Alkem Laboratories Limited (ALKEM) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Pharma consultant and ex-CEO of Alkem Conference Call with Mr. Prabhat Agrawal hosted by Dolat Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Sapna Jhawar. Thank you, and over to you, ma'am.

Thank you, Aisha. Good afternoon, and welcome all to this call with Mr. Prabhat Agrawal. Now all of you are quite aware that Mr. Prabhat Agrawal who has been the co-founder and CEO of Entero Healthcare Solutions, focusing on improving the supply chain in the pharma industry. Prior to starting Entero, he was the Chief Executive Officer of Alkem Laboratories. He worked in leadership roles at various industries being a financial services, et cetera. The topic for today's discussion will be the current growth prospects in the domestic pharma, the supply chain and distribution related issues in the COVID-19 and the way forward. I hand over the call to you, sir. Please take it forward with your opening remarks.

Mr. Agrawal, go ahead, please.

So good afternoon, everyone. Very happy to be here to share some of my perspectives about what's happening in the industry right now. As we all know, a couple of years back, I was leading Alkem Laboratories. And after that, I have been leading Entero Healthcare, which is a supply chain company. We are one of the largest pharmaceutical distributor in the country right now with operations in 25 cities, and representing more than 300 pharma companies in our portfolio. As everyone knows that second half -- since second half of March, after the lockdown was announced and the activity got reduced significantly, there has been a lot of disruptions on the supply chain side, specifically. Even though pharma, being in the essential services list, was relatively less impacted compared to various other industries, but nonetheless, some of the common services like transportation and all that was impacted and that led to disruptions in pharma as well. As everyone knows that pharma industry principally comprises of 2 consumers. One is the hospital segment, hospital and nursing home segment and then there is a trade segment, right? If I look at the hospital side, the demand has drastically fallen. I would see, even in our network, the demand has fallen, I would say as low as 50% of what it used to be before because most of the hospitals are not operating, their OPD centers or not operating. There is no burn, trauma, accident, elective surgery cases. The occupancy rates in hospitals are as low as 30%, 35%, right, so that has certainly impacted the demand big time. I believe every company will be struggling to meet their targets based on this level of demand. On the trade side, in the beginning, we saw a little bit of panic buying from patients and consumers in terms of stocking up their next 1 or 2 months of requirements, specifically from the chronic side, and to an extent also from the few patients who have a regular history of acidity, diarrhea and other issues. So they also stocked a little bit. But then towards the second half of April, we have seen that, that panic buying is over, and now the demand has considerably reduced, I would say, to an extent of almost 30% or more. So whatever is the sales of pharma company primary sales, but the secondary sales have gone significantly down in the second half of April, which is continuing. Unless this lockdown is relaxed and hospitals are being allowed to open, the doctors are being allowed to practice and open their clinic and consultation, the patient flow will not increase. So if the situation continues then the May could be equally bad. So everything rests on how -- there are not much of new prescription generation happening today. There is not much a doctor and patient meeting happening. So everything is stands still. And what's selling today is basically the chronic old prescriptions, fulfillment of chronic patients. I'm hoping things would get better probably in the second half of May onwards, provided all these number of cases and all go down. And the government relaxes the lockdown, people go on to the streets and start buying and shopping and all that. And then we expect the situation to get better. I believe once the things are normalized, the recovery in pharma would be pretty fast as compared to other sectors, right? Because a lot of patients and demand is there. Once everything is opened, and people would go and consult their doctors for issues that they have not been able to consult today in this lockdown. But happy to share more based on your specific queries, and we can discuss more. I would let people ask questions and I answer based on whatever I know today.

[Operator Instructions] The first question is from the line of Aditya Khemka from DSP Mutual Funds.

Mr. Prabhat, first question for you. When it comes to logistics, right, so my understanding was that since the lockdown was affected in late March, while some of the trucks, et cetera, were not sort of able to carry the goods, but some companies are telling us that some ports and flights were selectively working, and these companies were able to export their product to the export markets. How would you comment on that?

I don't comment much on the export market because today, we are not dealing in export market. But when the lockdown started on 23rd, 24th of March, in the beginning, there were a lot of issues in terms of goods moving from the CFAs to stockists, okay? And there were a lot of delays and disruptions happening there. But now in the last 1 week, I have seen that the things have normalized, especially for within the city supplies, right? But suppose a stockist is in the remote corner, like Davangere, Gulbarga, and all those places, then, of course -- or Vizag, where the company's CFA operations is not there and the stockist is like 500 kilometers away, there, there have significant delays that's happening and stock issues are happening. But in the major cities, I don't see much of issues right now. Even though there are a little bit of delays of what you used to receive in 1 or 2 days, now it's taking 4 or 5 days, but that's it. It's not that there is a massive shortage of stocks or anything.

Understood. And could you also comment on some of these propaganda companies or regionally small companies that we generally talk about in terms of doing heavy promotions and high-selling prescriptions, basically. In the current environment, are you seeing them sort of die a natural death or are you seeing them surviving this lockdown, this situation, and they could come back in full form after the lockdown is lifted?

So what we see now in this lockdown period, the influence of retailer has gone down -- gone up significantly, okay? Because there are not much of restrictions. So established brands are taking share from these smaller ones because whatever is available is getting sold. So if you have fever, for example, or anything similar or acidity or something like that, then the established brands, which retailer always stocks, because it's a very strong moving demand for those products. Though he is selling, now he is not caring for what is written in the prescription. What is available is getting sold.

Understood. So would that also mean that trade generics being -- for our products, retailers would generally enjoy a higher margin? So trade generics would be doing better in the current environment?

Yes, it should be, because trade -- of course, there's a lot of incentive for the retailer to post trade generic. And now we have an opportunity to do that because everyone knows that the stocks are not available and people are not going to wait to -- people are not going to go to 10 different shops to get their own preferred brand. So it's a much better opportunity for the retailer to post the trade generic.

Got it. One last question from my side. I noticed that some of these prescription audit data are beginning to reflect what you were saying in terms of higher inventories with the channel and lower demand in the acute category primarily because patient isn't getting diagnosed. But to my mind, even chronic could have suffered somewhat because one is the base of chronic patients who would do repeat purchase of the product they generally take, but other would be a bunch of patients who aren't aware that they are a chronic patient, and in the normal course of life, they would have gotten diagnosed of a chronic disease and they would have started taking medication. And now those patients will not get that diagnosis because they are not stepping out. So is the chronic demand lesser impacted or not impacted at all in the current scenario?

No, I would say lesser impacted. What I meant chronic, the old prescription, where patient is already put on a drug or is already on a therapy, he's getting that fulfilled, right? But the new patients are not getting generated because all the diagnostic labs, everything is not working, right? So you can't get a blood test done, you can't get simple things done, you're not able to meet the doctor and all the OPDs of the hospitals where patients get generated are not happening. So new patient generation is not happening. So it's the old one, who is already on a drug, they -- of course, that sales is continuing.

Understood. Sorry, Prabhat, one more. So you cater to both the retail channel and the hospital channel from the logistic firm. And we understand that hospitals are under a lot of stress because they're working at 10%, 20% capacity, ending with the emergency ward, et cetera. So are you seeing any payment delays from the hospital side to your side?

Yes, yes, yes. Absolutely. Most of the hospitals are -- people who don't need the stock definitely are not paying. People who need the stock, you can negotiate something with them to pay today, tomorrow, 1 week later, right? So see, the problem is the hospital want to pay only when they need something. If they don't need anything, they won't even pay you, right? So what -- the way it used to work that, because the rotation was happening, they need new stocks, so they had to pay old [Foreign Language]. So now the new supply [Foreign Language]. So while you write an email to them for payment, they will not respond or they will say that [Foreign Language] or this and that...

And what you're saying, Prabhat, applies for both the larger corporate chains like Apollo, Fortis, et cetera or does this apply more to the stand-alone nursing homes and hospitals...

See, everyone, like we are supplying to more than 1,000 hospitals in India, okay? Now the bigger ones, like Fortis and all that, okay, delay is there, but your payment is safe. In the smaller ones, now stoppage like that we have to be more careful because we don't know who's going to survive and who's not going to survive, right?

Yes, that was my question, actually. So would these smaller nursing homes not survive that, because there -- I mean the occupancy would be zero today, right?

I don't know, it's -- business model of anyone could not be -- cannot be so fragile that 2 months of no business can kill the business, right? So I mean, of course, you would incur some losses in the 2-month period, but then it should not be your business model because demand will be there. Once things open, there will be patient flow.

[Operator Instructions] The next question is from the line of Sapna Jhawar.

Prabhat, taking the question from the previous participant ahead, with a lower number of prescriptions and deferment of particularly noncritical surgeries or treatments, so as to say, which will impact the volume growth also, right, I mean, going ahead, so once things normalize, even then the progress should be gradual in nature? Or will it be like a complete U-shape recovery that we will see? Your thoughts on this?

Yes. So as I said, at least 30% of the demand for the month of March -- sorry, April would be shaved off, right? And probably similar expecting in April as well. Now your question is, if once we -- once everything opens up, how would be the recoveries? I believe, it depends on if the -- if we get back to normal as we were before as we were in the month of January or February, the recovery would be pretty fast. Only if you have extended lockdowns or intermittent lockdowns, then recovery won't be that fast. It all depends on -- because there's no issue in demand as such. It's mainly that where all the places, the demand gets generated is shut down. It's not that people are not eating food, but all the restaurants are shut down. So once if everything opens back, gets back to normal, people would go there and get their demands satisfied.

Sure. So I [indiscernible] all the thought process that chronic, the demand is particularly present on recurring and mutual. So that will continue and be in the growth mode. But if this situation extends more, up to June or probably or a little forward and go ahead in [indiscernible], we will also lose out a large part of seasonality in India. So that would impact the acute players also in the larger places. So how much would that actually put pressure on the cost, per se, and the operational challenges for these players?

So the big acute season would be June, July, August, September type, right, where the rainy season and the infections that happens in around that. Okay? So I am expecting that maybe by end of May or beginning of June, we should be out of this lockdown and all that, okay? It depends on how long this lockdown continues. Secondly, you asked about the cost and all that, right? So I mean, every company is trying to see how it can save cost, including us. So people are spending lesser on even [ doctor imports ] and things like that. Because now field force is not working in the field, so they are entitled for the allowances. So the bigger companies, I think, would be able to get over it without much of a difficulty, I believe. Maybe the smaller companies, who are -- who were -- whose cash flows were weak or even making losses and all that. And they don't have adequate funding and all that or not having bank clients and things like that. They would definitely be impacted much more than a large established company.

[Operator Instructions] The next question is from the line of [indiscernible] from [ Kodak Continentals ].

Sir, you indicated that the larger companies might get the opportunity to consolidate their positions. Also our [ ENDO 3 ], it seems that -- or the MRs from the smaller companies are not going to get an opportunity to meet the doctors or the hospitals, whereas they might still selectively meet the larger companies. In such a situation, do you see the smaller companies taking recourse to trade generics in order to survive? And obviously, because as you said, the focus and the selling is now getting more important, this will see a rise in trade generics as a proportion of total sales?

Rise in trade generics, as a proportion of total, can go up, but I'm not sure -- I don't believe that the smaller companies that can be getting in to trade generics. The trade generics is already dominated by few large guys, you see. And it's driven mainly by the trade channel, by the stockist mainly, right? And they are already tied to a few big companies, and they are not going to let the pressure go down. So space for a new one to get into that, I don't see that a very natural outcome of this long-term or something.

Okay. So clearly, the larger companies will consolidate, but you see this consolidation sort of more of a temporary affair or do you see this gain in market share by the larger companies can remain with them as we go forward out of the lockdown?

The ability to hold on to that market share gain, I mean, it depends on -- also the smaller companies, some of them might just fall off. But the ones that survived, are still going to come back and fight for their shares when things are normalized, you see. They might find it more difficult, but they will definitely be -- probably be more aggressive in terms of their marketing spend and all those kind of things. But the thing is any disruption or any such kind of a difficult situation always leads to a consolidation at -- for bigger players, including even for distribution. And I would say that in our case also, we have increased our market share because for a retailer, it's not normal times. You just can't go around and shop for -- in 10 different distributors for his upgrades. He has time to go out only once, so he will go to somebody who has everything than trying to shop around at this point in time.

Okay. And from the perspective of e-pharmacy versus the retailer, do you see this, again, as a situation where e-pharmacies can break in market share and keep it going at a faster pace from here on?

See, there are lots of many more people who are trying online than what they were doing before, okay? So the demand level or order level at online has definitely increased in this period. The people who were not even trying online, they are trying now. But the problem with online pharmacy is their delivery models because they are collecting orders for people from all pin codes in India, right? And they are not able to deliver. So their delivery rate has significantly dropped. And the delivery rate determines their sales. But their order levels have gone up. So mainly because most of the delivery were happening through courier service, and the courier is not working properly today. So their delivery model is not functioning.

Sir, finally, one question, which is more broad-based and not to do with the COVID situation right now. We have had to see developments in the sector. One is the proposal to cap the trade margins. Second is the Jan Aushadhi stores. Although, their unit economics doesn't seem very viable. Third, they have had the trade generics. And fourth, we might be looking at a situation where Ayushman Bharat becomes a little more successful from where it is right now when the insurance penetration increases. So within these trends, how do you see this impacting the industry? And within the industry, is there a way to understand who categorically stands to gain out of it and who stands to normally lose out a bit?

So the first point that you said was on the margin cap, okay? This topic has been going on for years now, okay? The same way, the genericization of brands has been the top and it's been going on for years, right? The problem is that the government doesn't clarify everything, right? So it's like, they will just see this year hanging on, but will not decide which way it is going to go, right? So people are not sure if margin cap is going to come, not going to come, you're not able to allocate capital, you're able to decide whether I should get into trade generic or get out of trade generic, right? So in the same way like on online pharmacy, they started with a draft policy, but that policy never sees the light of the day. So all the investors are in 2 minds, whether to continue or not to continue, what regulatory implication it will have and all that. So that policy certainty is not there, right? And that's -- in the current scenario when the economy has not been doing so well, and now it's going to go even low with this COVID scenario, it will be difficult for government to take decisions which are antitrade. And like trade generics, if you try to bring a margin cap, that's going to impact a lot of people in the country, a lot of small-time traders, right? So it's not -- it's going to be very, very unpopular. And that's why, at this point in time, government should even think on those lines. Second is you said about Jan Aushadhi stores, right? Okay. You said it right, you said that the unit economics of Jan Aushadhi -- even with the government venture, it's okay, you can do and make losses and sell. But we won't be able to get private players involved in this. A lot of private players also started, for example, Generico, probably you would have heard about it; DavaIndia; new players like StayHappi and all that, but then even [indiscernible] Generico and all that. The sales, at their own counter at 70% is still [ ethical ] and only 30% is [indiscernible]. If you have a mix, you can survive. But if you're 100% on trade generics or 100% -- sorry, not trade generics, 100% on Jan Aushadhi, the unit economics is normal because your sales value will be so low and your volume will -- won't be able to compensate for that. That model itself is a little bit -- I mean the business financial model itself is a -- will be a question mark. The third one, you mentioned about...

Ayushman Bharat and insurance.

Yes, yes. So again, you know the challenges of getting into Ayushman Bharat, right? Of course, there is a good [indiscernible] setting, but at the end of the day, if you want to bring private players into this, then you will have to take care of their financial returns and all that, right? And as all of you know, right, hospital, the return on investment is in single digits today, okay? So they're not even earning the cost of capital in spite of huge investment and with an occupancy rate only 70%, 80%. So if you -- but then, most of the people face a dilemma. Should I -- I've already had a fixed cost, should I just keep my beds vacant? Or do I try to sell my vacant beds by exiting Ayushman positions and all that? I mean everyone is asking about improving the package rates that Ayushman has declared. But unless -- and then it will depend more on the public sector hospitals than on the private sector hospitals.

And from the quality perspective, do you see the regulator taking a more quality-conscious stand and also maybe eliminating the confusion in terms of the discretionary powers of the state, FTFs, in terms of giving approvals to branded generics, and on the other hand, bringing in some more strictness around GMPs practices, which might create a secular trend of consolidation or gain of market share for larger companies or quality conscious companies?

There was the Draft Pharma Policy that was published a few years back, right? But nothing much happened on that. There were -- a lot of seminars and conferences were held around that. But in action, nothing much happened. So they will talk about the bioequivalence has to be proven for every region it would be launched, like U.S., but nothing happened there. Even in terms of quality consciousness, there were a lot of debates and inspections that were supposed to happen, hasn't happened much. So, I don't know, I mean, I have seen some -- out of the blue, something comes up, it gets talked about for a few months, and then it dies down again, right? There were talks about the CPMP. At that time, everyone consulted with court and this and that, how to comply. And then after a few months, it settled down, right? So I don't know, it's government side. I think the priorities for this government is totally different today. So I'm not saying it is going to remain the same for next 1 year. They have to think about reviving the economy and all that. I don't know if that priority, where will all these things fit in.

So in a year's time, if one were to sort of break the market acute and chronic, what would be the differential in growth versus the normal trajectory of growth? Acute, normal trajectory would be, I think, 7%, 8%, chronic could 11%, 12% sort of growth. But given the current pressures, you think this could be substantially -- this year could be substantially different?

This year will be lower, than -- growth should be low now because we have lost almost more than a month, okay? So in a month, if we take out like some 1st of April to, let's assume, 15th of May, and assume that demand in 45-day period has dropped by 30% to 40%, okay? And you factor that over the full year, you will see that your growth rate will taper down by at least 3%, 4%. You can do the maths, but whatever you have lost in these 45 days, you won't regain back in the rest of the year. So that portion of consumption is gone forever.

[Operator Instructions] The next question is from the line of Sudarshan Padmanabhan from Sundaram Mutual Fund.

Sir, my question is in this environment, [indiscernible] are not allowed or they do not interact with the doctors. And given that if you're looking at the entire market, I mean it's fairly fragmented, do you think, number one, at the current juncture that MNCs and larger brands will have more mind share when it comes to people buying drugs? And number two, as the COVID situation comes off, as compared to even the smaller companies if you look at their marketing spend, for a company like Sun or Cipla, would be substantially higher. Therefore, their ability to push and gain that additional demand for growth would be there. So from here to, say, the next 6 months or a year, which are the companies in your opinion or is it likely to say that larger companies will have a significantly better step forward as compared to smaller companies leading to smaller companies moving away?

Yes, I believe so. The larger companies would gain share. But then you look at the top 10 companies in India has already gained 40% market share, right? And other -- the next 10 would be another 20%. So top 20 companies in India would have already 60% market share. So it can't be significant gain in share, right? But even a marginal gain in share would -- can recover for them the last phase that they had in this 30- to 40-day period.

Sure. But between MNCs and the large generics, I mean, what is the case over there? Because you've seen this recover and MNCs dominate the market share and then the last 10 years with the Indian companies that have really taken up the market share. And I think of late, I'm seeing some MNC companies like AstraZeneca launching some interesting products back. So I mean, do we see the market share still continue to be dominated by the domestic? Or do you think that even the MNCs now will become far more aggressive and you see a moto over there?

I don't think so. I mean this COVID lockdown has nothing to do with the share between domestic generics and MNCs. I don't see that any big change in that -- the related shares being altered because of this.

No, but even as far the COVID, do you think that there is any chances because we see a lot of MNCs becoming a lot more aggressive than what they were before?

So MNCs, their growth driver is more related to launch of new innovative products, okay? That's where their space is. If the product has already been genericized, then, of course, the street -- I mean the Indian generic player has a better chance of capturing that demand because of their larger field force, their more aggressive marketing and all that and their penetration in these and that. I mean the MNC's more growth driver is how -- whether they can launch new innovative products and there, there is no competition -- less competition.

And once we come back from this whole issue, do you think that government across the board, including India, I mean, one is we have been seeing a scenario where the government was very aggressive in terms of coming after pharma companies going ahead with pricing controls quite aggressively. And second, given from the awareness part, I mean, given that there is so much of flash on the COVID side, do you think that the demands -- if you're looking at the IPM, growth can itself go up by, say, a percentage or 2 because of the awareness as well as government noninterference?

Yes. So I believe now the -- I mean the government should -- would be busy for the next 1 or 2 years in reviving demand and quick starting the economy, right? In that scenario, going aggressively after pharma companies in terms of price control and all that is not going to help in any way, okay? The Indians drugs are pretty much affordable. So we should not get confused between affordability and accessibility, right? It's like -- the issue has been more around accessibility rather than affordability. So I mean, going after, at some point in time, when things are very normal, you could decide about fixing with a lot of mixed priority items, you have the luxury to do that. But in today's scenario, your -- the government's main job would be to save job losses. You saw that in a lot of other sectors, which is going to suffer for a longer term; travel, tourism, real estate and all those things, NPAs. That would attract more attention than, I believe, price control and all these things. Secondly, probably there will be lots more thinking about self-sustenance and on those lines because this lockdown and global supply chain scenario has taught all the countries the importance of being self-sustained and all that. So I believe, you should think, and the government should think, more about how we can create more in-house supply chain rather than depending on China or any other country, even in simple items like medical devices -- low-end medical devices, like IR thermometers, protective equipment and things like that. So that should be the learning from this situation, and we should focus on ensuring that we invest and prepare ourselves better in case of [ consumer equalities ] reoccur in the future.

And sir, on the government pushing the backward integration program, and we've recently seen this notification with the government talking about making this API park and probably spending about INR 3,000-odd crores in [ ETP ] and common infrastructure, and also some kind of a pushover in terms of -- in whatever way it is to incentivize in the company. In your opinion, I mean, one of the scenes, the parts of China that's readily taking market share out of India, that these incentives are good enough, companies will participate, we will have an ecosystem of backward integration at least whatever we can, taking into account of the benefit that is given? Or do you think that the ecosystem is just not there, no matter what the government pushes Indian companies for backward integration in API programs?

So as these things go -- are very contradictory like having an aggressive price control and at the same time, trying to build your own backward integration, right? Because as and when if you're not able to pass the cost to the consumer, why would you invest thousands of crores in something like that, okay? Price control was, I think, one of the culprits for a lot of things moving out. So you would try to find different source of material and because you just -- I mean, look at today scenario, a lot of raw material prices have gone up, erythromycin prices have gone, paracetamol prices have gone up, but you can't increase the prices because there's a price [indiscernible] on each side. So I think even as to invite massive investment in API and all that capacity to India, they have to think through their entire chain and till how this formulation is priced to the consumer. Then it will make sense, not only just giving incentive or free land or free electricity.

The next question is from the line of [ Vrijesh Kasera ] from Mirae Asset Mutual Fund.

Just one question. There is -- is it -- as you mentioned, there will be lots of pressure on the near-term because of the COVID issue in terms of revenues and sales, what are the levers that the companies would have to actually minimize the impact on the profitability in the near term? Yes, so that was one of the questions, I'll come up with the second question after you answer this.

So now, companies will focus more on cutting down the cost which is not adding to the value of the company, right? So just to take a simple example, most of the companies have been sitting around a lot of nonperforming headquarters in terms of where they have placed the field force, which is not giving the productivity. It's an opportunity that they can rationalize that, okay? There are a lot of imports and marketing spend and things like that, that's probably not adding a lot of value to your growth. So it's an opportunity for you to do that. You can focus on employee productivity in terms of your operations, plants. You can consolidate your supply chain. You were having 2 CFAs very close by, you can shut one of them. So every function presents an opportunity for the companies to look for savings.

Okay. And longer term, do you think there could be consolidation, both at the distributor and -- as well as -- because there will be lots of small distributors that could -- would have working capital kind of issues with all this lockdown-related stuff. So at the distributor end as well as the small and marginal -- the pharma companies might also wind up, which could actually open up these deals, there could be a few brand acquisitions that could come along the way in the near future?

Yes. On the first question regarding distributor, yes, the small guys might find it more difficult to operate because it all depends on how the funding and the liquidity moves in the next few months, okay? Because everyone is dependent on this liquidity to manage the business. Especially, the distribution business, most of the investment is in working capital. So unless lines gets renewed, and most of the working capital lines are annually renewed, so if at the time of renewals, you ask for so many new financial covenants and things like that and you're not increasing the limits and all that, then -- if you -- depending on bank's capital, then of course, you see that a lot of smaller distributors might find it difficult to opt. And that's what I am saying, even in a situation of stress, the bigger, more established guys with access to capital and infrastructure and the brand equity are more likely to gain there than to lose. Coming back to on brand acquisition opportunities. Of course, I'm sure, I won't be able to give any forecast on that, but then a lot of investing opportunities might come up.

[Operator Instructions] The next question is from the line of Sapna Jhawar.

Prabhat, in general, a thought that in case with all this scenario and a lot of focus on hygiene level maintenance, there is a -- is it now that we will see some kind of, say, shortfall, degrowth or slower rate of growth in the x-rays category because of the self-awareness of people?

Interesting question. Now people know what's the N95 mask is, what's the [indiscernible] mask is, what's the hand sanitizers, right? So I don't know if it's going to be similar as a fact during this COVID period or prolonged views will continue or not, difficult for me to forecast that. But if that happens, people are more self-aware, they take better control of their hygiene and all that, of course, that will lead to a reduction in infectious diseases, right?

Sure. Sir, I mean, look, will it be -- I mean, I'm assuming that a large part of the urban population might still stick to the current regime of maintaining higher margins, so how much do you think will this be an impact in terms of acute medication intake?

Sorry, can you repeat your question, Sapna?

Sir, the assumption is that a large part of the urban population might still continue with the regime of maintaining higher levels of hygiene even going ahead post the entire COVID situation is over. But -- and how much portion of acute category growth [indiscernible] do you think -- if I were to just divide it categorically between urban and rural areas, the offtake of acute products?

The breakup of acute sales between rural and urban, is that what you're asking?

Right. Sir, in case -- I'm just trying to understand the growth prospects of the acute products post [indiscernible] situation. So will it be that there is more urban consumption and hence we'll see a slowdown in the growth or not?

So difficult for me to forecast in a way that how the consumer adoption of these hygiene products will impact the infection and related -- and result in decrease in demand of the pharmaceutical products. I don't see that apart from the urban cities, the people behavior will change substantially, unless this lockdown becomes a very regular and normal phenomena. If things get back to as it were before February and all that, people have short memories, they will forget what happened during this time, and they get back to their usual ways, right? I don't see -- I mean, at this point in time, I don't see a significant impact coming from change in consumer behavior regarding usage of hygiene products.

[Operator Instructions] The next question is from the line of [ Aveek Mitra ] from [ Pavitra Advisors ].

My question is something related to the previous one. I think there will be 2 kinds of social changes we can expect. One is the voluntarily, in which people's behavior may change and other is regulatory, like, suppose the social distancing norms, which can continue for a longer time, how do you think that the pressure on the hospitals and the rush on OPDs and things like that will come down, possibly? And do you think that, that will affect the kind of generation of prescriptions and the sale of medicines?

Yes. So again, it all depends on how the government allows the relaxation or how it ends the lockdown, right? So it -- even if the lockdown is opened with a lot of restrictions, social distancing and things like that, afterwards, it will become more and more normal for doctor and the patients. It's like airline industry, you can allow the airlines to fly, but you won't allow the passengers to be filled. Then naturally, the number of passengers per plane will decrease by [ 30% ], right? So it's like that. If you -- the new patient -- this version is not going to go away, right? The disease version will stay, right? If you put a restriction or diagnosis of that disease, right, then the demand will not go down because for the safety to convert into sales of pharma company, the diagnosis has to be done.

As there are no further questions, I would now like to hand the conference over to Ms. Sapna Jhawar for closing comments.

Thank you all for participating in this conference call. We hope that there's been some light on how the domestic pharmaceutical industry will go forward from here on. Thank you so much. Thank you, sir.

Thank you. Thank you, everyone. Thanks a lot.

Thank you. On behalf of Dolat Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.