Biocon Limited (BIOCON) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Biocon Limited Q1 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this meeting is being recorded. I now hand the conference over to Mr. Prashant Nair, Head, Investor Relations, Biocon Limited. Thank you, and over to you, sir.

Thank you, Nirav, and good morning, everyone. Thank you for joining us today to discuss Biocon's first quarter results for financial year 2027. A press release and presentation related to the same have been sent to the exchanges and are uploaded on our website for your reference. Let me introduce the management team on this call. We are joined by Biocon Chairperson, Dr. Kiran Mazumdar-Shaw; Mr. Shreehas Tambe, CEO and Managing Director; Mr. Kedar Upadhye, CFO, along with other senior members of our management team. We will begin with opening remarks from Kiran, following which we will open the call for questions. Please note that this call is being recorded. And the recording will be made available on our website within a day, and the call transcript will be shared shortly thereafter. Before we begin, I want to remind everyone about the safe harbor related to today's call. Comments made during the call may be forward-looking in nature, and must be viewed in relation to the risks that our business faces that could cause our future results, performance or achievements to differ significantly from what is expressed or implied by such forward-looking statements. Now I would like to hand over the call to Kiran for her opening remarks. Over to you, Kiran.

Thank you, Prashant, and a very good morning to everyone. I want to start on a confident note by saying that Biocon is now operating from a position of significant strategic and financial strength. The successful integration of our Biosimilars and Generics businesses has strengthened our operating model, expanded our global reach and enhanced our ability to serve patients, customers and partners across markets. With the major integration and investment phase largely behind us, we are increasingly focused on translating our capabilities into accelerated growth. In addition to which, we are focusing on improved profitability, stronger cash generation and, of course, better returns on capital. Against this backdrop, let me begin with a perspective on the key geographies in which we operate and the opportunities we see across our businesses. North America is our largest and most strategically important market and continues to offer significant long-term opportunities across both Biosimilars and Generics. The policy dialogue is increasingly centered around affordability, patient access and healthcare sustainability, creating a favorable backdrop for high-quality, cost-effective therapies. We are particularly encouraged by recent legislative and regulatory initiatives aimed at simplifying biosimilar development and removing unnecessary barriers to adoption. As an active participant in these discussions through industry forums and advocacy efforts, we believe that these developments have the potential to further strengthen the long-term outlook for Biosimilars in the U.S. We continue to strengthen our position in the region through the successful commercialization of Bosaya and Aukelso, which is our biosimilar Denosumab, Yesafili, which is our biosimilar Aflibercept and generic Liraglutide in the U.S. These launches expand our presence across important and growing therapeutic segments, while further enhancing the breadth of our portfolio. At the same time, we continue to strengthen our regional supply network through a combination of our global manufacturing footprint, local manufacturing capabilities and strategic partnerships, enabling greater proximity to customers and enhancing supply resilience. Together with a favorable policy environment for Biosimilars, these developments reinforce our confidence in the long-term opportunities across the North American market. When it comes to Europe, this represents one of the world's most established markets for Biosimilars and Generics medicines, where healthcare systems increasingly rely on affordable therapies to improve patient access and support long-term sustainability. Following the integration of our product businesses, we now offer a combined portfolio of 11 Biosimilars and 8 Generics medicines. These span key therapeutic areas supported by tailored commercial strategies across both retail and tender channels. During the quarter, we launched our Denosumab biosimilar for bone health across multiple European markets and Abevmy, our Bevacizumab biosimilar, in the Czech Republic and Switzerland. We also expanded our commercial footprint through strategic partnerships in markets such as France, Portugal, Slovenia and Spain, further strengthening market access and positioning the business for future growth. Now coming to emerging markets. Emerging markets continue to represent an important growth opportunity for Biocon, driven by increasing healthcare access, rising adoption of biologics and the growing need for affordable therapies. Following the integration of our businesses, we now offer a broader portfolio supported by expanded commercial capabilities and regional partnerships. We are also strengthening regional supply networks through a combination of local partnerships, contract manufacturing arrangements and technology transfer initiatives, helping bring products closer to the end market while expanding patient access to high-quality medicines. During the quarter, we continued to build momentum through new product launches, regulatory approvals and key tender wins across Asia Pacific, as well as Africa and Latin America. Highlights included the launch of Yesafili, the first approved biosimilar Aflibercept in Malaysia, continued leadership of our bevacizumab franchise in Brazil and further expansion of market access through multiple product approvals and commercial partnerships across the region. Now coming to financial highlights. So against what I've just spoken about, let me now discuss the group's financial performance for the quarter. In Q1 FY '27, the group delivered 10% year-on-year growth in operating revenue. Within this, biopharmaceuticals grew 17% year-on-year with strong traction across Biosimilars and Generics. And service revenues declined 16% year-on-year due to continued impact of challenges faced the previous year. EBITDA was at INR 902 crores with a margin of 21%. Generics profitability improved meaningfully and helped to offset the impact of challenges faced by the services business. Interest costs declined 23% year-on-year and 8% quarter-on-quarter to INR 213 crores, following the actions taken to strengthen our balance sheet. Reported net profit for the quarter before exceptionals was INR 145 crores, representing a 245% year-on-year increase. As we have indicated in the past, our objective is not simply to grow revenues, but to translate growth into stronger earnings and shareholder value. We remain committed to improving free cash flow generation, further reducing leverage and driving sustained improvement in return ratios. I would now like to discuss our business performance in a segmented manner. Let me start with our Biosimilars business, which remains our core growth engine and is well positioned and highly differentiated for the next phase of growth supported by recent launches and expanded manufacturing capability. Biosimilars revenue for quarter 1 stood at INR 2,855 crores, representing a 16% year-on-year increase, driven by the North America market. EBITDA for the quarter stood at INR 728 crores, representing a growth of 10% year-on-year and this translates into an EBITDA margin of 25%. R&D investments for the quarter stood at 7% of revenues. Q1 performance was broadly in line with our expectations, and we expect momentum to build progressively through the year with meaningful acceleration in the second half of FY '27. We achieved a significant manufacturing milestone with EMA approval for the second drug product line at our Malaysia insulin facility. Supplies from this line have started and should pick up further from Q2 FY '27. And this will support the next phase of growth in our global insulin franchise where we find rising demand across the world. Coming to Generics. The Generics business delivered a strong quarter, combining healthy revenue growth with a marked improvement in profitability, reflecting the benefits of recent product launches, operating leverage and disciplined execution. Revenue stood at INR 760 crores, representing a 21% year-on-year growth. EBITDA for the quarter stood at INR 56 crores. EBITDA margin at 7% improved more than 250 basis points over FY '26, driven by higher volumes and operating leverage. The GLP-1 portfolio continues to be an important growth driver for the business with generic Liraglutide contributing to growth across multiple markets, including the U.S. The significant investments made over the last several years in peptides, fermentation and manufacturing capabilities have created a strong platform for future growth. As utilization levels improve and newer products continue to scale up, we remain focused on further strengthening profitability, generating stronger cash flows and enhancing returns on capital. Now moving to our Services business. Syngene's Q1 FY '27 performance was impacted by lower offtake from a key biologics client and a ForEx hedge loss, partly offset by cost optimization initiatives. Revenues were down 16% year-on-year to INR 736 crores and operating margin -- EBITDA margin was at 12% for the quarter. During the quarter, Syngene entered into a strategic collaboration with BRIC-THSTI, a premier institute under the development of Biotechnology Government of India to strengthen capabilities across translational research, clinical development and bioanalytical sciences. We believe that this partnership further enhances its ability to support first-in-human Phase I and patient-based clinical research programs. Syngene also continued to strengthen Syn.AI, its AI-enabled drug discovery platform, expanding virtual screening capabilities and advancing AI-driven molecule design to accelerate drug discovery and development. Its strong balance sheet continues to support targeted investments in infrastructure, AI, digital technology and emerging modalities. FY '27, we have clearly indicated, is a transition year for Syngene as it navigates the impact of reduced demand from the large biologics client. While revenues are expected to decline in the first half, performance should improve in the second half, resulting in a single-digit revenue degrowth in rupee terms for the full year and EBITDA margins back to mid-20s. With the new management team now in place, the focus is on restoring commercial momentum, strengthening execution, driving operational excellence and improving profitability. These actions are expected to position Syngene for a return to profitable and sustainable growth from FY '28. So to conclude, I would like to say that we have started FY '27 on a steady footing and remain confident in the outlook for the year. With a stronger foundation, multiple recent launches, expanded manufacturing capacity and a continued focus on profitability, cash generation and returns, we believe we are well positioned to deliver stronger performance as the year progresses. With that, I now open it up for your questions. Thank you.

[Operator Instructions] First question is from Sidharth Negandhi. Kindly announce the company and proceed with your question.

This is Sidharth from CWC. I had a few questions, first on the Generics business and then on the Biosimilars. The Generics business has seen some strong growth, as you mentioned with the Liraglutide launch. But could you give us some color on what the growth in the base business ex of Liraglutide is? And within that, if one looks at the Generics profitability ex of R&D, it is lower on a quarter-on-quarter basis. There is a 600 points lower R&D spend, but a 200 bps sort of improvement in profitability. So is that some competitive intensity playing out in your base business? How should one look at that? These were on the Generics business. And on the Biosimilars business, if you could share any updates on your formulary listings for the insulin in the U.S.? And given that, that wasn't the case, what are the products that are driving your North America growth, as you've mentioned? And if you could give us some color on the market share across products and what's the change in the market share?

I will ask my colleague, Shreehas and Kedar to respond to your question.

Thanks, Sidharth, for the question. And I think the important part is to respond to your question, if I miss something, then please do remind me about those. The Generics business has been exceptionally important for us to get back to profitability. So what's really underpinned that turnaround right now is really a product mix that we are focused on. We focused on getting cost out of the system. That's helped as well. And the operating leverage has started to play. We've talked about in previous earnings calls that you will see once we integrate the businesses that the operating synergies will start reflecting in the business, and that's what you're starting to see. We had said we won't quantify it until we have better visibility to it. As we get to the second half, we'll start quantifying it and letting you know, but you're starting to see that in the numbers already. The part related to R&D is also another significant piece, which has contributed to R&D, also the EBITDA that you see. That's another clear incentive to see that the R&D outlay is in line with what the business is right now slated to grow. So that it's not in line with its more than what we want to right now outlay in that business. So that's on the Generics side. On the Biosimilars side, there have been a couple of growth drivers that Kiran listed in her opening speech, which was about our Denosumab biosimilars, which we talked about. And most importantly, earlier this month, we announced that Aflibercept is a product we are launching in the ophthalmology space. It's launched now and available to patients in the United States. That gives us a very unique play before a large part of the other competition comes in. It's a big asset, and we're very bullish about how that is going to grow. You also did ask about the insulin play, and I would point you out to the fact that our insulin glargine market shares have been steadily growing. Over the last couple of quarters, we've always signaled that we've been very responsible in how we've brought in other insulin products into the U.S. Our market shares have grown for glargine over last quarter as well. And we've got active conversations going, which we will make public about our insulin aspart, which is branded Kirsty as we move from the closed door network that we currently supply to in the U.S. to the more commercial payers. I think I probably tried to cover all the questions you had asked, but in case I missed, do let me know.

And maybe Kedar can help understand the growth in the base business on Generics versus the growth that's coming from the new product launches that you've done, Liraglutide and a couple of others. But just also to understand, you mentioned about -- I understand that R&D is obviously a need-based spend, and that's clear. But just to get some color because if I look at quarter-on-quarter, the revenue is more or less similar, but you've seen a change in the margin, right? You've spent lesser on R&D by roughly about 6% in that business, but you've seen only a 2% improvement in EBITDA. And therefore, is that more due to competitive intensity? Or is the EBITDA margin lower due to any other factor?

Yes. Maybe I can add here, Sidharth. Actually, there is nothing particularly different to call out from a competitive intensity standpoint in Generics. As you know, the growth will always be dependent upon new launches. This quarter, actually, the contribution from Liraglutide is in single digits. So it's picking up, and not fully reflected in this quarter. And I think you should note the work that we have done on OpEx across all 3 companies from quarter 4 to quarter 1 and even year-on-year, you will see a significant drop in the operating expenses. So as part of integration, we have taken a hard look on all costs. And there is an effort to be more productive, more efficient, which will allow us to retain the EBITDA. So it's, I think, difficult to give you precise movement about new launches or existing business or R&D, et cetera, because there will be quarter-to-quarter fluctuation. But if you take 2 messages, the new launches are expected to scale up even in Generics in the subsequent quarters and the work on OpEx and the thinking on productivity remains very strong.

Sure. So single-digit growth in the base business plus new launches is how I'm reading it and then no increase in competitive intensity.

Next question is from the line of Neha Manpuria.

This is Neha from Bank of America. My first question, Kiran ma'am, in your opening remarks, you had mentioned, I think you mentioned this last quarter as well that with the improving momentum in the Biosimilars business, our focus is on profitable growth. So if I were to read that a little more specifically, should I assume margins for the biosimilar business to improve versus last year? Would that reflect with this focus on growth? And how should we think about exit revenue or when you say meaningful improvement in the second half, could you give us some color on what that meaningful improvement would be?

Yes. So I'll start with my comments and then ask Shreehas to add to it. But basically, when we talk about focusing on profitable growth, I think we would like to basically veer away from just focusing on market share, because I think a lot of the focus from the investor community is on market share. And if you're going to only double down on market share, there is a danger that it might lead to a erosion of margins and profitability. And we would, therefore, like to really, really calibrate our business in a way that we maximize the profitable growth and profitable businesses that we are seeing across our Biosimilars. And maybe Shreehas, you'd like to add too.

Yes. Thanks, Kiran. I think that's slightly intensive in terms of how we are aiming, Neha, going forward. And I think the expectation as new products come in, there will be -- those products will obviously be at a higher profitability margin. So clearly, that expectation is accurate, and we should expect. It will also help us offset the market dynamics because price erosion is also another thing, which is real situation in the market, which will also happen. Competitive forces will also happen. And I think the competitiveness of Biocon is that we're able to bring in several products in a fully integrated manner, which is why we -- one, the EBITDA margins are robust and they continue to grow strong as you bring in more products. So that expectation is not unjustified.

So just to be clear, so the 27% margin that we've done for the Biosimilars business last year, that should be higher this year as we focus on profitable growth. Would that be a fair assumption?

We've always directed this to saying we'll be in the mid-20s, and it will ramp up. Kedar, do you want to comment on that? I don't think we've guided anything beyond that, Neha, at this point. But Kedar, you can come in there.

Yes, yes. I mean I would just -- Neha, I would urge you to normalize the 27% of last year. If you remember, in quarter 3, we had allocated more products for North American region. And for that quarter and for the full year, that pulled up the profitability. So if you normalize last year's margins to maybe 24%, 25%, yes, then we are all driving towards margin expansion.

Understood. And my second question is on Aflibercept. Given that the existing Biosimilars has close to -- a very high market share, what's the thought process there? Would that be a very slow ramp-up in market share? How do we think we can get a fair market share in Aflibercept?

Well, I think if I can respond to that question, the first thing is that there was a large concern in the past that in the ophthalmology space where the Biosimilars would be an accepted space, I think that myth's been busted already and there's clarity that Biosimilars are high-quality products and will be accepted and will thrive in the ophthalmology space. So I think that path has been paved, which is a very good sign. Where it places us is in a very strong position as we come in this month with a clear path for the next few months. We've got some active contracts that Matt Erick, who is our Chief Commercial Officer and his team in North America, has been tying up. So we believe, Neha, this could -- almost every ramp has a start and then it takes some time before it reaches peak. Now we should have a good, straight out of the gates, a good start to this, which will build up towards the second half of the year.

Next question is from Surya Patra.

This is Surya Patra from PhillipCapital. My first question is, let's say, the profitable growth again. So while we have been seeing a kind of steady and consistent improvement in the profitability of the Biosimilars business, which is earlier was facing challenges. But now we are facing challenges from other 2 businesses, Syngene as well as the other generic business. So the way Syngene guided for this year, there is low growth and challenges visible. So given that whether despite the ramp-up in the Biosimilars, should we see a kind of a moderated kind of profitable performance for Biocon as a whole for FY '27? Or how should one see the challenges of Syngene for the current year?

So Surya, let me first direct you to a very important pie chart that we have shown in our press release. And I think you should actually pay attention to that. As you know, 85% or 87%, or 83% of our business comes from biopharmaceuticals. The research services business accounts for about 17%, okay? So I think you should understand that the main growth drivers of our business is coming from biopharma, largely from the Biosimilars business as we have shared in my opening comments. So we do not believe that a temporary decline in profitable growth for Syngene is going to impact the performance of Biocon as a whole. I believe that Biocon is positioned very well for good profitable growth because the main growth engine for Biocon is Biosimilars and even the Generics business is now beginning to deliver better performance and better growth and better profitable growth. So I think you should read this in a very different way than assuming that every business is equally proportionate. So that's really the way I would guide you to look at the Biocon business, and not just jump to conclusions that because one part of a small business is not delivering as it used to, will impact the rest of the business. So I hope I answered your question.

Yes, yes. That's clear, ma'am. So in fact, given the kind of biosimilar progress what we have been anticipating, it was expected that possibly this year onwards, we'll see a kind of meaningful progress.

So I must also remind you, Surya, that our performance in the past has been severely impacted by a lot of the structured debt that we had included in our financials because of the structured equity element, which is now retired and behind us. And I think that's why you're seeing now a return to good strong sustained profitable growth.

Sure. My second question is about the biosimilar progression itself. So we have been guiding about second half pick up from all the products. So is it possible to give some sense or color about what is the kind of uptick that we are witnessing either in terms of penetration or enrollment or the kind of market engagement that we would be having or even in terms of the kind of a contracting cycle visibility that we would be having for products like adalimumab, Ustekinumab, aspart as well as Deno along with Aflibercept?

So maybe Shreehas, you would like to take this. But let me start by saying that we have guided for new launches, and you just heard that Aflibercept has just entered the market this month. And I think that is going to be a big contributor to growth this fiscal. Apart from that, insulins are tracking very well and very robustly. And with the commissioning and approval of the second drug product line in Malaysia, that's, of course, now unlocking a lot of the capacity challenges that we used to face in terms of addressing the demand. So I think when you look at all our other products, they are tracking well. And maybe, Shreehas, you'd like to add to what I'm saying.

Yes. One thing, I think that said very well. It sets the base, Surya, in terms of where we are. Just to add a little more color to what Kiran said, the 5 products that we've always said we're going to be focusing growth on, 2 we just talked about, Aflibercept, Denosumab. But there is beyond that aspart, Ustekinumab that you've seen a tremendous offtake in the past year. And then you've got Bevacizumab, which is in some sense, understated at this point in time. So these 5 products will drive growth. We've been contracting for some of these products in recent days. You know that in the August -- July, August through September, the July to September is the window when most of these payer negotiations finalize for full year of the following year -- for the following calendar year. And I think what I can tell you at this point in time is we are in a good place to have those conversations. It would be premature to disclose exactly what those are, but we are now in that place where we would be looking to bring these products to market. Some of the other things, like I was responding to Neha before, may not be really a commercial play. They are also fee-for-service models, which exist for Part B products, which is in the medical benefit space. And those are something that will come straight out of the gate as we launch these products. And happily we will see the benefit of it, which is why we've been saying that the second half of the fiscal year will be stronger than what you are expecting to see in the first half. Just to give you some broad color on that, Surya.

Next question is from Shyam Srinivasan.

This is Shyam Srinivasan from Goldman Sachs. Just going back to the Biosimilars, both approved as well as the launches that have just recently happened. If you could just characterize how some of the franchises are working, say, for example, the oncology franchise, Ogivri, those -- how are they doing in terms of either market shares? Because I think Kiran ma'am had also mentioned the deemphasis on market share as a metric to measure success, let's assume. So how should we look at our core portfolio, maybe U.S., Europe, if you could also comment, oncology as well as diabetes portfolio, the insulins and aspart, for example. And I know the launches have happened in immunology. So I just want to understand how the base business even in Biosimilars are tracking?

Shreehas, you might want to take this.

Yes, very comprehensive question, Shyam, probably the longest response. I'll try to be brief, and I'll lean on my colleague, Matt, to jump in if and when needed. Matt, please feel free to jump in. I think the -- your first question was in terms of how the legacy products, established products have been performing. I do want to point out to you and others on the call is and this is something that I've been saying for a very long time that the Biosimilars business is very enduring, both in terms of its margins and its revenues. The products continue to be strong. We've launched Fulphila in 2018. It's now 8 years that the product has been in the market, continues to drive margins and continues to have market share in case that's one of the ways to look at how it's been performing, continues to be 1/5 of the market, a 1/4 of the market, whichever way you look at it, continues to deliver strong performance and contributions to the bottom line. Same with Ogivri, which is in the HER2 breast cancer space. We're looking to add some more products in that. Bevacizumab I just talked about. But the legacy products are these 2. Insulin, you talked about was another legacy product, which we launched in late 2020, early '21. It's been there for a very long time, and continues to hold market, continues to deliver margins. We've been very cautious. It's the market shares for the taking. We've not gone all out and wanted to take everything at a go. But this is a very, very sustainable business in that sense. And very responsibly, we've taken market. This was the U.S. In Europe, it's a play where we focused on the immunology space, the inflammation space. And you've seen adalimumab do extremely well for us for the last 7, 8 years, we've had a very, very strong position despite the fact that there is competition which has played around with concentration and strength because of the kind of quality that we brought to the market and the reliability of supply that we've been able to provide. So I believe that the legacy products in Biosimilars is a very strong indication that they provide enduring margins for a very, very long time. So this was one myth, which was again challenged and busted that they will fall off in a few months. So that's not the case. On the new product launches, I think I responded in a fairly detailed manner to Surya, but I'll pause and check with Matt because Matt is the one who's really driving a lot of this growth that you are seeing in our advanced markets, along with Sushil in the emerging markets. But over to you, Matt.

Yes. Thanks, Shreehas. Just a little more color, particularly around the oncology products in the U.S. So those established products remain very strong from a market access standpoint. And as Shreehas said, with that strong stability comes strong margins. And that's what we're looking at. Our focus is continue on select channels to drive the sustainability. So you see this market share maintained as profitability continues to be strong. Also on our other products, market access, as Shreehas said, going through into the July calendar year remains very robust in our ability to add additional market access in contracts in the U.S. This is why both Kiran and Shreehas has commented on, you'll see these growth start in the second half. So lots of good momentum there. As Shreehas said, not a lot more to add in Europe, exactly what's going on there with the adalimumab and continued momentum in some of our key oncology products. And absolutely, we're excited about all the new launches, especially Aflibercept, which we see strong demand and strong opportunities within the U.S., particularly around the market access piece. Thank you, Shreehas.

Second question, and I'll be brief is on the generics part. And maybe, Kedar, just on the profitability. So we are showing 7% EBITDA. I know it's been a little volatile on that line item. But do you foresee now with the kind of growth that we have seen that there is a path to higher profitability? And the split of API to formulations, how is that trending?

Yes. So I think the split of API to formulations is about 60:40 this quarter. Historically, it's been 2/3 and 1/3. So maybe eventually, it will go there. The profitability improvement is an agenda across all 3 businesses, Shyam. So we are not guiding specifically. But as the new launches kick in, as our work on the cost continues, margin expansion will remain a priority. And that will also include a hard look on operating expenses, hard look on what is relevant for us to pursue in R&D. And we do have active cost improvement program in the materials and factory overheads as well. So all of this is expected to improve and not only the portfolio improvement because of launches. So we'll continue to do work on all these levers, Shyam.

[Operator Instructions] Next question is from the line of Damayanti Kerai.

This is Damayanti from HSBC Securities and Capital Markets Limited. So my first question is again continuing on your efforts for optimizing costs. So Kedar, you mentioned you have been working on a lot of initiatives to really assess the cost and make improvement wherever it's feasible. So just want to understand on 2 things. First, if you can update on utilization of some of the new units, including units in the U.S. And what kind of cost drag you are incurring as these new plants are scaling up? So that's my first question.

Yes. So I think Damayanti we'll not call out any specific number at this stage in terms of the cost track. But what has happened is the improvement that you are seeing in the Generics profitability is because of 3 things. One is some of the premium on API products, pricing premium. Secondly, optimization of the R&D portfolio and thirdly, OpEx. So I think all these 3 levers are helping. And there will be some time lag before the new units start contributing meaningfully in terms of utilization. But our numbers for the subsequent quarters do show that. So as the things improve, the numbers will reflect that higher utilization and the associated benefit on revenues and margins.

And when you look at what...

Damayanti, just to add to what Kedar is saying, I think the focus there has clearly been on fiscal discipline. And that is why you're saying that what Kedar just mentioned is whether it is in the R&D alignment to business in terms of whatever we have outlaid there or the cost synergies that have come in because of the operating leverage, because we were able to merge the 2 businesses that it has offered. That is the first level of benefit that you are seeing come through in the cost benefit that you are seeing. And this will -- we expect this to remain. So it's not a one-off that will happen. We expect this to carry through over the course of the coming quarters as well.