J B Chemicals & Pharmaceuticals : Q4 FY 23 Earnings Call Transcript

J B Pharma

Q4 FY '23 Earnings Conference Call

May 25, 2023

This transcript is published as is what we have received from our vendor who manages the conference call. We would request you to go through the audio recording in case you want to reconfirm anything that has been mentioned in the transcript

Moderator:Ladies and gentlemen, good day, and welcome to the Q4 FY '23 Earnings Call of JB Pharma as on date 25th of May 2023. 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 star then zero on a touchstone phone. Please note that this conference is being recorded.

I now hand the conference over to Mr. Jason D'Souza, Vice President at JB Pharma. Thank you. And over to you, sir.

Jason D'Souza:Thank you, Bikram. Welcome to the earnings call of JB Pharma. We have with us today; Nikhil Chopra, CEO and Whole-Time Director; Mr. Kunal Khanna, President, Operations; and Mr. Lakshay Kataria, Chief Financial Officer of JB Chemicals & Pharmaceuticals Limited.

Before we begin, I would like to state that some of the statements in today's discussion may be forward-looking in nature and may involve certain risks and uncertainties. A detailed statement in this regard is available on the Q4 FY '23 results presentation that has been sent to you earlier.

I would like to hand over the floor to Mr. Nikhil Chopra to begin the proceedings of the call with his opening comments, after which, Mr. Lakshay Kataria will address the financial highlights. Over to you, sir.

Nikhil Chopra:Thank you, Jason, and very good afternoon to all of you, who have taken time out to join us for the fourth quarter and annual conference call for JB Pharma. To commence, I would like to take all of

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you through the highlights of our performance and then as Jason shared, our CFO, Mr. Lakshay Kataria will follow with his views on the financials. And after our comments, we'll be more than happy to take the questions from all the participants.

So to start with, I'm pleased to announce a robust quarter and a financial year with a healthy contribution from both domestic and international business. During fourth quarter, we reported a revenue growth of 22% to INR762 crore and crossed a milestone of INR3,000-plus crore sales for the financial year. Our domestic business -- formulation business grew at 29% and the revenues increased to INR380 crore in the quarter, whereas annually it stood for INR1,640 crore for the current financial year with a growth of 38%. While our big brands got bigger, the acquired portfolio also ramped up. Our per person productivity improved to INR6.2 lakhs in the year, up from INR5.4 lakhs in FY '22.

Speaking of the brands that we acquired, starting with Azmarda, a very potent addition to our cardiac portfolio, emerged among the top 300 brands in IPM as per IQVIA MAT March 2023, and now ranks at the number of 261 as per IQVIA MAT March data. I'm pleased to share that thanks to our dedicated efforts of our team, Azmarda continues to draw monthly volume similar to those in our pre- exclusivity periods.

Across our big brands, I'm again happy to share that we have made gains in our market rankings. As per IQVIA MAT March 2023, the domestic business witnessed a growth of 22% versus IPM growth of 8%. I'm proud to note that as per this information, we are the fastest-growing company among top 25 in IPM for 2 consecutive years. And if you talk about the big brands, what we have been talking, the entire concept of making big brands bigger, let me talk about Rantac, which gained 10 ranks, which stood at #35. Cilacar, Cilnidipine, our anti-hypertensive franchisee gained 8 ranks to rank at #44. Metrogyl gained 52 ranks to rank at #142. Nicardia gained 68 ranks to rank at #172. Cilacar-T, combination of Cilnidipine and Telmisartan gained 9 ranks to #194. And Azmarda, what I shared earlier, gained 125 ranks to rank at #261.

Why I'm sharing these numbers is in lieu of the business that we have achieved in India is a combination of both organic and inorganic mix that we're trying to drive on the ground with our 2,000-plus medical reps, who day-in and out meet all the healthcare professionals and the entire hypothesis of making big brands bigger and not going wide. But going deep in terms of what we have done for our brands in terms of lifecycle management, incremental innovation, looking at what we can do with the patients in terms of consumerization, looking at what more can be done in terms of driving better adherence in chronic therapy, those all aspects we have taken of building the business that is where we stand.

And in terms of value what I shared that we ranked at 23rd number, fastest-growing company in top

25. But also I'm very happy to share from a backbone perspective, from a prescription perspective, we are now 15th ranked company in the country. JB Chemical generates close to 5 crore prescriptions in a quarter, which enlightens me in terms of the journey that we have travelled in last 8 quarters and we have gained ranks in prescription.

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Talking more about what we're trying to do in India, our chronic portfolio continues to outperform. The chronic portfolio outperformed the overall industry chronic portfolio growth at 24% in the year as compared to 11% IPM growth in chronic part. JB Pharma now ranks 20th in overall chronic segment, gaining 4 ranks in last 12 months. And within chronic portfolio, if we're talking of cardiology, we are now 8th ranked company as compared to 13th ranked company 18 months ago. And 3 of our brands feature in top 25 in cardiology. Besides having a progressive portfolio like Azmarda and Razel, we are well placed to drive the therapy shaping initiatives across the care continuum for hypertension to heart failure.

Let me talk about the acquisitions in the inorganic business that we acquired in last 1.5 years. The acquisitions we have made have been strategic, keeping in mind company's overall objectives. Azmarda and Razel have strengthened our presence in cardiology therapy as I shared earlier and now we are 8th ranked company in cardiology overall as a segment and we are the fastest-growing company in the cardiology segment.

As per IQVIA March 2023 data, JB Pharma is the fastest-growing company in top 10 in cardiology and that was shared earlier. And talking about Sporlac, Sporlac gained 152 ranks in -- and is now ranking at #334. And overall in the covered markets, Sporlac is #1 brand when we compare ourselves to Bifilac and Vizylac. Our paediatric brands that we acquired have also performed well during the financial year. Smooth integration of our acquired Razel franchisee, rosuvastatin, which we acquired 4 months ago is as per plan. The company is already beginning to witness good momentum for Razel.

So concluding in terms of the way we are positioned now in India, 23rd ranked company in terms of value, close to INR1,640 crore revenue that we generated for the financial year. In terms of prescription, we are 15th ranked company. Mix of our organic brands, as well as inorganic acquisitions are overall performing as per our plan and we have 2,000-plus medical reps who continue to day-in and out with doctors and our purpose on productivity now stands at around INR6.2 lakhs.

I shall now turn my attention towards international business. We witnessed good traction in the international formulation this quarter and the year. The Russia business witnessed demand normalization, while we continue to focus on increasing our sale in South Africa private market. Our other BGx market, which is a combination of Sub-Sahara Africa, Latin America, Southeast Asia and Middle East, also reported good results on the back of demand normalcy seen back post-COVID times.

Put together, if you look at the way we have performed in our ROW international market, first half of the year we were flat in growth, but if you look at our YTD growth, it is around 12%. So, we have gained growth and overall the demand has come back in quarter 3 and quarter 4, particularly in our business in BGx that is ROW, Russia and South Africa. Also, just to share in terms of the work that we do in our CMO business, our CMO business has been a feather in the cap, registering a growth of 60% to a revenue of INR406 crore in the financial year, while the growth for the quarter has been 18%.

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If you look at our CDMO business we have been touching a figure of INR100 crore every quarter, which has been a fantastic performance and it has only helped us in terms of what revenue and what EBITDA we have generated to further invest in the company. The CMO business, along with domestic formulation business today accounts for 65% to total revenue in the year.

I would like to repeat this once again. The CMO business, along with domestic formulation business accounts for 65% of total revenue in the year. The increasing acceptance and continued demand of lozenges was the key driver for this upsurge. We have introduced a number of products in our industrial markets in the world of lozenges with our marquee partners, and expect that they should gain traction in the coming years. We are cognizant of geopolitical issues and economic headwinds and their impact on the demand patterns. Our teams are managing our response in a calibrated manner. Our focus on containing costs continues as we combat inflammatory, as well as environment issues globally.

Now, I would like to hand over to Mr. Lakshay Kataria to take you through the financial details and overall performance of the company.

Lakshay Kataria:Thank you, Nikhil. A very good afternoon to all of you and welcome to our earnings call. I will now be taking you through the financial highlights of quarter 4 fiscal '23 and fiscal '23 overall. We witnessed a strong growth on our revenues, both for the quarter and financial year. Quarter 4, we clocked a revenue of INR762 crore. And the year, we clocked a revenue of INR3,149 crore. Gross margins stood at roughly 63.9% in the last quarter versus 65.9% in the same quarter previous year, with a sequential improvement from 62.3% in the previous quarter.

Gross margins for the year was 62.9% versus 65% last year, largely impacted by cost inflation and higher Azmarda sales in the year. In the quarter, our operating EBITDA, which is EBITDA before ESOP cost, reached INR181 crore, reflecting a 21% year-on-year growth. The margins were flat compared to Q4 FY '22. However, we registered an increase of 26% in the operating EBITDA for the year, which was at INR765 crore versus INR605 crore in the previous year.

On the expense front, our total employee cost, including ESOPs as a percentage to overall revenue, improved both for the quarter and for the financial year. There was a reduction in the non-cash ESOP cost and therefore, this cost as a percentage to reported EBITDA improved from 19.2% in quarter 4 fiscal '22 to 10.4% in quarter 4 fiscal '23, and from 11.4% in fiscal '22 to 9.9% in fiscal '23.

Other expenses as a percentage of sales improved to 24.7% in Q4 fiscal '23 vis-a-vis 27.4% in Q4 FY '22. Also in the financial year, this ratio was 23.6% versus 24.7% in the last fiscal year. Depreciation was INR32 crore in the quarter, up quarter-on-quarter due to new acquisition of Razel, and INR114 crore in the financial year on account of amortization of acquired brands. The increase in finance cost year-on-year and quarter-on-quarter was largely due to term loan for brand acquisitions. Profit after tax for the quarter was at INR88 crore with a growth of 4%, while it stood at INR410 crore in the financial year. ETR for the year, that is the effective tax rate was 26%.

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	We reported a healthy balance sheet and a strong cash flow during the year. Operating cash flow at
	INR626 crore versus INR170 crore in the last fiscal. The company's cash and cash equivalents,
	including investments in mutual funds was at INR282 crore. And our net debt situation also improved
	from INR429 crore in December '22 to INR266 crore in March '23. There was a substantial
	improvement in our net working capital metrics, which improved to 89 days from 111 days in FY '22.
	This is the lowest level of working capital that the company has witnessed in the past many years in
	an overall challenged macroeconomic environment.
	In summary, our journey of growth and transformation continues. And as we move forward, we hope
	to continue to improve our operational efficiency.
	I now request the moderator to please open the forum for Q&A.
Moderator:	We'll take our first question from the line of Rahul Jeewani from IIFL Securities Limited.
Rahul Jeewani:	Yes. So, sir, our organic India business growth looks slightly muted this quarter that for the 9 months,
	our run rate on organic India business was around mid-teens. But for this quarter we have grown in
	double-digits, likely at 11%, 12%. So what has led to this muted performance on our organic India
	business? Was it any base effect or the NLEM price revisions impacted us?
Nikhil Chopra:	So, I don't think there was any base effect or any NLEM impact. Overall, Rahul, if you look at quarter
	4 has been soft. This quarter has been soft for us. And if you look at overall the IPM performance,
	particularly, I think 2, 3 category of elements, particularly if you look at respiratory, you look at
	conjunctivitis, you look at upper respiratory tract infections. There, I think you could see the upsurge.
	I'm talking of IPM now. And JB does not have that type of portfolio.
	Our portfolio is steady in terms of what we market for cardiology, what we do with our antibiotic and
	GI product, and whatever new launches we have done, probiotic. So it was a soft quarter for us. But
	overall the guidance that we would like to give for India business that we should always be 300, 400
	bps better than the market that is how -- and you will see more stability in terms of how -- what we
	report every quarter-to-quarter in terms of what we deliver for India business.
Rahul Jeewani:	Sure, sir. So for the categories where you are present, can you call out what was the growth at an IPM
	level for, let's say, cardiac or the anti-infective segment? How would these therapies have grown at a
	market level?
Nikhil Chopra:	Rahul, I think -- offline, I think, Jason, will be more than happy to share all the specific details. And I
	will ask Jason to share all this. So more or less, if you look at the growth that we saw, if I have to give
	a top view, our chronic portfolio grew at around mid-teens plus and our acute portfolio grew at around
	high-single-digit. That is what I can share. But more details, we will be more than happy to share with
	you offline.

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