Indoco Remedies Limited (INDOCO) Earnings Call Transcript & Summary

A very warm welcome for the 76th AGM of Indoco Remedies Limited, which is being held through video conferencing. It is already 10:30 a.m. We have been informed by Link Intime that we have the required quorum. We are therefore proceeding with the business of the meeting. I now request Company Secretary, Ramanathan Hariharan to take you through the proceedings of the meeting. Ramanathan?

Thank you, sir. Good morning, and a warm welcome to all of you present at the 76th Annual General Meeting of Indoco Remedies Limited. All documents referred to in the notice, along with the statutory registers maintained by the company as per the Companies Act 2013 will be available for inspection in electronic mode. Members seeking to inspect such documents can send an e-mail to [email protected]. I would now like to introduce the directors who are present virtually: Chairman of the company, Mr. Suresh G. Kare; Managing Director of our company, Ms. Aditi Panandikar; Joint Managing Director of our company, Mr. Sundeep V. Bambolkar; Independent Director and Chairman of the Audit Committee, Nomination and Remuneration Committee and Risk Management Committee, Mr. D.N. Gawaskar; Independent Director and Chairman of the Stakeholders Relationship Committee, Mr. Rajiv Kakodkar; Other Independent Directors, Dr. Vasudha Kamat, Mr. Abhijit Gore; Non-Executive and Non-Independent Director, Dr. Anand Nadkarni. We also have Mr. Pramod Ghorpade, who is CFO of our company; CS Ajit Sathe of M/S Ajit Sathe & Company, who is the secretarial auditor of the company and has been appointed as the scrutinizer for the remote e-voting as well as for the e-voting process at the AGM. and Mr. Tejas Parikh, a partner of M/s Gokhale & Sathe, who are the statutory auditors of the company. With the permission of the members, I request our Managing Director, Ms. Aditi Panandikar, to address the shareholders on behalf of our Chairman. Over to you, madam.

Yes. Thank you, Ram. Dear shareholders, good morning. On behalf of the Board of Directors, I welcome you all to the 76th Annual General Meeting of Indoco Remedies Limited. Over the years, we have faced challenges, celebrated success and continued to grow and adapt in an ever-changing world. I want to take this opportunity to express my deep appreciation for the commitment and hard work of every Indocoite and the trust of every shareholder, business associate and partner. I'm happy to share that the company grew by 9% with revenues at INR 1,638 crores as against INR 1,503 crores in the previous year. Domestic formulations business was flat this year as we had a COVID-impacted high base in the previous year. International Formulation business grew by 22% with revenues at INR 754 crores as against INR 620 crores of the previous year. API business grew by 11% with revenue at INR 71 crores as against INR 63 crores of the previous year. Earnings before interest, depreciation and tax and amortization, EBITDA to net sales is at 17.4% at INR 285 crores compared to 21.8% at INR 327 crores the earlier year. The senior management team at Indoco collectively pledged to take the organization to new heights. I assure you that this journey towards excellence over the next 5 years will be immensely fulfilling and rewarding. A step in this journey is the recent acquisition of the U.S. company, Florida Pharmaceutical Products Holding Company Limited, LLC, for USD 4 million from Contract Pharmacal Corporation, CPC. FPP Holding is the holding company of Florida Pharmaceutical Products, LLC, FPP, which is based in Florida and engaged in the marketing and distribution of generic products in the U.S. This strategic investment marks significant milestone for our company, solidifying its position as a key player in the U.S. market. The smart synergy between Indoco and FPP will enable the company to commercialize its registered products in U.S. with a direct presence in the front end. We are dedicated to continually enhancing our research and development capabilities. Our commitment involves investments in cutting-edge technologies, forming strategic alliances and fostering an environment that encourages innovation. This endeavor aims to tackle the unmet health care requirements of individuals worldwide. On the corporate social responsibility front, your company remains steadfast in its commitment to support the underprivileged with a strong emphasis on enhancing the quality of life for women, elderly and children. Through our unwavering efforts, we aim to create a meaningful and positive impact on society, striving to uplift lives and foster a brighter future for everyone. I would like to express my gratitude to our shareholders, customers, Indocoites and all other stakeholders for their trust and support. Your trust in our vision is the driving force behind our success. Thank you all for Suresh G Kare, Chairman, Indoco Remedies Limited.

Thank you, Madam. I shall now take up the items of the agenda. The notice of the meeting has already been circulated and with the members' approval, we shall take the notice as read. The auditor's report for both the stand-alone as well as consolidated financial statements, which have been circulated to the members has no qualification and hence, with the members' approval shall be taken as read. The company has provided the facility of remote e-voting to the shareholders. The remote e-voting process started on September 22, 2023, at 9:00 a.m. and closed on September 25, 2023, at 5 p.m. The shareholders may note that since this meeting is being held through video conference and the resolutions provided in the notice have already been put to vote through e-voting, accordingly there will be no proposing and seconding for the resolution. Members of the company holding shares either in physical form or dematerialized form as on the cutoff date of Tuesday, September 19, 2023, may cast their vote by e-voting. Members who have not exercised their vote through remote e-voting may vote through e-voting by clicking on the voting button Cast Your Vote, which is appearing on the right-hand side of your VC meeting screen. You may enter your demat account number or folio number and OTP received either on your registered mobile number or registered e-mail ID during the registration for InstaMeet and vote. The results of the e-voting would be declared on or before September 28, 2023, and will be available on the website of the stock exchanges and company's website. Members who have registered themselves as speakers will now be invited to speak. The speakers who are invited to speak during the meeting should unmute and speak. Once his or her speech is over, they should mute themselves, next speaker can unmute themselves and then speak and so on. At vote, during the meeting, I request the speakers to please avoid repetition of same or similar questions. I seek your cooperation in this regard. The directors will answer the queries after all the speakers have spoken. Thank you.

Our first speaker for the event is [ Mrs. Prakashini Shenoy ].

Am I audible?

Yes, ma'am.

I'm [ Prakashini Ganesh Shenoy ] from Bombay. Respected honorable Chairperson, Mrs. Aditi and other dignitaries of the Board and my fellow shareholders, good morning to all of you. I received the annual report, which is colorful, transparent, knowledgeable, informative and contains all the information as per the corporate governance. I thank Mr. Ramanathan and his team for the same. The Chairman has given a beautiful picture regarding -- The Chairperson has given a beautiful picture regarding the company and its working in all parameters. Thank you, Chairperson, madam. I'm glad to note that the company is doing better when compared to last year in all parameters. Congratulations to one and all. Madam, I have a few questions. My first question is, any new -- what new innovations and products developed in-house R&D in the current year? And there is any expansion, please let me know. Who are our -- how are we planning for digital future? Last but not the least, Chairperson madam, my personal request to you is please continue with VC so that people all over the world will have an opportunity to express their views. I wish the company good luck for a bright future and pray God that the profit of the company shall reach the peak in due course. Sir, madam, I strongly and wholeheartedly support all the resolutions put forth in today's meeting. Thank you, Chairperson, Madam.

Thank you, ma'am. Our next speaker for the event is Mr. [ Vinay Bhide ]. Yes, sir?

Let me start the video also. Yes, that should come on. I'll start. Chairman, Mr. Suresh Kare; Mrs. Aditi Panandikar, our Managing Director, Mr. Sundeep Bambolkar, other distinguished directors present at today's AGM, company executives, fellow shareholders, I'm [ Vinay Bhide ], a company shareholder speaking from Mumbai. At the outset, let me congratulate both the Board and the management for a steady performance. We had a turnover of INR 1,667 crores in the audited financial year versus INR 1,540 crores in the last year. Net profit was slightly lower at INR 141 crores versus INR 155 crores. I have got a question on the performance just to understanding of the present and the future better. We had a drop in margin in the second half of the last financial year compared to the first half. My question here, sir, is that, was it due to the formulations business, the API business or both of them? The second question, we have a Dental segment where we are supposed to be first in terms of sales in this particular sector. Can you please tell us who are our competitors in this Dental segment? The third question is what is the percentage of the international sales in the total sales that we have achieved. One more point. Very recently there was a reporting of an unfortunate fire accident at our Aurangabad plant. So hopefully, not any major damages were there. But can you please tell us what was the reason that we have identified for the fire? And if we have launched claims, what is the status of the insurance claims that we have launched? Otherwise, I find that as a company, we are extremely, well late in my interactions with the department so far, including secretary have been very helpful. And I find that there is -- in addition to efficiency, there is a good coordination between the various departments. And sir just one suggestion to give on the AGM with your permission, sir. And that is that I had registered for the -- as an AGM speaker well in advance. And I was expecting the registrars, that is, to provide me the speaker sequence. I received the link late yesterday evening. And despite my prompt request, I have not been given a speaker sequence. You can understand that we are conducting the AGM towards the end of the quarter. So providing a speaker serial number will very helpful. Please do that next year. Otherwise, I find that we are having an excellent setup. I close with support for all the resolutions and best wishes to the directors and employees. Thank you for giving me an opportunity to speak.

Thank you, sir. Our next speaker for the event is Mr. Yusuf Rangwala.

Good morning sir. Good morning Chairman sir. Today, there are so many meetings, sir, but you are one of the latest in pharmaceutical company. Sir, why you kept the meeting on last day, sir? I'm very unhappy with your company, sir. Rewarded dividend this and you are one of the excellent company, sir. Why you kept on 26. Today, there are 15 meeting, sir. I'm very unhappy with the company, sir. Why you kept on the last day? This is first question. Second question, as our company share department sent me balance sheet, I'm very thankful and very humble for giving me a balance sheet. And also one more question. Sir, being on 75th year last year, but you are not -- whether you declare a bonus or not, sir I would like to know. You declare a bonus, my first question. Question number two, we are having a good reserve. Why not declare a bonus? Sir, as you mentioned last year, the promise for factory visit to Goa. This year after the month of Diwali sir please arrange a factory visit. Sir, annual report I saw that we had an anti-fungal. Sir you please send me anti-fungus cream. I want for myself. Please arrange the one cream anti-fungus for me sir, if you are manufacturing and nothing more to add. I'm very thankful to our Link people in each team and especially Prashant sir, Pramila madam, and our company share department. [Foreign Language]. We had a very excellent and very pharmaceutical company. My best wishes for you and good look. [Foreign Language] Please take care of our share and be happy. [Foreign Language]. Thank you very much. May God bless our company. [Foreign Language]

We don't have any more speakers in the panel. So I now request the management to take up the queries.

Right. Yes. So I have made note of some of the questions. And there was a question from Mrs. Shenoy on the new products and innovations we are doing in our R&D. I'm happy to share that at Indoco, we have investments in research and development in very complex generics and difficult to do formulations. So we are in the niche segment of ophthalmics and injectables for U.S. And these are very difficult to develop and difficult to manufacture products. And our R&D today makes us very proud because we have more than 100 process patents, formulation patents, and they are the strength based on which we have been able to kind of potentially go after exciting segments in the U.S. For the India business, we have launched several new products this year. And specifically in the derma segment. So we have Noxa, we have Ninaf. And there is another innovation expected for our legacy product Cyclopam soon to be launched. So that's on the new products and innovation. Regarding the digital part, Sundeep, would you like to take?

Yes, yes. Would you like to finish other things and then I take over?

Okay. Makes sense. So I think Mr. Bhide's first question was, why was there a drop in the second half in margins? So I'd like to share that the first half last year was a very unnatural first half for India business because post-COVID, the acute segment because of the use of several products like anti-infectives, anti-cold in peripheral diseases to COVID, they sold very well. And therefore, the first half looked exceedingly well and the second half had a dip. So that is the reason there was a drop. For the dental segment, there was a question, who are our competitors? So as you know, we are ranked #1 in the dental segment on the -- in the ethical business for how we are placed with the dentists. And in the ethical space, we have some competitors like Group Pharma, ICPA and Dr. Reddy's. On the -- other than ethical space, which is the OTX, our largest competitor is GSK with their Sensodyne. And okay, there was a question on the fire at Waluj, which I will touch upon briefly. It was a very small fire, but spread and became a little bit rapid because of the proximity to the warehouse where the tertiary packing material of our boxes was stored, which was all paper. So there was a kind of a short circuit and investigations into these are currently on. I think there was a question on claims. Probably Mr. Sundeep or Pramod will take that. On the digital future, even before Mr. Sundeep can start, very quickly across the company this year, almost in every segment, digitization or digitalization has started in a very big way. So for example, with our field force in India, we have given them iPads for promotion and detailing to doctors. This not only gives them a much better presentation for sharing information with doctors, it also allows them to download videos and us to share information with them on need basis, which can be shared with the customers. Across the organization, of course, we have implemented SAP S/4HANA. That's another digital initiative and many more. I'll leave Sundeep now to take on some of the other things.

Yes. There was a question about the insurance in the fire incident. So I would like to assure the shareholders that whatever losses the company has incurred because of the fire incident, they were totally recovered from the insurance company. We already got about 50% claim monetized and the balance will be done soon. As Aditi mentioned earlier, the fire happened because of an electrical fault in one of our small air conditioners and the spark fell on the plastic film and thus spread very rapidly to the shippers and the warehouse. But across all plants, I would like to assure the shareholders that we have taken a very, very active step to see that this incident is not repeated in future by a lot of education to all the plant heads and their heads of departments and the second and third line. Now coming to the digital future, we have already implemented SAP and a software, which will give huge management information system information to all the top management in the company for domestic business to start with. This will be followed by international business and operations. So this software sits on top of the SAP software, which we implemented in record time last year. Again, now for the procurement team, we have implemented Ariba, which enables the procurement team to carry out auction for all the supplies made by various vendors and suppliers, thus ensuring high efficiency in pricing. The third project we have taken up this year is HRMS, HR Management System. We have done this with partner success factors, SAP SuccessFactors to maintain continuity, and we have an implementation partner here. Incidentally, our implementation partner for SAP was EY. The next project we have taken up is machine learning. Ecubix is our partner there, and we have installed a trial software on one ophthalmic filling line and compression machine to study the machine learning parameters for these 2, and this will be then implemented across the organization in all our plants, giving us huge information about machine output, data analytics, et cetera. There was a question on why bonus is not being given. Bonus is simply transferring reserves to share capital, but that will entail higher payout of dividend to service the enhanced capital. So at this stage, you will be happy to note as shareholders that last year, we declared a dividend of INR 1.50 plus INR 0.75 for 75 years completion. And it's my privilege to inform shareholders that this year, we have maintained INR 2.25 per share as the full dividend. So we would like to steadily reward the shareholders and at the same time, keep investing money within the organization, within the company for expansion purpose. So at the right time, shareholders will be informed about management's information for bonus, et cetera. I think that was all. Percentage of international business to total last year for the year completed is 46%. Thank you.

I think there was also question on plant visits, as always. Let me just say this that most of our plants, specifically in Goa and Baddi are all USFDA approved. And as such, it is not possible to have people who are not qualified or who do not work in the plant for them to go in. What we will do and we can do is we have short films on our plants, the links of which we will put up on our website, so shareholders can have a better understanding of how the plants are.

Thank you, madam. With this, we will now conclude the 76th AGM of Indoco Remedies Limited. The electronic voting option will remain open for the next 30 minutes. Members who have not exercised their vote may click the voting button, cast your vote, which is appearing on the right-hand side of your VC meeting screen and vote. We thank all the shareholders and members of the Board for participating in the 76th Annual General Meeting of Indoco Remedies Limited. Thank you.