Good evening, ladies and gentlemen. I'm Kritika, moderator for Marksans Pharma Q2 FY 2023 Earnings Conference Call, hosted by DAM Capital Advisors Limited. As a reminder, all participants will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone telephone. Please note this conference is recorded. I would now like to hand over the floor to Mr. Nitin Agarwal from DAM Capital. Thank you, and over to you, sir.
Thanks, Kritika. Hi, good evening, everyone, and a very warm welcome to Marksans Pharma's Q2 FY 2023 earnings call with DAM Capital Advisors. On the call today we are representing Marksans management, Mr. Mark Saldanha, Founder, Chairman and Managing Director, and Mr. Jitendra Sharma, Chief Executive Officer. I'll hand over the call to Mark to make the opening comments, and then we'll open it for questions.
Hi, Nitin. Thank you and welcome and thank everyone for joining us on our Q2 FY 2023 and H1 FY 2023 earnings. I'm pleased to announce that we have had a strong financial performance and a high double-digit growth across all the regions in the quarter. Our robust growth comes from regions which were supported with obviously volume growth as well as market share gains in existing products. A strong revenue growth and a focus on cost efficiencies resulted in an improved margins of 17.7% in the quarter. Moving on to the operational environment, it continued to remain a tough and high inflation with high inflation supply chain and challenges and pricing pressure.
We witnessed a high single digit price erosion in generic RX business in the U.S. Our focus remains on sustainable growth. Manufacturing and innovations are a strategic pillar for growth. In October 2022, we acquired a manufacturing facility from Teva Pharm India that has the potential to scale up our manufacturing footprints in India by an additional 8 billion units per annum over the period of next two years. Obviously this will drive our transformational growth journey moving forward. We plan to produce and manufacture tablets, hard capsules, soft gelatin, ointments, creams and liquids from this plant. This plant is in addition to the three existing manufacturing facilities in U.K., U.S., as well as in India, which we already have.
This plant is basically spread across 47,597 square meters. It has approvals from EU health authorities, the Health Canada and the Japanese health authorities. We're expecting this transaction to be finalized by April 1, 2023, subject to the usual closing conditions. In our previous calls we've always mentioned and we are still moving forward to backward integrate ourselves into API manufacturing on our core molecules for captive consumption. That will potentially have cost synergies and potential gross and EBITDA margin expansion of 500 basis points. Our focus on R&D still remains, with our product pipeline being very strong. We plan to launch several products with high value in the next two years.
Our R&D expense was 2.1% of the revenue at INR 18.7 crores in H1 FY 2023. We further aim to increase R&D spends between 2.4-5% of sales in the coming years. We are confident that our market share gains and the volume growth in the existing product portfolio, supplemented by new molecules, will drive our growth journey in the coming quarters and years. We do see a potential growth demand in RX and OTC and in the segments that we are already existing in in various markets, and especially the RX to OTC switch, which obviously is very lucrative. With this, I'd like to turn it over to Jitendra who will update you on the financials before we can start our Q&A questions. Jitendra?
Thank you, sir. I will explain the financial performance of Q2 of FY 2023. For Q2 of FY 2023 our revenue was-
Sorry to interrupt, sir. Sorry to interrupt, Jitendra, sir. Your voice is little bit low.
Okay. Sure, I will start. For Q2 of FY 2023, our operating revenue was INR 452.6 crores, an increase of 25.5% compared with INR 361.2 crore last year. U.S. and North America was at INR 190.3 crores, representing a 13.7% increase year-on-year basis. EU and U.K. formulation market grew by 32.6% to INR 153.5 crores. Australia and other formulation market recorded 39% growth to INR 43.9 crore. Rest of world saw 56.4% increase in the sales to INR 24.9 crores in Q2 of FY 2023.
Gross profit was at INR 228 crores, up 23.4% year-on-year. Gross margin declined by 80 basis points from 51.4%- 50.7% in Q2 of FY 2023 due to the pricing pressure. EBITDA was at INR 80.3 crores, an increase of 33.6% YOY, led by operating leverage. EBITDA margin improved by 110 basis points from 16.6% in Q2 of FY 2022 to 17.7% in Q2 of FY 2023. Profit after tax was at INR 60.1 crores in Q2 of FY 2023 compared to INR 46.3 crores in Q2 of FY 2022. Growth of 29 point. EPS for the quarter was 1.52, 36.3% growth on YOY basis.
Hello.
Operating revenue for the first half.
Sorry to interrupt, Jitendra, sir. Sorry to interrupt you. Sir, your voice is too low, sir. Could you please come closer to the mic?
Okay, sure. Sure. The operating revenue was at rupees-
Sorry to interrupt, sir. Still, it is too low. Could you please speak louder?
Yeah. Yeah, just a minute. I will do that, yeah. The operating revenue was at INR 886 crores in H1 of FY 2023, up 24.8% YOY. The gross profit for the first six months of fiscal 2023 increased by 20.4% year-on-year to INR 448.3 crores. The gross margin was at 50.6%. EBITDA for the first six months of fiscal 2023 increased by 11.4% year-on-year to INR 153.1 crore. However, EBITDA margin declined by 210 basis points from 19.4% to 17.3% in H1 of FY 2023.
This was mainly on account of increase in cost of materials, freight costs, in last year.
Excuse me, sir. Jitendra, sir, can you please speak a bit louder because most of them are unable to hear you clearly.
Okay. In the first six months of FY 2023, the PAT grew by 10.5% year-on-year basis to INR 120 crore. The earning per share grew by 14.1% to INR 3 per share. We spent INR 18.7 crore in the first half of the FY 2023 in R&D, which amounts to 2.1% of the sales. We continue to remain debt-free. We had a total of INR 335 crore of cash and bank balance as of 30th September 2022, which we plan to utilize for CapEx and funding our inorganic growth strategies. With this, I would like to open the floor to questions and answers. Thank you very much.
Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please press star and one on your telephone keypad and wait for your turn to ask the question. If you would like to withdraw your request, you may do so by pressing star and one again. I repeat, ladies and gentlemen, if you have a question, please press star and one on your telephone keypad. Ladies and gentlemen, please stay connected while we connect back the management. I request you all to stay connected. Ladies and gentlemen, please stay connected while we connect back the management line. I request you all to stay connected. Welcome back, sir.
Hello.
Ladies and gentlemen, if you have a question, please press star and one on your telephone keypad. I repeat. Ladies and gentlemen, if you have a question, please press star and one on your telephone keypad. First question-
Hello.
Yes, sir. Shall I go ahead?
Hello?
Shall I go ahead with the question and answer session, sir?
I can't hear a thing.
Sir, can you hear me? Am I audible?
Kritika, I can hear you, but I think the others are unable to hear you. That's what all are saying. One moment. Let's check it.
Hello. There seem to be some connectivity problems. We are not getting you. Hello?
One moment, sir. I'm just reconnecting your line. Ladies and gentlemen, please stay connected while we connect back the management. I repeat. Ladies and gentlemen, please stay connected while we connect back the management. Mark, sir, can you hear me?
Yeah, much better. I think there's some disturbance in the line. I was not able to hear you earlier.
Okay. I'm sorry for the inconvenience, ladies and gentlemen. Shall we go ahead for the question and answer session, sir?
Yes, sure.
Thank you, sir. First person comes from Madhav Shastri from Capital Private Limited. Please go ahead. Madhav G from Shastri Capital-
Hello.
Private Limited. Please go ahead.
Yeah. Good evening, sir.
Good evening.
Can I hear you, sir?
There is some problem in your line. Hello?
Sir, can I?
Yeah.
I hear you, sir?
Go ahead. Go ahead, Madhav.
Yes, sir. Good evening, and congratulations for the good numbers and thanks for the opportunity.
Hello. Thank you.
Yeah. My question is regarding the new acquisition that we made from Teva.
Okay.
The acquisition cost is INR 200 crores. More about that, what would be the expected CapEx amount on this facility there?
No, the acquisition cost, basically, the amount we plan to spend, including the aquisition cost and CapEx is INR 200 crores.
Okay. Thank you. One more thing, sir. Actually, what is our plan for the U.S., sir? Are we going to make it for the U.S. market as well?
Yes. Obviously we would have to get this plant registered in the U.S. We do plan to obviously utilize infrastructures for both Europe as well as U.S.
Now the call is on.
Sir, are we able to use any of the products and get to start getting revenues from this plant, sir?
Pardon? Did you say when will we get the revenues or?
No, I'm saying that now, see, this is the business from Teva. They may be supplying some products from this manufacturing facility to Teva.
Yeah. We
Yeah. Yeah. Yes, sir.
We would have a supply arrangement with Teva for the next 12 months after the acquisition is closed. After that, we will be taking a call on extending the supply arrangement if need be. We do plan to also produce our products for various markets.
Okay. Sir, can we have some from the first one, first year of the EBITDA, sir?
The CapEx will obviously be within the next two years. It's not gonna all have happen in one year because there's a lot of capacity expansion that we have to work on. We will be doing some revenues in the first year itself, which will be supply arrangements with Teva and some of our products that we'll be producing in that plant.
Okay. If I may be allowed with the last question, sir. Is there any plan to shift some of the plant or some of the products from the existing Goa facility to Teva?
Also saying the same thing, so I'm putting a message I have in front.
Basically, there will be some products, but we'll have to only move products which are European approved because that Teva presently has European approvals. We will be probably leveraging the Teva plant for those products which are required for U.K. and rest of Europe.
Okay. Okay. That's all for me, sir. Thank you very much, sir. All the best.
Thank you.
Thank you, sir. Ladies and gentlemen, if you have a question, please press star and one on your telephone keypad. I repeat, if you have a question, please press star and one on your telephone keypad. We are having a question from Prerit Choudhary from Green Portfolio. Please go ahead.
Thank you for the opportunity. The first question I have is, so we acquired Access Healthcare in June 2022. Now in this quarter we would have. Hello?
Yeah, go ahead. Go ahead.
In this quarter, we would have the full effect of this Access acquisition. If you can just give me the break-up of how much revenue that we made from Access in the current quarter.
Hi, this is Jitendra here. The ASC relatively is a small business. For this quarter too, we have achieved revenue of around AED 5 million, which will be translated into rupees equivalent of INR 12 crore.
Okay.
Around INR 12 crore.
Okay. My next question is, we are planning the API backward integration project. But in the numbers and capital work in progress, I'm not seeing any update. If you can just explain a bit about when would this project would start and what would be the sources of funds above for this?
Basically the API, obviously we plan to file our first DMF, because it's a long process. It still needs approval. It still needs to come onto our license. We plan to basically file our first DMF in the mid of 2023. I do believe any upsides in terms of you know leveraging of profitability will happen only towards the end of 2023-24.
Okay.
Next financial year.
Once we start making the API, are we planning to sell it to the outside market or only use for the capital-
It's only for captive consumption.
Okay. My next question is, so in the balance sheet I'm looking at is the goodwill has grown from INR 300 million - INR 476 million. If you can give some explanation of why we have grown the goodwill.
This goodwill was on account of acquisition of Access Healthcare, so around INR 17 crore has gone into goodwill. On purchase price allocation of what consideration we have paid, for the acquisition of the company.
My last question is, in the accounts, we have around INR 18 crore as restricted cash balance. What will be the use of this money?
Basically this restricted cash of INR 18 crore is into escrow account, which we have kept towards the buyback of share. The buyback program is going on right now, and as per the SEBI requirement, we have kept 25% of the overall buyback budget into the escrow account.
Okay, thanks. That's it from my side.
Thank you, sir. Ladies and gentlemen, if you have a question, please press star and one on your telephone keypad. I repeat, if you have a question, please press star and one on your telephone keypad. We will wait for a moment while the question queue assembles. Ladies and gentlemen, if you have a question, please press star and one on your telephone keypad. We're having a question from Nitin Agarwal from DAM Capital. Please go ahead.
Mark, on the U.S. business, you know, while you're ramping up your filings, what is the kind of filing target that we have in mind over the next couple of years?
We have very close to 30-odd products that we are working on right now. 30. We are expecting, as a matter of fact, approvals every year and probably, you know, every half yearly we will see approvals coming in 2023. I think 2023 we'll probably see about five, yeah, ANDAs getting approved. On an average, maybe seven, eight product approvals per year. We are targeting about 30-odd products for the U.S. market.
In terms of composition of these products, you know, what is the split between OTC and this RX products in these approvals that you're expecting?
Obviously it'll be about probably maybe 65%-70% will be in OTC and the balance will be in RX.
Okay. Secondly, on that account, on the current portfolio that you're marketing, I think where do we see, I mean, in your assessment, how much of the incremental sales potential do we have in the current sort of portfolio of ANDAs?
Well, obviously we, it's just at the tip of the iceberg. We'd we have not penetrated anything significantly, but we are still doing decent numbers. I do see next year our growth drives happening from the U.S. because we have been awarded items, and we do plan to commercialize by March of 2023. We do see a much more healthier roadmap for our next financial year. With this, our market share will slowly start growing. I think we we have a tremendous growth potential in terms of market penetration, market share on our existing product portfolio. Obviously, the new products will just be the icing on the top.
Mark, on the you know, we've seen a fair amount of disruption which has happened on the generic side, or the prescription side of the business in the U.S.
Yes.
There's been a lot of questions around the price erosion which is happening. How has been the business on the OTC side, the market environment on the OTC side? Has the pressure been as severe as the
Uh-
The OTC business?
Well, the OTC, in terms of pricing pressure was not as bad because, you know, OTC is more on private label, more on, it's a much more sustainable business model. There was obviously profit margins because of cost of, you know, cost of inputs going up and, freight going up, everything of that stuff going up. Obviously the advantage of the OTC is while you have better visibility, you have a sustainable business model, you have contracts for a longer duration.
The negative side is you are stuck with the contract and you gotta honor it and if your costing or your pricing or your other intangible cost goes up because of various issues, it does have an impact on the bottom line. That said and done, now we see, you know, the freight costs coming down. We see a lot of raw material pricing being eased. We do see a better profitability being generated and revenue growth is anyhow quite stable and moving in a positive direction where OTC is concerned.
Last one there. Mark, on, so when you are typically competing for these bids with these retailers in the U.S. or with the customers in the U.S. I mean, what is the typical nature of competition that you have to contend with? How many typical players and are there players from India? Because typically on the generic side, prescription side, that's where essentially bulk of the problem from industry essentially originates from.
Obviously the players are, you have all the big guys out there. Most of the big guys have entered into the foray of OTC. In terms of the largest player, you'll obviously have Perrigo, but beyond that, you have a lot of Indian players that are into the OTC. A lot of top Indian pharmaceutical companies which have entered into the OTC foray. Competition is there in every area. The only difference between OTC and RX the distribution channel has consolidated tremendously. That consolidation has affected you know competition and price erosion which has taken place as a cascading impact of that. While OTC is still fragmented and diversified where that is concerned.
Thanks. If I can have one last one. You know, there's a if on the U.K. market, which seems to be growing pretty well in H1, has anything really changed in the market for us given whatever is happening in the continent out there? What is the outlook for our business in the next couple of years?
I think the outlook is only gonna get stronger because of the product pipeline that we have and the nature of the products that are getting approved. We are looking much more healthier, much more stronger. We're also penetrating into the market. We have become very prominent players over a period of time, consistent deliveries. We have a much bigger product portfolio in the U.K. market as compared to the U.S. We've got, you know, you know, RelonChem must be having over 100 plus market authorizations, while Bell's has got about 60-odd market authorizations. Much more diversified and wide product portfolio in the market in the U.K. market.
That has given us obviously an advantage to basically cater to a much more diversified portfolio as well as we are more consistent and preferred source of partnering with. We are seeing definitely better market share. All said and done, I do see. I have a better visibility. I do believe there's a better visibility, better growth potential because of the product pipelines that are coming into that market in the next 12 months.
Thanks, Mark. I'll join back with you.
Thank you, sir. Next question comes from Agastya Dave from CAO Capital. Please go ahead.
Hi. Am I audible?
Yes, you are audible.
Yeah. Thank you very much for the opportunity. Sir, I missed probably 90% of what you have said because the line was just terrible. I'm pretty sure it was.
Yeah.
Not from my end. I'm very sorry if my questions are slightly repetitive.
Okay.
One thing is that this quarter I was expecting some sort of a hit from on the FX side. So was there a hit? If not, then will we get a hit in the next quarter? How have you managed the cross-currency risks? That's the first question.
Hi. This is Jitendra here. Fortunately, of course, like, you know, the rupee has, you know, weakened, like, you know, in the first half of this year. Our revenue, of course, are 100% export-oriented.
Yeah.
We have gained. Of course, there is a foreign exchange gain only. There was no hit.
Okay. Okay.
Uh.
Okay. Okay.
Yeah. Yeah.
Okay, adjusted for that, what would have been the better margin? Any adjustments that you can provide?
Nothing very significant. I think there is.
Not significant. Okay.
Not significant.
Okay.
Yeah. Yeah.
Okay. Sir, next question is that we have been talking about margins going back above close to or above 20%. Given the pipeline and given the strength that you are seeing and the new filings, when can we expect that 20% margin for the entire portfolio for the company as a whole?
See the guidance we had given earlier for this year was around 15% EBITDA margin. I think that
Yes, you have surpassed. Yes.
Yeah. We are doing better now. You know, for the first half, you know, I think that's almost over 17%.
Right.
With the trend like, you know, which we are seeing now in the input cost price reduction, in the freight costs.
Mm-hmm.
Also have started coming down.
Mm-hmm.
It's, you know, definitely we expect to do better in this year. Hopefully if this trend continues.
Right.
We may see that number next year.
Right. Given the price movement, right, because raw material prices are correcting, my guess is that some of the finished good prices will also come off. But then there are new launches which are happening, and there is a natural tendency of pharma products to lose some of their pricing, right? If I look at the combination of everything, and I look at Q2 revenues of INR 453 crores, this portfolio, what you have today, what kind of growth are you expecting over the next two years? The current portfolio, I'm not talking about the new filings.
Yeah. Basically we, Go ahead. Go ahead, Jitendra.
No, no, but you continue. You continue please.
We are trending, obviously this year we are trending at INR 1,800 crore revenue, and we do believe this product portfolio will see us crossing INR 2,000 crores in the next year.
Okay.
We plan to achieve what I've always committed in all our discussions in the previous con calls.
Right.
That we are moving in the path of crossing INR 2,000 crores in the next financial year.
Just to be like repetitive here, but this is coming from the existing portfolio and existing.
Yes.
-business. This is like-
Yes.
Pure organic growth of the existing portfolio. Okay.
Yes.
Then the filings that you have, the OTC and the RX filings, what kind of market potential do you see there, and how rapidly will they grow? My guess is that anything you launch in U.K. will obviously grow very fast. Anything you launch in the OTC will grow very fast. On the RX side, what would be the ramp-up that we'll see in revenues?
Basically, after obviously our first objective, our first milestone is the INR 2,000 crore, but I've always maintained that, you know, the time, now that we have got the platform, we've got a lot of product pipeline. I do believe, you know, we will, after crossing that milestone of INR 2,000 crore, I think, you know, we should be moving towards probably the next milestone of INR 3,000 crore, within one third of the time that took us to jump from INR 1,000 to INR 2,000 crore.
Great, final two questions. I did hear you were talking about your backward integration project. Can you please repeat what you said? The last question would be that you were also looking at probably acquiring something on the front end in the EU markets. Any progress on that?
Well, just to address your backward integration, obviously, this has been a longer project than we had planned for, and
Right.
We are planning to file a couple of DMFs in the mid of 2023.
Okay.
These are again molecules where we have captive consumption and where we are growing by strength. We will be seeing some. Obviously, after filing DMFs, we still need to get it onto our licenses because they are all ANDA products.
Right, sure.
That takes about six to nine months to get it. Hopefully
Right.
We are expecting by the end of 2023 or early 2024, we should see that profitability kick into the system, the cost advantage kicking into the system. That's where we do see our margins also improving slightly from a cost efficiency point of view.
Right.
With regards to the EU, we are still pursuing that part of it. We do plan to expand in our geographies. It's always been our aim. We are looking, we are exploring different M&As. We have been in active dialogue over the last six months, you know, and some dialogues are closer than others, but nothing concrete to put pen to paper, which is worth talking of because these are at very initial stages. You know, we will keep pursuing it and we are hopeful that we will come across some M&As which will add a tremendous value to the company and the shareholders.
Nothing imminent as such as of now?
Listen, in M&As it can happen.
Right.
Within a couple of months or maybe in a year's time. It's difficult, but we are actively looking at it.
Okay. Sure.
So-
I get the point, sir. I get the point.
Yeah.
Right. All right. That's about it, sir. Thank you very much, sir. I would really appreciate it, sir, whatever your opening remarks were, if they can be posted on the exchanges. It would be nice to go through whatever you have said. We couldn't hear anything. Thank you very much, sir.
Yeah.
Congratulations.
Thank you.
For a very good quarter. Thank you, sir.
Thank you. Thank you.
Thank you, sir. Next question comes from Manuj Mathew, an individual investor. Please go ahead.
Hello. Congratulations, Mark and Jitendra. My first problem was I couldn't connect to you because I had a problem with the line. In fact, this con call was the worst ever con call by DAM, you know, the people who coordinated the con call. Okay?
Yeah.
My first question is your buyback over?
No. The buyback is still going on. We have completed about 50% plus of the buyback.
I know. There's been no buyback for some time. I mean, that's why I was asking whether it's over.
No, it's not yet over.
Okay. Question number two. As you had said earlier, from your present product portfolio, you'll be doing INR 2,000 crore. Okay, but with Teva coming in, would you be doubling this INR 2,000 crore?
Obviously Teva.
From-
I would like to say, that's a very good question actually. Teva basically, we have to work on expanding the capacity of what we're acquiring.
Right.
We have projected a spend of nearly INR 200 crore into this project.
Okay.
which includes the acquisition cost and the CapEx.
Okay.
I do believe that once we achieve that objective, definitely Teva would basically be doubling our present capacity if not more of what we presently have in our present plan. With a new capacity of that magnitude and that volume, it will definitely give tremendous potential for growth. That's where we are. You know, you have to invest today to see returns tomorrow. That's why we do believe that with what Teva basically opens up, the potential it opens up, we can definitely increase our revenue and reach the next milestone, maybe INR 3,000 crores, you know.
The next question is, this turnover of INR 452 crore, has it come because of the Forex benefit or has it come with driven volumes?
Sorry, I didn't get that. Can you repeat?
the INR 452 crore you did this quarter, was it because of the-
Yes.
Forex, you know, depreciation, the rupee depreciation, or was it because of the driven volumes?
It's driven by volumes, prima facie. We have grown in terms of revenue in all the continents and all the geographies that we are doing.
The next question, Teva, as from April first will belong to Marksans. As of today's capacity, what volume do you expect from Teva? As of today's Teva capacity from April.
Well, from April, the Teva capacity prima facie is not very large, so it's probably, you know, 1.5 billion tablets.
Okay.
INR 2 billion maximum.
Okay. I mean, it's per quarter. Can you add INR 100 crores?
No, no. INR 100 crores per quarter is not possible. I mean, I'm talking of, you know, 1 billion tablets, 1.5 billion tablets for the whole year.
Okay.
That's not a very large volume, but we are gonna increase it and we are working on CapEx aggressively out there. Obviously we will achieve, you know, maybe INR 200 crores. Once we hit our objectives of increasing capacity, we'll probably achieve maybe INR 200 crores per quarter, if not more.
Okay, thank you.
Right now the capacity is low, so we have to increase our capacity on that.
Okay.
On Teva.
Thank you, and congratulations once again.
Thank you.
Thank you, sir. Ladies and gentlemen, if you have a question, please press star and one on your telephone keypad. I repeat, if you have a question, please press star and one on your telephone keypad. We are having a follow-up question from Madhav from Capital Private Limited. Please go ahead.
Thanks for the opportunity, sir.
Thank you.
What is the current status of input prices like freight cost and the input item prices? Is there any reduction are we seeing in the current quarter and the future also, sir?
The freight cost has come down definitely from what it was historically high, and that is helping our bottom line, which was actually eroding a lot of our bottom line. I do see some better profitability in the coming quarters. The input cost is slightly, I would not say slightly, improved. I mean, it has cooled down from an upward trend. We are seeing it in a downward trend, but it is at a very slow pace. You know, the global market scenarios are so volatile with the war still raging in Russia and Ukraine.
You know, it's no one has a crystal ball to see as to what impact it will have. Obviously China has got its own challenges of lockdown. Again, we are very cautious in terms of giving any forward-looking statement. As on today, it is looking positive. It is improving to that level.
Okay. Do we have any regulatory audits in the last con call to today, sir?
I didn't get you. Could you repeat that?
Any regulatory audits in all the three sites between last three to four months, do we have? USFDA or-
No. Yeah, but
I mean.
Obviously, yeah, we have not. I mean, in U.K. we have had audits, U.K. audits. Our U.K. plants have been audited. Out in India, you know, audits can happen anytime, so it does not matter whether you've been audited or not audited, they can come anytime.
Was there any audit at the U.S. facility, sir?
I didn't get you. Could you repeat that?
No, we have one facility in U.S. as well, right?
Yeah. That gets audited very frequently, obviously, once a year, twice a year. In U.S. it's different. You know, they come in any time because it's a local audit.
There are no clinical observation. We are doing both of, in all the audits, right? As of now, right?
Again, U.S. audits can happen anytime. I would, you know, you have to take note of that. Yes, as of today, we have our GMP status. We are working on it. There are no observations. We obviously work towards a brighter future tomorrow.
Last was that I think, so we are well prepared now. Actually we are launching our, we are actually now accelerating our momentum into the regular markets. 34 filings means there's a very good number for the size of Marksans. I think the leadership structures and the facilities and the filings, I think, necessary care will be taken and, I think the proper things are established in terms of, getting this rightly done. Am I right, sir?
Thank you.
Yes.
Yeah. Thank you. I mean, I didn't get most of that, but I'm. Yeah, I mean, we are moving in the right direction because, as a company, we are evolving and, we've reached a stage where visibility and growth is much more stronger and better out here.
Only one thing I'm crossing fingers because when actually we are accelerating this filing phase, so definitely there will be certain regulatory issues may crop up. What I'm saying is that I think the leadership structures are properly placed in to see that those things are going to be going smooth functioning. That is what I'm expecting from your team, sir.
Well, we are working hard to basically achieve all objectives.
Yeah. Thank you very much, sir.
Thank you, sir. Next question comes from Utsav from DAM Capital. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity. I wanted to know about your plans in the Australia and ROW markets. That's my first question.
The Australian market, obviously, we had a bit of a challenge in terms of our pricing pressure, in terms of profitability part of it, for the first time actually because of freight and because of the disruptions, supply chain disruptions. We do believe that the Australian market will grow. We are seeing growth. We have evolved over the many years. It's a smaller market. Population is small, so obviously, in terms of the absolute numbers, it'll always remain small, but I do see a growth happening there. The ROW, I mean, the other emerging markets, I think we are doing fairly well. We do see us doubling our revenue in the next couple of years. It is getting strong.
We are expanding into different geographies, and our product portfolio is getting stronger. We do see that adding value both in the top line as well as the bottom line. I'm quite optimistic where that is concerned.
Okay. Thank you for that, sir. My next question was around, you know, the distributor model in these markets. Where do you have a front-end presence? Do you have a front-end presence in any of these markets? Yeah, that's what I wanted to know.
Obviously, Australia, we do have a front-end market. The rest of our emerging markets, presently we do distribute our market and marketing, you know, collaboration with front ends.
Lastly, sir, on your M&A plan, you spoke about some M&A transactions in the call. Can you explain what kind of areas would you be looking for, what markets and, you know, if you'd be looking at some vertical integration in other markets through M&A? If you could add some color on that.
Well, presently in M&As, we are exploring, obviously, the Pan-European market. Now there will be obviously front end market authorizations. Pretty much what we have in U.K., we'll be expanding into other geographies of Europe. That said and done, that is right now on the horizon where we are pursuing. We are actively in discussions. We are talking to various companies. That's a geography of interest for us right now. Besides that, we don't have anything on our plate, any other geographies on our plate to discuss. Again, you know, M&As are some things which sometimes opportunities come and then we have to explore it at that particular time.
Sir, what would be the potential size of a deal? I mean, what's the potential target size?
It's difficult to say because we don't have a target right now in hand, so it's difficult to actually put a potential target. Again, we are looking for a platform to launch our products. We are looking for a platform where we can have distribution channels and where we can add value.
Okay. Thanks for answering my questions. Thanks.
Thank you, sir. Ladies and gentlemen, if you have a question, please press star and one on your telephone keypad. I repeat, if you have a question, please press star and one on your telephone keypad. We're having a follow-up question from Prerit Choudhary from Green Portfolio. Please go ahead.
A couple of questions back, you said that the new Teva plant, you will be producing 1.5 billion units per annum. But if I look at the document, the existing capacity of that plant is around 6 billion, and the total capacity is 8 billion. Would it require to ramp up that capacity or, I mean, how should I look at it?
Basically, you know, we are talking of 8 billion with the expanded expansion capacity that we are working on. Presently their capacity volumes are low, and it will take us a good six to eight months after we get into the plant to actually achieve part of that objective. That's why we have given a two-year window period for us to achieve that objective of touching 8 billion capacity.
Okay. Just a follow-up question on the API side. How we will be funding those projects?
It will be through internal accruals only.
Okay. Thank you. That's it from my side.
Thank you.
Thank you, sir. We are having a follow-up question from Nitin Agarwal from DAM Capital. Please go ahead.
Thanks. Mayur, just quickly on the Teva portfolio you've been talking about, for filling up the entire 8 billion tablet capacity, I mean, would you require a significant share of contribution from the newer set of products or the current set of products can take you to a significant distance there also?
Obviously, since our geographies and our product portfolios are increasing, our market share is increasing, you know, we do need additional capacity. I do believe this INR 8 billion will be more from an additional capacity requirement point of view. That is pretty much double than what we are presently doing with our present facility in Goa. That will obviously generate that equivalent revenue spot. That's where we are very optimistic after we cross the INR 2,000 crore. That's where if we produce more, we can sell more and definitely that will be a growth for the next milestone.
In your assessment, by when do you start reach an optimal capacity utilization of the Teva asset?
You're talking of our present plant?
No, the Teva plant. When will you hit the optimal capacity utilization of that asset, after you acquire it? I mean, how many years will it take you to utilize it optimally?
It will be happening parallelly. Today we do believe whatever capacity we do activate or do start or whatever, presently they have a very small capacity, so that's where we are taking. Obviously, 8 billion to scale up from 1.5- 8 billion is not gonna happen overnight. As and when we scale up, let's say the first objective will be to get it up to 4 billion, and then we'll do 8 billion. As, by the time we touch 4 billion, we'll probably be sold out in terms of the capacity of 4 billion, and then we'll be moving towards 8 billion.
I do believe that we won't keep any spare capacity lying around.
Lastly, you know, on an overall business mix, what will be at a global level, share of between OTC and prescription on an overall global level? How do you see this going forward?
I think OTC is about 65%, RX is about 35%. Historically, it was 50-50, with OTC now taking a little larger share of 65-35. Moving forward, I do believe it will remain that way, give or take a percentage point, you know, here and there, but I do believe it will probably remain there, will remain in the same mix, maybe 65-35.
Thank you.
Thank you, sir. Ladies and gentlemen, if you have a question, please press star and one on your telephone keypad. I repeat, if you have a question, please press star and one on your telephone keypad. We are having a follow-up question from Madhav G. from Shastri Capital Private Limited. Please go ahead.
Thanks for the follow-up question, sir. In the OTC, we are having there 65%. No, sir. From the 65%, what is our own label share?
When you mean own label, are you talking of our controlled brand, I mean, our controlled label, like, you know, Bell's, or you're talking of private label?
No, I'm talking about the FMCG, the two e-commerce platform. I'm talking about that.
No, no.
E-commerce.
You know, e-commerce platform is relatively very small because we've just launched it, not even a year. It is growing. Obviously, in terms of the overall business, it is relatively very small, maybe a single digit.
Okay. In your presentation, I saw that, no, actually there is a store label and own label. What is the difference between store label and own label, sir?
Well, store label is what we supply to retail outlets. Own label is what we, like we said, we do the e-commerce and a few of the retail outlets, we promote our own brands.
The presentation was showing, the pie chart is showing somewhere around 20%-25%, I think the pie chart was showing. The reason I'm asking this question, sir.
Um-
The presentation that was uploaded to the BSE website that was showing that the own label somewhere close to 20% like that. The pie chart.
Yeah. I mean, in U.K., so own labels, we also do RX in our own labels, not only OTC. All our RX is basically in own labels.
Oh, gotcha. Okay, got it.
Yeah. Okay.
Okay, sir. Thank you.
Thank you, sir. Ladies and gentlemen, if you have a question, please press star and one on your telephone keypad.
Okay, I think there are no participants. You can close the call.
Thank you, sir. Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using Chorus Call conference call service. You may disconnect your lines now. Thank you, and have a pleasant evening.
Thank you. Bye-bye.
Thank you.