Ladies and gentlemen, we will now begin with the question -and-answer session. The first question is on the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.

So, the first is on the bookkeeping part. Rs.325 crores is an exceptional loss. Even if I exclude 30 million from that settlement payment, still the remaining amount is considerable. Is it largely to do with remediation measures?

So obviously, one is the remediation is only about Rs.26 crores in this quarter; 20 crores in India and about 6 crores in the US. Earlier also, we all had sort of guided that as we go along, these costs are coming down and they’ve come down in this quarter. So, the balance is basically about the DOJ settlement of 30-plus million and the allied legal cost that we provide with that which will be part of that. So that is the reason why it is about Rs.325 crores.

Derma is a therapy in India has witnessed good slowdown. So, any particular reasons to highlight here?

In the 2nd Quarter, right, we saw slowdown in two of our core therapies, right. There was a slowdown in the acute business in the 2nd Quarter which impacted our respiratory sales and in derm there has been a slight slowdown in the 2nd Quarter. However, we are seeing a strong recovery in the 3rd Quarter; so, in the month of October, we grew 19%, right as per IMS. So , India business, we think from here on, right , will come back strongly. And I think respiratory has been a big dampener in the 2nd Quarter which is coming back strongly in the 3rd Quarter. So, I think overall, we continue to believe that India will do well this year and going forward.

Thirdly, the US sales have been gradually slipping from 100 million now. So, when do we see this segment reviving?

So, US, 2nd Quarter was a tough quarter for us because we had some supply disruptions because of some of the remediation work that is ongoing in the 2nd Quarter. However, in the 3rd Quarter, we've resolved all that and we are back with full supply in the 3rd Quarter. Additionally, I think in the 3rd Quarter we have almost four or five good launches. I think the Varenicline partnership that we did with Mankind, the product we in-license, we've got some good market share there , and I think we have almost 3 injectables getting launched in this quarter through some partnerships. So , that coupled with some of our in -house launch es. So, I think from the 3rd Quarter you should see US sales come back to the original levels, right? So , 2nd Quarter we think was an aberration.

This upfront payment of $5 million to Cassiopea, this would happen in this 3rd Quarter or how to think about it?

Yes, it will happen in the 3rd Quarter.

But I think 3rd Quarter against, we also have an income coming from Astria, right, almost $15 million we've already received from Astria in Ichnos, right? So, there is some income also on the innovation side.

The next question is from the line of Damayanti Kerai from HSBC. Please go ahead.

I just need some more clarity on margins. So obviously , you mentioned '24 will be a transition year and then for FY25 you mentioned 200 basis points better margins on the core business part. But for the quarter, say if I look at the numbers , 14.4%, I'm excluding the FOREX part, so that is anyway I think looking much lower than what we had seen previously. So, can you specify whether the slower performance in India and US contributed majorly towards it and maybe in 3rd Quarter and fourth quarter as India and US comes back, we'll see better margins?

First and foremost, obviously, if you factor in the currency loss, you will come to almost 15.7%. What we are saying is that this being a transition year, we've already guided in the past also, we look at about a 2% improvement because of reduction in the R&D cost … in the initial commentary we gave that we are also looking at improvement in the margin expansion from RYALTRIS as well as from across other geographies like Europe and LATAM. So, therefore this should significantly take our margins in terms of whatever been guiding in the past , would be closer to 19%, okay, that's what we are working towards. Even in the second half, I do agree with your point that as India and the US kicks in better, so obviously you should see it improve. So, I think this is the trajectory we're looking at.

So, you maintain that 19% margin trajectory for your business?

As we've already alluded, that is a transition here, but over the years, we're trying to improve that, yes.

My second question is in the US business . So, you mentioned some supply challenges which you have resolved now. But can you comment a bit on the pricing part also because I guess what others, or your peers have commented that prices are more or less stable. So, how was it for your portfolio and how do you see it for next say for the coming quarters?

So, the pricing environment seems to be stabilizing. However, we are still seeing standard price erosion of roughly mid-single digit, around 5%, 5%-odd across the portfolio.

Can you also share update on Monroe regulation part because if I remember correctly, you mentioned somewhere in the second half of the fiscal we should be seeing some notable update there?

So, in Monroe, we are pretty much done with most of the remediation. We are taking engineering batches this month and followed by validation batches and commercial batches. So , the remediation is pretty much done. Obviously, we would have a dialogue with the FDA before resuming commercial sales either by way of a meeting and we are also expecting an inspection at some point.

Any timeline where do you expect like FDA can likely reinspect the facility?

It's extremely hard to predict that, but we've started the work where we've started taking batches, first with engineering batches followed by validations and then commercial batches.

In terms of cost also, you mentioned 26 crores was the remediation cost , that was specifically for the US plant or -?

No, no, India was about 20 crores and US was about 6 crores, US is much lower.

I think remediation we are mostly done with everything at this point in terms of expenses and I don't think going forward we would have an exceptional item as a remediation going forward.

The next question is from the line of Vikas Sarda from NT Asset Management. Please go ahead.

Two questions. One is that the Ichnos spend in the first half has been higher than full year run rate guided of $60 milli on. So, how should one look at that in the second half? And secondly, this 200-basis points margin expansion next year is only from R&D or you're building in the RYALTRIS and the operating leverage in that?

So, good morning, Vikas. Thanks for the question. So, as you can see in the current year in the first half, we spent about 36 million, which last year was almost 43 million. So, in the 36 million also we have in the first half of the year normally we pay out bonuses and there are some severance costs as we are going about restructuring the operations out there. So , we still are pretty much guiding close to 60 plus is what we had said , will be there about. So , we're not expecting that to substantially go give and take a few million here or there. So, as far as Ichnos, that's where we are. And as you know, this year in the 3rd Quarter, we also received 15 million on licensing. So those are other incomes that will keep coming in. And as far as the margin expansion is coming, 2% is basically from basically from Ichnos, that is innovation and the balance is when we say that we'll take a trajectory from where we are today, almost a 3% plus , 2% is here plus a 1% will come from all the margin expansion that we'll get from increasing our businesses, operating leverage in Europe, LATAM. So those are the things. What we have not specifically even called out here, is that as Monroe goes live, today we have a 25 million operating cost which is also baked into our numbers. As we go along even that will kick in next year. So, I think all in all that's how we are trying to run the run rate closer to where we are.

How much of the Zetia payment has already been made and how much is pending? And also, in the balance sheet, there's one item called other current asset which has gone up in six months by almost 400 crores. So, what is that for?

One is obviously we have paid more than 35 million plus for the Zetia and we also paid about one installment of the DOJ that came in. So, these are all that went in. As far as the other current asset is concerned, receivable going up almost 190 crores, that is largely on account of… as you know, when we make these payments outside India, we have to pay GST on that, which we can take credit against that, but as of now, that money is gone. So, that is one money that has gone. Also, the other thing is that we have in the other current assets PLI which we accrued about 80 plus crores in the current year which we are yet to get money from the government. I think they will plan somewhere in the second half to give us money. A lso, apart from that, we also had some increase in our prepaid expense of about 60-70 crores, some advance payment to supplier. So that is why it looks like 400 crores jump. But I think as the second half goes by, at least the input tax, some of those credits we can take, and it will come off. So , I think overall with the improvement in the business in the second half also, we should see cash coming back in the business.

The next question is from the line of Nitin Agarwal from DAM Capital. Please go ahead.

Can you help us understand the guidance for FY25 a little better in terms of what EBITDA levels we are looking at?

Currently, obviously this quarter we're a little less than 16%, but we gave a glide path how we'll go there. We said 2% will come basically from innovation R&D spend reduction and 1% from the expansion in the various markets , also, obviously as Monroe goes live, we'll also get some benefit. I have not put that in this. So overall, based on this, we are looking at a trajectory close to 19%.

Yes, 19% for FY 25. This is a transition year , Nitin. I think we'll have to check it as the year comes.

Secondly, on the remediation costs, what kind of positive impact do we see on account of that next year?

You're talking of remediation costs further in the next year, is that what you're saying?

Because you are saying it's going to be almost zero this year from here on, so, how much will be spent for this year?

So, this year so far we have spent about 77 crores. So, that will not be there next year. But in any case, I'm calling it out separately.

That is an additional lever which is probably there for us?

Yes, there are additional levers in terms of profit.

Glenn, on the India business now , how are you looking at India from again a two, three-year perspective here on?

Our view, Nitin is our India business continues to remain very strong, right. I think between the RX business mainly driven by the respiratory, cardiac is doing exceedingly well for us , derm and then diabetes, right. I mean, we are pretty much leaders in three out of the four, right. We're among the top two, three players in three out of the four segments. So , India business RX continues to be strong. OTC, we are doing exceedingly well. So that's another growth lever going forward, whic h will contribute significantly to our India business. And then we have some reasonable institution business , that's doing well in terms of hospitals and institutions. So that will come up as a new growth lever. So, I think all in all, India will do well for us, I mean on a sustained basis, we feel very comfortable with like a 12 to 15% growth coming out of India, right, for the next three years.

And likewise, on the US, Q2 you mentioned is a soft year, things will bounce back from Q3, but with Monroe and all probably beginning to come back from next year , how should one think about US, there has been some improvement in the outlook which happened in general for other players on the US side?

So, I think the US business next year will be mainly driven by bringing back Monroe, some of the new launches that we have next year, right. And I think our respiratory play will start hopefully from next year. We're hoping to get our first approval in the respiratory space and then we'll keep getting approvals from there every year. So , I think a lot of our US build out is primarily driven by respiratory and some complex products that we are working on. So, it's hard to predict specifically in terms of numbers, but I mean, we have a good portfolio of products that we are filing, right , and assuming they all get approved, and things are on track, right, the US business should look strong right in the years to come.

On that, Glenn, when are you looking to file the Fluticasone in India?

Fluticasone MDI, right, between Q4 and Q1, right, we will file the fluticasone MDI.

There's been very strong growth in both ROW and Europe now. Is it largely RYALTRIS driven or there are more things which are sort of driving it?

I think Europe is more broad -based beyond RYALTRIS. RYALTRIS is a big contributor, but we also have four or five respiratory products that we are selling there , are doing exceedingly well. And I think going forward we still believe that Europe will continue to outperform, right , I mean 15 %, 20% is the minimum growth trajectory that we are seeing for our European business. ROW also is doing extremely well. We got a big approval in in Brazil of Salmeterol Fluticasone MDI, it's the first generic approval. The rest of ROW, which is Asia, Latin America, Middle East, Africa, Russia , CE, all these geographies are doing well. Russia also , we got Ascoril LS a big approval which will be a big driver. In most of these geographies, they continue to do exceedingly well. So, I think these two geographies will be significant growth drivers for us in the years to come… and of course, India continues to do well. So, the US is a big unknown. We are doing the right things in terms of portfolio but given the uncertainties we really struggle to put any number for the US business.

The scale up which you're talking about in Europe and R OW, what kind of margin operating leverage to be see playing out in this business? And at some l evel, are these businesses below corporate level margins or have they now passed it?

So, Europe obviously was below corporate level till last year, right. I think this year it has come up closer to corporate level, and I think further margin expansion is coming out of Europe, right as we go forward. R OW, most geographies were almost at corporate level , Latin America was way down, right. I think that is adding almost 3%, 4% every year from here on in terms of their EBITDA margin. So, that itself is giving you some significant leverage coming through, right, as we go forward.

The next question is from the line of Krishnendu Saha from Quantum AMC. Please go ahead.

Coupled with the margin question, just trying to understand Glenmark Life Sciences revenue, which is right now currently in the consol account will not be there from FY25 onwards. So just trying to understand what kind of contribution they do at the current level on the –

Just wondering on the accounting part and on the margin part, Glenmark Life Sciences will not be in the numbers from FY25 onwards, how does the margin look because they do contribute something to the margins of the consol level.

As per accounting standard, this is how you see the margin today. And the earlier questions are also for the same. We have a continuing business, and we have a discontinued business. So, on the continuing business taking FOREX loss, we have a current quarter EBITDA margin of about 15.7% which we have given a clear trajectory and a glide path how we'll go to 19%, 2% from innovation R&D and from -

But I'm just wondering if it is the consol when Glenmark Life Sciences is consolidated and in FY25 when they are not, does it not impact the EBITDA margins?

So, that impact is only we're absorbing, no. I can't hear you clearly, but I'm just gathering what you're saying, it's hard to hear you out. From what I understand, you are telling that GLS margin will not be there. I agree that is what we are doing by virtue of these measures by which we are reducing our innovation R&D spend and we are looking at other markets which are doing better and growing, who's margins are expected to improve. So , both put together that is how we are expecting and also with some support from as we go along with Monroe , etc., we're very confident we'll come closer to 19%.

I think over and above that, the key is to take notice of is the PAT margins because in next year, you will see a significant improvement in the PAT margin. So, not only are we getting to that 19% plus EBITDA margin, right, but we're also expecting a significant improvement in the PAT margin compared to where we've been right along with GLS. So, that should drive the next year.

Just trying to understand, this is nothing to do with your guidance or whatever. Is there a 100% consolidation on the PAT margin for GLS on the consol lev el because we're not selling 100% so how does the consol do, do we have 100% of the profit of GSL in the consol?

The entire 100% of the EBITDA margin all is removed of GLS , there is nothing of GLS left back in the continuing business, it's completely out. In future, whatever we buy, we buy at arm's length.

No, I'm talking about historically , FY'22-23 numbers which are getting consolidated, do they match total 100% of the profit of creation into the consol, is it like if they earn 100, does it reflect 100 in the EBITDA margin, is it like that on a historic basis?

The entire margin of GLS is removed from here. It's not there in the continuing business.

We quickly read the disclaimer before we end the call , the documents prepared and discussed during the call today including information statements and analysis desc ribing the Company or its affiliates, objectives, projections or estimates are forward-looking statements. These are based on current expectations, forecast and assumptions, and are subject to risks and uncertainties which could cause actual outcomes to di ffer materially from these statements depending upon economic conditions and other incidental factors. So , no representation of warranty is provided in relation to this document, and it should not be regarded by recipients as a substitute for the exercise of their judgment. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. With that, we can close the call. Thank you everyone for joining us today.

Thank you, members of the management team . Ladies and gentlemen, on behalf of Glenmark Pharmaceuticals Limited, that concludes this conference call. We thank you for joining us and you may now disconnect your lines.