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Edited Transcript of ERIS.NS earnings conference call or presentation 21-May-19 11:30am GMT

Q4 2019 Eris Lifesciences Ltd Earnings Call

AHMEDABAD Jun 6, 2019 (Thomson StreetEvents) -- Edited Transcript of Eris Lifesciences Ltd earnings conference call or presentation Tuesday, May 21, 2019 at 11:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Amit Indubhushan Bakshi

Eris Lifesciences Limited - Chairman & MD

* Sachin Shah

Eris Lifesciences Limited - CFO

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Conference Call Participants

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* Anubhav Aggarwal

Crédit Suisse AG, Research Division - Associate

* Ashish Thavkar

Motilal Oswal Asset Management Company Limited - Associate VP

* Duby Rex

* Kunal Mehta

Vallum Capital Advisors - Research Analyst

* Prakash Agarwal

Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals

* Tushar Manudhane

Motilal Oswal Securities Limited, Research Division - Research Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, good day, and welcome to the Eris Lifesciences Q4 FY '19 Results Conference Call, hosted by Axis Capital Limited. (Operator Instructions) Please note this conference is being recorded.

I now hand the conference over to Mr. Prakash Agarwal of Axis Capital Limited. Thank you, and over to you, Mr. Agarwal.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [2]

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Yes, thanks. I welcome you all on behalf of Axis Capital to the Q4 Fiscal '19 Eris Lifesciences Con Call, represented by the senior management. Over to you, sir.

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [3]

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Thank you, Prakash. Good evening, everybody. Since this is the year-ending call, I would request some time for you -- for me to take you over through a couple of slides. It -- these are the same slides, which we have put into the presentation as the presentation for quarter 4 and FY '19.

So I'm just following our slides, giving you a broad indication of what is to be told, and then we will lead into question part.

So FY '19, from a business highlights point of view, we had a substantial high growth in H2, which is 16.7% versus 9.9% for IPM after a slow growth in H1 '19, which was 2.4% versus 9.3% for the IPM, which I am quoting the AIOCD numbers. For quarter 4, our growth has been 22.3% vis-à-vis 9.9% for IPM.

So the slow growth in H1 and in last quarter in the preceding year has been fairly compensated in the last 2 quarters. And in -- if I only talk about H2 '19, we are now per the AIOCD growing at 16.7%.

Second important thing is business has become more chronic in nature than ever. In FY '16, I think we were 18% of acute, which has now come to only 15%. So 85% of the business is now either chronic or subchronic.

Another -- other important things were a couple of new collaborations, so partnered with Medtronic for diabetes monitoring device, called Guardian. I also told that even we will be launching blood pressure meter, which has happened. We have just launched the blood pressure meter. This is in collaboration with Microlife with a brand name of Circa 120/80 Exclusio and Premier in India.

In this year, we would be launching 2 products -- 3 products rather, which have been in-licensed, 2 of them should be commercialized by quarter 2 '20, a month here and there. And one of them would be the first time in India which will go through the regulatory approval depending upon the classification. It might take between 6 months to 2 years.

We had a substantial inventory reduction in the last quarter. Internally, we figure out that we would have higher reduction of at least INR 25 crores in the last quarter. This reduction was majorly done to streamline the inventory. Since the secondary growth has picked up, we wanted the inventories to come in line. You know that there has been a pressure post GST on inventory management, so we took this step in the last quarter.

Last year, we also had a discontinuation of one of our brand, which was Triglimisave LS, which was the leader in its own -- in the brand category. And approximately, in the last year, we would have launched -- lost, sorry, INR 20 crores on account of Triglimisave LS discontinuation, which happened approximately in the month of June.

The Kinedex acquisition has been completed. We bought over the reaming 6.7%, and now we -- and now it's a completely owned company. Also, in April 2019, we prepaid the entire term loan, once again, achieving a debt-free status.

So that was more from a highlight point of view. Now I will go to quarter 4.

Before that, I must inform you that Financial Express CFO of the Year Award was conferred to Sachin, Sachin Shah, and we're all very happy about it. Not only that, we also got the National Best Employer Brand of the year, which was our really focus. It was a big exercise, and we win it around -- in between 100 brands.

Now coming to straight to quarter 4 '19. As I have alluded that the high stock inventory, in our mind that number should be close to INR 25 crores, and because of that, the quarter 4 '19 growth is at 1.5%. EBITDA went down to INR 62 crores from INR 71 crores. The PAT margins were at INR 27 crores (sic) [25.1%]. So this is more or less how we figured out in quarter 4. The numbers are here in the presentation, these are broad numbers.

So the -- we have actually broken down the sales into each and every bucket for a deep understanding of everybody. And since it's year-end, we just wanted to give a feel across everything.

So in the quarter 4, in the standalone, we've grown by 2.4%. In the base business of Eris, excluding Strides, we've grown by 4% and Strides has degrowth 5 -- 5.1%.

In the subsidiaries, the Aprica has grown by 44%. Aprica actually took this exercise last year -- last quarter, where they reduced the inventory, so it's a base effect probably. But we actually -- we have seen the good, handsome growth there also. Kinedex has degrown by 40% in the fourth quarter.

So this is about quarter 4. As I told you, it was 86% chronic. The chronic therapies grew by 5%, and acute therapies degrew by 55 -- 15% in the last quarter.

Now coming to FY '19. FY '19, on the whole, grew by 17% on the top line. The gross margins were at 84.4%, which are exactly what's there in the last year, which signifies that after taking all the other businesses, including the businesses which we had bought, we have been able to bring them to the same gross margin level. This has largely happened because of pruning the portfolio, which is high-margin and high-growth category.

The overall EBITDA for the year stands at around INR 345 crores of -- with a growth of around 7%. Margins are at around 31.4% vis-à-vis 34%. As you know, the last piece of the sales actually contributed more than 70% to the bottom line. So that's where you see this a little bit disturbance.

We -- on the expenses side, there has been an increase in the HR. It has been basically because that the people which we took in Strides was a reflection of only 5 months in the last year, which has now been to 12 months. That's the major component of that increase which you see. The net profit margins have been around 30%, which have come down from 34% last year.

Now very importantly, let me break down the sales in between entities. So base sales for the last year had been at INR 72 crores -- I'm sorry, INR 724 crores, which has been a growth of around 7%. Strides has been at INR 158 crores (sic) [INR 157 crores] for this year. Aprica INR 46 crores, Kinedex INR 40 crores and UTH revenue has been INR 11 crores. That's how -- sorry, INR 1 crore. That's how the numbers are.

So the base business growth has been subdued largely because of 2 components. One is the inventory correction, which we took in quarter 4 and the other is the discontinuation of LS. If I try and put these 2 things together, then the way IPM is reflecting around 10%, 11% consolidated growth. Our base business growth, which is more chronic, is around 12 -- 12.5%. If I try and normalize these 2 caveats.

So as I told you, we've become more chronic, so 85% of the sales in the last year has been chronic. The chronic has grown by 20%, while acute therapies has grown by 4%. And once again, I repeat that acute therapy has now become only 15% of the total portfolio.

So the growth, as per AIOCD, the secondary growth, as I mentioned in the slide, that we are happy to inform you that we have not only come back in the growth trajectory, but are once again delivering secondary growth which are industry-beating. So we are -- more often than not, we are in the top 1 or 2 growing companies among the top 30 companies in the last 2 quarters.

Besides that, the chronic business, the base business has been doing a bit better in the entire -- between all other businesses. And Strides has -- Strides, as a business, has also shown a growth, which is a tad better than the base business.

Our prescription ranking remain unchanged or have got a little better. We continue to hold fourth rank in cardiology; 3 in diabetology; 3 in gastro; 6 in CP, physician practice; and 4 in neurology. This is as per the SMSRC February '19 data, MAT February '19 data. Of course, it is on our own portfolio on our own markets.

Other very important and good aspect of the sales in the last year is that the top 10 brands of ours, which had contributed 63% to the total sales. 8 out of those 10 brands had grown more than the industry. The 2 brands, which have not done best, one is which is Rabonik, which is a PPIs, which has grown by 3.2% vis-à-vis 7.6% of the market. And one is Tayo, which is our brand of vitamin B, which has degrown by 1% while the market has grown 11%. We have taken remedial steps for Tayo immediately because it was a flagship brand.

Other than the #1 brand, mother brand of ours which is Glimisave, which contributes INR 220 crores annually, has grown by 13% vis-a-vis 11.5%. Telmisartan, our brand Eritel, has grown by 18% vis-a-vis 17%. Olmin has grown by 10% vis-a-vis 8.7%. Tendia, Teneligliptin, too is now INR 60 crores brand, has grown by 36%, which is at par with the market. So even at the larger base, the market share has been intact. ReNerve is INR 60 crores and 6 -- and 3.6% growth. Internally, there is a caveat, which is only AIOCD-based data. Internally, ReNerve has done far better. Remylin at INR 55 crores, 14% vis-à-vis 8%. Rabonik, I told you; Tayo, I told you. LN Bloc at par with the market more or less. And Cyblex, which is our antidiabetic, INR 40 crores, it's 51% vis-à-vis 12%.

So if we look at the share of the top 10 brands, they have done relatively better than the market. But if you cut out, again, 2 halves, H1 and H2, H2 would have been very, very significant over H1. The point, which I'm trying to say is it's the H2 actually wherein this team actually came up and the business got back to track.

We are now 2,000 people, so number doesn't really change it. We were in the same vicinity last year. The YPM is 4.1 lakh per person.

In the presentation, we have some charts that basically talk about how the revenue has grown over the last 4, 5 financial years, and it is there for everybody to see. This more or less is what I wanted to tell.

Now we are ready to take questions from your side.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We have our first question from the line of Anubhav Aggarwal from Crédit Suisse.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [2]

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Sir, just one clarity. This INR 25 crores number that you mentioned on inventory rationalization, can you just roughly help how was this distributed between Strides and your base portfolio?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [3]

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Look, I haven't done that math. But look at the proportion of the sales between the 2, and I think that would be a fair calculation both sides.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [4]

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Okay. Because I was asking that Strides sales are down from INR 42 crores in third quarter to INR 29 crores now. That's like 30% sales down.

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [5]

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Yes.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [6]

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Normally, fourth quarter is weak, but not more than 10% typically.

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [7]

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Yes.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [8]

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So that's why I was asking that such a sharp decline in Strides sales. That's the reason I was asking out of INR 25 crores, if you look, proportionally, still the decline in sales is very high in Strides portfolio. Why do you think third quarter was abnormally high number for you, or...

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [9]

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So I mean if you look at the total number of which we are putting up is around INR 158 crores. So if I do INR 158 crores divided by INR 12 crores, the average is INR 13.16 crores. So INR 14 crores from rounding up INR 13.16 crores is not very high. So we haven't done the numbers between both of this. But we were close to landing at around INR 164 crores, INR 168 crores, that was the number which was in our mind if we wouldn't have done the inventory correction.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [10]

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And can you just take us -- I mean, GST-related inventory correction doing now, what's the relation with so long after this -- that you suddenly decided to take this inventory write-off now? What happened? What triggered this?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [11]

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So Anubhav, honestly, we didn't have the headroom to do this earlier because the secondary growth, we were not progressing the way we would have liked to. So if we would have done it at that point of time, the fall would have been steeper. So we're just waiting for the time when the growth actually comes back. So that we thought that this is the right time for us, so that this year -- from next year, we move up in a symmetrical manner.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [12]

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So what were your channel inventory days earlier versus what's now?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [13]

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Look, internally, it's very difficult to know. We don't get the stock and sales statement from everybody. So the number which I'm going to tell you is based on a 60%, 65% of what we collect, and then there's an extrapolation. So I think we were -- this transit, we were at 44, 45 days roughly. These are all numbers roughly but they made sense. And if INR 25 crores goes down, then I think 4 days is something which we would have corrected.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [14]

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I guess I mean I have not understood what was so pressing need of this correcting 4 days. I mean what's -- so you think that the liberty was at your side when to correct it. So the channel was really not pressing for it. So what is the main...

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [15]

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I mean the channel -- we would have applied extra force to put this up, and we -- that we didn't want to do. 44 is not a good number anymore. It was something, which was right a couple of quarters back or years back. Now the good number is 35, 36.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [16]

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So that means you will take further 4 days correction at some point in time?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [17]

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So it depends. What happens, it's a function of -- it is a 2-way matrix. If the growth is better then what happens, a lot of accommodation happens because of the growth. So clearly, if we grow by that 18%, 20%, which is shown in the market, then the correction will be automatic. It works both ways.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [18]

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Okay. Okay. And just one clarity on Triglimisave LS. I was assuming that you would have shifted prescription from this combination drug to your other, the -- let's say, similar molecules. So when you show a loss of INR 20 crores, that's not a net loss for you. That's just loss from the brand, but you would -- this would not be total impact on sales for you, right?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [19]

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Look, I -- we wish it could have happened. But finally, this is about prescription. It takes a long time. For these kinds of markets to come together, it takes 3, 4 years. And also remember, what has happened is when Triglimisave was building up, these [shipped gliptins] were not in the market. So a lot has changed. Triglimisave LS adds for the market. And we were the brand leader in the lower strength. So technically, how much have I gained in Triglimisave LS? I don't know. But has it shifted? It has not even shifted 25%.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [20]

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Okay. Okay. So you would say that this quarter would have at least INR 3 crore kind of loss just because of the Triglimisave kind of...

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [21]

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INR 4.5 crores -- INR 4 crores, 4.5 crores.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [22]

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No. But 25%, you would have shifted, INR 5 crores is total gross...

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [23]

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Yes, yes. Okay. Total is this. But 25% is the best case scenario, which I'm telling you.

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Operator [24]

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(Operator Instructions) We have a next question from the line of Mr. Prakash Agarwal from Axis Capital.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [25]

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Sir, if you could just highlight on the outlook, how do we see the fiscal '20 as the growth in fiscal '19 has been a tad lower because of external reasons? If you could just throw some light on the outlook, a. And b, how big are these in-licensing opportunities?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [26]

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Okay. So in-licensing opportunities are not a game changer. The game changer was we assumed it's something, which will take 6 months to 2 years depending upon the regulatory classifications. The 2, which we are getting, are only incremental in nature. So I don't expect us checking opportunity from these 2 categories. That's on the other side.

The first side is, largely, Prakash, we would like to reiterate that we will beat the market by a decent 30% to 50%. And there is a tailwind in the brand, and there is a tailwind in the overall portfolio also. And if the market remains -- it became a little more buoyant because last month, there was a huge -- there was a stark different. One data showed around 9.5%. The other data showed 13%. So we don't know which one is more closer to the reality. But if the market comes back to 13%, as was indicated by IMS, then the growth would be much higher. If it remains at 9%, 10%, then we will try and aim for that 30% to 50% ahead of the market.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [27]

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Okay. Understood. And secondly, since you achieved debt-free status, what are your plans for fiscal '20 in terms of any spots that you want to fill up? Or what are your thoughts in terms of utilization of cash flow?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [28]

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So from a capital point of view, you know there is something just coming up in Guwahati, which is incremental in nature, so there is some allocation which has happened on that site. As far as acquisition is concerned, we have nothing in sight as of now. So acquisition doesn't seem to be happening because we have not even started at this point of time. But we will be building up naturally, so there is a plan of having more portfolios. So there will be brand launches, and then there will be some addition in people and new therapy lines. So we are more -- like it will be more of organic until the time we find an opportunity for acquisition.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [29]

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And lastly, on the CapEx, you mentioned there's something in Guwahati. So what was the CapEx last year and this year?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [30]

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Sachin will answer this.

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Sachin Shah, Eris Lifesciences Limited - CFO [31]

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The CapEx last year was around INR 35 crores. Not Guwahati. Guwahati was around INR 1 crore only last year. And this year, we're planning around INR 35 crores in Guwahati.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [32]

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So INR 35 crores was not last year, INR 1 crore was fiscal '19. You're expecting it could go to INR 35 crores for fiscal '20.

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Sachin Shah, Eris Lifesciences Limited - CFO [33]

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Yes. We are getting a plant for soft gels. And we are also getting a plant -- a smaller unit for nutraceuticals also. That should get us around 8% to 10% of manufacturing sales for us.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [34]

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Okay. And this will be construction for '20 and revenue generating for '21. Would that be fair to understand?

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Sachin Shah, Eris Lifesciences Limited - CFO [35]

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On the facilities side, the production should -- the sales should come from the quarter 4, but let's assume for next year, quarter 1.

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Operator [36]

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(Operator Instructions) We have next question from the line of Duby Rex from iThought Financial.

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Duby Rex, [37]

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Exports as of now is 0. But do you have any plans on that, on that front?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [38]

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Can you please come again? I'm sorry, I missed it.

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Duby Rex, [39]

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Sir, do we have any export breakup in the sales this year? And do we have any plans to export in the future?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [40]

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No, not as yet. Neither we have any revenue from export, neither there is any plan to export.

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Operator [41]

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(Operator Instructions) We have our next question from the line of Ashish Thavkar from Motilal Oswal.

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Ashish Thavkar, Motilal Oswal Asset Management Company Limited - Associate VP [42]

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Yes. So sir, for Guwahati, look, whatever site plans for that we were about to do for Strides in-house, has that happened? And if not, when? And if that happened, is there a scope for gross margin expansion?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [43]

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Yes. So Ashish, that is what exactly what Sachin answered, that pessimistically, we will start producing from Guwahati in the fourth quarter. And before that, we have a brand, which is a INR 60 crores product, which we will ship to Guwahati. So then all these things happened. So INR 60 crore advantage will come, I think, very soon. And Strides' advantage will actually begin from the fourth quarter. If INR 60 crores comes in, then there'll be a gain, both the sites. And once the whole thing is actioned, then we will be at the stage where we started, when 85% was in sight. So we hope to reach the same stage when the Guwahati is functioning completely.

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Ashish Thavkar, Motilal Oswal Asset Management Company Limited - Associate VP [44]

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Okay. Got it. And in terms of the employee costs and the other expenses in terms of absolute numbers for FY '19, as far as the Strides integration is concerned, everything is in the cost. And what's your outlook there for the next 2 -- 1 or 2 years? Say, for example, other expenses like almost like INR 290 crores and even employee cost is INR 190 crore. So all the integration has been done and what's your out -- what would you like to guide on...

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [45]

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So we will maintain that we would look an additional -- roughly around 200 people across the year. That's what has been the guidance. And that we want -- that is what we are keeping in mind at this point of time. So for all practical purpose, assume that we will add 200, 250 people during the current fiscal. And over and above, we don't expect anything significant at this point of time.

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Ashish Thavkar, Motilal Oswal Asset Management Company Limited - Associate VP [46]

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Okay, okay. Another thing, softgel and the nutrition side of the businesses, like are we having an inorganic portfolio? Or how will I look at that?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [47]

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So softgel, Ashish, one large brand, ReNerve Plus, is in a softgel formulation. So that -- when it comes inside, we are roughly doing 6.5 crores monthly on that, 6.5 crores, 7 crores monthly on that. And that's going well. So when that comes inside, that is the leverage we're talking about.

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Operator [48]

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(Operator Instructions) We have next question from the line of Tushar Manudhane from Motilal Oswal Financial Services.

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Tushar Manudhane, Motilal Oswal Securities Limited, Research Division - Research Analyst [49]

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Sir, just coming back to gross margin. We are already at 84.4%. And with this site transfer, if you can just quantify what can be the further improvement in gross margin in -- for FY ''21 full year basis.

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [50]

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I won't really ask you to break in some -- any increment from there. If we are there, that's what we are planning.

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Tushar Manudhane, Motilal Oswal Securities Limited, Research Division - Research Analyst [51]

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Okay. And you also referred to some new therapy to add, so if you can further elaborate on that.

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [52]

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Okay. So we have launched the blood pressure meter, as I alluded in my presentation. And we're just 1 month in the market. So that's one business, which we have already started. The other business, which we have started is the cosmetology business, but that's on a very small scale. We only have 15, 18 people because the portfolio, which we want will only come in, in the third quarter. So we scale up in the third quarter.

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Tushar Manudhane, Motilal Oswal Securities Limited, Research Division - Research Analyst [53]

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Sir, which therapy you referred to? I'm so sorry, I missed it.

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [54]

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Cosmetology.

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Tushar Manudhane, Motilal Oswal Securities Limited, Research Division - Research Analyst [55]

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Cosmetology, okay. Okay.

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [56]

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Yes. And incrementally, we are adding some people in the neurosciences business. That business is showing good traction. So incrementally, we are adding some businesses in the -- some people in the neurosciences. And as of now, this is the plan.

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Tushar Manudhane, Motilal Oswal Securities Limited, Research Division - Research Analyst [57]

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Okay, okay. And sir, any impact of this trade generics on the growth or on the brand success?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [58]

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I -- nothing, which I could have figured out actually.

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Operator [59]

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(Operator Instructions) We have the next question from the line of Duby Rex from iThought Financial.

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Duby Rex, [60]

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Sir, on a steady state, what would be the expected tax rate going forward, the tax bracket that you will be having?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [61]

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Tax rate.

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Sachin Shah, Eris Lifesciences Limited - CFO [62]

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Yes, the expected tax rate is around the same, 8.5%, 9%, should be the same.

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [63]

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For this year, yes.

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Sachin Shah, Eris Lifesciences Limited - CFO [64]

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Yes.

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Operator [65]

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(Operator Instructions) We have our next question from the line of Mr. Prakash Agarwal from Axis Capital.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [66]

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Yes. I had one more, sir. Just if you split the 2,000 MRs, in the past, you have given the split, which is how much is above 4.5 lakh productivity versus the Strides, which came later and had a lower productivity. What is the split today?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [67]

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Okay. Let me just try and give you an approximate number, so 200 -- 700. Almost 700 people would be below 4, and rest will be above 4. And if you include the subsidiary, this will go to 800 actually.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [68]

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On a net basis also, what would...

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [69]

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700 to 800 should be the number.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [70]

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And this 800 would be primarily Strides and the subsidiaries and some of the tailwinds.

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [71]

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Yes. So out of the 700, 250 would be the neuro team, which was kind of -- which is kind of coming up. Another 200 would be in the gynecology business, which now you see gynecology business is growing at around -- from the market data, it's growing at around 20%, 25%. And some other people placed in different divisions. But largely these are 3 businesses where we will have the biggest chunk and, of course, in the Kinedex. So these are the 3 major chunks and then some here and there.

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Operator [72]

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(Operator Instructions) We have the next question from the line of Ashish Thavkar from Motilal Oswal Financial Services.

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Ashish Thavkar, Motilal Oswal Asset Management Company Limited - Associate VP [73]

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Sir, any update on our ties with Medtronic?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [74]

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So Medtronic is a -- we got a product called Guardian. Right now, that product is being used as a service product. And how do we commercialize this? We have still not figured out. So I don't think any commercialization would happen in this financial year. It will remain more of a service product. You know we have a very large patient engagement group, and that's where we are using it.

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Ashish Thavkar, Motilal Oswal Asset Management Company Limited - Associate VP [75]

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Okay. So currently, you're offering it to the doctors.

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [76]

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Yes, we're offering it to the patient directly through doctors.

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Ashish Thavkar, Motilal Oswal Asset Management Company Limited - Associate VP [77]

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Okay. Fair enough. And last question on -- any update on the IVF segment because we were looking for something...

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [78]

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So IVF segment started working. We have deployed around 50 people in the IVF segment. We have started touching 1 crore on a run rate basis. And this is -- this will be -- So every year, Ashish, there will be couple of businesses, which will be hypergrowth business, so IVF this year will be a hypergrowth business.

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Ashish Thavkar, Motilal Oswal Asset Management Company Limited - Associate VP [79]

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Okay. You said 1 crore per month run rate?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [80]

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Yes, a month.

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Operator [81]

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(Operator Instructions) We have next question from the line of Kunal Mehta from Vallum Capital.

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Kunal Mehta, Vallum Capital Advisors - Research Analyst [82]

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I'm Kunal. Sir, I just wanted to understand, I do appreciate the hiccups, which we have been facing because of a slowdown in the chronic market. So just 2 questions from my side. So firstly, can you just attribute the reasons why -- I do understand the economy as a whole is slowing down. But can you just attribute the reasons for slowing in all of these extremely chronic brands, which have given fairly robust growth for many years in the past?

And I want to -- and secondly, from a long-term perspective, from a 3-year perspective, can you just give us a road map of how you wish to, I would say, steer your organization in terms of the -- both the growth in the existing brands and introduction of new brands and plus entering in new therapy areas for the next 3 years?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [83]

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Yes. So chronic has actually not slowed down significantly. Nothing really to -- for us to worry. It is the acute, which had seen a sudden volume slowdown during the last year, and that is what has slowed down the industry's overall growth. So right now, I don't have an answer. I don't even -- I can't even -- I haven't even discovered whether the chronic has really slowed down significantly for anybody to look out for the reasons. I think these are more transient stuff, 100, 200 basis points here and there is more transient, and that I think would settle down. And I feel that the movement would have been much more in the inventory side than actually on the organic side.

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Kunal Mehta, Vallum Capital Advisors - Research Analyst [84]

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Sure. And to the second question?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [85]

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Yes. From a prospective point of view, prospect?

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Kunal Mehta, Vallum Capital Advisors - Research Analyst [86]

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Yes. So I just want to understand that -- so now we are reaching a stage whereby in terms of the key therapeutic areas, key brands we have, we are #3, 4, 5 in all of those brands. And I do appreciate the fact that going from #3 to #2 would be a lot more tougher process than going from #5 to #3. So I just want to understand in terms of the new brand introductions, new therapeutic areas, which we plan to enter, what is the strategy there for the next -- from a longer-term perspective, for the next 3 years?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [87]

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Okay. So a small employee addition here. The rank, which we have shown you is from the prescription chart side. From the sales side, the ranks are not as inspiring as we would like. So we are, more or less our brands are between 1 to 7 in that -- no, 1 to 7, 1 to 8, that's where most of the brands would sit.

So the brand itself -- all these brands and the market themselves have still have a long way to go. And these are not the markets, which would shy away from growth. So the opportunity there is large. And overall, diabetes and hypertension, which is now 25% -- 25%, 26% of our business, there, our market share is one is 5.5%, 6% and the other is 4%. So for us, headroom is not a problem.

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Operator [88]

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(Operator Instructions) As there are no further questions, I now hand the conference over to the management for closing comments. Sir, over to you.

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [89]

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Yes. Thanks for taking your time, and this is what we have to say to you next time. Thank you, Prakash. Thank you for hosting the conference.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [90]

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Thank you very much, sir. Ladies and gentlemen, on behalf of Axis Capital Limited, that concludes this conference call. Thank you for joining with us. You may now disconnect your lines.