Dr. Reddy's Laboratories Ltd

Ladies and gentlemen, good day and welcome to the Dr. Reddy's Q4 FY23 earnings conference call. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Richa Periwal. Thank you and over to you, ma'am.

Thank you. A 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 and full year ended March 31, 2023. Earlier during the day, we released our results and the same are also posted on our website. This call is being recorded and the playback and transcript shall be made available on our website soon. All the discussions and analysis of this call will be based on the IFRS Consolidated Financial Statements. The discussion today contains certain non-GAAP financial measures. For a reconciliation of GAAP to non-GAAP measures, please refer to our press release. To discuss the business performance and outlook, we have the leadership team of Dr. Reddy's, comprising Mr. Jiri Prasad, our co-chairman and managing director, Mr. Ismail Israeli, our CEO, Mr. Parag Agarwal, our CFO, and the entire 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. G.V. Krishan. Over to you, sir.

Thank you. Thank you very much. Good evening and good morning to all of you. Welcome to this annual earnings call. My best wishes to you. I am delighted to be here today along with the members of the executive team. As we have seen in our published results, this year has been an outstanding year for the company, a year in which we've set all tech highs in our reported sales, profits, and generated a healthy cash flow. And we continue to strengthen our core businesses while investing and building businesses of the future. Our sustained investments have been made to drive manufacturing excellence, strengthen our pipelines, and we continue to build efficiency and productivity in our R&D, as well as operations, and continue to augment reaching customers by opening new markets and new channels. Looking beyond the financial performance, during the year, we made great progress on multiple fronts, and we were recognized for these achievements. Noteworthy among these are the recognition by CNBC TV18 under the Master of Risk, Healthcare, and Pharma segment. And we secured leadership and scores from the CDP for the action on climate change and supplier engagement. We also featured in the Bloomberg Gender Equality Index the SNP's Global Sustainability Yearbook, the DGSI Sustainability Index in Emerging Markets category, and were also awarded by the Economic Times as being among the best organizations for women in the year 2023. Our largest was recognized by the World Economic Forum as part of its Global Lighthouse Network. These recommendations are an endorsement of our commitment to building a sustainable, high-performance organization focused on the needs of patients as well as society. I'm excited about how far we have come in the past few years and by the opportunities we have for the future as we continue to make efforts to bring to life our credo of good health can't wait. With this, I'd like to hand over the call to Parag for taking you through the financial performance of the company. Thank you Prathaj, greetings to all of you and I hope all of you are doing well. I am delighted to take you through our results for the quarter four and full year of fiscal 2023. FY23 has been a year of strong financial performance with the highest ever sales, record profitability and robust cash flow generation from operations. Let me provide you with a quick rundown of our Q4 and FY23 financials. For this section, all the amounts are translated into U.S. dollar at a convenient translation rate of rupees 82.19, which is the rate as of 31st March, 2023. Consolidated revenues for the quarter stood at rupees 6,297 crores, that is U.S. dollar 766 million, and grew by 16% on year-on-year basis and declined by 7% on a sequential quarter basis. Year-on-year growth was given by growth in both generics and CSCI businesses. This was further augmented with income from divestment of a few non-coal brands in India. Quarter-on-quarter decline was primarily due to sales volatility in the energy business. The revenue for the financial year 2023 stood at decrease from the 2005 APS growth, that is US dollars 2.99 billion and green by 15%. that growth was mainly driven by new product launches partly offset with price erosion. Consolidated growth profit margin for this quarter has been 57.2%, an increase of approximately 430 BPS over previous year, and decline of 210 BPS on quarter-on-quarter basis. Year-on-year increase was driven by new product sales with higher growth margin and for an exchange. Quarter-on-quarter decline was primarily due to product mix, and lower operating average, although partly offset by divestment income. Growth margin for the Global Generate and CSCI was 61.7% and 25.2% for the Quartic. Growth margin for Advice Institute 3 has been 56.7%, which is an increase of 360 BPS over Advice Institute. The increase was driven by new product sales, the high growth margin, High government incentives and favorable foreign exchange. Partly offset with the impact of price erosion. Growth margins for the global generics and CSAI were at 62.1% and 16.2% for the year. The SBA spend for the quarter is received $1,799 crores, that is $0.219 million, and increased by 15% by its domain class quarter and quarter. The year-on-year increase is largely on account of sales and marketing investments and the gross impact of forex translation. The annual spend for the year is between 6,803 crores, that is $828 million, and has grown by 10%. The annual cost as a percentage to scale was from the 7.7% and is lower by 130 basis points over previous years due to better operating leverage. The R&D spent for the quarter is reduced by 27 crores, that is US dollar 65 million, and is at 8.5% of sales. Our R&D efforts are focused towards building a healthy pipeline of new products across our market, including biosimilar. The R&D spent for FY23 is reduced by 1,938 crores, that is US dollar 236 million. R&D percentage of sales for the year is still at 7.9%. The EBITDA for the quarter is received 1,631 crores, that is US dollar 198 million, and the EBITDA margin is 25.9%. The EBITDA for the year is received 7,308 crores, that is US dollar 889 million. EBITDA margin for the year is at 29.7%, which is ahead of our aspirational target of 25%. Our profit report tax for the quarter stood at 1,326 crores, that is $1.51 million, and that for the year stood at 6,037 crores, that is $734 million. Our profit report tax for the quarter grew by 434% year-on-year, and for the year it grew by 87%. Effective tax rate has been at 27.6% for the quarter, And at 25.3% for the year. The effective tax rate was lower in FY23, largely due to changes in the company's jurisdictional mix of earnings. We expect our normal ETR to be in the range of 24% to 25%. Profit after tax for the quarter student received 959 crores, that is US dollar 117 million, and that for the year student received 4,507 crores, that is US dollar 548 million. Reported EPS for the quarter is received 57.52, and that for the year is received 270.85. Operating working capital reduced by received 364 crores, which is US dollar 44 million, against that on December 31, 2022, mainly supported by an improvement in receivables. Our capital investment stood at Rs. 258 crores, which is US$31 million in this quarter, and Rs. 1132 crores, which is US$138 million during the year. The free cash flow generated during this quarter was at Rs. 1596 crores, which is US$194 million, The free cash flow generated during this year was at Rs. 4,009 crores, which is USD $488 million. Consequently, we now have a net surplus cash of Rs. 5,046 crores, that is USD $614 million as of March 31, 2023. Foreign currency cash flow hedges in the form of derivatives for the US dollar are approximately US dollar 774 million, largely hedged around the range of rupees 82.4 to rupees 84.5 to the dollar, ruble 7380 million at the rate of rupees 1.045 to the ruble, and Australian dollar 4.2 million at the rate of rupees 57.8 to Australian dollar maturing in the next 12 months. With this, I now request Eray to take you through the key business highlights.