Sanofi India Limited (500674) Earnings Call Transcript & Summary

?? Good evening, everyone, and a very warm welcome to the investor conference call hosted by Sanofi India Limited. Joining on the call, we have with us Mr. Deepak Arora, Managing Director; Mr.?Rachid Ayari, Whole-Time Director and CFO; and Mr.?Haresh Vala, Company Secretary, from Sanofi India Limited. Before we begin this investor call, there are three important announcements. Please note that the proceedings of this meeting are recorded.?Secondly, please note a standard disclaimer that there are certain statements in this call which may be forward-looking and the actual results, may vary depending on the various other factors, which may impact the future performance.? Moving on to the agenda. We will cover the performance for the quarter and half year ended June 2026 and other highlights. Thereafter, we will have a Q&A session, which will end at exactly sharp 5:00 p.m. All investors and participants are please requested to keep the questions brief and to avoid any repetition.??[Operator Instructions]? I now hand over the proceedings to the management to take us through the presentation.?

Thank you so much, and a very good evening to everyone. I'm very, very excited and delighted to share the domestic results of quarter 2 2026 on behalf of the India leadership team. Along with me, I have?Rachid and?Haresh. So let's start with the good news first. I think a strong momentum further boosted by diabetes business. As promised last time, we will be investing ourselves into making sure that we optimize and maximize diabetes business unit, growing by double-digit and being above market growth. And here we are. If you look at the quarter 2 results, close to around 14% double-digit growth, powered by innovative portfolio, which is both with?Toujeo?and?Soliqua. This was not possible without looking at how we did transformation last year, bringing in discipline and execution and relooking into some of the strategic levers like public sector and trying to accelerate in public sector by expanding into new accounts of CARE or state accounts with?Toujeo?and?Soliqua. And you can see that close to around 70% growth is attributed by that discipline of execution, expansion and acceleration in public sector, while we continue developing strategies with diabetes care in terms of making sure that the -- we reach the last milestone with help of digital footprint.? Also happy to share that there's a 2% growth in quarter 2 over last year's quarter 2 based on the continued ROI or return of investment, which we looked into for partnership with?Emcure?and Cipla with the expanded footprint and reaching the last milestone for our patients requiring an established portfolio. This is coupled by continuous optimization of resources and profit before tax, which Rachid?will take us through. So overall, very, very happy with and pleased with the quarter 2 results. And I would say, very optimistic also as we move forward based on what we have seen in consecutive 2 quarters of what diabetes business unit is giving back to us. Can we go to the next slide??Just talking about the performance, this is -- basically will -- in the next slide, we're talking about how we delivered it. The scale of innovation was met with the value proposition and the equity Sanofi holds in the diabetes market, simply the strategy of owning Lantus and growing??Toujeo?and?Soliqua. If you look at, we still continue to be a market leader, close to around 47% market share by value and volume acceleration of plus 6% with Lantus.?Toujeo?being the second -- preferred second-generation basal insulin, has grown by 11% in the market share in value. And if you can look at the basal analog market share, which is the result of both Lantus and?Toujeo, we have 58% value in the market share and close to around 61% in the volume. This [indiscernible] -- this really talks about our consolidated leadership in basal analog segment as we continue. And last but not the least, the icing on the cake is the shaping of?Soliqua, which happened last year, is continuing despite of erosions happening in GLP-1 market. Soliqua continues to grow by 16% quarter-by-quarter.? Innovation is the key. And innovation is just not about bringing new products. Innovation is about also kind of advocacy and adoption we are doing in the market. If you look at, the big aspect is about the TZIELD data set, which is actually added with the Indian data set coming from the real-world experience narrative and the Indian patients, which is strengthening?Toujeo?and Soliqua positioning also in the Indian guidelines. So we have Soliqua and Toujeo real-world experience publications, which were close to around four between quarter 4 to quarter 2 of this year, LANDMARC real-world evidence study, which was a scientific evidence of dissemination and civil advocacy. And last but not the least, continue preparing how do we make sure that the overall insulin initiation to intensification is simplified by bringing some novel devices and AI platforms to strengthen patient support program.? Extend, as we talk about own and grow, talk about innovate, we need to make sure that we extend the access and equality in the access to the public sector. And with this where we shared 70% growth in the public sector by expanding into the CARE segment, tells us about the pathway which we are opting for in terms of continuous diabetes franchise growth. And last but not the least, digital outreach in Tier 2 and Tier 3 markets despite of the optimization. So this gives us an overarching promise what we shared with you all, leveraging existing diabetes portfolio, maximizing it for a sustainable and profitable growth. With this, I hand over to Rachid.?

Thank you, Deepak.?You still have...

Sorry.

Yes.

While we talk about sustainable and profitable growth, we also have to give back to the society. I'm very happy to share that our CSR 2026 update in terms of our promise being made on the commitment to CSR projects, we are actually ahead of it, reaching out to build stronger communities. By end of this year, around 600,000-plus direct beneficiaries will be reached with different programs, example, in Kids and Diabetes in School as well as Mobile Medical Units. And we recently added an MOU signature with national -- with NHM in MP, and we are making sure that we expand from what we have been doing in Lucknow in Uttar Pradesh, in Maharashtra, Goa and with this addition to Madhya Pradesh, in terms of bringing and expanding our flagship CSR project Kids as well as the Mobile Medical Unitsto make sure that we have early screening, screening to diagnosis and treatment, closing the loop in non-communicable?diseases. Thank you, Rachid, over to you.

Yes. Thank you, Deepak. Good evening, everyone. So in our presentation today, we try to be brief, so we give you more time for your question and to clarify the -- any points because there are a lot of fluctuations in the financial statements. So I hope that you will ask all the questions that are not clear yet. So as mentioned by Deepak, strong quarter. So we try to detail the total income. So plus 7%, mainly 94% where we focus on the sales, which is growing by 6% between the domestic and export. The other operating income, it's mainly related to service that we are providing to certain entity of the group, mainly the private company in India and the Consumer Health. And for the other income, it's mainly the interest on the deposits and the FX gain.? So strong quarter that allowed to offset the quarter where we have certain fluctuation coming from the partnership and the transition period. And if we look to the YTD right now, June 2026, we are at minus 4%, offsetting significant gap that we have in Q1, minus 2% on the sales, domestic and export and mainly coming from the exports where we are losing a bit. And other operating income, we -- it's related mainly to Consumer Health where there are certain services that were provided in the past that we are not providing anymore as today. Can you move to the next, please??Yes. So if you take another quarter, as mentioned by Deepak, plus 8% for the domestic, minus 2% in the export part. We see the same trend in YTD H1. So minus 2% on the top line, including export and domestic, with a good performance from diabetes, so double-digit growth, plus 17%. And this is a great achievement for Sanofi India, thanks to Deepak and the team, of course, and the restructuring that was done in Sanofi India and the new strategy where there is a focus on the new products and also on the public sector, which is paying significantly in diabetes part. Still in the partnership is impacted, as mentioned in Q1, and in the different interaction by one-off from 2025 related to safety stock or certain transaction agreed with a partner in the transition phase.? Exports, more or less we are stabilizing. And we are facing certain challenge from Australian market where the huge competition in this market for the mature products. But the good thing is that the strategy that we put in place, we are offsetting a significant part of it, thanks to specialization of the Goa site in certain products that are manufactured worldwide from Goa site.? Yes. Can we move to the next? Again, in terms of operating expenses, we -- a lot of focus and financial discipline on the financial without impacting any projects where we see that there is a return on investment. So there are certain things that we see that there are not any more important to do or to impact our top line. So if we look for -- from a quarter perspective, it's minus 5%. In YTD H1, minus 15%, and we continue -- this will be the trend without impacting, of course, the top line. So for this part of the OpEx, we focus only on the personnel cost, employee cost and the other OpEx because the depreciation and there is no -- and finance costs, there is no major fluctuation on these 2 parts. Can we move to the next??Regarding the profit before tax and exceptional items, so strong performance for the quarter with double-digit growth, plus 19%, so from INR 94 crores to INR 112 crores. And we see a significant improvement as well, plus 3% in terms of percentage to net sales, from 24% to 27%. This is on quarterly basis. And if we look to the H1, so we see minus 4%. And this is mainly explained again -- I'm sorry that I'm coming again to the transition period for the partnership that impacted Q1. This is the impact. And we were in the -- yesterday, we were in the Board, and we try to eliminate all one-offs and you find out that if you take all the one-off, the top line will be positive. And if you take the bottom line, the profit before tax and exceptional items, we have a kind of high-digit growth if we exclude all the one-off from last year and all of is related to this transition period with the partners. Before concluding, I'm moving to the Q&A, just when you look to the financial statements, you see that it's a very healthy situation where you look at -- to the cash of the company. So we are growing by 34% in terms of cash. No major risk that we were faced. So the company remains strong, and we -- I hope that we continue to deliver on -- as per expectations. I think this is the last one -- the last slide from my side. There is one to Deepak, yes.

I think to sum it up -- thanks,?Rachid. When we talk about continued progress and clear priorities, these are always set on the execution, the business strategy, financials, but I think starting with people. And as you are aware, with the transformation done last year, it was all to make sure that we are building right capabilities and leadership changes. Two, we remain focused and bringing in some kind of vigorance in terms of the way world looks at AI today and how AI can help not only internally but externally in terms of making sure from screening to diagnosis, diagnosis to treatment, the pathway is streamlined and there are bridges in terms of closing the loop with help of new technology. Execution remains the main stage. The strategic transformation which was completed, focus on insulin and winning partnership model for legacy brands, is key and delivering results today, really shows the strong execution, driving growth, significant margin expansion through operational excellence and alliances.? Talking about business, I think we are already there in terms of future-ready to go market capabilities and testimony is the consecutive 2 quarters gain and the growth which we have seen with diabetes portfolio, being very customer-centric in AI-enabled initiatives and last but not the least, making sure we are bringing some innovative customer journey orchestrations with devices and processes. Last but not the least, I will sum it up by saying 2026 marks a year of acceleration for diabetes business unit with 17% growth in the first half. And this talks about the ready capabilities of a modern organization business model, supporting sustainable profitable growth and a strong quarter 2 with 19% profit before tax, driven by business and OpEx efficiency through. With this, we'll open up for question-answers, and happy to take your questions between me and?Rachid.??

?? [Operator Instructions] First question is from the line of Rajkumar?Vaidyanathan??from RK Investments.

First of all, congrats on the good set of numbers on the diabetics segment. So the question is on the partnership business, why there is a prolonged anemic growth here? And I think the management is not kind of explaining this piece. While you are answering the good part of the business elaborately, but this part is not being articulated well to the investors. So I would request more color on this.

Yes. So I will take that, if you want to develop more, Deepak. So we signed the partnership for cardiovascular and CNS in March 2024. And the first year -- so the first year, the agreement with the partner that we start building their safety inventory in Q1 in 2025. And this is -- was done once we prepared all the -- the safety stock was done in Q1. This was impacting the performance of Q1 2026 because there was a kind of supply of safety stock in Q1 2025 because we are working on -- what we are booking in our accounts is the sales in -- the sales to -- the primary sales to the partners. This is one. There are other agreements with the partners related to sales returns that -- in the transition period. That was agreed, and this is -- it was one-off. It was positive in Q1 2025. So this is the major, let's say, impact that were positive in 2025 Q1.?And then if you take them out in 2026, this is what impacted the performance in Q1 2026 and systematically the H1 2026.

Yes. But Rachid, see, even Q2 you're showing only 2% growth, and it is not even in line with the industrial. And if you see the Cardio and the CNS segments have done very well in this quarter. So when do you think you will catch up with the industry? Because there is no gross to net issue also here, right? So it's -- we are comparing apple-to-apple. So that's the question -- that's a question the investors have because people invest when you show growth. I mean if there is no growth in the top line, then there will not be much interest from the institutional segment, right?

No, you are right. If we take Q2, it's apple-to-apple, yes. So...

So basically, I want to know whether.

[indiscernible]

Yes. So the question is, is this anemic growth is more -- is it a structural issue? Or is it more something headwind just for a, say few quarters, then you will come back to the normal industry-led growth? I just want to know what time frame you have? If that can be articulated, that will be helpful.

Yes. The partnership part is really strategic for us and very important for our business. So there is a strict follow-up with the steering committee and the organization is focused on that. So look, the 2%, yes, I believe that it's not as per our expectation, but we are working with the partners to see how they can reorganize and reinvest. And this is what happened. So we see that they are reorganized their team to have more focus on the portfolio. So this is as today, so the investment that has been done from the partner. But still, the competition in the market is quite aggressive in this portfolio. So maybe 2026, I don't -- I'm not expecting that we will reach the industry growth. 2027, this is what we are evaluating right now. I don't know, Deepak, if you want to add.

Just to add to Rachid, we have to look at the partnership from the three aspects of CV, CNS and OADs, anti-diabetic. And if you look at the last changes which we did in the partnership with Amaryl with Emcure, and today, when we look at -- we just divided and look at OAD segment, for example, the sales out from the partner Emcure is meeting the market growth, which gives us a very promising kind of a direction that we are on the right track. It's taking a little time for others. But I think as we move a couple of quarters, we should be getting closer to the market growth, if not on the market growth, knowing that this is a generic market, everyone is playing very competitive. But I can assure Cipla and Emcure and us are not leaving any grounds to make this partnership do what it's really intended to.

Okay. Sorry to labor on this point. So is there an issue that Emcure and Cipla are pushing their own products sidelining the Sanofi products? Will that be a situation or?

No, there's a difference. No, that can -- we can tell you very clearly, as a partnership, it's a win-win. And Emcure is really invested as we are invested, while the other products which they are bringing in have a separate team. But they have a team which is a stand-alone team for Amaryl and also for the CV portfolio. So that's rest assured that there's no digression happening because of the new products coming into their pipeline.

That's a very good point. When we selected a partner, we have taken in consideration at this point to avoid having such risk when we start running this partnership. But as mentioned by Deepak, so today, we -- there is no risk -- such risk in this partnership. It's -- We are working like one team, honestly. So a lot of interaction. And when there is a problem, we try to fix it together. So no risk from this part.

[Operator Instructions] Next question is from the line of Rusmik Oza from 9 Rays.

My question was that we are very focused on diabetes. So beyond diabetes, is there any initiative to get into any new segment of the Indian market? And can this 14% growth which we saw in the last quarter, will this be sustainable in the next 2 quarters till the end of this calendar year?

Look, it's a good point. But we are not only focusing in diabetes, in fact. If you take the partnership we -- the cardiovascular market is still very important for us and the CNS with Cipla the same. So we -- this is we should not neglect and there is a lot of focus and it's part of our strategy. Now regarding the diabetes, we think that we -- there is still significant opportunity in India market, where the under-diagnosis patients is still there. And today, we are talking about 100 million patients, right? So in the next upcoming years, it will evolve. So with our portfolio for the insulin part, we had a lot of discussion and questions regarding the GLP-1. We don't think that there will be any impact for the insulin part, and we are expecting that opportunity is still there in the market. And Deepak, I think you can develop better than me.

I think what we have seen in the last 2 quarters gives us a very clear direction that the equity of Sanofi insulin portfolio is very high in the market, and we need to keep -- continue leveraging it. So I don't know whether it's 14%, 15% or 10%. But yes, the promise what we have with ourselves and to our patients and to our community is that we'll continue doing what we can do to support these patients in their progressive disease, unfortunately, diabetes being a progressive disease and making sure that we bring in innovation from patient support program to early diagnosis to treatment and also getting into the public sector to bring innovation into public sector for getting these patients equitable access to Toujeo or Soliqua. So that can be what I can assure you that we're not leaving any grounds to make sure that what we have seen in the first half to repeat in the second half.

One more question was that are there any identified products from the parents basket which can be brought into India going forward based on whatever internal discussions we have with our parent?

So at this moment, when we look at the -- so we need to complement what we have today, right? So diabetes is which are the cornerstone for us at this moment, followed by CV and CNS. Currently, we are evaluating whatever comes in the pipeline for diabetes. Surely, India will be a place to really focus upon. For this moment, whatever is available is the innovative devices, Bluetooth devices, AI platforms, we will -- we are working on business cases to see how we can complement the -- and make it very simple for our patients who are taking insulin on a daily basis. Rest of the stuff, as the pipeline evolves, we will keep our discussions close to our parent company.

Okay. And the last question, sir, before the demerger, the payout ratio used to be quite healthy. So going forward, also, can we expect the payout ratio to be -- the dividend payout ratio to be closer to the yearly earnings number?