Ladies and gentlemen, good day and welcome to the Dr. Reddy's Q1 FY 2023 Earnings Conference Call. As a reminder, all participant lines will be in listen-only mode. Please note that this conference is being recorded. I now hand the conference over to Mr. Amit Agarwal. Thank you and over to you, sir.

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 ended June 30, 2022. Earlier during the day, we have released our results and the same are also posted on our website. This call is being recorded and the 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. Erez Israeli, our CEO; Mr. Parag Agarwal, our CFO; and the Investor Relations team. Please note that today's call is a copyrighted material of Dr. Reddy's and cannot be rebroadcasted or attributed in press or media outlet 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’ll hand over the call to Mr. Parag Agarwal. Over to you, sir.

Thank you, Amit, and greetings to everyone. I will take you through our financial performance of the quarter. For this section, all the amounts are translated into U.S. dollars at a convenient translation rate of IND79.02. It is the rate as of June 30, 2022. In this quarter, we had a strong growth in our profit supported by the segment income and brand divestment while we were impacted by additional competition in key products in the U.S., inflationary pressure, the normalization in Russia, and slowdown in the pharma market growth in India. The 5G challenges were also present, but we have done reasonably well and are confident of further improving our performance from here on. Consolidated revenue for the quarter stood at IND5,215 crores and grew by 6% year-on-year but declined by 4% on a sequential quarter basis. Sales growth has been impacted due to higher base effect as Q1 FY 2022 included sales from COVID products and Q4 FY 2022 had higher sales in Russia, driven by stocking up, which has normalized in the current quarter. This impact was partially offset by the brand divestment income in the current quarter and the new product launches across our businesses, while the price erosion has been in line with the trend seen in the last few quarters. Consolidated gross profit margin for this quarter has been at 49.9%, a decline of 230 basis points over the previous year and 300 basis points sequentially. Gross margin for the Global Generics and PSAI business was at 55% and 15.7% respectively for the quarter. While the current quarter gross margin was supported by brand divestment income, it was impacted due to several one-offs, adjusted for which we are within the normal range. Let me explain these in a bit more detail. Firstly, our gross margins were impacted due to significant movement in the product rate during the quarter, which we believe will normalize going forward. Secondly, the gross margins are also impacted due to increasing commodity prices and adverse leverage on manufacturing overhead due to lower sales pace. We expect this to normalize from next quarter with an increase in our sales. Thirdly, in this quarter, we have launched a new band segment in India, which is currently procured externally and has a lower gross margin. We plan to transition all manufacturing in-house after the expiry of patents, which would lead to an improvement in margin. With the above measures planned to be undertaken, the modernization of the burn-off and the launch of two significant products, we believe that starting next quarter, our gross margins will improve and will be within the normal range. The SG&A spend for the quarter is IND1,549 crores, that is US$196 million, an increase of 3% year-on-year and a decrease of 1% quarter-on-quarter. As a percentage of sales, our SG&A has been at 29.7%, which is lower by 90 basis points year-on-year but higher by 90 basis points sequentially. The R&D expense for the quarter is IND433 crores. We continue to drive productivity across our businesses, while also making investments to strengthen pipeline and capability development in marketing, digitalization, and personnel, including Horizon 2 businesses. The net finance income for the quarter is IND235 crores, supported by gains on account of strengthening during the quarter. While we have forex related benefits in finance income, these have been partially offset due to forex impact and costs affecting our gross margin and SG&A. The EBITDA for the quarter is IND1,779 crores and the EBITDA margin is 32.1%. Adjusted for the one-off settlement income, bank divestments, and growth related to gross margins, we are within our normal range. Our profit before tax stood at IND1,456 crores, which represents a growth of 97% year-on-year and a growth of 490% quarter-on-quarter. Effective tax for the quarter has been at 19.0%, primarily on account of recognition of previously unrecognized before tax assets on operating tax losses. We expect our normal Effective Tax Rate (ETR) to be in the range of 24% to 26%. Profit after tax for the quarter stood at IND1,188 crores, which is US$150 million. Reported EPS for the quarter is IND71.40. Operating working capital increased by IND790 crores, primarily driven by increases in North America, which should normalize during the next quarter. Our capital investment during the quarter stood at IND331 crores, which is US$42 million. Free cash flow during this quarter was a net outflow of IND232 crores, which is US$29 million after payment of IND509 crores for the acquisition of the Cidmus brand in India and the indicative portfolio from Eton Pharma in the U.S. Consequently, we now have a net cash surplus of IND1,275 crores, which is US$164 million as of June 30, 2022. Foreign currency cash flow hedges in the form of derivatives for the U.S. dollar are approximately US$366 million, largely hedged around the range of IND77.6 to IND80.4 to the dollar, with rates of IND0.9204 to the ruble and IND55.8 to the Australian dollar and South African rand at a rate of IND4.82 to the 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. Our performance in the current quarter reflects the strength of our diversified business model. We have been able to mitigate several challenges faced during the quarter by monetizing various opportunities that have led to higher performance at an overall business level. Let me share with you some key highlights from the current quarter. One, we settled litigation for Suboxone for $72 million, which further strengthens our balance sheet. Two, we completed U.S. FDA inspection of our new sterile injectable manufacturing facility referred to as FTO 11, leading to subsequent approval of products from this site. This enables us to commission this plant and bring on stream additional capacities and capability to grow our injectable business. Three, we acquired a cardiovascular brand in India and the injectable portfolio from Eton Pharma in the United States. There is progress with filings in China, which will be our second product to use the GPO model. We are progressing well on product pipeline across more molecule generics by similar and efficient product lines. There has been good momentum in the initiatives related to our Horizon 2 business and sustainability growth, as discussed during our recently concluded Investor Day. All of this will enable us to continue to deliver on our long-term growth aspirations. Now, let me take you through the key business highlights for the current quarter. Please note that all references to the numbers in these actions are in respective local currencies. Our North America generics business recorded sales of $250 million for the quarter, which is a decline of 2% year-over-year and 13% on a sequential basis. This decline was largely attributed to incremental competition in a couple of our key products during the quarter. The quarter-over-quarter decline was also driven by high base due to COVID product sales with normalized volumes and pricing adjustments occurring due to the impending entry of competition. Apart from these products, the price erosion for the base business has remained consistent with the normal trends seen over the last few quarters. In this quarter, we launched seven new products, some of which should ramp up in the coming quarters. We expect strong launch momentum to continue throughout the year. Similar to the last three years, we believe that we can continue to grow this business on the strength of new product launches; however, there will be volatility on a quarter-to-quarter basis due to the fundamental nature of the generic business model. We are preparing for a volume-limited launch of our ANDA product in the United States in September 2022. The precise volume-limited amount of the generic we are permitted to sell between September 2022 and January 31, 2026 is confidential. Our Europe business recorded sales of €50 million this quarter with a year-on-year growth of 12%. However, there was a sequential quarter decline of 4%. During the quarter, we launched nine products across various countries in Europe. We expect to continue to see growth momentum for the rest of FY 2023. Our emerging markets business recorded sales of IND903 crores, with a year-on-year decline of 1% and a sequential quarter decline of 25%. This decline was due to a high base effect as we had COVID product sales in Q1 FY 2022 and divestment income in Q4 FY 2022. Furthermore, the increase in stock findings seen in Russia last quarter due to the conflict has now normalized but impacted the current quarter's growth. Within our Emerging Markets segment, sales were down on a year-to-date basis and 60% on a quarter-to-quarter basis in constant currency, due to the same reasons. During the quarter, we launched 25 new products across various countries in the emerging markets. We believe that on an annual basis we will be able to grow this business in line with past trends, adjusted for the one-offs of profit sales and the divestment income from the previous year. Our India business recorded sales of IND1,334 crores, with a year-over-year growth of 26% and sequential growth of 38%. Adjusted for the brand divestment income in the current quarter and COVID product sales in Q1 FY 2022, we have grown at a healthy double-digit rate. During the quarter, we launched five new products in the Indian market. As per the Q1 report of June 2022, our ranking in value terms remains at number 10. We continue to reshape our portfolio in the Indian business, focusing on growing major brands, acquisitions, and partnerships for focused therapy areas, while divesting non-core brands. Our PCI business recorded sales of $91 million, with a year-over-year decline of 10% and sequential decline of 8%. Adjusted for COVID product sales in Q1 FY 2022, the business has grown over the last year. We expect to see improvements in sales during the remainder of the year. We believe that there are several opportunities for growth in our core business, and we are committed to our long-term strategy, progressing well towards productivity improvement and making the right investment choices to deliver sustainable growth in line with our strategy outlined on Investor Day. With this, I would like to open the floor for questions and answers.

Thank you very much. First question is from the line of Saion Mukherjee from Nomura. Please go ahead.

Yes, thanks. Parag, can you just quantify the impact of forex across line items? There is an income in finance income, but you also mentioned there are certain impacts in COGS, so if you can just quantify the net impact?

Yes. So, Saion, the movement of the ruble and some of the other currencies has led to an adverse impact in the gross margin, which would be roughly around 150 basis points in that range. In finance income, there is the upside that hasn't been recorded, and that's due to accounting standards. So overall, that's the kind of impact that our P&L has.

Okay. The second one is on Russia, particularly, so I just missed the constant currency growth; can you indicate that in Russia? And also, are you able to take any more hedges in Russia or are you just running with the hedges that you had at the end of the fourth quarter? Since the hedge amount is large, what kind of realization do you expect on currency? Can you provide guidance going forward?

So, Saion, yes, let me answer. The first question is on the constant currency sales impact. So, during the quarter, our Russian business declined by 14% year-on-year in constant currency. As we signaled in the last quarter, this includes the normalization of the inventory stocking that we saw at the start of the conflict. Regarding your second point on forex hedging, as you know, the ruble has appreciated significantly from around 1.3 to 1.45. We believe this rate may not be sustainable in the long run. Currently, the cost of hedging is extremely high, and so we are not hedging. What we are trying to do as a business is to reduce our working capital cycle, and we have had some success in that. Instead of hedging our exposure, we are reducing the cash conversion cycle to minimize the impact on our business.

Saion, just to add to that, if you take the normalization of inventory, we will continue to gain in Russia.

Okay. Just one more question, if I can ask? On India, you mentioned that adjusted for COVID, you had healthy double-digit growth, but if you adjust for the acquisition, can you share the growth number?

So, Saion, if you take both out, which is the brand divestments and also the impact of COVID in the base, then we have grown at a healthy double-digit. If you consider the impact of acquisitions, taking that out, then our growth would be in the single-digit range.

Thank you. The next question is from the line of Anubhav Aggarwal from Credit Suisse. Please go ahead.

Question is on the U.S. market; when you talk about price erosion, you mentioned a couple of products. Is there any element of shelf-stock adjustment on vessel pricing also in this quarter?

Again, can you repeat?

So when you call out, U.S. sales are down 13% quarter-on-quarter. One is price erosion or volume impact on Suboxone, but on just trying to understand, is there an element of shelf-stock adjustment there, which is just artificially depressing the reported number? When we start the next quarter, that number, we start at a higher base. That's what I want to clarify.

As I mentioned in my part, we see the normal adjustment related to market dynamics, and that's what impacted us in this quarter.

Regarding the shelf-stock adjustment, there was no significant impact, Anubhav.

When you say SSA, what does that mean?

Shelf-Stock Adjustment.

So, you're not saying that we happened to record higher sales last March quarter and we were surprised with the price erosion. So, there is no limit. So, net-net $230 million that we're reporting, let's say that becomes an opening base for the second quarter for us.

We are not guiding, but let's say we do not see any surprises the way that you described.

Okay. Second is in the Russian market. Now, we've seen good momentum in July as well. Has there been any element of us gaining market share or is it business as usual? Can you provide some qualitative insights on the Russian market?

In the Russian market, Anubhav, we are seeing our operations normalizing. The supply flow of money within Russia and from Russia into India is also normal. There are certain companies that have shifted their spending from above the line, which is mass media TV, to below the line, which is trade discounting and so on. So, there are some shifts in the way expenses are being made, which is happening in the market. But overall, it is business as usual. As you know, in the area of medicine, we are very focused on ensuring that patients receive our medications. Right now, I’m pleased to say that our operations are normal.

Sorry, just to add clarification on this; what I meant was, if the ruble to INR conversion is much easier than, let's say, ruble to euro or USD. So, is that benefiting you guys or, in general, are Indian companies seeing higher market shares in Russia? Have you seen any visible signs of that?

In terms of visibility for the reported quarters, we did not have an impact as such. We do not observe that anyone located in Russia is being adversely affected. All the pharmaceutical companies that we know of and visibility shows they are functioning in Russia and continue to operate. Likely in the long term, it may change, but as of now, that is what we see. In terms of our business in Russia, it is favorable, as people appreciate that we have chosen to continue our operations there. It is comfortable for us to work in that market, and this will likely help us in the future. But as we speak, I think this is usually the right way to provide the best transparency of what we see unfolding.

Okay. Thank you, guys.

Thank you. The next question is from the line of Damayanti Kerai from HSBC. Please go ahead.

Hi. Thank you for the opportunity. My question is about the U.S. business. You have a sizable portfolio of injectable products in the U.S. Can you comment on how pricing erosion in this part of the portfolio stands against the pricing erosion in the broader portfolio, which mainly consists of oral solids? And in terms of some of the complex generic launches we are anticipating in the future, what are your expectations on pricing in that segment?

Thank you. The behavior of pricing in the injectable business is comparable; it involves a similar number of transactions with customers. The fulfillment pattern is the same as well. We don't see any significant difference in pricing erosion. The only difference in injectables is that you can directly work with those individuals as well as with wholesalers, affording more flexibility in terms of market share and growth.

Yes. We are working on various product launches, many of which are injectables. What are your expectations in terms of pricing for these products once they come to market, compared to the current portfolio?

Some of the products we will launch in the future may see limited competition. These are products indicated during our Investor Day; others are in our pipeline but not disclosed. In general, as I mentioned before, if there is high competition, we will experience similar pricing erosion for injectables as well. I don't think there will be significant differences in the purchasing patterns between hospitals and retail when it comes to that.

Sure. My last question is, can you comment on the trends you're observing in commodity prices or logistics costs? Has there been any change compared to what we saw in the previous quarter? Is there any sign of moderation?

No signs of moderation, but no further deterioration either. We continue to see some impact from commodity prices, especially those closely related to inventory, as well as shipping costs. Typically, there is a time lag when commodity prices drop; we only see the effects on our results after several months.

Sure. Thank you for your answers. I will get back in the queue.

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

Yes. Thanks for the opportunity. My question is on gross margins. I know Mr. Parag mentioned around 150 bps on the ruble, and correct me if I'm wrong, but the Rupee-dollar also had substantial movement. You also said that there was a high base last quarter as well, which would affect that too. Are these not factors that led to a decline in gross margins?

Overall, the forex impact I cited was in aggregate. The U.S.-dollar to Rupee impact isn't significant. The headline is that if you exclude the positives and negatives, both which are non-recurring, then our gross margins remain in the normal range. If you analyze the last several quarters, our gross margins fluctuate between 51% to 53%, 54%. The point that I want you to grasp is that our reported gross margin is 49.9%, which benefitted from divestment of brands in India, but there are other non-recurring one-offs. If you adjust these as well, our base gross margin is within the normal range.

I would like to add that we do not anticipate changes in the pattern of our gross margins moving forward. As we have discussed previously, the dynamics in pricing are affected by products from inventory, and we will generally continue to operate within the range mentioned previously.

Okay. I'm trying to understand this; during your meeting in Mumbai, you mentioned an EBITDA target of 25%. Are we still on track for fiscal 2023 and 2024 in that range, given that we had a blip in Q1?

We remain consistent with what we discussed in Mumbai. It's not necessarily a number we will achieve every quarter in the next many years, but what we are saying is that this is the number we are going to achieve on average, which will allow us to invest in the future and also provide the right returns for shareholders. It could be higher than this in case of a very successful launch of Lenalidomide, and after that, it might be lower.

I must also clarify that—sorry, just to clarify—the aspiration of 25% stated excludes particular products. It is the margin for our business in aggregate.

Okay, understood. Just to clarify on the launch, does it include exclusivity, as well as other strengths?

Yes.

That's correct.

Okay, perfect. Thank you and all the best.

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

Thank you for taking my questions. Parag, again on the gross margin. If I look at the gross margin—if I were to exclude the brand divestment in the quarter, we seem to be at around 57%, 57.5% margin. From your comments, it seems the FX normalization is anticipated, but there were also expectations that commodity prices would not cease either. So, what will lead to the normalization? Was it the Revlimid launch contributing, or something else? I'm trying to understand what would move us from the existing margins to the normalized range being discussed.

There are two or three key drivers. I wouldn’t single out Revlimid. First, the margins from new product launches, including Revlimid, would be a significant driver for an uptick in gross margins. Secondly, as I mentioned, there are brands like Cidmus that we are currently sourcing externally and working towards internal sourcing. Additionally, as part of our productivity initiative, we consistently aim to in-house brands, contributing to improved cost bases. There are various cost improvement programs we are working on, like sourcing from alternate vendors and improving plant yields. If you recall on Investor Day, we presented the productivity status for each of the three businesses, indicating our progress and further headroom for improvement.

Additionally, the normalization in India and Russia will enhance visibility in growth as we mentioned earlier. Some of these impacts were one-offs, and others will normalize. This results, as well as the positive contributions from APIs, will also figure into our returns. So, we’re very confident that even without Revlimid, our gross margins will adjust.

That's very helpful, sir. Second, regarding the PSAI business, I understand the base impact in the previous year was due to COVID, but if I look at it quarter-on-quarter, there seems to be moderation. Are we observing customers de-stocking with their inventories being high, limiting our ability to scale that business? Regarding the PSI business, are we able to pass on cost pressures observed to our customers? I notice margins there seem to have deteriorated as well.

First, after a few quarters in which we saw a decline in APIs, we're seeing growth again this quarter. It's modest growth—single-digit—but nonetheless, we believe this will continue; it is driven by new products and customers in new territories. The second piece has to do with activities captured under the PCI umbrella. We refer to it as API plus, where we sell products in countries where we do not have direct access. We observe a positive trend in growth here, which is healthy for us. Lastly, the CDMO activity on small molecules is also contributing, though it's not significant yet.

And what about the margins?

The margins will improve as the API business grows because it's a high-cost base type of business. Thus, margins should improve accordingly.

Got it. Thank you so much, sir.

Thank you. Next question is from the line of Balaji Prasad from Barclays. Please go ahead.

Hi. Thank you for taking my questions. This is on behalf of Balaji Prasad. Just wanted to circle back on generic Revlimid. Can you provide any further color on expectations here? Any further insights on key launches in the U.S. this year and next?

As mentioned, we are anticipating a volume-limited launch during September 2022. We will have permission to do that between September 2022 and January 31, 2026. After that, it will be unlimited. We are prepared and looking forward to it. Regarding other launches, we have over 25 launches planned in the United States. Overall, we are consistent with what we discussed during the Investor Day; we are confident about continuing to show active growth on a compounded annual growth rate (CAGR) basis.

Thank you.

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

Hi. Thank you so much and good evening everyone. Parag, I just wanted to clarify your earlier comment on EBITDA margins for Q1. You did say excluding one-offs, the EBITDA margin was in the range of what I presume is 23%, 24%?

Just to clarify, our reported EBITDA margin is 34%. If you exclude the impact of Suboxone settlement and the brand divestment, then it is around 20%. When we adjust for a few non-recurring impacts—like adverse effects from COVID sales in the base and gross margins—our EBITDA falls within the normal range of 21% to 25%. Typically, our EBITDA margin fluctuates within this range.

Okay. That’s clear. For the sale of the brand, you've recorded IND230 crores through revenue line items. What are the costs against that? What I'm trying to understand is the EBITDA impact of this divestment.

The stated amount is the total proceeds from the divestment, meaning the entire amount falls to EBITDA.

Okay, got it. That’s all from my side. Thank you.

Thank you.

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

Yes. The first question was on the Revlimid. Sir, you mentioned about the likely launch of the product starting September. Just wanted to understand what should be the competitive intensity here? More importantly, how does the limited volume condition result from the settlement? I know that low single-digit or mid-single-digit volume conditions are linked to competition, but I wanted to clarify how restricted volumes in the settlement would work?

The conditions are rigid. In the case that we can sell exactly the amount indicated in the agreement, the volumes and market share percentages remain confidential. This is a very significant launch for us. As for competitive intensity, of course, it will depend on the number of players and the volumes they can supply at that point; we will have to wait and see, but we believe it should be a good launch.

Okay. Because if the volume limit condition is also not reserved, then there could be larger competition, leading to increased price erosion. That's the core of my inquiry.

I understand your question, but I'm unable to share further details regarding that.

Fine. The second question is on the therapeutic revenue mix. We observed significant growth from the anti-infective segment, but other segments have remained muted. Should this be a concern area for growth this current year if we exclude Revlimid’s contribution?

I do not see this as a concern.

Okay, so you don't see it as a concern?

That's correct.

Sure. One last question, regarding the licensing deal you had with the U.S. firm. Has the $8 million upfront fee been booked in this quarter?

No, it hasn't been booked. It is to be amortized over the contract period, which is four years.

So even the upfront amount is being amortized over the contract period?

That's correct.

Okay. Thank you very much.

Thank you. The next question is from the line of Tarang Agarwal from Old Bridge Capital. Please go ahead.

Hello, sir. Good evening. Just one question on the M&A strategy. It seems you have recycled some of your brands in India, acquiring Cidmus while divesting some other brands. Can you explain the strategy behind this? Does it help release sales resources to focus on other divisions?

Yes. Thank you for the question. We have a clear strategy in India regarding which segments to focus on and which brands to divest. We aim to sell brands that are not in focus to generate value that can be reinvested. This strategy allows for better capital allocation and improves company performance. So, you should expect to see both acquisitions and divestments in the future. Our intent is to secure our place in the market while focusing resources on brands with a better competitive outlook to reach our aspiration of becoming a top company.

Will it also release some MR bandwidth to focus on some of the brands? Could this potentially mean more EBITDA lost by letting go of these brands?

Absolutely, it helps us focus our resources on brands we believe in. Over the long term, this will help us grow. While quarter-to-quarter, we may need to adjust for lost sales, we are confident that this focused approach will benefit us over the year.

Are you losing EBITDA purely by divesting these brands?

You're not losing; you're gaining. If you consider the EBITDA from the products against the value received for them, it’s a better deal for the company.

Thank you. Our next question is from the line of Kunal Dhamesha from Macquarie.

Just one question regarding the volume percentage allowed for us with Revlimid. Is it calculated on an annual basis or a calendar year basis?

Kunal, your voice is not clear; can you repeat?

Yes, I’ll repeat. So in terms of the volume percentage allowed for us for Revlimid, is it calculated annually or on a calendar basis?

All these details are confidential at this stage.

Okay. Thanks. Just that one question.

Thank you. The next question is from the line of an unidentified analyst from InCred Capital. Please go ahead.

Hi. Just a clarification: this IND230 crores of brand sales you've generated that is included in this IND1,500 crores reported revenue for India, correct?

Yes, that's right.

Okay. Secondly, in the U.S. you mentioned increased competition in a couple of products. Did you see a new entrant in any key products, or did the existing players become more aggressive? You specifically mentioned two products?

Yes, in these products, Apotex initiated competition for both during Q1.

Do you mind naming them?

I mentioned Apotex launched competition for Suboxone and Icosapent.

Okay, got it. Thank you.

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

Hello, good evening. Thank you for the opportunity. I have one question. Considering all the one-offs that we have discussed, can we consider this quarter's performance as a base and sustainable rate, or could you provide some clarity on that?

I prefer to use the word consistent. It aligns with our investment strategy and our ongoing performance. We may face market situations from time to time, impacting performance, but overall we project growth of single digits in the U.S., double digits outside the U.S., and our targets for EBITDA and ROCE remain the same.

So the revenue and margins will be in this range only, right? Could you clarify what a normal structure would resemble for FY 2024?

We're not providing guidance for specific quarters, but as stated earlier, we're projecting growth in double digits outside the U.S., single digits in the U.S., and aiming for a certain EBITDA and ROCE. This outlook remains valid. Variances may occur per quarter, but we believe these figures provide a solid trajectory for sustainable growth.

Okay. Thank you for your answers.

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

Yes. Hi. Thanks for the follow-up. Regarding the injectable business, what is its current size annually? Are we experiencing challenges in the supply of syringes, stoppers, etc.,?

About 16% to 17% of our business is from injectables.

Currently, we do not see any supply challenges.

One of your peers mentioned in a recent call about shortages related to syringes and stoppers, especially for the U.S. market.

I recall that, but we’re not experiencing that currently.

Okay, perfect. Regarding the litigation settlement, I understand the case was resolved some time ago. What triggered the recognition in this quarter?

The litigation we won in the past was related to an IP case. If you recall, we were injected when we launched the product in June 2018 and were denied entry to the market for nine months. The $72 million is a settlement for that waiting period.

Yes, but we had won the case some time back, correct?

No, to clarify, there were two separate issues: winning the IP case means they confirmed our infringement situation. The other was achieving a win in seeking compensation for our inability to market during the injunction.

This settlement was accounted for in this quarter, which is why we're acknowledging it now.

Okay, perfect. Thank you very much.

Thank you. Ladies and gentlemen, due to time constraints, that will be our last question for today. I now hand the conference over to Mr. Amit Agarwal for closing comments. Thank you and over to you, sir.

Thank you all for joining us for today's earnings call. Should you have further queries, please feel free to connect with our Investor Relations team. Thank you.

Thank you very much. Ladies and gentlemen, on behalf of Dr. Reddy's Laboratories Limited, that concludes today's call. Thank you for joining us, and you may now disconnect your lines. Thank you.