Torrent Pharmaceuticals Limited (500420) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q2 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, Sagar. Good evening, and welcome to second quarter earnings call for FY '26. We continue to see robust performance in our branded markets, which accounted for 73% of the overall revenue this quarter. Our 2 largest branded markets, India and Brazil, each delivered healthy double-digit growth. India business grew at 12% and Brazil grew at 21%. Constant currency growth in Brazil for the quarter was 13%. On the generic side, U.S. business grew at 26% and Germany grew at 5%. In constant currency terms, Germany revenue declined by 5%, mainly due to the continued supply disruption at the third-party supplier. Revenues were INR 3,302 crores, up by 14%. Operating EBITDA at INR 1,083 crores grew by 15%. Operating EBITDA margin for quarter 2 FY '26 is 32.8%. The overall leverage, which is the net debt to EBITDA now stands at 0.45x. A quick update on JV. We have received approvals from Competition Commission of India as well as Competition Commission of South Africa. The Competition Commission of India approval is subject to complying certain voluntary modification, which will be outlined in the CCIF final order, which we should be getting this month. We have also received SEBI approval on launching the minimum tender offer, and we should be completing that by December 15. I now hand over the call to Aman for India business.

Thanks, Sudhir. India revenues at INR 1,820 crores registered a growth of 12%. As per the AIOCD secondary market data, the IPM growth for the quarter stands at 8%. Torrent's chronic business grew at 13% versus the IPM chronic growth of 11%, driven by outperformance in cardiac and gastro. On a MAT basis, Torrent has 21 brands in the top 500 of the IPM with 15 brands now more than INR 100 crores sales as of MAT September 2025. Field force strength at the end of the quarter stands at 6,800 compared to 6,600 in the previous quarter. We are on track to continue expansion to 7,000 reps by the end of the financial year. The Curatio business grew 27% in H1 and 29% in Q2, driven by strong demand generation on account of OTC ad spends and field force expansion in previously noncovered regions. We are hopeful that the high growth may continue for the rest of the financial year. Going forward, we expect our overall India business to continue outperforming the market growth. Our focus during the year will be to continue improving our market share in focused therapies, particularly chronic therapies, new launch performance and improving field force productivity in the expanded divisions. I'll now hand over to Mr. Sanjay Gupta for the International business.

Thank you, Aman. We will start with our branded generics market of Brazil. Based on internal sales, Q2 constant currency revenue was at BRL 196 million, registering a 13% year-on-year growth. IQVIA data shows Q2 market growth at 7%, with Torrent growing at 15%. We are seeing healthy volume growth, coupled with mid-single-digit pricing increase. In Brazil, we have a rich pipeline of 65 molecules, which have been filed and are waiting for Anvisa approval. In the U.S., we registered constant currency revenues of $39 million, up by 21%. Growth is coming from new launches where we have achieved our target market share, and we are also seeing increased purchase volume on existing contracts. Moving on to Germany. Our German business registered constant currency revenue of EUR 30 million, down by 5%. As highlighted last quarter, growth continues to be impacted due to the disruption at a third-party supplier. I would like to conclude my comments here and open the call up for questions.

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

My first question is on India business. So 2 things. First, can you split the growth across the drivers, volume, price and new launches? And second part will be, can you talk a bit about GST impact on the business during the quarter?

Yes, sure. So as per the AIOC data set, our growth for the quarter was 12% versus 8% of the market. Breakup of volume is 3.7% versus 0% of the market, price at 5.5% versus 5.5% of the market and new products at nearly 3% versus 2.5% of the market. GST impact was minimal. I think probably due to additional discounts and some one-off costs, I think it's probably about 0.5% impact, I would say, so not too much.

And since then, now the business is as usual, right, after 22nd of September?

The business is as usual, sorry, what was the question?

No, I think after GST implementation, post 22nd of September when this change was implemented, now operations in India are back to normal level, right? Initial maybe some days, you had seen some disruption.

Yes. After the GST impact, this month has been pretty much in line. And we would rather wait for this month to get over and then December because the seasonality impact of Diwali and all would play a bit of a role. But I think it's pretty much in line with our H1 performance.

Sure. My second question is on Brazil market. So very strong underlying growth, which continued. My question is your plan for filing for Semaglutide. So I understand earlier you commented in India, you plan to launch at the time of market formation. But if you can talk a bit about your plans for Brazil market? Have you filed the application?

I can confirm that our application is with Anvisa. What we don't know is -- hello?

Sorry, you said your application is already filed with Anvisa?

Yes.

Okay.

So we are waiting for approval. I really cannot comment as to when we will expect the approval to come.

Okay. And my last question is on Germany business. When do you see supply disruption getting normalized, which impacted recent quarter performance?

So we are obviously working and pushing our supplier towards ending it quickly. Right now, all indications are that to some extent will continue in Q3. Hopefully, Q4 onwards, it will not be the case.

Our next question comes from the line of Abdul Kader Puranwala from ICICI Securities.

Sir, just a follow-up on the previous one. So in Germany, what kind of growth are we looking at this year? And how should we look at it from an FY '27 perspective?

I would refrain from giving a guidance because what we are facing is kind of out-of-the-box situation with one of our major suppliers facing disruption. So like I told the previous caller that I would expect this to be over by Q3. But if it is by any chance doesn't get over, then we will be impacted going forward. So I would refrain from giving guidance on Germany going forward until the issue is resolved.

All right. And sir, just on the Semaglutide opportunity in Brazil, so how critical is this launch for you? And any color on how do you see the market shaping up?

So the market is -- market is huge. It's like a $1 billion market by the time it goes generic. Essentially, the market is shifting towards Wegovy and Ozempic is coming down as can be expected. What we are expecting is approval in wave 1. I don't know exactly how Anvisa is going to treat these because we hear different stories -- are they going to process by batches or they're going to process in order of application or -- so right now, there's a bit of uncertainty as to how Anvisa is looking at all the companies who have filed. And I mean, it is a major opportunity. It's probably a very important opportunity no matter the number of competitors. So beyond that, I don't know what you expect me to comment. Usually, we target 15% market share for our products. So I think 10% to 15% of sema would be a material opportunity and would move the needle for Torrent. But again, we are not sure about the approval process.

Understood. And sir, just one final one from my side. Sir, if you could just comment briefly on how your key brands have done in India. I'm referring here to Shelcal, Unienzyme and the acquired brands like Tedibar.

All brands have done pretty well this quarter. Just to give a sense of the therapeutic growth breakup, Cardiac has grown 14% in the quarter. Cardiac is our largest contributor, and Gastro has grown 15%. And the overall derma piece, including Curatio has grown about 29%. So overall, it's been a broad-based kind of growth that we have seen. We think the chronic business should continue the high volume growth as well, given the expansion that's happened over the last couple of quarters. So upcoming quarter, we believe the same momentum should hopefully continue.

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

Given that now we have received approval from CCI for the JB Pharma acquisition, can you talk about in terms of when do you plan to have operational control of the asset? And what kind of synergy number are we looking at from, let's say, our next 2- to 3-year perspective?

So Rahul, as I said in the opening briefing that we've got SEBI approval for MTO, which will kind of get over in the third week of December. And then probably January, we should see the closing of transaction. And once that is happening, I think we should be able to start giving you indications on what kind of synergy value we are looking at.

Okay. So you will comment on synergies after, let's say, the buyout from KKR in Jan '26?

Correct. Correct.

Okay. Sure, sir. And just one another question on the India business. This quarter, we saw very healthy volume growth of around 3.7% versus market volume growth being very tepid. So what is allowing us to, let's say, outperform volume growth? So are we seeing volume growth in our focused therapies?

Yes, we are, mainly driven by chronic performance in most of the chronic divisions. So if you recall, most of the expansion since the last 2 years has been in this segment, cardiac, diabetes and CNS, and we're seeing the bulk of the outperformance happening there. Some of the new launches from last year and 2 years ago have now become pretty sizable contributors to the overall India business. So they're also continuing to grow reasonably well. That's also adding to the growth. And the overall volume growth, I think 6 months into the year, I believe, now is giving us a pretty good signal of comfort that the expansion probably has kind of given us that desired outcome. So hopefully, that continues for the rest of the year, and our expansion also is on track. We'll be almost at 7,000 MRs by the end of the year. We plan to enter into one new therapeutic area this quarter as well, which hopefully we should share by Q4 on the status of that.

Sure, Aman. And just if you could also comment in terms of how are you looking at the Semaglutide opportunity for the domestic market? So while Brazil, you are targeting to be in wave 1, what about the India market?

Yes, the endeavor continues to be in the first wave on market formation. When that could be still uncertain. So we'd rather wait before commenting on that. But it certainly seems based on the Mounjaro launch that the market potential may be higher than what was expected even a couple of months ago because Mounjaro has taken off very rapidly. The dynamics would be obviously very different at generic pricing. So yet to see what exactly the opportunity is, but again, our market share targets have been fairly aggressive in the recent launches. We'll have the same targets for Semaglutide as and when it launches. And if we are in the first wave and if we do launch well, I think it would be a pretty meaningful growth accelerator in the next year.

Sure, sir. And just in terms of sema, when the market opens up, would we launch both the injectable or the -- and the oral version? Or do you think that the oral launch could be a few years away?

No, not a few years away, maybe slightly after the injectable, but certainly both are planned within the next financial year.

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

Sir, again, on the India market side, the price growth has been sort of getting a little moderate. We used to have 7%, 8% price growth. We are now down to 5.5%. So while, of course, the broad-based growth is definitely a commendable thing, but just on the pricing aspect, if you could throw some light.

No, I think this is pretty much in line what we -- as per what we had planned from, say, a couple of years ago that expansion has to deliver volume growth. Pricing growth has to be in line with the market growth. And some years, it may be higher, some years, it may be lower. This year, we felt this was the appropriate kind of price growth that may be -- that the market may allow. And I think within this range, plus/minus 1% or 2% should continue for the next couple of years.

Got it. And sir, with respect to GST, a few peers were concerned and had an impact because of GST. Interestingly, we didn't have. But does it mean that you would have had a decent market share probably at a higher discount?

No, I would not think so. Our impact was minimal. Our discounts were minimal. So I cannot comment on what the industry has seen as an impact, but we have certainly not seen beyond 0.5% of growth impact.

Sir, secondly, on Brazil, typically, the product approval time line is pretty long. This is our earlier experience. So from that perspective, what's your thought on Semaglutide market formation?

So you're right. So traditionally, in fact, Brazil, the approval delays are getting longer. It used to be 24 months. And today, if you file a new dossier, it's going to be 36 months. But Anvisa is treating Semaglutide in a different manner because of the importance of the drug. So I'm not very clear as to they have given out statements, which have evolved over time. So we would expect them to treat this kind of as a priority filing in the interest of patients and in the interest of economic -- health care economics in Brazil. So hence, I don't think this is a typical filing.

Got it. And on the same product for India market, the patent expires in March, this market formation likelihood in March itself? Or is there a risk for the market formation itself getting delayed?

So there is a litigation ongoing right now. So hard to comment. So we'll have to wait for some time to understand exactly when the market can form.

Our next question comes from the line of Amit Kadam from Canara Robeco Mutual Fund.

Just can you take us through the -- some changes in the working capital, saw some little deterioration in terms of receivables and payables. Just can you elaborate what has happened in this particular half?