Ladies and gentlemen, good day and welcome to the Q4 FY '22 Earnings Conference Call of Dr. Reddy's Laboratories Limited. Please note that this conference is being recorded. I now hand the conference over to Mr. Amit Agarwal, Head of Investor Relations. Thank you and over to you, sir.

Thank you. Very good morning and good evening to all of you and thank you for joining us today for the Dr. Reddy's earnings conference call for the quarter and full year ended March 31, 2022. Earlier during the day, we have released our results and the same are also posted on our website. This call is being recorded in playback and transcripts shall be made available on our website soon. All the discussions and analysis of this call will be based on the IFRS consolidated financial statements. To discuss the business performance and outlook, we have the leadership team of Dr. Reddy's, comprising Mr. G. V. Prasad, our Co-Chairman and Managing Director; Mr. Erez Israeli, our CEO; Mr. Parag Agarwal, our CFO; and the Investor Relations team. Please note that today's call is copyrighted material of Dr. Reddy's and cannot be rebroadcasted or attributed in press or media outlets without the company's expressed written consent. Before I proceed with the call, I would like to remind everyone that the safe harbor contained in today's press release also pertains to this conference call. Now I hand over the call to Mr. G.V. Prasad. Over to you, sir.

Thank you, Amit. Good evening and good morning and welcome to all of you to this earnings call. Fiscal 2022 has been quite a challenging year. It started with the severe wave of COVID in India and ended with heightened geopolitical conflicts, an inflationary environment, and economic crisis in certain parts of the world. I'm proud that despite all these challenges, our team has delivered very good operational results. Over the last few years, we've been able to grow on a consistent basis. The key highlights of this year are healthy revenue growth with steady margins, good progress on the productivity journey, some meaningful launches of products across markets, enhanced offerings of the much-needed COVID products, and closure of a few significant business development deals. Our priorities for FY 2023 will be to strengthen our product pipeline across markets, focus on enhancing our quality systems, continue with the productivity agenda, and make value-accretive inorganic moves. While we continue to focus and grow our core businesses, we will also invest in creating future growth drivers. Our CEO, Erez, will cover these aspects in more detail. Sustainability is another area where we have made significant progress, but there is a lot more to do. We are on a journey to integrate sustainability into our core business strategy and the execution systems. We have identified multiple areas where we can work towards improving the environment and the societal benefit. Shortly, we will announce our detailed ESG targets for the long term. We continue to be driven by our credo of good health count rate, and we keep the interest of our patients first. We will continue to serve them in every possible way with utmost urgency and diligence. With this, I hand over the call to Parag for taking you through the financial performance of the company.

Thank you, Prasad, and greetings to everyone. Hope all of you are keeping well. I’m pleased to take you through our results for the quarter four and full year of fiscal 2022. It is yet another year of good financial performance with growth in sales and EBITDA and strong cash flow generation from operations. While we faced several headwinds during the year, we mitigated these through productivity initiatives and a few one-time opportunities. Let me take you through the key financial highlights for the quarter and FY '22 in a bit more detail. For this section, all the amounts are translated into U.S. dollars at a convenient translation rate of INR75.87, which is the rate as of 31st March 2022. Consolidated revenues for the quarter stood at INR5,437 crores, equivalent to $717 million, and grew by 15% on a year-on-year basis and by 2% on a sequential quarter basis. The growth has been driven by all markets in our Global Generics segment and divestment of a few non-core brands. The revenues for the financial year 2022 stood at INR21,439 crores, equivalent to $2.83 billion, and grew by 13%. The growth was supported by improvement in the base business volumes and new product launches. Consolidated gross profit margin for this quarter has been 52.9%, a decline of 50 basis points year-on-year and 90 bps on a quarter-on-quarter basis. While the gross margin benefited from income from brand divestments, the decline was primarily attributable to pricing pressure in North America and Europe, combined with the effect of an increase in commodity prices. We also had higher provisioning for inventory, including COVID-related products. Gross margin for the Global Generics and PSAI business stood at 58.2% and 18.4% for the quarter. The gross margin for FY '22 has been 53.1%, which is a decline of 120 basis points over FY '21. The gross margin for the Global Generics and PSAI business were 57.6% and 22.2% for the year. The SG&A spend for the quarter is INR1,567 crores, equivalent to $207 million, an increase of 9% year-on-year and 2% quarter-on-quarter. During the quarter, we made a provision of INR98 crores towards an old outstanding litigation with the state of Texas, U.S. Adjusted for this charge, we were in line with normalized levels of strength. The SG&A spend for the year is INR6,208 crores, equivalent to $818 million, and has grown by 14% in line with business growth. The SG&A cost as a percentage to sales was 29.0%, which is largely in line with the previous year. While we will continue to drive productivity, in parallel, we would also invest in markets to strengthen our brands' positioning, expand market reach in various channels and new countries, continued digitalization agenda, and explore new businesses. The R&D spend for the quarter is INR433 crores, equivalent to $57 million, and is at 8% of sales. The R&D spend for FY '22 is INR1,748 crores, equivalent to $230 million. The R&D percentage to sales for the year stood at 8.2%. While we optimize the spend in the proprietary products business, we have enhanced our pipeline, correspondingly increasing the spend for generics, biosimilars, and NCE. During the quarter, we took an impairment charge of INR752 crores, equivalent to $99 million. The impairments were largely pertaining to product-related intangible assets from the proprietary product segment, wherein the market potential has reduced, and secondly, Shreveport subsidiary-related assets, due to a substantial reduction in the cash flows of products forming part of the subsidiary. The EBITDA for the quarter is INR1,298 crores, equivalent to $171 million, and the EBITDA margin is 23.9%. The EBITDA for the year is INR5,140 crores, equivalent to $677 million. The EBITDA margin for the year is at 24.0% and is closely tracking our aspirational target of 25%. Our profit before tax for the quarter stood at INR248 crores, equivalent to $33 million and tax for the year stood at INR3,230 crores, equivalent to $4.6 million. Adjusted for the impairment and the tax litigation charges, our profit before tax for the quarter grew by 37% and for the year by 17%. The effective tax rate for the quarter has been at 64.8%, and that for the year has been at 27.0%. The effective tax rate was higher due to the impact of impairment charges taken. We expect our normal effective tax rate to be in the range of 24% to 26%. Profit after tax for the quarter stood at INR88 crores, equivalent to $12 million, and that for the year stood at INR2,357 crores, equivalent to $311 million. Reported EPS for the quarter is INR5.26, and that for the year is INR141.69. Operating working capital increased by INR444 crores equivalent to $59 million against that on December 31, 2021, mainly driven by increases in receivables and inventory. Our capital investments stood at INR374 crores, equivalent to $49 million in this quarter, and INR1,466 crores, equivalent to $193 million during the year. The free cash flow generated during this quarter was at INR482 crores, equivalent to $64 million. The free cash flow generated during this year was at INR1,157 crores, equivalent to $152 million. Consequently, we now have a net surplus cash of INR1,545 crores, equivalent to $204 million as on March 31, 2022. Foreign currency cash flow hedges in the form of derivatives for the U.S. dollar are approximately $342 million, largely hedged around the range of INR76.5 to INR79.4 to the dollar, RUB9.6 billion at the rate of INR0.99 to the ruble, AUD4.4 million at the rate of INR55.32 to the Australian dollar, and ZAR122 million at the rate of INR4.83 to South African rand maturing in the next 12 months. With this, I now request Erez to take you through the key business highlights.

Thank you, Parag. Good morning and good evening to everyone. As Prasad highlighted, FY '22 has been quite a challenging year, yet it has been fulfilling. We rose to the challenges and have been able to deliver a steady and sustained performance. We have revisited our strategy to cater to the new opportunities and mitigate risk. Our financial strength with a strong balance sheet creates an opportunity for us to grow in the current business environment. Let me take you through some of the key highlights of the year. One is strong growth across the branded markets of India and emerging markets, steady growth across the generics market. We regained milestone revenue of $1 billion in North American generics, improved market share in most of our major markets, EBITDA and ROCE in the range of our aspirational targets, generated strong free cash flow leading to a net surplus of more than $200 million, entered the high-growth space of medical cannabis business in Germany through the acquisition of Nimbus Health, exclusive collaboration with Novartis for in-licensing of key brands in the Indian market, and significant progress made in our digitalization and sustainability journey. Additionally, we continue to focus on productivity while simultaneously making investments to strengthen our pipeline and capabilities. Our core businesses of generics and API will continue to drive growth in the near and midterm, that is what we call Horizon 1. We are encouraged to witness several incremental opportunities such as scaling up our existing small-sized businesses and creating new business models for long-term growth, that is for us Horizon 2. Our financial strength allows us to grow and invest for both Horizon 1 and Horizon 2 businesses. Now, let me take you through the key business highlights for Q4 as well as the full year of '22. Please note that all references to these numbers in this section are in respective local currencies. Our North America generics business recorded sales of $465 million for the quarter with strong growth of 11% year-over-year and 7% on a sequential basis. On a full-year basis, we recorded sales of $1.3 billion with a growth of 6% over the previous year. This growth was largely led by key new product launches like vasopressin for injection. We were also able to grow market share for many of our existing products, which helped to partially mitigate the impact of price erosion. We launched three new products during the quarter and overall 17 products during the year. We expect the launch momentum to further improve in FY '23. Our Europe business recorded sales of EUR53 million this quarter with a strong year-on-year growth of 17% and sequential quarter growth of 11%. On a full-year basis, the sales were EUR192 million and grew by 8%, driven by new product launches. During the quarter, we launched four products in Germany, two products each in Italy and Spain, and one each in the U.K. and France. During the full year, we had 34 new launches across our markets in Europe. We expect this strong momentum to continue in FY '23. Our emerging markets business recorded sales of INR1,201 crores with a year-on-year growth of 36% and a sequential quarter growth of 4%. On a full-year basis, emerging market sales were INR4,567 crores and grew by 30%. We launched 16 new products during the quarter and 86 new products during the year across various countries in the emerging markets. Within the emerging market segment, the Russia business in quarter four grew by 87% year-over-year and 62% on a quarter-to-quarter basis in constant currency. In FY '22, the Russia business grew by 38% in constant currency. This strong performance in Russia was partially led by divestment income and higher Q4 sales on account of stocking up, which we expect to normalize during the coming quarter. The current war situation in Russia and Ukraine raised federal business uncertainty and significant fluctuations in the currency rates. We have managed the situation very well and ensured the safety of our employees, continued business operation, and financially secured the near term with effective hedging. Our India business recorded sales of INR969 crores with a year-over-year growth of 15% and a sequential decline of 6%. On a full-year basis, our sales were INR4,196 crores with strong growth of 26%. During the quarter, we launched eight new products in the Indian market. After the IQVIA report of March 2022, we are now at number 11 in terms of monthly sales. India remains a priority market, and we are committed to continue to grow this business at a healthy rate. Our OTC business recorded sales of $100 million with a year-over-year decline of 8% and sequential growth of 3%. On a full-year basis, the sales were $411 million with a decline of 5%. During the year, there was a normalization in the channel customer stocking level after 2021. We believe that the customers are now back to pre-COVID levels, and we should witness steadier growth in the business in FY '22. On the R&D front, our focus has been on building a global pipeline of value-assured products, including federal generic injectable biosimilars. We are also selectively investing in few NCE product candidates. While the number of products filed in the current year has been slightly lower, we are on track to accelerate this in FY '23. Additionally, we are prepared to leverage our balance sheet strength to invest in value-accretive inorganic moves. I would like to remind that there are several factors that impact the short-term performance of the company, including the evolving geopolitical situation and higher commodity prices. However, I'm confident that we will emerge stronger with every challenge. We do see opportunities in the current situation and are readjusting our strategy to cater to the new opportunities for future growth. In the coming months, we will be holding our Investor Day to take you through the growth leaders for Horizon 1, Horizon 2, and our approaching goals towards ESG. With this, I would like to open the floor for questions and answers.

Thank you very much. We will now begin the question-and-answer session. The first question is from the line of Ankush from Axis Securities. Please go ahead.

Sir, my question is about the U.S. business. So how much of the sale is contributed by the new launches for FY '22 and last year?

The growth is attributed to two factors: one, our new products, as I noted, vasopressin, and a growth in market share of existing products. Both contribute significantly to the growth.

So can I say that it's $1,000 million sales in the U.S. market for the full year that new launches have contributed; how much sales have new launches contributed, if you quantify, sir? And how many new products are we looking to launch next year?

Overall, as you know, the price erosion in the U.S. business is in double digits, and that's more than offset by the new product launches and the share gains. So I can confirm that the new product launches would contribute in double digits to the overall revenue without disclosing any specific numbers.

Agree. And sir, how many new products are we looking to launch next year?

The momentum will continue. This year, we launched 17 products in North America. We expect to launch about 20 to 25 new products in FY '23.

So the last one, what is the strategy for the Indian market? How are we looking at the launch of new products, basically the growth in the Indian market, sir?

We will continue to launch similar numbers of products as this year. At the same time, the main growth in India will come from growing the brands we are investing behind that will continue to generate significant growth in the markets. Secondly, the inorganic moves that we already disclosed, as well as additional moves that we are working on as we speak. In addition to that, we will have new products that will come as part of the pipeline similar to what we had this year. This is what we call Horizon 1. As part of Horizon 2, we are going to have additional moves in areas, including our outpatient initiatives as well as in the areas of mutation, biologics activities, and digital. So overall, India is a major market for us and will continue to be a focus market for many years to come.

Thank you, sir. Thanks from my side.

Thank you. The next question is from the line of Kunal Dhamesha from Macquarie. Please go ahead.

Hi, congratulations on the good set of numbers and thanks for taking my questions. So the first question is related to the COVID contribution for FY '22. If you can give a broader idea of what contribution in terms of revenue was from COVID or related products, especially on the India side and emerging market side?

So the contribution, as you know, both India and emerging markets have grown this year in strong double digits. A good amount of this growth came from COVID. But even after excluding the impact of the COVID portfolio, both these markets still recorded double-digit growth. So overall, I would say for the company as a whole, the contribution of COVID product sales overall is less than 4%.

Sure, and for the India market, barring the inorganic activity, what is our organic growth target for FY '23? And if you can just broadly give the growth drivers in terms of pricing volume and I think, new products we are already aware, but would pricing be a significant driver for us this year?

We are not guiding at that level of details. But we expect India to continue to grow organically in double digits also next year.

Thank you. And the second question is on the capital expenditure for FY '23. This year we had some good amount of capex, I think for the Europe facility, but what would be the guidance for FY '23?

So for FY '23, we expect the capital expenditure overall to be at similar levels, around somewhere between INR1,500 crores to INR1,700 crores.

And I believe that would be some additional facilities. So for which geography and for which injectable or oral solids, which kind of dosage form are we looking at?

We are not anticipating the need for additional facilities. The investment is primarily in the facilities that we have. FTO 11 is our injectable facilities that we have been investing in quite a lot in the last couple of years. These will be the main focus of the investment.

Okay, sure. Looking forward to the Investor Day. Thank you.

Thank you. The next question is from the line of Neha Manpuria from Bank of America. Please go ahead.

Thank you for taking my questions. Erez, on the emerging market business; one, if I were to look at emerging markets ex-Russia and Ukraine, that seems to have come off significantly from what we were doing in the first three quarters. I understand there's some amount of COVID contribution. Is it fair to assume that the run rate that you have done in this quarter is the base on which we will grow? Or is there any one-off or deferment of shipment that we should keep in mind?

No one-offs in those markets. These markets are growing very well and will continue to grow at that level. Just if you recall, we discussed our strategy, which is to take our portfolio globally. Emerging markets are actually doing well, especially on the injectable side. They will continue to grow, including smaller markets, based on leveraging that portfolio as well as local brands.

And on Russia, normalizing for the stocking up that we would have seen in the quarter. In recent weeks, have you seen any change in the demand patterns there or sales there that you would like to highlight? Or should we assume that Russia would remain on the double-digit growth path that we have seen in the last year?

I believe that we will see some normalization of what we discussed. Overall, we believe that Russia is an opportunity, especially as some players will not invest in marketing the products over time. We will continue to operate this as usual. What we don't know is what will be the impact on the overall economy of Russia. This is something we will have to see.

Fair enough. And my last question is on margins. If I were to adjust all the one-offs, we did about a 21% margin in the quarter. I understand there is development coming in generic Revlimid that is coming through. But core margins, excluding Revlimid, is this the base? Or given the investments that we have planned, do you think margin expansion from here would be tough excluding Revlimid?

We believe that the number is higher than the number you mentioned. It's actually 24%. We aim to sustain the neighborhood of the guidance we provided in the past. So we are comfortable with the 25% target and hope to be in that area as we want to take whatever additional resources we have for investment in the future. We maintain our ability to invest for both maintaining this level of profitability and investing in the future, especially in Horizon 2.

Just to clarify that you maintained the level of profitability even without excluding Revlimid?

We are not guiding with and without because naturally, first, we don't. And second, I wish I knew exactly what will happen. But let's say, long-term, no matter what will be the scenario for Revlimid, we are absolutely aiming for the same level.

Thank you. Next question is from the line of Surya Patra from Philip Capital. Please go ahead.

Thanks for this opportunity, sir. My first question is on the cost front. So despite all the challenges we've seen, we've managed to deliver strong gross margins and all that. Going ahead, do you think we will face any cost challenges incrementally given the supply shortages that are likely due to the Chinese lockdown, etc.? And secondly, you have talked about the Phase 1 growth we've already seen and you are designing a Phase 2 kind of growth for Dr. Reddy with new product launches and specialty offerings. Will we see a kind of challenging phase in the initial period in terms of costs given the higher expenditure around the development? How will that be shaping up?

Like everybody else in the industry, we are facing some increase in costs, whether it's commodity prices or in areas related to logistics, transportation, and so forth. And it’s unfortunately not the first quarter we've seen; it's built up since COVID. We were able to mitigate most of it through a very effective supply chain, so we are not dependent on any specific geographies or vendors, allowing us to maintain competitive fulfillment. Our logistics are primarily sea-based, and this mitigates some of those challenges. While we may see costs fluctuate from quarter to quarter, I believe that long-term, we are well-positioned to address those challenges.

The second question is on the U.S. growth front. As you have been continuously mentioning, the double-digit price erosion is the norm in the U.S. business front. In recent past, our trend towards the U.S. has moderated because we prioritize non-U.S. markets for growth. Given that and the continuing price erosion scenario, is it fair to believe that, excluding Revlimid, we may see a flattish performance in the U.S.? I'm not asking for any guidance but...

Our U.S. business will grow. We expect to see launches in addition to other activities. We grew 9 out of the last 11 quarters before even Revlimid. This trend is likely to continue. Due to the timing of those launches, we may see fluctuations in the sales in the United States. However, we expect overall net sales to grow in the coming years. In addition, we are investing in building platforms outside of the business model that allow us to grow long-term.

Okay. Just last one, sir, on inorganic growth trends. When you mentioned that, are you talking about only inorganic growth within India or are you also open for these activities in other areas? If it is that, then what areas would you be interested in? Could you share some details?

We are open to inorganic moves in every one of our regions. For preference, India is absolutely our focus, and in terms of what type of development, we prefer product acquisitions that complement the focus areas of our strategy. Most of our inorganic activities were around product enhancements. We work to strengthen our portfolio both organically and through licensing activities. We prefer not to make big acquisitions but rather complementary ones that provide us with a relevant business. We want to remain primarily focused on organic growth.

Thank you. Wish you all the best.

Thank you. The next question is from the line of Nikhil Mathur from HDFC Mutual Fund. Please go ahead.

Hi, good evening, everyone. My first question is around the Russian market. Given the global sanctions that the West applied on Russia, we came across many media articles in which many global innovative companies are either withdrawing from the Russian market or curtailing their operations there. Have you had discussions with the procurement ecosystem in the Russian market that this would be a substantial opportunity for Dr. Reddy's, given your legacy presence in the market? There are challenges currently, but could this emerge as a long-term structured opportunity for the company?

We do see that as an opportunity for us. We cannot discuss specific discussions right now, but it's absolutely one of the avenues we are examining.

Okay, and the second question is on the broader U.S. outlook. One is the opportunity in the next three years, excluding development; how do you see the addressable opportunity in terms of brand building exclusivity versus the preceding year?

Without Revlimid, we see it similarly to this year. We have new launches that should contribute significantly, and while price erosion will continue, we don't foresee dramatic changes ahead.

One final question for the U.S. market. Just now in one of the earnings calls concluded for one of your peers, this question was asked. Progressively, we've seen margins and return ratios getting depressed in the U.S. market, and now with added pressure of cost inflation, any color on how long this pain might continue before rationality kicks in? Do you think even Indian companies at the $100 million to $120 million sales pace in the U.S. might also need to pull out or curtail aspirations in the U.S. market? How do you assess the mitigation of that pain?

I will answer this question. The U.S. market will always remain price competitive. There's always been pricing pressure, and it will not end. It will depend on how well you choose your portfolio, execute pricing, and remain competitive to establish your presence. We are taking steps to strengthen our portfolio, lower costs, improve market share, and we aim to continue growing in the U.S.

The U.S. will remain an important market for us. We believe in America; it will continue to be a crucial area for our growth. In the generics segment, the growth might not match what we see outside the U.S., but other growth drivers we are working on will continue to grow as we do in other regions long-term.

I completely understand that. I was just hoping for some comments on competition's reaction to the current state of affairs in the U.S. market.

We believe that this situation will persist, and we do not see significant changes coming up.

Thank you. The next question is from the line of Prakash Agarwal from Axis Capital. Please go ahead.

Yes, hi. Good evening to all. A couple of questions. First, on the COVID-related products, you mentioned a 4% contribution. But is there any write-offs we might have taken at the inventory level in the full year or the quarter?

Regarding inventory provisions relating to COVID, there are some write-offs but they are not significant overall. The overall inventory levels for our COVID products also are not material. We have stocked up adequately to meet any potential demand, and the overall levels are not material.

Okay. When you say not material, I'd understand it would be under 1%.

I wouldn't assign a specific number. It is not material in the overall context of our business.

Got it, and secondly, on the proprietary business that we have built over the years, I understand most of the assets are either out-licensed or a couple of them have been discontinued. Going forward, what is the income stream for this? One is, I understand the milestones, but we don't have anything in the channel for future out-licensing. Would that be a correct understanding?

On the specialty side, there's nothing significant. There are some single-digit income streams which will continue, but beyond that, there's not much.

Because if I'm not mistaken, this has contributed significantly in terms of out-licensing which has flowed down from gross margin to EBITDA and has contributed to margins. Is that correct? And if it's not in the future, this could be an extra margin pressure point for us?

Let me clarify. First of all, in the specialty segment, we have two categories. We have products discussed for the United States. As you rightly mentioned, most of them were either licensed or discontinued. We are currently receiving certain levels of royalties, and our income from those milestones will arrive when it does, particularly for products like the one mentioned. We are also making selective investments in specific anti-cancer products through our gene discovery subsidiary. This is more of a long-term initiative, and we are also licensing and collaborating with partners in the United States for those products.

Would it impact some margins?

Because there are no activities, there will be no impact on margins.

Okay, so that can continue, and if there's lumpiness, that might not continue.

There will be lumpiness as these are milestone-driven.

Okay, perfect. Lastly, regarding the two new products you have, Vascepa and vasopressin, their market share is gradually increasing but not to the expected level. Is there a scaling issue, or have you already reached a satisfactory market share that isn't reflected in the current data?

We believe that we have a good share in this product.

And we can't provide any granular numbers today.

Have you achieved a fair share on Vascepa, about 5% to 15%?

We have a very good share on these products.

And since it is a recent launch, vasopressin is still under the scale-up phase. Would that be a correct understanding?

We also have a good share on this product.

Okay, sir. Thank you and all the best.

Thank you. The next question is from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead.

Hi, thank you and good evening, everyone. Most of my questions have been asked, but just a couple more. One is, what's the current exposure to the Ukraine market? And are we holding any receivables there?

The level of exposure is not material, and we do not anticipate any material adverse range or significant adverse events.

Okay, great. Thank you. And, Erez, you mentioned a couple of times that for the U.S. market you are putting in some effort outside the generic business. Can you elaborate on that? Is it the NCE effort or something else?

We will elaborate more in the Investor Day, but we are, as we speak, exploring other channels that are not exposed to current business models in the United States, of course, because of the high levels of price erosion that need to be mitigated. We are exploring and dealing with opportunities that are not part of that business model.

Great, we'll await the details. The other question, Erez, is on efforts you have put in India; one is the Sputnik vaccine and the other is the outpatient online healthcare platform. Can you update us on both of these?

Sure. On Sputnik, the main effort is on Sputnik Light. We got approval for Sputnik Light as a vaccine and as a booster for the Sputnik vaccine, and we are now conducting a trial that we will have the results for in the coming weeks as a vaccine for other products in India. We hope to obtain approval for that, allowing us to compete in the entire potential market in India. As for the outpatient online healthcare platform, we are scaling up. We are adding more cities in metros, and it's in a scale-up mode. So far it looks very promising, but it is still in early stages.

Okay, great. Thank you so much, and we look forward to Analyst Day. Thank you.

Thank you, Sameer.

Thank you. The next question is from the line of Vishal Manchanda from Nirmal Bang. Please go ahead.

Thanks for the opportunity. With respect to the two brands that you divested in Russia and CIS, Ciprolet and Levolet. Can you share what's their contribution since sales from these brands would not recur going forward?

That would be about INR50 crores to INR60 crores per annum.

And even without these brands contributing next year, you would grow double-digit in these markets?

Yes, yes, yes.

Okay. And just one more on Rituxan and biosimilars: One, when do you expect to file that? And second, whether you will attempt an interchange on that?

We are looking for rituximab as a potential 2024 event, calendar year 2024. Regarding interchangeability, yes, we are actively pursuing that.

So substitutable, is that right?

This is a biosimilar that should be competitive with the other biosimilars of rituximab.

Okay. And just one more on China. Can you share how many approvals you have got under the QCE framework so far? And how many of those have been commercialized?

This year we filed for 11 products and received three approvals. Overall in fiscal year 2023, we expect to launch about seven products.

How many, sir?

Seven.

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

Hi, sir. Thanks for taking my question. One on Voveran. What opportunities do we see on this product given that this molecule has been under some growth pressures in the past?

Which molecule?

Voveran, that we acquired from Novartis for the Indian market?

Yes, we see that as an important opportunity for us. First, we will leverage our Indian facility and believe that our cost structure will allow us to be competitive. Second, it’s a focus area for us, particularly chronic diseases like diabetes and cardiovascular. This opportunity allows us to bring a real brand to the physicians we are visiting anyway, and we believe that we will have margins that enable us to grow these molecules in the future.

Thanks. And secondly, Parag, in the press release, you called out for gross margin pressure, some inventory provisions. Can you give us a sense of what would have been the quantum of these inventory provisions that would have hurt your EBITDA margin, the gross margin this quarter?

Overall, I would say the impact on the gross margin is not significant. It will be less than 50 basis points from the inventory provision.

Okay. Thank you and best of luck.

Thank you. The next question is from the line of Vinod B from InCred Capital. Please go ahead.

Hi, most of my questions are answered. Just a follow-up on Russia. Could you make a few comments about how the business has changed before the war started and after that, especially in terms of logistics, payment, etc.? Are you able to get products across into Russia, and how are you managing the payments mechanism out?

Let’s start with the basics: we are shipping products to Russia, and we are getting paid. The logistics within Russia is similar to what was before. We had to adjust our channels, the airlines, or other logistics means to shift to Russia, but we have not seen any issues with achieving that. As for payments and such, we are not aware of disruptions as we speak. We don't see major changes in investments in the market; at least, no one has left or changed significantly the competitive landscape.

Got it. Thank you.

Thank you. Ladies and gentlemen, this concludes the question-and-answer session. I would now like to hand the conference over to Mr. Amit Agarwal for closing comments.

Thank you, everyone, for joining us today for the earnings call. In case of any further questions, please get in touch with the Investor Relations team. Thank you.

Thank you. On behalf of Dr. Reddy's Laboratories Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.