Release Date: May 21, 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) reported a consolidated operating revenue of INR 2,009 crores for FY24, representing a 19% growth year-on-year.
- The company achieved a 15% organic growth in its Domestic Branded Formulation business in Q4 FY24.
- Eris Lifesciences Ltd (BOM:540596) successfully integrated multiple acquisitions, including Oaknet, Glenmark, Dr. Reddy's, and Biocon Nephro and Derma businesses, enhancing its portfolio.
- The company has a strong EBITDA margin of 34% for FY24, with an adjusted EBITDA margin of 36% after accounting for non-recurring items.
- Eris Lifesciences Ltd (BOM:540596) plans to reduce its debt by INR 400 crores in FY25 and INR 600 crores in FY26 through internal accruals, aiming for a debt-to-EBITDA ratio of less than 2x by September 2025.
Negative Points
- The company reported a decline in Q4 gross margin by 180 basis points due to an evolving product mix and new portfolio additions.
- There were significant one-time non-recurring expenses in Q4, including INR 21 crores for donations, SAP implementation costs, and deal-related expenses.
- The capacity utilization of the Ahmedabad plant was less than 20%, leading to underutilization costs of INR 17 crores.
- The company's return on capital employed (ROCE) dropped to 11% in FY24 from 34% in FY22, primarily due to the impact of acquisitions and amortization.
- Eris Lifesciences Ltd (BOM:540596) faces challenges in integrating and scaling newly acquired brands, with some brands like Cosmetology underperforming compared to Dermatology.
Q & A Highlights
Q: Can you give us some idea of the magnitude of the fundraise and in what form you intend to do this and by what time?
A: We intend to raise around INR1,000 to INR1,250 crores. The CPs are due in the first or second week of June. (Sachin Shah, CFO)
Q: How have the acquired brands from Reddy's and Glenmark performed this year, and what are your strategies to scale these businesses?
A: Dermatology is emerging as our fourth largest therapy. We are seeing high-teens growth in Dermatology, while Cosmetology hasn't performed as well. We aspire to be one of the top 5 in Dermatology. (Amit Bakshi, Chairman and MD)
Q: What are the monthly sales numbers for MJ Biopharm, and are you at breakeven?
A: In Q4, we are almost at breakeven with a loss limited to INR1 crore. We are run-rating at INR60 crores. The large portion of growth will be driven by Biocon brands. (Amit Bakshi, Chairman and MD)
Q: Have you launched anything from the Swiss Parenterals portfolio in your Domestic Formulation segment?
A: Yes, we have started manufacturing Biocon's Critical Care products at Swiss and plan to launch four to five new brands manufactured by Swiss by the end of this quarter. (Amit Bakshi, Chairman and MD)
Q: Can you clarify the INR21 crores non-recurring item in Q4?
A: This includes SAP implementation costs, deal-related expenses, and some donations, all of which are one-time expenses. (Krishnakumar Vaidyanathan, COO)
Q: What is the organic growth for the Branded Formulation business for the full fiscal year 2024?
A: The organic growth for the full fiscal year 2024 is around 9% to 10%. (Krishnakumar Vaidyanathan, COO)
Q: What are the key variables to track for the debt reduction target of INR400 crore and INR600 crore for the next two years?
A: Key variables include EBITDA, operating cash conversion (70%-75%), capex of INR70-80 crores per annum, and interest expense of INR240 crores. (Krishnakumar Vaidyanathan, COO)
Q: Can you provide an update on the products you are working on internally as part of your R&D program?
A: We have launched two products and are waiting for the third drug approval. We have also received marketing authorization for a new drug and plan to launch three products in Q1. (Amit Bakshi, Chairman and MD)
Q: Where do you stand in terms of ranking for Diabetes products that have gone off patent?
A: We rank number 3 and number 4 for double and triple drug combinations of Dapa and Sita. We are number one in the generic space for Vilda. (Amit Bakshi, Chairman and MD)
Q: What are your expansion plans for the organic business?
A: We have no plans for significant organic expansion at this point. We aim to integrate the 600 new personnel and increase productivity. (Amit Bakshi, Chairman and MD)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
