U.S. Markets closed

Edited Transcript of ALKEM.NSE earnings conference call or presentation 11-Nov-19 11:30am GMT

Q2 2020 Alkem Laboratories Ltd Earnings Call

MUMBAI Dec 2, 2019 (Thomson StreetEvents) -- Edited Transcript of Alkem Laboratories Ltd earnings conference call or presentation Monday, November 11, 2019 at 11:30:00am GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Gagan Borana

Alkem Laboratories Limited - General Manager of IR

* Rajesh Dubey

Alkem Laboratories Limited - President of Finance, President & CFO

* Sandeep Derjit Singh

Alkem Laboratories Limited - MD & Executive Director

* Yogesh Kaushal

Alkem Laboratories Limited - SVP of Chronic Division

================================================================================

Conference Call Participants

================================================================================

* Aditya Khemka

DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare

* Ashish Thavkar

Motilal Oswal Asset Management Company Limited - Associate VP

* Chirag Dagli

HDFC Asset Management Company Limited - Senior Equity Analyst

* Damayanti Kerai

HSBC, Research Division - Analyst, Healthcare and Hospitals

* Neha Manpuria

JP Morgan Chase & Co, Research Division - Analyst

* Prakash Agarwal

Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals

* Saion Mukherjee

Nomura Securities Co. Ltd., Research Division - Head of India Equity Research

* Tushar Manudhane

Motilal Oswal Securities Limited, Research Division - Research Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Ladies and gentlemen, good day and welcome to the Alkem Laboratories Q2 FY '20 Earnings Conference Call hosted by Motilal Oswal Financial Services Limited. (Operator Instructions) Please note that this conference is being recorded.

I would now like to hand the conference over to Mr. Tushar Manudhane from Motilal Oswal Financial Services. Thank you, and over to you, sir.

--------------------------------------------------------------------------------

Tushar Manudhane, Motilal Oswal Securities Limited, Research Division - Research Analyst [2]

--------------------------------------------------------------------------------

Thanks, Janis. Good evening, everyone. Thanks for joining this call. From Alkem Senior Management team, we have Mr. Sandeep Singh, Managing Director; Mr. Rajesh Dubey, Chief Financial Officer; Mr. Amit Ghare, President International Business; Mr. Yogesh Kaushal, Senior Vice President, Chronic Division; and Mr. Gagan Borana from Investor releases. Over to you, Gagan.

--------------------------------------------------------------------------------

Gagan Borana, Alkem Laboratories Limited - General Manager of IR [3]

--------------------------------------------------------------------------------

Thank you, Tushar. Good evening, everybody, and thank you for taking out time and joining us for Alkem Laboratories Q2 FY '20 Earnings Call.

Today we released our financial results, and the same was also posted on our website. In this call, we have our senior management team of Alkem to discuss the business performance and outlook going forward.

Before I proceed with this call, I would like to remind everybody that the call is being recorded and the call transcript will be made available on our website.

A brief disclaimer for today's call. Today's discussion may include forward-looking statements, and the same must be viewed in conjunction with the risks that our business faces. At the end of the call if any of the queries remain unanswered, please feel free to get in touch with me.

With this, I would like to hand over the call to Mr. Sandeep Singh to present the key highlights of the quarter and strategy going forward. Over to you, sir.

--------------------------------------------------------------------------------

Sandeep Derjit Singh, Alkem Laboratories Limited - MD & Executive Director [4]

--------------------------------------------------------------------------------

Thank you, Gagan. Good evening, everyone. Thank you for taking out time and joining us for our quarter 2 and half year '20 results conference call. I would briefly touch upon some of the key performance highlights and would then leave the floor open for questions and answers.

Quarter 2 of FY '20 has been a strong quarter for the company, with revenue growth of 18%, EBITDA margin of 20%, which is 100 basis points improvement over the last year, and a net profit growth of close to 46%. Our India business, which contributed about 70% to our overall sales, grew by 17.6% during the quarter. This was largely led by significant growth in our anti-infective portfolio, which registered a secondary sales growth of more than 30% as reported by IQVIA. Apart from anti-infective, our other established therapy areas like gastrointestinal, pain management and vitamins also delivered growth which was higher than the market growth rate, thereby maintaining a lead position in these therapies. In our chronic segment like neuro/CNS, cardiac, anti-diabetes and derma, we continue to build out on our growing base with growth rates infinitely ahead of the therapy growth rate, thereby improving our rank and market share.

Our large field force, strong brands, comprehensive product portfolio, pan-India distribution network and effective sales and marketing strategies underpin our performance in the India market.

Our International business, which contributed around 30% to overall sales also delivered a healthy growth of above 15% during the quarter. This was mainly driven by our U.S. business, which grew by 12% on the back of new product launches and gaining market share in existing products. Besides U.S., the international markets like Australia, Chile, Kazakhstan also registered good growth, both in local currency as well as Indian rupees.

During the quarter, we invested INR 123 crores in R&D, which is about 18% higher than the same quarter last year. We filed 5 ANDAs during the quarter and received 7 approvals, which included 2 tentative approvals. With this, we now have a fairly strong product pipeline of 132 ANDAs already filed with the USFDA, with over half of them yet to be commercialized. Timely new product approvals and the commercialization would be our key focus to drive growth in the U.S. market.

Talking about updates on regulatory inspections, I'm happy to share that both our formulation facilities in India at Daman and Baddi have received EIR. Bulk of our filings are from these facilities. Also on the St. Louis facility in the U.S. where we received an OAI, our team is working towards addressing the observations and resolving them. Currently this facility accounts for less than 3% of our U.S. sales.

Just touching upon our half yearly performance, we have delivered a 15% revenue growth, coupled with 150 basis points of improvement in EBITDA margin and a net profit growth of close to 43%. Improvement in our EBITDA margins is mainly driven by our continuous effort towards cost optimization and productivity improvement. This, along with lower tax rate due to investments made in manufacturing facilities that are entitled to fiscal benefits has driven our strong bottom line growth. I'm hopeful that the significant investments that we have made in our infrastructure and in our people over the past couple of years will help us sustain this momentum for the coming quarters.

Thank you for listening. With this, I would like to open the floor for questions and answers.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) We take the first question from the line of Neha Manpuria from JP Morgan.

--------------------------------------------------------------------------------

Neha Manpuria, JP Morgan Chase & Co, Research Division - Analyst [2]

--------------------------------------------------------------------------------

First on the domestic business, while I understand seasonality helped the quarter quite a bit, if you look at industry numbers from secondary data, this seems to be -- it seems to be indicating a volume slowdown. Are we seeing any such trend as we enter into October, putting aside the seasonality aspect?

--------------------------------------------------------------------------------

Yogesh Kaushal, Alkem Laboratories Limited - SVP of Chronic Division [3]

--------------------------------------------------------------------------------

This is Yogesh Kaushal. There was some depression seen in the first quarter. But if you see the last month report, there is again a revival in unit, where close to around 1.5% to 2% unit growth is seen. So going from -- see there's no therapy challenge if you see or there is no change in the pattern disease management. So we actually don't see any major challenge in coming time [in domestic business].

--------------------------------------------------------------------------------

Neha Manpuria, JP Morgan Chase & Co, Research Division - Analyst [4]

--------------------------------------------------------------------------------

Sir, are you seeing increasing volume probably shifting towards straight generic? Have you seen that trend? I mean is -- are straight generic business growing faster than the Rx business?

--------------------------------------------------------------------------------

Yogesh Kaushal, Alkem Laboratories Limited - SVP of Chronic Division [5]

--------------------------------------------------------------------------------

Not really. If you look at even prescription revival today, the prescriptions are showing a very healthy trend across. And in fact, internally also if you see, our generic contribution to overall portfolio has remained same. So this growth is largely driven by unit and prescription. In the industry, there is a good revival of prescription network.

--------------------------------------------------------------------------------

Neha Manpuria, JP Morgan Chase & Co, Research Division - Analyst [6]

--------------------------------------------------------------------------------

Understood. And my second question is on the U.S. business. In the opening comment, you mentioned new launches and market share gain. The quarter-on-quarter improvement, was that driven by one of these factors, both of the factors?

--------------------------------------------------------------------------------

Sandeep Derjit Singh, Alkem Laboratories Limited - MD & Executive Director [7]

--------------------------------------------------------------------------------

Both the factors, Neha.

--------------------------------------------------------------------------------

Neha Manpuria, JP Morgan Chase & Co, Research Division - Analyst [8]

--------------------------------------------------------------------------------

Okay. And sir, you also mentioned that there are certain ANDAs that we haven't commercialized, which you've got approval for. Is this because these are not viable? Or should we expect an acceleration in the number of launches as we go ahead?

--------------------------------------------------------------------------------

Sandeep Derjit Singh, Alkem Laboratories Limited - MD & Executive Director [9]

--------------------------------------------------------------------------------

I'll answer the second part first. The acceleration in number of launches will certainly happen because there was a time, if you recall, few quarters ago, our approvals were probably 8, 10 a year. Now this quarter itself, we've received 7 approvals. So certainly, the number of approvals are increasing, and therefore, number of new launches would increase.

Obviously, the -- I forgot the first question, Neha. Can just remind me, please?

--------------------------------------------------------------------------------

Neha Manpuria, JP Morgan Chase & Co, Research Division - Analyst [10]

--------------------------------------------------------------------------------

Are all the approved pipeline that we have, which we haven't commercialized, are these all viable to be launched in the market? Or do you think some of these probably will not -- you'll probably stay away from launching these products?

--------------------------------------------------------------------------------

Sandeep Derjit Singh, Alkem Laboratories Limited - MD & Executive Director [11]

--------------------------------------------------------------------------------

Right. So as you've heard from the commentary, there are obviously some tentative approvals as well. So obviously those are waiting for final approval for expiration of the patents. But yes, there will always be some part of the portfolio which is, by the time it gets approved, the economics and dynamics change. And therefore we may not be in a position to launch, and there are some products that for other reasons also we may not be able to launch. For example, our API vendor probably has some issue or some concern that could be those sartans, which have continued issues and things like that. So to answer your question, there will always be some portfolio -- part of the portfolio that we will not be able to commercialize.

--------------------------------------------------------------------------------

Neha Manpuria, JP Morgan Chase & Co, Research Division - Analyst [12]

--------------------------------------------------------------------------------

Sir, how many launches have you done so far in the first half?

--------------------------------------------------------------------------------

Sandeep Derjit Singh, Alkem Laboratories Limited - MD & Executive Director [13]

--------------------------------------------------------------------------------

Sorry, how many...

--------------------------------------------------------------------------------

Neha Manpuria, JP Morgan Chase & Co, Research Division - Analyst [14]

--------------------------------------------------------------------------------

Launches?

--------------------------------------------------------------------------------

Sandeep Derjit Singh, Alkem Laboratories Limited - MD & Executive Director [15]

--------------------------------------------------------------------------------

I don't have the numbers in front of me right now, Damayanti (sic) [Neha], but I think the number is about 7.

--------------------------------------------------------------------------------

Neha Manpuria, JP Morgan Chase & Co, Research Division - Analyst [16]

--------------------------------------------------------------------------------

Seven. And would this number be the same in the second half? Or should I assume a better launch momentum in the second half?

--------------------------------------------------------------------------------

Sandeep Derjit Singh, Alkem Laboratories Limited - MD & Executive Director [17]

--------------------------------------------------------------------------------

No, I think if we do about 12 in the whole year, I think it will be a great achievement. It will be our highest ever; 10 to 12 will be a big number for us.

--------------------------------------------------------------------------------

Neha Manpuria, JP Morgan Chase & Co, Research Division - Analyst [18]

--------------------------------------------------------------------------------

Understood. And last question, if I may. Gross margins, we've seen them moderating to 150 basis points quarter-on-quarter. While I do understand there's a higher share of anti-infective, given how strong U.S. was, a little surprised by how much it has moderated. If you could give us some color there?

--------------------------------------------------------------------------------

Sandeep Derjit Singh, Alkem Laboratories Limited - MD & Executive Director [19]

--------------------------------------------------------------------------------

Yes. Neha, as you pointed out very well, actually, we sold more anti-infective compared to non-DPCO-covered products. Growth is at both the places, but growth is very high here. And that is one of the reason. Besides this, we have one-off, I think also in this gross margin. We utilized R&D material significantly, by the tune of say around 1%. So both these factors, they have lowered down gross margin. I think it's a temporary phenomenon. We'll come back to our original position.

--------------------------------------------------------------------------------

Neha Manpuria, JP Morgan Chase & Co, Research Division - Analyst [20]

--------------------------------------------------------------------------------

Sir, what was the second one, one-off impact? I didn't quite understand that.

--------------------------------------------------------------------------------

Rajesh Dubey, Alkem Laboratories Limited - President of Finance, President & CFO [21]

--------------------------------------------------------------------------------

Material used for R&D activities.

--------------------------------------------------------------------------------

Operator [22]

--------------------------------------------------------------------------------

Next question is from the line of Damayanti Kerai from HSBC.

--------------------------------------------------------------------------------

Damayanti Kerai, HSBC, Research Division - Analyst, Healthcare and Hospitals [23]

--------------------------------------------------------------------------------

My question is regarding the U.S. sales. So has sartans contributed significantly towards our U.S. sales or it's broad-based performance which we are seeing?

--------------------------------------------------------------------------------

Sandeep Derjit Singh, Alkem Laboratories Limited - MD & Executive Director [24]

--------------------------------------------------------------------------------

No, sartans haven't contributed anything significant to our sales. This is broad-based.

--------------------------------------------------------------------------------

Damayanti Kerai, HSBC, Research Division - Analyst, Healthcare and Hospitals [25]

--------------------------------------------------------------------------------

Okay. So it just gives us new launches, as you commented in the opening remarks, right?

--------------------------------------------------------------------------------

Sandeep Derjit Singh, Alkem Laboratories Limited - MD & Executive Director [26]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Damayanti Kerai, HSBC, Research Division - Analyst, Healthcare and Hospitals [27]

--------------------------------------------------------------------------------

Okay. Coming to India, I think we obviously are I think picking up well on the specialty part. So last year, if I remember correctly, I think on the diabetic portfolio, we are almost presenting all the new launches, except the SGLT2 part. So have -- are we going to launch those category in near term?

--------------------------------------------------------------------------------

Yogesh Kaushal, Alkem Laboratories Limited - SVP of Chronic Division [28]

--------------------------------------------------------------------------------

Yes, we are. See there are 3 key GLT2s, which are in pipeline down. They will go off-patent in next 1.5 to 2 years' time. The first is empagliflozin, which will go off of patent in 2022-23. So we should be eyeing for this. Plus, we are also looking at some of the Japanese SGLT2, but we are more bullish on the one which are approved by FDA. So we might wait for 2 years and launch this.

--------------------------------------------------------------------------------

Damayanti Kerai, HSBC, Research Division - Analyst, Healthcare and Hospitals [29]

--------------------------------------------------------------------------------

Okay. So maybe 2 years from now, we'll be seeing launch of these products, right, start of launch of these products?

--------------------------------------------------------------------------------

Yogesh Kaushal, Alkem Laboratories Limited - SVP of Chronic Division [30]

--------------------------------------------------------------------------------

Yes, yes.

--------------------------------------------------------------------------------

Damayanti Kerai, HSBC, Research Division - Analyst, Healthcare and Hospitals [31]

--------------------------------------------------------------------------------

Okay, okay. Sir, one question regarding your balance sheet. I think if I'm looking at intangibles, it went up to some INR 1,380 million compared to INR 442 million in March period. So what is leading to this increase?

--------------------------------------------------------------------------------

Rajesh Dubey, Alkem Laboratories Limited - President of Finance, President & CFO [32]

--------------------------------------------------------------------------------

Well, actually, during -- in intangibles, major contribution is of right-to-use assets because of change of accounting standard AS 116. So earlier, whatever lease arrangements were there, now it has come as intangible assets recognized in the balance sheet. And that's major contribution by which it has increased. So it's accounting adjustment.

--------------------------------------------------------------------------------

Damayanti Kerai, HSBC, Research Division - Analyst, Healthcare and Hospitals [33]

--------------------------------------------------------------------------------

Accounting change, okay. Okay. Finally, sir, how should we look at the effective tax rate for this year and coming years?

--------------------------------------------------------------------------------

Rajesh Dubey, Alkem Laboratories Limited - President of Finance, President & CFO [34]

--------------------------------------------------------------------------------

Damayanti, we are going to remain somewhere close to 10% for this year. And for next -- if you recollect our guidelines, it was 12%, 13%. I think we'll remain in that. So there is no change in our guidelines as far as tax is concerned.

--------------------------------------------------------------------------------

Damayanti Kerai, HSBC, Research Division - Analyst, Healthcare and Hospitals [35]

--------------------------------------------------------------------------------

Okay. And sir, 10% you said for this fiscal and then 12%, 13% for next year?

--------------------------------------------------------------------------------

Rajesh Dubey, Alkem Laboratories Limited - President of Finance, President & CFO [36]

--------------------------------------------------------------------------------

Correct.

--------------------------------------------------------------------------------

Operator [37]

--------------------------------------------------------------------------------

Next question is from the line of Prakash Agarwal from Axis Capital.

--------------------------------------------------------------------------------

Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [38]

--------------------------------------------------------------------------------

Congrats for the good set of numbers. First question on Sandeep's comment on cost optimization and improvement in productivity. So just wanted, where are we in terms of as far as WIP as mentioned and we have seen some improvement, but is it half done and half yet to achieve? Where are we in the overall scheme of things? And what are the 2, 3 big steps we have taken in the past and which is still WIP?

--------------------------------------------------------------------------------

Sandeep Derjit Singh, Alkem Laboratories Limited - MD & Executive Director [39]

--------------------------------------------------------------------------------

Yes. So Prakash, so one of the broad things, which as you rightly said it's ongoing, so one is on the procurement part. So API price, if you remember, last year was a big issue, Chinese issues were causing the prices to go up. So we overtook a program where we said how we could contain this. So that is under progress. That has, I would not say, completely hit our numbers, I think going forward in H2, it will play out better. And honestly, for the complete effect, it will still take longer. So procurement is something which we're focusing on.

Second is just basically overheads of plants and all. We are focusing there. There also we have got some results. Again, that is work in progress.

Last but not the least, on your supply chain and working capital, also something which we are working on.

But Prakash, these are ongoing things, very difficult to say that we have done it because honestly, it has been part of our operating framework. So I will never say it's done. They're always ongoing, and yes, it will give us results. And they are giving us some results. But to pan out completely, it'll take another 1 year.

--------------------------------------------------------------------------------

Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [40]

--------------------------------------------------------------------------------

No, I see that actually. I mean if I see the other cost. I mean there's a very big Y-o-Y also improvement, but not able to see that in the staff cost percentage to sales. I mean I understand these are all linked to incentives or performance.

--------------------------------------------------------------------------------

Sandeep Derjit Singh, Alkem Laboratories Limited - MD & Executive Director [41]

--------------------------------------------------------------------------------

Absolutely. So we did very well. So as we're happy, we paid them incentive. So, yes.

--------------------------------------------------------------------------------

Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [42]

--------------------------------------------------------------------------------

Okay. So how do we look the year going ahead. ?I mean the season seems to be continuing. October and November, there are still rains. So how do we see the remaining year, what is the outlook?

--------------------------------------------------------------------------------

Sandeep Derjit Singh, Alkem Laboratories Limited - MD & Executive Director [43]

--------------------------------------------------------------------------------

So see, Prakash, it has been a good season. Obviously, referring the numbers. So if season continues, we will outperform whatever we have told you. But we maintain our guidance of mid-teens. Looks like this year, we would be close to that, it will be 15%. Beyond that, trying to predict -- we are not -- we don't like to give guidance. So I'll refrain from that. But if season continues, we will outperform what we have told you in the past.

--------------------------------------------------------------------------------

Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [44]

--------------------------------------------------------------------------------

Okay. And just a reiteration on the margin front, sir?

--------------------------------------------------------------------------------

Sandeep Derjit Singh, Alkem Laboratories Limited - MD & Executive Director [45]

--------------------------------------------------------------------------------

Yes. What reiteration, sir?

--------------------------------------------------------------------------------

Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [46]

--------------------------------------------------------------------------------

I mean what you mentioned in the past, on the margin side, are we on [track]?

--------------------------------------------------------------------------------

Sandeep Derjit Singh, Alkem Laboratories Limited - MD & Executive Director [47]

--------------------------------------------------------------------------------

Yes, we are certainly on -- in line with that. We will hit those EBITDA percentage improvement of 100 basis points roughly, which we discussed in the last call. And last couple of calls, actually, we are in line. So you will see EBITDA percentage improvement this year and going forward.

--------------------------------------------------------------------------------

Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [48]

--------------------------------------------------------------------------------

Perfect. And second question on actually on Pan. There's some disruption in ranitidine. So have you started to see the positive impact on Pan? And do you think these issues will be resolved and events will eventually neutralize? Or we are aggressively taking the market share?

--------------------------------------------------------------------------------

Sandeep Derjit Singh, Alkem Laboratories Limited - MD & Executive Director [49]

--------------------------------------------------------------------------------

No, we are -- see, Prakash, it's a little early for us to really predict anything, but I think initial traction is there. There was -- we are getting some market share, but though we'll hold on with really commenting how much we could get off that, because still early days, honestly. So we are trying to capitalize on it, but we cannot -- it will certainly be positive, but to quantify it right now, we are not in a position to do that.

--------------------------------------------------------------------------------

Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [50]

--------------------------------------------------------------------------------

Okay. And lastly, if I see the debt has actually come up. So is there a new CapEx plan? Or what is it happening on the debt side?

--------------------------------------------------------------------------------

Rajesh Dubey, Alkem Laboratories Limited - President of Finance, President & CFO [51]

--------------------------------------------------------------------------------

Prakash, Rajesh Dubey here. Yes, you very rightly see, debt number has gone up a little bit, but that is mainly on account of our more working capital requirement, which will too ease out in coming quarters. So by year-end, in fact, we would like to make this statement, debt has gone down and which we are going to do. But for time being, it is mainly on account of more working capital utilized.

--------------------------------------------------------------------------------

Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [52]

--------------------------------------------------------------------------------

Okay. So which are the facilities which are ongoing, sir? Sikkim is largely done if I understand right.

--------------------------------------------------------------------------------

Rajesh Dubey, Alkem Laboratories Limited - President of Finance, President & CFO [53]

--------------------------------------------------------------------------------

On what?

--------------------------------------------------------------------------------

Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [54]

--------------------------------------------------------------------------------

CapEx plan? What is the CapEx -- I mean where is the CapEx going currently?

--------------------------------------------------------------------------------

Rajesh Dubey, Alkem Laboratories Limited - President of Finance, President & CFO [55]

--------------------------------------------------------------------------------

See CapEx -- major CapEx is already were and some places it is going on. So Indore, bio is there. And then we have some API planned CapEx also. So it is unlike greenfield kind of CapEx, but some or other expansion, it is happening. I think last time also, we give guidelines of around INR 450 crores for this year. I think that is sufficient for our CapEx requirement.

--------------------------------------------------------------------------------

Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [56]

--------------------------------------------------------------------------------

And next year, sir?

--------------------------------------------------------------------------------

Rajesh Dubey, Alkem Laboratories Limited - President of Finance, President & CFO [57]

--------------------------------------------------------------------------------

Next year, around INR 400 crores.

--------------------------------------------------------------------------------

Operator [58]

--------------------------------------------------------------------------------

Next question is from the line of Aditya Khemka from DSP Mutual Funds.

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [59]

--------------------------------------------------------------------------------

Yes. Actually, my question links to somewhat what Prakash was asking about. So in terms of the net debt, right, and Dubey, sir, you mentioned that working capital requirement has gone up. So when I analyze that, what I see is your payable days have actually come off significantly, which is causing more utilization of cash. So was there a onetime big payable sitting in your balance sheet in FY '19, which you had to pay off? Or is this like a general reduction in payables that you have cut down?

--------------------------------------------------------------------------------

Rajesh Dubey, Alkem Laboratories Limited - President of Finance, President & CFO [60]

--------------------------------------------------------------------------------

No, no. Everything is general, actually. We do not have anything one-time as far as payables or receivables are concerned. See working capital is mainly on these 2 fronts. Inventory, we have a little bit higher inventory looking to our going forward requirement. And at U.S., we have some increase in some -- fewer number of days in our receivables. As far as payable is concerned, actually, we are more meticulous for -- these small scale industries and where we have to pay early, and we are complying it completely. I think that's the reason of coming down by 1 or 2 days, not beyond that.

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [61]

--------------------------------------------------------------------------------

Right. And could you also comment on how the input prices are now stabilizing or moving. So our gross margins have been quite volatile, and I understand that depends on the input price mix as well as the business mix. But having grown so well, we're still not able to sort of improve on the gross margin aspect, at least quarter-over-quarter, we have not done that. So just trying to understand, is the input prices still rising, stable or in pockets they have started declining? What is the situation?

--------------------------------------------------------------------------------

Rajesh Dubey, Alkem Laboratories Limited - President of Finance, President & CFO [62]

--------------------------------------------------------------------------------

Aditya, input prices, it has started softening. And I think, we'll be evidencing the softness going forward in quarter 3 and quarter 4. Our gross margin, yes, I understand, and I think in my first answer I already replied. But again, I will reiterate it. Actually, there are 2 factors in that. One additional R&D material requirements, which will see via (inaudible). So that is one-time kind of requirement. It has gone there.

And second, in our domestic sales, actually we got very high sales of DPCO-covered anti-infective, which comparatively gross margin, it is not very lucrative what we have for non-DPCO. So that is change of mix of product, it has contributed. But as I said, going forward, you'll witness good improvement there. And of course, softening of prices also is going to make positive.

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [63]

--------------------------------------------------------------------------------

Fair enough. And Sandeep, could you break up for us the primary growth that you saw in your acute and chronic business, just to get a sense of how the 2 businesses grew this quarter?

--------------------------------------------------------------------------------

Sandeep Derjit Singh, Alkem Laboratories Limited - MD & Executive Director [64]

--------------------------------------------------------------------------------

Yogesh, why don't you...

--------------------------------------------------------------------------------

Yogesh Kaushal, Alkem Laboratories Limited - SVP of Chronic Division [65]

--------------------------------------------------------------------------------

Yes, so see overall, close to around 18% growth, if you see, 15-odd percent has come through acute and around 24% has come from chronic.

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [66]

--------------------------------------------------------------------------------

Okay. And what is the number of MRs we now have in each of these segments?

--------------------------------------------------------------------------------

Yogesh Kaushal, Alkem Laboratories Limited - SVP of Chronic Division [67]

--------------------------------------------------------------------------------

See out of around 8,000, our 60% -- 65% field force is in acute and 35% in chronic. So in last 2, 3 years, there is a good expansion in chronic. But at the same time, we are also consolidating our acute. So out of 2-odd thousand field force expansion, close to around 1,200 is in acute and 800 is in chronic.

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [68]

--------------------------------------------------------------------------------

And total on number of MRs today stands at 8,000, is what you said?

--------------------------------------------------------------------------------

Sandeep Derjit Singh, Alkem Laboratories Limited - MD & Executive Director [69]

--------------------------------------------------------------------------------

So on consolidated basis, it will be around 10,000.

--------------------------------------------------------------------------------

Yogesh Kaushal, Alkem Laboratories Limited - SVP of Chronic Division [70]

--------------------------------------------------------------------------------

Including managers.

--------------------------------------------------------------------------------

Sandeep Derjit Singh, Alkem Laboratories Limited - MD & Executive Director [71]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [72]

--------------------------------------------------------------------------------

Including managers, it is 10,000. Okay. No, that's good. Just one last question. So when you pay incentives to MRs, that comes under other expenses and not under salary, right?

--------------------------------------------------------------------------------

Yogesh Kaushal, Alkem Laboratories Limited - SVP of Chronic Division [73]

--------------------------------------------------------------------------------

No, that is others, not in incentive.

--------------------------------------------------------------------------------

Rajesh Dubey, Alkem Laboratories Limited - President of Finance, President & CFO [74]

--------------------------------------------------------------------------------

This is under personnel cost.

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [75]

--------------------------------------------------------------------------------

So the incentive paid is under personnel cost, right?

--------------------------------------------------------------------------------

Sandeep Derjit Singh, Alkem Laboratories Limited - MD & Executive Director [76]

--------------------------------------------------------------------------------

Yes, employee benefit expenses.

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [77]

--------------------------------------------------------------------------------

Okay. So then compared to the first quarter in our...

--------------------------------------------------------------------------------

Rajesh Dubey, Alkem Laboratories Limited - President of Finance, President & CFO [78]

--------------------------------------------------------------------------------

In our grouping, it comes under employee benefit expenses.

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [79]

--------------------------------------------------------------------------------

Yes, employee benefit expense. So in the fourth quarter of FY '20, your employee benefit expense was INR 390 crores. And second quarter, it is still INR 390 crores, despite my general understanding that this quarter you would have paid higher incentives to your field force. So could you reconcile this?

--------------------------------------------------------------------------------

Rajesh Dubey, Alkem Laboratories Limited - President of Finance, President & CFO [80]

--------------------------------------------------------------------------------

See the incentive mainly depends on achievement of targets. So I would not say quarter 1 people, they have made missed their target. Yes, if you see last year compared to INR 320 crores, what was last year's quarter 2? It is on higher side. But yes, we paid due incentive to our field employees because they have achieved their targets.

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [81]

--------------------------------------------------------------------------------

Yes, I got that, sir. Okay, great. One last question. What is our total attrition rate right now in the MR force?

--------------------------------------------------------------------------------

Rajesh Dubey, Alkem Laboratories Limited - President of Finance, President & CFO [82]

--------------------------------------------------------------------------------

We are in the range of around -- at a domestic front level, we are in the range of around 24%.

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [83]

--------------------------------------------------------------------------------

24% attrition, okay.

--------------------------------------------------------------------------------

Operator [84]

--------------------------------------------------------------------------------

We take the next question from the line of Ashish Thavkar from Motilal Oswal.

--------------------------------------------------------------------------------

Ashish Thavkar, Motilal Oswal Asset Management Company Limited - Associate VP [85]

--------------------------------------------------------------------------------

So on the U.S. business, post a generic player entering in the MMF suspension, so where are we -- I know you don't give EBITDA numbers, but where are we in terms of the margin profile for the U.S. business, comparing now and then?

--------------------------------------------------------------------------------

Sandeep Derjit Singh, Alkem Laboratories Limited - MD & Executive Director [86]

--------------------------------------------------------------------------------

Mr. Dubey, margin for U.S. business? I won't comment on finance numbers.

--------------------------------------------------------------------------------

Rajesh Dubey, Alkem Laboratories Limited - President of Finance, President & CFO [87]

--------------------------------------------------------------------------------

See margin of U.S. business, I don't think there are any major significant change in this quarter. And it is more or less identical of last year. Yes, after mycophenolate suspension additional player, we managed it so well. I don't see any negative side as far as margin is concerned. So it remains in the same range only.

--------------------------------------------------------------------------------

Ashish Thavkar, Motilal Oswal Asset Management Company Limited - Associate VP [88]

--------------------------------------------------------------------------------

Okay. But have we lost a major share to the (inaudible)?

--------------------------------------------------------------------------------

Rajesh Dubey, Alkem Laboratories Limited - President of Finance, President & CFO [89]

--------------------------------------------------------------------------------

No, it is not major share loss. But yes, of course, some share of market, it has gone to [new player] also.

--------------------------------------------------------------------------------

Ashish Thavkar, Motilal Oswal Asset Management Company Limited - Associate VP [90]

--------------------------------------------------------------------------------

Okay, great. And on the trade generic side of the business in India, if you could comment on the prospects for this business? And how should we look at this business in the coming years?

--------------------------------------------------------------------------------

Sandeep Derjit Singh, Alkem Laboratories Limited - MD & Executive Director [91]

--------------------------------------------------------------------------------

The prospects have always been good. It's the same what it was last quarter, what it was last year. It's the same, sir.

--------------------------------------------------------------------------------

Ashish Thavkar, Motilal Oswal Asset Management Company Limited - Associate VP [92]

--------------------------------------------------------------------------------

Okay. And would you like to comment on the working capital involved in this business if I compare with the branded business that we have?

--------------------------------------------------------------------------------

Rajesh Dubey, Alkem Laboratories Limited - President of Finance, President & CFO [93]

--------------------------------------------------------------------------------

Yes, we do require some higher working capital into this business, but it is not like normally have. I think there's no change compared to earlier quarters in this quarter. So if in range actually, in fact, we have improved only because of [strictening of] period and all of that related. So I think, yes, of course, from branded, it is a little bit more, but it's in our range only.

--------------------------------------------------------------------------------

Ashish Thavkar, Motilal Oswal Asset Management Company Limited - Associate VP [94]

--------------------------------------------------------------------------------

And would it be fair to say that you would be like equaling more than 2 on this business compared to say what you were like 1 now, 1.5 years back?

--------------------------------------------------------------------------------

Sandeep Derjit Singh, Alkem Laboratories Limited - MD & Executive Director [95]

--------------------------------------------------------------------------------

No, we are [assuming 2] last 1 year -- last year. Why will it be less or more? So this is important business for us. It has been and it will be.

--------------------------------------------------------------------------------

Ashish Thavkar, Motilal Oswal Asset Management Company Limited - Associate VP [96]

--------------------------------------------------------------------------------

Okay, great. Last question on this MR addition side, like you're already at 8,000 numbers, any plans to add the MRs?

--------------------------------------------------------------------------------

Rajesh Dubey, Alkem Laboratories Limited - President of Finance, President & CFO [97]

--------------------------------------------------------------------------------

See we had massive expansions in the last 2 years. At least for the next 2 to 3 years, we'll see more consolidation and working on productivity. Yes, as and when, in certain cases, wherever we need to improve our reach further, those expansions will be marginal, but not the way we did for the last 2 to 3 years.

--------------------------------------------------------------------------------

Ashish Thavkar, Motilal Oswal Asset Management Company Limited - Associate VP [98]

--------------------------------------------------------------------------------

Okay, but you are happy with this 8,000 number as of now?

--------------------------------------------------------------------------------

Rajesh Dubey, Alkem Laboratories Limited - President of Finance, President & CFO [99]

--------------------------------------------------------------------------------

On about happy and all, it depends on the need. So if we really need to go further deep, we will do that. But as of now, we see our reach quite satisfactory.

--------------------------------------------------------------------------------

Operator [100]

--------------------------------------------------------------------------------

Next question is from the line of [Pranav Chauhan], individual investor.

--------------------------------------------------------------------------------

Unidentified Participant, [101]

--------------------------------------------------------------------------------

Yes, I just want to ask you, related to the ANDA filing. Related to -- you mentioned about it that this quarter, you announced 5 ANDAs and you got a tentative approval for 2 ANDAs. So what are the timelines for those tentative approved ANDAs are getting to be commercialized in upcoming quarters?

--------------------------------------------------------------------------------

Sandeep Derjit Singh, Alkem Laboratories Limited - MD & Executive Director [102]

--------------------------------------------------------------------------------

So we said we launched the 5 -- we filed 5 ANDAs and we also said we got approval for 7 ANDAs, including 2 tentative approvals. So the ones that -- the 5 that got approval, we will launch them as soon as possible. The ones that are tentatively approved will take long enough. They will wait for their patent expiry. That are filed, typically take 18 months to get approved.

--------------------------------------------------------------------------------

Unidentified Participant, [103]

--------------------------------------------------------------------------------

So you mentioned about that half of the ANDAs are yet to be commercialized. So how many of these ANDAs are pending for more than 2 years?

--------------------------------------------------------------------------------

Sandeep Derjit Singh, Alkem Laboratories Limited - MD & Executive Director [104]

--------------------------------------------------------------------------------

More than -- pending for more than 2 years, the number would be about 20.

--------------------------------------------------------------------------------

Operator [105]

--------------------------------------------------------------------------------

Next question is from the line of Saion Mukherjee from Nomura.

--------------------------------------------------------------------------------

Saion Mukherjee, Nomura Securities Co. Ltd., Research Division - Head of India Equity Research [106]

--------------------------------------------------------------------------------

Sir, you mentioned about this onetime impact because of high R&D material cost during the quarter and you mentioned a number of 1%. So 1% of sales entirely is that one-off or a portion of that is to be considered as one-off?

--------------------------------------------------------------------------------

Rajesh Dubey, Alkem Laboratories Limited - President of Finance, President & CFO [107]

--------------------------------------------------------------------------------

Saion, I referred only one-time portion only, that is 1% which has gone as a one-time in this quarter. So whatever normal material we have -- we consume, I'm not referring that. I'm referring 1% -- additional 1% of (inaudible).

--------------------------------------------------------------------------------

Saion Mukherjee, Nomura Securities Co. Ltd., Research Division - Head of India Equity Research [108]

--------------------------------------------------------------------------------

Okay. And secondly, on the staff cost increase. Now I understand there is an element of higher sales force that we have. And as you mentioned that it would be a phase of consolidation going forward. So if we were to grow our domestic business, let's say in this mid-teen kind of a range, I mean given the incentive structure that you have, what would be the growth in employee cost then?

--------------------------------------------------------------------------------

Rajesh Dubey, Alkem Laboratories Limited - President of Finance, President & CFO [109]

--------------------------------------------------------------------------------

See, employee cost, yes, it is around 18% of our revenue. I think more or less, it has to be in the range of 17% to 18% only on totality basis. And see now, whatever employees we added a year back have I think given their productivity. So if we are not adding substantially, of course, it is going to better off as a percentage to revenue. So if you ask me on absolute terms, it depends what kind of target achievement is there. We are very optimistic we are going to meet their targets. We keep on giving good incentive as per our incentive scheme. So on absolute term, we don't see any major changes in that. But definitely, as a percentage, improvement is going to happen.

--------------------------------------------------------------------------------

Saion Mukherjee, Nomura Securities Co. Ltd., Research Division - Head of India Equity Research [110]

--------------------------------------------------------------------------------

Okay. Okay. And sir, finally, on research and development. So INR 100 crores, INR 125 crores a quarter is the kind of expenditure we are doing. You think this is the kind of levels we should sustain and there is no plan to have a meaningful increase in this?

--------------------------------------------------------------------------------

Rajesh Dubey, Alkem Laboratories Limited - President of Finance, President & CFO [111]

--------------------------------------------------------------------------------

Saion, this time, it was 5.5% of our revenue. And in the guidelines also, we have given 5.5% to 6%. I think we are going to remain with it and it's going as per our plan only and whatever is required for R&D. You'll appreciate this kind of spending is needed. So we are not debating anything what guidelines we have given earlier. So it is going to remain 5.5% to 6% for the year also.

--------------------------------------------------------------------------------

Operator [112]

--------------------------------------------------------------------------------

Next question is from the line of Prakash Agarwal from Axis Capital.

--------------------------------------------------------------------------------

Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [113]

--------------------------------------------------------------------------------

Just trying to understand this R&D. I mean what's the thought process here given the disruption in the U.S. generic market? Obviously everybody will be giving a rethink on the capital allocation. So are we continue to -- the overall solid typical 8 to 10 filings or the 12 now or there's a rethink on those assets and -- as we are also progressing on the biologics? So if you could just help us understand what is the thought here in terms of investing.

--------------------------------------------------------------------------------

Sandeep Derjit Singh, Alkem Laboratories Limited - MD & Executive Director [114]

--------------------------------------------------------------------------------

So Prakash, as you rightly said, a lot of people are taking a relook at it. So we don't have any substantial plans to change. I think oral solid will continue. After a couple of years, we can relook at it, how much we need to allocate to biological and small molecules. But I think now is not the time to discuss that. We have a set portfolio and it's doing pretty well. It's working for us. We are not increasing our R&D as a percent of revenue. I think that is good enough for this moment.

--------------------------------------------------------------------------------

Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [115]

--------------------------------------------------------------------------------

So I mean -- yes, so the question actually, so I mean where are we in terms of our biological, this thing (inaudible)?

--------------------------------------------------------------------------------

Sandeep Derjit Singh, Alkem Laboratories Limited - MD & Executive Director [116]

--------------------------------------------------------------------------------

Biological, next year we should be launching 2 production in India. And eventually, we'll take it to RoW and regulated markets in Phase III. So Biologicals is something which -- it takes a long time. You know that better than a lot of us. You have -- I have seen your reports on Biocon and all. So our ultimate aim is to go to regulated markets, but that's a 5-year plan, Prakash. It would be premature to talk about it right now. But yes, we have put in substantial money. We are serious about that space. And we'll start with India and RoW, and the regulated markets will -- it will take us actually 3 to 5 years to get that.

--------------------------------------------------------------------------------

Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [117]

--------------------------------------------------------------------------------

Understood. And secondly, is there a thought in terms of in-licensing molecules, given the new introductions are getting seldom. So is there a thought in terms given the strong field force we have or the [DA] gap or therapeutic product gap we have. So is there a thought there?

--------------------------------------------------------------------------------

Yogesh Kaushal, Alkem Laboratories Limited - SVP of Chronic Division [118]

--------------------------------------------------------------------------------

We are exploring those opportunities. In last 2 years, if you see, we have couple of products where we have done in-licensing, mostly with Koreans and Japanese molecules, which are doing well, like evogliptin and vancomycin. These are the few which we've launched. But amongst the established one, we'll keep our eye on those molecules, which are more futuristic and can fit in our therapy choices. So we are open to those.

--------------------------------------------------------------------------------

Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [119]

--------------------------------------------------------------------------------

And lastly, on the strategy for next year, since you had a very good season this year and growth is on a high base now. So what are the 2, 3 things that we are planning to do so that the momentum continues?

--------------------------------------------------------------------------------

Yogesh Kaushal, Alkem Laboratories Limited - SVP of Chronic Division [120]

--------------------------------------------------------------------------------

We -- one is, for the last 3-odd years, we are consolidating on our chronic portfolio. So chronic will continue to outperform acute in the coming time. Our growth was quite decent this year, and if we sustain it, we should be at least contributing at our milestone for around 1%, 1.5% of growth, that would be additional, plus the subchronic segment, right. So the seasonal was only for acute, the 2 anti-infectives. But we have a decent portfolio on subchronic as well, which is ortho, like GEMCAL and also calcium products. We have vitamin D3. These are not dependent on sales. That also now contributes substantial chunk to the business. We have gastritis products, so pantaprazole kind, which also are not seasonal. So we have around 20%, 25% portfolio, which is seasonal, but rest around 70%, 75% is nonseasonal. So we intend to consolidate those to overcome this challenge. We foresee this and we should be strategically working to mitigate these challenges.

--------------------------------------------------------------------------------

Operator [121]

--------------------------------------------------------------------------------

Next question is from the line of Aditya Khemka from DSP Mutual Funds.

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [122]

--------------------------------------------------------------------------------

Sandeep, you spoke about this cost optimization exercise, right, where you have seen some benefit already coming and some you are seeing ahead of you. Is there like an amount of savings that you're targeting more or less as an organization in terms of savings of overheads?

--------------------------------------------------------------------------------

Sandeep Derjit Singh, Alkem Laboratories Limited - MD & Executive Director [123]

--------------------------------------------------------------------------------

Yes, we are. But honestly, I would not like to disclose that, Aditya. That's more internal targeting we have taken. We'll...

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [124]

--------------------------------------------------------------------------------

Sir, let's say the amount is INR 100 crore rupees, so how much would you have realized till now, 20%, 30%, 80%?

--------------------------------------------------------------------------------

Sandeep Derjit Singh, Alkem Laboratories Limited - MD & Executive Director [125]

--------------------------------------------------------------------------------

Okay.

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [126]

--------------------------------------------------------------------------------

All I want to understand is, how much have you done and how much is...

--------------------------------------------------------------------------------

Sandeep Derjit Singh, Alkem Laboratories Limited - MD & Executive Director [127]

--------------------------------------------------------------------------------

20% to 30% realized so far. Yes.

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [128]

--------------------------------------------------------------------------------

Yes, so what was the percentage you mentioned, sorry?

--------------------------------------------------------------------------------

Sandeep Derjit Singh, Alkem Laboratories Limited - MD & Executive Director [129]

--------------------------------------------------------------------------------

20% to 30%, let's say.

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [130]

--------------------------------------------------------------------------------

We have realized 30%. Okay. Understood.

--------------------------------------------------------------------------------

Operator [131]

--------------------------------------------------------------------------------

Next question is from the line of Chirag Dagli from HDFC Asset Management.

--------------------------------------------------------------------------------

Chirag Dagli, HDFC Asset Management Company Limited - Senior Equity Analyst [132]

--------------------------------------------------------------------------------

I don't know if you've covered this in the initial comment, but October 2019 data by AIOCD showing negative volume growth for the industry. Your thoughts around what you're seeing at Alkem and probably around the industry?

--------------------------------------------------------------------------------

Yogesh Kaushal, Alkem Laboratories Limited - SVP of Chronic Division [133]

--------------------------------------------------------------------------------

See we answered this. So if you see the IQVIA data, there is a revival in unit growth. We are seeing around close to 2% unit growth, which used to be around in a range of around 4.5% to 5%. While we don't neglect the AIOCD data because last time also we had a similar question, where we said that, look, there will be some change in the pattern of disease in India. So your water-borne and your vector-borne diseases will be slightly on a lesser side. But your other diseases pattern will evolve.

So I think there is little correction, which may be happening in pharma sector. But if you see a lifestyle disease management or gastric/GI tract and all, they are showing a positive trend. So this appears to be more on a correction mode rather than any challenge on long-term basis in terms of unit growth. So there's a reason there's a revival in last 2 months.

--------------------------------------------------------------------------------

Chirag Dagli, HDFC Asset Management Company Limited - Senior Equity Analyst [134]

--------------------------------------------------------------------------------

Okay, sir. And sir, typically, our second half is seasonally weaker than the first half. Now this trend hasn't panned out last year because of some changes that we did. How should this year appear, second half versus the first?

--------------------------------------------------------------------------------

Yogesh Kaushal, Alkem Laboratories Limited - SVP of Chronic Division [135]

--------------------------------------------------------------------------------

See if you ask me, immediate answer is, yes, the anti-infectives, there will be little slow down compared to monsoon. But luckily this year, the monsoon is stretched. Even in this month also we are seeing monsoon. So our phasing is also in line with this trend also. So if you see our first 6 month phasing is a little aggressive compared to the latter 6 month. So as far as our annual commitment is concerned, we should be, by and large, there. So it won't be a challenge for us.

--------------------------------------------------------------------------------

Chirag Dagli, HDFC Asset Management Company Limited - Senior Equity Analyst [136]

--------------------------------------------------------------------------------

And our India market, target growth is 15%, did you mention earlier?

--------------------------------------------------------------------------------

Yogesh Kaushal, Alkem Laboratories Limited - SVP of Chronic Division [137]

--------------------------------------------------------------------------------

Around, yes. On the domestic front, we are targeting around 15%.

--------------------------------------------------------------------------------

Operator [138]

--------------------------------------------------------------------------------

Well, ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to the management for closing comments.

--------------------------------------------------------------------------------

Tushar Manudhane, Motilal Oswal Securities Limited, Research Division - Research Analyst [139]

--------------------------------------------------------------------------------

Thank you, everyone, for attending this call. If any of your queries have remained unanswered, please feel free to get in touch with me. Thank you.

--------------------------------------------------------------------------------

Operator [140]

--------------------------------------------------------------------------------

Thank you very much. On behalf of Motilal Oswal Financial Services Limited, we conclude today's conference. Thank you all for joining. You may disconnect your lines. Thank you.