Dr. Reddy's Laboratories Ltd

Ladies and gentlemen, good evening and welcome to quarter four and full year FY25 earnings conference call of Dr. Reddy's Laboratories Limited. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touch-tone phone. And now at the conference, Artemis Richa Periwal, Thank you, and over to you, ma'am.

Thank you. Good morning and good evening to all of you. Thank you for joining us today for the Dr. Reddy's earnings conference call covering the quarter and full year ended March 31, 2025. We appreciate your time and participation. Joining us today is the leadership team of Dr. Reddy's Limited, comprising Mr. Iraz Izraeli, our CEO, Mr. M.V. Narasimham, our CFO, and the investor relations team. Earlier today, we released our results, which are now available on our website. We will begin today's call with Ambien presenting the financial highlights for the quarter and the year. Following this, Erez will share his thoughts on the business performance. We will then open the floor for a Q&A session. Please move. 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. This call is being recorded and both the playback and transcripts will be available on our website soon. All discussions and analysis in this call will be based on the IFRS consolidated financial statements. Today's discussion includes certain non-GAAP financial measures. For the reconciliation of GAAP to non-GAAP measures, please refer to our press release. Before we continue, I would like to remind everyone that the safe harbor of provisions outlined in today's press release also applies to this conference call. Now, I hand over the call to MDS.

Thank you, Rekha. Greetings to everyone, and I hope you're all doing well. I am pleased to present an overview of our financial performance for the fourth quarter and full year FY2025. Fiscal year 2025 was another milestone year for the organization marked by strong financial performance. We achieved record high revenue exceeding US dollars 3.8 billion and crossed the US dollar 1 billion threshold in EBITDA for the first time. Both revenue and EBITDA registered double-digit growth for the year. Please note that all the figures in this section are translated into US dollars using convenient translation rate of 85.43 rupees, the rate prevailing as of March 31st, 2025. Revenue performance consolidated revenues for Q4 FY25 stood at Rs 8,506 crores, which is equivalent to US$ 996 million, reflecting a year-over-year growth of 20% and a sequential increase of 2%. For the full year, revenues were at Rs 32,554 crores, and US dollars 3.8 billion representing a growth of 17%. These results include contributions from the acquired consumer healthcare business in nicotine replacement therapy which added rupees 597 crores in Q4 and rupees 1202 crores for the full year. The overall revenue growth was driven by this strategic acquisition and contributions from our generic portfolio across geographies. Excluding sales of annuity business, revenue growth was at 12% on Euro year for both the quarter and the year and 2% sequentially for the quarter. Gross margins, the consolidated gross profit margin for Q4 was at 55.6%. reflecting a year-over-year decline of 300 basis points and a sequential decline of 312 basis points. The decline was mainly due to reduced manufacturing overhead leverage and higher milestone income recognized in the comparative period. Gross margins for the global generics and PSA segments stood at 59.3% and 26.3% for the quarter. For the full fiscal year, the consolidated gross margin remained stable at 58.5%, consistent with FY24. Gross margins for global generation PSA were at 62% and 27.1% for the full year, respectively. Selling and general administrative expenses. As any expenses for the quarter amounted to Rs. 2,406 crores, which is U.S. dollars to 82 million, marking a year-over-year increase of 17% and remaining broadly flat quarter-over-quarter. Virginia's percentage of the sales was 28.3%, representing a decline of 63 basis points year-over-year and 57 basis points on QOQ. For the full year, Virginia expenses amounted to Rs. 9,387 crores in dollars 1.2%. 1 billion, up by 22% year-over-year. This increase is primarily driven by recently acquired NRT business in the consumer healthcare segment, investment in other commercial activities and higher prices impacting logistics costs. We continue to maintain disciplined cost structure while strategically allocating resources to strengthen existing business and expand into the new growth segments. Recent and development investments, R&D remains a key pillar for long-term growth. We continue to enhance our internal R&D efforts with strategic external collaborations for innovation assets. R&D expenditure for the quarter stood at Rs. 726 crores, US dollar 85 million, representing year-over-year increase of 6% and quarter-over-quarter increase of 9%. As a percentage of revenues, R&D investment was at 8.5%, lower by 118 basis points EUR and higher by 57 basis points sequentially. Full year R&D investment was Rs. 2738 crores, USD 320 million. Reflecting a year-over-year increase of 20%, the investment largely focused on building differentiated pipeline, spanning small molecules, biosimilars, complex generics including peptides and novel oncology assets. Other key financials, impairment loss is 77 crores in Q4 and Rs. 169 crores for the full year. The impairment pertains to certain product-related intangibles from main portfolio and other product-related intangibles forming part of the company's global generic business in India and Europe due to adverse market conditions. Other operating income is Rs. 247 crores in Q4 versus 66 crores for the same quarter last year and Rs. 436 crores for the full year versus Rs. 420 crores in FY24. Q4 increase is primarily an account of reclassification of foreign exchange gain related to foreign operations from FCTR. The full form of FCTR is foreign currency translation reserve. Post divestment of support manufacturing facility. The net benefit to P&L on account of FCTR reversal after adjusting CV rent cost and other one-time cost is Rs. 121 crores. Earning EBITDA, EBITDA for the quarter was 2,475 crores, US dollars 290 million, registering a year-over-year growth of 32% and quarter-over-quarter growth of 8%. EBITDA margin was at 29.1%, an increase of 267 basis points on year-over-year and 160 basis points sequentially. For FY25, EBITDA stood at Rs 9,213 crores, U.S. dollars 1.1 billion, reflecting euro growth of 11%. The annual EBITDA margin stood at 28.3, down from 29.7 in FY24, reflecting a decrease of 143 basis points. Finance income and profitability. Net finance income was 235 crores in Q4, versus 102 crores crores in previous year and 472 crores for full year as compared to 399 crores last year. Higher Euro a year income is due to net foreign exchange gains. Profit before tax was Rs 2,005 crores in USD 2.35 million in Q4, up 25% Euro a year and 7% QQ. PBT for the year was Rs. 7,678 crores and in terms of $899 million for the full year, a Euro year growth of 7%. PBT margin was 23.6 for Q4 as well as for FY25. PBT includes 89 crores for the quarter and 101 crores for the full fiscal from the NRT portfolio. Effective tax rate was 20.8% for the Q4 and 25.4% for the full year. ETR for the quarter is lower due to reversal of previously recognized tax provisions pertaining to prior years and FCETR transferred to the income statement is not subject to taxation. The full year ETR is higher than the previous year mainly due to the reversal of previously recognized deferred tax assets related to land indexation and the recognition of previously unrecognized deferred tax assets on operating tax losses compared to the period ended March 31st, 2034. We expect the ETF for FY26 to be similar to the current fiscal year. Profit after tax is attributable to the equity holders was 1594 crores. In dollars, 187 million in Q4, up 22% Euro a year and 13% QQ. Translating to margin of 19%, full year profit after tax was at Rs. 5,655 crores, reflecting Euro a year growth of 2% and margin of 17%. Earning per share stood at Rs. 19.1 for the quarter and Rs. 68.1 for the full year. Based on the company's performance, the board has recommended payment of dividend of Rs. 8 per equity share of face value of Rs. 1 each. This is equivalent to 800% of the face value for the year ended March 31, 2025 subject to approval of the members of the company. Cash flows and balance sheet operating working capital as of March 31, 2025 stood at Rs. Rs. 12,590 crores, a reduction of Rs. 192 crores compared to December 31, 2034, primarily driven by improved receivable management. Capital expenditure was Rs. 767 crores for the quarter and Rs. 2,699 crores for the full year. Free cash flows for the quarter was Rs. 1,110 crores and for the full year Rs. 1332 crores for the full year before acquisition related payouts. At the event, the company maintained net cash surplus balance of 2454 crores. Post-NRP acquisition payout in September, foreign currency cash flow hedges executed through derivatives instruments as of March 31, 2025 are as follows. An amount of US$786 million has been hedged using structured derivative contracts maturing over the course of the next financial year. These contracts provide a minimum production rate of Rs. 80, Rs. 85.9 per US$1. while retaining the potential for upside participation in the event of U.S. dollar appreciation. An amount of Ruble 2,500 million has been hedged with a minimum production rate of Rs. 0.91 for Russian Ruble. These contracts are scheduled to mature within next three months. With this, I now request Ares to take us to the key business highlights.