Hester Biosciences Limited (HESTERBIO.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Hester Biosciences Limited Q4 FY '20 Earnings Conference Call hosted by IIFL Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rahul Jeewani from IIFL Securities Limited. Thank you, and over to you, sir.

Good afternoon, everyone. This is Rahul from IIFL Institutional Equities. I thank the Hester management team for giving us the opportunity to host this call. From Hester, we have with us today, Mr. Rajiv Gandhi, CEO and Managing Director; and Mr. Chetas Patel, Chief Financial Officer. I will now hand over the call to the management for their opening comments, post which we can have the Q&A session. Over to you, sir.

Good afternoon, everybody. And as always, it's a pleasure to have you all on the call, and it's always my pleasure to give you sort of an overview on the functioning of the company, the results and then take any questions at what you might have for me or for the company. As far as our results are concerned, considering that FY '20 has been a year below expectations in terms of sales and profitability, we have tried to be as elaborate as possible in our press note, trying to cover most of the issues. Nonetheless, I shall still go through all the points, and then we could have a Q&A session. We would not go through all the financials as they are already there with you through the press note as well as through the results. So I would just address the subjectivity -- the subjective part of the discussions. Now talking about the overview of the financial year that is FY '20, the year has been below expectations. The bottom line has been marginally, in fact, lower than what it was in FY '19. If you recollect, and if you have been following, you would have seen our comments and the results, Q1, Q2, Q3, the poultry industry had been in a reasonable recessionary condition all across that -- just a moment. Hello, are you all able to hear me because somebody has just message me that they are not able to hear me? Is everybody able to hear me?

Audio is clear and audible, we can hear you very well.

Yes. Okay. So sorry, I just took to address that thing. Yes. Sorry for this break. So the year -- last year was a recessional year, recession for the poultry industry, mainly the maize prices had been very high throughout the year, almost unaffordable by the poultry farmers, wherein you are aware that 75% of their feed -- the 75% of that budget goes towards their feed costs and 50% of the feed cost comes from maize. So Q1, Q2, Q3 had been reasonably tight, in fact, very bad for the poultry industry as things started improving in the beginning of Q4. But that improvement I guess did very less because the COVID issue came up, and there were very strong rumors even before the lockdown came in that eating chicken and eggs would cause transmission of COVID onto the people who would eat them. So that, again, crashed actually even more. The crash was even bigger than what it was in Q1, Q2, Q3 for people and that affected us even before the COVID lockdown happened. Incidentally, last year, before the year began, we had started planning for getting into the market, into additional territories, get a little bit aggressive on the marketing, distribution and area coverage side. So we hired more people, made inroads and investments into territories where we were earlier not there. So we made all these expenses. And unfortunately, on 1 side, our expenses went up. And on the other side, the market did not [indiscernible] us. So in short, this has been the main reason why the business got impacted last year throughout. If you see, we have been able to maintain more or less our gross profit margin. So it does give an idea that the gross with the GP ratio being more or less intact, it's the other expenses that really cut into our bottom line. On the animal health side also, things were going reasonably well -- not really well, but there had been problems even in the dairy, et cetera, all the year round. But the government tenders were expected in a big way in February and March, specifically the Brucella vaccine, which because of this COVID situation, the procuring of the Brucella vaccine has just come to a standstill at this point of time. Just a few days ago, we got a call from the necessary agencies for the Brucella vaccine. As you are aware, the government had allocated INR 1,568 crores for animal husbandry, which include immunization of all animals, cattle, sheep, goat against Brucella, PPR and foot-and-mouth disease. Hester is an active supplier of the PPR vaccine as well as the Brucella vaccine. With the Brucella vaccine having gone to the central tender under that scheme, the states started to not buy the Brucella vaccine. Unfortunately, they did not buy and the tender procure did not happen. There are 2 companies who bid and who have been probably allocated the Brucella supplies, that is Hester Biosciences and Indian Immunologicals. So we definitely feel that all these things have contributed a lot to the results that you see on the top line as well as on the bottom line. Going further from here, having already created the team, we have decided to contain them, not to displace anybody, not to try to cut the team, et cetera. But we have tried to get in a lot of efficiency into our system in terms of -- even the lockdown period has given us a few learnings, which otherwise, probably it would have taken longer time. But it has also showed us a way how to be more efficient without actually doing all the travel and going farm to farm, place to place in order to get business, trying to work more intelligently, use social media platforms like teleconference, video conference. It has actually helped us to a great extent. And we are also working on various policies internally for our people to partly work from home, et cetera, wherein we would be able to reduce our administrative expenses to some -- to some level, we'll be able to reduce it. As I said, going further, the Brucella vaccine orders are expected to come in the next 1 or 2 months, I'm pretty sure there cannot be any delay in that. Also, we have further rationalized our product mix, pricing optimization has been done, keeping in mind mainly the bottom line. We have very clearly put our focus, which have high gross margins, which have lower distribution costs so that all this could also lead to an improvement -- a direct improvement onto the bottom line. Our thrust is going to be the health product side, on the poultry as well as on the animal health division site. The reason being, as you are already aware on the poultry vaccines, we have near to 35% market share. And our forecasted growth is more or less, a little more than what the market would be growing on a year-on-year basis, definitely eat a little bit into the market on a year-on-year basis. But on the cattle, sheep, goat, swine side, we believe that there is a lot of potential because we are relatively very small in that segment, and we proposed to put in a lot of efforts, energies, focus into those areas. And we have chosen additional products with high gross margins, et cetera. So that is going to be our focus area. We have also at the same time, we have created a laboratory which would be used as part of the marketing strategy in order to get samples, to test samples from various dairies and give them our -- give them the report on the health status of their animals, et cetera. We were already doing this in a laboratory for the poultry but that lab was at Anand, we have extended that scope, and we have also gone on to the large animal side in order to make a better penetration. On the internal issues, we have set up the manufacturing science and technology division with a focus on implementing innovation and best services and solutions for poultry manufacturing. We believe that there is a scope to improve the efficiencies within our manufacturing system, and we are working towards that as well as we are looking -- we have embarked on various field trials, et cetera, between our products, competitor products. Not that we are not doing it before, but we have gone in full earnestness with setting up of this manufacturing science and technology division. As I mentioned to you, we are expecting the Brucella orders in the next 1 to 2 months' time. Hopefully, if that crystallizes, it would give us an absolute and immediate jump in our turnover. As far as exports are concerned, exports have done reasonably well. They grew at around 63%. And this year, we hope to grow them 100%. In fact, during March, there were 3, 4 consignments, which got stuck up just because the freight stopped, shipment stopped. Otherwise, we would have grown the exports more than 63%. Nonetheless, we have now again started the exports. Shipments have already started taking place, and we believe that in Q1 itself, there would be reasonable amount of progress as far as exports is concerned. And of course, also for the -- also for the domestic sales. On the poultry side, we have tied up with an -- we have signed a technical collaboration agreement with an Egyptian company, wherein we'll be giving technology for them to produce poultry vaccines, and we have also taken international exclusive rights for marketing. Our main idea and intention in this collaboration is: one, to give them the technology and earn technology fees from them; and two, get the marketing rights specifically for the avian influenza disease vaccine in poultry, which today, neither does India allow nor Nepal nor Tanzania allows us to produce that. So taking on exclusivity is only going to complement our range. It is not going to eat away or conflict with anything that we are doing as far as all the other 3 places are concerned. Talking about -- that was about Hester India. Talking about Hester Nepal, last year was the first time that we saw the company come out of the red. We had reasonable good tenders coming from the FAO and everything last year seemed to be going on, on track. Hopefully, this trend should go on from the second quarter onwards because FAO, just from last week, has again now started issuing tenders. They have already issued a tender for animal vaccines, but that does not include the vaccines that we produce. But we hope that this would soon get on to the PPR vaccine, which we are actively supplying all over the world under the FAO tenders. Nepal is, if this trend goes on, not only will we do good in exports, but we have also put in a lot of efforts and a lot of focus in trying to become the largest poultry vaccine supplier in the country of Nepal itself. We have succeeded, we have created a very strong distribution network. We have people on the ground and this is progressing reasonably well. So we hope that the Nepal trend from year on improves as whatever we have seen in the results of last year. Texas Lifesciences, another of our subsidiary continues to provide Hester India with all the health products, the nonvaccine products on the poultry as well as on the animal health side. We have been getting more and more products from Texas. There has been an increase in the turnover also. And I think within this year's time, we would have totally converted everything, whatever we buy from outside onto Texas Lifesciences, except a few products for which we do not have the permissions, and we would not be expanding at Texas Lifesciences. But otherwise, we would get everything over there. Besides we have also started registration process directly from Texas into Tanzania and also into the neighboring countries that is Kenya, Uganda. And we hope that these registration activities are far more quicker than things that we should be able to even export products from Texas Lifesciences. Another thing I would like to state on -- in terms of registration activities in Africa. There are 4 or 5 associations made between neighboring and group countries, which now might allow a common registration between them. Hopefully, in a year's time, that should go through, thereby reducing our registration activities to 1 country in that group rather than all 4 or 5 countries, and that would make us register at 5 or 6 places instead of around 40 countries. So that seems to be a very good positive approach that has been taken in the African continent by the respective countries. Talking about our distribution in Hester Tanzania. Things are being put in place, infrastructure created well, down the line distribution network in place, sales people in place. And now slowly, we are trying to grow the business having made the full network, and we are very confident. In fact, we would be making a big shipment from Hester India to Hester Tanzania as well as from Hester Nepal for the PPR vaccine, for our own stock and sale at Hester Tanzania in the next maybe 60 days time. Lastly, Hester Africa, our big project in the African continent to manufacture animal vaccine. The project is going on stream so far. Delays have been very minor. There have been no stoppage of any work, et cetera, in Tanzania towards the construction of this project, everything seems to be going on track. Hopefully, if international flights do begin from July, that would help our teams to go there for the installation as well as the commencement of those machines, which are to be used there for the production. So this is a brief on Hester India as well as its subsidiaries. As I said, I have not gone through those figures specifically. I now leave it open to the house to ask questions. And hopefully, I should be able to answer all.

[Operator Instructions] The first question is from the line of Ketan Gandhi from Gandhi Securities.

Sir, what is the likely time and cost for developing COVID-19 vaccine? And what will be the Hester share of cost? And who will create the manufacturing capacity?

We are a little bit too early to give the time line for the cost. We would be starting the animal trials by November. And based on that, we would take it further. At this point of time, I would say that the earliest that Hester Biosciences could come out with a COVID vaccine would be sometime end of next year.

Not any idea about the cost, sir?

No, no idea about the cost. A difficult question because I myself don't have an answer to it at this of point of time.

Okay. My second question is, what is the likely CapEx for India and Nepal and Tanzania for FY '21?

The CapEx for -- just a minute, sorry. You're talking about the capital expenditure that was made in this last financial year?

Yes.

I have not understood your question.

What is the likely CapEx for India, Nepal and Tanzania?

Likely CapEx is this, okay. We have already completed the full capital expenditure. In Nepal, there is no CapEx needed. In Hester Africa, we have already completed this thing, our capital day over there. And we have yet to spend INR 20 crores, which will be coming by way of -- yes, which will be coming by way of loan and grant from the Gates Foundation. And as far as Hester India is concerned, we have not planned any expenditure at this point of time, though we have some product -- projects in hand, but we would take it as it comes, depending on the first 2 or 3 quarters, we would take a call. But no CapEx at any of these places or otherwise.

Even Tanzania?

Yes, Tanzania is already -- our equity investment in Tanzania has already been done. It's just that we need to get the loan and the grant from the lender. And that -- yes. So that is whatever is spending that would come.

Okay. And sir, my last question is time line for the commercial production in Tanzania and a breakeven time?

The end of this calendar year is the time wherein we hope to commence commercial production. And breakeven time, in the second year. In 2022, we will breakeven.

The next question is from the line of Prakash Kapadia from Anived PMS.

If I look at India, 50% of the chicken consumption is out of home consumption. So what gives us confidence of recovery as the way things are this segment will take time to recover given the current situation? Any thoughts on that?

As I mentioned to you, that I agree with you that the recovery period in terms of restaurants and all this is going to be a little slow. But even home consumption, if that even gets back to its normal level, there would be a reasonable improvement as far as the demand is concerned. And we are definitely also going to focus on the large animal segment. On the poultry, we have -- I'll tell you, honestly, on the poultry side, if we have -- I've been talking to many companies, feed manufacturers, et cetera. In rural India, where we are viewing everything in terms of urban areas where there is restaurants but rural area has less of that, and there is a lot of home consumption in rural areas. Today's economy, if you see the recovery rate of rural India, it's faster than that of urban area. So this also, to a great extent is going to neutralize the lesser demand that is going to be generated from urban areas. This is a very detailed discussions I've had with people, big players who are making feed, medicines, health products and supplying ancillaries to the poultry. So this has been a sort of a common consensus that we have come to.

But rural would still be a much smaller market, right, to offset because urban would be a much higher market given the spend?

It appears the perception of it is that way, that rural market is small. The consumption in rural market is extremely high. And even today, if you go to see, if you would be seeing various aspects of the economy, rural economy is recovering much more faster than urban. I fully agree, it can't substitute and take over all eggs and chicken that restaurants would buy in an urbanized area. But nonetheless, the rate of recovery is reasonably good, and we have reasons to believe all the feed manufacturers that in the next 4 months' time, the whole thing should come back to normal as what it was before.

That's helpful. And cost of production of chicken was INR 80, INR 85, and media reports now suggest the selling price is over INR 100, which was a very, very low few months ago. So is that the trend which you were seeing? INR 100 to INR 105 of selling price? And is that [indiscernible] the sector, if any, in terms of sentiment?

The current prices of poultry meat are definitely high. It is around INR 100, INR 120 -- INR 110, INR 120. And even in normal cases, the prices should definitely hover a little bit plus or minus INR 100. I mean, that is normally the trend which everybody is looking at, at this point of time.

On the balance sheet side -- hello?

Yes, yes, I can hear you. Please go on.

Sure. On the balance sheet side, obviously, because of lower sales, we've seen receivables and inventory both go up primarily because of lower sales. So what are we doing to mitigate credit risk, if any, bad debts, if any, or any [ obsolescence ] risk in inventory at our end?

Let me address the amount of receivables issue first. We are reasonably in control as far as receivables are concerned. Our credit policy has been well-defined right from the beginning. Yes, there has been some leniency given in these days because the situation has been such that there is a need to become a little bit lean. But that leniency does not diminish our chances of recovery or anything. In fact, if you take historical data, we have hardly had any bad debts and the same trend should continue without a doubt. In terms of inventory is concerned, yes, there is an increase in inventory. We are working on it. Our production levels will be low a little bit at this point of time. So we have to liquidate the inventory, which is there, and we'll take it as it comes, but it does not seem as a problem in terms of our inventory, goods expiring on the shelf, neither do we feel there is a problem as far as receivables is concerned.

Understood. And lastly, Rajiv, from my side, you mentioned in the opening remarks about the employee addition and specific geographies which you were targeting. So obviously, that has been a major factor for employee expenses being higher by almost 39%. So if you could give some perspective on number of employees in terms of sales and business development last year as of date? And which are the geographies which we are targeting?

I -- it would be inappropriate for us to give you a breakup of what the staff we have in marketing, et cetera. I can tell you one thing, that we had 8-0, 80 people earlier. Now we have up to 140 to 150 people in the market. Hello?

Yes. And specific…

Can you hear me? I don't know whether you heard me. Okay. Okay.

80 to 150 employees and…

Yes, I mean, it is a little as in 100% jump.

Yes. Understood. Understood. And in terms of North where south, which are the regions which we feel there is potential and room for us to grow and the road ahead for us?

For poultry, it is West and South. For the cattle, it is North and South. Overall, South is the biggest market if you take for livestock, animal husbandry, et cetera.

Okay, okay. And we have headroom to grow because we have a very low market share, is that what…

Yes, we have a very big headroom to grow as far as the animal health division is concerned and also the poultry health product side is concerned.

Understood. And if things come back to normalcy from the second quarter onwards, is it possible we'll end the year with at least the PAT of FY '19 in FY '21, assuming things go in the direction of recovery and Q2 onwards, things normalize?

It would be inappropriate for me to give a commitment in terms of profitability, but you could be rest assured that in terms of our ratios, our margins, we have left the past behind. With Q1 itself, we are back to where we are on our original historic margins, and we shall continue with that.

The next question is from the line of Kuntal Shah from Oaklane.

My question is pertaining to -- you have answered the question on the Brucella but can you elaborate what are your plans for FMD and especially in India and the CapEx you are likely to incur for the same? And what is your -- I mean what is the assessment of state of global and India tender for PPR? And has PPR procurement shifted from states to central procurement?

PPR continues state at the moment. Brucella has completely shifted to the center. FMD is completely to the center. We have a very firm desire to get into the foot-and-mouth disease vaccine. We have been looking at various avenues. At this point of time, it would -- at this stage, where we are and considering the current economic situation, et cetera, we would not really want to look at all these things in the first and second quarter. Once we are in the third quarter, we would want to revisit all these things. But for sure, at some point of time, we will be in the foot-and-mouth disease vaccine over here as well as in Africa.

Okay. And sir, status of tenders for PPR globally in India?

Status -- so I'm sure the tenders and all will start again as far as the United Nations FAO is concerned. In India, we have already started getting tenders. Supplies have yet to be made, but tenders have already -- we have already started covering tenders, and we are already processing, courting. All this has already started now.

Sir, I see in your consolidated balance sheet that capital work in progress is now INR 74 crore. Presumably, this is -- large part of it is towards Africa plant. So how is the grants which are being received accounted for it? Is this capital received? Or how is the accounting of the grant…

Capital received. The grant would go as a capital received.

Okay. And sir, already, last year saw INR 25 crores increase in trade receivables and inventory also went up. So now 3 months have gone by roughly. Any improvement visibility in reduction of both? Or what is the time frame when you think your inventory and the trade receivable will normalize?

Yes. There is a reduction in the amount receivables as well as on the inventory and it will be seen in the first quarter itself. And I think that in 2 quarters, this should all come down, recede back to its normal level as where we are -- where we were, sorry, earlier.

The next question is from the line of V.P. Rajesh from Banyan Capital.

Just one question, trying to understand how much you have spent so far on this COVID drug that you are working on.

At this point of time, our expenses have not been -- it's within a very inconsequential range at this point of time. All our work besides giving them the technology know-how, the commercial agreements that what we have signed with them, and besides that, to create minor changes in the infrastructure over here. Now besides that, there is nothing much that we have spent at this point of time. We have innumerable offers from other companies who are also willing to work with us on the COVID-19 project. And any expenses and anything that we'll do, we will take it during the second -- it would be all discussed and planned in the second quarter of this year. But we have innumerable offers, wherein there are companies who are willing to collaborate with us on this vaccine development further.

[Operator Instructions] The next question is from the line of [ Ashish Shah ], an individual investor.

Congratulations on a decent set of numbers. I just wanted to understand, in the Nepal plant, how much percent of your top line would be domestic? And if you could give a hint as to how much it was in the previous years and now?

90% exports and 10% domestic.

Okay. And do you see this staying the same? Or would you think domestic, there might be an increase?

We want the sales to go up and we own 95% exports, but I feel that our exports should oscillate between 80% to 95%. And it is an export-oriented unit in any case, by the way.

Correct. Correct. Secondly, wanted to understand, you have increased your sales marketing team, like you mentioned, from around 80 last year to 140, 150. Are you planning on further increasing it in this year? Or are you -- would you be going ahead with just these numbers?

I think there is no -- we are not going to increase any field force in this year, and we will just consolidate everything what we did last year. And that's about it. In fact, we will get in more efficiency into the system. COVID has taught us this lockdown as to how to sell more intelligently rather than just run around. So I think there will be a lot of efficiency that we will get into the system. And I firmly believe that there will be a reduction in some of these costs and -- in selling costs, even with these many people with us.

Got it. Understood. And lastly, because the poultry industry right now is in a little bit of a difficult condition, are you seeing a lot of farmers getting out of the field? I don't know if they have any other alternatives to go to and maybe larger players becoming bigger?

At the moment, we don't see farmers getting out of the business, et cetera. But overall, there is consolidation happening in the poultry industry, where integrators are trying to get into the small farmers like Godrej, Suguna, Venky's. They all are definitely trying to increase their reach and getting small farmers within their scope of integration. But at least we do not see any farmers who are shutting down or getting into a desperate situation. It was -- there was a bad situation in February, wherein eggs and meat were just not being sold because of the COVID fear and all these things. But no, no, I -- we don't see any such things.

Understood. But with these larger integrators growing in size, would that mean that your market size that you have available for you would -- wouldn't it mean it's going down?

Yes. Can you hear me?

Yes.

Yes, sorry. I think the line -- I don't know -- something -- I was -- you were asking a question and then the voice blanked out.

Okay. Sorry. So with these larger integrated players growing bigger and eating -- let's say, taking away some of the smaller farmers' areas, would that mean a reduction in your own market size? Or do you not see that as a concern?

Our market size is directly proportional to the number of chicken on the ground. So whether it is produced by A or B or C, our market size is not going to go down. And I mean our business goes down if the number of chicken reduces, otherwise, no.

The next question is from the line of [ Manish Gandhi ], an individual investor.

I just have one question. So yes, it's regarding corona vaccine and overall human vaccines. So why now and not in past, we thought of venturing into human vaccines? And what expertise we bring compared to, say, big companies in India and abroad? Many are pursuing the same. Can you please just share your rationale behind it?

Vaccine manufacturing, whether it is human, whether it is veterinary, the process, the intellect, the capabilities, the requirements are more or less the same. An egg-based vaccine, whether for poultry or for human, goes through the same process, whether it is if there is a bacterial vaccine, whether if it is through a fermentation process, it goes through the same, whether it is human or animal. As far as human vaccines are concerned, it always goes through my mind, it had always, that you know what about human vaccines, human vaccines, like, yes, it always would come into anybody's mind, not just mine. We had been working for over a year with IIT Guwahati on other projects, and that is the time when this thing came up. And therefore, we took this as an opportunity to foray into human vaccines. And even the platform that we are going to be using for the COVID vaccine, it is a paramyxovirus virus which is for the poultry. So based on that, we took the plunge into it. And now let's see how this trend takes us further and how faster into getting into human vaccines.

Next question is from the line of [ Viraj Mahadevia ], an individual investor.

Congrats on somewhat stable results during a difficult environment. A couple of questions from my end. One is when will you hire a local sales team in Tanzania and other African markets? You talked about building the sales team in India by almost 100%, but how about Africa?

In Tanzania, we have already hired people and they are already at the floor level, at a few places in the country of Tanzania. The rest, we are working at the moment through distributors in each of [indiscernible]. And once we size up the business a little bit wherein we have a -- we sort of see a comfort level that, here is a distributor, here is our stock point, here, our stocks will be there. And then based on that comfort level, we will take the whole thing further in hiring people. But being a foreign country -- not just a country, sorry, a continent, we would go a little slower and take it one -- take the whole thing one step at a time in hiring people. But that is not going to slow down in creating a distribution channel in each of the countries.

Understood. So you're saying that we are hiring -- currently, we built a small team in Tanzania and other countries are going through distributors, and we'll keep it that way until the business starts to ramp up?

Yes. Once the distributor -- and we are even very clear, like even in Tanzania, we had a distributor. That distribution started selling our products. We appointed that distributor as our exclusive distributor with a clear understanding that in days to come, we will change over to Hester Biosciences Tanzania, which we did. And now, that distributor is also one of our employees over there. So we are going in a gradual manner, being a foreign country, a different social setup, a different commercial setup. I think it is better to understand the culture, people and the commercial and the commerce and then get into it.

Understood. Any chances of any debtor defaults in poultry in India, given your sort of bloating receivables that you mentioned?

No, we have not had. I think, our amount -- our bad debts have -- I think it is 0.6% or something that we had, something of that sort.

And any receivables in terms of receivables aging -- maybe this is a question for the CFO, any receivables over 120 days that are not coming in?

No, no, no. He says -- okay. He says, there are 1 or 2 which are minor, but that's not a concern area at all.

Okay. What are the key products being developed for poultry and large animals through R&D? Can you give us a sense?

Our R&D development, what I see in terms of poultry is concerned, we are looking at developing: one is diagnostic kits; two, we are developing on the poultry side. I'm not able to really be -- just -- can you help me -- we are trying to do -- on the PPR side, we are even developing a thermotolerant PPR vaccine as well as trying to make a PPR vaccine, which can be given through nasal spray, which right now, it is to be given injected. So that is something that we are developing. On the poultry, we are also developing a combination of a Newcastle and a Gumboro vaccine, so that 2 can be given in 1 shot. I'm not prepared with anything more. It doesn't come to my mind right now, [ Viraj ].

So nothing else like anthrax or any of the other diseases in the field that you're targeting?

No, no, no. See, for Hester Africa, we are going to be trying to do R&D for around 16 type of different vaccines. So that all is going to happen in Africa. We can't do that research over here. It will all be done in Africa. Over here, see, there are vaccines, which we have already developed, but we have not yet registered, which are the HS, BQ. They are already developed, but because the market being small, we have not commercially taken them. So that way, we have 2, 3 such products also. I would not be able to remember the names. I remembered these 2 products in cattle. But for poultry, more or less, everything is covered. We have the full range. And in poultry, we are now looking at improving the efficiencies in production, et cetera, at this point of time more.

Understood. And sorry, just last question. You mentioned earlier that PPR is a state subject still, and those tenders…

Yes.

Brucella has moved to center. Can you give us a sense on the likely sales in PPR for state and Brucella for center in the next 12 to 24 months?

I personally think that Brucella vaccine tenders under the scheme should come up to anything a little less than 100 -- yes, it should come around INR 100 crores or a little less than that. As far as PPR is concerned…

Per year? Sorry.

Yes, yes. Per year, per year, per year.

Yes, yes. Brucella. And PPR?

And PPR, it should be approximately INR 12 crores to INR 15 crores.

The next question is from the line of Anirudh Shetty from Solidarity.

So my first question was on the COVID piece. Say, assuming things really work out for us, and we see success in these times, are we open to making further investments in this human vaccine space for any other disease?

Sorry. Can you just repeat your question? I was -- can you repeat your question, please? Are we looking at another human vaccine? That is what your question is?

Yes. So in the human vaccine, is our focus going forward only going to be on COVID? Or are we open to other vaccines as well maybe sometime in the future?

No, no. We have a few plans already in mind. We are discussing and partly working on it. It would be very inappropriate for me to diverge or discuss all that at this point of time. But sooner than later, at the right time, we would definitely come out with that -- with those details. COVID cannot be the only -- it's not the end, it's the beginning.

Got it. Sir, my second question is on the Hester Nepal plant. So we have a certain plant, which can generate some revenue. But assuming the FAO opportunity turns out to be much bigger than the current capacity, is there scope for further expansion?

Well, yes. At our plot, we can go up by capacities to some 4, 5x. Without constructing anything, by making more investment in plant and machinery up to some INR 5 crores, we can, in any case, double the capacity. And plus, we have enough space over there to build, I mean, 2 labs or the size of what we already have right now.

Okay. Okay. And sir, we are currently going to cater to the FAO opportunity. But say, many years down the line, once the vaccination is done with, how do we plan to use this facility? Where will the bulk of the vaccines be catering to?

You mean to say, after the PPR business is over?

Yes. Assuming the vaccination is done and we've achieved success, how do we plan to use the plant after that?

I'll tell you, this will take 10 to 15 years. To be very honest, I don't have a plan on hand at this point of time. But something or the other will come up and we will work towards that. But at this time, I don't have a plan on what would we do after 10 or 15 years.

No, that's okay. And sir, on the Tanzania plant, I understand you are looking to cater to the entire African continent. Can you just give us some sense on as of today, what is the nature of the opportunity? Is it a very untapped opportunity? Is the -- how are the farmers getting their vaccine? Is it a very, very high cost for them as of now, which we can kind of bring down? Can you just shed some light on that, please?

Yes. Currently, the vaccines available in the African continent, few are available. What is available is anything from 5x to 10x the price, maybe sometimes even a little more than that. And that's also true for health products as well. Maybe health products may not be that high, but at least 4, 5x definitely than what it is available in the international market. And some of the vaccines, which we are going to be producing, they would be offered for the first time. So in a way, there are 2 things in this. One is lesser sale with a high price or more sales with normal international prices. Either way, we feel that we would be able to achieve an ex turnover as forecasted.

Got it. Got it. And sir, my final question is on the FMD piece. So sometime in the future, we're looking to do it in India, Africa, as I understand it right. But can you just throw some light on the -- at least the India piece, what is the size of the demand? Who is the competition right now? How do the margins and the ROCE tend to be in this business vis-à-vis our existing categories?

You are talking about the foot-and-mouth disease?

Yes. Yes, sir.

Yes. See, as we are not in it, and though we have worked on it, I'm not actually right now, sitting with the papers or these figures right in my mind. But what I know is that the FMD market right now, the price, I think the market for the FMD vaccine should be approximately INR 1,000 crores in this -- in India. And I think there are 2 or there are 3 players who are selling foot-and-mouth disease vaccines: one is Indian Immunologicals; one is Brilliant; and the third is Biovet. They are the 3 companies.

Got it. And would this require a separate manufacturing plant if we decide to enter it?

Yes, yes, yes. It would require a separate building. It cannot be produced in the same building. So whenever, hypothetically, we go into FMD, it would be a new investment that we would do.

Okay. Got it. Got it. I had some other questions, but I'll reach out to your CFO for the rest.

Yes, please do so. We'll most willingly answer all that.

The next question is from the line of Manish Jain from GormalOne.

My question was primarily on exports business. Roughly looking at all this global situation and the Indian situation, when do you see exports will overtake the size of the domestic sales?

From -- you mean to say the sales in India vis-à-vis exports? I work -- I mean, we are working very hard towards trying to get this thing, get into international business. To be honest, if things go right and if everything gets structured well, I don't think it could take more than 2 to 3 years to overtake the Indian sales. The opportunities are tremendous. We are looking at specific -- hello?

Yes, yes, yes. I can hear you.

Yes, yes. So we are at these -- if we are working hard towards trying to structure these things and that's what is our desire.

The next question is from the line [ Ashish Shah ], an individual investor.

Sir, at least just one more question I had was, in this past year and FY '20, how much was your domestic sales of this PPR and Brucella through tenders?

It would be inappropriate to give precise figures, but [Foreign Language], I think PPR would have been around less than INR 10 crores, a little bit less than INR 10 crores. And Brucella would have been approximately INR 4 crores to INR 5 crores.

Understood. And with the state governments, like you had mentioned earlier, sometimes they delay the tendering process and all. So now with the Brucella moving towards central government, do you think that will help expedite the process? Or do you not see much change thing?

No, no, no. It will help expedite the process, though there is a delay because of this COVID situation. Everything was to happen in February-end, and it's got delayed. But I have reasons to believe that this should hasten up the whole thing.

The next question is from the line of [ Viraj Mahadevia ], an individual investor.

Rajiv, I have one more question. Regarding your P&L, in your consol P&L, you mentioned that some of your expenses have been born because you expanded your field force. I assume that comes under employee benefits expense. But your other expenses have also grown by about INR 15 crores. Can you give us a sense of what -- where that growth has come from and why?

Salary as well as conveyance, all these selling, marketing. What happens is hiring a person is an expense. Selling, marketing, conveyance, travel, all this even adds up. In fact, those expenses are on a one-to-one as much as the salary or even a little more rather.

Right. So you're saying, effectively, these people have joined and are well out on the field, marketing?

Yes. In COVID times -- minus COVID times, yes.

As there are no further questions, I now hand the conference over to the management of Hester Biosciences for their closing comments.

As always, it's been nice to talk to everybody and I hope I've been able to satisfy everybody with the answers for the questions that you all have had. You are free to reach up to Chetas or me at any time for any specific questions, I'll do my best. And please do ask questions for which we have the answers and which we are not pushed on to giving any classified information. But besides that, it's been nice as every time. And just to sum up, that this year has been below expectations in terms of sales and profitability. In terms of profitability, I could assure each one of you that we will climb back to our ratios in terms of profitability. And we are working hard also towards ensuring that the sale goes up and it goes as per the forecast that we have made without considering the COVID situation. We do not know how much we will succeed in that. But as I said, profitability, be rest assured. So with that, I thank all of you and hope to connect with you, if not earlier, in the next con call, with the next Board meeting, when we will be probably declaring the Q4 -- our Q1 results of this financial year. Thank you.

Thank you. Ladies and gentlemen, on behalf of IIFL Securities Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.