IPCA Laboratories Limited (IPCALAB) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to IPCA Labs Q2FY27 Earnings Conference Call hosted by TAM Capital Advisors 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 this conference call, please signal an operator by pressing star 10-0 on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Nitin Agarwal from DAM Capital Advisors. Thank you and over to you, sir.

Thank you. Good afternoon, everyone. A very warm welcome to IPCA Labs due to F-27 earnings call hosted by Dam Capital Advisors Limited. On the call today, we have IPCA Labs Management, Mr. E.K. Jain, Managing Director, and Mr. Harish Karmath, Corporate Counsel and Company Secretary. I'll hand over the call to Mr. Jain to make the open comments and we'll open the floor for questions. Please go ahead, sir.

Thanks, Nitin, and Dam Capital for organizing this call. Today's hearing call and discussions and answer given may include some forward-looking statement based on our current business expectation. This must be viewed in conjunction with the risk that pharmaceutical business face. Our actual future financial performance may differ from what is projected and perceived. You may take your own judgment based on information given during the call. Our domestic formulation business for Q2FI-27 has delivered growth of around 14% and it has reached around 1,157 crore as against 1,019 crore in Q2FI-26. Mad September 2026, IPCA's rank remains 16, as per IQVIA. Our market share has improved to around 2.11% as against 2.09% in September 26th. Top 6 brand of Ipka are featuring among the top 300 brand of the industry. Out of the top 6 brands, ZeroDoll SP is the top brand of the company and it has improved its rank to 8th rank. Here's against 11th in the Q2FI 26. ZeroDoll as an umbrella brand has crossed 1,500 crore sales as per IQA in September 2026. It has become the fourth largest brand in IPM. As per IQVIA, on chronic segment, mid-September 2006, IPCA has achieved a growth of around 20 percent, as against IPM growth of around 17 percent. And as per IQVIA, the acute segment, IPCA has achieved a growth of around 11 percent. We are at par with the overall market growth there in... This is an acute segment, largely because some of the portfolios like anti-malarials and anti-bacterials are declining, anti-bacterials are having very marginal growth, and even cough and cold is having very low growth. On export formulation business, on a standalone basis, IPCA has grown by 32% in Q2FI27 to around 653 crores, as against 493 crores in Q2FI26. Our promotional branded business in ROW markets has delivered growth of 19% for Q2FI26. 7 to around 172 crore against 145 crore in Q2FI26. Generic market excluding tender has delivered around 36% growth in Q2FI27 to around 364 crore against 268 crore in Q2FI26. Institutional generic business has delivered growth of around 45% for the quarter. And API has delivered a growth of around 6% for the quarter. Our consolidated Q2FI26 business has grown by around 14% to around 2,910 crore, as against 2,557 crore. For Q2FI27, we continue to see significant price increase on inputs, logistic cost, shipping cost. And even fuel and your energy cost. In spite of all these factors, overall consolidated EBITDA margins have improved to around 22.97% in Q2FI27 as against 21.68% in Q2FI26. Standalone EBITDA margin of EPCA has improved to 26.61% in Q2FI-27 as against 25.46% in Q2FI-26. Having given the broad number, now I will request participants to ask questions.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may please press star and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Sain Mukherjee from Nomura. Please proceed with your question.

Yeah, hi. Good evening. Mr. Jay, I wanted to check on ZeroDoll franchise. What's the kind of growth you're seeing, and if you can split between volume and price increase in this, and what's the headroom to grow this franchise? What would be the key drivers and any competitive pressures that you might be seeing in the market?

Overall for, let's say, April to September, if you look at our pain segment has grown by around 14 percent from 1,000 internal numbers from 1,065 crore to around 1,216 crore. So we have this continuously growing at 14 percent for the first half of the current year. And in fact, in the second quarter, this quarter of the current financial year, on pain segment, we have grown by around 16%. The overall pain segment delivered a number of around 628 crore from 543 crore. So we have recorded almost around 16% growth. So, on a continuous basis, both our portfolio of rheumatoid arthritis and osteoarthritis, which includes Xerodol and all rheumatoid arthritis products, they are continuously performing and continuously growing in the range of around 14 to 15 percent kind of range. So, we have absolutely no concern on that, and in fact, from current 1,500 crores of Umbrella brand, We are looking for similar kind of growth to continue for the next 3-4 years.

And sir, how much of the growth of say 14-16% would be volume-grade?

Volume-grade growth may be almost around 8-9%. And price growth may be around 4 to 4, 4.5 percent, yeah.

And do you expect the volume growth momentum to sustain?

Yeah.

Okay. And so one other question was on growth and margin guidance, if we can reiterate the numbers, any press look you have for SI27, and how should we think about the margin?

Whatever guidelines we have given earlier, that will stand here. In earlier quarter, we have given guidance that overall growth guidelines was almost around 12 to 13 percent, which was revised to 14 to 16 percent. So that would remain. And consolidated EBITDA margin guidelines was from 22 percent to 23 percent. That will also stand here.

And sir, what is your expectation?

We are not revising the guidelines. We are not revising the guidelines. Okay, okay.

Yeah, no sir, and what is the medium term EBITDA expectation less over the next 2-3 years? Where do you see EBITDA? Are you consolidated?

Every year we should be improving by almost around 1% to 1.25% of EBITDA on consolidated basis. And IPCA EBITDA will go by almost around 1.5% stand-alone EBITDA. Understood. Okay. Thank you.

Thank you, sir. Ladies and gentlemen, to ask a question, please press star and one now. Participants who wish to ask questions, may please press star and one at this time. The next question is from the line of Shashank Krishna Kumar from MK Global. Please proceed with your question.

Thanks for taking my question. So, I think this quarter for Unicam QOQ, we saw a sharp cross-margin uptake. If you would just share what drove that and whether this is a figure that we can work with going forward as well. And also for Unicam, also are we sticking with their earlier guidance of 10% top-line growth around 13% margins?

Let's see, Unicam has delivered almost around the... 11.3% kind of beta margin in current quarter. I think overall, because of freight increase, the freight was significantly increased in this particular quarter, and the freight number says almost around 30 crores extra has gone in this quarter. If you look at the other expenditure of Unicame, that has moved from 142 crores to 189 crores. There is an increase of almost around 47 crore in other expenses, out of which almost 31.2 crore is only increase in the freight expenses. It is all because of significant increase in the freight expenses. The increase in overall freight cost and also overall little increase, let's say, your air shipment has also gone up because of overall time the shipping lines are taking to deliver the goods and all that. So some of the consignments was to be sent by air and all. Air percentage of overall has gone up almost in this quarter to around from 5-6% to around 25%. So that has taken almost around 30 crores out of these freight expenses, out of EBITDA that has gone, and that has resulted in a little lower EBITDA margin. Otherwise, let's say that European business has done well. Brazil, till now, they were incurring losses for first two quarters of the current financial year. That has started delivering now the profit. In time to come, Brazil business will also move up. So, if situation normalizes, margins can move up. But if your freight and all these energy costs remains high, maybe it may remain between 11 to 13 percent kind of thing. EBITDA margin.

What is it?

And the GM that we saw this quarter is sustainable, right?

Close to 38%. It may be 1% or 2% here and there vary because the input costs are fluctuating too much.

If you could also call out the US portfolio growth, both IPCA which is getting booked in Uniken and the Uniken portfolio this quarter.

Overall, let's say, U.S. in dollar terms, if you look at, overall portfolio growth is almost around 9% and EPCAD's portfolio is, let's say, value growth is almost around 74% in dollar terms. So, I think EPCAD's portfolio, I think, for the quarter has given almost around $5.8 million of sale. And Unicam's portfolio is almost around, has become $38.5 million for the quarter.

Perfect, sir. Thank you. That's helpful. All the best.

Thank you, sir. The next question is from the line of Rashmi Shetty from Dalat Capital. Please proceed with your question.

Yeah, thanks for the opportunity. Sir, on the institutional business, you earlier guided, you know, 3,300,000 crores for this year, and we have already done 236 crores in first year. You feel that it will be lumpy and in second half, sales will be pretty low, or you are upgrading the guidance for that?

Institutional business, normally we don't give any kind of, let's say, very aggressive guidelines because of... By nature of this business itself, we wish to be very conservative. This year, because of, let's say, when guidelines were given, I think, overall, I think, in first quarter, significant amount of shipment which was to go in last financial year. Because of non-availability of ships and other things, those businesses got shifted in the first quarter of the current year. That shipment was almost around 25 crores. But in second quarter also, we have grown good in this financial year. And the trend would continue. But we don't expect this time of growth.

Okay, so as of now, we should maintain that 300 crores number for the full year.

It will certainly exceed because, say, what, this 25 crore was never taken into account on that line. So maybe it may become 325, 330, 340, but overall, we don't expect this business to grow significantly. It may come down also next year, year and there.

Got it, got it, sir. And, sir, on the branded business front, we still maintain that 15% growth. So, in generics and branded business, we should expect a little soft quartered in itch too, right, to achieve the guidance.

My business is going good on generics. We are delivering good growth overall. Branded business, let's say, overall in the first half of the current year has given growth of almost around 22%, except one particular geography where West Asia shipment not happening in time has given some kind of decline in that business, a little bit by 3%. But overall, all other market has grown very well, in fact. So, we maintain our guidelines of 15% to 16% growth overall in India.

Okay. And, sir, on the bookkeeping question, on the interest cost part, you all have repaid some debt, right, on the long-term borrowing, and the interest cost was still high in quarter two. If you can explain related to that, and how should we see the run rate in quarter three and quarter four?

Our interest cost in the quarter two has also come down. It's not gone up. Because last year we have paid our entire foreign currency debt, which was outstanding in books, because we were carrying the cash in books. So we, before this, around the time then the rupee depression started, we thought it wouldn't let us pay every, all dollar loans in books. So right now we have only very small borrowing of. Around 155 crore or so on rupee term loan, which probably at the year end would be close by around 70-75 crore. I think that's the balance going to remain at this. So, practically, we are a debt-free company because we are carrying almost around 700 crore cash in books and debts are hardly any. That debt also we are not paying because that debt is contracted at a very low rate compared to the current market rate of what we are realizing on deploying money in mutual funds and all. So, we are not prepaying that debt.

Correct. I understood. What I meant was that this 12 crore run rate, you know, which we have done in last two quarters, this number should decline in H2, right, because of the debt?

Yeah, yeah, it will decline. Yeah, it will decline.

Okay, okay. Thank you, sir. That's it from us.

Thank you, ma'am. Ladies and gentlemen, to ask a question, please press star and run now. Participants who wish to ask questions, may please press star and one at this time. The next question is on the line of Nitin Agarwal from Dam Capital Advisors. Please proceed with your question.

Thanks, sir. Just a couple of questions from my side. If you can give us a little more color on how the UK, Europe and the Australia business have scored in the first half?

Yeah, I'll give the number here. Overall, generics wise, if you look at, in Q2, European business has grown by around 23%, Australia, New Zealand has grown by around 24%, US has grown by 31%, Canada has grown by 45%, South African business has grown by 46%, overall, so most businesses in generics has done well. And the UK, we had some issues here every now and then, so this is now stabilized for the UK? UK, my portfolio is growing. Last financial year, we were facing a lot of problems because of, let's say, our earlier kind of portfolio was just very, very... Old products, maybe gender-sized, 15, 20 years old, and those products were selling below cost in the market. So last year in Europe, in UK, we have, UK portfolio, we have suffered in the overall, I think, in the whole of the year, maybe around 2.5 million kind of loss in UK. But because of that kind of scenario, there are lots of disturbance in the UK market today. A lot of products are going in short supply and prices are returning back because the situation of selling product at lower price cannot continue for long. So, that has changed, and the UK subsidy has also delivered profit in this year, and UK overall business is moving up now. And sir, on our subsidiaries, you can give us an update on how the various subsidiaries are done? Let's say except one subsidiary, which is fiscal, all the subsidiaries have done well, and they are all in profits here. This guy will still take some little more time because there are good order positions on their API side, and so maybe I think by next financial year, the things will start improving there. Okay. Thank you, sir.

Thank you, sir. Ladies and gentlemen, to ask a question, please press star and one now. Participants who wish to ask questions, may please press star and one at this time. As there are no further questions from the participants, I now hand the conference over to management for closing comments. Thank you and over to you, sir.

Thank you, madam. Having answered all the questions, I think we can close this concord. Thank you, everyone, for participating in this concord. Thank you.

Thank you, sir. On behalf of Dam Capital Advisors Limited, that concludes this conference call. Thank you all for joining us, and you may now disconnect your lines. Thank you.