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

Ladies and gentlemen, good day, and welcome to the Q3 FY '21 earnings conference call of Hester Biosciences Limited, 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.

Good afternoon, everyone. This is Rahul from IIFL Securities. 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 open the floor for Q&A. Over to you, sir.

Good afternoon, everybody. This is Rajiv Gandhi from Hester Biosciences. As always, nice being connected with all of you on this call on every quarter. We had our Board meeting today and a press note has also been released, which I've tried to be as elaborative within the press note, so that there is a lot of information that is already passed on. Nonetheless, as a recap, I would like to go through the working of Q3 as well as the 9-month at Hester. Talking about sales, on a quarter-to-quarter basis, we achieved INR 52.82 crores, thereby showing a growth of 22% against the corresponding Q3 of last year. On a 9-monthly basis, we did a turnover of INR 145 crores as against INR 127.99 crores, giving us a growth of 14%. In terms of net profit, we have done reasonably well as far as Q3 is concerned. There has been a rise of 72% on a quarter-to-quarter basis. Q3 FY '21, we achieved INR 13.29 crore as against INR 7.73 crores. On a 9-month annual basis, the growth has been 18, 1-8, 18%. We achieved 31.04% in -- cumulatively for the 3 quarters as against 26.22% as what it was last year. As you are aware, we have 2 divisions. One is the Poultry Healthcare division and other is the Animal Healthcare division. The Poultry Healthcare division on a quarter-to-quarter grew 32% from INR 30.02 crores in FY '20 to INR 39.61 crores in this financial year. On the Animal Healthcare division side, Animal Healthcare division products include cattle, sheep, goat and swine products. We registered a 4% growth from INR 9.48 crores to INR 9.90 crores. Would like to mention over here on the 4% growth is that on the corresponding quarter last year, we had a very big tender business, government supply business, which was not there at this point or in this quarter. And therefore, the growth seems very negligible, and it gives a little bit of a distorted growth rate. But if you look at the 9-monthly, the 3-quarter, cumulatively, we have grown 19% from INR 25.88 crores to INR 30.83 crores. So this has been the overall growth as far as we are concerned in terms of our division, in terms of our sales and our net profit. There has also been an improvement in the gross profit margins on the EBITDA, the net profit margin as well as on the EPS. Talking subjectively on performance, other parameters, we have the 2 divisions, but within the 2 divisions, we have 2 subgroups that is the vaccines and the health products. Vaccines, if you talk about both the poultry and the animal divisions, both put together, we registered a 20% growth on a quarter-to-quarter basis and 12% growth on a 9-monthly basis. On the health product side, we registered a growth of 48% on a quarter-to-quarter, while 31% on a 9-monthly comparison. In terms of our geographical coverage, the domestic sales grew by 43% on a quarter-to-quarter, 20% on a 9-monthly comparison, but our exports reduced considerably by 51% in the quarter 3, and 5% totally, if you take the 9 months. Now this has happened because the demand of our products within India has shot up tremendously. And therefore, what we did was to make sure that the demand in the country is met. More so, there have been many restrictions in transporting, exporting material from 1 country to the other. So all that led to us focusing on the domestic market in which we have done reasonably well. Since the last 2 calls, you would have heard me talking about the Brucella tender. There was a tender, then it got canceled, then there was a re-tender. We have already put in the bid. The bids have been opened. Hopefully by March, the supplies under that tender for the Brucella vaccine should commence. Last but not the least, on the current situation, on the overview in the last 9 months or the last 3 months, you all would have read quite a bit on the bird flu that has been coming in the news. Hester had even sent a press note, I think, on the 21st of December, in which we had clearly stated that our sales have not been impacted by bird flu, and in fact, we have been able to register a growth. Even in these days, we have a strong team. We have a strong product in terms of health products, all other vaccines. So if a poultry farmer is used to a regime of using proper vaccines of -- which are currently available using good feed additives, health products, having a good sanitization program, it has definitely helped them even in this bird flu time situation, and that has, therefore, not impacted on our sales. Taking things further from here, what next? Last time, as committed to set up a division for herbal products, in this quarter before the year-end, we would be introducing a reasonable, wide range of herbal products. And probably when we talk again, I would be able to give you some feedback on how many products we have launched, et cetera, on the herbal product side. The vaccine, because of the current situation, wherein there is a lot of demand within India for our vaccines also, we have embarked on an expansion plan. We want to increase our vaccine capacity and hope to finalize these expansion plans within a month's time, and we would then start the implementation of these expansion plans as far as vaccines are concerned. And there has been quite a bit of a demand within India as well as we see the Brucella vaccine, the LSD vaccine, all these things put together are definitely making us look that suddenly, there has been a sudden big rise in the demand for vaccines within India as well as internationally. Till such time, our capacity increases, we will internally -- as any case what we had decided earlier, we will push our health care products, the non-vaccine products, which now also would include the herbal products. And as you have seen, there has been a sizable growth even in our health product business. So we will try to grow the business in that manner, try to squeeze out as much as what we can out of the current facility in terms of vaccine production, and this is the way that we would take our business forward. As you all may be aware, it's been quite a few years that we have been trying to look at expanding the business by acquiring a company, maybe on the manufacturing side, maybe on the distribution side. We had earlier twice taken permission from the Board to raise finances in considering that permission at lapse, we have taken the permission again, but we are mere to being close to choosing at least 1 option for manufacturing and 1 option in the distribution side. And we are very seriously looking at it. So hopefully, if things go well, we could put ourselves on an extremely high expansion growth, which would even cover -- and I'm talking both these opportunities internationally. So we are looking forward that we can just get on to a higher orbit if any of these things materialize. And to take care of this, we have taken the Board's permission to raise finances up to INR 200 crores. Last but not the least, to give you an update on the COVID-19 vaccine, which we are developing in collaboration with IIT Guwahati. The process has been slow at this point of time. IIT Guwahati's team is working hard to develop the master seed. As soon as we get a breakthrough in that, we would take over the master seed, do the animal trials and then take the whole project further. We have our hands -- we are keeping our fingers crossed. I'm sure we would see some light at the end of the tunnel within a short time. So that gives an overview as far as Hester India is concerned. Hester Nepal, we have tried to keep the sales as much as last year, though, this year, we had many high plans, aspirations to take this Hester Nepal to an extremely new height. But unfortunately, because of the COVID, things just could not happen. And in Nepal, the lockdown impact was higher because it is land locked. Of course, our vaccines go by air, but there have been a lot of difficulties in even shipping out the vaccines from Nepal. Things are now getting back to normalcy. Hopefully, that should help us to take things further. Texas Lifescience-s, our company, which manufactures health products for us, as you can see, there has been a growth in the sales as well as if you look at it on the profit side, there has been a little bit of a dip on the profit side. Because there have -- in these shortage times, transportation times, there have been quite a few problems in terms of getting raw material at the right price, paying more to get them, transporting them et cetera. But having said all these things, 95% to 98%, what is produced in Texas comes to Hester. And the bottom line of Hester is anyway now known to you. So somewhere or the other, you have seen that we have made up for this. Nonetheless, having said that, we are very conscious to ensure that the bottom line at Texas Lifesciences definitely goes up than what it is at this point of time. Hester Tanzania, our trading arm in Africa in the country of Tanzania, it has been going a little bit slow over there. There has been a marginal rise. It's not that it is not there. But nonetheless, things have not been so active. Things have taken a longer time to reach there. Things have not even reached there. Once they have been delivered, there have been high transportation costs, et cetera. So there has been a little bit of a turbulence. But it's a small venture. It's a small investment, which we are aiming to make it big. So the -- if you really go to see, it's not at any consequential at this point of time. Nonetheless, in days to come, we hope to make it fully as part of our whole thing and a big contributing entity for us in Africa. Last but not the least, Hester Africa. Things are moving over there. The lockdown impact and the disease impact have been different in the country of Tanzania as against what it has been in India or anywhere else in the world. In India and most of the other countries, from March 2020, there had been a lockdown situation, which went all the way up to June, July. In some cases, currently, there is a lockdown. There is an international embargo. There is a domestic lockdown. Tanzania was relatively free in all that period. But now it seems that in the African continent, there have been instances of COVID, et cetera. So there -- earlier, we would not be able to reach there. Now when we can reach there, it happens that, though, we are very confident that there is nothing in Dar es Salaam that has impacted us. We have our senior people there. In fact, I myself was there around 3 weeks ago. But ultimately, we need people to go and work there and do the installation, et cetera, and of which also 80% is done. But at the end, it's not within us to force somebody to go there immediately. There is a regular coaxing, convincing being done, and people are going there. Therefore, our production -- first commercial batch to be taken has got delayed. We now hope to do it in the month of May or June. So if you really look at the time line earlier, we were talking in the first quarter, in the first month of January. It has moved; so this has moved 6 months. In a way, though internally, we had even tried to prepone that January commencement to even in the last few months of 2020, but that did not happen. January did not happen. We have reasons to believe that our confidence will not be shattered now that we have given the date of May or June. So everywhere on record, I have maintained June 2021. Nonetheless, we'll try our best to make sure that we do it a little bit faster than that. So that's all from my side. I'm now open to take questions myself as well as our CFO, Chetas, both are here, and we would be happy to answer any queries and questions. Over to all of you.

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

Sir, do we have any vaccine for -- currently in India for flu vaccine?

No.

Okay. Sir, can you please share the technology transfer update on Novapharma in Egypt? And when we'll be able to get the income from that?

We have already been -- in our last quarter, you would have seen an income as other income also that -- so part of it is in bits and pieces, the technology transfer amounts that we are getting. It's an ongoing process. The whole project should get over in approximately 1.5 to 2 years' time. And a lot also depends upon their speed on how they would be handling it. So there we are going as per our commitment, but we have to honor, and we have to go with their timeline rather than our timeline.

Fair enough. Sir, it's a bookkeeping question, consolidated debt and cash. And another question is linked with that only that if debt is currently very low cost and why you're thinking of diluting equity for the CapEx?

Okay. So should he answer the first part, then I will answer.

Yes. So I'll cover the CapEx part. Yes, we are quite now enjoying our financial position. It is increasing well. That's why our debt ratio and -- it is comparatively reducing now, and we now have much cash balance with us.

No. So I want consolidate debt and the cash.

Sorry?

I want the figure of the consolidated debt and what net cash?

Consolidated figure of the debt?

Yes.

Yes, but that is there, part of the consolidation, it is...

INR 114 crores.

INR 114 crores.

I'm sorry?

INR 114 crores, consolidated.

Consolidated debt is INR 114 crores?

Yes.

Okay. And my -- another question, sir? Why you're funding it with the equities other than debt? What is the thought process, sir?

There is -- the thought process is that we want to take a jump, which is we see 1 or 2 good opportunities. And this is the way we have completely planned ourselves to take it further. I mean, in a way, you can always say that debt is always cheaper finance in a way because there is a fixed rate of interest and reducing, et cetera, et cetera, equity. But there is also something like debt equity ratio. There is also something like how do we take the project ahead. There has to be a balancing between debt and equity. It's not just -- it would be very easy to, say, take debt INR 200 crores [indiscernible] project. But I think it don't happen that way that easily.

All right. And sir, how has been the working capital days in December 2020 versus December 2019 and March '20?

There has been a sizable improvement. I don't have the figure with me unfortunately, but there has been a sizable improvement. I can assure you on that.

Okay. And going forward also, there will be improvement for next 12 months?

I think going forward also, we could continue the current -- we would have already reached -- as I don't have the figures, I'm not really exactly able to tell you the number of days. But what we have reached by now in the current situation with the demand of our products, et cetera, I think even maintaining the current credit period would be good enough for us. To be very honest, we are already better than what we were even in the pre-COVID days.

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

Rajiv bhai, congratulations on getting back on the growth path. I had a question -- a couple of questions, Rajiv bhai. One is you've created all these capacities with the expectation of tender business coming, which unfortunately has not fructified and has been delayed, is it not possible to divert some of those capacities to some of the newer opportunities you're seeing, i.e., are some of not your existing capacities fungible, so you don't need to make more investment?

The tender business has been more looked at from Nepal, and in India, this is the first time that we are so aggressively looking at tender business that is Brucella. The tender is out. The quantities have been decided, everything. So in a way, if the tender goes through, which I have reasons to believe it will go through and the purchasing will start and the immunization program will start. Then if that happens, as per the document that has already been given to the people who have bid for the tender, I see no reason in worrying as far as that is concerned. Another thing, different vaccines, we need a different type of production capability, different type of setup. So it is just not possible to have a room and today make vaccine A, tomorrow change a few things here and there and make vaccine B. That's not possible as far as biologicals is concerned.

Understood. Understood. My next question is you mentioned in your note that you're looking to divert some of the overseas supplies to the domestic market because demand has become so big.

Yes.

Is that -- does that make sense? Because inherently, I would think that export orders are better pricing and profitability? And what has suddenly changed in the domestic market that the opportunity has become so big?

The opportunity has become big in the domestic market. And our profitability is more or less the same while we are exporting and what we are getting over here. So our logic is, here we have something already sizable. So might as well fulfill that rather than get into a sprinter business at 10 places where each supply in the big scheme of things is inconsequential, but all that put together within India makes an extremely big impact on our top line.

Okay. Can you outline your...

To give you an example, if we are supplying $50,000 worth in 1 country, $95,000 in 1, $100,000 in 3, $35,000 in 1, in case rather than that, there is a $200,000 order extra coming from India in itself at this point of time, when there is a need of products over a year, might as well to us to recover that opportunity would be difficult over a year. While in those countries, as our business is small, we would -- it would be relatively easier for us to recover those opportunities.

Understood. Can you outline your CapEx plans for current quarter and FY '22, the new financial year and share any updates on capacity expansion split between Brucella, LSD, COVID-19, if at all, and others such as FMD?

Yes. So as I mentioned, that in the next few weeks, we would be finalizing the plan. Now there are a few avenues we have. We are at a crossroad where we need to take a decision. So it would be more appropriate for us to give a consolidated statement with all the avenues already exhausted and the avenue taken and then come to you and then take it further. So today, to give you some information in bits and pieces, one way we are taking INR 200 crores, we already have a firm plan to put in some the INR 30 crores, INR 40 crores, INR 50 crores, another INR 150 crores, we will put in. Let me come together with everything rather than talk in bits and pieces.

Understood. And last is, what is the pending CapEx in Tanzania?

Pending CapEx in -- around 10% is left. So out of [indiscernible] [Foreign Language] how much? Yes, around less than INR 5 crores.

Okay. And is that to fund the project cost increase due to the delay or?

No, no. I'm talking about our -- the allocated budget. There is no overrun in the project for your information. Even with this time delay, there is not a single dollar of overrun in the Tanzania, Hester Africa project. You might have seen the photograph in the press note, Viraj, today.

I did.

[Operator Instructions] The next question is from the line of Ravi Naredi from Naredi Investment.

Sir, anything when you want to say for financial year '22 projection either in top line or anything?

We have certain thoughts, ideas in mind. And to give a -- it will be more than what we think we have planned. That much I can tell you. Otherwise, we would not be looking at taking money. We would not be looking at projects. I would not make a blatant statement that in the next few weeks, we will come back to you with our plans, et cetera. Give us some time.

Okay. Okay. Okay.

I mean to give you very crudely, we have been growing at a good percentage, 5%, 10%, 15%, 20%. The time has now come for us to do something big.

Okay. Okay. Okay. That is very nice. And sir, when Africa project will starts?

Sorry? Please repeat.

Your Africa project, when will the production will start and it will...

May, June, May, June, May or June.

May, June '21.

2021, '21, yes.

Okay. Okay. And sir, what is the COVID vaccine plan? Anything you have made past statement, anything progressing well?

It is not progressing at what we had thought. So that is the fact. My press note mentions the line that we are still working on it.

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

Rajiv bhai, congratulations on a good set of numbers. And Rajiv bhai, I have been always appreciative about your growth mindset. So my first question is, as we are choosing to temporarily produce more in India, rather than going for export, so what has happened in the short time? Is it demand is unprecedented, which we didn't thought of? Or is the capacity constraint from competitor is also playing part? Or the third thing, is the Brucella you are seeing more demand in what you had thought about?

To answer your question in reverse. Not even 1 vial of Brucella has gone in the tender, so everything is yet to come. Opportunity is, #1. And sir, your second last question, the manufacturing constraint of competitors, I'm not aware of the competitors manufacturing constraint. So I would not be able to comment on that. Answering your first question now, is -- there has been reasonable, good -- if you recollect last year, last to last year, we had increased our marketing force and everything. Probably all this is leading to us gaining more and more demand and increasing the thrust, et cetera. But the bottom line is that there has been a good demand for our products and things are looking good for us. So I mean, that's my answer. It's very easy to say that, "Oh, we created demand. We displaced competition." But I mean those answers would not be really comforting answers to give you. The fact is that we have been putting in efforts, and we are getting the business right now.

Right. No, it is nice to hear. So this is not a short term, but this is a -- you see the long-term trend of what -- your efforts in last 2 years, increasing your salesperson and everything. That's good.

Yes. I think so we are definitely -- we restructured a few things, and all this is helping us towards that.

Yes. And Rajiv bhai, just 1 more question, actually, I'd asked I think 2 years back also on AGM or something. So I always appreciate the new, new things, new, new opportunity you always look for and always a growth mindset. But -- so how means you think about because as we have a big opportunity in Brucella, we have many things to do in Nepal, and we have a huge capacity coming in Tanzania. And still, you are -- and of course, the new manufacturing you're looking at India. Still, you're looking at another opportunities in international market for acquiring manufacturing industry. I just want the thought process and about everything. How do you think as entrepreneur just...

Okay. No, your question is very good, very valid. First of all, expansion in India, is for products that are to be used in India and certain products which can be exported from the Indian plant. The expansion in Africa currently that we are doing is specifically for the African-specific animal diseases. And the third, what about our expansion plans? Our expansion plans, wherever we do, whether it is Africa, which we are trying to do, we are looking at setting up or acquiring a good distribution network and/or if we go into manufacturing, acquiring or setting up to manufacture something on the health products side, so that is something which was never covered in any of our earlier plans and now that is being incorporated into those things. And the asset -- the turnover to asset ratio in health products is far more better than what it is in vaccines in terms of sales to assets. So we have reasons to believe that assets now created on the animal health side, would turn -- churn out much more higher turnover than what it would by putting as much money in a vaccine plant.

The next question is from the line of M.J. from GormalOne.

Rajiv, congrats on very successfully getting everything together. I just wanted to understand on your marketing team expansion plan. When do you think you will go for the next round of marketing team expansion in India and in your export markets?

Exports -- so as far as the next round of people we need to hire now over year, we are looking at picking up more people after -- say, from the first quarter of the next financial year, nothing to do expansion in terms of marketing in this quarter because things are moving okay. And we always need to have a mix between getting more people, getting more sales, but at the same time improving the efficiency also and counting on the sales per salesperson. So that is an important thing over a year as far as India is concerned. As far as international, Africa is concerned, we hope to start creating the whole distribution marketing network, probably, mid-first quarter next year or towards the end of the first quarter. And that is how we would take it further. We would do it, say, around 5 to 6 months from now as far as Africa is concerned. The reason being we have delayed this in Africa is that production start -- production in a vaccine plant, it cannot happen that today we switch it on today's inauguration and here there are millions of dollar vaccines worth available. It's a slow process. So while the production would build up, our marketing team would build up. And while the marketing team is not there but the production is there, we can always sell it through distributors and take it further.

Perfect. Perfect. And just one housekeeping question, someone asked earlier. Your gross debt is INR 114 crores. How much is the gross cash?

Gross cash. I don't have that figure right now in front of me. I would not mind sharing that with you, Manish offline.

Yes, we'll take it later.

[indiscernible] not others, but I don't have that right now with me.

The next question is from the line of [ Kishore B. ], an individual investor.

And congratulations on a good set of numbers. And I just have a question, like, maybe your thoughts on this, like any plans on expanding into the vaccines for pets, like dogs and all?

We have a desire since a long time to get into those vaccines as well as into foot-and-mouth disease vaccines. But we are very clear if we get into pet vaccines, we would like to tie up with some international company for international marketing. The pet market size is very small in India as compared to what it is internationally. If you really do a survey, in United States, there is more sales through the pet market rather than through the organized poultry or the cattle, sheep, goat, swine. But that is not so in India. In India, it is miniscule. So we want to get into it, but we will do it at an appropriate time, if we get some international handholding as far as pets is concerned. And what was your second question?

No. This is my first question. And since like we have like setting up plants in U.S. and Africa, since we have a good market for pets there as well, I wish to see...

No. We're -- I've never mentioned we are setting up anything in the United States. So that's not idea that we are looking at, at this point of time.

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

Rajiv bhai, nothing else at my end. My questions have been answered for now.

The next question is from the line of Ankit Kanodia from Smart Sync Service.

Good set of numbers. And I would also like to thank you for sharing the detailed note and would request you to continue with this tradition in the future quarters as well and that really helps to understand. But -- most of the questions have been answered. I just wanted your view on what would be -- what is our basically long-term vision and strategy for our company? So as we are aggressively looking for expansion in different markets, in different segments as well, so how do we see our company for broad vision, you can say, 6 years or 5 years down the line, maybe 2025, how do we look at trends? And what are the key risks to our vision? What can go wrong? What are your thoughts? If you can give some color, that would really help us to get a long-term view.

Okay. First, thank you for complementing me for the press note. I think last 2, 3 times, we have been giving more in detail. But since -- as from -- since the time, I know we have always been trying to give as much information as possible through the press note because whether I give it in the press note or somebody finds from the balance sheet, ultimately everything is anyway in public domain. Might as well give it so that your -- most of the questions get answered through the press note or through the releases. Coming to vision, our Animal Health business is a good business, growing business all across the world. In India, if you look at it, poultry is reasonably consolidated, growing at around 8%, 10%, 12%. Cattle farming, dairies, et cetera, we see a metamorphical change in India in the next 5 to 10 years, wherein a scattered backyard population of 1 to 5, 10, 20, 30, 50 cows, would get consolidated into big dairy farms, wherein you have hundreds of cattle giving milk, et cetera. So this is something which we are looking forward ourselves in India, which will make our business grow probably five, tenfold, even if a little change happens in that -- the whole characteristic of the dairy industry. Sheep, goat farming is also now picking up. There are people who are getting into organized sheep and goat. Till 5 years ago, there was hardly any sheep or goat available. I mean if you go to see, we have started goat pox vaccine. We are the first people in the country to manufacture the goat pox vaccine. There is still no second person who is manufacturing. Lumpy skin disease is, again, another disease that is coming up. For vaccines, a disease means an opportunity. But overall, I don't see it at that, and I don't even mean that if there is disease, it's better for us. But overall, animal health industry is going to restructure itself further in the large animal segment. Restructuring, in itself, even without much increase in population, it is going to give a very big business to not only us, to all animal health companies. We are looking at other geographies like Africa, which is a continent where things are even much more scattered over there than what it is in India. In fact, poultry farms are even immensely scattered what they were more than 25, 30 years ago over here. So we are looking at such economies where the growth potential is very high. On the flip side, you might say or it might be termed as a risk that we are looking at areas which are risky and how would we mitigate those risks, et cetera. I -- to that, my answer is that risk mitigation is also process which is evolving. I could not have a risk -- I do not have a risk mitigation plan today on how will I mitigate risk in the next 4, 5, 6, 8, 10 years in the African continent, whether there is a political problem, whether there is a social problem, whether there is a bird/animal population, disease problem, et cetera. So the risks are -- there could be sometimes diseases, which create a massive problem. There could be -- we are looking at developing economies. So the problems in any developing economy could come on us, but these are macro problems that we have. And as the world is in itself becoming more enlightened with people having all information all over the globe everywhere, however, rural, you are, I think all these things will help us mitigate our risk and take our business further. And at some point of time, we are looking at up geometrical progression spiraling growth and hopefully, we should be doing far more in terms of top line and bottom line in the next 2, 3 years from now.

Just a follow-up, sir. Just like we had a very good association with Bill Gates Foundation in terms of our African business. So don't you think if we can have a similar sort of association, even in our domestic business, that takes care or mitigates some of our political-related risk because when such a big organization is with us, we somehow get that kind of a confidence that some sort of political risk can be mitigated. What is your view on that?

I personally -- yes, my view on that in -- you're talking in India, right?

Yes. Yes. Yes.

I personally feel that India as a country, the way it is going, the way there is progress, I think political risk is the least of the worries, I think, at this point of time in our country, and things are looking upward. So that risk, I personally feel that we don't need any mitigation to any political risk as far as the Gates Foundation is concerned. Here, the role that they can play with us is very small, or I mean they have got a big office. They are doing a lot of great, fantastic work, but it should also be within their objectives to do certain things in certain geographies in certain countries. So it might not match between their objectives and our objectives of doing things over here. So I think -- and the banks in India are there to give us money. The system is quite robust over years. So I don't think really we need an international institute, however big it is to help us search for us business in this country.

Okay. And what about the competitive intensity, given that the market is going to expand as per your understanding in the next 4, 5 years?

I'm sure there will be more competition that will be coming in, in days to come. And this is part of the churning process. I think there'll be more competitors. There will be something new again happening. There'll be something bigger demand happening, busy shift. So [Foreign Language]. I mean to pinpoint all these things is extremely difficult. Certain things you just have to move on. Not that we do it in a rash manner, but we move on with a sort of a clear consolidation and take things as they come while we move.

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

[indiscernible] plans you have? Hello? Am I audible now?

Yes. Now I can hear you. Yes.

Yes. Sorry about that. So my question was that given all the expansion plans you have, what do you think the revenue and margins should look like in 5 years?

As far as our margins are concerned, we -- if we can keep these margins or a little bit higher margins at a bigger turnover of INR 400 crores, INR 500 crores, INR 600 crores, nothing like it and in terms of other geographies, like if you have seen, even in a small turnover, we did reach a breakeven analysis at our plant in Hester. Likewise, gross margins being good as what they are, I do not see any difficulty as far as maintaining margins is concerned. The whole challenge is how do we take the whole thing further once the plant starts registration in different countries, et cetera, et cetera. So I don't think margin is an issue as far as we are concerned. And plus we are doing business in such geographies where, in any case, the margins are higher.

Right. That's helpful. I'm sorry I didn't get the revenue growth that you can be at in 5 years?

The revenue within 5 years from this point of time, if you take a simple 25% growth on a year-on-year basis and if we are talking of a 5-year, we are anyway talking of doing -- getting more than double. But we are getting into an expansion mode. We will get Hester Africa into it. So it should be substantially more than that. I'm not able to give a figure. Neither am I avoiding to give a figure, but let's leave it to the way it grows. There are all signs which show that we are growing fast.

Right. Right. And how are you organizationally set up to grow like this? Because obviously, you are getting into a hyper-growth phase. So if you can just comment on how organizationally set up for it.

We have built this organization in the last 20, 22 years. We have reasonable stability in our organization. But as you grow fast, you need more and more people. There is always a challenge to get the right type of people to get the right type of job done. So those challenges as much remain with us as what it would be with any other company anywhere. And we just have to move forward and keep the selection process on all the time and get the right people for it. I think that's the only thing. There is nothing really more than that.

Okay. And just a housekeeping question. I think your press note is fantastic. Thank you for sharing such detailed comments. I just could not make out what is the percentage revenue versus the other products? You've given the growth, but what is the percentage for...

Your voice has come muffed. Can you repeat the question?

Sorry. My question was, what is the percentage of revenue from vaccines in the current quarter versus the rest of the products?

[Foreign Language] Vaccine percentage, what is it? 75% vaccines.

75%. Okay. And do you think this mix will change in 5 years? How will it change?

It has to change. Health products should become substantially bigger than vaccines in years to come, for sure.

Right. But any guidance on the percentage side?

Well, we took a big team last year. We wanted both to become equal by this year, it has not happened. So -- but I'm sure in the next 2 years, there will be a diametrical shift. If you go to see until 2 years ago, we are 90% on vaccines and only 10% on health products. Now it has come down to around in the 70%. So slowly, that shift is happening.

The next question is from the line of Manish Gupta from Solidarity.

Rajiv bhai, I just want to, again, express appreciation for the detail that you are providing in the press release. And just a request, if you can also attach the balance sheet when you are providing this press release. I think it will save a lot of questions and also provide a little bit more transparency.

Just a minute. Can you -- just a minute. Yes, balance sheet, we have on a half yearly basis. That's what my CFO is just speaking to me, and I just repeated what he told me. So if offline, you can tell me what exactly you think could help us to have more clarity in press note without really distorting the norms of declarations and publishing, we are more than happy to do it.

Yes. So Rajiv bhai, I mean, the norm is that the balance sheet is declared 6 months and full year, but there are a lot of companies who publish balance sheet every quarter. And now given that we are growing at a rapid pace and because you provide so much of transparency, I'm just saying it will help all the investors rather than asking. Like people ask you questions on gross debt. You answered the question on gross debt. So you are sharing all the information. If you publish it on the balance sheet, then nobody will have to ask 2 questions on working capital, gross debt...

I think it is -- yes, I've understood -- Yes. It is a good idea. I have understood that. Let me see. See another difficulty we have when we have to do consolidation between 4, 5, 6 companies, though small, it becomes a little bit of a difficult proposition for us to do that. Having said that, it's an extremely valid point, and I think we should get into it.

The next question is from the line of Apurva Mehta from EM Investments.

Rajiv bhai, congratulations on excellent numbers. Yes, I just wanted to ask that this big expansion, which you're obviously trying to do it. What will be the payback period now? Ballpark, what you have just envisaged that you have 2-year, 3-year, 4-year payback period kind of thing? Or you must have something in your mind before going to a bigger expansion, yes?

We are working on 1 or 2 options to give you a payback period at this period of time. Apurva bhai, it would be like me giving you off-end figure on the payback period of time and, et cetera. I think we all know what the ideal situation is. Let us work on it. And then once a project is ready, that anyways, you would have to build -- make a payback period. So we will do it. Right now, I'm not able to really give you an answer, neither am I avoiding to answer. It's just that I don't know that myself.

Yes. Okay. And has been this majority, what the transformation of our company from a vaccine company to a mix of animal health and vaccine, so this more -- this CapEx will be more towards toward the animal health care to?

What happens is that even if capital expenditure is made equal on the vaccine and the health products side, but the turnover churned out for the health products from that investment would be far more than the turnover turned out from the vaccine. So I mean -- but still we need vaccines, which are also growing. When all our plans get -- and when we are talking of distribution -- increasing our distribution network, there it's all together. It's a trading entity, distribution, marketing entities. So then there, the whole calculations are different as against when we invest in a manufacturing.

So more towards the animal side, not towards the poultry side definitely?

Ultimately, yes, our Animal Health division has to grow much more than -- faster than what our poultry division is growing at this point of time. And in both that division, the health product should be doing much more than the vaccine in days to come on a percentage basis because the health product percentage is small at this point of time.

Okay. And today, what the utilization we'll be having on the vaccine side? We must be utilizing on, maybe, 80%, 90% of the vaccine capacity?

Yes, yes, yes. I think what you mentioned is perfectly, I would have answered the same.

Ladies and gentlemen, as this was the last question for today, I would now like to hand the conference over to the management for closing comments.

Thank you all for this 1 hour call in hearing me patiently. I hope I've been able to answer your questions, if not all, most of them. Our endeavor is always to answer as much as what we can. Certain times, we are not able to answer, not because we don't want to, but because I myself do not have that information. When I'm sitting on my table and something is asked, I may not have that information, but be rest assured, our endeavor is to be as transparent and open. Some of the suggestions even given today, I would love to implement that, like in terms of quarterly balance sheet, et cetera, et cetera. Those are very challenging desires. But nonetheless, I think we should try to work towards that. We all, myself, our team, our CFO, production, marketing team, all are working hard towards taking Hester Biosciences to the next level. And it's all your questions, which also -- I mean, when you ask questions, when we make notes while answering to you, it also gives us a lot of introspection. It also gives us ideas on what to do certain things, which we would have never thought we suddenly get a spark. So this interaction helps me personally. It helps the company, and that makes me very happy to talk to all of you on every quarterly basis. And so I think that's about it from my side. Thank you all, and hope to see you next time in the next quarter.

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