Operator
Ladies and gentlemen, good day and welcome to RPT Life Sciences Q2 FY27 Resil Conference Call hosted by Dalit Capital. 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 0 on your touchtone phone. Please note, this conference is being recorded. I now hand the conference over to Ms. Candice. Thank you, and over to you, ma'am. Thank you, Nazneel.
Good evening, everyone. I, Candice Pereira, on behalf of Dollars Capital, welcome you all to the Q2 FY27 Earnings Call of RCG Life Sciences Limited. I would like to thank the management for giving us this opportunity to hold the call. Today, from the management team, we have with us Mr. Ashok Nayar, Managing Director, And Mr. Amol Lone, CFO. I will now hand over the call to the management for their opening remarks. Over to you, sir.
Thanks, thanks, Candrin. And good afternoon, everyone. And thank you for joining us. It's a pleasure to connect with you again and take you through our performance for the second quarter and first half of FY27. In fact, quarter two has been a quarter of milestones for RPG life sciences. For the first time, we crossed 200 crore in quarterly revenue and 50 crore in quarterly EBITDA. All three of our business grew, and in parallel, we completed the most significant strategic step in the history of our API business with the creation of RPG Active Pharma and the acquisitions of Actives and Ragwa. I'll take you through each of this today. But before we get into quarter two and H1 highlights, I want to give a brief company introduction For those joining us for the first time, RPG Life Sciences has a legacy for more than five decades. From its origin as a joint venture between a global MNC and the RPG group, the company has evolved into an integrated pharmaceutical company with three businesses, domestic formulations, international formulations, and active pharmaceutical ingredients. In India, we reach over 100,000 Our portfolio includes six textbook grants that have been prescribed and taught in medical colleges for decades. Internationally, we supply to more than 50 countries. Now, if you see over the past few years, we have undertaken a structured transformation journey, sharpening The transformation is reflected not only in our financial performance, but also in the way we approach markets, engage with healthcare professionals, and improve productivity across the organization. With the two acquisitions this quarter, our manufacturing footprint has expanded from three to five sites, two formulation facilities, and three API facilities We have a professional team size of over 1,800 employees, providing us with the right Thank you. Their full revenue contribution will begin from quarter three. We also delivered our first 50 crore EBITDA quarter. With our adjusted EBITDA, excluding one-time restructuring and API acquisition link cost of 5.5 crore, we grew 15% to 50.1 crore in quarter two versus 43.6 crore last year. Gross margins also expanded by 260 basic points, despite multiple industry tailwinds and West Asia war impact. The margin expansion in a challenging external environment highlights the strength of our operation, procurement strategies, and execution discipline that has helped us mitigate this impact and grow our bottom line faster than our revenue growth. For the first half, revenue growth grew 16.2% to 407.3, crossing the 400 crore mark for a half year. H1 adjusted EBITDA grew 16.1% to 97.9 crore with a margin at 24.0. Our adjusted PBT before exception has also grown by 13.6 this year. Now, coming to domestic formulations, which contributes across 70% of our revenue, we grew 11.6% in quarter 2 to 145.7 crore, and 13% in H1 to 278 crore, continuing our momentum of market-beating growth. This is the sixth trade quarter where we have delivered market-beating growth performance. Now, what gives me the most confidence is the quality of this growth. It's been driven by volumes, which reflect real prescription demand. Our volume growth in H1 was 6.8%, almost twice the market of 3.4. As per PharmaRank, September 2023's database, RPG LifeScience is now the fourth fastest growing company in the Indian pharma market on a mad basis. We achieved top 50 ranking during quarter two, notably having advanced dual ranks in a short period from rank 62 in March 2025 to rank 50 today. Within Within our cover market, which is about 49,600 crore in size and growing at 9.8% in HMAD, we are the fastest growing company as per the Parmarag latest database. Now, growth has been broad-based with every key basket growing in double digits. In quarter 2, MAP grew at 24%, Nephrology and Rheumatology grew at 23%, Cardio grew at 18%, and Immunosum tolerance grew at 30%. Importantly, each of this basket is growing faster than it did last year, which indicates acceleration and not merely contribution. Devisalization has stabilized, our medical marketing programs are delivering high returns, and our sales force effectiveness and digital interventions are visibly improving field productivity, with our PCPM increasing from 6.5 lakhs to 7.7 lakhs this year. Our leading brand in the pain management category, Naproxen, continues to deliver strong performance, The key milestone this quarter is that naproxen has cost 100 crores in secondary sales on a mad basis, making it one of the fastest growing large brands in India. H1 primary sales was 47.9 crores, up 13.6 crores. And we are on track across 100 crores in primary sales internally too. And we are investing to make this more durable. Through Orthoignite programs, we are engaged over 300 orthopedic surgeons in the CMEs this year. We also are carrying out naproxen master programs where we are engaged more than 550 young orthopedic surgeons and we are in the process of building relationship with tomorrow's prescribers today. We have also added over 4,000 orthopedic surgeons to our master doctor list to reinforce our ortho and pain range. Our new launches, our philosophy has been simple, launch products with complete focus on making them succeed. The 12 brands we launched in F526 delivered 12.4 crore in H1, nearly double the 6.3 crore in H1 last year. And two sales from these launches were up 50% year-on-year. Brands such as Preserve and RPC are building into meaningful franchises. At the same time, we have improved the quality of sales, reduced returns, and rationalizing trade discounts. We also revitalized legacy brands like Norpes and Serenes. Norpes in particular grew 40% in H1, and we are scaling up awareness through CMEs, journal publication, and targeted campaigns. In FY27, we also made three strategic launches, Naproxen ES is India's first Naproxen as Omniprazole combination, Kritipinum, which extends our orthopedic franchise into anti-infective, and Flow Access marks our entry into medical devices, building our Our focus remains on building depth with therapists to sustain our growth trajectory. We have strengthened our operating disciplines through a set of focus initiatives designed to improve the field effectiveness. And by integrating digital tools, iPads, and automation into our workflows, we are enabling our medical representatives to make better We are currently enhancing the platform further with more intelligent and personal capabilities, including AI-led content delivery and sharper segmentation. This helps us move from one-size-fits-all approach to more contextual engagement with our doctors. Going forward, RPG Sales will continue to play a big role in deepening and customizing our reach and engagement. Coming to API, from acquisitions to value creation, our API business delivered an exceptional quarter, growing at 85.5% to 27.5 crore in quarter two. H1 revenue grew 57.1% to 54.1 crore. This is entirely organic and was delivered while the team was simultaneously executing two acquisitions, On the strategic front, we moved with spirit and discipline. On 29 July, we announced the transfer of our API business to RPG Active Pharma, the investment by InvaSend, and the acquisition of Actel. The subsidization became effective on 14th August. We announced the Ragway acquisition on 2nd September, and subsequently affected both the acquisitions in end September. The scale we have built is significant. The expanded network has five times the manufacturing capacity, four times the reactors, three times the product and pipeline molecules, and twice the customers and employees. With the transaction completed, our focus has anchored firmly on value creation, where our creep priorities include improving asset utilization, accelerating customer acquisition and exports, strengthening the product pipeline, and delivering procurement, process, and cost synergies. We remain committed to our ambition of delivering 25% plus CAGR and the API business over the next five years through a combination of organic growth and disciplined acquisitions and product valuation. In short period, we have transformed a standalone API business into significantly larger, multi-site, backward-integrated organization with further committed capital available for organic and inorganic growth. Every acquisition we look for API will be with the lens of being a building block in one integrated company focused on deep capabilities, capacity, chemistry, product portfolio, approvals, and customers. We will also look to incorporate U.S. FDA approvals and therefore access to the U.S. markets as part of the larger strategy. It's also important to note that the strong API business is a complementary to our formulation business and will make it even stronger. The API carve out increases management bandwidth for the formulation engine as RPG, AP as a separate dedicated management team. Therefore, focus depends on both verticals and we expect better overall performance of both. Coming to international formulations, its international formulation is back on a growth path with revenue of 6.4% in Cotter 2 to 36.7 crores and 7% in H1 to 71.7 crores. Our core franchises continue to perform well, while the key brands like Sodium Valprit are growing 38% in South Africa and 17% in Australia. We are also deepening channel engagement, including a dedicated channel partner program in Myanmar to mark 25 years of still oxygen in the market. We stepped up our customer outreach significantly. At CPHI this year, we met 162 customers and held more than 75 discussions with potential partners with strong interest from Balkans, Middle East. We are winning tenders with recent wins in Latam, Ethiopia, and other markets. We expect to add about 10 crore of revenue from FI29 from Chile and Ethiopia. We also completed our first CDMO project on time, which is expected to add about 8 crore from FY29 in UK, and CDMO increase will continue to grow for us. To sustain this momentum, we are accelerating R&D and building the portfolio. We have built a data-led R&D roadmap targeting about 25 crore by FY30. Our expanded ATI portfolio gives IF a forward integration advantage on these new molecules. We have also added depth to the team with two senior IAs who bring strong international marketing expertise. Together, these steps give international formulations a clear and sustainable growth runway. So, on building a future radio organization, our three business are our growth engines, but a large business needs a stronger foundation. So, over the last few quarters, we have focused on strengthening our business support functions in line with our growth ambitions as we scale. In digital, 100% of medical representatives are We have invested ahead of the curve in Salesforce effectiveness, deploying multiple AI-enabled dashboards to strengthen campaign, monitoring, commercial analytics, and data-led decision-making And our internal medical representative app, RxR, has also been upgraded to RxR 3.2, with enhanced salesforce capabilities for customer tracking and engagement analytics. These interventions are not only helping representative save time, but also enabling more targeted customer outreach and improving field productivity. IT upgradation projects across both corporate operations and plant modernizations underway. In finance, we are moving to paperless workflows. On talent and HR, we have hired critical leaders with deep sector expertise, including a dedicated CEO for RPG Active Pharma, redesigned HR roles across sites, and put in place detailed succession plans with a strong middle management layer. In training, we have introduced industry first curricular and AI-led customized training for medical reps based on the identified skill gaps. On ESG, our sustainability framework is on track for completion by December 26th. Our FY26, BR, RSR, and GRI reports are published. Scope 1 and 2 assessments are complete, and scope 3 analysis will be completed in quarter 3. Coming to our financial roundup, to sum up the Thank you. Deported PBT reflects two one-off items. Last year included a 11.2 crore gain from the fire insurance recovery, while this quarter includes 5.5 crore of one-time restructuring and acquisition-related costs, such as fees and etc. So closing, as we look ahead, our priorities are clear. In domestic formulation, we aim to grow faster in the market, retain our top 50 position, and scale our new launches, including semaglute type. In the API, we'll integrate both plans carefully, focus on value creation pillars, and align our R&D infrastructure with the expanded pipeline. In international, we'll deliver our FY27 plan while protecting margins, close partnership discussions, and onboard further CDMA projects. So, our approach remains one of discipline, cautious optimism, delivering today's commitment while investing in tomorrow's growth. We now have a market-weighting formulation business, a substantially large and well-capitalized API business, and a stronger organization to support both. I am confident that this position of R&D Life Senses is well for sustained and profitable growth. Thank you for your continued push and support. Now we will be happy to take the questions.
Operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may 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 Ranjit Verma from Sameeksha Capital. Please go ahead.
Yeah, I can't remember. Hello.
Operator
Yes. The voice is a bit feeble. Yeah.
Operator
Yes, this is better. Please go ahead.
Thank you for the opportunity. So I have two questions. First, for the acquired API entity, would you please quantify the contribution of the revenue and the EBITDA for FY27? And the second, the cash flow generation was relatively weak in H2, primarily due to high working capital. So how do we look at the working capital days or the cash conversion cycle on a steady-state basis going forward?
So on the revenue and EBITDA, EBITDA is, like we said in earlier calls, so it will be in mid-20s. It's similar in line with our existing business of API. And from the top line, it's a H2 that we are now setting up the business and all acquisition-related integration things. So the top line will be directionally in the range of 25 to 30 crores for the H2.
As to Amol, you said what is going to happen to our acquired assets. So actually the billing will commence from quarterly for both the sites. And we registered a 50,000,000 sales in contact with a MACDAS.
Okay. On a cash flow generation.
So cash flow generation is too early because it's an integration right now is happening. So probably there will be, we're expecting some CAPEX as well. So we'll come back on this point as we conclude Q3 and Q4, where's the operation stance and then the operation normalize the set of acquired properties.
Operator
Thank you. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. Next question is from the line of Mohammed Patel from Adelwee's Public Alternatives. Please go ahead.
Yeah, I have a couple of questions. First one is, what led to the gross profit margin expansion in a while? Yeah, I just wanted to understand what led to this improvement.
So, yeah, so there are a lot, the multiple things, like we also have, so though 2.6%, it looks positive, we also had a hit from the Asia war front. However, we were ready, like we are completely disclosing and transparent in earlier calls. We were taking a lot of efforts in price increase, passing the cost to our customers. Then internally, we have some initiatives at a company level where cost-saving initiatives we are driving. So all these together, product mix, these three, four initiatives, we end up having a little impact on our way. We could control the impact on Asia or slightly also there was an upside on the effects on the dollar front, so that also helped us in controlling the loss and as well as contributing positively on a year-on-year loss profit.
So, besides that, we also built our strategic inventory, that was the drill, and we included our product mix, so further to what Amol said. So, that led to the overall improvement in what we did.
This product mix improvement has happened in which of the business?
So, it's multiple, like largely, it's not only one particular division segment, but then we have largely looked out all our three segments. I mean, be it as an international formulation, API, domestic formulation, where limited scope we have. There are also other initiatives internally we drive, like converting customer from CIF to ex-work or something like that. So all these initiatives are quite aggressively being driven internally at an organization, and that's the reason we could see the loss margin in quarter two.
Okay. My next question is, employee benefit expenses have also grown higher in revenue. So, what is the reason for the same and do we expect this higher rate to continue?
See, employee, so there are two things that at an organization we have done. So, we have, one is that there is a mix of the contractual labor converting into the fixed labor, fixed employees. So, there is some benefit there that we see in the contract labor. Having said that, last year, with some pressure on the margin and all, quarter three and four, we had a headcount freeze, and all the headcount and all we did in this year, and then all market-related development, medical rate increase, all those field force that we have got up. So, for the incremental revenue, whatever we are targeting, so we require the field force that we are driving through this.
So, this is FY27 specific investments that we do, then next year we should expect some normalization?
Yeah, this will be now at this level and this will be a normal level.
So, this headcount has been normalized, whatever we did was for the H1 and the Cotter 1, and going forward, almost all the talent and the hiring have been taken, freely start seeing their output.
Okay. And there is also other expenses, if I exclude the one of 5.5 crore, that has also grown much faster as compared to revenue. So, if you can highlight the reason for that as well?
There's only one major reason is, again, Asia war. There's a freight component gets reported into that, so which is, so, I mean, the import freight, sorry, the export freight and the domestic freight that has been contributed in that line. So, if you see, the difference is around 7 odd crores. Out of that, 5.5 is about the strategic initiatives, and the rest is largely about the freight and all.
Okay. So, again, this will also be getting normalized, starting maybe H2.
It depends on, again, Asia, what is all increases coming from the freight forwarders and the domestic supply chain. If it normalizes, it's directly linked to the petrol prices, diesel prices, and the cruise prices. So, it depends.
My next question is domestic formulation business growth. I think Q4 and Q1, we grow 18% and 15%. And this quarter, we see a reduction in growth to 12%. So, what is the reason for the reduction in growth?
First of all, our D.F. is a long-term professional story for us, and it's very important as we contribute 70% of our business. Now, if you look, the difference between, if you already know that there's almost a 10% difference in the recorded sale price to retailers, the price to stockies. However, for us, two important things happened. Three days have come down to 42 to 38 days. We wanted to strengthen the business, make it more hygienic and ensure that the prescriptions are larger rather than the primary stock. So we had almost had a four-day inventory reduction there. Second, one of our key third-party manufacturers, we almost had supply challenges because he had issues because of the West Asia. There were some issues in registration of some products. However, I am happy to say that all those things have been cleared in October. In fact, we almost recovered some of the sales. Without that impact, our DF would have been actually at 15.2% growth. And our outlook for quarter 3 remains positive for DF. In fact, it will continue to get back to the growth which we were getting.
Okay. My next question was related to this. So, we continue to aspire for 1.5 times the market growth going forward?
Yeah, absolutely. That is very clear. Even if you see the 11.5 or 13% which grew is also 1.5 times. So, 1.2 times. So, yeah. So, our thing will continue and as I said, with these two challenges resolved for us, we will be above 1.5 in the coming quarters also. Coming quarters and continue.
So, what will be the major driver for this small performance, 2-3?
For domestic, our performance versus the market, which will be the 2-3 major growth drivers.
Okay. So, we have launched, so, as we mentioned that our new launches, what all we did last year continue to be successful. We are almost going 50% by this. We have also launched three new molecules, Napros and ES for the first time, which already we have clocked recrossed We have launched critipenem, which again is a very severe for bone infections, and the third is our Floaxes, a medical device which supplements our nephrology transplant business. The other thing is the divisionization which we did has reduced the portfolio clutter, and in fact our cardiology, the new division which we created has grown by 18 percent, and if you see one of the reasons why naproxen has become 100 growth is because we decluttered the whole business and we divided the business into primary care and specialty care. Primary care focusing on general medicine and bone, health and pain. And specialty care focusing on nephrology, rheumatology, cardiology and urology. So this clear, this strategy itself decluttering and ensuring clear focus in each and every specialty is the one which will actually drive the business besides the new molecules. And also our medical marketing activities which we recently started has actually been one of the leading things which we do. So, if you see our Naprocin flagship brand has crossed 100 kron in the second round, it is growing at about 14%. MAPS are growing at 24%. So, this is more to do the quarter 3 and the quarter 4 will actually have very robust growth considering what we are doing.
Okay. My next question is related to international formulation business. So, it has been, you know, after recovery, it has been growing at single digit for the last two quarters. Do we expect to go to double-digit growth rates in the next year, and what will drive that?
So, in fact, our recent interventions which we did in international populations with building up a new team, we have now making foreign emails and dozer tenders, which our 3DMO projects, we come to another three. And as I mentioned, we almost met 160 customers. We added talent in that. So, IF will look right from H1 itself, H2.
Any update on NAPROS in Canada?
The question, in fact, we just got an approval a week before. The audit, social audit approval got cleared. And by December mid, we will be able to start supplying.
And this will be a key aspect to the growth going forward?
It will be a key aspect to the... There are two things in this. First is, this will be our first product which will be OTC in the global space. Second, it is the only second product in Canada where the originator is there and we are there. So we believe that at least to start off 25% to 30% of market share to come to us. And going forward, this has got a lot of potential because this is one of, Neproxene globally is considered to one of the best non-steroidal anti-implemented products. In fact, we are very excited about this prospect. And shipment will, as I said, shipment will start in December.
Okay, I have some questions for the API business now. So, the API business, I think starting next quarter, I think the base effect will go away. So, at the current base of 30-35 crore, what should be the growth for the organic API business on a medium-term basis?
Yes, so organic API will continue to grow in double-digit growth with what we were growing earlier. In fact, that is something, it will, perhaps if we have got into foray and some new markets have come. In fact, we will be growing better than the earlier times in this, organically. And whatever we add inorganically is a plus and an upside.
Okay, I have one question related to the acquired API. So just before that, if you see, just before that, on the revenue front, if you see, My next question was related to that. So, now the acquisition has been into RPG system. So, anything that changes from the last call that we had regarding the outlook for Actes or Ragao?
So, nothing changes from the last call to this call. The only thing that changes is the order pipeline has become stronger than we thought.
Thank you so much. All the best.
Operator
Thank you. Next question is from the line of Rajas Joshi from Chris Capital. Please go ahead.
Thank you for your opportunity. Am I audible? Yeah, yes. Yeah, good evening, sir. I had a question regarding our domestic populations business. I mean, there's been a, I think, I believe there's been a discrepancy with regards to the numbers, growth numbers that we see on Farmer Act versus the numbers that are actually reported by us. I mean, could you please explain, I mean, if at all this discrepancy is there and what do you think it's called this discrepancy that will exist?
So, I actually answered the question before to the other gentleman who asked, but however, I'll just answer and I'm sure that you are aware that any pharma market database records sales at PTR levels and that is the price of what is sold to the chemist. But however, in our case, we had to bring more strong hygiene in the business and bringing robustness in the business. We, by design, have reduced the inventory days from 42 days to 37 days, 38 days. That itself is around buy and up close. The second thing I said, one of our key third-party manufacturers who supplies for us key products underwent two structural changes. One, of course, because of the West Asia crisis, and there were some U.S. FDA auditing there. So the supplies became a challenge. However, I'm happy to say that we have already got that cleared, and in October the supplies have started. And this one-time inventory corrections has actually helped us for us to have a strong, stable, and sustainable business. And our secondary business is a clear reflection that the increase, if you see the volume growth of 6.8 itself is a clear indication. So all markets are growing, if you see, and we are investing ahead in our medical marketing and taking measures to see the growth rates continues to grow. And over the last quarter, we must have seen that we are continuously out-marked the primary growth. And we will almost recover the 5 to 5.5 growth from the supply challenges which we face in this quarter.
Thank you for that clarification. I think the question again will be on the domestic piece itself. I think there's been a lot of talk and chatter about there being rationalization in terms of distribution margins for some of our key products, especially with the Supreme Court case also going on. I just wanted to check if there would be any impact on our pricing slash margins, if at all, some of these stringent rules would come into, you know, enforcement.
So, before that, first of all, we welcome the government's move because making cancer treatment more affordable to patients and thereby excess increases and widen. So, see, I'm sure you must be seeing what happened in 2017. So, our selling price does not change. The rationalization caps, yield margins, and the marks are added further down the chain. So mainly in the hospital level, where some drugs were sold above the procurement cost, and the government has come hard on that and has rightly intervened. So the MRP comes down. So for us, there is not much difference. Not only for us or any organization for which it is, that the MRP will come down, but the price at which we sell to our distributors stays broadly the same. So there is no material impact on our sales and margins. In fact, I believe that over time, it will actually help us because better affordability should bring more patients into treatment, which will support volumes across our oncology and speciality portfolios. And even if you see the 2017 instance, the last five years, actually the oncology business has grown, the patients have widened, and care has become more approachable.
I understand, sir. Nothing. Thank you for this detailed answer, and I thank you all the very best.
Operator
Thank you. Next question is from the line of Mohamad Patel from Adilvis Public Alternatives. Please go ahead.
Thanks for the follow-up. I have one follow-up question. We used to do 24.5% margin in FY25. So, what are the steps we are doing to reach those levels and by when can we expect the same to reflect in the numbers going on?
See, our primary focus is also on the growth activities towards the growth of the business. I think we probably will have to compromise a little bit on the bottom line because when we are getting into the new segment of the competitors and there are expenses and there are things which we will have to do. So, of course, 25% at FY25 level is the aspiration, but we'll take all of the efforts to be near to or about to that level.
So, we are a 24% lifetime margin management. So, we are not very far off, okay? And we are strategically investing into our future growth. There's a team and an operational ramp as we recur and grow as well. So, we are aspiring towards that and we should reach that. Okay.
And any change in the CAPEX for this year or next year?
There is no change in the CAPEX that we already have planned, except those which will be coming for the acquired assets, if anything is come, which we are already anticipated, but not major to indicate.
So, we expect 7-8% of sales of CAPEX? 7-8% of CAPEX? No, sorry. We expect the KPEX to be 7-8% of sales?
Yeah, yeah. Below that. Correct.
Operator
Thank you. Anyone who wishes to ask a question may press star and run on their touchtone telephone.
Operator
There are no further questions. I now hand the conference over to the management for closing comments.
So, thank you very much, and thank you for being here. We hope we have addressed all the questions and queries which you had. Looking forward to meeting you next time. Thank you. Thank you.
Operator
Thank you. On behalf of Doris Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
