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Indoco Remedies Ltd
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Good day, ladies and gentlemen, and welcome to the Q1 FY '23 Earnings Conference Call of Indoco Remedies, hosted by JM Financial Limited. [Operator Instructions] Please note that the conference is being recorded. I now hand the conference over to Ms. Cyndrella Carvalho from JM Financial. Thank you, and over to you, ma'am.
Thanks, Michelle. Good afternoon, everyone. I, Cyndrella Carvalho, on behalf of JM Financial, welcome you all on the quarter 1 FY '23 earnings con call of Indoco Remedies. At the outset, I thank the management of Indoco Remedies for giving us this opportunity to host the call. And I congratulate the management on delivering sustainable number trends.
Today from the management team, we have with us Ms. Aditi Panandikar, Managing Director; Mr. Sundeep Bambolkar, Joint Managing Director; Mr. Pramod Ghorpade, Chief Financial Officer; Mr. Vilas Nagare, Corporate Affairs and M&A.
I now hand over the call to the management for their opening remarks. Over to you, Mr. Aditi.
Thank you, Cyndrella, and thank you, everyone, for joining us this afternoon. Let me start with a couple of positives we have happening at Indoco right now. I'm very happy to share that last week, we have gone live with SAP S/4HANA, all modules at Indoco. I'm very confident that SAP implemented at Indoco is going to result into higher levels of efficiency as well as help us in all our strategic pursuits.
Secondly, as mentioned in the last call, in a few weeks from today, specifically on 23rd of August 2022, Indoco will complete 75 years since it was registered. It's a matter of great pride for all of us at Indoco. And Indocoites across all locations, all functions are engaged into various activities as well as improving sales to ensure that this is indeed a great platinum jubilee year for the company.
Let me now come to performance of this quarter. As you all will recall, the organization had performed very well in the last financial year, partly because of certain tailwinds of COVID products as well as excellent growth in international business. I'm happy to share that while for India business, the tailwinds of respiratory and anti-infective basket of products is not there, we have still managed to give a steady performance in business. And in fact, without the impact of those products, India business would have grown by over 14%. Also happy to share that international business has done a great growth for the company.
So we closed the first quarter of financial year 2022/'23 with a consolidated sale of INR 395 crores, of which domestic contributed to INR 200 crores, international business contributed to INR 177.3 crores, which is 45% of the top line. In domestic market, respiratory and anti-infective, as I mentioned earlier, had tailwinds of COVID last year, and therefore, they dented our performance. We are confident though that both these segments will recover and start performing well in the coming quarters.
On the international front, the U.S. business has grown by 40.7%. Sales in the Europe region are flat in view of some of the challenges we have, servicing orders to Europe, and as we take the business to other locations, so that there is a higher capacity to service contract manufacturing, which should get corrected.
Going forward, we anticipate an easing down in the stress that has been put on the cost of goods and a normalization of other increases in freight, et cetera, which have put a constraint on our EBITDA earnings. I'm confident as the half year concludes and for the year forward, we shall show an improvement in our EBITDA margins, which took a hit this quarter.
For the first quarter, we have recorded an EBITDA of INR 71.3 crores, which is at 18% of income and a profit after tax of INR 38.5 crores, which is 9.7% of sales. That is all from me. I will now hand over to Mr. Sundeep to take you through financial highlights.
Thank you, Aditi. Once again, good afternoon, all the participants. Hope you and your family members are all safe and healthy. Let me first begin with the business highlights. Net revenues of the company grew by 3.6% at INR 394.9 crores. EBITDA to net sales for the quarter is at 18.1%. PAT to net sales for the quarter is at 9.7% at INR 38.5 crores and earnings per share for the quarter is INR 4.17. Now on the Indian pharma industry, IPM valued at INR 45,078 crores has registered a growth of 2.1% during the first quarter. This IPM growth of 2.1% comprises of volume growth at minus 1.8%, price growth at 5.1%, along with new product growth, minus 1.2%. IPM value trend line indicates a gradual normalization of the sales trend.
Anti-infectives, vitamins, minerals and nutrients and respiratory are de-growing when compared to the slow-growing IPM. Derma and gynecology therapies growing at 24.1% and 25.3%, respectively, are driving the growth of the IPM. Indoco ranks 27th on cumulative basis that is July '21 to June '22, with market share of 0.67% and reflects growth of 13.5%. Considering first quarter performance, Indoco ranks 29th with market share of 0.62% and reflects a growth of minus 3.4% during the first quarter.
Domestic formulation business, revenues from domestic formulation business for the quarter, degrew by 7% at INR 200 crores as against INR 215.1 crores. Major therapeutic segments like dermatology, ophthalmology and gastrointestinal performed well during the quarter.
Now on to the international formulation front. Revenues from international business registered a growth of 16.3% at INR 177.3 crores as against INR 152.4 crores. Revenues from regulated business for the quarter grew by 15.1% at INR 147.7 crores against INR 128.3 crores. Revenues from U.S. business for the quarter grew by 40.7% at INR 64.9 crore against INR 46.2 crore. Revenues from Europe for the quarter were INR 77.7 crores against INR 79.2 crores. South Africa, Australia, New Zealand was at INR 5 crore against INR 2.9 crores and emerging markets showed a growth of 22.7% at INR 29.6 crore against INR 24.1 crores. The API business of the company grew by 22% at INR 13.3 crores against INR 10.9 crores. Revenue from CRO and analytical services for the quarter was at INR 4.2 crores against INR 2.8 crores. This is all about the business highlights for the quarter. And I now request the participants for their question. Thank you very much.
[Operator Instructions] The first question is from the line of Aditya Khemka from InCred Asset Management.
Sundeep sir, could you quantify the profit share that we received in 4Q in our export formulations. And what is that number in 1Q FY '23, please.
Aditya, it's between INR 6.5 crores and INR 7 crores.
This is for 1Q FY '23 sir?
Yes.
Yes.
And what was the same number in 4Q?
Fourth quarter last year, I think it was around INR 7 crores. So we are roughly doing the same number, Aditya.
Yes. So the question here Aditi was that last year same -- I mean last quarter, we obviously had some supply challenges in brinzo the second half of last year. My understanding was after our con call last quarter was that the issues were now behind us and we were supplying. So why isn't the profit share number moving up?
Yes. So as we had explained earlier, but let me do that again. When we supplied brinzolamide, we supplied to Teva, which is booked as our sales. And the profit share comes to us after Teva further sells it in the market, closes their quarter and a quarter after that. So it's a long kind of a gestation thing. So while we have supplied brinzolamide to Teva in the last quarter, we are now in the process of regaining market share, which it says is going to be a Herculean task, but we will do it. And you will see impact of that in the future quarters.
Understood. Could I also get a sense of the launch of Combigan in the U.S. market?
Yes, Aditya. We have finished answering the CRL and all documents have been logged in with the FDA. We were given to understand earlier that by September first week, we get approval, but that has gone ahead by almost 1 and 10 days. So it should be around 15th of October that we'll get the approval. The goods have already been shipped and they're with the partners warehouse.
All right. So basically, the launch now will be in somewhere mid-October, that is your TAD, target action date now with the FDA?
Yes.
Okay. And also, could you -- so I'm just worried about the sequential decline that we have seen in the regulated market revenues. So I'm wondering, Europe, obviously, our commentary has been very exciting there with Baddi getting commercialized, there also we are seeing no sequential uptick. I mean as a sequential, I'm comparing to the fourth quarter of last year to the first quarter of this year. And same with the U.S., despite at least supplying brinzolamide, even if no profit share, the number seems to be really weak compared to the fourth quarter of last year. So what is driving that, sir?
No. Actually, there have been certain factors, if you recall, during the commentary of our first -- sorry, Q4 of last year, we had clearly said that we need time till September for things to settle down and then show a real good growth because we have been passing through turbulent times for availability of material for COGS, for so many other factors, availability of containers, availability of key starting materials, APIs. But I think in spite of all that, the performance has been quite commendable, number one. Number 2, coming to Europe's flat trajectory, there are a number of European products, which are being site transferred to Baddi because we want to make go-out for U.S. business.
So now when you go to the authorities, they say that the site needs inspection. Earlier, MHRA would be honored by Mainland Europe and Mainland Europe authorities inspection would be honored by MHRA. But now that's not the case since Brexit has happened. However, for one of our very large suppliers, the inspection is plated to be either end of October or beginning of November. So we are on a very sound wicket as far as Europe is concerned.
Coming to U.S., we have projected a figure of INR 300 crores plus for U.S. This is the short-term blip you are seeing, and I'm 100% sure that we will be meeting all year-end target. Because of dodgier fees, sometimes things go up and down, but that will get steadied from the second quarter onwards.
Got it, Sundeep sir. Makes sense. Aditi ma'am, on the India business, our -- sorry, on the gross margin essentially. So are we -- have we taken the NLEM product portfolio price increases in April and on the non-NLEM portfolio, have we started the process of taking price increase wherever due?
Yes. So yes.
Yes. Aditya, I'll just answer that. You know that inflation in India was pretty low, 3.75% to 4%. That's for a scheduled category product. So long, we were getting hardly any price rise for that. Now the government had sanctioned, but we cannot suddenly jump into it. That's point number one. Second, non-NLEM products, we are allowed price rise, but however, we have to watch the competition also side-by-side. So these things are being watched. And after a running period of 12 months, we will be doing that.
So you will suddenly see an impact quarter on -- Y-o-Y basis. This is what Sundeep is saying.
No, so that I understand for the non-NLEM because there, there needs to be a 12-month gap between your last price modification and the current price modification. So I understand it happened over the year. For the non-NLEM portfolio, every other company that at least you've spoken to seems to be suggesting they have taken the entire 10%, 11% increase that is allowed. So I'm just wondering why -- because our raw material -- our gross margins are down like 400 basis points, right? So that there clearly is a cost pressure that needs to be passed on if we are keen on maintaining margins. So I just -- I couldn't understand the argument that Sundeep was going on.
Our M&A portfolio is only 11%. You know that.
Yes, I do. I do. But I'm worried about by 11% have we taken the price...
Most of our product basket is acute sub-chronic. And here the -- it's not as easy to just increase prices. We'll do it in a standard manner.
Okay. Understood. Lastly, on the growth for the India business. So obviously, in the last call, you mentioned there were about INR 40 crores to INR 50 crores of one-off sales in the last year driven by COVID-related sales of ATM and Febrex. I'm just wondering, and this quarter, you're saying 14% growth, excluding COVID-related products. So I'm just wondering for the full year, excluding COVID, will we do mid-teen, high-teen growth for the full year?
Yes, yes, we'll be able to do it.
And that would have price increase element of 4%, 5% or less or more?
Yes, about 5%. Aditya, let me just take this opportunity to share some more details. As I said, if we just take the impact of Karvol Plus, ATM out, the organization would have grown at close to 14%. And driving the growth are fundamentally strong brand. Cyclopam is growing at 44%, Febrex Plus at 28%, the entire opthal portfolio is growing at 50%. Dental prescription-driven business is growing at 25%. So there are some very good triggers, which give me great confidence that save these kind of blips, ups and downs that will be created because of base effect of last year. India business this year will do very well on a qualitative as well as quantitative basis.
That makes a lot of sense, Aditi, ma'am. Just before I get back to the queue, just one more question on the EBITDA margin. So do we stick with our EBITDA margin commentary on improving margins versus last year? Because this quarter, we have seen a decline in EBITDA margin.
Yes. I think we have said very clearly that for the first half this year, it will take us at least half a year to stabilize. And after that, you will see growth.
[Operator Instructions] The next question is from the line of Jainil Shah from JM Financial.
My first question is on the domestic business. How many products have we launched in the last 2 to 3 quarters? And how are they performing? And any particular therapy area that we will be focusing on and you want to call that out?
So this quarter, we did not have any new launches. But last year, specifically in the second half of last year, which is Q3 and Q4, we did have new product launches. The products we've launched are Noxa, which is Ozenoxacin cream in the derma segment, but we are taking it to the general practitioner. DROPIZIN syrup, which is peripherally acting cough suppressant, so without sedation. We have also launched Subitral, and Subitral DS, which is itraconazole with a micronized novel dosage form. I'm happy to share that in the first quarter this year, we have totally clocked around INR 3.6 crores sales from the new launches of last year, which is 1.8% of our top line, way above 0.9% kind of levels that we used to do earlier.
That's great. And the therapy area that you wanting to focus on?
Yes. So we are still consolidating in the chronic space. Most of our launches are going to be in acute and sub-chronic. Respiratory, which is a very, very interesting space, and where we have a very big stake as well as GI, where we have big stakes. Yes?
Yes. That's helpful. My second question is on the U.S. business. How should we look at this business going forward? How many ANDA filings are you planning and launches that we can expect maybe in FY '23 and FY '24.
We file at least 4 ANDAs every year, 4 to 5. And this business will grow. Definitely, it's on a very big growth path. We have certain strategic things to be implemented in the next 2 to 3 years. And we made also a 5-year plan. We are mainly into now the new pipeline is in 2 complex injectables into suspension ophthalmics and into sustained release solids. So this is the idea going forward. And you will see a very good growth in U.S. business.
What kind of size are we looking at, maybe, say, 3 years down the line, 4 years down the line in terms of...
Current size -- this year, we would be around INR 305 crores to INR 310 crores and the business will easily grow at 33% to 35% per year.
[Operator Instructions] The next question is from the line of Dhara Patwa from SMIFS LIMITED.
I just wanted to ask whether we have launched Lacosamide in the U.S. market.
Yes, we have launched both Lacosamide tablets as well as Lacosamide injections in the U.S. market. And in fact, Indoco was the first company to launch Lacosamide injection. For some months, no other company got approval, at least for 2 to 3 months. And now 2 other companies have got approval, but we are not sure whether they have launched.
So how much market share do we have in U.S. market for this opportunity currently?
The market was $43 million when it was -- before it went generic. And subsequently, it climbed to $49 million. And as regards to market share, it's a bit too early. Maybe we are finishing 3 months in this -- at the end of August after launching [Technical Difficulty] to the patient. So maybe next meeting, we'll be able to give you concrete numbers.
Okay. This is helpful. And the second question was on the employee costs. Like this quarter it was [ 20.8 ] as compared to your historical levels around now [ 18, 19 ]. So is this the new base? Or there was some one-off in the employee cost in this quarter?
Yes. So this quarter, increase in employee cost is a function of increments that have been given. So to a certain extent, you can expect this number to be constant. However, as the sales grow as percentage to sale, we should correct it.
So [ 19, 19.5 ], should we assume for the subsequent quarters since the increment won't be there in the subsequent quarters right?
Yes, yes, yes. It's the same numbers that we have given for this quarter.
[Operator Instructions] The next question is from the line of Kunal Mehta from Vallum Capital Advisors.
Firstly, I would just like a clarification on the European side. So I think you're always very optimistic on the growth of this business. And so could you tell us, I mean, for this year, what are the targets you have set for the European business and barring this process of shipping the products for another size, I mean what do you see the general environment in Europe for our products?
Yes, yes. The environment is fine. There was, as I explained earlier, one very important product, which is a huge supply. We want to site transfer it to Baddi where we have huge capacities and big back sizes. So that is happening by November.
We will not roll that back. That apart, there is growth in every other product. But because this particular product seems so big, that's why you're seeing a flat number. But from second quarter onwards, things should improve, definitely.
Understood, sir. And also in the last quarter, I think we had announced certain capacity expansion initiatives. I think there was one initiative, which was announced in one line for high potency products went for Europe. And also there was expansion of lines in injectables, I mean sterile products as well as suspension products. So can you just give us a status on the initiative right now? Are they now being commissioned and what sort of outlook do we have in terms of revenue from these CapEx activities?
Yes, perfect. I think you got it right. The high potency department is just about to start functioning. We are about to start trial batches next week. And thereafter, will be the scale-up and validation batches. So that's online. The new line, Line #5 is coming into the plant by end of September. So that is also on track. It will take 2 months after that to get qualified and validated, which means by first week of December, we will start the trial batches on that line. And we are planning one more line after that, after line 5 settles down. So this is our CapEx program.
So sir, can you give us an understanding on this high potential business which you're trying to cater to, I guess [indiscernible] it is coming? And what is the nature of this contract and other details if possible, something?
There are no contracts as such. These are products which are 0.25 milligrams, 0.5 milligrams per tablet, but very high potency. And the regulators are not comfortable that the company manufactures such products in general manufacturing area because of cleaning validation issues. So that's the reason we thought of this.
I can just add here that because these products cannot be made in multiproduct facilities, there are very few sites which can make these products, and that is why it is a good business to look at.
So this is an additional business, in addition to what you're doing right now? So it's not as if you are getting a manufacture from some other addition.
Yes.
[indiscernible]
Just one last question. So when you say that you have a target of INR 300 crores for the U.S. business this year. This amount is only -- it is excluding any profit share which you're referring, -- I'm sure you're factoring in the regular dossier income, but any except any, I would say, large quantum of profit share is something [indiscernible] is a part of this?
No, no, no. This is a normal total business, including everything.
Okay. So you are also encoding, I mean, let's say, brinzolamide profit share starts coming from let's say...
Yes, yes, yes.
[Operator Instructions] The next question is from the line of Rashmi Sancheti from Dolat Capital.
So on Europe business, basically where do you see that the growth was flattish because -- because of the shipping days and these are taking some issues in getting the repeat order?
No, not repeat orders, Rashmi, it is -- as Mr. Sundeep explained, there are certain orders from some geographies for which if you have to transfer site to another location, so the capacity is freed. We have to wait for the regulators approval, which is why things have gone a little slow.
So basically, what you're doing is like some Goa Plant I, you are planning to transfer that to the Baddi III unit. Is it correct?
Yes, yes.
And Goa I, you want to dedicate it completely for the U.S. business?
Correct.
But Goa plant I, we don't have U.S. FDA clearance, right?
We have U.S. FDA clearance. We have a warning like a hanging, but the clearance is very much fair and current supplies are going on.
Okay. So on warning letter, what is the current update? Have you heard anything from the U.S. FDA related to the inspection or anything?
No, nothing, nothing yet.
Okay. Ma'am, what is the reason for transferring the price transfer from Goa to Baddi, basically, everything to come under one roof, that is what your aiming to?
No, the idea is to segregate by geography. Because when the regulators come down and the product mix, it is not advisable to mix up or add too many products at one site. So the idea is Goa I, II, III will be dedicated for U.S. and Baddi will be entirely doing Europe.
Understood. And how much time it will take for this approval on the Baddi plant? And when do we expect this mix supply from Baddi to Goa?
Another quarter.
Okay. You should expect normalization of European sales from the second quarter onwards?
Third quarter onwards. By second quarter, things will approval will come in.
Do you maintain your guidance on Europe of around 20%, which you gave last time?
Yes, we maintain.
Okay. And ma'am on U.S. business, what are the kind of launches or how many launches have been planned in this quarter?
2 launches we have planned in the current quarter.
And how many filings we have done in this quarter?
In this quarter, we have not -- in the whole year, we plan to file 4 or 5.
Okay. And on U.S. basically we have installed a new line -- new steroid plant and that was about operational in June month. So what is the current take on that, whether -- is this operational whether we have started supplying from that particular plant?
No, no, no. That was a replacement line. The trial batches have started just now. The new line #5 will come inside the plant in the month of -- end of September, and that will get qualified by end of November, and the trial batches on that new line will start in December.
Correct. As you mentioned. So this replacement client, which you mentioned, this is also in Goa II or in Goa III?
Goa II sterile plant.
Okay. And the new line which you're talking about is also in Goa II, right?
Yes.
Okay. And what kind of filings or how many filings basically you're planning to do from this particular plant? Or is it that we can expect the numbers only from FY '24 onwards?
See, filings is a continuous process. As I said, if you take 5 filings per year, we don't want to give you details at this stage as far it is opthal or injectable or solids. So it is considering the total business that we are talking about.
Okay. Sir, last time, I mean, last quarter, you all mentioned that in India business, we will be taking the -- or we have taken 6% price increase across the base portfolio, which includes 4% to 5% on non-NLEM and 10.7% on NLEM portfolio. So is it that it has not taken yet and you were just saying that you're planning to take it. And now because of the competition, you will take it in a phase manner?
Correct. That's correct.
Correct. Correct.
Okay. So -- but even on non-NLEM, you won't be taking it that also you will be evaluating the competition and then take it?
No, I think that we will take. So that is not an [ EBIT number], no, yes.
Okay. So in first half -- I mean second quarter as of now is on NLEM portfolio, you have not taken any kind of price increase on any part of the portfolio, yes.
Yes. Correct.
And still you maintain that domestic business would show a growth of around -- I mean it would show a growth on a high base of FY '22 in a mid-teens.
Yes, we maintain.
Okay. And on gross margins and on EBITDA margin side, when you say that we would see an improvement from the second quarter, can we expect that from the current level, the gross margin should at least improve by 100 basis points in FY for the full year?
Yes, of course.
Definitely.
Okay. And you maintain that your EBITDA margin would be in the range of [ 90%, 70% ] for FY '23?
Yes, we've set that earlier also...
Okay. So as of now we are not seeing any risk or the cost for the freight cost or the raw material costs going up, we are basically seeing a softening month on month or we are still seeing some challenges on that?
In fact, we are seeing things softening down in the last 3, 4 weeks.
The next question is from the line of Kunal Mehta from Vallum Capital Advisors.
Sir -- ma'am I just wanted to understand what is your reason behind delaying this or probably deferring this price rise in India? Because when you study the IPM data, I mean even the data power, our underlying therapy or underlying molecules installs, I mean a lot of the players actually have taken market share even across a few players, there has been good price increases of at least high single digits. Of course, not entire 10%, but at least good, high-single digit. So I mean, could you please help us understand what is the reason behind [indiscernible] this price increase in a non-NLEM portfolio.
If you speak of IPM in particular, see you have to understand one thing. We have several products which feature in the top 5 in their own therapy segments. But possibly, when it comes to anti-infectives where IPM is a very large player, they probably have a brand in a position where they can take that price rise and be comfortable with it. I'm not saying we are not going to do it. We'll just start taking it all in the first quarter.
Sure, sure. And so -- and since now we are August 10 days, 9 days have passed, and you've always seen July. So could you give us an outlook of how the season -- acute season [indiscernible] for the next -- this quarter and the next is expected to shape, any early indications that you read from the data which you have on hand?
So we've already closed July, but I'm sorry, I'm not free to discuss that. But it's very clear that at least when you look at the range, every time it rains in Indoco, there is a celebration because, obviously, with respiratory and anti-infectives both contributing close to 40% of the top line, it is very clear that sales will pick up for both these products. But we are also seeing other segments, as I said earlier, which are not necessarily linked 2 seasons doing exceedingly well. If you look at our prescription growth and our climbing of rains on a prescription basis there is great positive. And possibly some data, which is already in public domain, I can share with you for the month of July, we have jumped 1 rank in IPM and are now 26 we have overtaken [ agenda both ] in growth as well as units sold as well as price, et cetera -- growth for India. Yes.
And for the month of July Y-o-Y, have you seen prescription growth?
Yes. Y-o-Y, MAT, YTD across all doctor specialties, across all products, even where the primary fluctuation you will see this year because there was a lot of over-the-counter last year in some areas. But prescriptions are very much there. Even for ATM and Karvol Plus, we are -- our prescription levels are better than many other competitors.
The next question is from the line of Aditya Khemka from InCred Asset Management.
[Technical Difficulty]
Mr. Khemka, we're not able to hear you.
[Technical Difficulty]
Sorry, voice is breaking.
Am I audible now?
We are hearing you in phases. I mean not very clear, Aditya.
Breaking.
Okay. I really don't know what the problem is, but I'll try to put my question and the...
Now you're clear.
Now you're clear.
Now you're okay.
Okay. Great. So my question was on the softening of prices. We've heard similar commentary from other pharma companies as well, where the prices have sort of come up from the appeal given it's not normalized to pre-COVID levels. I just wanted to understand how much inventory of raw materials do we generally carry? And I'm sure because of driven by COVID, we would have carried higher than normal inventory. So how much time would it take for us to go from high-priced inventory consumption to lower price inventory consumption?
We generally carry, because of COVID, we had to build up inventory. We generally these days carry 2 months inventory.
2 months inventory?
Yes.
And that's including raw material and packing materials, Sundeep sir?
Yes, yes.
Okay. Okay. And secondly, on the IMS data, I think you guys present secondary audit data on your presentation. The source is IMS or is it AIOCD?
Secondary data or prescription, which one did you want to know?
The brand data for the Indian business you put on the presentation that's right.
That is EVAC. Generally, the primary, secondary, whatever we call it which we get from the ABC, that is EVAC. I'm sure they have written it, it's not we will add it. The prescription data, if anywhere quoted would be IQVIA.
All right. Understood. So what I noticed in that data was that some of your new launches are also doing phenomenally well. And as we said, ophthalmics and some of the newer products. So could you talk about the chronic portfolio built out? And ma'am internally, do you evaluate your performance, the India business performance in the acute, sub-chronic, chronic bucket or do you make 2 buckets acute and sub-chronic together chronic separately? And what is sort of your MR productivity in individual buckets? And what is the upside in that MR productivity is what I wanted to understand.
Yes. So I will not be able to give you right now MR productivity by product basket or bucket because these products, although we call them acute, sub-chronic, and chronic, they are actually spread across all our divisions. Except for synergy which is the division formed from [ CNDN focus ], which is a pure [indiscernible] division. Almost all other divisions carry all 3 baskets. But let me give you some more details of how these categories have performed for us.
So in the first quarter this year, acute actually degrew by 24% because of respiratory and anti-infectives, as we have discussed. But the sub-chronic basket has grown by 17% and chronic by 5%. And on immediate preceding quarter basis, acute is flat, sub-chronic has grown by more than 19% and chronic by 10%. So this is how they fare, average PHY based on people on payroll is around 3.7.
Perfect. But ma'am, I know it's very difficult to get into chronic given the intense competition and the marketing power of the incumbents, but on a very small base, the 5% growth in chronic seems lower than what the market will be... is there something needs to...
Yes, I'm sorry, you want to complete your question?
The question was, there's something may change for our strategy...
Yes, yes, yes. So what we have done this year is, if you remember, we have 2 divisions in chronic. One was CND, which was focused on the cardiologist. And the second one focus, which was on endocrine and consultant physician. And since we were not able to make too much headway with 2 divisions, we consciously decided last year -- in the last quarter that we would create a new division synergy from these 2 divisions.
So what we have done now is that we have established a good specialty brand matrix in synergies. And there are products like Aloja, which is our alogliptin, and Telmichek, which is a telmisartan, which are the growth drivers. And other products like Glychek, which is gliclazide, Prichek which is Glimepiride and Cal-Aid, we are consolidating. So we have done away with the phase. I mean there was really no point as you also said being 40th in a particular category and things like that. So from around 290 people in both these divisions, we are now at around 170 with one division and consolidating. So I feel this will be qualitatively a much better business, and we'll be able to develop good brands.
Got it. [indiscernible] a few products were large, so your original [Technical Difficulty]
No voice is really cracking. Can you repeat that?
It's okay, ma'am. It's okay. I was saying that you have rationalized a few products and a few amass. So your base would have shrunk on the chronic side. And then you're -- and then you have grown on that base. That's how we should read it, right?
Yes, yes, yes absolutely. Yes.
Got it. And last question, ma'am, on the India business again. So when you look at the environment where you have online pharmacies, you have Amazon entering into, let's say, the delivery in other markets, not in our market yet, hopefully. And you have some of these generic announcements being made margin caps being made. At Indoco, what are the vulnerabilities that you have to any of these -- or all of these sort of changes happening in the broader market?
Yes. So Aditya, fortunately what is not a very great strength at Indoco becomes a huge strength when it comes to dealing with all these supply chain kind of disruptions that are happening. That is if your legacy products with good prescription support and a very good demand attached to them, there is very little that happens by way of discount expectation because the demand is there, okay?
So we feel pretty comfortable because as of now, at least, the e-pharmacies and all the others have been picking up products from our own stockist. So we are not doing anything separately with them. Because the demand of products is there. In fact, even on Amazon, one of our products featured, what could have by put by somebody else, so we asked them to withdraw it.
So these kind of things happen. And when it comes to generic and others, we are seeing them having more traction in the chronic space. So erstwhile product, brands, brands over INR 50 crores, very well developed with good prescription support, they are comparatively net impacted by this. And also, we do not have very high-priced products. So the generic price advantage, which the customers should get, it doesn't feature much, yes? So compared to some other companies, Indoco is in a much better pace. But yes, this is an evolving kind of a landscape, and we are aware and watching it.
I understand. Sundeep sir, on the export side, you mentioned freight cost as well as one of the issues in terms of being able to supply to European countries. Again, some of these indexes like the Baltic Dry Index et cetera, that we track, they are showing some cooling off in freight rates and higher availability of containers. Is that something you've noticed around sir?
Yes, yes. See, the problem started because of non-availability of containers, simple economics, you know better than me when there's a shortage, the prices shoot up, and that's what happened. So manufacturing of containers was taken up on a war footing globally. And today, the situation has eased quite a lot. And as a result of which the prices of the rates of freight have come down.
Right. So my question was that from the second quarter onwards, which is I mean from -- sorry, July onwards, have you seen no lag in manufacturing and dispatch? Or is there still a significant lag between manufacturing and dispatch?
No, no, no. The lag is very, very short. The moment the batches are ready, they're lifted off, go to the seaport and shipped immediately.
I get that. And in the API bucket, Aditi ma'am, I think Patalganga, we expanded capacity and I think you talked about it. How do we -- our external API 10%, we are consuming more and more internally. [Technical Difficulty]
Again, I couldn't hear you very clearly, but I think I get a gist of what you're asking. So as you rightly said, our internal consumption is going up, but we are also now able to -- last year, we suffered from this specific issue where our internal customer satisfaction and external customer deliverable crashed -- clashed for time. So some of our capacity has gone wasted. This year, there is very good planning, and I expect we will do much better. We have orders we have ordered both from internal as well as external customer, and we are working towards it. So I feel this year, we have -- we expect a good growth in API business.
The next question is from the line of Cyndrella Carvalho from JM Financial Limited.
Ma'am, I just wanted to understand from you how should we understand our investable portfolio strategy ex-U.S. What are your thought process over there, apart from the U.S. market? Do you have any plans, which you could share with us right now?
So currently, the injectable business, we are concentrating only on U.S. It's because in India, if you want to go into injectables, you must have a frontend in the critical care where we do not have one. So it will be an entirely new business thing we'll have to look at. Within the U.S., there are many injectables, which are in shortage. If we check FDA sites in any particular day, you see that -- that's because not only our injectables are very much needed and demand increases day by day, but they are difficult to make and several plants have had challenges on stability and other fronts. So it becomes a good niche segment to be in because if you are able to deliver product well, then you can garner good market share. In the injectable space for Indoco, we are getting into difficult to do and complex injectables. So that we do not want to get into commoditized kinds of segments. I hope that answers the question.
Which we have to understand what is the kind of capacity utilization for our U.S. FDA plant as of now, if you could share any rough indication around that?
Right now, I think plant II, which is a sterile plant, we have about 67% to 70% capacity utilization. Plant I, we have plenty of capacity. We are supplying only one product to the U.S. and plant III, our capacity is occupied right now because of European products, which we are going to transfer to Baddi. And once that happens, that plant will be totally free to manufacture U.S. products.
As there are no further questions from the participants, I now hand the conference over to the management for closing comments.
Yes, I'm really thankful to the participants for a very, very active call. Wish you all a safe and healthy period ahead. All the best wishes to you and your family. Thank you very much.
Thank you. On behalf of JM Financial, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.