Dr. Reddy's Laboratories Ltd

Ladies and gentlemen, good day and welcome to the Dr. Reddy's Q1 FY24 earnings 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 and then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Richa Periwal from Investor Relations Team. Thank you and over to you, ma'am.

Thank you, Dragan. 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 ended June 30th, 2023. Earlier during the day, we have released our results and the same is 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. 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 our CEO, Mr. Ilaiz Israeli, and our CFO, Mr. Parag Agarwal, along with 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 expressed written consent. Before I proceed with the call, I'd 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 Abharwan. Over to you, Parag.

Thank you, Richa. Greetings to everyone and a warm welcome to our Q1 FI 2024 call. We had a strong start to the year with robust sales and record profitability. I'll start today with an overview of our financials for the quarter. For this section, all the amounts are translated into US dollar at a convenient translation rate of rupees 82.06, which is the rate as of 3rd June 2023. Consolidation revenues for the quarter stood at rupees 6,738 crores, that is 6.81 million, and grew by 29% on year-on-year basis and by 7% on the sequential quarter basis. Adjusted for brand divestment income on a rebate comparator, the underlying growth was higher at 35% on YOY basis and 12% sequentially. The growth was driven by the generous business mainly in US, MRV markets and Europe. Excluding the one-off gains from brand divestment, loss of revenue for divested portfolio and MGM related price reduction, India business registered a high single digit growth. Consolidated gross profit margin for this quarter has been 58.7% and increased of 880 basis points over previous year and 150 basis points over previous quarter. The improvement in gross margin was primarily driven by favorable product mix, supply productivity savings, better manufacturing leverage partially offset by brand divestment income during previous period. The growth margin for the global generics in PSPI were at 63.9% and 15% for the quarter respectively. The SG&A spent for the quarter is Rs. 1,770 crores which is $0.216 million, an increase of 14% year-on-year while a decline of 2% quarter-on-quarter. The year-on-year increase is in line with business growth and is on account of investment in sales and marketing, digitalization, and other business initiatives. The SBA cost as a percentage of sales was only 6.3% and is lower by 340 basis points year-on-year and 230 basis points quarter-on-quarter due to better operating damage. The R&D spent for the quarter is Rs. 498 crores, that is $0.61 million, and is at 7.4% of sales. Our R&D efforts are focused towards building a healthy pipeline of new products across our market, including biochemical development. The EBITDA for the quarter is 2,137 crores, that is near $260 million, and the EBITDA margin is 31.7%. This is largely driven by growth margin expansion and productivity initiatives across the value chain. Our profit before tax for the quarter stood at 1,846 crores, that is US dollar 225 million, an increase of 26% year-on-year and 39% over previous quarters. Effective tax rate has been 24% for the quarter. The effective tax rate was higher than the previous year, mainly due to changes in the company's jurisdictional mix of earnings. We expect our ETR to be in the range of 24% to 25%. Profit after tax for the quarter of student rupees 1,403 crores, that is US dollar 171 million. Reported ETR for the quarter is received 84.22%. Operating working capital increased by 710 crores, which is $87 million. I do that on March 31st, 2023, mainly due to an increase in receivables and inventory. Our capital investment stood at 362 crores, which is just $44 million in this quarter. The free cash flow generated before acquisition-related payout during this quarter was at Rs. 674 crores, which is US$ 82 million. Consequently, we now have a net surplus cash of Rs. 4,985 crores, that is US$ 608 million, as of June 30, 2023. Foreign currency cash flow hedges in the form of derivatives for the U.S. dollar are approximately U.S. dollar 783 million, largely hedged around the range of rupees 82.7 to repeat 84.4 to the dollar, rubles 6,775 million at the rate of rupees 1.02 to the rubles, and Australian dollar 3.7 million at the rate of rupees 67.9 to Australian dollar maturing in the next 12 months. With this, I now request Erez to take us through the key business highlights.