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Hester Biosciences Ltd
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Ladies and gentlemen, good day, and welcome to Hester Biosciences Limited Q1 FY '23 Financial Results Conference Call hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Rohan. Thank you, and over to you, sir.
Thank you, Priya. Good afternoon, everyone, and welcome to Hester Biosciences Q1 FY '23 Earnings Conference Call.
Today, we have the senior management with us Mr. Rajiv Gandhi, CEO and Managing Director; Ms. Priya Gandhi, Executive Director; and Mr. Nikhil Jhanwar, CFO, on this call. I thank the management for giving ICICI Securities team the opportunity to host this call. Over to you, sir.
Good afternoon to you. Good afternoon, everybody on the call. As always, nice being again once in 3 months with all of you and present to you the working of our company, Hester Biosciences.
The results were declared today. The press note has also been circulated, and I'm sure you have both these documents with you. This is one of those rare times after a very, very long time that I'm addressing everybody with results which show a down in the revenue as well as a down on the profitability side, et cetera.
Having said that, first, let me just go through briefly the financials and then give you my explanation for the functioning of the company, et cetera.
Our sales revenues have gone down by 14%. And in that, if you go -- if you look at the sale of vaccine, as against the health products, vaccine sales have gone down by 30% while the health product sales have gone up by 42%. Now the reason for the profitability to go down is that the vaccines are much more profitable than the health products. Therefore, a decrease in the vaccine always leads to a decrease on the profitability of the company.
At the same time, if you have noticed, since the last 2 years, I've always been stressing that we, as a company, would like to derisk and make sure that all divisions contribute equally to the top line as well as to the bottom line and we take on the business further so that at no point of time do we get stuck up because of one branch doing bad or one branch doing good, et cetera.
On the vaccines side, the reason for this low sales being on a comparative basis is that the corresponding quarter last year was -- last to last year was exceptionally good because it was a busy situation in the country while there were -- it was an impact from COVID. But because of the disease situation, we had an unprecedented sale for a few of our vaccines, and that pushed up the sales to an extremely high level. So one issue is that this quarter, we are -- the last year's quarter, we are comparing to an exceptionally good poultry vaccine quarter year before last. So that, on a relative basis, also that makes a difference.
On -- looking at it absolutely in this year, the poultry industry has been going through a lot of problem in the last 1 year's time or at least 9 to 10 months' time. Feed prices have gone up. Poultry production costs have gone up. So inputs, everything has gone up. Output has not. It's not even just been stable, but at times it has even gone down. So it has impacted the poultry a lot, and many poultry farmers have reduced the population of the birds at their farms. So there has been an actual degrowth. It is not that we have lost any market share at all. There has been a degrowth in the poultry industry, which has led to this lower sales. Also, there has not been any exceptional condition as which was there last year. So these are the reasons why -- due to which the health products -- vaccine sales have gone down.
We have been continuously pushing all the divisions and the health products division did well showing a growth of 42%. But on the other side, the profitability of the health products is lower than that of vaccine. So that has impacted the bottom line.
Having said that, we are taking things further. And we -- while we will continue to push the health products division harder and harder to get higher and higher sales, we are definitely looking into the profitability situation as far as health products are concerned. Even the last year, the input cost from the health products, all raw materials went up tremendously. We were not able to pass on those costs on to the consumers. So by way of that, we have lost in our profitability, which otherwise was planned on the last to last year's margin, but we could not achieve those margins just because we could not pass the cost on. And it's not that we could not. We did not want to pass on these costs. We are growing, growing our business. We are stabilizing ourselves. And at this point, we did not want to unnecessarily rock the boat too much by completely pushing on our cost on to the end user.
So these are the reasons for which we have had a downside on the profit at the same time because of the less sales in vaccine.
Another thing is that we have also been putting in a lot of effort last year on the market development side. We have hired people. Our team has grown up by 1.5x over what it was at the beginning of the year. So all these costs have gone in. And the output, of course, on the poultry side, we have not been able to get those outputs. So these are the additional costs that have also put in -- that have gone in.
Another aspect while comparing the 2 quarters last year and last to last year, please also keep in mind, last to last year, because of COVID, there were many restrictions on travel. And therefore, our cost on sales was relatively lower. And this year, it has actually been higher. So at that time, the costs were lower, the sales was very high of poultry vaccine so everything fit in as last to last year, while everything is on the other side as far as the sale is concerned.
But having said all that, going further from here, we are very confident that this thing is now going to be arrested. I think with this quarter gone, the Q2 gone, we have definitely arrested the degrowth, the downtrend, and now we are definitely on an upward swing. This is assured. I mean you could take this as an assurance from me.
Now certain indicators which I can give you at the moment, which would prove my point that we are now on an upside, lumpy skin disease is a current big problem throughout the country. We are one of the only suppliers of this vaccine, and it has given us a tremendous sale in this quarter as far as lumpy skin disease is concerned. We have reasons to believe that this vaccine would be used now on a year-on-year basis. This vaccine is to be given to cattle once in a year. So the vaccine gives immunity for 1 year and then you give it after a year. So we hope that there would be a continuous repeated business as far as lumpy skin disease is concerned.
Talking about the other vaccine, PPR vaccine for sheep and goat. The national tender was already loaded. We were L1. We have been given the mandate to supply the PPR vaccine across the country. Unfortunately, the supplies did not start in the last quarter, but we believe that they will start in this quarter in the next 30 days' time. That also is going to give us an extremely, extremely big boost as far as PPR vaccine is concerned for supplies to all over the country. The tender details are all public. There is nothing just known to us. The requirement, it specifies approximately INR 20 crores of business supplies to be made by us to the government in 15 to 18 months. These months have already passed by. These supplies could go for the time period for which they want the supplies, maybe lesser time. So that's one of the very, very big upside that we are looking at this point of time.
Another thing is that you would have recently read in the paper just it was 2 days ago. The government of India has now allowed to manufacture and sell the H9N2 avian influenza vaccine for the poultry. That also is likely to give us some boost, not a very big boost, but it is definitely going to help us get some boost because our other vaccines like the Newcastle disease vaccine, et cetera, we were giving them in a very fortified manner, which was giving a lot of protection to birds against H9N2, but now we will be making a dedicated vaccine for H9N2, which will reduce the sale of our Newcastle vaccine to some extent, but it will now directly give us sales in H9N2. So these are the indicators specifically on the poultry side -- and sorry, on the vaccine side, which give us reasons to believe that we have got a very big upward trend coming up for us in this quarter as well as in the coming quarter.
Last but not the least, there is the Petcare division. We have launched the Petcare division. After I finish my talk, I will request Priya to talk a little bit on the Petcare division. She will give you an idea of the issues in the Petcare division.
Other developments that we are working on over here in the company is we are currently looking at developing the classical swine fever vaccine, the sheep pox vaccine, the new version of the Brucella vaccine. All these vaccines are under R&D. And hopefully, in the next 6 months' time to 8 months' time, we should be ready with these vaccines as well, which would again give us some sale from all these 3 vaccines.
As you all recollect, we have been expanding our annual vaccine infrastructure. There are 2 expansions that are on the way, which are already fully paid for and in the CapEx is already completed in both of them. One being the bulk antigen production capacity. So that's something which is about to commence, and we should be starting in the next 3 months' time, and that should give us a big boost, and it will double the production capacity of our current vaccine. So this could be used for poultry as well as a few large animal vaccine.
The other expansion was for the fill finish. That has got a big delayed because we are -- nothing to do internally, nothing to do with us. It's just that the supply of equipment. We are dependent on international -- we are dependent on a foreign company. And therefore, there is a delay by them. It is an unprecedented long delay. As I said, nothing to do with us. We are just keeping our fingers crossed, hoping to get the parts required and we soon get into it, but that should start in Q4 -- sorry, the bulk antigen would start in Q3 itself, while the fill finish would start in Q4. It was a mistake that I made. So these are the updates as far as the poultry -- the animal vaccine is concerned.
Looking into the business of our subsidiaries Hester Nepal. There also we went through a tough time in the last quarter because there were 0 tenders from FAO, but we have been talking to FAO. They say that now things are rising, and they would start because -- the mandate to FAO is very clear towards eradication of PPR. So they say that they are working hard towards it. We have reasons to believe that this tender business should start. But as I mentioned in my earlier calls, in my earlier quarters, we are also now putting in a lot of effort from there to get domestic business up. Now that activity is slowly gathering moss. And therefore, hopefully, the local business should also increase as well as we should start getting the tenders from FAO for the PPR vaccine to be supplied to all across the globe.
As for Africa, 5 vaccines have been commercially made. We have got the NOC to start marketing 3 of them. 2 we would be getting in the next few weeks' time. And we are quite ready to take on marketing of these vaccines.
Today, the situation worldwide being a little bit on the recessionary side due to various reasons, inflation, the geopolitical situation, the whole programs of African countries, though they had earlier committed to us, they are a little bit slow in that, but all this has to pick up and has to happen at some point of time. A lot of many of my comments are that this has not happened, that has not happened in India, in Nepal, in Africa. But at the end of the day, this far, but -- and how much far more? It can't just go on and on like this. And it's not just wishful thinking that it will all improve. I have full reasons to believe that things should turn around and we should be able to take things further.
So Hester Africa, we are more or less set. We manufacture a pure lumpy skin disease vaccine over there. And today, if you see on Internet worldwide, there are problems of lumpy skin. They are suddenly shot up. We would, again, be one of the very few companies in the world to enter Africa, making a lumpy skin disease vaccine strain. And that also we are hoping that we should get a lot of international inquiries for that.
And then CBPP and Gumboro vaccine, Newcastle vaccine in poultry and PPR also from there for the Tanzanian market. So all our efforts are in, and I think all of these efforts should pay off now within the short time.
We have a joint venture with Thrishool on the distribution side. That company has also started performing well. In fact, though not mentioned in our press note, we have sort of -- we are 50% owners Hester Africa -- or Hester India, sorry, is a 50% owner of Thrishool, where we have shown a quarterly profit of equivalent to INR 1.47 crores, which is 50% of the profit as much as our shareholding is concerned. So the actual profit is multiplied by 2, a little over INR 3 crore, so that is catching up, and we are going to be doing a very aggressive distribution in beginning from Tanzania and then taking it further to, first, East Africa, then in Southern African countries and then to West Africa. So this is all as far as our animal vaccines, health products business is concerned.
Talking a little about the COVID vaccine, the Covaxin drug substance, which we have an agreement with Bharat Biotech, for which we have got funding from BIRAC. The project is at the moment -- we are having validation of the facility. We have just recently had a meeting with Bharat Biotech and we are putting in a structure so that by -- in the next 3 months or so, we should be able to go on stream and take up the first batch for the Covaxin drug substance for Bharat Biotech for them to produce the Covaxin vaccine.
This facility, as I mentioned, it is a multipurpose facility. It is not restricted to Covaxin. There are many questions, even last time what happens if the Covaxin demand goes down. We have already put in a strong plan, what if. And we are ready to implement that plan. The moment we get any indication on the changing demand for the drug substance for the Covaxin vaccine. So we are fully prepared. It is not of any concern to us at this point of time on what will we do with the facility in the event of the drug substance not being required for the production of Covaxin.
So with this, I complete my presentation to you on Hester, on all its matters, except for the Pet, which I now give it -- I request Priya to talk a little bit on the Pet division.
Over to you, Priya.
Thank you. Good afternoon, everyone. This is Priya Gandhi. So sometime around the end of quarter 4 in financial year 2022, we have a -- company wanted to introduce the Pet division to become an overall animal health company to address various species along with poultry and animal health care. So we decided to include the Pet division. While this quarter 1, our sales has been non-consequential, the top [ FIs ] of the top line. However, there has been a lot of back-end working that have gone into -- in the quarter.
We have established a full-seeded sales force, which works out of Delhi, Calcutta, Bangalore, Bombay to address all the 4 regions of the country. We have identified a couple of products. We already have 11 products which are out in the market, various products for -- to address, anti-infective, parasite, grooming products, nutritional, therapeutic products, there are 10 to 11 products which are already out in the market. From quarter 2 onwards, we are also looking at more and more products to address -- to launch in the Pet division.
Speaking of the distribution and supply chain, for now, it's going to be very similar to what it is for the poultry as well as animal health care division, where it's going to primarily be through secondary sales, whereas we have appointed distributors, we sell through veterinarians. Because quite a few of our products from the 11 products that I just mentioned, are prescription-based product that we will have to be given via the veterinary doctors or retailers through prescriptions. So this is the model that we want to follow for now, if I speak of the sales and distribution.
Like I mentioned, we've made sales in the last 1, 1.5 months only because before this we were establishing the products and establishing manufacturers such that we could keep the product quality intact. So we wanted to identify manufacturers that could do justice to this one prerequisite that we had. So a lot of our efforts have gone into all this back in planning in the last 4 months. And hopefully, from the second quarter, we will -- it will really -- the top line will start shooting up. And of course, from Q3, Q4 onwards, we're also going to look at launching more and more products in this division. Thank you.
That completes our presentation. We now await questions.
[Operator Instructions] We take the first question from the line of Ankit Kanodia from Smart Sync Services.
My first question is related to -- if you look at our revenues, so from FY '19 until today, it has been close to that INR 180 crores to INR 200 crores mark. And we all know how our plan for Nepal and Africa had been delayed for whatever reasons it has been. And that we have scaled up our team to manage the new sort of growth which we expect to come, plus there has also been some expansion plans which is under the way. I think it would be shared in that EBITDA margins and the return ratios for FY '23 would take a hit. However, what would give you the confidence that maybe in FY '24 things are going to look up? If you can give some color, both qualitatively and quantitatively, that would really help, sir.
So was it your observation? Or is there a question?
The question is basically the -- how confident we are that FY '23 and FY '24 would bring -- would bring back some growth? Which -- because if you look at the years before FY '19, we were [indiscernible]
Yes. What has happened is -- I agree with you, 2021 -- I mean, more than that, '19, '20, 2021, yes, there has been a little bit of disruption from what we should have been otherwise, but it's somehow -- and what has happened is all our expansions also came during that time. So it makes us look even slower than what we should have -- what otherwise we would have been. Had there been no expansions today, we would have been in a much more comfortable situation as far as profitability and all that is concerned. But everything all happened at the same time. We see steady condition at same time. Our investment, same time. Geopolitical situation, same time. But I'm sure in the coming months to come, coming 1 year, we will be able to completely turn around, and we will be able to reach up to the expectations as what we have built for ourselves. What I have made known to all of you and take it further. It's not that I'm trying to not give a specific answer, but there is a level of confidence in it to make sure that all these things will turn around completely.
Thank you, sir. And my next question would be related to the compounding animal market, which we have recently started. Any ballpark number? I mean, when do we see this becoming a number in terms of sales where it would be meaningful to our overall total? Any guidelines or any target you have him mind?
Yes. I could take that question instead of Priya. See, the pet business is a completely different marketing as against the other products. Other products are B2B and B2C and even creating demand. There is an emotional portion involved in pet business as against pure economics for the other production animal.
As per our forecast, as per our financial planning, in this financial year itself, we should be able to break even as far as the sales are concerned. And going further, how big we would be, yes, there are plans made, but we would not really want to get into discussing this at all at this point of time. I mean we have been passing through tough times for the last 2 years, just let us breathe and let's just put our head down and take it further. Trust me, this division is also going to give us a lot of pride and a lot of awareness. We would be the only company in the country that has business for production animals as well as pet animals.
Great. Sir, my last question would be related to the Africa business. So now that the country commencement has happened, and we do have a sizable capacity over there. So any ballpark guidance you would want to give? I'm not looking at a number, per se, but in terms of capacity utilization, any target you have in mind 80%, 60%, 100%?
Any vaccine plant built anywhere in the world, the capacities are always higher than what it is needed at a point of time. Because the cost to make it a little bigger are humongously high. So we have got a good sizable plant. Even if we are able to achieve around 20% of our production capacity within the next around 6 to 8 months' time, we would be more than happy and it would be as per our forecast.
[Operator Instructions] We take the next question from the line of Mr. Rehan from -- Advisors.
Sir, am I audible?
I'm sorry to interrupt, sir. Sir, your line is echoing. [Operator Instructions]
Yes, I switched to the handset.
Better. I can hear now, yes.
Sir, what would be the reason that we made an operating loss in the animal healthcare segment?
[Operator Instructions] There's a lot of disturbance from your line, sir.
We'll take the next question from the line of Manish Jain from GormalOne LLP.
First question was just a housekeeping question for Nikhil Jhanwar on the pending CapEx for FY '23 and plan for FY '24. What is the current gross debt and gross cash on a consolidated basis?
Standalone, it is INR 154 crores. And [Indiscernible] it is INR 256 crores. And as regards the pending CapEx, maybe -- and in terms of [ work it out ] and -- very nominal [ Manish Ji ] CapEx. All the CapEx has happened over here in Africa. Everything. It's just that now this CapEx has to start giving results.
Excellent. And...
Including the COVID drug substance, that also CapEx has already been incurred.
Perfect. And I just wanted to know on avian influenza. We're talking of sales only in exports or both India and exports?
India and exports. Start up with India. In fact, the moment we got this notification, we have floated it out to many countries, and we have started getting inquiries for the H9N2 avian influenza vaccine, but we will start off by selling in India. And in the meantime, of course, international countries -- other countries you need registration. So that would happen subsequently, but it would happen.
Okay. Moving on to lumpy skin disease. Given the kind of very aggressive flaring up of the disease across India, especially in Gujarat, Rajasthan, Punjab and other states, should the demand come from the market? Are you able to satisfy all the demand which did come up?
Yes. It could be a little staggered at this point of time because the rush has just suddenly come in, but we -- let it be in September, we should be absolutely capable of giving and -- sorry, by end of August, mid-September, we should be able to do as much quantity as desired.
Okay. And my last question was, before I join the queue, was on -- you have mentioned we are making some change or improvement to the Brucella vaccine. What exactly are we doing there?
So we acquired the technology from government of India to produce subunit vaccine, and they call it Delta Part Brucella vaccine -- Delta Part 2 of Brucella vaccine. So that's the technology which we have acquired. And government is also waiting, and they are supporting us -- fully pushing us to see that -- make that vaccine. And in terms of improvement, it would be a little less costlier vaccine in terms of manufacturing, and it would give as much or better protection.
Okay. And just one related question on lumpy skin disease. Once, given the kind of disease prevalence, do we also have a complete lumpy skin disease treatment option that we offer right now?
See, lumpy skin disease is a viral disease, and there is no direct cure for the lumpy skin disease. But as always, in us human being also, whenever there is a viral attack, you address the bacterial infection, and that reduces the intensity on to the animal, on to the cattle. There is no direct treatment for lumpy skin disease. Prevention is the only method at this point of time.
[Operator Instructions] We take the question from the line of Mr. Mithun Aswath from Kivah Advisors.
Can you -- segmental breakup you give in the press release, you've given vaccines and other.
[Technical Difficulty]
I think we have lost the line for Mr. Mithun. I am taking up the next question, that is from the line of Yash from [ Mandel Vala Family Office ].
Am I audible?
Yes, I can hear you loud and clear.
Okay. Great. So, sir, can you talk a bit more about this lumpy skin disease outbreak? How severe is it? And how does it affect the livelihood of the dairy farmer? That's one. Secondly, has the vaccine supplies for the cities already started for us? This is in India. And what could be the revenue potential opportunity for us from the lumpy skin disease vaccine?
Okay. As far as first, I'll answer your question on lumpy skin disease. It is a severe -- it is a massive problem to the cattle owners because the cow falls sick and it gets lumps all across its body. It also gets fever, and there are other symptoms. In fact, if you can go on YouTube, we have even uploaded a film on lumpy skin disease, which would help you understand the disease itself. It's a viral disease. There is no other cure for it, and it also results in complete stoppage of giving milk, and death is the end in many cases. So it's a very big loss-making disease for the cattle farmers. It's a disease which is a very high economical importance for them.
As far as the vaccine is concerned, we produce a vaccine called the goat pox vaccine Uttarkashi strain. And the goat pox vaccine is also effective against lumpy skin disease. Internationally, there is also another goat pox vaccine which is effective against lumpy skin disease. Even international animal health organization also recommend that. Having made the goat pox vaccine around 2 years ago, the same vaccine is being administered against lumpy skin disease, but at a higher dose.
In goat, you give it as 1 mL. In cattle, you give it up to 3 mL against LSD, and it is Uttarkashi strain. We have already been producing this vaccine for 2 years. It's just that we have had to ramp up the manufacturing, and we have to supply. Supplies have already started in a reasonable big way. In this month and next month, it would be an all-time higher supply that we would be making on the lumpy skin disease vaccine.
And the potential revenue opportunity for us, if we just take those 3 or 4 states where the outbreak is?
I mean it could go in a few crores. It's very difficult to give exact opportunities in terms of vaccines. And these are -- we would not even want to get into those specific details and discussion, but it is an opportunity which could take us absolutely to the next [ tenure ].. That's what I can tell you for sure.
We take the next question from the line of Mr. Mithun from Kivah Advisors.
Yes. Can you hear me now?
Yes. I can hear you clearly.
I just wanted to understand the kind of CapEx that you've done in Africa, now also in India, you're doubling your capacity. I just wanted to understand by when do you think these will actually get utilized. Because right now, I think you have the problem of plenty in terms of capacity of both, say, the Covaxin, vaccines in Africa as well. Now, even in India, you're doubling capacity. But if you're not going to see demand from the poultry and these other spaces, how are you going to manage to grow and optimize these capacities? Because it's been quite a long time since you've put up, even the African facility, and nothing has actually taken off. That was the first question.
Second question was on the [ INR 60 crores ] in terms of amount that you will receive as advance for the Covaxin facility that you've created. I just wanted to understand, if Covaxin does not take off, would you still be able to get that grant? That was my second question.
Yes. So let me answer the second question. It's a multipurpose facility. And even if we -- at the moment, it is planned to make the Covaxin drug substance, which we will do it in the next few months. And so there is nothing that is going to stop direct from giving us -- completing the whole grant. I mean we have already received the first tranche. So there is nothing that is going to stop us from that. And after producing this vaccine, we are ready to even repurpose the facility for any other vaccine that comes up, but nothing is going to stop BIRAC from giving us the grant amount.
Okay. That's good.
Yes. And the first question is capacity utilization across all the plants. As I want -- as I mentioned even in my talk that today it appears that we have everything, more capacity, less sales. Yes, this is a typical phase that we are going through at this point of time. But things are going to change. As far as Indian capacity is concerned. We are very sure of the demand that is going to be coming up over here. These Newcastle vaccines are going to come up. Poultry, this is only a temporary situation. Yes, the temporary means it could be sometimes for 2 months, it could be sometimes for 6, 8, 10 months, but it is surely a temporary situation with this H9N2 now being allowed. In India, of course, we would have a marginal sales increase. But internationally, it has opened up a completely new territory and an opportunity for us.
And our facility was made, in any case, without even taking H9N2 or anything. It's not that now we have H9N2 so now we feel that, oh, now we are secure. There is nothing of that sort. We are anyway in good shape. And we will be -- the demand is going to go up, and we are going to be taking it further.
African continents, we have had innumerable things in the last 3, 4 years with all countries, all department of animal husbandry assembling all confirming their requirements, everything, including the meetings have been attended by FAO by the African Union. There is a lot of dependency on this plant. But unfortunately, COVID, geopolitical situation, everything has just added on together, which there was -- nobody had even expected this.
So give some time, and I'm sure all this would straighten out. If you ask me exactly when, 2 months, 3 months, 8 months, 9 months, I'm not able to give you absolute picture because nothing of these things are in my hand. But at the same time, I would not say anything is out of control. Demand is slowly improving. Let's take the case of Hester Nepal. We never had an idea that we would sell even more than INR 1 lakh or INR 2 lakh material in a month in the country itself over there. Today, our local turnover has reached to nearly approximately INR 6 crores or something of that sort. And it is increasing. It is even increasing day by day.
So as we are moving, as the situations are changing, we are also adapting ourselves, and we will make a headway and we will get through all these things. As I said, it's not that I'm wishing. It's not that I'm optimistic. I'm reasonably confident. When I say I'm confident is that being prepared for the worst and then working for it. It's not just we hope for the best.
So I think we just need a little time. And when things happen, for example, lumpy skin disease, had we not had all these capacities, these vaccine, goat pox vaccine, nobody in the country was willing to buy the goat pox vaccine 3 years ago. We were the only company then another company bought the technology. And we bought it thinking, sometimes less -- at least buy the technology, keep it. And today, look at it.
I mean this quarter and the coming quarters are going to be quarters for lumpy skin disease vaccine. Never ever we would have experienced -- thought that we will have this much of sale. So I mean these are all vaccine, diseases, COVID, the world rushed to make COVID vaccines. The people made millions and billions in terms of doses, in terms of money. A lot work got done. So I mean, we are at it, and this we have created an infrastructure that could help us do many things in the near future.
[Operator Instructions] We take the next question from the line of [ Mr. Dhanraj Jain's ].
Can you hear me?
I can.
As I understand, animal health care division includes health care products and vaccine for the animals.
Yes.
So while going through the biggest segment results, I see there is a loss in animal health care in the year ended March '22. And every quarter, there is a loss. So for sale, we are losing INR 1 crore 68 lakh something. So what would be the breakeven sales for this?
See, what has happened is that with increasing in little sales, we have invested a lot on the marketing and on the distribution side, okay? And we recruited nearly 50% more people than what we had last year. And we are now more or less nearing towards a breakeven analysis. And I think, Nikhil...
[indiscernible] So sir, around INR 4 crores to INR 5 crores of additional sales of health products is the breakeven for the purpose of segment...
Of animal health products.
Okay. Got it. And for vaccine?
Vaccine, we are anyway -- we are profitable.
Okay. And sir, my next question is regarding this consolidated revenue. If you take a standard on revenue and consolidated revenue for June quarter, is almost same as [indiscernible]
Yes, yes. Yes, it is the same. Yes.
Despite there [ note #6 ] of the auditor, they have shown the revenue from the subsidiaries at some INR 99 crores. So the inter transfer [indiscernible]
No, no. So what happens is we are required to give the details of all the subsidiaries, Texas Lifesciences, which manufactures health products, sells it to Hester and Hester then in turn can sell to third parties. This turnover of subsidiary that eliminated both in the sales and purchase, and that's the reason it doesn't get replicated into the console results. but as a procedure related party transactions [indiscernible]
Because it is a related party transaction from company A of Hester to company B of Hester itself.
But there is a dependence on Nepal and Africa also because they are -- must not be supplying to you.
No, no. Nepal and they are not supplying, but then those sales are very, very minimal, very low at this point of time.
We take the next question from the line of [ Mr. Rehan ] from [ Sycamore Advisors ]
So sir, my question is with regards to the consolidated segmental results. For the June '21 quarter, you've shown an operating loss of INR 36 million in the animal health care segment in these results.
So last year, this was shown as a profit of INR 6.8 million. Just wanted to know what the reason is for this divergence. And if it is reclassification, can you please clarify what has been reclassified?
If you can clarify, INR 6.8 million, I'm not able to get. We are looking at the consoled results, correct?
Right. Consoled results, the segmented results where you've shown animal health care. So the INR 6.82 million was a profit that was shown in last year's results. While it's not shown in this quarter, I think something has been reclassified, as what I assume. So I just wanted a clarification on that.
Maybe I -- can I just look into it offline and revert to you on this? Right now, I don't have the number with me. So maybe let me have a look into this question and revert to you offline again.
We take the next question from the line of Alisha Mahawla at Envision Capital.
Sir, just wanted to understand that we have multiple levers for growth at our aligning for the remaining part of this year opportunities from lumpy skin disease, the PPR tender that will start, the Covaxin opportunities Q3, Q4. And also, we have commercialized 3 vaccines that are going to commercialize 3 vaccines in Africa. So what is the kind of growth that the company is aspiring now for this year?
For Africa, we have already commercialized 3 vaccines or 4 vaccines. 4 vaccines, I think, We have already commercialized, one is about to get commercialized. [indiscernible] Yes, 2 are in the pipeline. Sorry, I earlier said 5, 4 are commercialized and 2 are in the pipeline. So now -- in terms of sales from Africa are concerned, we are looking into the sales to a few government, specifically for the CBPP vaccine as well as the Newcastle disease in poultry, Gumboro in poultry and even the lumpy skin disease worldwide from there. So these are the opportunities that we are looking at. I would -- it would be really difficult for me to give a quantification of these things at this point of time. But overall, I think, by next quarter, we should be able to generate a reasonable amount of sales over there. And we hope that by mid-next year, we are already breakeven as far as Africa is concerned.
That's helpful giving us some color on the Africa business. I'm saying on the overall consolidated business, considering the opportunities in India, which are seen in India, plus globally, plus the PPR tender, et cetera. I'm saying on a consolidated basis, what is the kind of growth that the company is targeting for this year?
And this is -- I have the same answer for you what I answered earlier. We are working towards it. And the lumpy skin opportunity is huge. I don't want to give you the figures. You can wait for our next quarter results for that. The PPR tender is INR 20 crores. FAO wants to buy nearly INR 0.5 billion, not million, billion, in PPR vaccine. The moment that starts, I think we would be grappling to even put in 1 or 2 freeze dries to make sure that we supply to them. It's just that this has not happened at this point of time.
Okay. And with respect to your margins, while you did mention that your gross margins were impacted because vaccine is a higher-margin business, so [Indiscernible] this year. On an overall basis, what is the kind of sustainable margin that we're working with?
We could go back to our margins, which were there a year ago, and you could be rest assured that we would be at the least up to those margins, which we had at the least. So I think we are, for sure, our gross margin, we would definitely be in the higher 60s up to 70, we should be able to touch those margins. Our PAT, we have been talking at around 35% to 40%, we should be able to manage those margins. So I think that's what we are looking at.
We take the next follow-up question from the line of Mithun from Kivah Advisors.
Just a question on some of your subsidiaries. I think the African -- you have a distribution company which you set up, where you have only 50% stake and you have Texas Life, which you have 50% stake. And the Nepal subsidiary, also, you're not 100%. Any reason for why having minority or majority, but not 100% stakes in these subsidiaries? Would it be easier for us to kind of consolidate some of these entities? And we are a small organization, by how many entities have been created?
Okay. Thrishool in Africa, Tanzania was an already existing distribution company, and we proposed and they agreed up to 50%. So therefore, the 50%. And we feel that being a distribution company, I mean, it is fine as long as we have our foot in over there and we are able to distribute, we are okay with it. Texas was an existing company where we used to get our products manufactured. We bought in equity so that we have a larger control of that business. So therefore, we bought up to 55%.
As far as Nepal is concerned, we have a local partner, and it would be very interesting for you to know our local partners, are there in [ Hind Electronics ] who are assembling Samsung TVs over there. And it's just that we went to Nepal, and we were at one time point of time looking at a 100% subsidiary. But after being there, after meeting the local people, we did think that there is value addition in case if we have a local person. And therefore, we went on with that model in Nepal, and we have a local partner who is absolutely nonexecutive in every which manner. Everything has been managed by our team.
And so all these things, there has not been a fixed calculation in terms of balance sheet towards 50, 55. It's like a partnership evolved, and we make that person as a partner and we go on with it. So that's the way it has been. In Africa, we are 100% owned -- I mean Hester India own 100% of Hester Africa. We have gone fully our way because there was no reason to look at any partners. And we even were working with the Gates Foundation. We had a lot of internal strengths towards that, and we went alone. So I would not put any logic. It just evolved that way.
Right. So that's very helpful. Just one other point. I think there was a very large tender, the government was talking about in the order of INR 100 crores for the Brucella vaccine. And there was a very large development that the government was looking at for the whole animal health care. And I recently read, even I think you have been appointed at a senior position for the same. I just wanted to understand how is that rollout happening. You're talking about this other vaccine PPR where the size is INR 20 crores. But can we see that the larger game plan that the government has for animal health care being rolled out quite quickly now as COVID dissipates, the government focus comes back on other issues?
Yes, government focus will come back on -- it has already rather FMD, Brucella, rabies, PPR, now lumpy skin, even goat pox, sheep pox vaccine. It is putting in a lot of thrust in all these areas. And in days to come, it is going -- all these things are going to become big. And we would be there at a time whenever when -- I mean, when the moment comes, we would be there, and we would take business forward. Brucella tender last year did come out. We did bid. We were L2, and we did not agree to the terms to supply the L1 rate. Therefore, we kept ourselves out of it for this 1 year. Now this 1 year is about to get over, and there is going to be retendering again.
Right. Sir, I just wanted to understand because you are part of that national committee for advisory. I just wanted to understand what is more of a 3-, 4-year strategy of the government in terms of size, how play that could. Help us kind of understand the opportunity.
Yes. So the committee has been formed. I'm definitely a part of it. But no meetings have been called so far, so we are hoping that the meeting would soon be called, but it is with a clear intention to put a thrust on animal health and mainly on the prevention side. Mainly on the vaccine side, we may ensure that the preventive medication, preventive care is taken so that diseases don't come out, don't come out because it is always more expensive in terms of treatment as well as in terms of loss when you are trying to cure the disease.
I mean you have already done the damage. You have lost days. You have lost meat and all these things, and then you try to cure it. So government is very clear in looking at prevention medication. So one of the objectives of this committee would definitely look into preventive medication, which is vaccination.
Right. Sir, just trying to understand, in terms of outlay, anything the government has talked about...
No, no. Government has not spoken anything about the outlay. They had the earlier budgets to which the allotted money, but now they have not yet specifically spoken on the outlay.
Ladies and gentlemen, that was the last question for the day. I would now like to hand the conference over to the management for closing comments. Over to you, sir.
Yes. As always, it's been a -- it's been nice to interact with everybody on the call. And it is not only that I'm giving information, but some of the questions also put our own minds to think, and it gives us also ideas and it keeps us also as much alert. And as usual, we'll again come back on to the next quarter call, and we will take all the questions, et cetera. There was 1 question which we want to take offline. So for that -- our CFO will take that question offline. We've already noted the name of the person, and we've also got their number through the listing that we get over here when we are addressing the calls. So thank you all very much and hope to again speak to you in the next 90 days time. And I would also like to -- I would also put across -- I would request Priya if she has anything to say.
Thank you all for joining today's call. While last Q1 results have been a little bit disappointing, but we do have a lot of hope. And I mean, we have reasons to believe that in Q2 and Q3, we will pick up. Also with respect to companion animals, some of you did ask a few questions. And in our best note as well, we don't -- we've not given up too much information, but we shall -- I mean if I get a chance offline, I will be more than happy to speak about it in detail with any of you. But yes, we are working on this division full-fledgedly for [Indiscernible] the dependency on any 1 division or [Indiscernible] on any 1 division like the [Indiscernible] the animal kind of gets distributed. And also, it helps us achieve our objective to become an overall animal health care company. So I will see you all and talk to you all in the next quarter. Thank you very much.
Thank you, everyone. On behalf of ICICI Security, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.
Okay. Thank you.