Dr. Reddy's Laboratories Ltd

Ladies and gentlemen, good day and welcome to Dr. Reddy's Q1FY23 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your test phone. Please note that this conference is being recorded. 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 June 30th, 2022. 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 will be made available on our website soon. All the discussions and analysis of this call will be based on the IFRS consolidated financial statements. To discuss the business performance and outlook, we have the leadership team of Dr. Reddy's comprising Mr. Reddy, Israeli, our CEO, Mr. Farhad Iqbal, our CFO, and the investor relations team. Please note that today's call is a copyrighted material of Dr. Reddy's and cannot be rebroadcasted or attributed in press or media outlets without the company's express written consent. Before I 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. Parag Agarwal. Over to you, sir.

Thank you, Amit, and greetings to everyone. I will take you through our financial performance of the quarter. For this section, all the amounts are translated into US dollar at a convenient translation rate of Rs. 79.02, which is the rate as of June 30, 2022. In this quarter, we have a strong growth in our profits supported by the settlement income and grant divestment, while we were impacted by additional competition in key products in the US, cost inflationary pressures, normalization of stock holding in Russia, and slowdown in the farmer market growth in India. Despite these challenges and existed for few one-offs, we have done reasonably well and are confident of further improving our performance from here on. Consolidated revenue for the quarter stood at Rs. 5,215 crores and grew by 6% year-on-year basis and declined by 4% on a sequential quarter basis. Sales growth has been impacted due to higher base effects as Q1 FY22 included sales from COVID products and Q4 FY22 had higher sales in Russia driven by stocking up which has normalized in the current quarter. This impact was partially offset with the brand divestment income in current quarter and the new product launches across our businesses, while the price erosion has been in line with the trend weakness in the last few quarters. Consolidated gross profit margin for this quarter has been at 49.9%, a decline of 230 basis points over previous year and 300 basis points sequentially. Gross margins for the global generics and PSCI businesses were at 55% and 15.7% respectively for the quarter. While the current quarter gross margins were supported by brand divestment income, it was impacted due to several run-offs, adjusted for which we are within the normal range. Let me explain these in a bit more detail. Firstly, our gross margins were impacted due to significant movement in the forex rates during the quarter which we believe should normalize going forward. Secondly, the growth margins were also impacted due to increasing the commodity prices and adverse leverage on manufacturing overheads due to low sales pace. We expect this to normalize from next quarter with an increase in our sales. Thirdly, in this quarter, we have launched Chronic Band Sigma in India which is currently procured externally and has a lower growth margin. We plan to transition to in-house manufacturing after the expiry of patents, which should lead to an improvement in margins. With the above measures planned to be undertaken, normalization of the run-off, and launch of new meaningful products, we believe that next quarter onwards our growth margins will improve and will be within the normal range. The FD&A spend for the quarter is between Rs. 1,549 crores that is US$196 million, an increase of 3% year-on-year and a decrease of 1% quarter-on-quarter. As a percentage of sales, R&D has been at 29.7%, which is lower by 90 basis points year-on-year, however higher by 90 basis points sequentially. The R&D expense for the quarter is Rs. 433 crores, that is US$55 million, and is at 8.3% of sales. We continue to drive productivity across our businesses while also making investments to strengthen pipeline and capability development in marketing, digitalization and people including Horizon 2 businesses. The net finance income for the quarter is Rs. 235 crores i.e. US$ 30 million supported by GAIN on account of strengthening of global rates during the quarter. While we had forest-related benefit in finance income, this has been partially offset due to forex impact and costs impacting our gross margin and SG&A. The EBITDA for the quarter is Rs. 1,779 crores and the EBITDA margin is 32.1%. Adjusted for the run-offs of settlement income, bank divestments and those related to gross margin, we are within our normal range. Our profit before tax stood at Rs. 1,456 crores which is a growth of 97% year-on-year and a growth of 490% quarter-on-quarter. Effective tax rates for the quarter has been at 19.0% primarily on account of recognition of previously unrecognized deferred tax assets on operating tax losses pertaining to our SWIFT entity. We expect our normal EPR to be in the range of 24-26%. Profit after tax for the quarter stood at Rs. 1,188 crores i.e. US$ 150 million Reported EPS for the quarter is Rs. 71.40 Operating working capital increased by Rs. 790 crores i.e. US$ 100 million against VAT on March 31, 2022 The increase was primarily driven by an increase in receivables in North America which should normalize during next quarter Our capital investment during the quarter stood at Rs. 331 crores, which is US$42 million. The free cash flow during this quarter was a net outflow of Rs. 232 crores, which is US$29 million after payment of Rs. 509 crores for the acquisition of Sigma's brand in India and the inductible portfolio from Eaton Pharma in the US. Consequently, we now have a net cash surplus of Rs. 1,275 crores that is USD 161 million as of June 30, 2022. Foreign currency cash flow hedges in the form of derivatives for the USD are approximately USD 366 million, largely hedged around the range of Rs. 77.6 to Rs. 80.4 to the dollar, ruble Thank you, Parag. Good morning and good evening to everyone.

Our performance of the current quarter reflects the strength of our diversified business model. We have been able to mitigate several challenges faced during the quarter by monetizing various opportunities that led to highest-ever profit at an overall business level. Let me share with you some of the key highlights of the current quarter. One, settlement of impending litigation for G. Suboxone for $72 million, which further helps threatening our balance sheet. Completion of USFDA inspection of our new sterile injectable manufacturing facility, referred as FTO11, leading to subsequent approval of the product from the site. This enabled us to commission this plant and bring on stream of additional capacities and capability to grow our injectable business. Acquisition of cardiovascular brand Sidmus in India and injectable portfolio from Eaton Pharma in the United States. A World of Abiraterone Tender in China, which will be our second product tour GPO model. We are progressing well on product pipeline across small molecule generics by similar and efficient products slash NCEs. There have been good momentum in the initiative pertaining to Horizon 2 business and sustainability goals laid out during our recently concluded investor day. All of this will enable us to continue to deliver on our long-term growth aspirations. Now let me take you through the key business highlights for the current quarter. Please note that all references to the numbers in these sections are in respective local currencies. Our North America generics business recorded sales of $230 million for the quarter, which is a decline of 2% year-over-year and 13% on a sequential basis. This was largely attributed to the incremental competition in a couple of our key products to Gisopoxone and Acosepam during the quarter. The Q on Q decline was also driven by a high base for a first to five launch vasopressin injectable with normalized volumes and pricing adjustments due to the impending entry of competition on day 181. Bearing these products, the price erosion for the base business has been within the normal trends over the last few quarters. In this quarter, we launched seven new products, some of which should be ramped up in the coming quarters. We expect strong launch momentum to continue during the year. Similar to the last three years, we believe that we can continue to grow this business on the strength of new product launches while there will be volatility on a quarter-to-quarter basis due to the fundamental nature of generic business model. We are preparing for a volume-limited launch of linaludamide AMDA product in the United States during September 2022. The specific volume-limited amount of generic linaludamide that we are permitted to sell between September 2022 and January 31, 2026, when we are licensed to sell in unlimited quantities of generic linaludamide, are confidential. Our Euro business recorded sales of 50 million euros this quarter, with a year-on-year growth of 12%. However, sequential quarter decline of 4%. During the quarter, we launched nine products across various countries within Europe. We expect to continue to pay growth momentum in the rest of FY23. Our emerging markets business recorded sales of 903 crores rupees, with a year-on-year decline of 1% and a sequential quarter decline of 25%. The decline was due to higher base effect as we had COVID product sales in Q1 FY22 and brain divestment income in Q4 FY22. Further, the increase in stock holding seen in Russia during last quarter due to the conflict is now normalized. However, impacted the current quarter growth. However, impacted the quarter growth. Within the emerging market segment, and 60% on the quarter-to-quarter basis in constant currency due to the same reasons. During the quarter, we launched 25 new products across various countries of the emerging market. We believe that on an annual basis we will be able to grow this business in line with the past trends adjusted for the one-offs of COVID sales and red divestment income in previous years. Our Indira business recorded sales of 1,334 crores rupees with a year-over-year growth of 26% and sequential growth of 38%. Adjusted for the brand divestment income in the current quarter and the COVID product sale during Q1 FY22, we have grown in as a healthy double digit. During the quarter, we launched five new products in the Indian market. As per the Accuva report of June 2022, our rank in value terms is at number 10. We continue to reshape our portfolio in India business with the focus of growing big brands, acquisition and partnerships for focus therapy areas while divesting non-core brands. Our PCI business recorded sales of $91 million with the year-over-year decline of 10% and sequential decline of 8%. Adjusted for COVID product sales in Q1-A4-22, the business has grown over last year. We expect to see improvement in sales during the balance of the year. We believe that there are several opportunities for growing your core business and leading you up in your growth. We are committed to our long-term strategy and are progressing well toward productivity improvement and making right investment choices to deliver a long-term sustainable growth in line with our strategy unveiled on the investor day. With this, I would like to open the floor for questions and answers.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchscreen telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Anyone who wishes to ask a question may please press star and 1. First question is on the line of Sion Mukherjee from Nomura. Please go ahead.

Yeah, thanks. Praag, can you just quantify the impact of Forex across line items? There is a finance income, but you also mentioned there are certain impact in COGS. So if you can just quantify the net impact.

Yeah, so Sion, the... Movement of ruble and some of the other currencies has led to an adverse impact in the gross margin, which would be roughly around 150 basis points in that range. And in the finance income, there is the upside that has been recorded, and that's because of the accounting standards, the stress type method. So overall, that's the kind of impact that our standard has.

OK. The second one on Russia particularly So I just missed the constant currency growth if you can just indicate in Russia and also are you able to take any more hedges for in Russia or you know the hedges that you had at the end of fourth quarter you are just you know you are running with that at the moment and since the hedge amount is large for this year you know what is the kind of realization that you will have on currency and

and you know any anything you can guide going forward how should we model for Russia in terms of the currency rate so science yeah let me answer the first question is on the constant currency sales impact during the quarter our Russian business declined by 14 percent year-on-year in constant currency and as i as we had signaled in the last quarter this includes the normalization of the inventory stocking of that we saw at the start of the conflict um now coming to the second point on forex hedging uh as you know ruble has appreciated significantly from uh you know it used to be at a rate of around 0.9 to 1 to rupee and it is now ranging anywhere between 1.3 to 1.45 We believe this rate may not be sustainable in the long run and currently the cost of hedging is extremely high, prohibitively high. So we are currently not hedging. What we are trying to do as a business is to reduce our working capital cycle and we have had some success in that. So instead of hedging our exposure, we are reducing the cash conversion cycle to minimize the impact on our business.

And just for me, if you take this normalization of inventory, we will continue to grow in Russia.

Okay. So just one more question if I can ask. On India, you mentioned adjusted for COVID, you had healthy double-digit growth. But if you adjust for the acquisition, can you share the growth number?

Both. So if you take both out, Sayan, which is the brand divestment we take out and also the impact of COVID in the base, then we have grown at healthy double digits. If you look at the impact of acquisition, if you take that out, then our growth would be in single digits.

Okay. Thank you. And John, back to you.

Yeah. Thank you. The next question is from the line of Anubhav Agrawal from Credit Suisse. Please go ahead.

Question is from the US market. Just when you talk about price erosion, so you talked about a couple of products. Is there any element of shell stock adjustment on vesopressin also in this quarter in the US sales?

Again, can you repeat?

When you call out, so U.S. sales are down 13% quarter-on-quarter. One is the price erosion or volume impact on Suboxone and Vespa, which you called out. But on Vespa, I'm just trying to understand, is there an element of shell stock adjustment there? Like, for example, let's say $5-10 billion, which is just artificially depressing the reported number. And when we start the next quarter, that number, we start at a higher base. That's what I want to clarify. Okay.

So like I mentioned in my part, basically we see the normal adjustment that is related to day 131, the situation. And that's what impacted us in this quarter.

Yeah, and on the FSA adjustment, there was no such major impact.

When you say FSA, what does that mean?

We are not guiding but let's say we do not see any

The price erosion that we have seen in this quarter in aggregate is in line with the trends that we have seen in the last few quarters and we are not seeing any sign that it's worsening. That's the point I would like to make.

Second is in the Russian market. Now we've seen good amount of July as well. Has there been any element of us, you know, some market share gains, some visible signs of that happening or is it business as usual? Can you give some qualitative what's happening in the Russian market?

In Russian market, Anubhav, we are seeing our operations are normal. Reddy's Laboratories Ltd Reddy's Laboratories Ltd Reddy's Laboratories Ltd

Sorry, just to add just a clarity on this. So what I meant was, for example, with ruble to INR, conversion is much easier than, let's say, ruble to euro or USD. So is that benefiting you guys or in general the Indian companies who take a higher share in the Russian market? And have you seen any visible signs of that?

So... In terms of visibility for the reported quarters, we did not have impact as such. We do not see at that moment anyone that actually lives in Russia. All the pharmaceutical companies, to the best of our knowledge and our visibility, are working in Russia, are operating in Russia. Likely that long-term it will change, but right now that's what we see. In terms of our business in Russia, it's favorable. People understand that we took a decision to continue to work in Russia. And indeed, it's comfortable for us to work and probably it will help us in the future. But as we speak, I think business as usual is the right way to give you the best transparency of what we see on the ground.

Thank you guys.

Thank you. The next question is from the line of Damayanti Karai from HSBC. Please go ahead.

Hi, thank you for the opportunity. My question is on US business. So you have a sizable portfolio of injectable products in the US. So can you comment like how pricing erosion in this part of the portfolio stand against the Pricing Erosion in the Border Portfolio, which mainly consists of oral solids. And also, in terms of some of the complex generic launches which we are anticipating in the future, what are your expectations on the pricing part? So that's my first question.

Thank you. So the behavior on the injectable business in terms of erosion, is similar, so if a number of competitors are coming and facing a handful of customers, the price erosion is the same, and also the pattern of the procurement is the same. So we don't see that's a different behavior. The only, I think, big difference in terms of injectables in which you can work directly with the hospital as well as to work with the wholesalers and of course this is allowing you more flexibility as it's related to share and market both. More and more in our case we will see a more injectable coming naturally as this is where the patent is and this is where many people will go. I'm not sure I captured the second part of the question. If you can repeat, please.

Yes. So we are working on various complex generic products. Many of those are injectables, and these products might come over the next few years. So I was asking in terms of pricing, how do you see these products stand in terms of pricing erosion once they come in market compared to the current portfolio which we have.

So some of the products that we will launch in the future may see limited competition and these are the products that some of them were indicated during your investor day, some are in our pipeline and we did not disclose. In general, like I said before, If there are multi-unders approved for a product, we will see similar phenomena of price erosions also for the injectables as well. I don't think that there will be significant difference in the behavior or the pattern of the procurement of the hospital versus the retail in that respect.

Sure and my last question is can you comment on the trends which you are observing in the commodity prices or logistic costs etc. Has there been any change compared to what we saw in the previous quarter like any sign of moderation there?

No signs of moderation but no sign of worsening. We see the some of the commodity price still impacting, especially those that have inventory attached to it, as well as shipping costs. Naturally, normally there is some time that it takes while the oil and some other commodity price goes down, and then, of course, accordingly, normally in a certain period, Thank you for your answers. I will get back in the queue. Thank you.

The next question is from the line of Prakash Agarwal from Access Capital. Please go ahead.

Yeah, thanks. Good evening and thanks for the opportunity. Question is on gross margins. So I heard Mr. Parag saying about 150 bps on the ruble, largely due to ruble. But correct me if I'm wrong that, you know, rupee dollar also had a substantial movement and you also said that there was a high base last quarter on the stress in. So that is also come down a bit. So are these not also factors that led to some decline in the gross margins?

So overall, the forex impact I told you was in aggregate. The US dollar rupee impact isn't significant. The important headline is that if you take out the positives and the negatives, both which are non-recurring, then our gross margins are in the normal range. If you look at our last several quarters, our gross margins fluctuate between 51% to 53%, 54%. And the point I'm making is that our reported gross margin is 49.9%. which has benefited from divestment of brands in India. But there are a number of other one-offs which are non-recurring in nature. And if you adjust these as well, in aggregate, our base gross margin is in the normal range. So that's the headline that I want you to understand.

And I want to add to that, we do not see a change in the pattern of our gross margins going forward as well. So like we discussed in previous calls, the nature of the game in which is impacted from Forex, from inventory, from price erosion, etc., we will always be in the range of somewhere between the numbers that Parag just mentioned, and this will continue also in the future. So we can reiterate that this is the A margins that we feel comfortable on the gross margin and we reiterate also what we discuss in the rest of the day about our commitment for the EBITDA margin as well. So what we see is a consistent, if you wish, performance that is related to that. Probably now we see it more on the lower part of the range but within the range.

Okay. And trying to understand this, you know, when we met in Mumbai, the R&D day you had, so we have talked about 25% EBITDA margin, and I understand this is ex-rev limit, right? So are we on track for fiscal 23, 24 in that range? I mean, given that we had a blip in Q1?

So we have consisted of what we discussed in Mumbai. It was only a few weeks ago. What we said, I just want to make sure that it's the same. It's not necessarily a number that will achieve every quarter in the next many, many years. It will fluctuate. What we are saying is this is the number that on average we are going to get, which we feel comfortable with, which will allow us both to invest in the future and also to give the right return for return for the shareholders. So this is indeed in the case of very successful launch of lenalidomide, it could be higher than that. And after that, it can be lower than that. This will continue this kind of fluctuation. On average, we are consistent of what we discussed in Mumbai.

And I must also clarify that, sorry, just to clarify, the aspiration of 25% that we have stated is not including or excluding any particular product. It is the margin and aggregate for our business.

Okay, understood. Okay, and just a clarification on the limit is when you say launch, it includes the two exclusivity as well as the other strengths, right?

Correct.

Sorry, sir? Yes, yes. That's right. Correct. Okay, perfect. Thank you and all the best.

Thank you. Our next question is from the line of Neha Manpuria from Bank of America. Please go ahead.

Thank you for taking my question. Parag, again on the gross margins, if I look at, you know, if I step out the brand divestment in the quarter, you know, we're closer to about the 57, 57.5% margins. from your comments it seems like the effects will normalize but there was also an expectation that commodity prices wouldn't come off. What essentially will lead to normalization of this? Would it be Revlimid launch which will essentially help improve this margin? I'm just trying to understand what will move us from the existing margins to our normalized range that we're talking about.

Yeah, so now there will be Two, three drivers. One is I wouldn't single out Revlimid first of all. I think I would say that the margins of the new product launches, including Revlimid, would be one significant driver of an uptick in the growth margins. The second would be, as I pointed out, there are brands like SIDMUS where we are sourcing them externally and we are working towards internal sourcing. And SIDMUS is one example I have given you. As part of our productivity initiative, we constantly work on in-house brands which will lead to an improvement in our cost base. So that is going to be clearly a second lever, which is part of a larger productivity lever. There are a series of cost improvement programs that we are driving, looking for alternate vendors, improving plant yields. If you remember on the investor day, Sanjay presented our productivity status for each of the three businesses, which is OSDs, API, and Sterile, and where we were a few years back, where we are now, and the further headroom that we have in productivity. That's going to be the second significant lever that gives us the confidence that we'll maintain our gross margins in the normal range.

And the other is that the EM, India and Russia, because of the normalization that you say, you're going to have more visibility to growth as we discussed on this. Some of them were one-off and some normalizations. as well as the API that is going as well. So just to make sure, we are very confident, even without development, the gross margin will be there.

That's very helpful stuff. And second, on the PSAI business, you know, I understand the base impact, you know, in the previous year because of COVID. But if I were to look at it quarter on quarter also, there's been moderation. So are we seeing, you know, some amount of customer destocking or, you know, customer inventory being high, which is limiting our ability to scale up that business? And also, on the PSI business, are we able to pass on the cost pressures that we are seeing in the PSI business to our customers? Because margins there seem to have deteriorated too.

So, first, after a few quarters in which we saw the decline of the API, which is one component of the PCI, This quarter, we see that we are coming back to growth. It's a very single-digit growth, but we are growing, and we believe that this will continue, and we do see the pickup. And this is primarily being driven by new products, new products and new customers in territories. The second piece that is growing for us is the activities that we are capturing under PCI. We call it API Plus, in which we are are selling dosage forms in countries in which we do not have direct access. So we do see a pickup in this business very, very nicely, and it's actually very healthy growth. And the third part, which is also growing, although it's not yet continuing significantly, is the CDMO activity on the small molecules. The part that disappeared This quarter, from the number discovered, which was there last time, and this is why it looks like a decline. But overall, if you normalize it, for it is a growing business now.

And on the margins, sir?

Sorry? The margins, the more the API will grow, accordingly the margins will go up. Because it's a very cost-based type of a business and it very much depends on that, so the margins will go up.

Thank you so much, sir.

Thank you. Next question is from the line of Balaji Prasad from Barclays. Please go ahead.

Hi, thank you for taking my question. This is Mikayla Ahn for Balaji Prasad. I just wanted to circle back on generic Revlimid. I guess, could you just provide any further color on expectations here and also just any further color on key launches in the US this year and next? Thank you.

So, like I mentioned, we are going to have a volume limited launch during September 2022 and and we will have that kind of permission to do that between September 22 and January 31st of 2026. After that it will be unlimited. And naturally we are ready for that and looking forward for that to happen. As for the other launches, we will have 25 plus of other launches in the United States. And overall, very consistent of what we discussed during the discussion of the Investor Day. We are confident that we will continue to grow United States on the CAGR basis with what we call the time to time in which we will have blips ups and blips down as it's related to the nature of the product Thank you. Thank you. Next question is from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead. Hi, thank you so much and good evening everyone.

But I just wanted to make sure on your comment on EBITDA margins for Q1, you did say that if you exclude one-offs, then even EBITDA margin was in the range of what you normally do, which I presume is 23%, 24%.

Yeah, so to clarify, I reported EBITDA margin from here is 34%. If you take out the impact of Suboxone settlement and the brand divestment, Then it's around 20%. And then I spelled out a few non-recurring impacts, adverse impacts, for example, the COVID sales in the base and the gross margin. If you adjust for that, our EBITDA is in the normal range of 21 to 25%. If you look at the last several quarters, our EBITDA margin typically fluctuates in this range. So that's what I mean by the normal range.

Okay, yeah, that's very clear. And the second question is for the sale of brand, what you have recorded, 230 crores through revenue line items. What's the cost against that? And I guess I'm just trying to say that what's the EBITDA impact of this number?

The total amount, it's the total proceeds of the divestment, and therefore the entire amount falls to EBITDA.

Okay. Okay, got it. That's all from my side. Thank you. Thank you.

Thank you. The next question is from the line of Suryapatra from Philip Capital. Please go ahead.

Suryapatra, your voice is not very clear.

I request you to use the handset. Okay.

Is it fine, sir?

Yes.

So the first question was on the revenue. So you mentioned about the likely launch of the product starting September. Just wanted to have a sense, what should be the competitive intensity here? And more importantly, what I was trying to understand is the limited volume condition. How reserved is that condition on the settlement? Even the Tewar's launch is also under low single digit or mid single digit kind of volume condition only they would have launched But the prescription trend indicates that they are having double digit kind of percentage volume currently So that is why just trying to understand how rigid is the limited volume condition for the settlement place

It is rigid in the case that we can sell exactly the amount stated in the agreement and the volumes and the market share that pertains to it is confidential, like I mentioned, so I cannot discuss that. Naturally, it's a very significant launch for us. As for the intensity of the competition, of course, it depends on how many players will be there and what will be There are volumes that they can supply into the market at that point of time. That's yet to be seen. We will have to wait and see. We believe that it should be a very good launch for us.

Okay, because my point was also that if the volume limit condition is also not reserved, then there could be a kind of a larger competition and hence the price erosion could be larger. So that is the ultimate point that I was trying to understand here.

No, I understand the question. Unfortunately, I cannot share the details of the outcome. Fine.

So the second question is on the therapeutic revenue mix, what we have said in the 20-year filing. So last year, obviously, the global generic revenue growth, if you consider it, is around 16% kind of a growth that we have seen. The last part of the growth has come from the anti-infective as a segment. So there was a kind of a 74% kind of jump in this segment. Whereas the other segment remain either single digit or muted or low double digit kind of trend. So whether that is a concern area for the growth of the current year, if we ignore the level of contribution for the time being, then whether that can have a kind of Moderator trend for the current year in general for branded business, let's say India, Russia, emerging market like that.

I do not see a concern. Okay. So that's not a concern. I do not see a concern. Sure.

Just last question, sir. In fact... The origin licensing arrangement what you had with Olema of US so whether that $8 million upfront receipt that has been booked in this quarter?

No, no it has not been booked. It is to be amortized over the contract period which is over four years. But that is okay.

Even the operant amount is also be amortized over the period.

That's right.

Okay. Yeah. Thank you.

Thanks a lot. Thank you. The next question is from the line of Tarang Agarwal from Old Bridge Capital. Please go ahead.

Hello, sir. Good evening. Just one question, sir, on the M&S. I mean, what we've observed is you've recycled Some of your brands in India, you've got Shedless on one side and you've also bought a small injectables for a couple of products. So just wanted to get a sense on why, what is the kind of advantage you get by getting rid of those brands in India? Does it release a decent amount of, you know, Salesforce, which can then be devoted into some other divisions and the thought process behind buying the small injectable space that you have.

Yes, so thank you for the question. The divestment in India, we have a clear strategy in which which segment want to focus on and which segment we don't and which brands we want to focus on and which brands we don't. So what you're going to see in India, on top of it, you can get very nice value for the brands that are not in the focus, which we like to monetize. We feel that it's a better alternative for the capital allocation of the company and also for the performance of the company. So likely what we are going to see in India in which we will sell brands, that are not in focus and we will actually even buy brands like we did this quarter with Tidmus and the Novartis deals. So you are going to see both and this will allow us to establish ourselves when we also add both the Horizon 1 and the Horizon 2 activities in India to bring us to the aspiration of the number 5. In the case of the United States, We are always trying to find those low competition assets, especially if they are injectables, in order to create a better portfolio for the United States and for the customers of the United States. And if we do not have the means or we did not develop it in the past, we are getting it from others. That's, by the way, what we did at the time with Suboxone. That's what we did with Acocepant. So it's something that we are doing for many years and we'll continue to do so. So our pipeline in the US will continue to be products that we develop ourselves as well as licensing and products that we acquire.

Okay. And just to follow up on the India piece, does it release some kind of, you know, MR bandwidth to focus on some other brands and The kind of maybe, you know, gross profit or EBITDA that you might have lost by virtue of letting go of these brands.

So absolutely, it is helping us to focus our resources on the brands that we believe. This is part of what focus means. In terms of growth, we believe that on the long term, it will help us to grow. Naturally, quarter on quarter, we may need to adjust for those sales Loss in EBITDA or cross profit by virtue of divesting these funds? You're not losing, you're actually gaining, because if you take the EBITDA that this product would have made versus the price that you got for it, it's a better deal for the company.

Okay. Thank you. Thank you, sir.

Thank you. Our next question is from the line of Kunal Damesha from Macquarie. Please go ahead.

I agree. Just one question. I mean, when we meet, So, Kunal, your voice is not clear. Can you repeat, Kunal? Yeah, I repeat.

So, in terms of volume percentage allowed for us for every day, is it calculated on annual basis or calendarial basis?

All these details are confidential at this stage. Okay, thanks.

I just have one question. Thank you. The next question is from the line of Vinod Pathirampal from Incred Capital. Please go ahead.

Hi. First, just a clarification. So this 230 crores of brand sales that you generated that is part of this 1300 crores of NTR revenue that you have reported right correct yes that's right okay second in the US you mentioned about incremental competition in a couple of products Did you see incremental entry of a new player in any of the key products or is it that the existing players got more aggressive? I'm asking this because you specifically said two products.

Yeah, in these two products, Apotex launched competition for both during Q1.

Do you mind naming them?

I said Apotex, the company Apotex.

Yeah, yeah. Do you mind naming the products?

I said Suboxone and Aposetine.

Ah, okay, okay. Got it. Okay, great. Thank you.

Thank you. The next question is from the line of Darshil Javeri from Crown Capital. Please go ahead.

Hello. Good evening. Thank you for the opportunity. Sir, I just have one question, if I may. Sir, the performance in this quarter, considering all the one-offs that we have, could we take this performance as a base and sustainable quarter run rate, or could you just give some color on that?

That would be very helpful, sir. Yeah, I like to use the word consistent. So it's very much consistent, one with the strategy and our investment, and consistent also with the performance. With the understanding that we are facing sometimes a situation in the market that sometimes will be in favor and sometimes not, but overall, all the stuff that we discussed, our growth, which will be in the U.S. single digit, outside of the U.S. double digit, Reddy's Laboratories Ltd Reddy's Laboratories Ltd Reddy's Laboratories Ltd Reddy's Laboratories Ltd Reddy's Laboratories Ltd

Could you just give us some clarity on what would a normal otherwise look in FY24 or something, sir?

Again, we are not giving guidance, but I'm repeating what I said before. We said that we are continuing to grow on a double digit outside of the U.S., single digit in the U.S., and we are aiming for about 25-25 on EBITDA and ROC. This is still there. This is still valid. We cannot guide per quarter or per specific year. This can be fluctuate, but we will be in the neighborhood of those numbers sometimes up and sometimes down. But we very much believe that we are in this area. And not just that, we believe that it will even allow us to invest well into the future so we can be consistent for many years like this.

Okay, thank you so much for that answer to my question. Thank you so much.

Thank you. Our next question is from the line of Prakash Agarwal from Axios Captives. Please go ahead.

Yeah, hi. Thanks for the follow-up. Just on the injectable business, what is the current size annually and are we seeing, you know, some supply challenges in terms of clearages, you know, stoppers, etc.?

So, Prakash, about 16-17% of our business is from injectables

and we do not see right now a challenge of supply.

Okay, because one of your, you know, peer group has talked about in the recent call that there have been shortages and stoppers and syringes, especially for the U.S. market. That's right.

Okay. I don't recall this.

Okay, perfect. And secondly, on this individual, you know, of you recognizing in this quarter, I understand the case was won sometime back, so what regards the recognition particularly for this quarter?

The litigation that we won in the past was on the IP case. If you recall, we were injected when we launched the product in June 2018, and we were denied to go to the market for nine months. and the $72 million is a settlement of that period of time that we were denying from coming to the marketplace.

Yeah, so this was some quarter back when we won the case.

No, the case, I'm repeating, there are two separate issues. One is to win the IP case. It means that the court decides that we are in an infringement situation and the other is to win Reddy's Laboratories Ltd

The next question is from the line of Madhav Madhav from FIS International. Please go ahead.

Yeah, hi, good evening. I just had one quick question. So the India brands which we have sold, like what is the EV sales or EV bid at which we have sold it? So the 230 crores that you've recognized?

So it was an answer before.

It's a multiple, so there are different brands. They have been sold to different companies at different multiples, but the average multiple ranges between 3.5 to 4. Of sales, just to clarify. I'm giving you the sales multiple.

Okay, perfect. That's the only question. Thank you.

Thank you.

Thank you. Ladies and gentlemen, due to paucity of time, that would be our last question for today. I now hand the conference over to Ms. Samit Agarwal for closing comments. Thank you and over to you, sir.

Thank you all for joining us for today's earnings call. In case of any further queries, please get in touch with Investor Relations team. Thank you.

Thank you very much. Ladies and gentlemen, on behalf of Dr. Reddy's Laboratories Ltd, that concludes today's call. Thank you all for joining us and you may now disconnect your lines. Thank you.