Granules India : Transcript of Analysts/Institutional Investor Meet/Con. Call

REGISTERED OFFICE

GRANULES INDIA LTD., 2nd Floor, 3rd Block, My Home Hub, Madhapur, Hyderabad - 500 081, Telangana, INDIA.

Tel: [phone], Fax: [phone], [e-mail], www.granulesindia.com

CIN: L24110TG1991PLC012471

Date: October 27, 2022

To,

National Stock Exchange of India Limited

BSE Limited

Symbol: NSE: GRANULES: BSE: 532482

Dear Sir,

Sub: Transcript of the Earnings Conference call for Q2 of the financial year 2022-23

Ref: Our letter dated 10.10.2022 for intimation of the schedule of the Earnings Conference call for Q2 of the financial year 2022-23

Pursuant to regulation 46 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the transcript of the earnings conference call of the Company for the second quarter and half-year ended on September 30, 2022 has been enclosed herewith and uploaded on the website of the Company at the below-mentioned link:

https://granulesindia.com/investors/investor-resources/earnings-call-transcripts/

This is for your kind information and records.

For GRANULES INDIA LIMITED

CHAITANYA TUMMALA

Digitally signed by CHAITANYA TUMMALA DN: c=IN, o=PERSONAL, title=1722, pseudonym=5a1421da00444714ae97e8764 0a0419e, 2.5.4.20=f7feec72a52be0b16d0827d9d73aa 615bad9538180242f5bb3efe11f1a5fd10d, postalCode=500013, st=TELANGANA, serialNumber=ae6c5085a4c307805711d3f1 ab8a1ff2da48346a26aa5fe898e52ec0775c3 c69, cn=CHAITANYA TUMMALA

Date: 2022.10.27 12:51:05 +05'30'

CHAITANYA TUMMALA (COMPANY SECRETARY & COMPLIANCE OFFICER)

"Granules India Limited

Q2 & H1 FY2023 Earnings Conference Call"

October 20, 2022

MANAGEMENT: DR. KRISHNA PRASAD CHIGURUPATI - CHAIRMAN &

MANAGING DIRECTOR - GRANULES INDIA LIMITED

DR. KVS RAM RAO - JOINT MANAGING DIRECTOR & CHIEF EXECUTIVE OFFICER - GRANULES INDIA LIMITED MS. PRIYANKA CHIGURUPATI - EXECUTIVE DIRECTOR,

GPI

MR. SANDIP NEOGI - CHIEF FINANCIAL OFFICER - GRANULES INDIA LIMITED

MR. IRFAN RAEEN - ORIENT CAPITAL

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Granules India Limited

October 20, 2022

Moderator:Ladies and gentlemen good day and welcome to the Q2 and H1 FY2023 Earnings Conference Call of Granules India Limited. As a reminder all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call please signal an operator by pressing "*" and then "0" on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Irfan Raeen from Orient Capital. Thank you and over to you.

Irfan Raeen:Thank you Yashashri. Good evening, everyone, myself Irfan Raeen from Orient Capital. We are an Investor Relation Advisor to the company. I hope that all of you and your families are safe and healthy. On behalf of Granules India, I extend a warm welcome to all participants on Q2 and HI FY2023 financial discussion call. Today on the call I am joined by Dr. Krishna Prasad, Chairman & Managing Director; Dr. KVS Ram Rao - Joint Managing Director and Chief Executive Officer; Ms. Priyanka Madam - Executive Director, GPI; and Mr. Sandip Neogi - Chief Financial Officer. I hope everyone had an opportunity to go through our investor deck and press release that we have uploaded today on exchanges and on company's website. Before beginning with the call, I would like to give a short disclaimer. This call may contain some of the forward-looking statements which are completely based upon our beliefs, opinions and expectation as of today. These statements are not a guarantee of our future performance and involve unforeseen risks and uncertainties. With this I hand over the call to Dr. Krishna Prasad Sir. Over to you Sir! Thank you.

K P Chigurupati: Thank you Irfan. A very good evening to all of you ladies and gentlemen and thank you very much for joining us today. I am sure all our investors had received the proceeds from the buyback by now and are happy that the company has interest of the investors as a priority. All of you would have gone through our numbers and Sandip will also take you through them. Let us only dwell on some key indicators.

During the current quarter we continued and improved on our performance on all fronts compared to Q2 of FY2022 and Q1 of FY2023. While net profit has grown the most important and satisfying parameter is the cash position. We had generated operational cash of Rs. 218 Crores as compared to Rs.181 Crores during Q1 2023. After accounting for capex, we generated a free cash of Rs.124 Crores compared to Rs.98 Crores in Q1. As explained in our last call our focus continues to be free cash and we will continue to focus on this. As of today, we have completed the buyback and had incurred an outflow of Rs.310 Crores including taxes and other expenses. We are confident that after taking this amount and future capex into account we will end up with a positive cash flow and reduced net debt by the end of the current fiscal year as compared to March 2022. On the business front while we continue to see price erosion in the US, we will continue to offset this through increased sales in other geographies and increased focus on operational efficiencies. This had been an ongoing issue for the past many years, but Granules had been able to successfully manage this. On the positive side the slow downward trend in raw material prices is continuing but the cost of energy had gone up adding to our cost. The international freight rates especially for reefer containers had not reduced much during the last

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Granules India Limited

October 20, 2022

quarter but we see a downward trend in Q3 already. To supply PAP and DCDA some of our important raw materials had been stable and we expected to continue and possibly improve.

The political situation in Europe had caused disruption in raw materials coming out of this region but for us we were impacted only on excipients. We are mitigating this by qualifying alternate sources from other geographies. Work on the DCDA project is proceeding smoothly and we expect to see results in less than two years. R&D is progressing smoothly and details of the ANDA fillings, approvals and DMF fillings are in the investor presentation. While we continue with our current business model and keep trying to grow it, I am greatly excited that our journey towards Granules 2.0 is proceeding smoothly, and we are all excitedly looking forward to the positive outcomes from this. As usual I request our JMD, Dr. Ram Rao to take you through this journey. Over to you Dr. Ram Rao!

KVS Ram Rao:Thank you Mr. Chairman. Good evening, everyone on the call. I echo the views of the Chairman on a very satisfying second quarter performance of the company. In my last quarter remarks, I spoke about Granules' long-term strategy on science, technology and innovation. I am very happy to confirm that our strategy relating to this is on track. We made decent progress on the enzyme and fermentation technology driven product development and completed proof of concepts for a couple of projects. We are also making good progress on the continuous process development effort and DCDA and as pointed out by the Chairman we should see the commercialization of this product in the next couple of years. The R&D and portfolio management strategies are much more robust now and are based on the initiatives of science and technology and we have also made a very good progress in institutionalizing ESG as a way of doing business for us. All these science technology related initiatives are going to increase the R&D spend in the subsequent quarters. I have also communicated in the last quarter we see huge untapped market potential for our core molecules in Europe, South Africa and AMEA countries. We have now started expanding in these markets. The first set of European launch of some of these molecules through our partners is likely to happen during Q3. With this I hand it over to Sandip for financial highlights.

Sandip Neogi:Thank you Sir. Let me now take you through the top financial parameters now.

Revenue: The second quarter revenue was Rs.1,151 Crores as compared to Rs.888 Crores in Q2 FY2022 growth of around 30%. This growth is mainly attributed to increased business in the US especially in the API segment. The revenue share of noncore molecules stood at 16% which is higher mainly because of the increased core sales in the current quarter. Even though in percentage terms the others have decreased but in absolute numbers showed a marginal growth. The sales breakup as per business verticals and details are presented in our investor presentation which is available on the website.

Value addition which is basically sales minus cost of material consumed. Value addition percentage in Q2 has contracted by 1.1% mainly due to segment mix as in this quarter API sales was more.

Page 3 of 13

Granules India Limited

October 20, 2022

EBITDA and EBITDA margin: EBITDA for the quarter was Rs.243 Crores when compared to Rs.151 Crores in the previous year same quarter an increase of 61% over the previous year mainly on account of increased business across major geographies.

R&D: Our R&D spend for the quarter was Rs.25 Crores as compared to Rs.47 Crores in the same quarter in the previous year. It is expected that R&D spending will be in the range of Rs.40 to Rs.45 Crores in each quarter going forward.

Net debt: Our net debt was Rs.553 Crores as compared to Rs.613 Crores in the last quarter mainly on account of repaying of the long-term debt. Our focus on cash collection has also resulted in free cash of Rs.124 Crores in the current quarter.

Cash-to-cashcycle: Our cash-to-cash cycle was at 141 days in the current quarter compared to 144 days in the previous quarter. The decrease of 3 days was mainly attributed to a reduction in the receivable days due to factoring of invoices.

Operational cash flow: Operational cash flow for the quarter was Rs.218 Crores when compared to Rs.101 Crores in the previous year same quarter. Higher operating profit and a focus on working capital management contributed to higher operating cash flow in the current quarter.

Capex spend during the year stood at Rs.94 Crores.

With this I open the floor for questions.

Moderator:Thank you very much. We will now begin the question-and-answer session. We have the first

question from the line of Rahul Veera from Abakkus. Please go ahead.

Rahul Veera:Sir just wanted to understand that is the gross margin on Paracetamol lower than other products because sequentially when the sales have gone up in Paracetamol specifically the gross margin is not up to the mark?

K P Chigurupati: You are right Rahul. Gross margin on Paracetamol is lesser than other products.

Rahul Veera:Was there any one-off in this Paracetamol sales in this quarter or we are seeing this kind of traction going forward as well?

K P Chigurupati: There is no one-off Rahul. Actually, basically the whole thing came from availability of raw material. Now the supply of PAP has stabilized we see this going forward. Market was not a problem for us we had marquee customers and they continue to be with us.

Rahul Veera:If given the incremental sales from Paracetamol and from US the percentage of sales has increased sharply but we were targeting to more markets like Europe or even the LATAM markets right so how is the shape up now?

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