- Operating Cash Flow: INR 2,100 crores over 6 years.
- Inorganic Growth Investment: INR 1,900 crores.
- CapEx: INR 400 crores.
- Dividend and Buyback: INR 400 crores.
- Market Share in Diabetes: Increased from 3.5% to 5%.
- Market Share in VMN: Increased from 1% to 2.5%.
- 6-Year Average Gross Margin: More than 80%.
- EBITDA Margin: More than 35%.
- Operating Cash Flow to EBITDA Ratio: More than 75%.
- Revenue from Dermatology Acquisitions: Expected INR 375 crores in FY '24.
- EBITDA from Dermatology Acquisitions: INR 130 crores in FY '24.
- Projected Operating Cash Flow (Next 3 Years): In excess of INR 1,800 crores.
- Projected Operating Cash Flow (Next 4-5 Years): In excess of INR 6,000 crores.
- Vision 2029 Revenue Target: INR 5,000 crores.
- Swiss Parenterals FY '23 Revenue: INR 280 crores.
- Swiss Parenterals EBITDA Margin: 37%.
- Swiss Parenterals Profit After Tax Margin: 25%.
- Q3 FY '24 Revenue Growth: 15% to INR 486 crores.
- YTD Operating Revenue Growth: 14% to INR 1,458 crores.
- Q3 Gross Margin: 83%, up by 200 bps.
- Q3 EBITDA Margin: 37%, up by 300 bps.
- Q3 EBITDA: INR 175 crores.
- Q3 Profit After Tax: INR 101 crores.
- 9-Month Profit After Tax: INR 317 crores.
- 9-Month Cash EPS: INR 30.
- Net Debt: INR 887 crores.
Release Date: February 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Eris Lifesciences Ltd (BOM:540596, Financial) achieved a significant market rank improvement from #29 in 2017 to #21 in 2023.
- The company has generated an operating cash flow of around INR 2,100 crores over the past six years.
- Eris Lifesciences Ltd (BOM:540596) has successfully diversified into new therapies such as dermatology, CNS, women's health, nephrology, and insulins.
- The company's EBITDA margin has consistently been more than 35%, with an operating cash flow to EBITDA ratio of more than 75%.
- Eris Lifesciences Ltd (BOM:540596) has projected strong cash generation, expecting operating cash flow in excess of INR 1,800 crores over the next three financial years.
Negative Points
- The acquisition of Swiss Parenterals involves a significant financial commitment, with INR 200 crores funded through debt financing and INR 437.5 crores in non-convertible debentures.
- There is a disparity between the standalone and consolidated performance, with standalone performance showing a meaningful drop.
- The company faces challenges in integrating and scaling the newly acquired Swiss Parenterals business, particularly in the Indian market.
- The dermatology acquisitions have experienced some disruptions, particularly in transitioning stockists and stabilizing sales.
- The company's net debt at the end of the quarter stood at INR 887 crores, indicating a substantial debt load.
Q & A Highlights
Q: Can you provide details on the financing of the Swiss Parenterals deal?
A: The consideration payable at closing is INR 200 crores, which will be funded through debt financing. Additionally, INR 437.5 crores will be issued as a 1-year NCD with an 8% coupon rate, redeemable after one year.
Q: Why is there a disparity between standalone and consolidated performance?
A: The Gujarat facility, which is part of Eris Therapeutics, does not reflect in the standalone results. Incremental growth and new products are part of Eris Therapeutics, hence the consolidated performance is a better reflection of the business.
Q: What are the revenue targets for Swiss Parenterals in India and RoW markets?
A: For the first year, the target for the domestic injectable side is around INR 100 crores. The oral solid piece for RoW markets will take some time to build, with initial estimates around INR 30-40 crores.
Q: What prompted Eris Lifesciences to acquire an asset focused on RoW markets?
A: The acquisition aligns with our growth strategy to expand beyond the Indian market. Swiss Parenterals offers a unique opportunity with its strong export business, extensive dossier portfolio, and high EBITDA margins.
Q: Can you provide more details on the business mix and key markets of Swiss Parenterals?
A: Swiss Parenterals has a strong presence in South Asia and Africa, with a focus on antibiotics and general injectables. The business operates on a distributor-led model, with plans to leverage Eris' domestic expertise for front-end operations.
Q: What is the expected growth from the acquired Biocon portfolio for FY '25?
A: The Biocon portfolio is expected to contribute INR 24-28 crores in the last quarter of this financial year, with an annual run rate of INR 10-12 crores next year. Gross margins are expected to improve to around 70%.
Q: What is the guidance on mergers and acquisitions strategy over the next 2-3 years?
A: While we remain open to new opportunities, we will maintain financial discipline and ensure that any new acquisitions align with our capital allocation strategy and debt management goals.
Q: Will there be any additional capital investment required for Swiss Parenterals?
A: We may need to invest INR 40-60 crores for capacity building and front-end operations over the next 2 years. This is part of our broader capital resource planning.
Q: How will the revenues and investments from Swiss Parenterals be structured?
A: General specialty products will be managed through Swiss Parenterals, while specialty products requiring field force will be handled by Eris. This ensures efficient resource allocation and market penetration.
Q: Can you elaborate on the product portfolio of Swiss Parenterals?
A: Swiss Parenterals' portfolio includes a mix of antibiotics, general injectables, lyophilized products, liposomal formulations, and inhalation anesthetics. The business has a strong presence in both specialty and high-end antibiotic segments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
