Torrent Pharmaceuticals Limited (500420) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q1 FY '26 Earnings Conference Call of Torrent Pharma. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Sudhir Menon, Executive Director, Finance and CFO. Thank you, and over to you, sir.

Thank you. Good evening, and welcome to the first quarter earnings call for FY '26. We continue to see strong performance in our branded markets, which accounted for 72% this quarter. Our 2 largest branded markets, India and Brazil, each delivered healthy double-digit growth. India business grew at 11% and Brazil grew at 16% in constant currency. On the generic side, U.S. business grew at 19% and Germany grew at 9%. The euro growth for Germany was 1%, mainly due to supply disruption at the third-party supplier this quarter. Coming to the key highlights for quarter 1. Revenues at INR 3,178 crores grew by 11%. Operating EBITDA at INR 1,032 crores grew by 14%. This quarter, other expenses include acquisition-related one-off expenses of INR 15 crores. Adjusted for this one-off, the underlying operating margin for the quarter stands at 32.9%. Net leverage stands at 0.45. I'll now hand over the call to Aman for India business.

Thanks, Sudhir. India revenues at INR 1,811 crores registered a growth of 11%. As per the AIOCD Pharmatrac secondary market data, the IPM growth for the quarter stands at 8%. Torrent's chronic business grew at 13% versus the IPM growth of 9%, driven by outperformance in cardiac, diabetes, Gastro, and CNS divisions. We continue to see positive traction in our Consumer Health business, particularly in the Curatio brands. On a MAT basis, Torrent has 21 brands in the top 500 of the IPM with 14 brands more than INR 100 crores sales as of MAT June 2025. Field force strength at the end of the quarter stands at 6,600 compared to 6,400 in the previous quarter. We are encouraged by the performance in the recently expanded divisions and headquarters. This expansion will help us to provide a platform for new launches and increase our territorial reach and gaining regional market share in previously untapped areas. We expect the India business to continue outperforming the market growth. Our focus during the year will be to continue to improve the market share in focused therapies, new launch performance, improve field force productivity in expanded divisions and regions and continue the investments and scale up of the Consumer Health portfolio. I'll now hand over to Mr. Sanjay Gupta for the international business.

Thank you, Aman. We'll start with our branded generics market of Brazil. Based on internal sales, Q1 constant currency revenue was BRL 143 million, registering a 16% Y-on-Y growth. As per IQVIA market growth was at 5% for Q1. Secondary sales for Torrent as per IQVIA also grew by 14%. Growth was aided by the performance of top brands and new launches. In Brazil, we have a rich pipeline of 62 molecules filed and waiting for ANVISA approval. Moving on to Germany. Our German business has registered a constant currency revenue of EUR 32 million, up by 1%. Growth was impacted due to supply disruption at a third-party supplier. In the U.S., we registered constant currency revenues of USD 36 million, up by 16%. Growth is coming from increased purchasing on existing contracts and achieving targeted market shares in recent launches. Operator, we can open the call to questions now. Thank you.

[Operator Instructions]. Our first question comes from the line of Damyanti Kerai from HSBC.

My first question is, can you explain the ForEx loss which you have booked in other income? So that's my first question.

Yes, I think...

How much is the number -- yes, yes.

So INR 48 crores is the ForEx loss, which we have booked in other income. And the major part is on the euro-USD pair, I would say, where the euro has appreciated almost by 10% this quarter. So it's more of translation losses, which I believe going forward, you should start seeing some of them reversing.

Okay. So it should reverse in coming quarters. And in Brazil, I understand the currency situation is not as, I think, severe as what we had seen in the previous quarter, right? So compared to the constant currency growth and reported growth, I understand the difference has come down.

Yes. So Damayanti, if you see last full year, the currency depreciation was around 15%. And since then, I think it's appreciated by almost 10%. So still there's a depreciation of 5%. So you see that 5% difference between constant currency growth and INR growth.

Okay. Got it. Coming to India, I have a few questions. So first, if you can break down the India growth into the components, volume, price and new launches? And also, if you can talk a bit more on like your MR expansion plans?

Yes. So our growth reflected in the AIOCD Pharmatrac data is 12.2%. The breakup of that is 3.5% volume, 6% price and 2.5% new products. And this is against, I think, 8% growth of the market for the quarter. And in terms of expansion, I think nothing really new from the last quarter that we shared. Essentially, it's the same expansion that's been executed in the chronic segment. We've added 200 MRs this quarter. I think a similar number may be added by the end of Q3 this year. So give or take, the plans remain the same, that maybe 6,900 to 7,000 MRs should be onboarded by the end of the financial year.

Okay. That's helpful. And my last question is on Brazil. So you mentioned there are 62 products awaiting for approval. So can you update like a few years back, I believe the approval cycle in Brazil were slight -- like very lengthy. So have you seen improvement in the approval cycle? And when do you expect these 62 approvals to come, say, over 3, 4 years or it could be even further?

So it depends upon the type of submission, right? So some of these are clone submissions from the company's approved products. Hence, the clone submission in Brazil generally takes 6 to 9 months. Some of these will take between 30 to 36 months. So essentially, what we are looking forward in Brazil is we have 3 divisions, and we are looking at 2 to 3 product launches per division per year.

So see, around 8 to 10 launches we can expect per year, right?

Correct.

Our next question comes from the line of Neha Manpuria from Bank of America.

My first question is on the margin. The adjusted margin of 32.9%. Sudhir, you didn't really give us a margin guidance last time. So based on the performance of the first quarter, would it be fair to assume that this is the run rate or slightly better probably as we go through the year given the branded growth?

Yes, that's what we expect, Neha. Minimum what we have reported in quarter 1 should continue for the rest of the quarters.

Understood. And my second question is on Germany. The supply disruption that we mentioned, if you could give some color on when this would normalize? Or do we expect this to continue to impact us for a couple of quarters?

Unfortunately, I won't make a prediction at least a couple of quarters.

And what is this related to exactly, Sanjay?

So in Germany, 75% of our business comes from third-party products, right? So we have a lot of partnerships. And so one of our partners has had some supply issues linked to regulatory requirements. Hence, it has a major impact on growth. So -- and we are kind of a little bit hostage to the situation in the sense it's not within our direct control. And some products we are sourcing to other places or we are bringing them in-house, but it will take some time before it normalizes.

Okay. So this year, we shouldn't assume any improvement in Germany?

It would be a good news if we can show some improvement in the subsequent quarters, but I don't know. I'll just keep my fingers crossed.

Understood. And my last question on U.S. Now that the facilities are improved, we started seeing contract wins and new product launches gaining share. How should we look at the traction in that? I mean if you could give us some color on the number of launches we should be building? And what's the sort of growth that Torrent can see in the U.S. market?

So I would say that in the course of this fiscal year, we should see about 10 launches. Some of them are mature products and a couple of them are day 1 launches. So in the first quarter, we launched about 4 or 5 products. And the biggest launch for us so far was the Esomeprazole granules, which we launched at the start of the fiscal year. And we've had other a few smaller launches of products, which are already genericized. And then last week, we launched [ Sacuval ] also. So going forward, we expect another 5, 6 launches for the rest of the fiscal year.

And with these launches, it's fair to assume that U.S. is now profitable for us. And with every subsequent launch that profit margin improves?

I think Sudhir will answer that.

Yes. Neha, it is still not profitable. It will take some while before we get into the profitable zone post R&D. But the progress is looking positive. So I think quarter-on-quarter, you'll see the losses coming down for the U.S. and therefore, a positive contribution to the overall performance.

Our next question comes from the line of Tushar Manudhane from Motilal Oswal Financial Services.

Sir, just on the MR count, again, we have increased the MR base by almost 1,000 over the last 1 year. And from 5,700, we are reaching to almost 7,000 by end of FY '26. But somehow the growth rate or let me put it other way, the MR product is still lower or sort of the growth is still not catching up with the addition of MRs. If you could elaborate on this.

I would not look at it in that way. Generally, the MR additions take at least 12 to 18 months to onboard and kind of get familiarized. So if you see last year's full growth, we were at 13%, which was I mean, significantly higher than the market growth. And that was a result of the expansion done in the previous kind of 2 years, right? So that is the time and impact that it takes. So anything that gets done today won't have an impact on positive growth in the next quarter or 2 quarters. It may be seen in the next 1 year and 2 years. So I think the numbers that we are seeing in the places that we have expanded in divisions we have expanded, certainly, there is a positive -- meaningful positive uplift. Otherwise, we won't continue doing it. So I would say that it's best to look at it from a 2-year horizon rather than anything shorter than that. And just to kind of add one more point is that last year's Q1 growth in India was actually 15%, and this year is 11%. So on a 2-year CAGR, it's about 13%, so which is still significantly higher than our previous CAGR before the expansion started. So these are all signals together that add up and give us confidence that the expansion is certainly helping increase our growth.

Got it sir. If you could break the growth into consumer health care and -- I mean consumer fees and the prescription please, for India segment?

We have not done that. We don't really look at it that way. We see every brand separately, every division separately rather than kind of looking at consumer versus prescription. But I would say that the investments being made in the brands like Tedibar, for example, are certainly giving very, very positive results, way more than the prescription growth. And we believe that should continue for the next couple of quarters at least. It's at a base which is growing rapidly. And until we reach a certain level of market share saturation, I don't think that should slow down. And partly that's aided by the consumer spend that we've been making for the last, say, 1, 2 years. So definitely, there is a positive correlation that we are seeing. And as we mentioned earlier also in brands that we see whether the results are not really coming in expectation to what we thought, we cut down the spends. So it's all kind of measured at a portfolio level.

Got it, sir. Just at least if not the growth rates, but if you could share what has been the composition of India business into prescription and consumer?

Composition of the sales contribution or...

Yes, India business into prescription and consumer?

Yes. I mean we've generally shared that the consumer brands are between 10% to 15% of the total portfolio.

Got it, sir. Got it, sir. And just one more on Germany as such, last couple of years, there has been, unfortunately, some of the other reasons, which has been keeping the growth under check. So any rethought on the geography per se or you think that we'll be able to do better in next 3 to 4 years?

No. So there's no rethought on the business in terms of geography. We are trying to improve. And every time we improve something else goes wrong. So -- but that doesn't mean that we are not -- we are giving up on Germany. We are the fifth largest generic company with about 6% of the German generics market. We have an aggressive growth strategy in terms of new launches and cost improvements of existing portfolio. So all that work continues.

Got it. And just lastly, one more, if I may, on India business, like how many launches you would have done over the last, say, 12 months out of that, how many line extension and how much first to market?