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Eris Lifesciences Ltd
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Ladies and gentlemen, good day, and welcome to the Q4 and FY '23 Earnings Conference Call of Eris Lifesciences Limited.
We have with us on the call today Mr. Amit Bakshi, Chairman and Managing Director; and Mr. V. Krishnakumar, Chief Operating Officer and Executive Director.
[Operator Instructions]
Please note that this conference is being recorded. I now hand the conference over to Mr. V. Krishnakumar, Chief Operating Officer and Executive Director of the company.
Thank you, and over to you, sir.
Thank you. Good afternoon, and welcome to our fourth quarter conference call. I'm Krishnakumar, and I'll be sharing the highlights of the quarter and full year review. We have reported stand-alone revenues of INR 315 crores in quarter 4 which represents a growth of 11.5%. Our stand-alone revenue for FY '23 stands at INR 1,331 crores, which represents a growth of 9.5%. This has been lower than our guidance due to a couple of factors.
First, we had launched an immunity boosting supplement called Zac D during the wave 2 of COVID, which is exceedingly well during the pandemic. However, given a strong association with COVID, the sales selloff has clipped both the pandemic, wherein we discontinued the product.
In addition, we had to take returns and write-offs in FY '23. While we did not discuss this as a major point in our commentary during the year, the fact remains that this has impacted some part of our stand-alone growth for the year. Secondly, there were a couple of significant brands in FY '23, Zayo being one of them. We cannot talk much about them since the matter is still sub judice.
But where we took extended periods of primary sale disruption that were unforeseen. Adjusted for these 2 onetime factors are stand-alone revenue growth for the year from our continuing business stood at 15.6%.
In fact, our base business continues to perform stronger than ever. Our diabetes franchise has grown by 25%, and we have gained the rank in the therapy with limited having become a INR 300-plus crore revenue Mother brand. Our cardiac franchise has grown by 16%, excluding the impact of Zayo and our VMN franchise has grown by 16%, excluding the impact of Zac D.
We invested INR 1,265 crores in consummating 3 dermatology acquisitions in FY '23. This has been our largest single year investment and that to in a single therapy. Notwithstanding that dermatology is a large and attractive therapy we need to acknowledge that this investment was not an easy decision, and it took a lot of hard and conviction on our part. This conviction came from 3 aspects of our business understanding: number one, our long-standing experience in chronic therapy; number two, our ability to build [ forge ] lasting relationships with super specialist; and number three, the stickiness of old gold brands and our ability to build them further. Post acquisition of Oaknet. We approach the business with an owner manager mindset and with a complete willingness to roll up our speed and do the hard work to create value. We took a proof of value creation initiatives focused on product range expansion, driving sales and marketing excellence and expansion of specialist coverage.
Within 6 months of the acquisition, we could start seeing early impact in terms of an acceleration in organic growth and margin expansion. And we started getting the conviction that we have a strong base there, which we can build on. And when we got the opportunity to bring in complementary products through the Glenmark and the Reddy's bolt-on deal in quarter we had the confidence to go ahead.
I'm happy to note that our pieces have delivered tangible results with Oaknet very first year with us. With the business clocking a 22% organic growth in FY '23.
After a sale of 3 flat years during FY '20 to FY '22. The EBITDA margin has expanded from 10% in FY '22 to 24% in FY '23, and we are confident of a further expansion in FY '24. On a stand-alone basis, our EBITDA margin for FY '23 was 38%, down by 185 bps from FY '22, largely driven by a 134 bps increase in stand-alone COGs.
The lost sales on account of COVID products and at-risk launches that I just spoke about have also played their part.
However, we continue to maintain a consolidated gross margin of close to 80%. Despite the dilution in margins caused by the amalgamation of the newer businesses, specifically Oaknet and our greenfield insulin piece. With Oaknet performance becoming stronger and our insulin volume scaling up.
We expect a significant uptick in consolidated gross margin as well as EBITDA margin in FY '24. Preservation of a consolidated gross margin of 80% has been an integral component of our growth strategy, all these years and will continue to remain so, in future as well.
Eris MJ which houses our greenfield insulin business has organically clocked a revenue of INR 17 crores in the first full year of commercial operations. We have 2 commercial products at present, human insulin and Glargine we are expecting this business to scale up significantly in the coming years with a narrowing of operating losses.
In order to simplify our corporate structure and unlock synergies among our business units, effective first April 2024. We propose to demerge the domestic formulation business of Oaknet and amalgamated with the parent company Eris Lifesciences. Through this merger, we will strengthen our overall go-to-market alongside realizing better operating efficiency, scale benefits and business synergies.
We have already commenced the operational integration of the businesses from 1st of April, and this is expected to be completed by the end of June 2023. Our detailed stand-alone and consolidated financial information is available in our investor presentation uploaded earlier today. These were the highlights for the quarter and the year.
We are now happy to open up for questions.
[Operator Instructions] The first question from the line of Kunal Dhamesha from Macquarie.
The first one on the amalgamation of Oaknet domestic business. What kind of synergies are we looking at on that front? Would we be able to generate some cost savings from there? Or what's the thought process there?
And second, on the insulin side, I think last quarter, we said this quarter, we were expecting to do around INR 7 crores to INR 8 crores revenue. But again, we are coming at around INR 6 crore, and that's been flat for 2 quarters. The burn has also increased a little bit.
So what are our expectations?
And probably what different things you are trying to kind of see the uptick there?
Yes. So, insulin first, we had some supply issues in the month of -- in the last quarter. Therefore, the sales was a little slow. Otherwise Glargine has done well one when we look at April. So our plan for the next year remains intact, and we do not see any significant movement from what we have spoken. And we are aiming for no loss in this year from MJ. So we maintain that number. Both on the top line and bottom line.
And synergies from the 2 things, look -- we are looking to cross-sell between women health, dermatology and some endocrinology. You know we have been a strong player in endocrinology. And there are 2 indications which are very good when it comes to dermatology also. One is the PCOS in girls which is our mainstay narrative in the women's health business within Eris.
And PCOS has a manifestation of skin problems. So we need -- we see that we can cross-sell at that level. And we are also looking at a postmenopausal kind of a scenario, which basically again is an interface between hormone and dermatology. So women endocrinology and dermatology, we are trying to put this together in cross-sell.
So Amit, what will you do? Will it increase our doctor coverage or the product that we take to like in terms of benefit, how should we think about the manufacturing going through for us?
Yes. So higher penetration. We have been -- it has just been -- has been selling dermatology. We need 2 dermatologies at this point of time. We will extend that dermatology bouquet to endocrinologist and gynecologist. So that's -- you'll see a greater reach in the coming time.
Okay. And second one, on the Oaknet, I think you have seen a very good growth. So that's great for this year. And we kind of remain confident. But I think we have operated multiple levers like increasing the penetration to around 90% of dermatologist and then also launching new products.
But do you see enough runway going into FY '24, '25 where we can continue to see similar growth that we have seen in FY '23 for Oaknet? Or would you say the low-hanging fruits are already there? And then -- now it's more about building the existing brands?
Kunal, there is no room. There's too much in hand as of now. I mean, I don't know how far it goes, but we have a 24 products lined up for new launches, which have been -- we are holding up, at least for the first 2 quarters.
We have been working on some formulation development throughout the last year.
Some of them are now coming through there is 1 or 2 things which we are talking to an international licensing, which is also in progress. The new brands, which we have taken from Glenmark and Dr. Reddy are showing us a complete new phase of growth. So the opportunities are quite high but we are not taking everything together. We were just walk in one stand by the other.
So first 6 months would be consolidation of and getting the things together with increasing the each in the specialty, which I was talking about. And in the second half, we will look at expansion. We have got 3 divisions. I am very con -- I think comfortably can tell you that post the second half, we will be having a fourth division also.
And I've been talking to you about this that the sales look good. If you look at the presentation, In sales we are #3 in our COVID market. But there is a large market which we are not presenting and that is typically the acne market, which is very large and the hair care market.
And we have got everything aligned there from a product to a narrative.
So there's too much in hand, but we will take it in one by one. So that's how the plan is. The Oaknet and dermatology is going to keep us very busy for the next 2 years.
[Operator Instructions] The next question is from the line of Punit Pujara from Helios Capital.
So I had a question on Insulin Glargine, you referred to the supply issue. So was that from Biocon.
No, no barging issue. It was human insulin the MJBs.
Understood. And sir, could you just us update about how the [Technical Difficulty].
Sorry to interrupt, sir, your voice is breaking up, Mr Pujara.
Is it better?
It's still breaking up.
Hello?
Yes, sir. This is slightly better.
Can you give us an update about the Insulin Glargine product that was in clinical trials, which is targeted to be launched in the current calendar year?
Yes, it's going online. Mr. Pujara. We see the studies are closed. We have to get them to the DCGI. So we are running on time as far as Glargine and also the GLP is concerned. We are very hopeful that we'll see the launch in this year. So nothing changes on that. Standard is going as particular.
And once we submit the randomization [indiscernible] -- once we submit the clinical trial data, it will take around 6 months of time. Is that understanding right?
Yes, yes, you're right. Generally, it is -- in the last couple of months, there's a little bit of slowness in the moving -- in the department. So we expect that to get all right. We're expecting in June or July, hearing.
Let's see how it pans out. The study has been completed.
The next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services.
Sir, just a clarity first, [ adjusting ] Zayo and Zac D for 4Q FY '23, what would be the stand-alone year-on-year growth?
Not done that math.
We have not done that math, but most of the Zac D data. There was some...
Is there any more Zac D effect KK in the fourth quarter. It will be at risk product.
Yes. Basically. But we can [indiscernible] get back.
So look, it should be in the range between -- it should be around 300 basis points. Largely saying I have not done the math, but from the gut. So Zac D doesn't have anything because we finished the [ Zac ] time Zac D was always out. So it's only about the active, which would be in the question.
So effectively 4Q FY '22 had sales of Zac D and Zayo. Or it's been -- so that would clear all this?
Say that again, sorry.
Same quarter last year, did you had Zac D and Zayo sale?
Zac D, Zayo, yes, but not Zac D. I mean I have to check Tushar but Zac D would be very minimal. But let me check that and then totally, I can tell you, we are talking about around 300 basis and we are talking 11.3% -- 11.5%. So that it 14.5%, 15%. That's what it looks like.
Understood. And sir, secondly, just to understand how much would be the operational costs related to the Gujarat facility, which will come up in FY '24?
Yes. So that query come in the books in financial year '24, from a full year standpoint, and it should be similar to the Guwahati plant level.
Understood. And considering the significant launches, considering the operational cost for this perceptive still the profitability of the margin and north for FY '23. Is that understanding right?
Yes, Tushar. So factoring in everything, we are still expecting a meaningful jump in EBITDA margin in this financial year.
The next question is from the line of Prakash Agarwal from Axis Capital.
Just trying to understand the slide 4 better. So Aprica and this trade generic [indiscernible] EHPL, both have made some losses.
And what are we thinking about these 2 small ones. Your statement or organic stand-alone growth has taken well. But I'm trying to understand how should we see the margins going? Because I understand insulin business can turn EBITDA neutrally? And Eris Therapeutics also, so if you could give some color on the segments that you have described. How does that look for FY '24 and '25?
So Prakash, look EHPL was always a drag on the EBITDA right? And I remember telling me in one of the calls that we are not very -- can do about the trade generics. So the sentiment continues -- we will try and not lose this INR 4 crore in this year, which we lost in the last year.
We lost INR 4 crores.
Yes. So the plan is, I have no upside on the top line. The plan is simply no loss at an EBITDA level. Regarding Aprica, was a bad year for Aprica. Aprica is not a bad business.
We've been doing well over a period of time, but we had some it is on one of its kind situation in Aprica. So Aprica, I remain positive.
I see Aprica doing well in this year and getting back and go to into the profit, EBITDA as well as the top line growth.
Okay. And sir, some color on the Eris M J and Therapeutics?
Eris M J, you know. Eris M J we expect INR 20 crores down by the end of the year when we started, and we are almost there.
We wanted it to do INR 20 crores, INR 21 crores that we ended up INR 17 crores, some plan didn't work out and some -- and there were some deficiencies in supplies from MJ, especially in the last quarter. So we are aiming for a 0 EBITDA there, which you said. And Eris Therapeutics is basically where the Gujarat facility, so the expense which you see is on the facility piece.
So the plant has commercialized in March Prakash. So this will be the first full year where Eris Therapeutics will start booking revenue. So once that starts happening, which has already started happening from April then you will see the numbers falling in place.
Okay. And some color on...
Sorry for interruption. For all practical purposes, you should see Eris Therapeutics is part of stand-alone. It's just a different operating plant because of which it is in a separate company, but it is part of stand-alone.
Okay. Understood. So moving forward, the 2 [indiscernible] that we had of these one-off products you mentioned and the new initiatives, how do you see the base business growth and margins for you? Just a very broad color guidance. I'm not sure if you've already said, I joined a little late.
Yes, Prakash, we thought that we'll review guidance after the end of the first quarter because Oaknet has now become a prominent part of the entire team. Goes from the top line and also expected under bottom line.
And this was the first month when everything was getting together, not the first one, technically, but we wouldn't be booked only INR 12 crore sales of Glenmark & DRL in the first quarter. And that was expected because of the pipeline filling in all those things. But I mean, April has come out well. So because Oaknet was a considerable and significant piece, we would wait for a quarter to give you the guidance for the next year.
So that's our back. It takes a little more time than that. And regarding the stand-alone, we just told you we grew 9.5% on the books. And we wanted to grow 15% at the start of the year and we will be -- we told you why it got a little [indiscernible]. We expect -- we expect the -- margins have never troubled us in the stand-alone. We continue to be at 30% and 40% -- 38%, 40% margin.
So the growth in our terms internally has been quite good last year has been one of the best years for us internally, but because of all these issues on the financial, you have a stress.
So we believe that we can continue this kind of trajectory. Especially because of the new launches, which are shaping up well. If you look at our new diabetes launches they have shapped well. We will say, which has been a concerned about the growth, and we've been telling that [indiscernible] product, it's a big product has now hit more than INR 300 crores at the inflection -- reflection level.
So I have no problems in the stand-alone business other than the moving parts. And I believe the journey would be like that.
Okay. Fair enough. And lastly, on the strategy. For fiscal '24, you have 2, 3 assets to turn around and you have some debt. So is it fair to assume that the focus will be largely based and to pay off the debt versus or you would be open to any opportunistic asset as well?
First 2 quarters, we want to pay it back. That's the idea which we are working. First 2 quarters [indiscernible].
So nothing in 6 months' time, hopefully, that is how we are preparing ourselves. So 6 months is consolidation and putting everything together. Post 6 months is the time when we look at it.
Having said that, if there is something which is very mouthwatering and one of a kind, kind of a thing, then we might change.
Okay. Fair enough. I have one more if you allow me on the -- now the working capital side. So it is largely due to the acquisition last month and having full balance sheet impact? Or is it going forward also, do you see this? Or it will come down?
It will come down, Prakash, by the end of the financial year, you will see that a lot of it will get normalized. So I think stand-alone later day, so 35, 40 or around 35, I think that is still something that is the normal for the business.
There have been too many onetime events that have happened in the financial year because of which you see this number being slightly different, but it will fall in line.
The next question is from the line of Bino from Elara Capital.
Most of my questions were answered. Just one clarification. If I remember correctly earlier, you had given a guidance of your tax rate being about 25% in FY '25.
Now with substantial acquisitions, would there be any change in that at a blended level, overall level?
No, there is no significant change because of the acquisitions. The trigger for the tax rate was related to our Guwahati facility.
So that still remains to be the case.
Having that we are able to get a lot of -- some of -- a lot of the dermatology products in our own plant, which is a little ambitious for this year, but if we are able to get it, then we will see some benefits coming out of that.
Okay. But how would that be because of the plant is coming out of the tax holiday, then how would that benefit?
So currently, the dermatology formulations are all manufactured by third parties. So when we get it in and we are working on getting it into our Gujarat facility, which is at a 15% tax rate.
The next question is from the line of Prashant Nair from AMBIT Capital.
Can you share the share of sulfonylureas products in the diabetes portfolio for this fiscal? That's number one.
And secondly, how have you seen the diabetes market overall evolve after the Sitagliptin launch.
Has there been any acceleration shift of the market. To Sitagliptin away from either sulfonylureas or also you have Vildagliptin. So how have these products kind of played out with [indiscernible] Sitagliptin coming?
Yes, Prashant. So we'll just fetch out the data for sulfonylureas. 60% is what KK tells me. There has been a lot of changes. I mean let me tell you we've grown by 25% with diabetes therapy in this fiscal year. A lot of that growth has been driven by the newer products we already articulated that from SGLT and DPP4 point of view, the contribution has gone up to 41%. This was the last time it has been discussed.
The changes are happening quite rapidly actually. We see that Teneligliptin which became very big in the first 4 years that we got shifted to Vildagliptin and it slowed down. We are seeing a similar tend in plain Vildagliptin. But Vildagliptin is now driven by the combination of Vildagliptin [ that double its process ]. So the change is actually shift. Because we haven't had a time when in 4 years' time, so many products have come out of the cliff -- out of the patient.
As far as our position, we know our position. We still feel that the market is still shaping up when it comes to Sitagliptin in combinations, right? We hold a #3 and #4 rank and we put that both products together. But we still feel that the report is not out yet. The market is still evolving. So that's how -- that the overview of how the newer markets are behaving.
And again, on an overall basis, putting all these things together, how do you see this therapy growing for you in the next -- say, over the next year or couple of years?
So in fact, we did an internal analysis, which we do for our [indiscernible]. And we can -- we are happy to share it with you at some point of time that -- last year, [indiscernible] were #1 company in terms of gains [indiscernible] and combination. So we continue to have a good share between the new therapies.
If you look at diabetes growth, diabetes has been our strength. At no point of time I remember diabetes is not growing far, far ahead of the market.
And because this [ tonic ] is sticky, we believe that we have some kind of a grip in that market. So the growth rates will continue in the same trajectory.
The next question is from the line of Tarang from Old Bridge Capital.
KK, I just wanted to double check in FY '23, there are no revenues flowing from Zac D or Zayo? Would that be a right assertion?
Yes. There were returns that we took, as I mentioned.
Okay. And the growth numbers that you enumerated in your opening address, these are all on the business, right?
These are not AIOCD numbers. These are on your P&L, correct?
All these are from a [ P&L ].
No, no. But [ AIOCD ] also reports to 15% to growth for a [ 14.5% ] growth.
It does, but in the first para that we spoke about, we only spoke about primary numbers. Let's not refer to AIOCD numbers.
The next question is from the line of Ankur Shah from Quasar Capital.
I was referring to Slide #15. So considering that top 20 brands now account for almost 70% of the revenues. And considering the acquisitions which we have done in the last 1, 1.5 years. Can you provide us sort of a consolidated view on how the company will look [ 6 months ] down the line with what kind of revenues?
And once we have set that base, how do we plan to grow this organically, what will be a sustainable growth rate? Can you throw some light on that?
One of the most frequented words in the entire presentation is organic. So it's all over the place. And if we will take one more quarter to you all, and we understand where you are coming from.
Just give us one quarter now, as I already said that Oaknet has become a big piece for us, and it's just kind of forming up in the new year. So maybe when we talk about the first quarter numbers, we will be -- we have a much better grip on where the numbers anything like to go.
Okay. And sir, the second follow-up question, sir, some of the brands are reaching very good scale. So now we plan to increase our coverage, our distribution, like how do we tend to take these brand to really at a mega scale, if you have some thoughts on that?
So you see last year, there has been a significant improvement in the stand-alone HR also, which means that we have added people by the end of the year. So as per the brand and as per the reach, we keep on adding people when they're wherever required. So in the diabetes where the brands are getting bigger, we added some people by the end of the last year.
So that's a continuous process, which we keep on -- which we keep on undertaking depending upon what is the reach into the reporting prescription markets and other surveys.
So we are behind the big brands almost at most of the given point, the bigger -- bigger brands have grown more than the market. So we continue to have a very sharp view on expansion, whether it is people expansion, coverage expansion or the portfolio expansion.
Okay. Okay. And sir, the last question on the manufacturing side. So you mentioned that you're trying to transfer some of the -- a lot of the Derma products into the Ahmedabad facility. So I was just thinking that the acquisitions have been done in the last year and whereas our facility was planned since quite some time. So is there any additional CapEx that you will be undertaking to make this facility viable to manufacture derma products?
There will be some incremental CapEx. We will get right now, it's a little bit we are just talking to the possibility side.
We really don't have the plan as of now, but there is an intent to make it possible.
And what happens because we have the basic infrastructure done, it's only the bolt-on flat in machinery, which is required.
So the chances are that you should be able to turn around.
Once we get there, we'll let you know what is the kind of CapEx, which we are looking for to get these things inside.
And sir, the major cost benefit analysis for this particular derma manufacturing is the tax, which is we will be saving on effect.
Otherwise, it doesn't make sense, right?
There is a gross margin benefit also which we get whenever we bring products from third-party to internal manufacturing, there is a -- they usually pay for itself on a gross margin improvement basis. The tax thing is a top of kind of a benefit.
For gross margin, we will be paying off for CapEx and working capital, right?
Yes. But they usually help you and you typically don't recover this in 1-year right? That's not the intent. But over an acceptable period of time, 3 to 5 years, the project usually pays for itself. That's how we think about it.
[Operator Instructions] The next question is from the line of Gagan Thareja from ASK.
Am I audible?
Yes.
Yes, you are.
Sir, first question is simply around your accounts. One, what should we pencil in for your effective P&L tax rate in FY '24? And second, what sort of debt repayment are you budgeting for FY '24?
[indiscernible] target for this year, it should in the range of 14%, 15%. And we intend to pay off around INR 400 crores of debt this year -- INR 400 crores to INR 500 crores.
INR 400 to INR 500 crores. And on the Oaknet piece, while -- it's worked out strangely for you in FY '23. Is it possible for you to give us some broad-based idea of how should we think of the Oaknet piece in terms of its scale and in terms of its margin profile for the next couple of years?
And I mean, what are your plans in terms of operating adjacencies, if possible in the Oaknet piece. And also, you've acquired brands from Glenmark and Reddy's, how should we sort of think about the scale of these 2.
And in terms of margins, what's the profile currently and how you will stack up in the next 2, 3 years?
I mean, I'm sorry, Gagan, I have to repeat that we'll be able to give you broad colors once the quarter is over. But if you insist, I will touch upon a couple of things.
#1 is very important. You see the gross margins of the Oaknet business and [indiscernible] Derma business will be closer to 80%. It will be in the range of 78% to 80%, which gives us a headroom for margin expansion.
Even if you see, we have INR 12 crores of sales from these 2 products coming in the last quarter, and the margins are where you are. So the margins are intact. There has been a good recovery. Recovery, when I say recovery, I mean the sales which was there outside when we bought and how much of that we are able to get inside. So there has been a very good recovery in the Glenmark brands. Dr. Reddy because it came in, in March, we still need one more one to get in.
So fairly positive on dermatology. Also, remember that if we wouldn't have got these 2 bolt-on acquisition, we were ready with a large number of new introductions, which now we are postponing it for the second half. So there is quite a lot which is happening in the Dermatology business.
And as a company, we are very keen because it's a very large therapy. We are #3 in our covered market. Overall, we are #10 or 11 between that. And we have a lot of spaces which are completely empty.
So there is a lot of excitement in the organization, but to give you more color, giving me one quarter.
So I'm just sort of trying to understand that at the optimal level, would Oaknet margins be comparable or similar to what you have on your stand-alone piece? Or is that going to be a different sort of a sustainable number?
And if you could sort of enumerate what that possibly could be once you've stabilized and optimize it?
And secondly, obviously, there will be operating leverage and you are talking of improvement in overall margins as well. Is it possible to give us some sort of a broadband to work with?
I mean, conservatively, if there is a number that -- or a range that you think is safely given by you at this point in time?
No, it's not a question of -- okay. So if you want to really scratch that. So Eris is 82% gross margin roughly and INR 5 lakh YPM and is 38% of EBITDA. This is the metric for the stand-alone Eris. Now Oaknet is around 80% of gross margin between 78% to 80% of margin, again INR 5 lakh of YPM.
So when these 2 metrics are there, there is a strong chance that [indiscernible] is the bottom line could be close to the stand-alone margin.
I'm just giving these 3 metrics. So it's just a matter of time when everything comes together, man give us a quarter will get back to you. We are excited about this.
We move on to the next question from the line of Kunal Dhamesha from Macquarie.
Just one bookkeeping question on the write-off that we have taken for Zac D and Zayo in this year, what would be the cumulative amount for FY '23?
Zayo there is no stocks that we have taken back. So Zayo is something which fell short. So there was no supplies for us. So we couldn't supply it.
But was there any inventory on our book?
No we finished of the inventories. We ran out of stock. There were no stocks. So that's where the sale went disrupted. If you look at the [ AICD in ] [indiscernible], at the peak, it should INR 50 crore last to last. Kruti am I right and then sell to INR 20 crore.
INR 17 crore.
So if you look at the data -- within this data, you'll find that [ AICD ] report from INR 50 crore of peak last to last year is INR 17 crores this year.
So clearly, we answer a short of the inventory and the group service that demand. So that's where -- that loss comes in. As far as Zac D is concerned.that be to the tune of INR 20 crores...
Zac D is to the tune of INR 20 crores. INR 20 crores, INR 22 crores.
What?
Combination of [indiscernible] together.
Zac D [indiscernible] Look, what happens Zac D some of the Zac D we destroyed even without putting them in the market. So that piece will only be taken at the COGs level. So you consider INR 7 crores to INR 8 crores from that point of view, your own sale point of view.
Okay. Sure. And then secondly, while we are not guiding for an EBITDA margin at would you say with the improvement in FY '24 would be [indiscernible] we would start seeing that from quarter 1 [indiscernible] or it would be more kind of towards the end or for the second half of FY '24?
So look, the big movements will come from Oaknet. And we believe that we will well around 75% of the movement will be caught in quarter 1 itself. So if we reach 75% of what we are thinking, we are up and running.
The next question is from the line of Harshal Patil from Mirae Asset.
Sir, one of my questions has already been answered on the margins. Yes, we'll wait for input from you next quarter.
Sir, just one clarification I wanted to -- from you. You definitely said that there is some postponement of new launches that was new product launches that was planned in FY '23 on to FY '24.
So can you just let us know what could be the number of launches that have been lined up for '24?
So I was talking about the Dermatology piece. I was not talking about the entire piece. So what we are saying is when the acquisitions are not planned. We were already developing formulations and talking to some of the international guys to introduce newer products in this calendar year -- in the current financial year, which we are now postponing to the second half of the year. The first half focus is to put whatever we have acquired together and consolidate on that.
The total number of products which we had discussed and had reached some kind of conclusion for all in 2024. But don't confuse it with diabetes kind of launches. Diabetes kind of launches are very bulky. They are far in few, but they will be bulky.
In dermatology, it is far more fragmented. And the brand sizes are not as big as diabetes. So '24 might look like a very big number. But here, you don't plan to make brand of [ INR 300 ] crores all the time.
The next question comes from the line of Prakash Agarwal from Axis Capital.
Yes. A quick one. [indiscernible] how much we have as on March 23 and what is the addition we are looking for the [indiscernible].
We missed you, Prakash. Please say it again.
On the MR [indiscernible].
Sorry, Sir, there's a lot of echo from your line, Mr. Agarwal.
Is it better?
No sir, there is still echo.
Can I go ahead.
Prakash please go ahead. We can hear you.
Yes. No, just wanted to move the MR number for fiscal '23 and likely addition for fiscal '24?
What we can see as of Prakash is we might need one more division in dermatology, but that will happen in the second half. A division in dermatology means roughly around 100 people, take some and leave some. So that is the visibility as of now.
And what is the current status as of now?
Some 700 in Oaknet close to.
That's including pre dermatology and one gynaecology.
Yes. So 700 in Oaknet as of now, might go to 800 by the end of this year.
And in total?
So Stand-alone is 2,200 and Oaknet is 700. So that is largely the total number.
Okay, okay. And then the max, you will add about 100 more.
Yes it looks like Prakash.
Okay. And just one clarification. So you said, you would diverge Oaknet and [indiscernible].
Your line is breaking up. Can you come again?
Okay, now I'll take it offline.
The next question is from the line of Punit Pujara from Helios Capital.
Just one clarification. On Slide 4 and Slide 6, numbers for Oaknet revenue and EBITDA are slightly different. Could you clarify, please?
The Slide 4 shows the numbers that are on our books because the acquisition happened in mid-May. So Oaknet full year revenues are INR 250 crores in but because Oaknet was with us for 10.5 months of the year. So what is in our books is INR 226 crores.
Okay. So slight fixes pro forma numbers?
Yes. Full year. What Oaknet actually did for the full year.
[Operator Instructions]. There are no further questions, I now hand the conference over to Mr. V. Krishnakumar for his closing comments.
Thank you. Financial year '23 has been a year of massive investment for us, starting with the Oaknet deal in May '22. Right through to the DRL brands deal March '23. However, we are happy to note that things have started coming together well as early as starting with April.
We are in the midst of operationally integrating Eris in Oaknet, and we are confident that the combined entity will deliver industry-leading growth, along with significant margin expansion.
We will continue to focus on good quality growth, which for us means growth achieved without the dilution of gross margin and cash conversion ratio. We will continue to be guided by the thesis as we execute on our multiple growth levers such as power brand expansion, new product pipeline and acquisitions. Thank you, and have a good day.
Thank you, members of the management team. Ladies and gentlemen, on behalf of Eris Lifesciences Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.