Mankind Pharma Limited (MANKIND) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 and 9 Months FY '24 Earnings Conference Call of Mankind Pharma Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Abhishek Agarwal, Head, Investor Relations. Thank you, and over to you, sir.

Good afternoon, everybody. A very warm welcome to our Q3 FY '24 earnings conference call. On the call today, we have: Mr. Rajeev Juneja, Vice Chairman and Managing Director; Mr. Sheetal Arora, Chief Executive Officer and Whole-Time Director; Mr. Arjun Juneja, Chief Operating Officer; Dr. Sanjay Koul, Chief Marketing Officer; Mr. Ashutosh Dhawan, Chief Financial Officer; Mr. Prakash Agarwal, President, Strategy. We will begin with opening comments from Mr. Rajeev Juneja, providing an overview of the quarter, followed by comments from Mr. Sheetal Arora on the business performance. Mr. Ashutosh Dhawan will share key financial performance and then we will leave the forum open for Q&A. I hope you had a chance to access the investor pack shared on Jan 31, 2024. However, I'd like to reemphasize on the fact that certain statements made during today's call may pertain to future expectations and plans. A comprehensive disclaimer regarding the same has been provided on investor presentation and press release uploaded on our website. Now I would like to invite Rajeev, sir, to share his comments.

Thank you, Abhishek, and good afternoon, everyone. A very warm welcome to our quarter 3 '24 earnings call. I'm delighted to share the company has witnessed a strong quarterly performance as our revenue grew by 25% year-on-year to INR 2,607 crores during the quarter. EBITDA grew by 39% year-on-year to INR 611 crores. PAT grew by 55% year-on-year to INR 460 crores. We have further bolstered our net cash position to INR 2,756 crores, and the return on capital employed has also increased to 31% year-on-year in December '23 compared to 23% as on December '22. Here, I would like to especially highlight a key fact that in this quarter, we have successfully optimized our working capital days to 42 days in December '23 versus 46 days in December '22. While Mankind Domestic secondary sales growth was 9% for the quarter as per IQVIA, which is 1.1x our performance to IPM growth for the quarter, however, we have reported a strong primary growth of 20% year-on-year in Domestic business, led by robust growth in chronic, recovery in anti-infectives and gastro. This basically has happened due to strong growth in modern trade and hospital sales. Our top 5 therapeutics by sales have outperformed the IPM by 1.5x. With the focus efforts of our team, our chronic segment share has increased by 130 basis points to 34.9% in 9 months '24 as compared to 33.6% in 9 months '23. We remain committed to increasing our presence in chronic therapeutic area. Our market share of our key chronic therapies, such as cardiac and antidiabetic, has reached to all-time high, exceeding 5% and 4.4%, respectively. In our Consumer Healthcare segment, while primary sales performance has been muted, we have demonstrated healthy growth in secondary, tertiary sales in various brand categories, resulting into market share gain again. We remain confident that this segment will regain its strong growth trajectory, propelling further expansion of our market share. On the R&D front, our focus remains on the product innovation, advancing drug delivery system and fostering strategic partnership with innovators to bolster our product offerings. The successful introduction of dydrogesterone reaffirms our position as science-driven organization committed to delivering high-quality solutions to meet evolving market demand. Given strong net cash balance sheet, we continue to pursue opportunities in chronic therapies and Consumer Healthcare business via strategic acquisition and in-license opportunities. With our collective efforts and strategic vision of quality, affordability and accessibility, we are confident to outperform industry growth in the years to come and deliver lasting value to our shareholders. With this, I will hand over to Sheetal, who will provide more details on our business performance.

Thank you, Rajeevji. Good afternoon, everyone. I'm pleased to offer key insights of our business segments. Our Domestic business, which accounts for more than 90% of our sales, has demonstrated robust year-on-year growth of 20%, reaching INR 2,400 crores in quarter 3 financial year '24. This growth is driven by several factors. First, we have seen strong chronic growth, 1.5x higher than the Indian pharmaceutical market. This includes a 16.7% increase in the cardiac segment versus 8.8% for the IPM and a 13.4% rise in anti-diabetes compared to 5.5% for the IPM. Second, there is a notable recovery in key acute therapies. Our anti-infectives segment grew by 13.8% against the IPM's 9.5%. And our gastro segment increased by 12.8% compared to 9.3% for the IPM. Third, our modern trade have continued to experience robust growth. Although this data is not captured in IQVIA report, that is why there is a bridge between primary and secondary sales. If we adjust our secondary sales growth rate to consider significant increases in modern trade and the withdrawal of key products due to regulatory restrictions, our IQVIA secondary sales growth would also show a substantial increase. Additionally, after adjusting for these factors, our volume growth has also exceeded by the IPM volume growth. We have also analyzed our primary sales volume data, which indicates a 2.3% volume growth in quarter 3 financial year '24 compared to a 1.8% volume decline in IQVIA secondary sales data. Our chronic business has shown a remarkable growth of 12.2%, consistently outperforming the IPM chronic by 1.3x and the CVM IPM chronic by 1.6x. This underscores the resilience and competitiveness of our chronic segment. I am delighted to report that our market share has increased sequentially, reaching 4.5% in quarter 3 financial year '24 from 4.4% in quarter 2 financial year '24. Even our CVM share has also rose to 6.6% from 6.5% quarter-over-quarter. Additionally, the count of our brands generating revenue of INR 50 crores has risen to 39 in MAT December '23, up from 37 in financial year '23, showing significant potential for further growth. Our Panacea revenues have continued to show healthy growth of 25% during the quarter. However, our Consumer Healthcare business experienced a subdued quarter with a revenue of INR 149 crores in quarter 3 financial year '24, a 5% year-on-year decline due to the corrective actions taken, as I previously highlighted. Despite this, our key brands continued to show strong secondary sales growth across categories, increasing their market share. Our Exports business has shown a growth of 118% year-over-year, led by a strong performance in the U.S. market. With our commitment to a healthier Bharat, I am confident that we are on the path to a brighter future. I do like to conclude by expressing my gratitude to all our stakeholders for their support and confidence in Mankind. Before I will hand over to Ashutoshji to provide us deeper insight into our financial performance, let me highlight a few important points. First, the growth of Mankind is 25% versus quarter 3 '23 versus quarter 3 '24. Chronic segment is 1.5x higher than the IPM. Market share of Q3, 4.5%, versus Q2, 4.4%. Panacea revenue growth is more than 25%. Exports has grown in the tune of 118%. Even the growth of EBITDA is 39%. Now Ashutoshji, please go for our financial details. Thank you so much.

Thank you, Sheetalji. A very good afternoon, everyone. First of all, I would like to thank everyone for taking time out for joining us. I hope you would have received our financial results and press release published on 31st of Jan 2024. Today, I will talk to you through the key financial highlights for quarter 3 FY '24. During the quarter, our revenue from operations significantly increased by 25% year-on-year basis to INR 2,607 crores as compared to INR 2,091 crores for Q3 FY '23. The EBITDA has grown by 39% on a year-on-year basis to INR 611 crores with a margin of 23.4% as compared to INR 440 crores with a margin of 21% of last year's Q3 FY '23, which is an increase of 2.4% on a year-on-year basis in percentage terms. This increase of 2.4% is driven by increase in gross margin of 0.7%. And the balance is supported by operating leverage being achieved due to strong revenue growth, which is 55% on a year-on-year basis. In Q3 FY '24, gross margins have increased by 0.7% to 68.3% as compared to 67.6% in Q3 of last year. This increase is on account of favorable sales mix and the price increase effect, which was undertaken in the prior quarters. The R&D expenses for the quarter are at INR 56 crores, which is 2.1% of the sales, which remains within the stipulated range of 2% to 2.5%, as we have communicated earlier. The depreciation and amortization expenses for the quarter increased to INR 110 crores from INR 85 crores in Q3 FY '23. This is primarily due to 2 reasons. First one is the capitalization effect as we have capitalized more than INR 1,000 crores in the last 12 months. Moreover, in this quarter, we have taken an accelerated depreciation on the items capitalized for our research center at Manesar as we have initiated the process of upgradation and expansion of R&D center to support future growth. The ETR for 9 months FY '24 is close to 20% as compared to 21.6% during FY '23. The profit after tax for the quarter was at INR 460 crores, which is 17.6% of the sales, representing a robust growth of 55% year-on-year basis. With diluted EPS of INR 11.3 per share of INR 1 paid, cash EPS, that is cash adjusted for noncash items like depreciation and amortization, was at INR 14.1. Further, I am elated to share that during the quarter, we witnessed strong cash flow from operations of INR 667 crores due to operational efficiency, resulting in reducing the working capital days from 46 days to 42 days on a 12-month trailing period basis. This led to a healthy net cash position of INR 2,756 crores. Our strong cash position in the balance sheet provides enough scope for any potential M&A and in-licensing opportunities. Return on capital employed ex cash increased to 31% on 12-month trailing basis as compared to 25% in FY '23. This is due to EBIT improvement and cash generation on a trailing 12-months basis. The return on equity ex cash increased to 26% on a 12-months trailing basis as compared to 23% in FY '23, primarily due to increase in PAT percentage on TTM basis. The CapEx, including the capital work in progress, was at INR 324 crores in 9 months FY '24. For FY '24, the total CapEx would be less than INR 500 crores. Further, we expect to maintain our EBITDA margins for the full year to be in the range of 24% to 26%, as mentioned in the previous interactions. With this, I would like to conclude our opening remarks, and we will now be happy to address any questions that you may have, please. Over to you, Abhishekji.

Yes, we can start the Q&A.

[Operator Instructions] The first question is from the line of Dr. Kunal D. from Macquarie.

Congratulations on the strong set of numbers. First one, on our reported growth of around 22% for the Domestic prescription business, if I strip out our consumer business, and we have mentioned categorically 2 things, modern trade and hospital sales. So I would just like to know, are those big growth factors in this quarter? And if yes, can you quantify those?

Let me tell you something that we are a very unique kind of a company, and many departments in Mankind are still evolving. In last few quarters only, this modern trade department has become quite organized. Otherwise, what was basically happening, all the goods were going from our regular stockist. And that's one reason, all of a sudden, modern trade is growing at a phenomenal pace. It is right now contributing 5%, 6% in our total sales. So that basically is a major reason that when you look at the IQVIA and we look at our own sales, there's quite a difference. This is one. The second basically is what we've always mentioned that our chronic growth is much better, which is 1.5% -- 1.5x to IPM. We are growing faster. If you look as a whole as well in chronic side, you'll find that 2 years back, it was around 33% in 2022, 34% in our shares in '23. And now it has increased in 9 months to 35%. This is the second one. The third basically is that the second quarter was not great. In third quarter, we have recovered a lot in antibiotics, in gastro, all sort of things have really happened. That's the major reason, plus something has come from some kind of growth as some sales have come from our other businesses like, example, Agritech. That's the reason, when you look at IQVIA growth versus as a whole growth of Mankind, there's a difference.

Sure. And just one bit on the sequential compression in gross margin, is it primarily on the back of more, I mean, acute kind of also recovering from Q2 to Q3 and maybe some of the newer businesses might have some lower gross margin? Is that the correct way to understand?

Okay. This is Ashutosh, Kunal. So yes, so if you see gross margin, on a year-on-year basis, so there has been an increase of 70 basis points. However, on a quarter-on-quarter basis, there is a dip of 120 basis point, and this is primarily because of 2 reasons. First one is that we have taken some inventory-related accruals due to slow-moving and non-moving items. So that has impacted negatively. And secondly, the impact is coming because our Sikkim plant was comparatively underutilized for this particular quarter due to shutdown on account of floods. So 10% was underutilization factor. So it's a sum total of these 2 key factors which has resulted in the gross margin compression of 120 basis points on quarter-on-quarter basis.

Sure. And it should come back, barring the product mix changes, et cetera, we expect these to reverse, right?

So yes, so we maintain to the guidance, given that our gross margins will be upwards of 68% a year.

Sure, sir. And then the last one, with your permission, on the consumer side, we have said that we have taken some distributor consolidation or IP implementation and channel inventory rationalization impacting our growth. So all those are now done in quarter 4 or we are still seeing those activities continuing?

See, there, Kunal, I mean, we said in the last quarter as well that we are going for optimization, automation, and we have done certain corrective actions. So this would be completed in quarter 4. And we hope, I'm quite confident, that next year will be much better.

The next question is from the line of Neha Manpuria from Bank of America.

Sir, if I were to look at the growth that we have seen in the Export business, that, of course, has helped margins quite a bit. And if I look at the approvals, Mankind seem to be getting quite a few approvals in the U.S. So would you still qualify the U.S. business like you have in the past as one-off? Or we should continue to see this business grow and contribute to margins?

This is Arjun here. So our U.S. business, if you see, I mean, we have been filing a lot of products in the U.S. So until about this year and last year, most of our products started receiving approvals, and we were launching these products in the market. So the base was very low in the last year, and that's why we are seeing a significant growth in this year. Also, the one-off product which we have, which is kind of a monopolistic product where there's no competitor in the market, is contributing to a major part of this growth. So we expect some sort of a competition to come in this product. We are not sure by when. But going forward, in the next year, we expect some growth to come in the U.S. market, but it will not be as significant as it was this year.

Understood. And if I were to strip out the sales growth that we have seen in Export market from even with some margin assumption, would we have still seen margin expansion in the Domestic business? Because it does not seem that way if I were to just do a basic back-of-the-envelope calculation, it seems like margins have been pretty much flattish this year despite the growth in Domestic.

I mean, look at the efforts of Mankind, which direction we are moving. We are moving towards chronic side. So that basically gives some kind of indication that, yes, in chronic side, since we are working, we hope that our gross margins will definitely increase.

And would that reflect an EBITDA margin improvement, sir? Or would that chronic expansion require us to continue to spend on SG&A promotion to achieve the growth rate that we want to achieve for chronic?

So why not? I mean, why not EBITDA will increase? For what we are working actually, I mean, we are working for long-term things always. So what is relevant, what is right, we keep doing that. We hope that EBITDA will definitely increase.

Okay. And my last question, sir, you mentioned potential opportunities that you're looking at Consumer Healthcare and chronic. In Consumer Healthcare, what are the segments that you would be interested in, given the existing portfolio that you have? What are the areas that would interest you?

Neha, anything which basically is towards pharmacy side would interest us, anything, because we have always seen that we are strong in our pharmacy side. So we want to just further strengthen that strength, not any FMCG.

[Operator Instructions] The next question is from the line of Harsh from Bandhan AMC.

Sir, you made a comment in the initial part of the commentary in terms of the volume growth. Could you clarify a little bit in terms of the Mankind growth, volume growth being 2.3% versus a negative 1.8% as per IQVIA data?

The point, basically, we basically emphasized that, I just said 5 minutes back as well, that our modern trade, hospital department is quite new. It is a few quarters old only. And that's one reason it is growing at a phenomenal pace. And for your knowledge and for all people's understanding, IQVIA does not cover that. And that's one reason when you look at it from IQVIA lenses, you find that our growth is in minus. But once you add our modern trade sales, the growth would be 2.5%. And also, one product which basically was -- had a regulatory effect, discontinued, that also was the reason for that.

Okay. So in the presentation, the 9-month data that was given, these numbers that you're talking about is on a quarterly basis, that I understand. But the presentation, Slide #17 that we have given, negative 1% volume growth, is there a way to sort of understand what would that look like post these adjustments on a 9-month basis?

Yes. So that is as per IQVIA, that number that we are reflecting as adjusted for the product restriction as well as the MT. As highlighted by Rajeevji, it's about 2% plus. So it's outperforming the IPM.

Okay. Even on a 9-month basis, the volume?

Yes.

The next question is from the line of Amey Chalke from JM Financial.

I just had a follow-up on the volume and the price constituents. So basically, next year or going into next year, we will see WPI to be on the lower side, the price hike you will get on the NLEM side. So how do you expect these constituents to change going into next year? Because the price hike component is around 6% right now, your product component is around 4%, which I believe is slightly on the higher side compared to peers. So how do you expect that to change in the coming year?

So basically, if you see, the WPI for next year will be flattish. It will not be negative by a big number, I think it's coming to around 0.02% or 0.03% negative. So I think WPI will be negative. I mean, if you see overall Mankind's portfolio, I think we are one of the only very few companies in the industry where the portfolio -- where negligible portfolio falls in NLEM. Whereas products which are outside of NLEM were allowed to take a 10% price increase. And over the last few years, we've been miser enough to take this price increase, which we are taking very judiciously in selective products where we don't increase our pricing too much because over the years, the tag of affordability, which we have maintained, we want to maintain the same tag. However, having said that, I feel that over the next year, we continue to expect a similar price increase to what we've seen this year.

Don't you think this price hike strategy is a drift from what we have grown over the last 10 years?

See, I mean, the strategy basically is only one that how can we grow and how can we maintain our accessibility image in consumer's mind because this has been done last couple of years working. So we always want to maintain that kind of image of Mankind in consumer's mind. Strategies, whenever there is the opportunity, whenever we see that competitors have increased, and we have some kind of a say that in top 10 companies, in top 15 companies, we are the most affordable, we go for that. We basically move as per the overall scenario in the market. Random, separately, we don't see like that. It's always been a holistic thinking.

Sure. And just last thing, this price hike, is it more towards chronic product? Is it more towards acute product? How would you describe it?

It is always more towards opportunity, neither chronic nor acute. Wherever we see the opportunity is there, we don't look from these lenses. We look where it will not affect us, where competitors will not be able to cut our corners. This is how we move forward.

So across the portfolio in acute and chronic, we remain 15% to 20% cheaper across the portfolio, be it acute or chronic.

Right. Okay. And just last thing, is it possible for you to tell us about the profitability of the acute and the chronic business, if not quantitatively, at least qualitatively, whether the chronic is still in investment phase or how things will move here?

We can give you a flavor around the gross margin front because at the EBITDA level, because there's an overlap for promoting chronic as well as acute, if you look at the gross margin standpoint, there is a delta of 10% to 12% better margin in the chronic segment on absolute terms basis as compared to acute. Let's say, if acute is giving a margin of 65%, then chronic will be giving 75%, 77%.

Yes. But that's very generic for all the companies. If you can give some flavor on the EBITDA, is it a chronic investment phase? Because the contribution of chronic business is expected to increase further over the next 5 years. So I want just to know directionally how it will change.

Amey, please understand that our Mankind's model is very, very unique. In what sense that like you see in any pharma companies, they have only chronic divisions. And here, our number of divisions have mixed portfolio, acute and chronic. And some divisions are only chronic, which has basically -- which are launched last couple of years or 4 years' time. So it's quite difficult for us to really, I mean, segregate those. It's always mixed up. And that's one reason we call -- whatever you call it, we give this kind of, I mean, generic answers. They are not separate, separate.

Even if you see chronic share has improved, the chronic share will improve, then definitely EBITDA and gross margin are going to improve.

Sure. And on the Exports, where do you see the Exports 5 years down the line? What are your priorities there? How do you see yourself in terms of geographic presence, manufacturing capabilities on the Exports side? That's the last.

See, Mankind was Domestic-focused company, and it will remain Domestic-focused company. Maybe 90% of sales definitely will come from Domestic. So Export, we are primarily in the U.S. and rest of the world. But we are clear that wherever we can get the opportunity to launch niche brands, which are high in profitability, we're going to launch those products. But going forward, 5 years down the line, Mankind's main sales will come from Domestic.

The next question is from the line of Chintan Sheth from Girik Capital.

Sir, I have a similar question on the Exports side. Basically, the current run rate, you said the growth will not be similar to what we achieved this year because of the -- because of certain opportunities we've got. But do we see the positive trend to continue or at least we can maintain or match the revenue trend of this year continuing going forward in the absolute basis? So we did around INR 200 crores this quarter. So that's the question, basically, yes, sorry.

So we can assume the positive trend will continue. The growth will not be as significant as it was this year. But growth will be there, like high-teen, double-digit growth will be there in the next year because we are expecting a few new approvals over the next few quarters.

And the existing products which are launched in last 9 months are also ramping up.

Sir, the participant has left the queue. I would request him to join us back. We'll take the next question from the line of [ Sagar Sethi ] from [ Sethi Investments ].

What is your margin profile and expansion, margin profile?

Sir, your audio is not clear. Mr. [ Sethi ], I would request you to kindly use your handset to ask questions.

What is your margin profile going ahead?

Margin?

The margin profile.

So we have given a guidance, EBITDA margin guidance of 24% to 28% -- or 24% to 26% for the financial year. And in 9 months, we have done 24.8%.

[Operator Instructions] The next question is from the line of Dr. Kunal D. from Macquarie.

So on the chronic business, we have done really well. I think FY '18 or '19, we had 28% contribution coming from chronic. Now it is at 35%. Do you believe that even over the next 3 to 5 years, such a pace of increase in contribution could continue for us?

Well, Kunal, thank you so much for asking. I mean, we said we are seeing it and we believe that Mankind is very capable of doing fantastic things in chronic side. We're a few years old. We are not 28 years old in chronic side, we are maybe 18, 19 years old in chronic side. And in those 18, 19 years, we have reached to this particular level. We believe that the future lies here. We are working towards that side. And that's one reason you can see from 2018, when our share was just 28%, it has reached to 38%. In how many years, we'll count the years, that's 6 years' time. We feel we are very confident that -- sorry, 35%, 28% in 2018 to 35% in YTD 9 months. And we'll definitely do very, very good. What basically is the ambition, that it should be in the line of any chronic side of the companies. Why not more than 40% or 50% in long term?

Just one addition here, on the -- 3 years back, we had the specialty chronic division. So we launched about 8 to 10 chronic divisions, which are ramping up. So these are focused toward super specialty doctors. And these are across cardiac, diabetes, CNS, respiratory inhalers, et cetera. So these are still ramping up. I mean, the growth rate is much faster than the company average growth rate. So net-net, if you see, that would also lead to market share increase on the chronic side.

And moreover, if you see, we are under-indexed in this segment. The IPM is at 38%. So we are at below average the IPM. So that also give us some headroom for growth here.

Sure, sir. And would you be able to provide the field force number, including the primary manager and excluding the first line managers?

So the total number of field force as on 31st December is 15,700. And if you see the breakup, so around 12,000 is the MR and the balance are the managers.

Sure, sir. And one on the depreciation and amortization, which has continued to go up, and you have highlighted that you have capitalized INR 1,000 crores gross block and that is the reason. But is the INR 110 crores per quarter more or less a sustainable number for us?

So as we mentioned that out of this INR 110 crores, INR 9 crores is a bit of an inflated number because that's the accelerated depreciation which we took. So it will be somewhere around INR 100-odd crores.

Sure, sir. And the last one on EBITDA margin, where you have guided for 24% to 26%. But any, let's say, medium-term guidance or outlook or aspirational target that you have in mind?

So we have given -- so if you see our 9 months EBITDA profile, so we are at 24.8%. We have given a guidance of 24% to 26%. And if we continue to maintain the growth momentum, which we are or the path on which we are, so we are hopeful that the margins will be getting achieved.

Sure, sure. And lastly, what I understood from your...

So Kunal, just to add the levers here, I mean, I get so many questions on EBITDA margin, but just a food for thought. So one is increasing share of chronic that will lead to margin expansion. Second is the new division that we spoke about, the super specialty in Mumbai. So these are under-indexed, and they are growing faster than the company average. So that will lead to margin expansion, which both these put together also leads to improving MR productivity. So if you see last year, we were at 5.7 lakhs per MR. We have improved in the last 9 months to 6.4 lakhs. So if the MR productivity increases, it flows down to EBITDA margins. So these are 3, 4 key parameters. And the last one is brand creation. So if you see last year, we had 36, 37 brands which were INR 50 crores. And as the brand sales increase, incremental effort to market those brands is less. So margin expansion happened in those brands. We are now 39 in INR 50-plus crore brands. So these are few food for thoughts that these initiatives lead to margin expansion, so direction should be there. Hope this helps.

Sure. Yes, yes, greatly, Prakash. And lastly, from your pricing comments, what I understood is we are currently at 15% to 20% discount. And we would be taking pricing, but we would not be taking it on overboard. So our relative discount would continue vis-a-vis peers. Is that correct understanding?

Yes, correct. The price increase growth will be in line or slightly lower than the IPM price increase growth so that the competitive advantage is maintained. At the same time, we will be carrying out the opportunistic price increase. Wherever opportunities are there, the price increase will be taken.

The next question is from the line of Gagan Thareja from ASK Investment Managers.

Sir, the first question is, can you quote the share of sales coming from DPCO or NLEM, which is under DPCO or NLEM?

So it's between 14% to 15% is what is under the NLEM.

And industry average is around 20%.

20% plus, yes.

Okay. And second, I mean, on the dydrogesterone facility at Udaipur, can you give us some idea of what sort of scale-up we can see from that in the coming year?

So dydrogesterone facility was recently started in the last quarter. And the facility is in the process of scaling up. Commercial supplies have already started. So I hope that from the first quarter of next year, the facility would be fully scaled up and would be catering to the domestic and international demand of dydrogesterone in totality.

Two questions related to that. One, I mean, in terms of scale-up of sales of dydrogesterone, would there be a sharp ramp-up next year? And second, obviously, currently, the OpEx is under-absorbed. And therefore, consequently, next year, would it mean that margins should benefit from the ramp-up from that plant?

So basically, I mean, this plant is made to cater to the future demands of dydrogesterone. Dydrogesterone is not just consumed in India, it's also consumed outside of India. There are several markets, for example, in China, Russia, out of Southeast Asian markets, which are big in consumption of dydrogesterone. So this plant is made to cater to the growing demands of India as well as international demand. So I was saying that it has no correlation to our sales in India. I mean, we were able to cater to the domestic demand in India through our existing plant where dydrogesterone was previously being produced. But seeing the potential of the product and seeing the growth of the product in the coming future, we started this new plant so that we are prepared well in advance to cater to the expected new demand for the growth in India and the newer markets.

So for the newer markets, there would be an approval process. When do you see yourself being able to position yourself in those markets with sales?

See, in newer markets like China, Russia, UAE, we have just started the approval process. It will take another 2 to 3 years minimum. So by '27, '28, you can see that the sales of dydrogesterone will go to those markets. It will take another 2 to 3 years minimum.

And for the tax rate, what should we budget for the full year this year and in the coming years, in FY '25?

So for the period, if you look at the -- for the 9 months period, our effective tax rate is close to 20%. And for the year, it should be around 21% or so.

And is there a scope to further ramp up Sikkim and therefore also sort of bring down tax rate in FY '25? Or does it stabilize at these levels going ahead?

Yes, so that's a good question. We have done the capacity enhancement last year. And if you see last year, we were at 22%. This year, we are hovering somewhere close to 20%. So we have taken benefit. Yes, there are levers available, but it all depends on the products being sold out of Sikkim plant and the expansion being carried out. So we expect it to be somewhere in the range of 20% to 21%.

Okay. The final one from my side, for the new chronic division, specialty chronic divisions, which you launched in Mumbai relatively recently, can you give us some idea of what's been the PCPM ramp-up from these divisions? And what time frame do you see that optimizing or coming to parity with the market average PCPM?

See, last 4 years, we've launched many divisions, quite a lot of divisions. The productivity ranges from INR 2 lakhs to INR 4 lakhs. That's the kind of a thing. And at different times, these divisions have been launched. Some are 4 years old, some are 3.5 years old, at different times we have launched. So in chronic side, once a division crosses INR 5 crore turnover, then it starts really, I mean, firing best. So we hope that as the time will pass, our -- these divisions will do very, very good. Because in chronic side, advantage basically is what -- your prescription stays with you and new prescriptions add to your growth. That's one reason we are so bullish about chronic side.

And even if you see the growth of the chronic division, this is much higher than the other general divisions. And some are growing in the range of 20%, some are growing in the range of 30%. So going forward, these divisions will contribute.

Right. And on the consumer portfolio, where this year has been weak because of some of the channel consolidation and IP activities that you're undertaking, how should we look at recovery in terms of growth in the coming years?

We mentioned to you in the past as well, I mean, a few minutes back again, in the last quarter only, we said that we are correcting certain things over there. So this year will be muted. Next year, we expect to really regain the previous kind of a growth. Good growth will come next year in consumer side.

The next question is from the line of Gaurav Jain from ICICI Prudential Mutual Fund.

I have a question, a follow-up on the Exports side. If you can help us understand for the 9 months, how much is the growth on the base business? And how much is the one-off opportunity? Because I think in the last con call, you said that you were targeting for a double-digit growth on the base business, removing the one-offs. So if you can clarify that a little better, please?

So I mean, we are on track to -- as we said in the last quarter that the new business, the newer launches which are there, which are getting ramped up. So there is significant growth in those products. And as well as from the one-off business, there is growth. So I mean, if you really ask me, I mean, it's almost like 60%-40% between the one-off product and the newer launches or the base business.

The new -- the growth basically in the 60% is from your launches and 40% is from one-off?

60% is from the one-off and 40% is from either the existing products or the new launches.

Understood, sir. Second question on expenses, for the 9 months, I think our employee cost is up by 19% and the other OpEx is up by 15%. Is there any specific reason for this higher increase? Or do we expect this run rate to continue?

No, if you see on quarter -- and if we talk about the employee cost, on a quarter-on-quarter basis, in value terms, it is flat. But since sequentially, there is a drop in the sale of around 4-odd percent, so that's why in percentage terms, it is higher. And if you compare it to last year to this year, yes, there is increase in employee cost because we have added additional headcount of close to around 1,000-odd people at the overall group level. And this also includes the impact of the annual increment, which is taken, and some ESOP expense has also come in. And moreover, on a year-on-year basis, there is a 25% increase. So that has also have a variable incentive impact therein.

All right. Will you be able to guide us for FY '25, how should we think about the growth in expenses and employee cost?

See, the endeavor is that the increase on a percentage basis, on an overall percentage basis, the employee cost increase percentage should be lower than the growth percentage of the company. That's how we try to peg it. And if you look at it in the percentage terms, from last year to this year, in percentage terms, it is lower.

[Operator Instructions] The next question is from the line of Rahul Salvi from Franklin Templeton.

I was looking at the investor presentation, so I don't know whether this question has been asked by previous participants. But the Domestic business grew by 20% Y-o-Y in this quarter and IQVIA reported growth is at 9%. So how much -- can you split the growth between modern trade, hospital sales and the actual primary sales if we go through the channels for our understanding? And why -- and the second question is why there is so much difference between reported IQVIA and -- reported and IQVIA numbers?

So my summation is you'll get a better understanding about this scenario in case you look at 9-month YTD growth numbers. So I'll start with that and then I'll answer your full question. So 9-month growth was 13.4% and IQVIA shows it 9%. So modern trade, e-commerce and hospital bill business is not captured by IQVIA. So it contributes in our sale of 5% to 6%. And in growth, it contributes by 2%. So if you look at 2% to 9% of IQVIA, so we are very close to 13.4%. And then the remaining percentage is from new business, which has already been mentioned by Rajeev sir. So we are close to that number, that primary number if you compare IQVIA versus primary on 9-months basis. So my summation is you should look at this number, the growth number on 9-months basis rather than 1 quarter because IQVIA number does not capture modern trade, corporate hospital sales. So there will be discrepancies. And our modern trade business has grown in this quarter by more than 35%, on YTD basis by 60%. So that's why it has an impact on overall growth numbers.

Okay. And modern trade and e-commerce is the same or it's different?

Modern trade is basically B2C. And e-commerce, it is brick-and-mortar. We supply medicines to brick-and-mortar stores.

So modern trade, basically, is this Apollos and brick-and-mortar. And e-commerce, you know e-commerce is what, basically, right? So we're talking about modern trade and hospitals.

Modern trade and hospitals.

And one -- something I just want to mention here that our modern trade and the hospital-based hospital department has come up recently a few quarters back. Earlier, it was not properly online, it was not structured. So things were happening as it is. But now since it is being supplied from Mankind to these hospitals, and as per our understanding, IQVIA does not cover these. That's one reason you're seeing that kind of a difference.

I think from next year, it will normalize.

Okay. So that also explains the minus 1% volume de-growth, which is shown by IQVIA because they are not capturing the modern trade.

Correct. We'll take that offline.

Okay, okay, okay. And second question is on the Export growth. So there was a question on that. But did you quantify the one-off? And if you're saying that we will still grow double digits on the base of this year, which will be around INR 650 crores, INR 700 crores, so that one-off will -- is a recurring one-off? Or what exactly do we mean to say?

We are not quantifying the one-offs. It is a reasonably large part of this year. We don't know when the competition on this product will come. But we also mentioned that last year and this 9 months, there have been a few launches. And our product selection is based on quality of the products with higher margins. So base portfolio is also growing double digit this year. And we expect base portfolio to continue to grow double digit next year as well.

Okay. So there is no visible competitor in this one-off opportunity as of now?

Currently, no. We continue as far as this quarter is concerned.

The next question is from the line of Alankar Garude from Kotak Institutional Equities.

Sir, would you attribute the strength in the hospital segment, the organized part which Rajeevji mentioned, to the Panacea acquisition?

No, it's not like that. I mean, see, the point was earlier, our regular stockists were supplying, right? So supplies were already there. But the problem was in one state, goods were coming in second state. So just to address that problem, we have centralized this modern trade, hospital business department. And now things are going straight from our depots to those places so that we can properly distribute sales to right people. And since it has been done in last couple of quarters, that is around 1 year, that's one reason we, all of a sudden, see huge sales, which was already there. And when it was being done from our regular stockist, IQVIA was covering, now it is not. That's one reason. Yes, certain kind of advantage you get when you get some kind of products from Panacea as well, but not very significant.

Understood, sir. And I think as you mentioned in response to the previous question, you expect this outperformance from these newer segments to normalize from next year onwards?

Newer segment means what?

Modern trade.

Modern trade. Yes, yes, yes, this will be done. Yes, yes, it will normalize.

Because this year, there is a base effect, so that's why.

Fair enough. Sir, the second question is, do we remain keen on divesting the Mahananda resort? And also, is the Gurugram residential project completely off the books now?

No, that project is on the verge of completion, the residential projects. So it is coming in the books. And with regard to Mahananda, so we would like to reemphasize that there is no further investment which is going into this particular resort. So this is self-sufficient or self-sustainable mode. And if you look at the EBITDA, that EBITDA is also higher if you compare it to the Mankind EBITDA level. But having said that, we remain committed to our initial position that whenever there are good monetization opportunity, we will definitely explore and capitalize on that.

Understood, sir. And one last question, if I may. In the previous call, we had mentioned about recouping 70% of our FY '23 sales for Codistar. Can you update us on the progress on that?

So Alankar, Codistar, when it was -- the product, when it was restricted, the company was doing approximately INR 8 crores per month. So we are already at the level of INR 6 crores per month. So we are very close to that, but there has been a steep decline because of price erosion. But unit-wise, we have improved. So we believe next year, we will reach very close to the number we were last year.

The next question is from the line of Rashmi Shetty from Dolat Capital.

Just one question on dydrogesterone. When we see the IQVIA data, we see that the value share has come down and there are some other competitors also picking up the share, which I understand that it is mainly due to the competition coming in. But in the volume share also, it has slightly come down. So here also, is there any adjustment of modern trade, which is not shown by the IQVIA data? That is my first question. And whether we are -- really the volume share has come down or we are really picking up in that product? Second question is on -- in case if the trade margin rationalization comes in the future, will there be any impact on Dydroboon sales because that is through clinics, right? And Drogyna is at the chemist level. So if you can give some picture on it.

No, let me take -- there are 2, 3 questions in this. First question, I don't think that Dydroboon and Drogyna are promoted through different channels. Both are promoted through trade channels. Whether it is Dydroboon or Drogyna, both are being promoted through trade channels, number one. Number two, modern trade definitely has impact, made an impact in overall volume growth. There is no confusion about that because it's not captured by IQVIA. Having said that, because of increased competition, we lost momentum in the first 2 quarters, but we have taken corrective measures in the third quarter. And let me share with you, if you look at our Q2 versus Q3, our market share has improved from 16% to 18%. And if you look at the December growth, we initiated corrective measures, some initiatives in third quarter, early third quarter, which has given us good results. So third quarter market share is approximately 18% versus Q2 market share of 16%. Plus if you look at December growth, IQVIA, Dydroboon growth was 19% versus industry growth of 17%. So we are on track for better performance in the coming months and the next year. I hope I answered your question.

Yes, sir, very well. And there won't be any impact in case of trade margin rationalization comes out on this particular product?

Nothing, no. No, madame.

Ladies and gentlemen, we will take that as the last question for today. I would now hand the conference over to the management for their closing comments. Over to you, sir.

Thank you, everyone, for joining us today. We really appreciate you taking time out for the call, and we look forward to interacting with you going ahead in subsequent quarters as well. Thank you. Have a nice day.

Thank you so much.

Thank you, members of the management. Ladies and gentlemen, on behalf of Mankind Pharma Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.