Thank you very much. We will now begin the question and answer session. Ladies and gentlemen we will wait for a moment while the question queue assembles. We have our first question from the line of Darshit from Robo Capital. Please go ahead.

Good afternoon and thanks for taking my questions and congratulations on the superb quarter. So my questions firstly is how do you see the mix of all these like four segments as you call it, API devices, formulations and Dr. Morepen evolving like, is it true that API will remain to be a key driver followed by devices and then formulations and do we see like Dr. Morepen revenue is flattish in the near future like say two to three years or one to two years?

Darshit I think this is a very valid question and I am very happy to share that as it stands today, so we are seeing growth all around, API of course is growing at a CAGR of 17% to 18% and of course medical devices growing much faster medical devices growing 25% to 26% on an average including the flips and flops together but 26% growth in medical devices and as I shared that now as we go forward formulation also is inching up, so going forward what we see that API share will reduce from 60 to maybe 50 because medical devices are growing faster and formulation of course will grow a little faster now with increased capacities. Of course we will keep investing in the capacities, but more important than percentages and number I would like to share that it is a part of the overall strategy that we have to go forward integration. If you look at the most pharma companies where they have high EBITDA margins 20% and 25%, they have high gross margins of up to 70% to 75% because of the formulation, branded formulation, but at Morepen we started as a API player and we have a strong API. Now we have good 40 to 50 products in our API basket. If we do our own formulation whether for Jan Aushadhi or for US market or for exports so we see a lot of advantage that if we have our own API we can excel in formulation also, so slowly, slowly the formulation things will go up and I am not saying immediate it may take three to five years for the formulation business to go up, but we are confident formulation will go up. Devices certainly are growing pretty comfortably. So API I would not say that it will grow low, but it would not grow at 30% or 40%. API will keep going 17% to 18% I would say up to 20% and we are I would say quite happy on that and the second thing is the Dr. Morepen as an OTC. Dr. Morepen is an independent OTC plate. It has to do with the consumer market, so of course there the whole connect is with the consumer, so it has nothing to do whether I have my own API, whether I have my own formulation or whether I sell devices or not. So Dr. Morepen, we are still evaluating that okay how should we talk about the growth of Dr. Morepen because it involves a lot of media spends. So we are working closely on that. Certainly at appropriate time we will come with the strategy on Dr. Morepen also.

I missed the part when you talked about EBITDA margins of formulation, how much was it?

As of today the gross margin I am saying, the gross margins in formulation industry, the branded formulation is very high it is between 60% and 70% but in our case the mixed formulation because of generics and Jan Aushadhi and everything, our gross margins is around 30% to 35% which is very low. So as we keep on investing on the doctors, as we keep on increasing our reach in the market, so our gross margin will go up there also and second of course is the scale. If we just have a scale of say Rs.100 Crores or so the numbers look small, but now this year the formulation will be around Rs.230 Crores to Rs.240 Crores so it gives us substantial number and maybe in the Q4 itself we will have some better margin, gross margin and then of course maybe it will be positive. So far we have been investing behind this business and we are comfortable that okay, the margins of the company would also go up.

I just like to summarize my understanding that API is will relax a bit and grow at the 17% to 18% CAGR, formulations will be the new driver, the hydro segment and following that will be devices and then Morepen we will see how it pans out correct?

Yes, API is certainly is aggressive. For API 20% to 25% growth at a large base is huge and of course we are happy over there also. Yes, the license will be growing faster than API and that is why the share of API will go down, not that growth will go down from 60% it has already come to 55%.

12% this quarter and we hope that we keep on adding 20 to 30 basis points every quarter. So I am sure we will be able to maintain a double digit number regularly between 12% and 13% blended EBITDA in the coming two years time.

Alright and is it possible that you can give a margin breakup for each segment?

I do not have the numbers with me now, but normally when we made these quarterly presentations, those are revenue numbers but yes whenever we have some private calls with investors and others, so we do share those numbers and we would appreciate that in our business some competitors are looking at each other’s numbers.

I totally get that. Thank you so much and all the best.

Thank you Darshit. Thank you for sharing interest.

Thank you. The next question is from line of Gunit Singh from Counter Cyclical PMS. Please go ahead.

Congratulations on a great set of numbers. Sir first of all I would like to understand your capacity utilization across segments for the company currently?

Yes capacity utilization, I would say we are at the peak capacity utilization in both the segments. I will say all the three segments so in the API I told that we are already increasing capacity and we are side-by-side expanding capacity and using it. We are operating at more than 90% to 95% capacity, which is an optimum for any process industry. In the medical devices we were short of capacities during COVID time and we were depending on lot of imports also, BP monitors we were not able to supply from our own plant we have to import and there was a lot of pressure on oximeters and oxygen concentrators but now last one to one-and-a-half years we have been investing on the capacities. We have added a new line for the glucometers and strips actually, we have added in a new line for the BP monitors and we are doing backward integration for our chip packaging unit SMP-9 so there is a lot happening just to keep up with the pace of the production. So that is one reason that now the medical devices business is around Rs.425 Crores expected within this year. So from Rs.400 Crores if you have to go to Rs.1000 Crores we have to invest more and more on the capacities also because we were all home grown businesses and need to invest in the capacities, so the third business of course formulation and as I shared that we have started investing in the capacities and of course there are old machines which are not having high speed machinery. So we have increased the formulation capacity almost three times which certainly was not fully operational in Q3. So this quarter it should be fully operational and whenever it is fully operational we will be doing 75% to 80% because it operates on a change over and other things so good capacity utilization I would say. We are at optimum capacity utilizations.

Alright Sir. So what is the revenue potential of the additional capacity that we have added in formulations?

Yes formulation, as I shared that that will become a new growth driver because in this quarter itself it has grown 40%, so next quarter it will grow almost 60%, so we are expecting that formulation business give or take one year here or there it will become Rs.500 Crores in the coming three years time and today it will be around 230 to 240 this year it will close so it will double the value and of course it will take some time for refining the EBITDA margins but going forward we are seeing a lot happening on the foundation side.

That is great to hear and considering the topline and bottomline numbers of this quarter and you mentioned that we will be maintaining a double digit margin for the coming two years can we consider this quarter to be the run rate going forward or do we see any seasonality in the business in some of the quarters?

Yes Gunit we all wish and I do not say that we do not want it we all want it but that all depends ultimately the market. So like I said the last couple of quarters I would say almost one, one-and-a-half years there was a pressure in the pricing from China. China is increasing prices now they have softened out, maybe if the trend continues and of course our team has also worked to reduce the cost stream so if everything goes well, this is what we all want, but overall what we are doing is a strategic change. Strategic changes is that yes, API, we increase new products and new reach. In the medical devices we add more distributors and better reach. We are spending on the brand building. Formulation we are adding on the marketing part and adding on the capacity so overall margins are going up. So we are comfortable that we should be able to maintain, but the answer is positive but I do not say that yes we will get the same numbers next quarter so I cannot publically say it.

Alright Sir but considering that we are in the second month of Q4 so I am sure you must be seeing some confidence that is why you are saying that we will see increase in the margins so that is very heartening to hear and Sir do we have any aspirations and growth numbers for FY2025 in terms of growth in topline and bottomline or some scientific margins that we are looking at for FY2025?

Gunit normally we do not give any guidance or results or predictions but I can only say that we will keep on growing at the same pace as we are growing or maybe a little better and that is why we always talk about the CAGR so we are expecting 16% to 17% growth this year while we end the year. So obviously if we continue the same path you can imagine that around 20% growth we should get. So then slowly, slowly as we build in capacity the growth may be a little more, we can go to 20% to 25% but I would say between 20% to 25% is our growth target and like you said it is more of an aspiration and we want to build about that.

Steady state operating margins?

Operating margin, of course EBITDA is the operating margin. We do not have any interest or not much depreciation as of now, so we will be in the early double digits I would say.

Alright Sir. Wishing you all the best. Thank you very much.

Thank you. The next question is from line of Yashwanti from Kojin Finvest. Please go ahead.

Congratulations for the good set of numbers. Sir just wanted to know if we had expanded our capacities in some of our verticals like API, devices, formulation so what has been the capex spend and talent addition for the period and the quarter period till date?

Look our capacity spends so far had been all from the internal accruals. We have spent around Rs.50 Crores in the capex in last nine months time and everything has been done from the internal accruals and that is the reason that whatever cash flow is being generated it is either going in the capex or it is going in the working capital. So we are always tight on the cash flows because of these things and going forward we are looking for our capex plan in between Rs.125 Crores to Rs.150 Crores for the API, there is another Rs.50 Crores for the medical devices and of course another Rs.40 Crores for the formulation, so we have a capex plan planned out and of course some working capital requirement also. So that is where we are planning to have a better fundraising plan depending on how the markets pan out and depending on how the results do because we are putting a pressure on the team that okay we have to perform first. So first we perform and deliver and then we ask.

The margin profile you said we will be maintaining around 12%, so is it possible to sustain this?

Yes but looking at the product mix we should be able to sustain it because there is nothing unusual with this time and of course export percentage is almost same. One product was not doing well Loratadine so some other product has taken over but the export percentage it remains the same and API margins. Medical devices are a very stable business and formulation as we increase our capacities so our expense percentage goes down as a percentage. For example in the beginning of the year maybe the salary percentage of the plant was like 27% to 28%, but at the end of the year the salary percentage has come down to 15% to 16% because the production has doubled, so if we have better machines, more fast moving machines, and a little investment in the capex so we can get better utilization of the manpower also.

Sir is it possible for you or is it the right forum to explain the vertical wise margin?

Yes you can write to our CFO he can share with you at ajay.sharma@morepen.com

That is all from my side. I will come back in the queue.

Thank you very much !

Thank you. The next question is from line of Saurabh Bhidhala from IISL. Please go ahead.

Good afternoon Sir and congratulations for a good set of numbers. Sir the question has been asked almost, I just wanted to ask on the margins so what kind of a margin in FY2025 and FY2026 you will be maintaining can you throw the color on this?

Yes, like you said that we have almost talked about margin multiple times but broadly speaking if we continue the same streak and the same set of numbers the way we are doing certainly the margin profile will keep on going up. Our EBITDA for this year as a whole if we are able to cross in two digits so certainly we will be adding 200 basis points next year, then next year and then next year. So we will keep on adding and say 150 to 200 basis points year-by-year and based on the set of same assumptions and once there is a good addition to EBITDA since we do not have much interest component I think everything will add to the bottomline and the PAT numbers which are very low now which are around 6% expected by end of the year naturally those will add another 150 to 200 basis points maybe from 6 to 8 to 10. So in the third year onwards we are saying that okay, maybe we should have a double digit PAT also. The third means FY2026.

Number two Sir your OTC brand is under very much pressure can you throw the color on this, what kind of a trajectory do you see in this?

Saurabh I will be frank that basically OTC needs lot of upfront investments and basically in terms of marketing and branding and everything, so we are presently not investing much in promotion and advertisement without any, I would say either investor or a strategic partner, so we are basically looking for that okay what is the right mix because last to last year during COVID time we started investing online so online was again bleeding exercise because there is a lot of upfront investment on the advertisement and customer acquisition so we are going a bit slow but certainly we have a lot of opportunities there and certainly you will hear some new products being launched so we are looking for more and more innovative products there and up to motion budget but otherwise Dr. Morepen as a company and as a brand and we shared in our previous calls also so Dr. Morepen is a consumers darling so it is basically a market friendly product so it deserves its own IPO and it deserves its own freedom but once we resolve things at a corporate level then Dr. Morepen will come out on its own, raise its own capital and go for its own IPO and go for market promotion and whatever, so we are trying to conserve cash and not invest on the advertisement that is the broad strategy as it stands today but as we go forward certainly we are looking for more innovative products so I am not disclosing the product now, but certainly in the coming quarters you will see some new product launches.

Okay, number three are you needing to raise some fundraising program or are you increasing the stake in your companies can you throw this on the color?

We are working on the resource augmentation. Of course, exactly as I shared that while we are doing capacity expansion and working capital extension and of course even if we are normal 20% to 25% growth so we need a huge working capital augmentation. So we have various plans which are being discussed internally but we have not given any final shape to anything, so we are still at an evaluation stage.

Okay, thank you.

Thank you, Saurabh, thanks a lot!

Thank you. The next question is from line of Raaj from Arjav Partners. Please go ahead.

Sir if I remember it right there was an EC approval pending for our plant so any status update on that?

EC approval?

Yes.

Environment, yes.

We have a running matter which is there with routine pollution department. The departments are very active, they were online monitoring and they visit our factories almost every week, but for the new project we have got a single window clearance and of course somebody had filed a case in NGT which is going in routine and regular dates but there is nothing pending, pending as such, but business as usual is going, but yes we are working on the zero liquid discharge ZLD they call and zero liquid discharge is being worked out which is we have achieved physically on sight but the department is yet to approve finally and they want some video call or they want some live demonstrations but that is a routine matter.

Alright understood and one more thing I wanted to ask about your capex plans I skipped the point on the segment wise capex which you intend to do?

Segment wise as I shared that we have a capex plan for different, different divisions. For example for API we are looking at around Rs.125 Crores capex and of course including working capital and then for medical devices around Rs.50 Crores and for Rx it is more of working capital and then OTC is as I shared that we will be going slow, so around Rs.133 Crores for the cap, for the API around Rs.50 Crores to Rs.60 Crores for the medical devices and for the formulation. So these are three to four I would say basically between Rs.200 Crores to Rs.250 Crores is capex plus working capital in the next two to three years time. So let us see how what the financial team may come out with and we are open to discussing and of course we have been approached by many multiple banks or any debt raising because we are debt free company, so certainly we are open to discussion of that. We are evaluating the various options.

Thank you.

Thank you. As there are no further questions from the participants, I now hand the conference over to Ms. Vaishnavi Ambokar for closing comments.

Thank you everyone for joining the conference call of Morepen Laboratories Limited. If you have any queries, you can write us at research@kirinadvisors.com. Once again thank you everyone for joining the conference. Thank you.

On behalf of Kirin Advisors Private Limited that concludes this conference. Thank you for joining us. You may now disconnect your lines.

Thank you guys. Thank you very much. Thank you for joining.