% that we used to report earlier, we are moving down to 12%. So can I say that now this 12%-15% is the new growth rate that we can assume in this geography because we have become a large player in that particular geography?
Yes. Very accurately pointed out. The base has become bigger. So with the base becoming bigger and our market share growing, we are amongst the top five companies out there. But you will see a 10%, 10%-12% growth happening from the region, and our team is working hard to surprise us, you know, and move ahead of that. But realistically, I think pretty much what we've shared is what we believe will continue moving forward.
Understood. Just one last question before I come back in the queue. So, say three years out, right? So we have successfully penetrated deeper into the U.K. geographies. And now we are slowly penetrating and increasing our market share in the U.S. regions. So say three to four years down the line, other than the U.S. market as a very large growth lever, what are the other growth levers that you foresee that can benefit Marksans over the next three to five years?
So I do believe U.K. is also; we've got a huge upside in our U.K. too, because of our products that are in the pipeline. I do believe U.K. will grow in terms of revenue and will beat market expectations. The only thing is it may take a bit longer. But the fact still remains, that is, that is also part of our growth drivers that are there. The U.S. will probably grow at a faster pace, but U.K. revenue also we are, we have a budget, we have a marketing plan, we have a sales plan, we have our next five-year outlook on U.K., and it is quite impressive from where we are today.
But if, if you are asking me about beyond these two markets, where else do we see our sales growing? I would like to grow in the European market, and for that, we are working on M&As, and we are exploring on those possibilities.
Understood, understood. Better luck to you and the entire team, sir. Thank you so much.
Thank you very much.
The next question is from the line of Ishita Jain from Ashika Group. Please go ahead.
Hi. Am I audible?
Yes, Ishita, you are audible.
Hi. Hi, Mark. Congratulations on a, on a consistently good quarter. My first question is on the capacity utilization. If you could, tell us what the capacity utilization has been across the four units?
So, the newly acquired facility is, the capacity utilization is, I would say about 25%, you know, somewhere around 25%. And we do plan to every month it will keep increasing. I think last month it was probably just 30%, yeah, so you can see month-on-month it's increasing. The other facilities are right now at, probably 65%, utilization.
65% is the U.K. unit as well as the U.S. unit?
Yeah. I'm talking of my, the other unit in India and my U.S. unit, and the U.K. unit will be around the same idea.
Understood. So my second question: so in U.S., we are currently in four categories, therapy areas in private label OTC. Are we going to be adding more breadth in terms of therapy areas, or are we going to add more vertical depth for growth in the U.S.? I mean, essentially just trying to understand what will drive growth for U.S. business.
Again, penetration with customers, there are a couple of approaches in terms of distribution. Current customers, I mean, we have a huge basket, right? And all our clients don't have 100% of our basket. Some have probably 10%, some have 5%, some have 30%, some have 50% basket. So our aim is to first penetrate with pretty much all the customers with our full basket and to ensure we optimize our product range into every client. So that's why we talk of market outreach, market penetration, better reach into each client. So that itself is a huge potential because the market size is obviously big, and it will reflect our revenue growth. Second is obviously targeting new clients, new customers, which are relatively bigger and larger.
And while we do both, we have to also make sure that we have a back end in place in terms of manufacturing capabilities to support the growth that will come in. Because, again, the U.S. market is a big market, so, you know, so the volumes are huge out there. So again, so is the U.K. and our future markets that we want to grow also. So we have to look into various angles. But just to answer your question, which is more U.S. specific, the approach is obviously a better market product penetration into existing clients, new product launches and new segments in the market that we want to launch.
Got it. Great. Just one last question from my side. You mentioned that right now we are not so big in Europe and you're looking for M&As for that geography. Just to sort of get some color in Europe, are we looking to be... Are we looking to replicate the U.S. model and be more private label OTC, or are we going for Rx, or are we looking at a mix?
It will be a mix. It will be more like our U.K. model, which is also fantastically, which is good, and we have literally replicated all our, all our business strategies across, have been very similar. We have been true to our principles and to our objectives and to our strategy all over the world. And what we implemented from the first acquisition till first M&A till today, we are continuing operating the same strategy. So we will be we will replicate what we have in U.K.
Great. All the best. I'll get back in the queue.
Thank you.
The next question is from the line of Darshil Pandya from FINTEREST CAPITAL . Please go ahead.
Hello, am I audible?
... Yes, sure.
Yes, sir. Sir, just wanted to know what the status on Teva plant has it started contributing to these numbers, and what are we expecting in for this year?
The Teva plant, obviously, in a standalone, if you see, it has contributed. In the consolidated, obviously, when you consolidate, it does not reflect in the consolidation because these, we have just shipped out product, it has to reach, and we are planning to launch these items. So, I do believe, the consolidated, you will see the, see the contribution happening probably in the third quarter, I mean, after September or October. But, it has contributed because we have shipped product out. Like I mentioned, we have done, we have done revenue in the first quarter. The second quarter will be better than the first quarter, and the third quarter will definitely be better than the first and second quarter, and the fourth quarter will probably be the best quarter.
So, we do see an increase happening month-on-month, and yeah, I mean, it is a reflection. If you look at our standalone numbers, it is reflecting on there.
Okay. Can you just quantify what was in the number terms for what, what revenue it, it will do?
I think we did, in the first quarter, we did about INR 60 crores from the Teva plant.
Sixty?
6, 6, 0. 60.
60. 60. And we are kind of anticipating around INR 500 crorecrore-INR 600 all across of revenue in the FY 2025, so-
Yeah, but-
In terms of that.
Like, like in the first quarter, we did about INR 60 crore,
Mm-hmm.
But in July, it helped we get about INR 30 crore, you know, so, so you can see it increasing month-on-month basis.
So any ballpark number that we can expect for this year, maybe?
I do believe, by the third quarter, we should be hitting close to INR 100 crore a quarter.
Okay. And by fourth, Q4, what... For a whole year, are you anticipating?
When you talk of INR 100 crores a quarter, that's one thing. It may not happen for the full year, four hundred crores, but you are then trending at INR 400 crores, and then the fourth quarter will obviously be bigger than the third quarter. So we are anticipating that growth to continue from Teva. But more than anything, these are in the consolidated numbers, you will see the difference in the consolidated in the third and fourth quarter. Especially in the fourth quarter, you'll see the rise happening because all the products that we've shipped will then see light in terms of product launches.
Got it. Got it. And obviously, saw some news article that, you know, U.S. and U.K., we might see some more contract manufacturing coming in. And you have any idea or any news about it?
Um-
Maybe they will-
Not, not exactly. I mean, there are different spaces. Not in our space. I don't see that happening. I don't see any difference in what we are doing to what the article basically talks about. So, I think I don't see that having any impact or any advantage to us.
All right. Okay, thank you so much. Much appreciated. All the best.
Thank you. The next question is from the line of Aejas Lakhani from Unifi Capital. Please go ahead.
Yeah. Hi, Mark and Jitendra. Congratulations on a really good set of numbers. Mark, my first question is that you've got some new marketing authorizations approved in the U.K. region. I'd like to understand, what is the market size of that, and are these, you know, margin-accretive products which you've been referring to, which we will see incrementally in the U.K. market? That's question one.
Yeah, these are margin accretive items. They are very niche products, difficult molecules, sure. So, they are not huge value drivers in terms of if you're asking whether the molecule will do a GBP 10 million sales, that may not happen. But the bottom line improvement is, will, it will add tremendous value to the bottom line.
Got it. And we have already launched these products in the U.K. market, and they are live. Is that understanding-
No, we just got the authorization. It takes at least, I don't know, 3-4 months to launch it. We have to manufacture it, we have to ship it out, and it has to be imported in, tested, released. So there's a good decision time of at least 3-4 months, and then we will see the launch happening.
Hello, Mr. Aejas. Does that answer your question? Hello, Mr. Aejas. Does that answer your question?
It should be accepted.
No, sir, he's on the line. Okay, we will move on to the next question. It's on the line of Niharika from Aequita s Investments. Please go ahead.
Hi. Thank you for the opportunity. So my first question is that we had onboarded OrbiMed as our investor, and they hold around 11%. So, like, have you reaped any benefits? Because that was our thought process of giving them preferential allotment.
There are multiple benefits. There are intangible benefits and there are tangible benefits. Obviously, they've added tremendous value on the board. They, we have regular meetings. They add a tremendous importance to corporate governance and all the discussions that we have surrounding our growth and M&A strategies. We have, we have been getting a lot of M&A targets to us, but that said and done, ultimately it's always our choice whether we have to move ahead with the M&A target or no. And, that said and done, you know, they, they are valuable partners to us, and, and obviously they have contributed, a decent amount, to, for us to go and explore and look at, M&A targets.
So I would say they've added both intangible and tangible value more.
Okay, understood. Any insight if there is any increase in competition in the OTC market from Indian, like, bigger players who are wanting to enter into OTC market in, say, U.S. or U.K.? If yes, then how are we coping with it?
Well, I don't know. I mean, this is not a new segment that we've created. It's been existing there for years. And I guess all the companies have been there in the past and will be there in the future. So it's just the nature of the beast, and it does not matter if you know who wants to come in. It's another market. I mean, you know-
Just because of our strength and, distribution channel in place, that we are kind of able to beat the competition. I'm just trying to understand our moat in the OTC segment.
Our strength is our strength, and obviously we have over a decade or so, we have mastered the art of selling and servicing the OTC market. That said and done, our focus is very on that segment. It's a part of our focus area. In terms of competition, competition is very in every segment, whether it may be Rx or within prescription products or OTC. So it is not differentiated from a competition point of view. Like I said, it's the nature of the beast. It's, we are in the pharmaceutical sector, which has large companies in the world.
Okay. And, if, like, on a very broader level, so U.S. is more margin accretive for us than U.K., margin-wise com... On a company level?
I think it is a, it's a fusion. It's a blended fusion of both. And, and obviously today, U.K., you've got to understand, U.K., we have been in the U.K. since 2008. So, we, we've been in U.K. for, nearly nine years before we entered the U.S. U.S., we relatively entered, entered only, like, four, five years back, that's in 2017, literally, myself. so, we've still got a long way to go in the U.S. market, but it's a, it's a big market and has potentially a growth. We, we still, we're still very small in the market, and that gives us, that gives us hope and potential that we can grow more.
Right. And on the Red Sea front, I think last quarter we had incurred INR 9 crore more because of the Red Sea issue. Is there a number that we can give for the quarter that that was because of some abnormal, Red Sea crisis that we faced freight?
Niharika, we incurred additional freight of INR 12 crore, if you see the year-on-year freight numbers.
Okay.
So, yeah, so we incurred INR 12 crore extra in freight.
Even currently you are facing freight issues?
It is further increasing.
Okay.
Definitely right now there is no respite.
Okay, understood. On the Teva plant, have you reached break even in this quarter, quarter one?
Yes.
Okay. And on the order book visibility, do we have, like, good visibility for, say, next one, two, three years? Like, because I'm not sure how our, like, orders are, kind of-
Yeah, I mean, based on the visibility, the confidence level, that we will, we will touch INR 3,000 crore within the next three years.
Then, typically, how long is the contract for with a customer? On average?
Two years, three years.
Okay. And this, this has some price escalation, this also element in the contract?
That price escalates, I mean, contracts don't give, I mean, we are not, we are not into real estate, so, but, normally when contracts are there, the price is fixed. But there is a clause that increase raw material, prices escalate beyond a certain level, percentage point, then you can always go back and revisit and renegotiate the price.
Okay, and my last question is, if you can give, like, top three, four products, five products, concentration on the total revenue, if we have that number.
Well, it's a very diversified portfolio. You know, in U.K., we sell about 350 different products. In the U.S., our basket is nearly touching about 60, 70 products. So I think, it's difficult to identify any molecule. And in a way, that's what makes it very robust, because we don't have one standout molecule which says, "Oh, well, we did INR 100 crore on this molecule." That's not. When I look at the numbers, I don't see any single molecule standing up like a leader, like an Eiffel Tower. The bar chart is literally at the same level of maybe 20, 30, 40 products. Yeah?
Okay. Okay, understood. Thank you so much for, for answering all the questions.
The next question is from the line of Viraj Mahadevia from MoneyGrow. Please go ahead.
Hi Mark . Congratulations on the great results. I just wanted to check, given the cash balances of INR 650 crore, has there been any progress on our acquisitions in the year?
No. Acquisition in the year, we went through two due diligence companies, but none of them worked out at the last minute. One of them we were last-minute outbid, and the second one we just in midway after the due diligence, part of it. So, right now there is no pen to paper. And we are in discussion with one more company, but it's too early to say whether it will take any shape or come up.
Right. Understood. And given, I think a year and a half ago, you mentioned, you know, your payout policy to shareholders of one third of free cash flows. I mean, as I look at it, in the last 10-12 months, you haven't done a buyback, and the dividends were still pretty small. So are you still adhering to that policy or is it going to change?
Yes, we are. Our CapEx was very high, so the free cash flow was very less. And the market, we have literally paid more than a free cash flow, just to continue our trend. But we have, we've spent over INR 160-odd crores in CapEx itself. You know, so when we look at the free cash flow, we had very limited... That formula would have not worked from a dividend point of view, to ensure our trend continues, but we still continue our trend.
Excellent. The last question is on the in-housing of some of the CDMO projects on the APIs. What progress have you made? How many molecules have come in there?
So we have signed, you know, one for one DMF, and we are working on the second one right now.
Thank you. All the best.
The next question is from the line of Aejas Lakhani from Unifi Capital. Please go ahead. The current participant... Hello, Mr. Aejas, can you hear us?
Yeah, can you hear me? Hello.
Yes, sir, please go ahead.
Yeah, Mark, hi, I got cut off earlier. Just a couple of questions. On the U.S., could you call out what is the order book today?
About INR 180 million crore.
INR 180 million crore, right?
Yeah.
That's executable over the next two years?
Yeah.
Okay. And, in the contracts with, U.S. customers, these increase in rates, are they like a pass-through, or is that something we have to absorb and it gets passed on with maybe a lag in the next, you know, quarters or so?
So, obviously, we have to absorb this for the time being, because we do not know whether this is a passing phase, whether it's going to last one month, two months, three months, and correct, you know. So it is, it's something that it is not something that can be passed on at this stage, unless it goes totally out of the spiral, out of control, then we can go and present some pricing first. But right now, we have to absorb it.
Okay. Okay. And, as the facility for Teva scales up in the next few quarters, do we expect some more operating leverage to play out, or do you feel that that will be eaten up by the incremental freight cost, similar to what happened this quarter?
I think, the operating leverage, the more we produce, the operating leverage will definitely kick in. And we are hoping that the operating leverage will be larger than the freight cost. So, while you can see the freight cost has gone up, but our rates are still very prominent. So again, operating leverage is kicking in, and will continue to kick in from all fronts. And based on that, yes, the freight cost is something that nobody wants it, wants to see it. Three months back, it was $2,000, now it is $6,000 as on this month itself. So nobody, nobody likes to take that hit of 300% on the freight.
But again, it's, it is going to be just part and parcel of, you know, the global geopolitical scenarios that are existing. But I do believe, and we are hoping that—I don't have a crystal ball, but I'm hoping that it will start coming down, because there is no rational point to keep increasing, because that is an old issue. And many a times I keep wondering what's driving this up, because maybe the shipping issues are from the port or something, but I have no idea what's driving this up, because it's, this rate here should not be a talking point today. But it is a fact that the prices have gone up.
... Okay, thanks for that elaborate answer. And Mark, now that you have two facilities in Goa, you know, you know, how do you plan to repurpose each of them? Because, you know, your old, older facility, which you've been running for so long, that already had, you know, a certain set of line and products that you were making. So is it that... If you could talk about how you are planning to optimize on the production, given that you have now two facilities.
Well, as the demand grows and as the sales grow, the other facility is not gonna be able to cater to all our requirements. So we have to basically start giving it to the new facility and make sure that we basically service our requirements globally, whether it may be for U.K., U.S., Australia, for Canada. So, obviously, the company is growing. You know, to touch INR 3,000 crore, we need 3,000 customers, we need two facilities. We can't just make that happen in one facility. Definitely, the second facility is already ramping up the volume in terms of tablets. You know, I mean, it's ramping up to the level that we anticipated, so it's meeting our expectations.
The speed, shipments happening, starting to happen, and every month we can see some progress in the forward direction. I do believe the second facility will basically contribute larger than the first facility. It may take, it may take, this, this calendar, this financial year to see that happen. Next financial year, I do believe we will see the full results of, that, being played.
Got it. How much would be the sales from the Goa facility today?
I didn't get you. How much would be the...?
So you said that, Verna facility will overtake your existing Goa facility in terms of sales in the years to come.
Yeah.
I'd just like to know, what is the sales from the Goa facility today?
It is, it is in the range of INR 750 crores-INR 800 crores.
Okay, wonderful. Okay. All the best. Thank you.
The next question is from the line of Naveen Baid from Nuvama Asset Management. Please go ahead.
Thank you for the opportunity. My question is actually a continuation of what the previous speaker, one of the previous speakers had asked. If you could give some color, not necessarily a finite number, as to, you know, what is the pecking order of the margins among U.S., U.K., and rest of the world business?
Margins are obviously, like I said, it's, you know, at the gross margin level, like, you know, we see to it that all geography should give us 50% +.
Okay.
Like, you know, so on an average, it is between 50%-55% across each geography.
Okay. But at the operating level, would, would it be safe to say that you'd be doing more margin in the UK?
At country level, definitely, you know, there are different numbers.
Mm-hmm.
And U.K., like, you know, definitely we have relatively higher margin. The Indian operations have relatively higher margin. U.S., we are catching up.
Okay.
- like, so you will see, a better number coming out from U.S. geography, also. So, so-
Would U.S. be lower than the concerned number for the company?
Yeah.
Okay, got it. Thank you. That will be it for my side.
Thank you. Before we take the next question, we would like to remind participants that you may press star and one to ask a question. The next question is a follow-up question from the line of Adityap al from MSA Capital Partners. Please go ahead.
Thank you for the opportunity. Sir, just wanted to understand, so, there have been news in the U.S. that Walgreens, CVS have been shutting their pharmacies. Do we see an adverse impact because of that, or it's a, it's a good news type of scenario?
No, we don't see any adverse impact of that. This is part and parcel of the cycle that U.S. witnesses every now and then. And you know, while they shut pharmacies, after one year, they'll be opening some more pharmacies, and we'll reposition the pharmacies in areas which don't have pharmacies. But sometimes in the growth strategy, they go and literally open pharmacies every mile or every two miles or every five miles. So maybe they'll just reposition it. So we don't see an impact on that.
Understood. And the question would be that when you were speaking about M&A and hunting for opportunities in the European region, so, are we looking at a company which is a marketing company or someone which has their own brand plus a manufacturing setup?
Yeah, difficult to cherry-pick what we would like, because that's what we will finally do. But from a manufacturing setup point of view, we are trying. We are not trying to acquire a company which has the manufacturing facility. One of our M&A, one of the due diligence that we did, that was one of the touching points that, you know, because it was overlapping the capacity and the facility that we had, so we didn't want to want to go ahead with that. But we would like more with market company with more market authorization and more time we have spread. And we would like to leverage low-cost manufacturing base out of India.
Understood. Just last question from my side. So now, when you were talking to another participant about the Teva plant, so Teva plant will be fully utilized by FY 2026. Do we-- Are we hunting for new land to build, or are we planning to augment our existing facilities in terms of capacity? How are we thinking about that?
Yeah, I mean, a very valid point, actually, but you're right. Teva facility has basically, you know, we are moving at a very fast pace, both from a growth point of view, from a requirement point of view. So we have been discussing, exploring, contemplating within the top team, you know, strategies beyond INR 3,000+ crore. What backend infrastructure we need to support, let's say, the next jump that we have to do after INR 3,000 crore. So we have to always align ourselves to ensure we have that support to fuel our growth. So we have to, in pharmaceutical, you gotta, you gotta plan two years before. You know, you invest today, you see returns after two to three years.
That's, that's typically how we move ahead, and we have already started working on that.
Perfect. Thank you so much.
The next question is from the line of Deepak Rao from KNR Securities. Please go ahead.
Hello. Good evening, sir. Congratulations on a great set of numbers. So I have three questions. So the first question is regarding the timeline for a U.S. FDA audit on the acquired plant for Teva. And the second question is, I just wanted to know if there's any guidance on how many filings are we aiming for in FY 2025? And thirdly, I just wanted to understand what all countries are we targeting when we think about entering Europe?
To your first question, I don't have an answer because, honestly, that's a regulatory question which basically no one has an answer to, and they are free to come anytime. So that is the first... That's the answer to your first question. The second one, in terms of the market, it is literally the same market that we already are delivering our products. Like I mentioned, our first plant, again, we have to align ourselves with the demand and supply gap. And definitely our demand has grown higher than what our supply was in the first plant. So we are anticipating we are servicing that gap from the second plant.
So basically the geographies are the U.S. market, the European market, the Australian market. And what's... And your third question was?
Sir, regarding what countries are we targeting in Europe?
Ah! So, I mean, right now, obviously the countries that... So right now, it's only UK that we are servicing from this plant. But in terms of countries, like I mentioned, we are looking at M&As, and the countries of choice would be obviously the Western Europe and, you know, we can start from Germany and then spread out from there on.
Okay. Thank you, sir. That answers my question.
The next question is from the line of Dominic D'Costa from Axia Capital. Please go ahead.
Good evening, sir. Thanks a lot for the opportunity, and congrats on the great set of numbers. I had two questions. One is, should we see increasing fixed costs, how do you think about fixed costs for the next quarter? Should we see any increase because of better increasing capacity utilization? That's number one. Second is, on the farm point-
You are not, you are not audible. I'm sorry, I can't understand the question.
Sorry, is this better?
Okay, slightly better, but go ahead. I'll try.
Okay. So my first question is, can you guide us towards the fixed costs for the next quarter? Should we expect any increase because of the new Teva plant, or all the fixed costs attributed to the Teva plant is already in the P&L for this quarter?
Yeah. The fixed cost is pretty much out there. There may be a slight increase happening, but most of the cost is already captured in the P&L. And as and when, obviously, we ramp up further requirements, which is going to happen on a quarter-to-quarter basis. Because obviously from, let's say from INR 60 crores, you want to do INR 100 crores, you want to do INR 120 crores, it's, you know, you need people, you need teams to execute that. So it will ramp up proportionately when infrastructure is ready to get it up to that level.
... Thank you. And the second question, is there any update on the 483 audit?
No update.
Okay. Thank you very much.
Thank you.
A reminder to all participants that you may press star and one to ask a question. The next question is from the line of Jayesh, an individual investor. Please go ahead.
Hello, sir. Good evening. Are you able to hear me, sir?
Yes, I am.
Yes. So congratulations for two things. One is, consistent and good set of numbers, and the second thing is our company is a billion-dollar company, so congratulations. Please congratulate, congratulations to you and your team.
Thank you.
Yeah. So my question is regarding the free trade agreement our country is trying to sign with U.K. So when it's signed, will there be any benefit from the U.K. operations to our company, sir?
No, there will not be any specific benefit arising or arising out of that agreement. So far as pharmaceuticals are concerned, already there are no duties as such. You know, so there may be some advantage, but nothing material.
Yeah, all right, sir. Thank you.
Mr. Jayesh, does that answer your question?
Yes, yes.
Okay. Thank you. The next question is from the line of Niharika from Aequitas Investments. Please go ahead.
Thank you again. Just one clarification that you said that Teva plant current capacity utilization is 25%, and U.S., U.K. is 65%. Did I hear that right?
Yeah, the Teva part, yes. Yes.
What about the Goa plant's capacity utilization? Why-
Okay.
U.S., U.K. have lower capacity utilization? Is it because we have, like, overcapacity to, like, cater to the demand, or is it, like, lower demand? Just want to understand on the capacity utilization front.
30% is quite a high utilization. You know, our plants can't go up to 100%, so maximum they can go up to 80%.
Okay.
So 65% is quite high utilization per plant. But that said and done, it will increase as the demand we have demand and based on product launches and all, it will reach that peak. But we won't wait, we can't wait for it to touch 80% and then start planning. So we obviously, that's where the Teva plant came into play, to service the demand and supply gaps that we foresee.
Okay, understood. Thank you so much.
Thank you.
Thank you. The next question is from the line of Akash Sawant, an individual investor. Please go ahead.
Hi, good evening. So from, from the numbers that I could see, we have about 70-odd scientists into R&D. Two questions. One, do you see a correlation between R&D expenditure vis-a-vis growth in revenue? And two, do we have any plans of adding more scientists or any kind of programs where they would develop products which would possibly end up contributing significantly to the top line in terms of another revenue stream?
So as companies evolve, we get into more complex molecules. Number of scientists increasing will again depend on the molecules that we are adding in. And the growth strategy that we have in place, we try to maintain a discipline in our approach and not go overboard. But that said and done, we do believe it will be in the same range as what we are spending today. For the next two years at least, it will remain in the same range, maybe range down.
Got it. Thank you. Thanks a lot.
Thank you.
The next question is a follow-up question. It's from the line of Naveen Baid from Nuvama Asset Management. Please go ahead.
Thank you for that. In your journey from the current INR 2,200-odd crore to INR 3,000-odd crore that you're targeting over the next couple of years, which market, you think will lead this growth?
You said, in our journey from INR 2,100 crore to INR 3,000 crore, which will grow? So obviously, the image of growth, the fastest growing market will be the U.S. market, where you see the growth drivers being the U.S. market. But that said and done, the U.K. market will also add value to this growth. But in absolute numbers and comparison, it will be the U.S. market that will take us faster and closer to the INR 3,000 crore, with the U.K. market bridging the gap to hit that number.
Got it. Thank you.
A reminder to all participants that you may press star and one to ask a question. As there are no further questions from the participants, I would now like to hand the conference over to the management for their closing comments.
Thank you everyone for participating in our Q1 FY 2025 earnings call. Thank you for taking time, and thank you for all your support and interest. Be safe, I'm looking forward for our next call. Thank you.