Dr. Reddy's Laboratories Ltd

Ladies and gentlemen, good day and welcome to the Q4 and full year FY24 earnings conference call of Dr. Reddy's Laboratories Limited. 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 this conference, please signal an operator by pressing star and 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, 2024. 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 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. G.V. Prasad, our co-chairman and managing director, Mr. Erase 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 outlet without the company's express written consent. Before I proceed with the call, I'd like to remind everyone that the safe harbors contained in today's press release also pertains to this conference call. Now, I hand over the call to Mr. G.V. Prasad. Over to you, sir.

Thank you, Richa. Good morning and good evening to all the participants here. Welcome to the annual earnings call of Dr. Eddies. I am delighted to be here today along with the members of the management team and the IR team. As many of you know, I joined the earnings call each year at the end of the financial year. FY24 marks our 40th year of serving patients with a legacy of innovation, affordability, and sustainability. Guided by our purpose of accelerating access to affordable and innovative medicines for our patients, in the last four decades, we have moved from our beginning as an API business to generic and OTC medicines, biosimilars, drug discovery, and services. As we bring to life our credo of good health country, we have accelerated our journey to licensing and collaboration in the areas of novel medicines and consumer health. We deliver strong financial results in FY24. Our growth and profitability in this year have been driven by our performance in the US. We also made significant progress for future growth drivers through licensing, collaboration, and pipeline branding. Our focus in 2025 will be to further strengthen our core businesses through superior execution as we invest in to build the future growth drivers. I am grateful to our people. the healthcare community, partners, and stakeholders for the trust imposed in us. We are committed to increasing the number of patients we serve around the world through our exciting pipeline of products and services. As we do this, we remain committed to the elements of sustainability, preserving the environment, positive social impact, and good governance. With this, I'd like to hand over the call to Parag for taking you through the financial performance of the company. Thank you, Prasad. Greetings to everyone, and I hope you are doing well. I am pleased to take you through our financial performance for Q4, as well as for the full year of fiscal 2024. As indicated earlier by Prasad, FY24 has been yet another year of outstanding financial performance, with all-time high revenues of over US$3.3 billion and highest ever profits. This fiscal recorded a double-digit growth in revenue, EBITDA, as well as PATH. For this section, all amounts have been translated into U.S. dollar at a convenient translation rate of Rs. 83.34, which is the rate as of March 31, 2024. Consolidated revenues for the fourth quarter stood at Rs. 7,083 crores, which is U.S. dollar 850 million, and grew by 12% on year-on-year basis, with a sequential decline of 2%. Adjusted for brand divestment income in India, on a week-based comparator, the underlying overall growth was higher at 17% on year-on-year basis. The underlying year-on-year growth is largely driven by the generous business in US and emerging markets. The QO2 decline is mostly on account of declining revenues from Russia, the US and India. The revenues for the financial year 2024 stood at at least 27,916 crores, that is US dollar 3.35 billion, and grew by 14%. The growth was primarily driven by improvement in the base business volumes across several geographies. Consolidated gross profit margins stood at 58.6% per quarter, an increase of 140 basis points over previous year, and seven basis points sequentially. The year-on-year increase was on account of improvement in product mix and productivity-linked cost savings, partially offset by brand divestment income during the previous period. Gross margins for global generics and PSCI were at 62% and 28.6% respectively. Consolidated gross margin for FY24 stood at 58.6% and increased at 193 basis points over FY23. Growth margin for the global generation PSAI business was 62.9% and 23.2% respectively for full fiscal FY24. The SDA spent for the quarter is Rs. 2,048 crores, which is US$246 million, an increase of 14% year-on-year and 1% quarter-on-quarter. The year-on-year increase is primarily on account of investment in sales and marketing activities and new business initiatives. The S&A cost as percentage to sales were 28.9% and is higher by 34 basis points year on year and 87 basis points quarter on quarter. The S&A spent for the year is at least $7,720 gross, that is US$926 million, and has grown by 13%, largely in line with the business growth. The S&A cost as a percentage to sales was 27.7%, which is in line with the previous year. While we continue to invest in strengthening our existing brand in digitalization initiatives, expanding new businesses to create future growth platforms, and developing our talent, we are focused on operational excellence and productivity improvement across all aspects of our operations. We continue to invest in R&D to support future business growth. The R&D spend for the quarter is 688 crores, which is US dollar 83 million, an increase of 28% year-on-year and 24% quarter-on-quarter. The R&D spend is at 9.7% of sales and is higher by 119 basis points year-on-year and 200 basis points quarter-on-quarter. The R&D spent for FY24 is 2,287 crores, that is near dollars 274 million, and has grown by 18%. R&D percentage to sale for the year stood at 8.2%, as it is 7.9% during the last fiscal. The increase is primarily on account of higher number of filings and our developmental efforts to building a healthy pipeline of complex products across our markets, for both small molecules and biosimilar. The other operating income for the quarter is increased 66 crores as compared to increased 28 crores for the same quarter last year. The other operating income for the fiscal is increased 420 crores as compared to increased 591 crores last year. The other operating income was lower on account of one-time settlement income reported in the previous year. The EBITDA for the quarter is increased 1,872 crores, that is US dollars 225 million, a growth of 15% year-on-year and a decline of 11% quarter-on-quarter. The EBITDA margin stood at 26.4% and is higher by 53 basis points year-on-year and lower by 283 basis points quarter-on-quarter. The EBITDA for the year is repeated 8,301 crores, that is US dollars, 996 million, recording a growth of 14%. Average margin for the year is at 29.7%, which is largely in line with the previous year. The net finance income for the quarter is Rs. 102 crores as compared to Rs. 80 crores for the same quarter last year. The net finance income for FY24 stood at Rs. 399 crores as compared to Rs. 285 crores last year. Profit before tax for the quarter stood at Rs. 1,602 crores That is US dollar 192 million, a growth of 21% year-on-year, and a decline of 12% over previous quarter. Profit before tax for the year stood at Rs. 7,187 crores. That is US dollar 862 million, recording a year-on-year growth of 19%. Effective tax rate for the quarter has been lower at 18.4%, and that for the year has been at 22.5%. The ETI during the quarter is lower due to a one-time benefit accruing on account of reversal of a tax provision, re-measurement of deferred tax assets owing to an increase in U.S. estate tax liability, and adoption of corporate tax rates under Section 115BAA of the Income Tax Act. The ETI was lower for full fiscal April 24 mainly due to adoption of corporate tax rates under Section 115BAA of the Income Tax Act of India. We expect our normal ETR to be in the range of 24, 25%. Profit after tax for the quarter stood at 1,307 crores, which is $1.57 million, posting a growth of 36% year-on-year and a decline of 5% over previous quarter. Profit after tax for the year stood at 5,569 crores, that is $6.68 million, a year-on-year growth of 24%. Reported EPS for the quarter is rupees 78.4, and that for the year is rupees 334. Operating working capital as of 31st March 2024 was 11,293 crores, which is US dollar 1,355 million, and increase of rupees 42 crores, which is US dollar 58 million over December 31st, 2023. The increase is mainly driven by higher inventory and receivables. Our capital investment in this quarter is 503 crores, which is US dollar 60 million, and rupees 1,518 crores, which is US dollar 182 million during the year. The free cash flow generated during this quarter was rupees 529 crores, which is US dollar 63 million. The free cash flow generated during this year before acquisition related payout was at rupees 2,672 crores, which is US dollar 321 million. Consequently, we now have a net surplus cash of 6,459 crores, that is U.S. dollar 775 million as on March 31st, 2024. Foreign currency cash flow hedges in the form of derivatives for the U.S. dollar are U.S. dollar 903 million, hedged around a rate of 83.6 and 84.20 to the dollar, maturing over the next 12 months with knocking available, which allows participation when USD is strengthened. And for the ruble, our ruble 2550 million at the rate of rupees 0.882 to the ruble, maturing in the next three months. With this, I now request Eray to take us through the key business highlights.