Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question, may press ‘*’ and ‘1’ on their touchtone telephone. If you wish to remove yourself from the question queue you may press ‘*’ and ‘2’. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Shaurya Punyani from Arjav Partners. Please go ahead.

Sir, just a clarification. So, you said you had 510 KL capacity for API and you are planning to add another 600. Is it right?

No, 600 is the total planned as per the QIP document. So, we will be adding 90 more.

And in six months you have said, right?

That's already planned but the civil work is going, so within six months we will be completing. Maybe 6 months to 9 months maximum.

Okay and so what are targets to like in terms of topline in terms of FY25 and FY26 like what kind of growth are we expecting?

Look depending more on the market where it is today, so we are seeing 10% to 15% growth but overall we are expecting we have been growing at 17% to 18% growth CAGR. So, depending on how the markets open up, if China markets stabilize and prices go up, so the growth may be high, but otherwise 10% to 15% is what bare minimum we are expecting.

And margins are improved, right? You are saying the medical device?

That's right. That's whole focus of the company that we should focus more on squeezing the margins than squeezing the volume. You would appreciate that 60% of the business, which is API business, this is B2B. In B2B, we have always to manage the prices. We just can't keep on reducing prices because it's unending. So, we have to hold the prices. That's why we stopped selling in the domestic market because the market is very competitive. I will not say competitive, rather very demanding. So, it's better to stay away and focus on exports.

Okay, sir. Thank you.

Thank you. The next question is from the line of Dhaval Jain from Sequent Investments. Please go ahead.

Sir, what is the main reason for the depressed margin in this quarter, if you can explain us?

There are two specific reasons of course, CFO Ajay is in the call, he can explain. The broader level is that the prices of the raw materials have started increasing and the prices of the finished product have not increased. So, the margin has temporarily been reduced because the market has not responded to an increase in the prices. That's one reason. Second is that when the prices were down, so of course we had to produce more. So, our operational expenses are high. Our production has gone up 11%. So, that 11% expenses have gone up, but sales utilization hasn't improved because the prices were down. In a way, there is a decrease in gross margins.

This margin which has gone down is mainly pertaining to the medical devices business?

No, only for the API. Medical devices is doing good. Medical devices, formulation, everything is good. Only in B2B business.

And if we see nine months FY24 to nine months FY25, pharma business has grown only 5%. Can you give us some guidance how do you expect this business to grow in the next 1 to 2 years?

Basically it all depends on the products. So, basically we have got 6-7 products which are sort of saturated. So, the moment we keep on adding new products, for example, next year, now in March, only empagliflozin patent is expiring. Next year, a few more products are expiring. So, Sitagliptin expired in India last year. Sitagliptin patent expiry is happening all over the world next 26 and 27. So, basically we have around 40 products where the pattern expires are lined up in next 3 to 5 years. So, more growth will come from the new products which are under patent now. That is one. And second, of course, the major growth would come from the finished dosage side, which I don't want to say that will add to API. But we are seeing lots and lots of people are looking for finished dosages from India. So, while we are trying to sell API, so API, our value addition is limited. If I convert that API into formulation, so I got 10x revenue. Of course, I have to do a little more effort to convert it and to get approval. So, if I jumble up, finished dosage, the API cost is only 10%. Instead of selling API for $100, if I make a formulation, it will sell for $1,000. So, that's where our margins will come and the revenue will come.

Sir, what sort of formulation business do you see in FY26?

Formulation business, formulation and OTC taken together is around Rs. 300 crores. So, we are seeing at least a growth of 25% there.

The formulation business?

Formulation and OTC taken together.

Okay, sir. So, full year guidance or next year should we look at 12% EBITDA margins?

EBITDA margin I would say is between 10 to 11 because now it is 10.72 for 9 months. So, I would say 11 to 12.

Sir even if the formulation business goes up, the margins will still remain there?

Then initially I think for 1 or 2 years and the numbers are small I don't see because formally as in today if we say Rs. 252 crore in the nine months, Rx an OTC so but still the major thing is coming from API only but you are right maybe up to 12% we can assume once the formulation business also goes up?

Okay, Mr. Jain, thank you very much.

Thank you. The next question is from the line of Rajesh Jain from RK Capital. Please go ahead.

Good afternoon. I have a question on your medical devices business. You have incorporated a new subsidiary where the promoters have a 20% stake. So, will the promoters be putting in money and if yes, how much money you will be putting in? That's my first question.

I would say it's an intelligent question, but you have understood very clearly.

20 basically, the company has been incorporated in a way that, okay, promoters and the both have to contribute equally. So, if promoters do not contribute, their share will go down. If companies do not contribute, company share will go down. But we have put up a condition in the shareholder agreement that Morepen share cannot be reduced. So, even if promoters do not contribute, promoter share will go down. Basically now since you have to buy an asset into this company from Morepen, Morepen is coming up with the hiring of plan. So, this company has to pay for it. So, we need to have a capital base. So, it all depends on what are the terms of the BTA, but of course promoters will have to pay for it.

Okay. The second question is on your guidance that you have answered to the previous participants. But if I remember correctly, did you not guide for around 20% CAGR over the next few years, FY26, FY27 on a blended basis considering all your businesses of medical devices, API and pharma? So, was the earlier guidance not of 20% CAGR growth, earlier on?

We maintain that, that's a CAGR, that's over a period of long term. But I think Dhaval had asked specifically for 25-26.

Okay, so you are saying that the growth will ramp up over a period of time, initially it will start slow in the range…

That's right, because now we are putting up additional machineries, we are installing plants for finished dosage, we are increasing capacity of medical devices. So, once everything comes, and as we shared in our earlier call, that devices export will start in 2 to 3 years, finished usage export will start. So, then the numbers will be multiple, but I always say that you have to take an average. In one year we grew 40%, but that doesn't mean every year we will do 40%. So, CAGR would be 20% which we stand by.

Okay. And how many new glucometer customers you have added in this quarter?

In this quarter, I don't have a quarter number. I have a nine-month number that I can quickly substitute. Ajay, you have the number with you.

Yes, for the quarter we have sold 13 lakh, 12.74 for the 9 months. For the quarter, it is 6.42 for the quarter.

Sir, I could not hear you.

For the quarter, it is 6.42 lakh meters.

For nine months, it is 9.48.

For the quarter, 36.42; for nine months it is 24.29.

Okay. And so the last thing is, in the results I could not find the cashflow statement. So, have you not published it or am I looking at, because there are 2-3 filings, I've gone through only one of the filings. So, cashflow statement.

That filing is six monthly.

September and March usually there is a detailed one where we have ratios and everything. Honestly Rajesh, I was also checking that I don't see ratios. They say the ratios are built only when the balance sheet is published. The balance sheet is published only in 6 monthly, September and March.

Okay sir, thank you so much.

Thank you. The next question is from the line of Rupesh Tatiya from IntelSense Capital. Please go ahead.

Hello sir, thank you for the opportunity. My first question is, sir, this 9 monthly selling and distribution expenses, they are Rs. 75 crore. Would you be able to give a split between how much we spent on medical devices and how much on the RX plus OTC formulation business?

Whether you have it or you have consolidated, but medical devices is nothing much other than some TV advertisement of that we had the KBC in this period. Other than that, there isn't much. So, but selling distribution, Rupesh, includes our distribution channels, C&F commission, freight inward, freight outward, not inward, basically freight outwards. Selling and distribution is not only marketing.

So, roughly can you give us splits or…?

Ajay, you have the numbers with you?

Yes, for quarter three for device business, we have Rs. 8 crores of selling and distribution.

Quarter 3, the number I see is Rs. 19.27 crore sir.

Yes, so that's devices.

Yes, 8 crore is devices, and 7 crores is for API and rest for the OTC and formulation.

API, there is an exhibition.

Can you give me entire nine months? Because the number is down quarter-on- quarter. It was Rs. 32 crore roughly last year Q3 and now it is only Rs. 19 crore. Q3 is not representative. Maybe you can give me for nine months, sir, Rs. 75 crore.

Yes sir, we have nine months as well. For nine months, for devices, that is Rs. 28 crores and for API, it is Rs. 21 crores rest for the...

That 28 plus 22 that is around 50 crore more. That is the rest 25 crore?

Rest is formulation and OTC, pharma.

50 crore is medical and 25 crore is API. API plus devices together is 50 crore, rest is for formulation and OTC.

Okay, I got it sir. And then can you also give the strips revenue for this quarter sir? Out of this Rs. 123 crore in medical, how much is the strips revenue?

Strips revenue for this quarter is Rs. 73 crores.

Okay. And then sir, you have last question from my side, you have given this 15% margin guidance over the long term. So, can you maybe tell me what are the top three things that have to happen for us to reach that15% range?

Broadly, we are going forward for more consumer front business and our further growth plan, I am not saying we are reducing our focus on API, but our growth plan will be more towards finished dosages, where the gross margins are higher to the tune of maybe 20%-25% EBITDA margin but even if I assume 20% now we are at 12% so average will increase. The finished dosage focus both in domestic also and export also. And in domestic, of course, it will be a bit slow, but in export, as we shared in our last report that we have established a full-fledged facility, which is up to international standards. So, that facility is only operational. The two new product launches are coming from that facility only. So, that is one focus and the second was the export of the medical devices. So, medical devices export also may start in 12 months’ time or 18 months’ time. So, there also we are seeing large volume also and increase in profitability also. So, in both angle, there is more focus on the consumer-front business and export business. And we are trying to reduce our exposure to the traditional APIs, where which is we'd get large volumes, but we do not get good profit margins.

Thank you, Rupesh. Thank you very much.

Thank you. The next question is from the line of Subrata Sarkar from Mount Intra Finance. Please go ahead. Subrata Sarkar: My question is from the exclusively on the medical device side. So, our medical device growth is quite muted basically. So, my question is, is it because the industry growth rate has flown down or we are not being able to ramp up because of our capacity constraint? Because already one of the major player in this BP machine, they are supposed to be out of the market. So, that should create bigger opportunity for the existing player. So, can you highlight this area?

Mr. Sarkar, you have rightly guessed that okay, in case one of the player has gone out, so opportunity should be much bigger. But I would say there is already inventory in the market but the major point is that the demand had been slow though in the first quarter we had a problem of capacity. So, we were even though demand was there we were not able to service but now capacity constraint has been done because our new lines have been laid and we are fully ready with the capacities. So, usually this third quarter, third quarter and fourth quarter a bit slow in the medical devices but no doubt as compared to last year same quarter we have grown 15%. The only point is that that's what I was telling earlier that every year we cannot go 30%-40%. So, sometimes we have to do market corrections. So, I don't think 15% growth is less. In Q3, we have grown 15% in terms of the new installation of meters and new strips sold. But here you would see that the whole game is that okay, we are installing new meters and those new meters will yield new strips anyways. Even if I didn't do any advertisement, if somebody has bought a meter, he'll buy the strips. So, basically, it's a very simple strategy. We keep on planting more and more machines in the market. The more machines we keep, more sales will keep on coming. So, we are very happy and our ratio is that, okay, how many meters you have sold and how many strips you have sold. So, that ratio is increasing. That ratio till last year was 150 per meter sold during the year and the number of strips sold. So, this is very high by now, but we will see at the end of the year what is the average. It's more than 150, it had gone up to 165-167. So, we are okay with the growth part, but going forward we will always see that okay if the markets are better, if the customer has more money, the customer is buying, only then we try to push schemes. We do not unnecessarily try to trigger the market if the market environment is low because we sell an advance payment. Only if the advance DD comes, then only we dispatch product. So, we better stay put. Subrata Sarkar: Got it sir. Sir, on the consumer medical device side basically apart from these two products, do we foresee any big opportunity in terms of revenue? Any other product that is comparable to this and what is our strategy? Do we have plan to get into those devices basically?

Yes, Mr. Sarkar, other than this, the major product what we see is this ortho supports wherein we have ortho support for your neck, for knee, joint pains. So, wherein there are now we have simple models that in the coming time, we will have some heating pads also. Earlier we had heating pads were imported. So, in the ortho support, now the country is going for so-called sports revolution and the kids are playing in the open. So, we are seeing a lot of traction in the ortho and more importantly in India, we are seeing a lot of export opportunities also. I don't know if you have heard of a brand Tynor, that's already like a Rs. 400 crore brand. Rs. 400 crore brand only on ortho. So, that's a big segment which we are working. Subrata Sarkar: But sir, that requires a totally different kind of set-up and manufacturing facility. So, do you have any plan to diversify it into those areas?

We already have it. We have the product, we have the factory, we have manufacturing. In our last presentation, if you see, we had shared the pictures of the plant also. So, we have an ortho manufacturing facility. In our Arab Health exhibition in Dubai this time, there were a lot of queries on ortho. Basically, ortho is such line that anybody can have it and it has lesser medical or regulatory challenges. In BP and glucose, there are regulatory challenges because you are dealing with the blood. You are entering the blood of the person; you are invasive or non-invasive. But in product like ortho, these are only help and service. These are only support systems. So, we are seeing a lot of opportunities, other than that, weighing scale is there, and of course, thermometer, but those are not, those can't be big categories. Subrata Sarkar: Yes, sir. From the big category or revenue perspective, ortho can be a big opportunity you think?

Ortho is, on the table it's a big opportunity, but as a company, we are very clear that so long as I keep making money in Gluco and BP and I can expand geographically instead of doing vertically slicing, if I can grow horizontally and I can keep on growing more into by having a better geography, I am okay. But sometimes in business, it's not that I want to sell BP monitor and I will not talk about Gluco monitor. Sometimes you have to have a basket, you never know what customer comes up with. And I shared this example earlier that we were talking to one of the US big chain, so we were discussing about BP monitor, but they say, can you give me a massager? So, we don’t know what customer wants. So, if the customer wants a massager, okay, we will make a massager for you. I have machines. I have the assembly line, we have got injection molding, we have got digitization, we have got everything. Subrata Sarkar: Okay, so last question, since you are long time into this area, so have you done any estimates, sir, what can be the potential market for BP and the glucometer and what is the penetration percentage as per your...? Sir, can you throw some light on this, like what is the total size of the market for BP and glucose, means what is the penetration percentage and how much can it grow, sir, from an India’s perspective?

Mr. Sarkar, basically I would say these are the questions which we all have on the table and unfortunately our data and statistics department, the country is very poor and I would say it is still improving. So, it's a WHO estimate that we have 100 million, 10 crores diabetic patients. So, out of 10 crores as I shared our number, we have only 1.35 crores. And I would say there may be another 1.35 crore or 1.65 crore others, it's only 30% penetration. So, it is estimated that 50% of the population is still unsolved or unaddressed or un-addressable. Either they don't know it or they are not able to reach it. Now, thanks to the internet, thanks to Instagram, thanks to WhatsApp, many people know about it, but in the tier 2 cities, tier 3 cities, tier 4 cities people do not have even enough doctors. And when we talk to our, sometimes our servants and maids, so there villages there may be one doctor in one village or there may not be a doctor in one village. So, the doctor may be 10 miles away. So, basically that reach and access to the medicine is still very far away. So, I am seeing at least for another 10 years, we are seeing an open platform, open canvas and the story would be written year-after-year and coupled with the technology, thanks to mobile then connected devices and telemedicine. So, this is a place where we will be there for life. And of course we have to keep alive and agile to the technology. For example, we have launched the app, now maybe some AI would come, so we will have the data building. So, penetration of the market is important. As in today, according to the best estimate, we are not more than 50% penetrated in the country. So, 30-40 would be a good guess. Subrata Sarkar: Thank you.

Mr. Sarkar, thank you.

Thank you. The next question is from the line of Mr. Darshil Jhaveri from Crown Capital. Please go ahead.

Good evening sir. A lot of my questions have already been answered. So, just wanted to have 1-2 clarifications. So, in FY25, we will be looking at kind of like a flat growth rate like revenue in terms of revenue rate because you are saying around Rs. 1200 crores for pharma and Rs. 550 crores for medical devices, right?

I think overall we are Rs. 704 crore. I think Ajay, you have the estimate for the full year. Of course, we do not give any guidance but..

In fact we have grown around 7%. So, we should be touching around Rs. 1,900 this fiscal.

Okay, 1,900 crore is the target.

Okay, no worries. Fair enough. I just wanted to know in terms of like a margin right now, we've seen a dampener right now. So, is it possible that this will kind of continue in Q4 like a lower margin or we see that in Q4 also there'll be recovery like how do we see the margins going on?

The way I look at it that okay these margin profile is temporary because prices in B2B things come up and down very fast and frequent. So, because one supplier changes one price and our whole costing goes up and down. That doesn't mean that the margin has gone down or up. It may go up for one quarter, it may go down the next quarter. I always see that is there any demand of the product? So, long as the product is there, so long as the requirement is there margin will go up and down and adjust itself. We are in businesses that if we buy costly, it doesn't mean that I will sell cheaper. And similarly, if I am making good margin, my customer is not going to give me higher margin every time. So, customer also comes to know that how much margin I am making. So, that way I would say broadly speaking, what we say in API is talk of 40% gross margins. And in other formulation, everything there is 60%-65% gross margin. So, far we have been able to maintain. So, I don't see margin is going down.

Correct. But in terms of increasing like how has the January month been sir? Like it's been good. Like I don't want any exact statement but qualitatively, how as it been?

Qualitatively, I would say the prices are forming up which is good, but of course it needs some time for the demand to come up because last quarter typically in the trade business in the finished dosage also and the medical devices also. In the trade, they do not try to have heavy inventories at the end in the March quarter. People have a lot of pressure to pay income tax and GST and everything. So, last quarter is usually quiet for the trade businesses, but API is usually good for the last quarter because international customers, they give orders in January, February after the closing. So, in the new year, we start getting good new orders. So, but too early to comment. So, I would like to keep quiet on guidance for the current quarter.

Thank you, Darshil.

Thank you. The next question is from the line of Mr. Ayush Jain from Xquity Advisory Services.

A quick question on CDMO part. So, what you are looking forward in the CDMO business?

Basically, Ayush, the way we look at it is, okay, in most of the CDMO businesses, if you understand the way it works, people are having big labs and R&D scientists and everything. So, we are able to communicate with the innovators for making some products, but they do not have facility to build and manufacture at large scale. So, they are looking for partners like us to make the capacities, who have large capacities. So, on the other hand, we have found some innovators that they are working with the CROs. They are okay, they work with the CROs, contract research organizations, and get the product made. And then they say, okay, Mr. Morepen, can you do it for me? I want to get this product made. Or maybe we are seeing opportunities, for example, Loratadine. We are making this last 30 years. Now we know how to make the best Loratadine. We are the largest producers since last three decades. Now if there wants to get Loratadine made outsourced, then we will be contract manufacturer for them. Or maybe there is a XYZ company, say it's sitting in Europe, any place, and they acquire some company, they have some product to manufacture, so we can make it for them. The whole idea is that we don't need to be always going to the market for B2B, we can go to the innovator also. And this work was earlier being done from China. So, it's basically China plus one model. So, people are in a way when it's a public secret that people are fed up from China and China had been behaving very erratic. So, we are seeing opportunities on the table where people want high end manufacturing from India because we have got FDA approved facilities. But ultimately, if we find that we can get good three customer and we need to put up a scientific lab so we can put up the lab also, we have already started working on those things also. Maybe another one year we will come up with that plan also, but still not on the cards.

Okay. Thank you. And the second question is around how the QIP played, people who participated in the QIP in August? Are they helping you out in getting foreign business, abroad businesses? Like you mentioned, will they help you around the US market or Europe market?

So, typically, Ayush this thing happens when we have PE players. So, in a private equity, the person sits with you on the board and they discuss all those stuff. But QIP investors are mostly public investors and they do not have day- to-day interaction. But certainly, we keep on getting feedback from them on our quarterly results and other stuff. But we certainly have more guidance from them on the overall business, but not any particular customer. But having large, beautiful people on your investor on the cap table itself is credibility to the company.

And just a quick thing from you. So, we come from the Northeast. We are presently at Guwahati, Assam. There is a lot of opportunity in Northeast, right? We can get it on the ground and all that. But the marketing campaign is not happy to that level. And previously one colleague of mine, Mr. Darshil or so, I don't even know his name, he also asked about that selling and distribution expenses part, right? The advertisement is not going that up or we are not doing focusing on much marketing right now?

Any particular state, any particular city, any particular district?

Medical devices. I want to just know what about your marketing plan in medical devices sector because right now we are seeing that the medical devices sector is a booming one right now.

Yes, there is a big opportunity coming up.

Yes. So, if we ante the game or up the game in the marketing part, can we have suppose a multiple growth in the sector?

And thing is, LightLife is basically you are going with that Obesity Management Plan, right?

That's right, weight management.

Okay, Thank you.

Okay, thank you very much, Ayush.

So, this was the last question. I now hand over the conference to management for closing comments. Thank you very much.

So, thank you very much, everybody, for a nice, intuitive question, and more importantly listening patiently to the whole commentary. So, we seek your guidance and support for quarter-on-quarter, year-on-year, and always giving our gratitude and shukrana for your support all the way. So, looking forward for a lovely quarter ending, and of course a year ending. Thank you very much. Have a wonderful evening and a nice weekend ahead. Thank you very much.

Thank you very much. On behalf of Motilal Oswal Financial Services Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.