Ipca Laboratories Limited (IPCALAB) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Ipca Laboratories Q3 FY'22 Earnings Conference Call hosted by DAM Capital Advisors Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Nitin Agarwal from DAM Capital Advisors Limited. Thank you, and over to you, sir.

Thank you, [ Vivian ], and good afternoon, everyone, and a very warm welcome to Ipca Labs Q3 FY'22 post earnings call hosted by DAM Capital Advisors Limited. On the call today, we have representing Ipca Lab management, Mr. A.K. Jain, Joint Managing Director; and Mr. Harish Kamath, Corporate Counsel and Company secretary. I will hand over the call to Mr. Jain for opening comments, and then we'll open the floor for questions and answers. Mr. Jain, please go ahead.

Thanks, Nitin, and DAM Capital for organizing this call. Good afternoon to all participants and thanks for taking out time and joining us for Q3 FY'22 earnings call. Today's earnings call and discussions and answer given may include forward-looking statements based on our current business expectations, they must be viewed in conjunction with the risk that pharmaceutical business faces. Our actual future financial performance may differ from what is [indiscernible]. You may use your own judgement on the information given during the call. Excluding the exceptional business for the last financial year, in first 9 months of the current year, we have achieved them on a stand-alone basis, a growth of almost around [ 13% ]. Our branded domestic and ROW market recorded a very strong performance in this quarter. API Institutional and Generic business recorded a decline in the business in this quarter. Domestic formulation business delivered almost around 23% growth for the quarter from INR 523 crores to around INR 645 crores for the quarter. Domestic API did business delivered around 16% growth from INR 71 crores to INR 86 crores for the quarter. ROW promotional market formulation business recorded a growth of almost around 41% for the -- from INR 78 crores to almost around INR 109 crores in this particular quarter. Overall, Generics business was around INR 179 crores as against to INR [ 218 ] crores last year, a decline of almost around 17%. Institutional business also declined in this quarter to INR 59 crores from INR 139 crores last year, which also included -- last year's figure also included certain kind of exceptional business around INR 35 crores. And Exports API business is around INR 224 crores for the quarter as against INR 278 crores in last financial year. The Generic business in U.K. is mainly impacted with much lower shipment to our distributors in U.K. We have started our own distribution arm in that country. The building [indiscernible] now in U.K. will take some more time. Institutional business is impacted by the lower shipment in the quarter and exceptional business in last financial year in Q3. However, the full -- for the full financial year, we are confident that we will achieve our guidance of around INR 350 crores on institutional business. On the API business, for the quarter, it mainly impacted because of two reasons: One was the current issue of [indiscernible] sartan, which we've resolved now. We have filed the process and started production, but business stabilization will take some more time, probably some business will get even impacted in Q4 FY'22, but we expect that business should get normalized from the first quarter of next financial year. The second reason was the exceptional business of Hydroxychloroquine, Chloroquine, what we had in last financial year, that has impacted this business. Overall Domestic business highlight is that most therapeutic areas have delivered very strong growth. In Pain, we have -- for the quarter, growth of almost around [ 22% ]; Cardio-Diabetes growth is around 13%; Antibacterials has almost around 20% growth for the quarter; Antimalarials had significant growth in this quarter around 34% from INR 19 crores to INR 26 crores; Cough and cold was the therapy, which industry, and we both -- everybody has grown very well in this quarter. Business from INR 24 crores has gone to INR 36 crores, almost around 51% kind of growth. Derma has also delivered around 32% growth; CNS, 29%; and Urology [ 42% ]. So overall, domestic business has delivered very good growth in this particular quarter. And in first 9 months of the current year, the Domestic business has also recorded a significant growth overall. Overall Pain portfolio contributes almost around 38% now in the overall business, Cardio-Diabetes contributes almost around 17%, Antibacterials overall -- in [ pie ] it has gone up to around 8% [indiscernible], Antimalarials around 6%; Derma has added more business. So it is now contributing almost around 5%. Cough and cold is contributing around 5%. CNS and Urology, both are contributing around 3% in overall price. On margin front, on stand-alone accounts, if you look at -- in Q3, we have delivered a gross margin of almost around 67.5% as against first 9 months gross margin of 67%. And EBITDA, before ForEx gain and loss, is almost around 23.49% as against 25% in the first 9 months of the current year. In spite of elevated raw material rates, the gross margin remained at 67% plus due to the better product mix sales with higher margins. However, the PBT got -- profit before tax was impacted due to higher energy cost, higher shipping and logistic costs, higher manufacturing cost, overall inflation and higher marketing costs with full return of marketing and promotional costs post COVID. [ I've ] given the brief overall background, I now invite to question and answer.

[Operator Instructions] We have the first question from the line of Naresh Vaswani from Sameeksha Capital.

So first question, what will be the reasonable growth guidance for FY'23 for Exports Formulations and Exports API business considering the capacities and approvals which we have or which you are expecting over the next few quarters? And if you can break this up between Generic, Institutional and [indiscernible] API?

I think overall for next financial year, we will give growth guidelines only after our budget exercise is currently going on. So after the other exercise is complete, we will give the guidelines in the first after fourth quarter results when we announce around that time, we will give the guidelines of both overall revenue as well as EBITDA trend. As far as the fourth quarter is concerned, we are likely to grow around 10% in the fourth quarter on a stand-alone basis.

Okay. And as far as margin is concerned, you mentioned the COVID [indiscernible], we are maintaining the margins. But I have two, three questions earlier or have we started taking price increases and budget include the increase in rate and power cost as well and how so can expect this margin to [indiscernible] that we guided during our 2020 [indiscernible].

Let's say, as far as the domestic market pricing is concerned, we have continuous basis whenever the month on which the prices are due to be taken because the 12 months cycle needs to be seen -- you can't increase prices before that period is over. So you can increase only after the 12-month cycle is completed. So that we are on a continuous basis, we are taking the prices. As far as [indiscernible] are concerned, pricing is a regular phenomenon depending on how the prices of APIs are behaving and negotiations with the buyers. But in this particular period, the price increase has been minimum because, #1, Europe itself was getting impacted and there was higher inventories in the market and demand was slow. And therefore, the price increases, even of those API prices, have gone up, price increases are not too [indiscernible] extent. As far as API markets are concerned, the price increases are regularly taken on the -- after the existing orders are [indiscernible]. But if you look at the material costs, [indiscernible] if you look at, let's say, overall, the crude prices have gone up because of that [ solvent ] price continue to rise. So that's the one major cost, which is continuously improving. But as far as other material costs are concerned, more or less, I would say that they are not going down and they are not going up. More or less, it's an elevated level which we have seen in earlier quarters, that's a continuing. And what we're doing from market and our talk with a lot of Chinese manufacturers and others, we see that retail demand is going up because most players in the market has covered the requirements up to the first quarter of the next financial year because a lot of uncertainties, Olympics, energy crisis in China and all that. So their demands have been going down. So it appears that probably from the fourth quarter or so, the prices -- raw material prices stand back a little come down. But solvent doesn't cost you too much, it's only 10%, 15% of overall API cost. So that's rising. And other cost, which is rising is paper, but that's all, again, as one part of overall cost. So I will see that overall, I think next financial year, the overall price [indiscernible] will come down. The prices of, let's say, antibacterials front is rising because of [indiscernible] shortage and [indiscernible] prices are still going up, but we are not getting impacted. So maybe [indiscernible] and other -- all the [indiscernible] products prices may go up, but we are not impacted because we are not a large player as far as antibacterials are concerned.

So okay. So considering what all the scenarios which we mentioned, can we reasonably say that this quarter's margin kind of bottom and it should trend upwards on [indiscernible] difficult to update that?

If you look at overall gross margin levels, I think probably we would be remaining at a similar kind of level. I think we have achieved almost around 67% in current quarter and probably margin level through [indiscernible] at the similar level. But on the expenditure front, yes, the costs are -- there is a significant amount of inflations are there and the costs are everywhere rising. We are facing this year your coal cost or maybe energy costs going up almost by around 55%, significant costs. Freight costs are more than doubled. So those logistic costs are significantly higher. We don't see it still that's coming down. Overall, all the chemicals for testing and other [indiscernible] practically costs have gone up significantly. So those costs is also -- has gone up in this year by almost around 20% to 25%. So practically -- and marketing costs have written back. All the costs are written back because now in last financial year, half of the year, people were sitting at home and we were paying them salaries. They were not working because that -- of the COVID scenario. But now that travel can all our -- all the promotional costs are practically have written back. So we are currently at the full cost, which we are higher to incurring on the commercial side and on the full [ staff ] side. So that cost will be there. So overall gross margin driven will continue to remain at around 67% or so. But the -- this other cost is definitely on rise.

Okay. And last question on the tax. I want to know what is your tax...

Sorry to interrupt, sir, but we request to return to the queue for follow-up questions. [Operator Instructions] We have the next question from the line of Prakash Agarwal from Axis Capital.

First one is on the sartans, so what I heard was it is now stabilizing. But in Q4, the impact would be there and it would normalize by Q1. So what is it taking so long? I mean you mentioned in the last call that Q2, Q3 will be done? What was -- I mean, if you could just remind us what was the issue and why are you taking down?

Let's say, when the issue came, I think when we had a call around that time, the newer process validation was started. So it was already one month, it has past subsequent to that in this particular quarter. So after the validation, only then you again start sampling in a lot of those issues, the documents and all [indiscernible] parties and also those issues are there. So -- and thereafter, the production stabilization based on the newer process has started. We are, again, working on -- and in this process, some kind of capacities are going down because additional step of verifications are introduced. So we are working on some kind of new process, which is again under validation right now, which will also further increase our overall production to the earlier level. So some kind of production has also gone down in this particular period and impact has continued in the -- it continued for half of this quarter. And the business, somewhere where you lost business gaining it again, will take some more time. And therefore, from I think overall from next financial year, first quarter itself, we already started signing the long-term contracts with the buyers and all that. So long term is yearly contract with buyers. And the business volumes are returning back, I would say that. So we're not concerned that the volumes will go anywhere else. We will definitely be able to have our volumes back in the next financial year, but business will remain impacted in the fourth quarter of the current year.

Yes. Okay. And just a follow here, sir, these are related to the API business in Europe or the Generic business or both?

It's basically everything what I'm talking is about the API [indiscernible] Sartan.

And when this returns, your gross margin is likely to improve since it was higher-margin business for us?

Overall, API margins are not that higher compared to the overall foundation margin, but margins would more or less remain at around -- gross margin levels will remain around 67%.

That is very clear, very, very clear. And the second question was on the cost side, which you mentioned that while gross margin will remain 67%. But with the cost, what you're hinting is costs are still on the rise. It is not stabilizing at least for Q4. And in Q1, there is [indiscernible] expectation.

Yes, costs are definitely on the rising trend because of overall inflation in Indian economy and a lot of chemical costs and solvent costs and all logistic cost, container costs, everything has gone up, yes. Everything has gone up.

And did you expect to come down by Q1? Or you were just mentioning about the input cost?

Still, there are no signs coming that your logistics costs are coming down. Coal cost has somewhat a little come down, but it's still almost around 50% higher than earlier it was almost around -- maybe around more than 100% increase -- more than 100% increase. But some cost has come down, but it's still 50% higher than the earlier level. The energy cost is still -- elevated level now.

So 21%, 22% is a fair margin [indiscernible] 25% in the past?

I will give the guidelines for the next financial year after the Q4, very clear guidelines with details.

The next question from the line of Kunal Dhamesha from Emkay Global.

So first question on the quarter 4. So will we see the similar kind of profitability seasonality in Q4 as well, which will see -- usually see historically, like Q4 on a profit -- profitability [ FY'21 ] than the other 3 quarters.

Let's say, overall turnover in Q4 is normally down because, let's say, around -- if you see that our first quarter was almost around INR 1,500 crores plus to that. Second quarter was well close to INR 1,400 crores. This quarter is around INR 1,300 crores. I think Q4 numbers are normally lower because Domestic business around that time -- that business is a little lower, but domestic business growth in this year is very good, and that is continuing in the -- but overall numbers will be on a lower side, let's say, overall business in last financial year if we see that Q4 numbers was on a lower side. Our business was almost around INR 1,100 crores. So on that, we will have almost around growth of around that 20% in the third quarter, but those will remain lower than the Q1, Q2, Q3.

Sure. And on the India business, I mean you said, [indiscernible] in September, October time, it will take a lot of price increases. So from a portfolio perspective what proportion of India business would have taken the price increase for this financial year?

Tactically, if you look at overall, I think what we have achieved the business growth in first 9 months is almost around 31%. Out of this, 25% is your volume growth and balance is price growth.

The next question is from the line of Surya Patra from PhillipCapital.

Just on the -- one more clarification on the Dewas plant side. So that you mentioned you have [ delivered ] the notification saying that it will be also commercialized partially. So could you please give some clarity about [indiscernible] what extent and what benefit that it can add to and will that lead to a kind of a standard gross margin scenario because it could go towards some [indiscernible] integration to the existing operation. And then now the operation [indiscernible] when the plant is [indiscernible] operating [indiscernible]. So some [indiscernible]?

Let's say, Dewas, I would say that there are two plants we are putting up: One is a bigger plant and another one our smaller plants. The bigger plant still work is going on, and I think probably even by March, it will -- practically, it will get commercialized only in the month of [indiscernible] or so. There is a smaller plant -- out of smaller plants also one section we have started that commercializing on urgency basis because one of the intermediates we are falling short of, and we wanted immediately the capacity. So even though this plant is not designed for intermediate production, we have started some intermediate production there in one particular section. So that -- we have expedited that so that those -- some kind of shortage which we are facing -- that is taken care of. But the overall commercialization of the entire plant will take -- let's say, in the next financial year only.

I am glad, sir, to get...

It was to be over in the Q4, Q4 the plant would be ready completely, and we will start commercial production from the next month. It's only the small section, we have started some intermediate production there.

Okay. Sir, second question is on the retail distribution. [ Let's say ] we have, in the recent past or some time that on and off, we have been seeing this issue of the distribution, what is the real issue? I think long way [indiscernible] that we had shifted to our own distribution [ channel ] and all that. Still we are taking similar kind of [indiscernible] So is it because of the COVID related [indiscernible] or it is another -- the old issue from [indiscernible]

Basically, we have one distributor in U.K. And in the past also, I think we have faced some problem relating to delays in tenants and therefore, we stopped further shipment. And then they regularize their account and they started paying money on regular basis. But recently, we are seeing the same trend again. And therefore, we have stopped the further shipment to them. And therefore, that has also impacted [ business ]. As far as our own distribution is concerned, the large amount of 5 or 9 weeks, your MHRA the regulatory agency in U.K., we almost launched around 6, 7 products there. But there is a tremendous amount of delays happening in getting the approval because in UK even the [ artwork ] needs to be approved, everything need to -- even though those products are in market now since it's being launched in our own name, [indiscernible] in the name of distributors. Taking those approvals are taking time. And therefore, let's say, out of the basket of almost around 40, 50 products, we have just launched 6, 7 products. So it will take maybe around a year's time to get all the approvals in place and then launch everything. So our own distribution will take some more time. So I see that U.K. business will remain impacted in the -- maybe around at least three to four quarters, it will remain impacted. It's for -- distributors who are -- those we were supplying their payment positions and all that -- they can improve and they can start paying us in time. We will [ not ] make supplies to them.

Just one on the subsidiary side, if you can give clarity about your subsidiaries that is in the [indiscernible] and also during the quarter?

Subsidiaries side, if you look at that -- if it -- because -- numbers, let's say Bayshore Pharmaceuticals has overall done in first 9 months, a turnover of around INR 110 crores distribution. They are taking off the Zenith or other manufacturers and all and announced they contributed a loss of around INR 18 crores in this year. Onyx Pharmaceuticals, has good growth almost around INR 99 crores turnover, they have contributed and they have contributed a PBT of almost around INR 26 crores in this year. So very good profitability overall. Trophic Wellness has done business of around INR 61 crores, and they have contributed almost around INR 14 crores to the. [indiscernible] The other companies are, let's say, Pisgah, we have started now -- the business has started reviving now there. But overall, in this year, they have contributed a loss of around INR 13 crores.

The next question is from the line of [indiscernible]

Am I audible, sir?

Yes, yes.

Okay. Sir, I have actually two questions about the recent acquisition that we made in Lyka Labs. So my first question was the company had Lyka facility. We think we don't have it, right? So how do we plan to scale our Lyka business post this acquisition? And also, they have recently expanded their Lyka capacity. So what kind of turnover in margins you think the company can do at a full capacity?

I get Lyka is a listed company, I would not like to comment on our call on Lyka because I think -- but yes, we have already started some kind of capacities is the basis [indiscernible] and all that exercise is currently on -- and so that will take some more time. And as far as our plan was there to integrate those all products in our markets where we are doing the branded promotions and all that and our hospital coverage in various countries. So all those registration meeting and filing registrations and that process is going on. So that will definitely give us advantage in terms of addressing various country tenders and also give the advantage in terms of promoting those kind of injectables in ROW market and their business itself will grow. So overall, that's the business plan here.

I have one more questions regarding this acquisition. So why -- the question was, the old promoters still have a significant stake. So what kind of management control do you have or will we have over this company? And do the intent to help them reduce the finance cost and raising working capital? Because what I can understand is we enjoy that advantage in the market whereas they have a high interest rates like the debts are at high cost -- [indiscernible]

Ma'am, these information they have already given in our offer document, okay? So whatever their ARC borrowings were there, it was at a very high rate of interest. Most of those orderings are now repaid out of the funds we made available to them. So that was given in our open offer document. So they are [indiscernible] substantially come down, right? And as far as our holding is concerned, the promoter family is holding just 20% because their earning even earlier also, and our holding is slightly above the promoter family holding.

Okay. Okay. So will we have a management control over that?

That is ma'am an already disclosed. So once this open up a formality that just got completed now, payment is pending. Post that, we will be adding our directors on their board, and we will be the promoter of that company. Those things are already made any clear in our open offer document under the takeover regulation.

The next question is from the line of [indiscernible].

Yes, sir, my question has been answered.

The next question is from the line of [indiscernible] from [indiscernible] Capital.

Yes. Sir, I just want to clarify, did you give a guidance of 20% growth in revenue in quarter 4?

Yes, on a stand-alone basis, that is right.

Okay. And sir, the second thing I wanted to ask you is that your domestic growth has been pretty strong and well ahead of industry and most other companies, is it because of some particular COVID related factors or something? Or it is something which is a more structural and can sustain for a fairly long time to come?

We don't have any COVID-related product in our portfolio. So except that hydroxychloroquine last year, whatever sold. It was not a COVID drug. It was repurposed for COVID and so that was the business mostly happened in the first 3 quarters in the last financial year. Between current year, there is no COVID business as far as we are concerned. Overall, I would say that the whole for industry and for us also your [indiscernible] portfolio has done really very well in the current year because of high level of infection from cough and cold and so many other issues and post-COVID complications to the many people and all that. So that has also helped overall the better growth of your domestic market. But as far as -- if you look at past 15 years, we have been continuously growing around 1.5x overall market growth, and that trend is perfectly continuing. And in current year, because of the overall very good the -- overall seasonalities and our promotions and that has definitely helped us in achieving much better growth. So in first 9 months of the current year, we have achieved almost around 31% kind of growth. And in this quarter also, we had a significant growth of almost 23% and overall, even the trend in the month of January was also significantly higher than what we have achieved overall up to now. So overall, let's say, business in domestic is very good, but -- and the market growth was also good, I would say that. And we expect that we will continue to beat the overall pharma market growth by around 1.5x. That's our future guidance. But what kind of overall pharma market growth will remain and all that? We will give the overall guidance only after the fourth quarter.

Sir, your guidance -- your ability to grow at 1.5x -- growth will be driven by expansion of your product therapy targets? Or it will be more of miming the trends and all those categories in which we have already been present.

Let's say by and large, the business growth will come from the categories which we are already in. And I say 15 years back -- 10, 15, 12 years back, we were no where in the field as far as the output for pain management business is concerned. Today, almost around 48% of our business is coming from sales. We have built a lot of other therapies like derma we have built, urology we have built, ophthalmology we are building up. So all those new therapies, urology we have built up. So those kind of therapies are now under built up time, we are further increasing in next financial year, some more divisions on cardio side and on ortho side. So to further accelerate overall growth. Our overall alignment to the growth market is also very good. We have a very small part, maybe around INR 60 crores, INR 70 crores of portfolio, which is on decline. The rest all are in the growth rate. So overall, structural alignment to the gross market is also very good in last decade. And then we don't have too many products in the market. Our whole business philosophy is that to see that product become big. So we don't keep on adding too many products. In a division, we hardly add a product in a year or some line extensions, it's only as a service product, but we don't add too many products in the market because it's basically the market -- India market is highly crowded. The new segment, you see every company in cardio diabetes will have 3, 4, 5 marketing divisions. So doctors who are open really prescribed and give you more prescription, they are so not by the 25, 30 companies, but maybe around -- under dividend for those companies. So every therapy, this is the kind of scenario. So unless you have a focus around the product and very clear conversion plans and retention plan, it's very difficult to get the mind share of doctor and then prescription from that. So market is fiercely competitive and we have to remain focused. So we don't have too many products.

[Operator Instructions] The next question is from the line of [ Naresh Vaswani ] [indiscernible] Capital.

So I want to ask among the cash outflow tax this year and next year, not in done due to accounting tax which you have provided in the P&L. The cash outflow percentage.

Overall, if we say we are a net company. And whatever net rate of tax is here, that is what is the cash outflow is there. But we are not up for the new rate of tax because still we have a lot of net credit line in the books of account. Some net credit is not in books of account because earlier we were not recognizing the net credit assets. So overall, we have -- currently, after filing the last financial year's written, I have almost around INR 365 crores of net credit still remaining in the books overall, which is credited there. So probably in the next financial year also and year thereafter, we would continue to remain in the MAT. And thereafter, we will have to offer a tax rate of 25% and [indiscernible] That's the broad guideline I can give you at this plan. Currently, let's say, provisions are made at the rate of, I think 32%, 33% tax rates are there, out of which some credit or utilized out of MAT and tax payment is around 17%, 18%. Probably we will definitely fund at the 25% kind of tax rate. Current ongoing maybe 18%, so that will go to around 25% after 2 years.

The next question is from the line of Nikhil from SiMPL.

Am I audible?

Yes. You are audible.

Just one question. On the promotional market, sir, if you repeated like for last 3, 4 years, our savings has been a band of INR 350 crores to INR 400 crores. How do you see the market evolving? And is it like for last 2 years, has COVID been a big issue? COVID has been a big issue, but you see the original growth rate of the market sustaining to what it was? Or any new markets which we are looking to enter?

Nikhil, what this kind of business get -- promotional market business get impacted by a lot of factors: The country's stability, the currency stability, that all impacts. And last few years, even though we had a significant volume growth. Overall, the numbers has not -- revenue numbers have not grown to a better extent mainly because of CIS market. The reason used to be around 33% to 35% level. It went up to 70%, 75% level. Prices in that market has not gone up 100% or maybe more because you can increase prices only to the extent of inflation there. So basically, that advantage got diluted. [indiscernible] remain at around that level, probably the business should have been double and everything could have added to the margin. So that has not happened. But in the meantime, we were building the business in other geographies now let's say, [indiscernible] African markets are now becoming almost at par with the CIS market. So CIS business has not gone in terms of overall number, even though the quantity is just maybe more than double there. But in terms of your overall -- the revenue numbers have remained more or less at the similar kind of level. So we have been growing around 15% year-on-year on this [indiscernible]. In current year also, we expect that kind of growth excluding the exceptional business in last financial year but on chloroquine, hydroxychloroquine shipments to the various, all these commercial markets. So currently also, the business growth in these markets around 15%. And for the whole of the year, we expect that kind of growth to be there. But excluding that kind of exceptional busines chloroquine and hydroxychloroquine.

Okay. And secondly, on the subsidiary, sir, the number which you gave, just want to understand because if I separate the control and the stand-alone, a large part of the impact has been because of the subsidiary. So any way where we are thinking of like controlling the cost? Because sales growth for last -- like even for 9 months, if you see the sales rate has been pretty good, but the cost has been significantly impacted. So anything which you are thinking? Or is this the kind of performance will sustain?

So current financial year, the cost has definitely moved up. And it cannot be compared with last year because last year's, there was hardly any kind of promotional cost there. And manufacturing costs, because of overall inflations and energy cost and overall, a lot of external factors, shipping costs and all that has gone up. Margins could have improved significantly, but material costs, this year, has significantly gone up. Rates have significantly gone up. In spite of that, we could maintain the overall gross margin level is only because of on continuous basis, regionally the prices in the market and wherever the cost has gone up, we have tried to see that how do we take the price increases and [indiscernible]. So overall, the cost level is definitely moved up. As far as subsidiaries are concerned, few subsidiaries are making very good profits and few are making losses. I would say that as far as your -- [indiscernible] is concerned that much better improvements will come in the next financial year. Ramdev also things have started improving. Onyx is doing very well. We have further expanded there. And I think business growth will continue to remain very well. And as far as Bayshore is concerned, it's [indiscernible] trading. So it's maybe some kind of onetime, some losses there on Bayshore account one particular product, but that's not a normal thing. Last year, their net profit and in next financial year also, they are likely to be profitable. And between the stand-alone and consolidated, the difference is just I think this is getting offset. There's a minor difference of INR 2 crores, INR 3 crores. The stand-alone profits are higher by a few crores compared to the consolidated.

What is this onetime loss in ratio if you can just...

Basically, some product-related now loss -- inter-trading, some loss is there.

The next question is from the line of Tushar Manudhane from Motilal Oswal. Mr Manudhane, hello?

Am I audible.

Yes, now you are.

Sir, just on the other expenses, which has been higher both quarter-over-quarter and year-over-year and considering the logistics cost remaining at the elevated level. So INR 340 crores is kind of a runrate to go for next few quarters? Or you see this number coming down 1Q FY'23 onwards?

Tushar, more or less, whatever the other expense are shown in the current quarter, that run rate will continue.

And then next year, given that it will be more of a full budget marketing promotion expenses assuming COVID don't come back then this whatever annual increment linked increase can be expected?

That is correct, right. So this year, whatever expenses are shown, all field staff expenses are back to normal in the current 9-month period. So those expenses will also continue in the next financial year, plus whatever inflation-related additional costs.

Understood, sir. And just on [indiscernible]

If the things get normalized at China level and all that geopolitical risk is not there. Logistic costs cannot continue to remain at this high level for a very long period of time. Energy cost, which has gone up, probably it's an exceptional thing which has happened in this year. So it will remain some kind of elevated level, but some reduction would happen. Only con cost have started coming down. So -- but petroleum are still at high levels. So FO and all those costs is right. So it all depends on a lot of the geopolitical issues and how China factor gets. But overall, I feel that on material cost wise, somewhere the price reductions will start coming in from the first quarter of the next year, the prices may go down a little bit.

Perfect. And just on Losartan while we've been validating the process and subsequently more or less, we are [ sandwiched ] in terms of the removing of [indiscernible] impurities. But the existing products in the market that don't carry any risk of recall, right?

No, there has been no recall.

Today also many countries allow the old processed part. In many countries, [indiscernible] the QPs are not even included today. It's only in Europe. But following Europe, a lot of customers started taking the newer material. Even their country requirement is at [indiscernible] , but they are asking for the lot which is not having this impurity.

Understood. And just lastly, if I may ask on institutional anti-malaria with -- so considering the 9 months sales of almost about INR 240 crores, and then we're guiding for INR 350 crores. So the quantum in the fourth quarter is expected to be reasonably higher that's -- this is new contracts which you have got? Or it's more of a pending contract which are to be executed more imports?

Mostly pending, Tushar, you can't get a new contract and execute everything within 3 months, not possible.

Is there some kind of shipment...

Shipment, department delays because of container, those things are also factored.

[indiscernible] business in this quarter was lower because there was a media field and almost around...

It is a planned shutdown. So there was a production loss also because of that planned shutdown.

The next question is from the line of Parth Dalia from DAM Capital.

My first question pertains to the India business. Could you share some light on the growth of our domestic business for the next financial year given the high days for the company?

Mr. Jain has already informed during our next quarter compound, we will give guidance for the next financial year. So as far as this financial year and the last quarter of this financial is concerned, the guidance is already given.

Okay. And the second question would be on the [indiscernible] share and the price hike. So what is the current share of our India sales that falls under the price control?

About 25%. And whatever price increase will come because of this price index growth, every company for that matter will take that kind of a price increase, and we will also take from April 1.

Our calculation suggests that we may get around over INR 50 crores kind of price rise on [indiscernible] from [indiscernible].

The next question is from the line of Saion Mukherjee from Nomura.

Sir, on the domestic market, what is the MRs trend that you have and expansion plans that you can talk about?

We are currently around 5,000 MRs and probably the 3 more divisions we are adding. So next year, the overall expansion may be around 700 to 800 more people.

Okay. And sir, this expansion is primarily sort of aimed at reaching more doctors and more geographies. That seems to be the focus, right?

Also the rheumatoid arthritis and osteoarthritis and all the [indiscernible] segment is our focus area, and we have significant market share and leadership there. We want to further fortify that. And therefore, we are adding more and more division on ortho side. So that's the one particular step we are taking. And on cardiovascular front, also the CTD range has been very well and I think CTD brands -- with that brand almost reaching around INR 130 crores in current year. Our reach is increasing with the cardiologists and overall in that market. And therefore, to encash that we are adding people. And also at the high-end cardiology, we are adding another division, which will have a lesser number of people. So there are two divisions are being added on cardio-diabetes side and one in ortho side so that will be the expansion next year. So the overall range from 5,000 currently may go up to around 5,700 or 5,800.

Right. Sir, the growth that you are witnessing, I mean, I'm just wondering if it is possible to sort of [indiscernible] like how much of it is coming from, let's say, new prescriptions that you're generating from a new doctor, sorry, versus higher prescriptions from existing doctors?

I think practically everywhere 80%, 20%. 20% of doctors will give 80% of prescriptions. What is our focus remain is we try to convert one product prescribers into 2 product prescribers, 2 into 3, 3 into 4. But the major business, what you get is from the core doctors. If I get Zerodol prescription from ortho, that has much more value compared to Zerodol prescription from a GP because ortho can write -- he is writing my product, you can buy 25 prescriptions compared to GP writing one prescription. So whole focus is on core. So whether it's cardiology or all. So it's not -- it doesn't matter that if more number of doctors prescribing compared to that, if a core doctor prescribes that we have business multiplier affected much more. So our focus is around core.

Sir, would you say since 80% of your, let's say, Zerodol prescription will be coming from ortho specialist?

Let's say Zerodol is covered by various specialties. Ortho, it's one of them. And ortho is the major prescriber...

Dental is there, ENT is there...

Dental is there. Practically and even -- Zerodol even consulting physicians because the people with low back pain kind of issues or maybe soft tissue pain problems and all will not reach to ortho. So each product wise in that also there is a sub segmentations are there. So maybe on those kind of products, consulting physicians becomes a major prescribers. So it's all depending on each product offering and who are the core for that particular product line.

Right. And sir, just one more question. Strategically, you seem to be sort of developing your strong relationships with some of the specialists -- so why not sort of launch more products? I know you mentioned that you're already selected in the products we launch. So how do you leverage the relationships either through acquisition or your own launches. Any thoughts here to sort of go beyond like 2 or 3 big brands, which are ending the deal very well for you?

We leverage relationships like also we have built a very strong relationship. And there's a limitation to add the product in the existing divisions. And therefore, we are starting a new divisions and new divisions will have faster success rate because of efficient relationships. Similarly, we are building a very strong franchisee now in cardiac. So we are now leveraging that through adding more divisions so that -- but we will continue to remain focus on the products because the market is fiercely competitive. You can't relax. Otherwise, we will also start leading the existing businesses because if you go and talk of 10 products to doctors he may not remember one. It's very difficult because he is also hard pressed and that there are 10 number of reps, they're choosing me to prescribe. So if you are focused then, you get a good amount of prescriptions. And then you keep on converting one product subscriber to 2 product, 2 product to 3 product, 5 product, 6 product subscribers. And that's how you start giving the significant amount of business. So then those kind of doctors becomes a core doctor for you. So there will be money to each amount of -- each core doctors who are writing for us that no visit should be need then. We continuously guide them that which are the product to be prescribed to them. So and all those kind of things are continuously monitor. We structuralized their monitor by the company.

The next question is from the line of Vinod [indiscernible]

My question is regarding European investment company called [indiscernible] and then you mentioned that you want to enter into a lucrative Lyka Labs business. So sir, I just want to understand like how big is this opportunity for Ipca and how you want to grow further in [indiscernible]

It is too early to say how big is the opportunities, and there is lot of gestation period also in building this business. What we will be now initially doing is to register the products which are manufactured by Lyka in the ROW market where we are operating through our own field force. We are doing that business -- branded business in about 40 countries in CIS, Latin America, Africa, Southeast Asia and all. So that is our initial work, what we will be doing, but it takes time, actually, you develop a product, you develop -- you file the dose registration, there could be inspection triggered, registration takes time. So it is a business having a lot of gestation period, but we have already started that work. And that was our interest in acquiring this company.

And Lyka -- we are doing by way of further expanding the vitalization capacities and all. So that work is going on. It will take some more time.

That's fine, sir. But from opportunity side point of view, how you see in the short, medium or long term.

I think [indiscernible] those [indiscernible] Lyka would like to reply. It's a listed company, we will not reply for Lyka.

Your next question is from the line of Surya Patra from PhillipCapital. As we have no response, we are moving on to the next question. The next question is from the line of Kunal Dhamesha from Emkay Global.

So just one clarity on the MAT credit. So sir you mentioned that we have INR 360 crores in MAT credit, the last income tax filing. So I believe that for FY'22, will we be roughly INR 180 crore out of that and then for FY'23 would be INR 18 crores utilization at roughly 15% of our [ CBT ] in each of the year. So wouldn't you say that in FY'24 will be back to the new revenue of 25%?

Broadly, Mr. Jain said the next 2 financial years, that is FY'23 and FY'24. More or less, we should be in the MAT only. So post that, we may go for the new revenue. That is out of sold actually.

But does that assume that some of the off booked MAT credit, you will be able to utilize. Because the MAT is not basically adding the operate. If we had INR 360 crores MAT credit and we'll be utilizing INR 180 crores for FY'22 and INR 180 crores for FY'23, then for FY '23, you need to utilize off-book MAT credit, something like that?

Overall, credit is around INR 360 crores, out of which some credit will be applied in current financial year, and a major part of that will be applied in next financial year thereafter because there are some kind of incentives are still there on -- particularly on [indiscernible]. So one plant that reduction is going away -- the 10 years are completed. Second plant is still there. So it's not as simply numberical that half is utilized this year and half is utilized next year. It will depend on all amount of tax calculations which are the incentives which are still available. So I would say that March '22 and March '23, probably in the 2 years, the whole credit may be utilized. Whatever remaining credits are there that play because once you opt for the new reason that those credits will left. And whatever -- therefore, we are not a lot of credits, which are not there in which because earlier we were not accounting. We have not taken those credit in books because we really don't know today that how much of those credits will get less. It all depends on CapEx calculations and overall profitability and what kind of overall incentives are available and all that. But definitely, I think current year as well as next year, we are on MAT. And thereafter, even if there are credit flat and this is small credit, we will get less because once you are open for new tax reason, either you can have incentive nor you can have utilized the past credit. So that will all that -- and we made a provision on defer books also in the exit a higher rate because current rate of tax, since we are at 33% now because we are not opted. So some kind of those deferred tax credits will also get reversed in books. And that figure may maybe around INR 80 crores, INR 90 crores or so that deferred tax liability will get reversed. I don't have right now the exact calculation, but probably I'm telling you right now, these are the numbers.

Ladies and gentlemen, that was the last question. I would now like to hand the floor over to the management for closing comments.

Of course, we are already -- whatever questions were asked, we have already answered. I don't think there is anything further to add to what we said. Thank you so much.

Ladies and gentlemen, on behalf of DAM Capital Advisors Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

Thank you.