J. B. Chemicals & Pharmaceuticals Limited (506943) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to the J. B. Pharma's Q4 FY '24 Earnings Conference Call as on the 21st of May 2024. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Jason D'Souza, Executive Vice President at J. B. Pharma. Thank you, and over to you, sir.

Thank you, Dorwin. Welcome to the earnings call of J. B. Pharma. We have with us today Nikhil Chopra, CEO and Whole-Time Director; Kunal Khanna, President, Operations; and Narayan Saraf, the CFO at J. B. Chemicals & Pharmaceuticals Limited. Before we begin, I would like to state that some of the statement in today's discussion may be forward-looking in nature and may involve certain risks and uncertainties. A detailed statement in this regard is available in the Q4 results presentation that has been sent to you earlier. I would like to now hand over the floor to Mr. Nikhil Chopra to begin the proceedings for the call and give us his opening comments.

Thank you, Jason, and good afternoon to all of you, and thank you for joining us to discuss J. B. Pharma's quarter 4 and full year performance for FY'24. During today's interaction, I shall walk you through the business performance for Q4 as well as the full financial year 2024 and shall throw some light on our outlook for the business for the coming year. Dear friends at the onset, I'm pleased to share that J. B. Pharma achieved all-round outperformance for quarter 4 as well as for FY '24. And our reported revenue for quarter 4 FY '24 was INR 862 crores, recording a healthy growth of 13% year-on-year and closed the year with INR 3,484 crores of revenue, registering growth of 11%. Overall, top line was impacted by strategic choices we made with respect to our South Africa business, excluding which revenues grew at 17% in quarter 4 and 14% in FY '24. When it comes to profitability, our cost optimization efforts and favorable product mix aided in improving it significantly. Gross profit margins expanded by 130 basis points in Q4 FY '24 to 65.2% and for the year it expanded by 320 basis points to 66.1%. Operating EBITDA, which is EBITDA excluding noncash ESOP cost, witnessed year-on-year improvement to 23% to INR 939 crores in FY '24 and 16% in Q4 FY '24 to INR 210 crores. J. B.'s balance sheet further strengthened in the year, and I'm glad to state that we are now net cash positive company. There has been a reduction in gross debt which was INR 357 crores as on 31st March 2024 versus INR 548 crores as on 31st March 2023. ROCE has also improved to 27% in FY '24 versus 21% in FY '23. Now let me take your attention to our business performance, starting with the domestic business, which grew strong to INR 465 crores in quarter 4, registering growth of 22% and INR 1,897 crores in FY '24, recording a healthy growth of 16%. This was driven by strong brand portfolio, meticulous execution basing on the field productivities and higher share of chronic products. I'm pleased to inform you that the ophthalmology portfolio integrated smoothly with J. B. Pharma's DNA in January 2024 and has already started registering delivering growth. We remain optimistic about our ophthalmological business. Our MR productivity metrics has almost doubled in last four years, which stands to 7 lakhs at the end of FY '24, which is per month per medical rep. J. B. has retained its position as one of the fastest-growing company in top 25 in IPM, and we have outperformed IPM at 10% versus 7.6% industry growth as per IQVIA MAT March 2024 data. I am also glad to announce that the company's five biggest brands now rank among the top 150 in the industry according to IQVIA MAT March '24, which is Rantac, Metrogyl, Cilacar, Cilacar-T and Nicardia. The portfolio of brands that we have acquired has also given us momentum. As per IQVIA MAT March '24, our Sporlac franchise recorded a revenue of INR 122 crores growing at 33% CAGR in three years. Azmarda, our heart failure pill, dropped INR 75 crores, and Razel have shown 24% growth year-on-year. Our latest acquisition of ophthalmology is integrated well and has recorded 11% growth month-on-month in March '24 as per IQVIA data. I would also like to emphasize that all our big chronic brands have registered strong volume growth. As per IQVIA MAT 2024 March, Cilacar registered volume growth of 10% in FY '24, Cilacar-T registered [ 10% ] volume growth and Nicardia registered 5% volume growth in FY '24 and Razel also recorded 22% volume growth in FY '24. Also, in our domestic business, now the cardiology overall market being as high as $3 billion market, and we are now 8th rank company, surpassing INR 1,000 crore revenue in our chronic portfolio MAT March '24, and we are the fastest-growing company in cardiology market today as March 2024 data. Our international business delivered revenue of INR 397 crores in quarter 4 FY '24 and INR 1,587 crores in FY '24 annually. The international business was impacted by strategic choices we made with respect to South Africa business, plus, whereas the reported international business revenue at 4% in quarter 4 without including South Africa business it showed an impressive growth of 15%. In South Africa, as you will all appreciate, we have lowered our tender business and we are emphasizing more on improving the mix and margin profile. So today, as compared to three years ago, where the private business contribution was 40%, for the year FY '24 our private business contribution to South Africa business has gone up to 70%, that is where we stand. U.S. and Russia delivered healthy growth with international formulations growing at around INR 267 crores for quarter 4 FY '24. CDMO grew at 9% year-on-year to INR 109 crores in quarter 4 and closed the year at INR 432 crores in FY '24. CDMO accounted for 27% of overall international business as compared to 21% in FY '21. Also happy to share the CDMO business has entered -- now we have entered into European market with a couple of strong consumer players in the world of immunity and cough and cold lozenges. For last three years, J. B. Pharma has consistently delivered strong performance every year. Overall, the revenue has grown at CAGR 19% since FY '21, while the domestic business has more than doubled during the same period. J. B. Pharma marked its presence in some of the most progressive therapies as 65% of our domestic business gets generated from brands which are in fast-growing therapeutic segments. Besides this, CDMO business almost has doubled over the same period. Domestic business and CDMO business today both contribute around 67% and the total revenue as against 55% in FY '21. This has helped operating margins and ROCE. Operating EBITDA has grown at a CAGR of 19%, while operating cash flow have more than doubled to INR 801 crore in FY '24 from INR 315 crores in FY '21. Operating cash flow as a percentage to operating EBITDA improved to as high as 85% in FY '24 from 56% in FY '21. Net working capital has reduced from 98 days three years ago to 87 days in FY '24. The objective of sharing this data of last three years in terms of -- is more to share with colleagues on the call is how J. B. as a company -- J. B. Pharma as a company has progressed over last three years consistently, not only in terms of top line, but, overall, in EBITDA, in profits, and also in net working capital and operating cash flow. Concluding, I would like to state that the domestic business will continue to outperform the IPM by 200 to 300 basis points. The domestic business share in the overall business will continue to increase while CDMO business will continue to gain traction. We expect both domestic and CDMO to cumulatively account for 75% to 80% of overall business in midterm. Apart from this, the focus for our international formulation business is to further improve profitability, the right business mix and a progressive portfolio. With this outlook, I'm pleased to revise our operating EBITDA margin guidance in the range of 26% to 28% as against our previous guidance of 25% to 27%. This upward revision is despite the addition of ophthalmology portfolio, which will be limited gross margins in the short term for the company. I would now like to end my opening remarks and shall be open for the question and answers from all our colleagues on the call. Thank you all for patiently hearing.

[Operator Instructions] We have the first question from the line of Rashmi Shetty from Dolat Capital.

Just want to know a bit more on the CDMO segment. That the first half is normally heavy, second half is normally lower because the seasonality plays a role, but despite that we have given a strong quarter 4. So how should we really look at it next year in terms of the annual growth? And also whether it would be still episodic in nature, spread across the quarters? Or how it would be -- whether we would be adding new geographies, whether we would be adding new categories like now currently we are into immunity and cold and cough segment. When are we going to add other products like motion sickness and the vitamins and all? If you can give more color on it.

It's a good question. In terms of the world of CDMO, if you look at -- we could generate the revenue of close to INR 432 crores for the current year. This business should grow between 12% to 14%. And you should see probably high teens growth happening quarter 3 onwards, that is October onwards. That is how our order book is placed. More so what I spoke earlier that we have got into the world of immunity and immunity lozenges, also our melatonin-based lozenges, we should start seeing them commercialize probably first quarter calendar year FY '25. Newer geographies, what we have entered is in the world of Europe, where we have commercialized our lozenges, but it's a small start. Probably, God willing, you should see our branded lozenges also available in the U.S. market at the end of the year, but it's a very small order. It's a very small start. That is what should happen. But we are very much bullish in terms of this business, which is $50 million because the capacity that we have is close to 2 billion lozenges, which we can manufacture. Last couple of years, we've been manufactured close to 1 billion lozenges. And this business almost has doubled last to last year. For three and half years ago, this business was contributing 5% of the revenue, $10 million. Today it is contributing 12% of the revenue. You have to also understand that this business has got high gestation period. It takes time for any new lozenges to being commercialized because the way it works with the reference sample we have to match the product, develop the product, share with our partners. They will do their own research in the market, come back to us. There will be more tweakings to the product. That is how this world behaves. But first-in-class immunity lozenges are already there in the market. Melatonin lozenges, you should start seeing commercializing probably year-end or FY '25 calendar starting year. And probably also, you should see our pain lozenges [ flurbiprofen ] which should also see commercialization probably sometime in quarter 2 FY '25. That is where we stand as a company in the world of CDMO.

Okay. And in the U.S., we will be supplying through the channel, I mean retail channels or it would be directly to the partners? How the business model is over there?

It will be the same model as what happens in other parts of the world. It will be through one of our partner.

Got it. Got it. And sir, then what would be your CapEx guidance in FY '25 and FY '26, like after whatever CapEx we have put in FY '24?

We are already covered for CapEx as far as our CDMO business segment is concerned. And specifically with respect to lozenges we did make some investments in the last one year as well. As stated earlier, we have a capacity of 2 billion lozenges annualized. Currently, we are running at a run rate of 1 billion lozenges. So we have adequate capacity to kind of ramp up our business. Whatever bottlenecks were there with respect to packaging, apart from manufacturing, have also been taken care of in the last 12 months.

So now it would be just a maintenance CapEx, right?

That is correct.

Got it. And one more question in the domestic business. In the presentation, you have mentioned that prescription growth is around 20%. Would you like to call out the ratio of specialists versus GPs or if you can give some color that majority -- how much percent is basically coming from the specialist only?

We would not like to particularly call out any specialists versus generalists. The growth has been in line with our focused therapy areas and within focused therapy areas, whichever prescriber category we are covering, we have seen significant growth in that. Specifically cardiologists, nephrologists and consulting physicians have been the key growth drivers for us.

Got it, sir. And just one last question. For your top products, what I'm seeing that they have really grown very well this year. Just want to know that especially in your Cilacar and your cardiac products, whether you have increased the market share or the entire market or the entire industry -- representative industry is only growing for those popular products?

So overall, if you look at -- Rashmi, if you look at overall IPM, when you look at 7.6% growth, the overall growth is driven by what is happening in the chronic space, which is 40% of the market, $25 billion market. And there are many other companies who are doing good work in the world of chronic space. But if you look at J. B., our market share in plain Cilnidipine -- our market share in Cilnidipine, Telmisartan, all this market share probably quarter-to-quarters have only gone up. Nicardia, I don't want to tell because, Nicardia, we hold 90% market share. So actually what we can achieve is only 100%. That is where we stand. But equally Razel, rosuvastatin, though we are low in the ranking, but the growth has been what I shared earlier, the growth has been in terms of volume, 20% plus volume growth in Razel also. And equally, in the world of heart failure, Azmarda pill, there also our performance has been fair. So overall, our chronic portfolio, what I shared also, is today we have crossed a benchmark of INR 1,000 crore revenue in cardiology and we are the fastest-growing in the cardiology segment with all our jewel products, whether it is Cilacar, Cilacar-T, Nicardia, Razel, Azmarda, that is where we stand as a company.

[Operator Instructions] We have the next question from the line of Tausif from BNP.

Sir, my first question is on India business ophthalmic brands that are already five months into integration. What has been the key learnings and challenges you have been seeing because this is something a new segment for J. B.?

See, the good thing is that there has been seamless transition. And the fact remains that when we acquired the brand, there was team transition also which happened, right? So we've got good support from our principal partner, Novartis, as well in managing this transition. The products are pretty much the same. The sourcing of these products have not changed, and we are seeing a good uptake happening because of them entering the J. B. DNA. So we are fairly comfortable with what we have seen in the last two to three months and are very, very optimistic about how we will kind of drive growth in this portfolio, given the fact that we believe that these were underleveraged and underinvested brands earlier.

Sir, any plans to increase the MR count in this business?

Yes. So we have plans to increase the MR headcount going forward. Within the -- in the erstwhile organization, this portfolio was being promoted by close to 75. Already the ramp-up has happened, and we have gone up to close to 104. And slowly but gradually in the coming year, we will kind of further ramp this up. But this is a steady state number, which we will work with for the next six to eight months.

Sir, my second question on the CMO segment, you have guided a growth of 13% to 15% for FY '25. Can you highlight this large part of growth will be driven by new product launches or there's still room for going to directly new regions?

So it will be a combination of both in terms of the volume growth that you will see with some of our existing partners, existing products. And that is why I told you in second half of the year, probably October onwards, you will start seeing some element of growth coming from our new launches, which will happen. And at the right time, we'll be more than happy to share with the group.

The next question comes from the line of Tanmay Gandhi from Investec.

Sir, firstly, on the India business, right, so you have guided for overall revenue growth of 12% to 14%, but the recently acquired ophthal portfolio itself should lead to 5% to 6% growth in FY '25, right. So is your guidance on the organic side or that includes ophthal portfolio as well?

This growth, 12% to 14%, is outside ophthal.

Okay. So is it fair to assume that overall consolidated growth could be in high teens?

Yes, you can take that number, yes.

Okay, sure. And secondly, now that we have turned net cash positive, right, so are you again on the lookout for acquisitions? And again, we have been seeing a lot of in-licensing deals announced by other companies as well, right. So are you also looking for those kind of opportunities or you are more keen on acquiring brands?

It will be a mix of all things happening across. First of all, the focus will be on what we are trying to do with as is the portfolio that we have got, how can we make it big. Equally, we are open to anything which is available in the market at the right value. And if we think that we can make it grow better as compared to where it stands. And thirdly, there are some initiatives that we have put that we being now a dominant company in the era of cardiology, probiotics, ophthalmology, probably, God willing, we may get into the world of in-licensing, but it will take its own time.

Yes. And sir, lastly, what kind of contribution are we expecting from new launches over the next two years?

So if we look at this year, our new product contribution to overall growth is as 3%, which will continue to happen.

Okay. And so far I think this was largely led by our legacy brands, right, where we have extended the life cycle through new SKUs, right? So will that continue? Or you're planning to launch under new brand franchise or new product category?

70%, 80%, you will see us doing much more in the existing therapeutic segments where we are present.

The next question is from the line of Abdulkader Puranwala from ICICI Securities.

Sir, my first question is pertaining to the MR productivity. So in the last two years, if you see, we have increased the MR count. We added close to 500 MRs and despite that the productivity [ hasn't stopped ]. I mean going ahead, how should we see the productivity ramp up happening here with and without the ophthal portfolio? And in terms of the newly added MRs, is the entire traction visible in this number what you posted in '24? Or that is still expected to jump in the years ahead?

Our productivity, what I shared in our -- in my commentary is now close to INR 7 lakh. And you should expect the productivity as is without any addition to grow around 8% to 10%.

Sure. Sure. And sir, my second question is with regards to the growth. So India business, as you're guiding, would be, say, somewhere around mid-teens. And on the CDMO side, also a similar kind of a guidance. So that is the kind of aspiration rate where we expect to grow in the medium to long term? Or there could be some surprise coming from the international market, and that will lift up the overall growth?

So what I shared in my commentary, India, CDMO and our emerging market, which is RoW, should grow between 12% to 14%. U.S., Russia, South Africa should grow at around high-single digit, around 8%, 9%. Overall, you should see us growing as a company 12% to 14% top line outside the ophthal portfolio.

Got it, sir. And sir, just a final one, if I may. So considering our recent track record on the acquisition side, so what that would interest us in terms of the therapeutic exposure in the Indian market? Any specific asset or any specific therapy where you'd like to increase your dominance further?

See, one year ago, we were not knowing that we will do acquisition in the world of ophthalmology. It all will depend upon what is available in the market and does it suit us. We basically go for a quality asset, not looking at as is whether the asset is growing or not. And if we see any opportunity of an asset which is available, which is quality, the market is growing at a good valuation that we can get, we will certainly have a look at it.

Sure, sir. And just a final one, if I may. So on the U.S. front, on the CDMO business, you said there would be a small order which you would be dispatching this year. So sir, any outlook here? I mean, is some kind of a batch order quantity where the customer initially wants to try and then that will relate to some bit of an order scale-up. How should we look at the U.S. as an opportunity for the CDMO business?

It's too early to comment on. We are working on a couple of projects, one of which is likely to get commercialized soon. We'll see how the data passes, and we'll have more clarity further going.

[Operator Instructions] The next question is from the line of Neelam Punjabi from Perpetuity Ventures.

My first question is on the domestic business. So I just wanted to understand what would be our expected revenue for our ophthal business in the next -- in FY '25?

For the ophthal business, we are targeting monthly revenue run rate of INR 15 crores to INR 16 crores.

Got it. And the acute business has been pretty weak recently. So how do we see this business going forward?

The acute business last year was largely impacting because of muted season. As we see the trends, we believe that the season will be much better this year. But of course, we need to have a guided approach towards that. If the season is better than last year than we'll certainly see growth coming in from acute as well apart from our chronic growth.

Got it. And on the PCPM side, sir, since we've reached about INR 7 lakhs and you all guided for 8% to 9% -- 8% to 10% growth in that, are we planning to add more field force for the domestic business organic portfolio?

Not as of now. No.

Okay. And lastly, what is the targeted -- what would be the ESOP cost for FY '25?

Yes. The ESOP costs for FY '25, we are expecting it to be in the range of around INR 40 crores.

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

I have two questions. First, many Indian branded generic companies are now actively looking at trade generics. So Lupin is a recent example, right? However, to my knowledge, there is no policy in India where drug can be dispensed without a prescription or a shopkeeper in a remote village dealing directly with [indiscernible]. So what do you think about this trade generics movement and that has kind of started with a renewed vigor in the branded generic space, Lupin being an example, recent one, Cipla been doing it for ages. And second, on the CDMO segment, do you believe that medium to long term, the proposed U.S. BIOSECURE Act can help grow this segment significantly? In other words, can BIOSECURE be an additional tailwind for this CDMO?

So I'll take the first question. See, trade generics is something which is not new. Companies have been evaluating this segment. We have always maintained that it will be a very, very small proportion of our business. Whatever we are doing is to evaluate some markets where the conventional distribution model cannot reach. And that's how it will be for us as well. We primarily believe more in branded generic space where the margins are much more accretive. So it's going to be a very, very small part for us going forward as well. And we don't see the fundamental nature of the market changing much. Branded generics will continue to be the dominant segment.

And on your second question, in terms of U.S. BIOSECURE Act, I think that does not have any impact because much of the lozenges -- majority of the lozenges that we supply to our partners are more herbal in nature. And it's a business where our partners play that in the consumer world. So limited comment that we can give on this.

Right. And there is no competition from China that we are facing on the lozenges, right? So that can have a beneficial advantage?

No.

The next question is from the line of Maulik Varia from B&K Securities.

I had one question. Just wanted to check what is our outlook for Azmarda for FY '25 and going ahead? And if I'm not wrong, it seems the brand is slightly under pressure as per the IQVIA data. Please correct me if I'm wrong, but I just wanted a little outlook on the same.

You're right in terms of assessment of the competitive intensity has increased in this space and last year saw a huge influx of brands, which did put our market share under some level of stress and pressure. But the good thing is, if we see the trends over the last four months, our market share volumes and value have pretty much remained steady. And going forward, we believe that the market will further consolidate only. Any LOE event -- the first seven to eight months, there is attention from a lot of players, but then the market pretty much consolidates between the top four to five players, and that's where we operate. Overall value-wise, if we really look at our share, we are still operating at 14% to 15%. The segment is progressively growing. And we also believe that going forward, we will see a good volume growth in this -- [ our new ] segment. So we are fairly confident about the prospects of Azmarda in the future as well.

[Operator Instructions] The next question is from the line of Alok Dalal from Jefferies India Private Limited.

Question on EBITDA margin. So Nikhil, what is the guidance for EBITDA margin for FY '25?

Alok, the EBITDA margin, what I shared in my commentary, is ranging -- operating EBITDA margin is 26%, 28%.

Yes. And what were the levers for margin improvement over FY '24?

So as I shared earlier in my commentary, overall, the product mix that you will see more improving over a period of time, which has been happening in last couple of years, more gaining market share in our chronic portfolio. Second, overall efficiency program that we continue to run overall in the company, whether it is productivity on the field, larger bed sizes, to bring efficiency, better vendor management, that will continue to happen, which will bring savings, which will probably help us to drive better gross margins. And last but not the least is the journey that we have taken in the South Africa business where we will see some impact in top line in quarter 1 this year. But then going ahead, your absolute EBITDA margins will only go up north in the South Africa business, which will overall in a more significant way help to range between 26% to 28% EBITDA margins for overall as a company.

Okay. Nikhil, the ophthalmologic portfolio, will there be a significant improvement in margin in FY '25? Or it is more towards '26?

No, no, no. So I think that has to be clarified. Next couple of years, that is FY '25 and '26, you will see a reverse, probably close to 100, again 50 bps dip in EBITDA margins because of the ophthal revenue. Gross margins, 100 to 150 bps decline you may see. But it will be salvaged by the entire effort that we are putting to improve our overall product mix to drive better efficiency and to drive better margins in our South Africa and Russia business.

And when you refer to 26% to 28%, this is excluding the ESOP charges, right, noncash?

Yes, operating EBITDA. That is what we are looking for operating EBITDA margins, which is 27% this year of INR 939 crores EBITDA absolute value that we have reported, which is 27%. We will be continuing to range between 26% to 28% operating EBITDA margins.

We have the next question from the line of Rahul Jeewani from IIFL Institutional Equities.

Sir, this operating EBITDA margin guidance of 26% to 28%, this obviously has the dilutive impact of the ophthal acquisition. So can you comment in terms of how your base margins would have been or would trend excluding the ophthal portfolio?

See, the way we have to look at this is while the gross margin is close to 150 bps dilutive because of ophthal, we get very strong operating leverage also on ophthal business. And some of the other levers, which we are talking about in terms of improvement of private mix in South Africa, overall portfolio mix in our international business and the fact that our chronic and the domestic business will continue to grow, will help us maintain this 26% to 28% going forward despite the dilution happening at a gross margin level.

So yes, just a clarification on that. So by that, you mean that the ophthal portfolio does not have any dilutive impact at an EBITDA margin level?

That is broadly, yes. But what we are saying is despite the dilution at gross margin level, right, we should be able to maintain this range of 26% to 28%. And on the ophthal side, Rahul, we get strong operating leverage as well.

Sure, sir. And on the international portfolio, with the revenue share for the South Africa private market business now increasing to 70%, have we already seen an improvement in profitability in that business playing out? Or do you think that would come largely in FY'25?

Yes, that we have already seen specifically in H2 of this financial year.

Sure. And apart from the South Africa tender business which you rationalized, on the export side, do you see opportunity to rationalize other parts as well? Or that would not be the case going forward?

That's a continuous process. We have been doing that. You have seen improvement this year and that's a continuous process, which we'll strive to kind of work towards and improve on.

Okay. Specifically, if you can comment in terms of Russia business because that is where I was getting to that Russia -- your own Russia business, your front-end presence in that business, our margins are lower than company average margins. So any plans of rationalizing the Russia business?

In fact, a lot of initiatives were taken in this financial year, and we have seen significant improvement in the profitability for our Russia business. This includes some front-end optimization as well. And also if we club Russia and CIS together, there has been a favorable product mix for our CIS markets. So we have already seen a significant improvement in terms of operating profitability this year, and that will continue to -- we'll continue to witness similar trend going forward as well.

We have one question which has come in on the Q&A panel. So in the Sporlac franchise, we have seen very good growth in Lobun and Pubergen. If the management would like to comment on that.

Primarily, even when we acquired the probiotic portfolio, we were very clear. With Sporlac, we were operating at the mass end of the market and with Lobun specifically it was the niche market of nephrologists. Because of our strong brand equity with Cilacar with nephrologists we were able to capitalize on this opportunity, and that is reflective on the numbers which we see for Lobun. With respect to Pubergen, I think primarily driving the business has helped us achieve scale even in a segment where we were not present.

[Operator Instructions] The next question is from the line of Neelam Punjabi from Perpetuity.

Just wanted to understand what is the reason for higher other expenses during the quarter?

Narayan this side. So very quickly, the reason of the higher other expenditures have been that during the quarter, we have seen a few one-off integration impact, that was one. And then they have been -- historically, if you see -- we clearly see that they are -- the margins do get impacted at the end of the quarter because of lower domestic things. And then there have been few one-off costs, which have been incurred during the year -- during the quarter. So this was the mainly three reasons: one-off integration impact, few one-off costs -- and yes, those are the two major reasons, yes.

If possible, could you quantify the one-off integration and one-off costs during the quarter?

See, we wouldn't really like to quantify. It's not substantial in nature. As Narayan mentioned, there was the one-off integration cost. There is a nominal Red Sea phenomenon because of which our freight costs have gone up. And the third piece is that largely, if you look at Q4, domestic business tends to be soft in March, and that impacts our margin profile. But overall other expenses have been inflated because of -- nominally because of Red Sea and one-off integration.

The next question is from the line of Harith Ahamed from Avendus Spark.

So on the export side, this year, we called out some challenges, especially in South Africa and growth for the segment has come in a bit muted at around 6%. So directionally, for FY '25, how should we think about growth for the export segment? Will we get back to a double-digit growth for the three markets put together?

So if you look at our export business, which is to be contributing 47% of the revenue, two parts of our export business, that is emerging market, which is $50 million, and CDMO, which is $50 million, should grow between 12% to 14%. Equally, Russia, South Africa and U.S. should grow at high-single digit, 8% to 9%. So you should see us growing in double digit for the year FY '25.

Okay. And for the CDMO business, in the past, you had talked about aspiration to reach $100 million of revenues. So does that number still hold and do we have any time lines for that?

So it's a journey. It is what I shared earlier, probably that is a journey that we want to travel for next three to five years with a lot of newer projects being on, newer partners, geographies, which continue to happen. And you should start seeing what we have been talking about all these newer initiatives happening in the world of CDMO probably October FY '24 onwards, and that will continue to happen. And our aspiration of $100 million still holds.

Okay. And last one on the Novartis portfolio, can you remind us on how much of the ophthal market is covered by the acquired portfolio. And when we think in terms of growth, what exactly is the strategy? Are we looking to add MRs? Are we looking to expand coverage of the space? So can you talk a bit about that?

So ophthalmology portfolio today in India is close to INR 4,000 crores, growing at 14%. The portfolio that we have got, which is in the world of glaucoma, pain, antibiotic, anti-allergic covers close to INR 2,800 crore market. Unfortunately, this portfolio of Novartis was not growing probably for the last couple of years. But the aspiration is to grow in the current year, that is FY '25, better than the ophthal market growth. And earlier, I think it was shared that around close to 70-plus people joined us from Novartis. And today, we have a team of 104 medical reps on the ground. Pan-India, we have coverage. We would also like to expand our portfolio in the coming time in the world of dry ice, where the portfolio is not there, antioxidants for ophthalmology. We may get into mid- to long-term in-licensing partnering for some biologics in the world of ophthalmology. Those all things plan we have put in place. And we are very much optimistic in terms of how tomorrow at least we can grow better than the market and improve our penetration with quality eye drops that we have got.

Ladies and gentlemen, that was the last question. I would now like to hand the conference over to the CEO, Mr. Nikhil Chopra, for closing comments. Over to you, sir.

First of all, thank you all for participating in today's call. Once again, emphasizing on the guidance that we have been giving for the company, which is short to midterm, overall business growing at around 12% to 14%; EBITDA growing at around 16% to 18%; and EBITDA margins -- operating EBITDA margins between 26% to 28%. That is where we stand. And both India and CDMO will contribute overall to the growth of the company and overall generating gross margins close to 65% for the coming two years. That is where we stand as a company. Net-net, what we want to do is to overall improve our market share in the portfolio -- progressive portfolio that we have today got in India, which is in the world of cardiology, probiotics, pediatrics, respiratory, ophthalmology. Equally focus and take our CDMO business up north and also look at how do we start launching some of the new products in our emerging market, RoW markets where we have been doing filings for our products. Net-net, creating value for the stakeholders, looking at how more and more number of patients, not only in India, but globally are treated with the help of medicines which are coming from the house of J. B. This is what I would like to conclude. And thank you all, once again, for participating and patience hearing and for the questions that you people asked. Thank you.

Thank you. On behalf of J. B. Pharma, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.