Ajanta Pharma Ltd

NSE:AJANTPHARM

Earnings Call Analysis

Steady Growth and Strong Dividend Payout

The company reported robust quarter and nine-month performances, with EBITDA margins at 28%, poised for a full-year guidance of 27%±1%. Revenue grew by 14% in the third quarter (Q3) and 10% over nine months, with branded generics constituting 71% of the revenue and witnessing an 8% growth. The company has declared a hefty dividend, representing 96% of the cash flow from operations. Gross margins remained high at around 75%, while personnel and other expenses showed a sizeable increase. Profit After Tax (PAT) also improved, registering a 19% growth, translating to INR 614 crores over nine months. Capital expenditure was controlled, resulting in strong Return on Capital Employed (ROCE) and Return on Net Worth (RONW), both compared favorably within the industry.

Resilient Performance Amidst Dynamic International Markets

Ajanta Pharma's latest quarterly earnings attest to a company steadily navigating through a complex global landscape. In reflection of their strategies, the company's total revenue rose by 14% to INR 1,105 crores for the quarter and by 10% to INR 3,155 crores over the nine-month period. This growth was predominantly driven by the Branded Generic business, which accounts for a substantial 71% of total revenue, marking a growth of 13% for the quarter and 8% over nine months. Signifying their robust international footprint, particularly in Asia, the business experienced a remarkable 28% growth in sales during the quarter and an 8% uptick across nine months. This resilience is further underscored by their confidence in attaining a low double-digit growth trajectory. Similarly, in Africa, a modest performance with 7% quarterly and 3% nine-month sales growth positions them well, as inventory adjustments pave the way for anticipated mid-teen growth rates in the future.

Challenges and Recoveries Across Key Markets

The tale of Ajanta Pharma's diverse markets narrates both adversities and recoveries. While their U.S. Generics business faced a 5% de-growth for the quarter, it still maintained an 11% growth over the nine months, mirroring the volatilities of international business and fluctuating seasonal demands. The Indian market, contributing to 31% of total revenue, witnessed an 11% growth over nine months, reflecting economic stability and a robust healthcare framework in the country. Their commitment to operational excellence is evident, as evidenced by the improved productivity among medical representatives and a performance outpacing the Indian Pharmaceutical Market by 200 basis points.

Fiscal Prudence and Shareholder Rewards

Ajanta Pharma's financial prudence is highlighted by an impressive gross margin of 73% in the third quarter, with the anticipation of closing the year at around 75%. Even in the face of a 20% rise in personnel costs and a steady 5% of revenue allocation to R&D expenses, the business has managed to maintain a healthy fiscal balance. In a show of shareholder confidence, the company declared a significant interim dividend of INR 26 per share, culminating in a total pay-out of INR 642 crores for nine months – a substantial 96% of their operational cash flow for the period.

Forward-Looking Guidance Amidst Fluctuating Costs

While Ajanta Pharma's EBITDA margins impressively stood at 28% for both the third quarter and across nine months, the company anticipates a slight dip due to rising expenses, revising full-year guidance to around 27% with a possible fluctuation of 1%. However, this cautionary note doesn't overshadow the fact that their Profit After Tax (PAT) for the nine-month period has already surpassed the entire previous fiscal year's PAT, boasting a significant increase to INR 614 crores from INR 466 crores.

Strategic Capital Allocation and Robust Financial Health

Ajanta Pharma has demonstrated strategic capital allocation, lowering its CapEx forecast for the fiscal year from INR 150 crores to INR 125 crores, indicative of potential operational efficiency gains. This is complemented by their robust financial health, with a cash flow from operations of INR 669 crores and a resultant cash conversion ratio of 75%, as well as a free cash flow of INR 346 crores, reflecting consistent profitability and liquidity.

Earnings Call Transcript 2024-Q3

[Operator]

Ladies and gentlemen, good day, and welcome to Ajanta Pharma Q3 FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Yogesh Agrawal, Managing Director of Ajanta Pharma Limited. Thank you, and over to you, sir.

[Yogesh Agrawal, executive]

Thank you. Good evening, everyone, and welcome to this earnings call. With me, I have Mr. Rajesh Agrawal, our Joint Managing Director; Mr. Arvind Agrawal, our CFO, and Mr. Rajeev Agrawal, our AVP, Finance and Investor Relations. I hope that the results are already there with you. We will take you through the business-wise performance for the Q3 and 9 months of the current year, along with the comparison of previous year same period.

I am pleased to inform you that the Board of Directors have approved the second interim dividend for the current year. Each share of INR 2 face value will receive a dividend of INR 26, amounting to the dividend amount of INR 327 crores.

In Q1 of this year, Board of Directors had already approved the dividend of INR 25 per share, having a face value of INR 2, amounting to the dividend of INR 315 crores. And for the 9 months of the current year, the company has given the dividend of INR 51 per share, having a face value of INR 2. And the total dividend payout for the 9 months stands at INR 642 crores, which is 96% of the cash flow from the operations for the period. The dividend yield works out to 2.42% based on the closing price of 30th of January 2024.

Moving on to the business. Our 3 verticals of the business, Branded Generic, U.S. Generic and Institution Business in Africa, generated total revenue of INR 1,105 crores against INR 972 crores, posting a growth of 14% in the Q3, and INR 3,155 crores against INR 2,861 crores, posting a growth of 10% in the first 9 months.

During 9 months, 71% of the total revenue came from Branded Generic business, which is spread across India, Asia and Africa. The sales stood at INR 755 crores against INR 666 crores, posting 13% growth in Q3 and INR 2,230 crores against INR 2,065 crores, posting 8% growth in 9 months. Let me now take up International business, and I will first start with the Branded Generic business in Asia and Africa, which contributed 40% in the total revenue. Let's begin with Asia.

In Asia, our presence spans across the Middle East, Southeast Asia and Central Asia, encompassing around 10 countries. During Q3, sales was INR 292 crores against INR 227 crores, posting a healthy growth of 28%. And in 9 months, sales was INR 776 crores against INR 719 crores, growth of 8%.

We launched 15 new products during 9 months of the current year in the region. Growth during Q3 was higher due to some of the supplies which got spilled over from Q2 to the Q3. However, on a full year basis, we estimate the growth to be low double-digit figure. Let's move to Africa.

Africa Branded business is spread across 20 countries. During Q3, sale was INR 155 crores against INR 145 crores, posting 7% growth. And in 9 months, sale was INR 472 crores against INR 458 crores, growth of 3%. We launched 5 new products during first 9 months of the current year in the region.

Our performance in the secondary sales continues to exceed industry growth and remains into the teens. However, due to rationalization of the inventory buyer or distributor, our primary sales growth for the first 9 months has been lower. As the rationalization is completed now, we are confident of posting mid-teens growth in the coming years in Africa. Let us now talk about other 2 verticals of international business.

U.S. Generics. U.S. Generics contributed 23% to the total revenue in Q3, with sales of INR 252 crores against INR 266 crores, posting a de-growth of 5%. And in 9 months, sales was INR 703 crores against INR 631 crores with a growth of 11%.

Q3 de-growth is attributed to last year's higher flu season, as mentioned in our earlier earnings call. In 9 months, we filed 6 ANDAs and expect to file about 2 ANDAs in the rest of the year. We received 6 final approvals and launched 4 ANDAs during 9 months of the year and expect to launch 1 more product in Q4 of the current year. We have 44 products on shelf and 22 ANDAs are awaiting approval with U.S. FDA.

Moving to African Institution. This business contributed 6% in the total revenue, which comprises of antimalarial products. In Q3, sales was INR 86 crores against INR 31 crores, posting a healthy growth of 179%. And in 9 months, sale was INR 188 crores against INR 141 crores, posting 33% growth.

High growth seen in Q3 was a result of preponement of few supplies of Q4. This business remains unpredictable due to the reliance on procurement of the agency's funds and schedule. I now invite Mr. Rajesh Agrawal, our Joint Managing Director, who take you through the India business now.

[Rajesh Agrawal, executive]

Thank you, and good evening to all of you. I'm delighted to share key highlights of India business with you. Our performance has been excellent on the back of increased volumes, price increase and new product launches. India business contributed 31% in the total revenue.

In Q3, sales was INR 308 crores against INR 294 crores, growth of 5%. And in 9 months, sale was INR 982 crores against INR 888 crores, posting healthy growth of 11%. India business includes the revenue from trade generics of INR 38 crores in Q3 of both the current and previous years, and INR 120 crores against INR 109 crores in 9 months.

In 9 months of the year, we have launched 13 new products including 4 first movers. Our medical representatives productivity has shown marked improvement aligned with our growth revenue -- aligned with our revenue growth while maintaining consistent MR levels.

We continue to outpace the IPM by 200 basis points with Ajanta growing at 12%, surpassing IPM growth rate of 10% as per IQVIA MAT December 2023. This trend extends to most of the therapeutic segments we are in where our growth has consistently outpaced the segment growth. However, in cardiology, our growth was lower to IPM due to price revision in one of our major products in December 2022.

In the covered market, we continue to be fourth largest in the IPM and among top 10 in all our therapeutic segments. As per IQVIA MAT December 2023, we have 4 brands in the top 500 branch list. In our sales breakdown, cardiology contributed 38%, ophthalmology contributed 31%, dermatology contributed 22% of our India business with remaining 9% coming from pain management.

I now invite Mr. Arvind Agrawal, CFO, to take you through the financial performance. Thank you, and over to you, Arvind.

[Arvind Agrawal, executive]

Thank you. Good evening, and warm welcome to the third earnings call of FY 2024. On this call, our discussion includes certain forward-looking statements, which are projections or estimates about future events. These estimates reflect management's current expectations about future performance of the company. These estimates involve a number of risks and uncertainties that could cause our actual results to differ materially from what is expressed or implied. Ajanta does not undertake any obligation to publicly update any forward-looking statements, whether as a result of new confirmation, future events or otherwise.

We will look at the consolidated financials and provide year-on-year comparison. The key financial highlights for Q3 and 9 months for FY 2024 are as follows: Total revenue in Q3 stood at INR 1,105 crores against INR 972 crores, posting 14% growth. In 9 months, revenue was INR 3,155 crores against INR 2,861 crores, a growth of 10%. Our gross margin came at 73% in Q3 and 75% in 9 months, and sale is in line with our guidance. We hope to close the year at about 75%.

Personnel costs increased by 20%, part of which about 9% is on account of regrouping of related expenses from selling expenses as explained in earlier earnings calls, and balance was regular annual increments and addition. R&D expenses was 5% of total revenue in Q3 .It was INR 52 crores against INR 61 crores in 9 months. It was INR 157 crores against INR 174 crores. Other expenses stood at INR 266 crores in Q3. Reduction is about 22% over previous year same period.

In 9 months, it stood at INR 792 crores, reduction of about 12% from previous year same period. Reduced international logistic costs contributed favorably, up about INR 34 crores in Q3 and INR 79 crores in 9 months compared to average of the FY 2023. We expect logistics cost to move up significantly in Q4 due to Red Sea crisis and higher marketing expenses in Q4, which will increase overall other expenses by about 7% over Q3.

EBITDA margin was at 28% in both Q3 and 9 months. EBITDA stood at INR 314 crores against INR 170 crores in Q3, and in 9 months at INR 894 crores against INR 588 crores. This positive performance was attributed to the combined benefits of the improved gross margin, reduced logistic costs and stabilization in U.S. price erosion.

However, as mentioned earlier, higher other expenses in Q4 may see EBITDA a little lower than 9-month average. However, we are revising our full year guidance to 27% plus/minus 1% for full financial year 2024.

Other income was at INR 14 crores in Q3 and INR 49 crores in 9 months, which includes ForEx gain of INR 4 crores and INR 19 crores, respectively. Income tax stood at 28% for Q3 and 27% for 9 months. For the FY 2024, tax is expected to be around 27%. PAT in Q3 was INR 210 crores against INR 135 crores. And in 9 months, it was INR 614 crores against INR 466 crores, 19% of revenue from operations. You will be pleased to note that PAT for 9 months for the FY 2024 has crossed full year PAT of FY 2023.

We incurred CapEx of INR 80 crores in 9 months FY 2024. CapEx, including maintenance CapEx for the FY 2024, is estimated to be at INR 125 crores against our earlier estimate of INR 150 crores. ROCE and RONW continues to improve and be comparable with the best in the industry. ROCE stands at 30% and RONW at 23% at the end of December 2023.

In 9 months FY 2024, we have generated a healthy cash flow from operations of INR 669 crores with cash conversion ratio of 75%, and free cash flow of INR 346 crores with 56% tax conversion. With these highlights, I open the floor for the question and answers. Thank you.

[Operator]

We will now begin the question-and-answer session. [Operator Instructions] Our first question is from the line of Rashmi Shetty from Dolat Capital.

[Rashmi Sancheti, analyst]

Congratulations on good set of numbers. So on the Red Sea impact, which you mentioned that it is going to impact the EBITDA in quarter 4. Is this something that it's going to impact the supplies in Asia and Africa sales in quarter 4?

[Yogesh Agrawal, executive]

No, not significantly. I think whatever guidances we have given for each of the regions, we should be able to meet those guidances. So overall, we've seen there is a little bit increase in the transit time of the shipment by 10 to 15 days, it has increased. But we are going to wait and watch and monitor the situation.

Maybe the inventory working capital may increase a little bit because the product will be sitting in transit for a longer time than the earlier months. But I think for the next quarter, we are okay to deliver the numbers what we had given the guidance so far.

[Rashmi Sancheti, analyst]

So like for Asia business, low double digit you have given for this year, right? And for FY '25 and '26, how should we look at this thing? How should we look at the growth in the next 2 years? And we had increased [indiscernible] everything in Asia branded and Africa branded business. So is it something that from next year, we can expect that the growth should be better because of the improving MR productivity?

[Yogesh Agrawal, executive]

Yes, absolutely. Africa, as I said in my opening remark comments, because of the inventory rationalization by our distributor, our primary sales was lower. But actually, when you see our secondary sales, it was in the mid-teens. So there is no issue as such.

And Asia also, I think for the 9 months or for the whole year, we are guiding for the low teens. So going forward also, we expect around low teens to mid-teens number for the Africa and Asia.

[Rashmi Sancheti, analyst]

Got it, sir. And then last question on institutional business. What is really changing in the entire business? Is it that the procurement agencies have now picked up the orders for antimalarial sales? And how should we actually see this for next 2 years? .

[Yogesh Agrawal, executive]

See, the Institution business is very predictable, which is what we've been saying always. This period is pretty much the -- when the -- most of the orders come typically. So quarter-wise, it can get skewed.

As I said, in Q3, we had a higher dispatches as compared to the next upcoming quarter. So very difficult to give any kind of outlook on the institution business. It depends on how much funds they get, what is the malaria season, what is the requirement. There are so many variables, which are beyond our control. So we take it as it comes. We can expect it to be a flattish kind of growth for the Institution business.

[Operator]

Next question is from the line of Sudarshan Padmanabhan from JM PMS.

[Sudarshan Padmanabhan, analyst]

Congrats on good set of numbers. Sir, my question is in terms of strategy, you talked about the impact in the cardiovascular segment. Given that we have cash in hand and we have also been in the industry for such a long time that we can expand the footprint, et cetera. Can you talk a little bit more about what we can do to improve the growth specifically in the cardiovascular space, which has been a little lower than what we had expected?

[Rajesh Agrawal, executive]

A couple of things. One is new product launches. So we have a good set of products that we have launched in the subtherapeutic segments in which we have presence also. And second is just to gain market share by way of increasing more CRM activities, which is what now our focus is.

And with these 2 things put together, we should be able to once again record faster growth compared to the industry and also go back to the growth rates that we were posting in the previous quarters and the previous years.

So we don't need to really launch newer divisions as such as of now. Increasing the productivity, we have enough divisions for these brands that we have. Increasing the productivity will be the major focus.

[Sudarshan Padmanabhan, analyst]

Sure, sir. Sir, with the cash in hand, and I think a lot of companies are buying brands, making acquisition. Do you think, as a strategy, you would be looking to acquire certain brands -- bolt-on brands or certain divisions to accentuate your already strong presence in the domestic market?

[Rajesh Agrawal, executive]

No, certainly. We are always on the lookout for suitable brand acquisition targets and also opportunities. And if there are any such opportunities and deals that are present in the market, we have been evaluating them and then deciding if they are really apt for our business. So we are out there looking for acquisition targets. It's not that that's not one of the focus areas in terms of growth levers. Inorganic growth is most welcome for us. We are happy to look at that.

[Sudarshan Padmanabhan, analyst]

And sir, one final thing before I join back. As the previous participant spoke about Red Sea, I mean, this -- specifically this year, we've seen very strong improvement in the operating expenses. Number 1 is going forward, I mean this 27%, 28% margins that we have been doing this year, how do you see the sustenance of it? And is there, as if -- in terms of transportation, costs moving up substantially with this issue to the Red Sea? What can one look at in terms of segregate this in the next 18 months, not necessarily in the next 3, 4 months?

[Yogesh Agrawal, executive]

I think, overall, the freight cost can go up at the current rate, what we have seen in the last -- that's what we have dispatched. The freight can go up by 0.5% overall, so which can translate into around INR 30 crores, INR 35 crores increased cost as compared to the current year. So that is the impact based on the current freight rates, which are going. Any up or down can increase or deteriorate the margins accordingly.

So other than that, as I said, the inventory working capital may slightly increase. For example, if U.S. transit time was 50 days, it can go to 65 days, any other markets also. For 15, 20 days, we are seeing the increase in the transit time. So that's all about the logistics. Anything else you want to know?

[Sudarshan Padmanabhan, analyst]

So more or less we should be plus or minus around this margin. Basically, you don't see it around this...

[Yogesh Agrawal, executive]

Yes. At this point in time, we don't see as materially impacting. Whatever is there, I think we should be able to manage in our growth.

[Sudarshan Padmanabhan, analyst]

Just 1 final thing, if I may squeeze in. With respect to the U.S. market, we've seen our peers -- we're not talking about lower price erosion and actually, we have seen reporting good numbers. One, we have Chantix. And number two, are we seeing similar kind of improvement, no? And I know that this is not necessarily the prime focus of the business, but it's not opportunistic is what I'm trying to understand here.

[Yogesh Agrawal, executive]

So what is the question?

[Sudarshan Padmanabhan, analyst]

So with respect to the U.S., I mean, are we -- when do we expect Chantix to be launched? And are we also seeing the base business erosion being lower and at some point of time benefiting our business in terms of sales?

[Yogesh Agrawal, executive]

Yes, absolutely. The price erosion has slowed down. In the current year, we have been at the normal level, which was pre-COVID levels of the high single digit. So we see the current year's U.S. market conditions are quite favorable. Chantix is a moving target. We were hoping that we get the approval any time, and we are looking to launch in this Q4. But I think the way it looks right now, we are looking at the Q1 of the next year launch for the Chantix.

[Operator]

Next question is from the line of [ Dr. Aman Kumar Singh ], an individual investor.

[Unknown Attendee]

Fantastic results, congratulations. Just wanted to ask 2 questions. One is on, have we taken the impact of launch of antimalarial vaccine in Africa? So like what impact it is going to have on our business so if you can just say that?

[Yogesh Agrawal, executive]

No, vaccines -- we are not in the vaccine business. So we've seen the GSK and I think 1 more vaccine, which is there. It's very slow in the rollout in the Africa. And it's going to take a lot of time for the vaccination happen. Also the efficacy of that vaccines is significantly lower as compared to other vaccines, which are being there for the other elements. So overall, I think next 3 to 5 years, we don't see the vaccines to be having a meaningful impact on the antimalarial market in Africa.

[Unknown Attendee]

Okay. Good. Another question is that what Sudarshan was actually asking the same thing. We have so much of cash, which we are actually giving back to the shareholders in terms of a very hefty dividend. But can't this cash be deployed in a more meaningful manner by either organically expanding or inorganically expanding the business?

[Yogesh Agrawal, executive]

No, definitely. That's always the outlook and the objective. So the only way we can use the cash is only for the acquisitions. And right now, whatever we have seen, can the businesses and markets, the acquisition can happen only in the branded generic space primarily, though we are open to any other acquisitions also. But right now, we don't have any candidate for which we would like to keep the cash in the company.

So we thought the cash flows are pretty strong. They will continue to be strong. And if they have a good candidate, we'll have enough cash to make the acquisition. So I think it's all about finding the right candidate. I think that's all the prime importance. And that's very difficult to time -- go ahead.

[Unknown Attendee]

Please go ahead. I think you were saying something.

[Yogesh Agrawal, executive]

No, no. As Rajesh said, we are always open and willing to look at the targets there. It has to make sense for us 2, 3 ways, which is very common generic, which I'll be telling you. It has to fit in our product portfolio. It has to be the [indiscernible] molecule. And it has to be reasonably priced, which we feel good about it. So after putting 3, 4 filters, we are very willing to look at the new candidate -- the acquisition candidates.

[Unknown Attendee]

Okay. So just last question. I mean, just assumption so do we expect in future that whatever is the dividend yield for this year, we expect the similar kind of a yield for at least coming 1 or 2 years?

[Yogesh Agrawal, executive]

Depends on what kind of CapEx plans we have and what are the acquisition candidates. If not the last year also, our dividend payout, including buyout, mostly together, was very sizable. And current year also is in the similar ratio. So I can give you a directional outlook that if there is no use for the money in the company, of course, it will be paid back to the shareholders.

[Operator]

Next question is from the line of Harsh from Bandhan AMC.

[Unknown Analyst]

Yes. Just in terms of the cardiac performance sort of repetitive in nature. But just to understand, the last 2, 3 quarter underperformance, I mean, 1 sense is the NLEM impact. But if one were to look at the overall molecule structure per se, let's say, metoprolol and the other statin families, would you say that there is some level of market share loss across statins? Or would you say that majority of the impact continues to be at the NLEM level?

[Rajesh Agrawal, executive]

The major impact is because of the NLEM price reduction that has happened. But also, as you have correctly pointed out, the competitive intensity in the marketplace has increased dramatically, as we see in the last 1 odd year. So there is some small bit of maybe insignificant market loss happening in statin and [ platelet ] combinations and some of the other combination products in which we are present.

Having said that, we have gone through this before in other specialties also, and we have stepped up our efforts by way of the CRM activities that we can do in an effort to regain the market share.

[Unknown Analyst]

Okay. And in terms of the addition to the salesforce, just qualitatively, if you could help us understand where is the new salesforce in terms of the contribution of productivity combined with the fact that in the international space, we are targeting a more focused approach. So on that spectrum, like how should we see the things?

[Yogesh Agrawal, executive]

What's the question? Have we heard the question correctly?

[Rajesh Agrawal, executive]

You were not very audible, sorry to say that. If you can -- so you mean to know about the productivity of the MR in the domestic or international?

[Unknown Analyst]

International space, the addition that we have made to the salesforce, where are we qualitatively on the spectrum of productivity combined with the fact that we are taking a more focused approach to the specialists in the international market?

[Yogesh Agrawal, executive]

Very broad question. So yes, we made a significant additions in the international market, for which last year, we have seen the productivity dip little. But as they are getting more productive and they're getting more in the maturity curve, we are seeing the productivity to bounce back up current year and next year, of course, it will go further up as well.

[Unknown Analyst]

Okay. And lastly, the volume growth for the India market, could you help us understand the volume versus value split on a Y-o-Y basis?

[Rajesh Agrawal, executive]

Would you like to know the breakup of the growth in terms of volume of driving new products? Is that -- so the volume growth for Ajanta is 4%, whereas for the industry, it is 2.6%. These are MAT December figures. So Ajanta is growing at a healthy 1.5x de-growth rate of the market growth in terms of volume. The price growth IPM is at 4.3%. Ajanta is at 3.9%.

As you would already understand, this is due to the NLEM impact that we have had to undergo. And on the new products, again, we are superior compared to the industry, IPM is at 3%, whereas Ajanta's contribution of new product growth is 3.7%.

[Operator]

Next question is from the line of Kunal Randeria from Axis Capital.

[Kunal Randeria, analyst]

Sir, the last 2 or 3 quarters, we are seeing that your R&D has been annualizing close to INR 200 crores, INR 220 crores. Now that the U.S. outlook is slightly better than what you had envisaged 1 year, 1.5 years back, are you planning to increase your R&D and filing going ahead?

[Yogesh Agrawal, executive]

Yes. The next year, filing will be higher. Current year, we have given the targets for 6 to 8 ANDAs. And we will be meeting our target for the current year. We will be filing 8 ANDAs for the current year. Next year, we are taking the target of 8 to 12 ANDAs. So the filing will go up.

Correspondingly, there will be incremental increase in the R&D cost, not very significant because they have gone to a very significant exercise of cost optimization across the organization, including R&D and manufacturing, because of which we see that certain benefits will come in. So there will be a marginal increase in the R&D spend, but probably percentage-wise, it should remain around the same of the current year.

[Kunal Randeria, analyst]

And then since you're through the R&D from the past peak, just want to understand what's the thought process behind product prediction?

[Yogesh Agrawal, executive]

For which market?

[Kunal Randeria, analyst]

U.S.

[Yogesh Agrawal, executive]

U.S., 3, 4 things. One is the complexities. When the product are P2, the landscape is pretty much known. The fact is if it's a limited competition in a P2 where the patents have expired, means it is a complex product. So if you take a calculated bet on how many of such complex products we want to have in the pipeline, then we look at the P3 products and we do the modeling seeing that between the delayed release, extended release, control release, challenging products. Then we do a certain modeling and we select the products from there, depending on the competitive intensity we estimate it to be.

There are certain P4 products, which we feel good about getting into filing those P4. So there are various lenses for each of the patent certification filing which we do. So it's a quite intense process which it goes through.

[Kunal Randeria, analyst]

And out of the 10 products that you'll be filing, how many would be P4?

[Yogesh Agrawal, executive]

I don't have that data with me right away. I don't have that data. Maybe I think...

[Arvind Agrawal, executive]

Rajeev can give the data...

[Kunal Randeria, analyst]

Okay. So my second question is, see, in India, you're not expanding your salesforce, right? And in Africa and Asia, we've already expanded. So from an OpEx perspective, that doesn't seem -- besides the normal inflation, there doesn't seem to be a lot of other OpEx that you will be doing? Also -- so what is the risk to your margins going to 30% in a couple of years' time? So I'm asking Ajanta [indiscernible] something like a trade is like a problem for the entire industry. So what's the risk?

[Yogesh Agrawal, executive]

U.S. price solution is one unknown variable, which is there, which you've seen in the past -- last year it impacted very significantly. Current year the environment is very stable, and our current margin also reflecting our U.S. performance current year also. So that is 1 variable.

Second could be Institution business, any variables where I am in that. So these are the 2 primary things. Other things, as you rightly said, the Branded Generics business is pretty predictable. The growth percentages may vary, but they are pretty predictable.

So as we've guided, and we've always been guiding last year also, our margins shrank. And we've given guidance at current year. We should bounce back to 26%. And current year, we are heading much better than our guidance what we have given. We have revised our guidance to 27% now.

Going forward also, we believe that in the coming years, it should inch up, how much and which year difficult to say. We don't want to give that much forward-looking outlook, but it should continue to grow.

[Kunal Randeria, analyst]

Got it. Got it. And just last one, if I may. So productivity in [ PCPM ] in India would be around 4 lakhs or slightly thereabouts. So given your portfolio, what do you think is the optimum level after which you would maybe look at sales for expansion?

[Rajesh Agrawal, executive]

No, there are -- so this productivity is on a blended basis for the entire India business. But if you look at the individual marketing teams, the teams are on varied levels. And if you look at specialties also, for example, the benchmark in cardiology in terms of productivity cannot be the same benchmark in ophthalmology, clearly, because of the smaller size of market and smaller, lesser business and prescription potential.

So on a blended basis, hard to say. We really don't benchmark in a way that if we touch this particular productivity that we would like to expand, we are constantly scanning the opportunities that are present. And as and when we feel that there is 1 in present and we can capitalize on that, then we will certainly look at expanding by way of adding more MR, either by launch of new divisions or by adding them in the existing teams.

[Kunal Randeria, analyst]

Okay. Just to kind of restate my question. So of the 4 divisions that -- I mean, 4 services you have, which ones do you believe that close to optimum and which would be maybe still some distance away from that?

[Rajesh Agrawal, executive]

I think ophthal, we are doing reasonably well because we are the second largest company and also in terms of productivity, we are very competitive with the largest company and the third largest company. So that's the benchmark.

In cardiology, we have enough headspace to grow. Our productivity is much lower compared to some of the other likewise competitors. And so it is in derma and pain. I think we have a long way to go in both of these segments. So this is what it is.

[Yogesh Agrawal, executive]

And just to close in on your field expansion, there will be a marginal field expansion, not a substantial one as we have been in the last 2 years. But going forward, that continues to be -- marginal field expansion will continue to happen across the organization, blended basis, India and overseas because we have continuously been getting launched. There will not be as significant, but there will be continuously -- some percentage of field expansion will continue to happen.

[Kunal Randeria, analyst]

But India, we haven't done any expansion in the last 3 or 4 years, right?

[Rajesh Agrawal, executive]

Yes. you're right.

[Yogesh Agrawal, executive]

In India, no. Yes. In India, no. It was primarily in the international markets.

[Operator]

[Operator Instructions] Next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services.

[Tushar Manudhane, analyst]

Sir, just on the India business clarification, what kind of growth we can anticipate for FY '24, given that third Q FY '24 was a bit softer?

[Rajesh Agrawal, executive]

I think a couple of things. One is it's hard to predict right away because the IPM, which you would have seen the data. The growth rates of the IPM has been a bit inconsistent in the past 6 months. We have had growth rates of 4%, 5% and suddenly 17% and again, 8%. So it's been a bit inconsistent. We are in touch with IQVIA. We are also monitoring the prescription data from the consulting agencies to really be able to predict for the coming years.

However, for Ajanta, our aspiration will be to outpace the market growth rate, especially the covered market growth. We are still about to enter into our next year budgeting sessions and all of that. So we have no particular outlook, which I can primarily share with you at this point. It's a bottom up process. It takes some bit of time. But we should be out with our guidance in the next quarterly investor call, hopefully.

[Arvind Agrawal, executive]

But the FY '24, we are talking about low teen...

[Rajesh Agrawal, executive]

FY '24, we stick to our original guidance, which was low teens -- low double digit, 12% to 13%. Are you there?

[Operator]

We got disconnected from the line of Tushar. Moving on to next participant. Next question is from the line of [ Harsh Beria ], an individual investor.

[Unknown Attendee]

Congratulations for the [indiscernible] in our margins. It's really good to see that we are coming back to a 30% -- almost 30% level. My first question is regarding our emerging market business. So if I see correctly, we have launched about 20 products in 9 months and maybe 10 products this quarter itself. So in that case, like when we are launching so many products, why are we only expecting low double-digit growth in this market going ahead?

[Yogesh Agrawal, executive]

It's a combination of mature brands where the growth are slightly lower and the new brands growth are very on a higher side. So a combination of all that put together, that's where we're estimating it to be the low teens to mid-teens growth.

[Unknown Attendee]

Okay. My second question is about our Indian market share, but in our covered markets, so we do give our IPM rankings, but we are obviously not present in all therapies. So in a covered market, what is our market share or what is our IPM rank?

[Rajesh Agrawal, executive]

Our ranking in each specialty, we have -- for ophthalmology, we have -- yes, overall, as covered market -- we're fourth rank in the covered market that we're presenting across all specialties. And then there are -- rankings are different as compared to different -- so for ophthalmology in the covered market, we are ranked first and so on and so forth. I think you would find that in the investor presentation also.

In cardiology, we are 10th rank in the covered market. In ophthalmology, we are #1. In derma, we are #2, in the covered market. Pain management, we are 11th rank in the covered market.

[Unknown Attendee]

And my final question is about ophthalmology division. We have seen very good growth coming back in this division. So what is the difference between the number one player and between Ajanta at this point?

[Rajesh Agrawal, executive]

By way of prescriptions, if you look at the total number of prescriptions, we are already #1. And we have been consistently first ranked -- highest prescription generating company in the country for quite some time. This is by way of sales. The #1 company has brands, which has been built over decades, which are hard to really catch up upon in a short span so therefore, the difference.

But that's not really the only thing. What's most important is by way of prescriptions. We are able to generate far more prescriptions in this. And in ophthal, our growth rate is by far faster than the segment growth. Primarily, we are one of the companies which is driving the growth rates of the segment in this particular segment.

[Unknown Attendee]

Great. And on this note, I have a final question, which is about our prescription generation. Can you also share the figure as to how many of our own medicines are prescribed on a per prescription basis. Is this something you're comfortable sharing?

[Rajesh Agrawal, executive]

Yes. We have not been giving out this data as such. It's a very integrated data that's perhaps best left with the company.

[Operator]

Next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services.

[Rajesh Agrawal, executive]

I think you got missed. Can you repeat your question?

[Tushar Manudhane, analyst]

Yes. I was actually referring for FY '24 where we've grown by, say, 10%, 11% for 9 months. And we are talking about 12% to 13% for full year of '24. So does it mean that we'll grow at pretty healthy rate of 15% to 16% for 4Q?

[Rajesh Agrawal, executive]

No, we don't anticipate growing at 15% for Q4. Our guidance was low double digit. So we could be landing by the end of the year at about 11% to 12% growth rate. Sorry, please?

[Arvind Agrawal, executive]

15% Q4...

[Rajesh Agrawal, executive]

Q4, 15% is what -- okay. So our aspiration is to cross 15% for Q4, is what our aim is. We are -- all the efforts are towards that. So you're right in a way.

[Tushar Manudhane, analyst]

Right. And just secondly, on EBITDA margin, the guidance is of 27% plus, minus 1. In 9 months, we're are already at [ 28% ]. So does it mean that we would be much lower in terms of EBITDA margin for 4Q?

[Arvind Agrawal, executive]

Not much lower. That's why we said 27% plus, minus 1%, basically because 1 is the higher freight cost, which is coming in now. So the benefit which we got in earlier quarter, that will not be there. And also some more filings and other expenses are there. So because of that, we are expecting it to be a little lower. So overall, for the whole year, we are expecting about 27% plus, minus 1%.

[Operator]

Next question is from the line of [ Gagan Thareja from ASK ] Investment Managers.

[Unknown Analyst]

Sir, for the tax rate this and next year, what should be sort of pencil in?

[Arvind Agrawal, executive]

I think the current rate is about 28%, right -- 27.9%, so 28% around. And I think we will -- we expect the same rate to continue for the next year also.

[Unknown Analyst]

Okay. And in terms of working capital, have you -- you indicated that transit times are rising due to Red Sea, does that have any impact on working capital for you?

[Arvind Agrawal, executive]

Slightly, it will be increasing. Fortunately, we have been able to manage working capital quite well, as you must have been in the ratio that we have brought down inventory to 68 days. It may again go up to about 80 days like last year. So that can be there. That is possible. As MD also guided, because of this delays in the delivery, I think there can be some increase on that count.

[Unknown Analyst]

Okay. Right. This year, on the NLEM products, the WPI link [indiscernible] or so. WPI now is very weak, negative territory. For the next year, if WPI remains where it is, and you aren't giving any exemption from WPI link increases, what impact does it have? Or how does it potent for your India sales?

[Rajesh Agrawal, executive]

WPI, as per our calculations until December, looks at nearly the same 0.01% on a negative side. So it's -- let's just say that it's the same. So yes, it's going to be a neutral impact. We will not be able to recover some of the input costs that incrementally are incurred by our company. So that's a regrettable part. But it will remain exactly the same as what it is. So there is no negative impact in some sense.

[Unknown Analyst]

Yes, I get that. I'm just trying to understand what -- I mean, what part of your India sales in percentage terms...

[Rajesh Agrawal, executive]

[ 12% ] of our domestic portfolio is covered under NLEM exposure.

[Unknown Analyst]

Okay. All right. All right. And finally, sir, if you could just restate your FY '24 full year guidances for the Asia and Africa business. I missed that. I mean you would have given some numbers, right, at the start of the call or anything?

[Yogesh Agrawal, executive]

For the Asia, full year will be the low teens. Africa full year will be mid- to high-single digit. Yes.

[Operator]

[Operator Instructions] As there are no further questions from participants, I now hand the conference over to Mr. Yogesh Agrawal for closing comments.

[Yogesh Agrawal, executive]

Thank you, everyone, for joining this call. In case if there are any questions that left unanswered, please reach out to our Investor Relations team. Thank you for joining.

[Operator]

On behalf of Ajanta Pharma, that concludes this conference. Thank you for joining us, and you may now connect your lines.

[Rajesh Agrawal, executive]

Thank you.