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 '25 Earnings Conference Call as on 15th of May 2025. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Jason D'Souza, Executive Vice President of J.B. Pharma.

Thank you, Ryan. Welcome to the Q4 earnings call of J.B. Pharma. We have with us today Mr. Nikhil Chopra, CEO and Whole-Time Director; Mr. Kunal Khanna, President, Operations; and Mr. Narayan Saraf, the CFO at J.B. Chemicals and Pharmaceuticals Limited. Before we begin, I would like to state that some of the statements 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 FY '25 results presentation that has been sent to you earlier. I would like to hand over the floor to Mr. Nikhil Chopra to begin the proceedings of the call and for his opening remarks.

Thank you, Jason, and a very warm welcome to all of you. And thank you all for being with us today. I will commence with the perspective on our quarter 4 performance. FY '24 is yet another year when JB has maintained strong operating momentum. JB continued being one of the fastest-growing domestic businesses in India as per IPM -- as per Indian pharma market. During quarter 4, revenue saw a rise of 10% to INR 949 crores, while operating EBITDA expanded by 15% to INR 240 crores, underscoring efficiency and execution strength. Net profit notably improved by 15% to INR 146 crores, reflecting improved margins and disciplined cost management. This performance has been underlined by the growth in India branded formulations, our CDMO platform and carefully chosen international markets that align with our strengths. Our gross margin came in at 66.1% during quarter 4, marking an improvement over the previous year. Our operating EBITDA margin stood at 25.3%, representing an increase of 90 bps. I will share some views on our domestic business. The domestic business reported a growth of 11% year-on-year to INR 519 crores in quarter 4 FY '25. As per IQVIA, we have delivered 13% year-on-year growth in the quarter as compared to 7% growth for the industry. As per IQVIA, our chronic portfolio showed 16% Y-on-Y improvement in quarter 4 FY '25, whereas acute portfolio increased by 10%. And our Ophthal business recorded a growth of 22% to INR 56 crores in quarter 4 FY 2. These are all IMS figures. Clearly, we believe that we have one of the most progressive domestic formulation business, which has been demonstrated by our business consistently outpacing industry growth for the last 5 years now. We have also done well on the prescription front with our prescriptions growing at 17% CAGR over the last 4 years. We now cover around 3.5 lakh doctors across facilities. Interestingly, majority of our portfolio is in fast-growing segments, leading to growth prospects. Around 75% of our business is generated from the segments that are progressive and growing faster than the IPM. As we have been sharing in the earlier commentary also, our chronic mix continues to improve, and our chronic business is growing significantly faster at a growth rate of 18% as compared to IPM chronic growth, which is at 10% as per IQVIA MAT March '25 data. In the cardiac segment, we have moved 5 ranks and now are ranked #8 in this therapy. Also, we have 3 brands among the top 20 brands in cardiovascular therapy. Through emphasis on building and scaling brands, we have consistently placed ahead within the IPM on the growth. We have now 6 brands among the top 300 brands in the country with Sporlac being the new entry in the top 300 brands in the IPM. Around 4 years back, we had 8 brands whose revenue was more than INR 20 crores. Currently, we have 25 brands whose revenue is more than INR 20 crores annually and 6 brands where the revenue is more than INR 100 crores annually. We have shown a sustained improvement in the field force productivity, which now stands at 8 lakh PCPM as compared to 4.6 lakh in FY '21. All our 5 acquisitions have integrated well and helped strengthen our position in the industry. The Sporlac franchisee has risen from INR 69 crores to INR 134 crores as per IQVIA MAT '25 data in last 3 years. Azmarda, that is [indiscernible ] is now INR 70 crores and [indiscernible] is expected to grow at around 15% to 20% over next 10 to 15 years. The recent franchisee now is INR 99 crores in 2 years, which was INR 67 crores 2 years ago. Moving to our international operations. Quarter 4 saw a high single-digit growth that is 9% to INR 430 crores for our international operations with CDMO business driving the entire growth. CDMO grew at 18% at a revenue of INR 129 crores for the quarter. Our position as one of the top 5 global CDMO player in Los Angeles reflects the strength of our capabilities and deep relationships with our marquee clients. We saw 6% improvement in our international formulations, that is branded generic business, to INR 282 crores, backed by double-digit growth in Russia and branded generic exports. Going forward, I see our international business gaining further momentum through new product launches, geographical expansion and a more focused CDMO strategy. Our ability to co-create with our global partners supported by world-class infrastructure and R&D capabilities positions us well to drive sustained high-quality growth in this segment. As we look ahead, I remain confident in our ability to sustain growth across our core businesses. In India, our focus will be on scaling our larger brands, deepening our prescription share in recently acquired portfolio and further strengthening our presence in chronic therapy. We expect India and CDMO businesses to contribute 75% to 80% to overall revenues in the medium term. The India and the CDMO businesses are high ROCE and high operating margins, which will further enhance profitability of the organization. At the same time, we remain committed of delivering profitability and we are raising our operating margin guidance for the third year in a row. EBITDA margins will be in the range of 27% to 29%. Once again, I will repeat, we are raising our operating EBITDA guidance for the third year in row, and our EBITDA margin guidance is now 27% to 29%. Underpinning all of this is our continued emphasis on the growth through planned execution. That brings me to the close of my opening script. I would now like to hand over to our CFO, Mr. Narayan, to share his views. Over to your Narayan.

Thank you, Nikhil. A very good afternoon to everyone joining us on our earnings call. Let me take you through the key financial highlights for Q4 and FY '25. For the quarter, we reported revenue of INR 949 crores, reflecting a year-on-year growth of 10%. The revenue mix stood at 55% domestic and 45% international. Our domestic business contributed INR 519 crores, registering a year-on-year growth of 11% in Q4. The international business delivered year-on-year growth of 9% with revenues at INR 430 crores. Our gross profit margin stood at 66.1% with a 90 basis points expansion, which is despite the in-licensed ophthalmology portfolio. Operating EBITDA, excluding ESOP expenses, came in at INR 240 crores, marking a year-on-year increase of 15%. The operating EBITDA margin expanded by 90 basis points to 25.3% in Q4 FY '25. Now on the cost front, other expenditure as a percentage of sales reduced to 23.7 percentage by 80 basis points. We continue to maintain agility in enhancing operational efficiencies and managing expenses effectively. Finance costs saw a significant decline coming down from INR 9 crores in Q4 FY '24 to INR 1 crore in Q4 FY '25, mainly due to reduction in the gross debt. Net profit increased by 15% to INR 146 crores. Now on the financial year 2025. Revenue grew 12% to INR 3,918 crores with domestic to international business mix at 58% is to 42%. The domestic business witnessed 20% growth. And as per IQVIA MAT March 2025 data, JB grew 12% versus IPM growth of 8%. On the international business, it saw 4% growth to INR 1,649 crores. In international formulations, Russia and Branded Generics, export business witnessed double-digit growth. CDMO saw 3% growth, however, saw strong recovery in the second half of the year. Gross profit for the full year stood at 66.4%, expanding by 30 basis points. Excluding ophthalmology portfolio, margins increased by 130 basis points. Margins improved mainly due to a favorable product and business mix, supported by ongoing cost optimization efforts. On costs, noncash ESOPs were at INR 55 crores versus INR 42 crores. Depreciation increased from INR 138 crores in FY '24 to INR 171 crores in FY '25 due to amortization of acquired and in-licensed brands. Therefore, net profit increased by 19% to INR 660 crores. J.B. Pharma's operating cash flows in FY '25 were reported at INR 903 crores versus INR 801 crores in previous year. In the pharma industry, we have reported one of the highest metrics on operating cash flow to operating EBITDA at 83%. Now coming on the balance sheet. ROCE was at 32% versus 27% in FY '24, while ROE improved to some extent at 19.2% in FY '25. As of 31st March 2025, net cash was at INR 689 crores versus INR 107 crores in the previous year. For the fiscal year, the Board recommended a final dividend of INR 7 per share, resulting into total dividend of INR 15.50, including of the interim dividend of INR 8.50 per share. We remain optimistic about the business outlook, and we are confident in our ability to continue delivering value to all our stakeholders. With that, I conclude my opening remarks.

[Operator Instructions] The first question comes from the line of Tausif from BNP Paribas.

Congrats on a good set of numbers. My first question on India business. Can you provide the breakup of India business ex ophthalmic in terms of price volume and new product launch for the year?

So excluding ophthalmology, our domestic business overall growth has been close to 12% and the volume growth is 6%. Outside that, there is price and close to 1% of NI growth. And if you compare this with the market, the market volume growth, as reflected externally has been sub-2% with respect to volume.

Also, if you can share some qualitative insight on the chronic portfolio, I think that has significantly outperformed versus the IPM. We have grown by 18% versus the IPM growth of 10%. Can you highlight which are the segments which have outperformed for J.B?

So our key brands, like Nikhil mentioned, our flagship brands continue to outpace the market and by a significant margin. Our mainstay chronic brands like Cilacar, Cilacar-T, Nicardia and Razel have consistently been outperforming the market. If you look at the MAT numbers as externally reflected as well, Cilacar plain for us has grown at 19%, while the market is 16%, which despite the fact that we continue to inch our market share performance within the Cilacar franchise and are slowly graduating towards 60% market share in this particular plain brand. Cilacar-T, we have grown at 37% compared to market at 25%. Razel for us, even the plain rosuvastatin has grown at 24% versus market 14%. And Nicardia, including Nicardia plain as well as XL has consistently delivered more than 20% growth over the last 12 months. So these have been the mainstays for us and clearly reflected in our outperformance of our chronic portfolio. In addition to that, even if you really look at the Azmarda figures and if you really look at the quarterly updates, for the Q4 in Azmarda, we have clocked 30% growth, whereas the market is growing at 20%. And we believe, as Nikhil mentioned in his commentary also that this particular category will continue to hit mid-teens volume growth in the future.

Thanks. My second question is on your brand Rantac. I think there has been a news related to the expert panel has recommended to suspend ranitidine. Where do you stand currently? I mean has the government has deferred the case to investigate further or it's the final decision, there will be no ban on the product?

So there is no ban on the product. Rantac continues to be made available to the patients given its very strong clinical efficacy and safety profile. The government has given some instructions in maintaining -- in manufacturers kind of closely monitoring the quality. This is something which we have been doing for years, and we'll continue to deliver on that.

[Operator Instructions] The next question comes from the line of Rashmi from Dolat Capital.

Just on the export formulation side, especially in Russia, South Africa and your other branded generic export market, what kind of new therapies or the products in different category are we adding? Are we doing the same what we have added in India? I mean all those products are also getting exported to this branded generic market. So what is the strategy which you are playing in this market? And how should we see the growth for the export formulation business ex your CDMO and API business?

So our international business is contributing around 45%, which includes U.S., Russia, South Africa, Branded Generics and CDMO. Our Branded Generics business is in 4 clusters, that is in Sub-Saharan Africa, Latin America, Southeast Asia and Middle East. And in that part of the world, 50% of that business comes from participation in tenders. What we have been doing for the last 3 years is filing progressive portfolio, which we have in India, which is a mix of gliptins, flozins, product for heart failure, eye drops. And those all products will start commercializing early FY '27. That is where we stand. And you should see growth for this business when this new products start commercializing -- this quarter, the growth was 10% for that [ DGX ] business. And probably FY '27 onwards with the new progressive portfolio, you should see a couple of points more coming in terms of growth. We should grow at around 12% plus.

Okay. So you're saying that 10% for FY '26 and then going ahead, once it ramps up, it should be in double digit in FY '27?

Yes.

Okay. And the CDMO segment, in the presentation you said that the order book remains strong in the coming few quarters also. It is more related to the seasonality factor or we have added new products or added new geographies over there? And what is the guidance you give it on this part of the business?

If you look at the growth for CDMO for the quarter was 18%. That is what we said, but that is not the right growth for the year. Our average business that we do in the world of CDMO is around INR 110 crores. That is a run rate that we have been following. And we continue to do business with our all big clients across the globe. What we have shared in our report is going ahead, the company has been working progressively for last -- even last year on some big marquee projects, which more details we can talk about in the coming time. But what details I can give you is these projects are some new lozenges which you will see in the world of Europe and U.S. You will see some pan-India project that we are running with one of our partner in the world of ORS. You will see some developments happening in the world of throat spray for cough and cold in many markets across the globe. And also you should see iodine-based formulations, maybe in the form of syrup and ointment, which will see the daylight. So these are 4, 5 big projects, which we'll be able to commercialize by end of the year. And starting next financial year, our run rate that we assume with all these businesses seeing the daylight, which today is around INR 110 crores every quarter should be around INR 150 crores every quarter.

Okay. And you mentioned that you'll be targeting U.S., Europe market. So this will be through partnership with the retail chain models or you will have a partnership with the companies or distributors. So what will be the strategy over there?

No in CDMO business, we are quite clear that we work with our principal partners and our principal partners are large consumer companies with global presence. So earlier, we have voiced the kind of clientele profile which we have for our CDMO business. So we directly deal with them. And of course, they have an extensive network of distribution channel partners in respective geographies. So we will continue to build on the same model.

Okay. Okay, sir. And one last question on your EBITDA margin, 27% to 29% is the ex ESOP EBITDA margin guidance, right?

Yes. Yes.

And what will be the ESOP number in FY '26 and FY '27, annual number, if you can give?

Yes. So the ESOP number in FY '26 should be in the range of around INR 41 crores to INR 46 crores and FY '27 would be INR 26 crores. In totality, now the ESOP cost that we are left with is around INR 75 crores, which will be charged over next 2 to 2.5 years.

[Operator Instructions] The next question comes from the line of Sumit Gupta from Centrum Broking.

Am I audible?

Yes.

So first is on the domestic formulations segment. So sir, on the Azmarda, how much sales was for the quarter? And what is the run rate of units per month? And how -- do you see this volume going forward?

So as we mentioned last time, we were targeting a run rate of close to 125,000 to 130,000 units per month. We are pleased to inform that we have been able to maintain that run rate. By the end of H1, so in the next quarter, we should be targeting a run rate of close to 140,000 units plus, and we'll continue to build on that.

Okay. So sales for this quarter was around INR 70 crores or INR 75 crores?

For Azmarda for the quarter?

For Azmarda. Yes, for Azmarda.

So when we talk about INR 70 crores, that's the annualized run rate for Azmarda.

Right. So how do you see going forward over the let's say, next 2 to 3 years at least, how do you see the INR 70 crores panning out?

So as we have mentioned…

So would we be taking price hike also?

Of course, we are taking price hike also for this particular brand, and the market is growing at mid-teens volume growth. So we clearly see that what is reflected in the market as a INR 70 crore franchise, over the next 2 to 3 years, we should be targeting INR 100 crore franchise for our Azmarda brand. As mentioned, we are looking at close to mid-teens volume growth. And over and above whatever price growth we can accommodate, we'll be able to build on that.

Okay. Great. And sir, how -- like what's the contribution from the top 5 products in India business?

So currently, the top 7 to 8 brands account for close to 64% to 65% of our overall India revenues. 4 to 5 years back, the top 5 brands accounted almost 84%. So that goes back to the point that currently, we have a large set of progressive portfolio and platforms, which are contributing to our growth and will continue to do so in the future as well.

So can we expect over the next 2 to 3 years, at least this percentage to come down at around 50%, 55%?

We can do a broad math. Basically, when we say that other products will grow, even our top 7, 8 franchisees will continue to grow, right? So we don't have the exact number right now to kind of estimate that. But the endeavor is to continue to build on the big brands as well as drive significant growth in our other progressive portfolio.

Understood. Understood. And sir, broadly on the sector level, so I just want to understand how the overall IPM market is growing. So previously, like 1 year, 1.5 years down the line like before it was growing at around 10%, 11%, 12%. However, the growth is at around 6% to 7% now. So how do you see this panning up? So like do you see -- like are you seeing competition from alternate channels? Like how do you see that shaping up?

So essentially, some of the volatility in the market tends to depend a lot on the seasonality. And last 1 year with respect to season, acute has been slightly subdued, as a result of which we have seen the IPM market also being significantly subdued and volume growth has been a major factor. The market has still grown at close to 8% with the volume growth being close to 1.8-2%. What we believe is that when the season is good, the volume growth can come back to 4%, 4.5% numbers, which means that the IPM should potentially be pegged at 9% to 10%. So we are fairly confident that this is a market which will continue to be range bound in the region of 8% to 10% going forward.

Okay. And sir, for the gross margin, you have increased the guidance for operating EBITDA margin. However, from the gross margin perspective, how do you see that? So shall we see improvement in product mix leading to improvement in gross margin? Or will it be on the operating cost side?

So we'll continue to see in this FY '26 as well around 30 to 50 basis points improvement in gross margin, supported by certain cost initiatives that we keep on taking every year-on-year. And obviously, mix will also play a very significant role where the India business and in India business, the chronic growing significantly ahead than the other businesses. So we clearly see both mix and cost initiatives will play a role in supporting around 30 to 50 basis points improvement in gross margin.

Okay. And sir, lastly, on the depreciation part. So the -- sequentially, we have seen around 10% to 11% growth in depreciation. So basically, like what is [surrendered] 27.42 and how shall we see this depreciation rate going forward?

So depreciation is mainly because of the amortization of intangible assets, which we have acquired over the years and particularly the Ophthal business also acquisition happened last year.

Okay. So going forward, so how should we see this, the rate overall 4% to 5% or more?

It would be in the range of 4% to 5% because we continue to invest in our CapEx. So we see the depreciation to be increasing only 4% to 5%, supported by CapEx and intangible asset depreciation.

Okay. So the follow-up on that, what's the CapEx guidance for the next 2 years?

Around INR 100 crores over the next 2 years. Each year, we continue to…

Yes. We maintain a consistent INR 100 crores run rate, maintenance close to INR 65 crores, INR 70 crores, another INR 25 crores to INR 30 crores for growth CapEx.

[Operator Instructions] The next question comes from the line of Alankar Garude from Kotak Institutional Equities.

Sir, if I look at our international formulation sales for the last 3 years, we have been in that range of INR 10 billion to INR 11 billion. I understand we had the South Africa restructuring and then also the issues in the CDMO business in the first half of FY '25. But directionally, how should we look at this segment over the next couple of years?

Good question, Alankar, in terms of the -- what analysis you have done. See, CDMO, we had a big spike in FY '23 because there the demand has gone up drastically up. But now our partners have been also normalizing the inventory and the inventory has normalized. So you will see CDMO business growing between 12% to 14% in the coming time. And I earlier shared the commentary in terms of what we are trying to do in the world of CDMO business with our existing partners and the new projects that we are trying to run. Second, around INR 120 crore cut that we took in South Africa business, that is done because that was more related to the tender business, which we did not want to participate. In hindsight, it has given us a good bump up in our profitability in our South Africa business, which is more now private business, 65% to 70% business is now private, which was earlier 40%. So that is on South Africa. [ BGX ] has not been a good story for us. And that is the way the business was modeled. 50% of this business was more tender, participation in government tendering, where we have been facing issues in terms of competitive pricing. But FY '27 onwards, you will see around -- in last 3 years, we have filed -- every year, we've been filing around 8 to 10 progressive products in these geographies. These are 40 countries across in Sub-Saharan Africa, Latin America, Southeast Asia and Middle East. So once that comes in, we'll be able to generate better demand. We'll be able to demand better pricing. And then I think the business will be more on a pathway where we want that business to grow at around -- healthy around 10% to 12%. That is what you should see in the BGX business. Russia has been a very good story for us last year in terms of top line and profit margins. So South Africa, things are arrested. Russia on a good wicket. CDMO 12% to 14% growth. FY '27 onwards, you will start seeing BGX business growing at -- basically, it can be 12% mid-teens growth. But 10% growth, you should see short to medium term, medium to long term, 12% plus growth.

Understood, sir. That's really very helpful. The other question was on trade generics. What is the scale of our trade generics business today? And do we intend to focus a bit more on this segment going forward?

We have always maintained that trade generics is not going to be our focus area. Some of the categories where we are present is by virtue of the fact that these categories are well served by distribution channels, which go beyond Tier 2 and Tier 3 markets. It's a negligible contribution to our overall India business and will continue to be a source. So we are not focusing heavily on this particular segment.

[Operator Instructions] The next question comes from the line of [ Gaurav from Antique Stockbroking ].

Sir, India business has sequentially come down this quarter quite a bit. Any insight on that?

The sequential numbers are largely because of the March phenomena, which has always been the case as part of the industry phenomena where the trade also rationalizes the inventory levels. So it's got nothing to do with the demand of our products, prescriptions in the market, nothing like that. March generally tends to be soft for the industry.

So any guidance in terms of -- we've grown significantly faster than the market in India over the last few years. You did allude the India market growth where it's going to settle. How…

So we have always maintained that we will maintain a 3 to 4 percentage points higher than market growth. We have been able to deliver that over the last 4 to 5 years, and our portfolio is well poised to continue to build on that.

And have we made new launches in the diabetes space in Q4 of this year?

No, we haven't made any new launch in the diabetes space in Q4.

And going forward, do we have some pipeline there that we want to launch in the next 2 years or 3 years?

So we always continue to evaluate opportunities. But beyond that, we wouldn't want to divulge any information.

Okay. Okay. Understood. In terms of in-licensing portfolio for us, in terms of percentage of sales, how large would that be for the India business?

So currently, if you really look at our in-licensing, it's largely for the Ophthal portfolio, but that is also an interim arrangement because the main rationale for us to acquire the Ophthal portfolio was the fact that perpetual license will figure in December 2026, which will significantly push up our gross margin profile. Outside that, we really have nothing much. There is one product, a very specialized product, which is a lipid-lowering agent. But apart from that, there's no other in-licensed portfolio.

So the in-licensed portfolio will be contributed to EBITDA, right, today, too, while lower gross margins, but it would be EBITDA positive, right?

It is EBITDA positive, the Ophthal portfolio, that's correct. And as we have mentioned earlier as well that post perpetual license triggering, it will be significantly EBIT accretive.

So how -- if you can explain this a little further, what happens post CY '26? Do we get ownership of these brand names?

That is correct. So we have already discussed the details about this arrangement which we have on the Ophthal portfolio. In December 2026, the perpetual license gets triggered, and we are full-fledged custodians of these trademarks.

And in terms of your appetite for more inorganic kind of opportunities in India, be it on the licensing side or acquisitions, what would be our appetite? And can we see some plays in the next 2 to 3 years?

So let me answer this. I think this perhaps is your last question because there are other people also in the queue. We look at opportunity in the therapeutic areas, which are more aligned to the strength which we have in execution. So we earlier also in our commentary have shared that we can go up to 1.5x of our EBITDA in terms of buying out any company, buying out brands. But we look at asset which is more quality based in a growth market and progressive. And the payback period that we put place when we commit for any acquisition is 7 to 8 years.

Operator, we have a few questions that have come on the question wall. I'll just answer that and then you can open the floor for questions. So I think one question is on the Ophthal business. What has been the current run rate? And what do we expect in terms of the current run rate for Ophthal in the next 2 or 3 years?

Yes. So the Ophthal business is on a positive track. Like we had mentioned earlier during the time of acquisition as well, when we acquired the portfolio, the quarterly run rate was close to INR 40 crores. Our first milestone was that over the next 9 to 12 months, how do we inch this towards a INR 45 crore quarterly run rate mark, and we have been able to achieve that. As we move ahead, we look at the market growth opportunities, we are clearly seeing that from a quarterly run rate perspective, this is already inched towards a INR 48 crore run rate mark, and we'll continue to build on that. Our strategy in terms of prescriber expansion has started yielding us good results. Even if you look at the last 12 months performance for the Ophthal market, our growth has been close to 11%, where the market has been very subdued at 4.5%. So we'll continue to build on our strategy. New launches have also started progressing and contributing. And over the next 1 year, we will see more contribution coming in from these new launches.

And how do we see the Ophthal business playing out in terms of top line growth for the domestic business over the next 2, 3 years and its impact on profitability?

So when we look at the Ophthal portfolio, we see that this is a portfolio which will be closer towards mid-teens. We clearly see us being closer to that mid-teen growth run rate for this business. Part of that will also be attributed to some contribution coming in from new launches. With respect to the overall profitability, this year, we believe that from an annualized run rate perspective, this portfolio will be close to INR 200 crores plus. And given the fact that for the next -- in FY '27 also, we'll be targeting close to mid-teens, we are looking at close to INR 230 crore annualized run rate franchisee when the perpetual license triggers in. And when the perpetual license triggers, the gross margin profile changes significantly from the current conventional margin profile of closer to 20%, it will be much closer to our domestic gross margin profile. One can do the math, and that's the significant upside we see kicking in, in our overall profitability.

Great. Second question that we have on the wall is that considering that the net cash position is increasing, how do you see other income over the next year and the next 1 or 2 years?

So we clearly see that we have a significant net cash surplus in this year's end. And based on that and with the future cash flows that we'll be generating, we clearly see that our other income should be in the range of INR 65 crores to INR 70 crores next year as a [indiscernible] income.

INR 65 crores to INR 70 crores.

Yes, INR 65 crores to INR 70 crores.

And we talked about new partners or new -- which will commercialize on the CDMO business. Any color that we would want to give in terms of the CDMO partners?

The important thing is what we are doing with current partners and selected new accounts. And as Nikhil clearly mentioned, the kind of new projects which are to be commercialized over the next 12 to 18 months, which includes lozenges with key marquee clients in newer geographies like Europe and North America. There's also LatAm opportunity, throat sprays, ORS solution. So these are important projects. In addition to that, we have always maintained that our endeavor will be to add at least 1 or 2 more anchor clients every year, and we are working towards that.

Great. And then the last question, then we'll open to the queue. Any update on the logistic cost in terms of the Red Sea issue, especially on international freight?

No. Yes, sorry, Kunal, please go ahead.

No. So pretty much the trends are consistent. No significant deviation from what the position was earlier.

Great. We can open the floor for questions. We can take the next question, moderator.

The next question comes from the line of Rahul Jeewani from IIFL Securities Limited.

Sir, on the domestic business, our productivity has improved to INR 8 lakh already. And given that the Novartis Ophthal portfolio would also move in-house to us in FY '28, how do you see the productivity shaping up for the domestic business over the next 3-year period? And if you can also comment in terms of the profitability for the domestic India business with some of these moving parts?

So Rahul, we don't talk about profitability of individual business. Profitability is spoken about overall company, which I think has been shared earlier. But let me answer your first question in terms of -- when we talk of 8 lakh productivity, we are talking in totality, which is inclusive of our Ophthal business. And in the coming time, you should see our productivity increasing by 12% to 14% over the next 2 to 3 years.

Okay. Sure, sir. And while we appreciate that gross margins on the Ophthal portfolio will increase, let's say, from a 20% kind of a number to a company average number in FY '28. But do you expect the entire quantum of benefit to flow down to EBITDA as well and hence drive a significant improvement in EBITDA margins in FY '28?

That is correct, Rahul. A significant part of the gross margin will flow through in the EBITDA. It's not a function of productivity being impacted or more people being added. It's basically sourcing profile changing and gross margin flowing into EBITDA. And while we mentioned that we don't want to comment on individual business profitability, we have mentioned earlier that on a stand-alone basis, the Ophthal profitability will be, if nothing higher than our India business current profitability.

Sure, sir. And sir, can you also talk about given that there is this risk around Rantac. So in the -- let's say, in the worst-case outcome of you being required to withdraw Rantac from the market, what would be our risk mitigation strategy be?

We would not want to comment on anything like that. For us, this is a product which has been pretty much been there in existence for so many years with a very strong safety profile. And we believe that the government and the key stakeholders understand that very well. And their request of manufacturers being much more vigilant towards quality is something which we respect and welcome so that some of the other low-cost generic players are pretty much cognizant of the quality parameters. As we speak, there are markets in which this molecule has been relaunched over the last 6 to 8 months, which again is a very positive sign. And as manufacturers, we are committed to maintaining the quality and government standards.

Sure, sir. And would it be possible to disclose the number of reps which you would have for Rantac ?

See, it is part of our mass division. And for that mass division, it is not that Rantac is the only brand. There are a significant number of acute brands which we have in that particular division. So it's not that our division is dependent on Rantac. If nothing, Rantac is not even a priority product.

[Operator Instructions] The next question comes from the line of Naman Bagrecha from IIFL Capital Services Limited.

Sir, just wanted your views on the API business. While it's a small business, we've seen over the last 2 years, '24, '25, it has been declining. So how should we see this business going ahead? Do you expect further decline? And what were the challenges over the last 2 years?

See, when we look at our API business, the third-party sale has always been dependent on one key product, which is the [indiscernible]. And we had always witnessed that over the last 4 years that the market for this particular category was in mature phase and in some geographies was declining. Therefore, we have taken a cautious call how we can utilize the API business to maintain our own supply security as well as contribute more towards improving the margin profile of our U.S. ANDAs. As a result of that, we in-source some products, and that is contributing to the profitability of our U.S. business. So we'll continue to do that. We don't see a further decline even in terms of third-party sales from where things stand right now. It will pretty much be range bound in what figures we are seeing over the last couple of years. But more importantly, how we are leveraging our infrastructure towards contributing more towards the overall business profitability in terms of captive consumption, that has been our effort.

Okay. In the opening remarks, we highlighted that our progressive portfolio is growing much faster than the IPM growth. Can you enumerate what would be our progressive portfolio growth versus, let's say, the market growth of that particular category?

So very difficult Naman to talk about -- see, we in totality are speaking, and I think earlier, Kunal had spoken that probably Cilacar market, cilnidipine combinations, Nicardia, Metrogyl, Razel, Azmarda, all this category, if I have to give you some glimpses, we are meeting the market growth. That is where we stand. More details can be shared offline. And Ophthal market also what was shared that we are growing at 22% as compared to market growth of 11%, 12%. So we have been beating -- for 75% of our progressive portfolio within India, beating the market growth in a significant way. That is what I can share. I think Jason can help you at some given time offline if you want more details, we'll be more than happy to share.

Sure, sure. And sir, just last one question on the dividend payout policy. So our dividend has increased. Could you -- is there any stated policy where you want to maintain, let's say, 40%, 50% or 60% kind of a dividend payout?

So our dividend payout Naman has been in the range of closer to 35% over the last 2, 3 years, and we continue to be at 35% even for this year. So I don't see any significant change in the strategy of our dividend policy.

The next question comes from the line of Mohammed Patel from Edelweiss Public Alternate.

Sir, I have one question. Can you talk a little bit about the nonprogressive portfolio? And what are the management's thoughts on this portfolio going ahead?

Nonprogress. Nonprogressive will be -- see, the definition of nonprogressive is what I think was spoken about that there are some brands within the Rantac franchisee, some SKUs within the Rantac franchisees, some SKUs within the Nicardia franchisee. So there are those type of portfolio which we continue -- our people continue to give brand reminder in the clinic of doctor. There's no other strategy.

Okay. So that part of the portfolio grows at least with the market or below market?

There's no growth -- in 50% -- if you look at ranitidine plain, there is hardly any growth. It is at par with the market. Nicardia, we are 90% of market. So we are only driving the market. Now we are driving the entire market growth for Nicardia franchisee with the help of Nicardia XL. Nicardia XL is growing at 25%, 30%, whereas Nicardia plain, which is INR 7 crores to INR 8 crores is stagnant, but more of your prescriptions, profitability, everything has been driven by Nicardia XL, which is around INR 3 crores, INR 4 crores a month. So that is how we manage the portfolio, which is nonprogressive.

Ladies and gentlemen, we take the last question from the line of Meghna Agarwal from Mount Intra Finance.

I just wanted to understand about the sale that is happening. Any time line for that?

Which sale?

Hello?

Hello.

Yes, can you hear me?

Yes, I can but you are talking about which sale? Sale of which --what, what? We are into formulations…

That INR 300 million stake [indiscernible] stake.

Sorry?

We can't hear you.

Yes, I was talking about the…

Meghna, we are not able to hear you well, please can you be a bit louder? We are not able to understand what you're asking...

Louder and clear.

And clear what you are asking.

Hello, am I audible now?

Yes.

I'm asking [indiscernible] what is the time line about that?

Stake of what -- sorry? Sale...

Promoters...

See, very difficult for us to answer that question in this conference call. This conference call is more related to the performance for the business. So these all questions probably will be more than -- if -- it is promoters say in terms of what actions they want to do. We basically are [indiscernible] management and we more focus on the business operations.

So like no time line as of now?

No.

Ladies and gentlemen, with that, we conclude the question-and-answer session. I now hand the conference over to the management for their closing comments.

So thank you all for attending the conference call today. This is fifth year in a row in terms of the way J.B team has been coming, meeting you all and sharing the insights in terms of the way business is progressing in transparency. And a couple of things that more I would like to talk besides business. I think anything and everything that we do at J.B is best-in-class compliance. And I think what was also shared that our plants also continue to get audited by the FDA, by U.S. FDA, by other regulatory authorities and our people at the plants also have done a fantastic job in terms of facing those audits and not only [indiscernible] observations, that is what we can boast in terms of what we have delivered as a company. So whatever drugs we manufacture are best-in-class compliance. That is what I wanted to share. And equally, the focus continues to be on the business delivery in terms of driving better profitability, focusing more on India, which contributes to the 60% of our business, CDMO contributing 12% to our business and also some parts of ROW market, which are more aligned to our strength. We will see how we can commercialize the new products and drive better growth and better productivity in the coming time. Thank you all.

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