Dr. Reddy's Laboratories Ltd

I now hand the conference over to Mr. Amit Agarwal. Thank you and over to you sir.

Very good morning and good evening to all of you. And thank you for joining us today for the Dr. Reddy's earnings conference call for the quarter ended September 30th, 2020. Earlier during the day, We have released our results and the same are also posted on our website. This call is being recorded and the playback and transcripts shall be made available on our website soon. All the discussions and analysis of this call will be based on the IFRS Consolidated Financial Statement. To discuss the business performance and outlook, we have the leadership team of Dr. Reddy comprising Mr. Erez Israeli our CEO, Mr. Swamin Chakraborty our CFO, and the Investor Relations Team. Please note that today's call is a copyrighted material of Dr. Reddy and cannot be rebroadcasted or attributed in press or media outlets without the company's express written consent. Before we proceed with the call, I would like to remind everyone that the safe harbor contained in today's press release also pertains to this conference call. Now, I hand over the call to Mr. Swamin Chakraborty. Over to you sir.

Thank you Amit. Greetings to everyone. I hope all of you are keeping safe and healthy. I am glad that we continued with our momentum of new product launches, productivity improvement and strengthening of COVID-19 portfolio while delivering the promise of serving our patients Unabatedly even during these challenging times. The current quarter was witnessed with strong sales growth across all our key markets. Healthy gross margin, significant leverage benefit on SG&A which resulted in a healthy EBITDA and profit margin. Let me take you through these in a bit more detail. For this section, all the amounts are translated into U.S. dollars at a convenience translation rate of Rs. 73.54, which is the rate as of 30th September 2020. Consolidated revenues for the quarter start at Rs. 4,897 crores, that is $666 million. and grew by 2% on a year-on-year basis. The year-on-year growth adjusted for proprietary products outlicensing income of Rs. 723 crores is recognized in the same quarter of previous year stood at 20%. Growth is primarily on account of new product launches across markets, volume traction in base business, and integration of business acquired from Hukat. Our energy business grew by 28%, Europe business grew by 36%, India business grew by 21%, Emerging markets business grew by 4% and PSAI business grew by 20%. Sequentially, our revenues grew by 11% Supported by gradual improvement in the volume pickup in India, Russia and other markets, new product launches and full quarter impact of the business occurred from Bhukan. Sequentially we saw 46% growth in India, 6% growth in both energy and euro and 8% growth in emerging markets. Consolidated gross profit margin for this quarter has been 53.9%. Although on a reported basis it declined by 360 basis points year on year, adjusted for outlicensing income during previous year, there has been an increase. This increase was driven by improved productivity, forex finances and product mix partially offset with price erosion. Sequentially, margin declined by 210 basis points due to lower export incentives, adverse forex stakes, and product leaks. Gross margin for the Global Generics and PSAI were at 59.4% and 26.8% for the quarter. The SGM spent for the quarter is Rs. 1311 crores. that is $178 million. A decrease by 1% year-on-year and an increase of 3% quarter-on-quarter. The sequential increase is primarily attributable to incremental costs arising with the integration of acquired business from mocha and increased sales and marketing related activities post-unlock. Fresh cost has shown a reduced increase Producing Trends Post Unlocked with Improvement in Career Availability. However, so far as productivity is concerned, SG&A has a percentage of sales at 26.8% to reflect an improvement of 80 basis points year-on-year and 200 basis points quarter-on-quarter. The R&D spread for the quarter is Rs. 436 crores i.e. $59 million with an increase of 19% year-on-year and 10% sequentially. This trend is in line with the increase in the number of R&D projects including development of COVID-19 products. As a percentage of sales, however, R&D was at 8.9% of sales. The EBITDA for the quarter is Rs. 1267 crore i.e. $172 million. EBITDA margin is at 25.9%. So we are pressing our aspirational target of more than 25%. Profit resource tax for the quarter is Rs. 862 crore i.e. $117 million. with a year-on-year growth of 12% and a sequential decline of 2% after absorbing an impairment charge of Rs. 78 crore on certain products in line with the requirement of the accounting standard. Effective tax rate for the quarter is at 11.6%. The ATR has been lower due to recognition of deferred tax receipts for one of our subsidies. We expect the ETR to be around 25% for the full year, as alluded earlier. Profit of the tax for the quarter stood at Rs. 762 crores, that is $104 million, which is 15.6% of the revenue. The reported earning per share for the quarter is Rs. 45.83. Operating working capital increased by Rs. 21 crore, which is $3 million. There has been an increase of Rs. 200 crore each in the receivables and inventory, which are in line with the growth in business. This was partially offset by the increase in the trade table. However, when we measure working capital in number of days, that has improved by 5 days. We invested Rs. 250 crores which is $74 million towards capital investment in this quarter. The free cash generated during this quarter was Rs. 603 crores which is $82 million. Our net debt as on September 30, 2020 was Rs. 136 crores. Our net debt to equity ratio is at 0.01 and continues to reflect our strong balance sheet position. Current currency cash flow hedges for the next 11 months in the form of derivatives for US dollars are approximately $305 million, largely hedged around the range of Rs. 74.4 2 rupees 76.7 to the dollar. In addition, we have cash flow ages of 2.1 billion rubles at the rate of rupees 1.031 to the ruble, maturing over the next 9 months. With this, I now request today to take to the key business highlights.