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J B Chemicals and Pharmaceuticals Ltd
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Ladies and gentlemen, good day, and welcome to Q1 FY '24 Earnings Conference Call of J.B. Pharma. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Jason D'Souza, Executive Vice President, J.B. Pharma. Thank you, and over to you, sir.
Thank you, Nirav. Welcome to the earnings call of J.B. Pharma. We have with us today, Nikhil Chopra, CEO and Whole-time Director; Kunal Khanna, President Operations; and Lakshay Kataria, Chief Financial Officer at J.B. Chemicals & Pharmaceuticals Limited.Before we begin, I would like to state that some of the statements today perception may be forward-looking in nature and may involve certain risks and uncertainties. A detailed statement in this regard is available in the Q1 FY '24 investor presentation that has been sent to you earlier. I would like to hand over the floor to Mr. Nikhil Chopra to begin the proceedings of the call for his opening comments, after which Mr. Lakshay Kataria will address the financial highlights. Over to you, sir.
Thank you, Jason, and a warm welcome to all of you. Thank you for joining us on the first quarter call to discuss J.B. Pharma's performance. I will begin with the operating and strategic highlights and we will be followed by our CFO, Mr. Lakshay Kataria. He will be sharing the financial highlights and his thoughts on the performance. Subsequently to our comments, the forum will be open for the questions, and we'll be glad to address those. Thanks quarter 1 has marked a continuation of the trends set in the previous year. Growth across both domestic and international businesses have been good. To share some numbers, in quarter 1, we reported a revenue of INR 896 crores, marking a growth of 14%.The key aspect being debt, we crossed a milestone of INR 400 crores in quarterly run rate in the international operations at INR 407 crores, growing at 11% year-over-year. This followed good traction in our J.B. offices. Domestic business delivered 17% growth to such INR 489 crores on the back of impression growth in the acquired and chronic portfolio, where most of these brands have completed 1 full year as a part of our J.B. portfolio. On the chronic side, J.B. continues to outperform IPM by a wide margin. Certain parts of exit portfolio saw weaker seasonal demand income.Turning the discussion to our branded portfolio, we have made good gains in the track bands, which you would have seen in our investor presentation. As per IQ net June 2023, J.B. showed a growth of 20.7%, contrasting with 10.6% in the IP in the Indian pharma market growth. Our biggest brand has on have grown even bigger.We are pleased at how the market has responded to Cosma up our half-year pin where we had reduced the pricing by 50% in December 2022 before the loss of exclusivity. The team has been particular about a live settle management of existing products while successfully introducing new offerings. Our task is simple to make these star brands even bigger. And this is basically working both in our own as well as acquired portfolio. The recent acquisition that is present is Razel portfolio is gaining good traction and its monthly sales have jumped from a monthly average of INR 5.5 crores in the current year FY '22, it is prior to us acquiring the ban to INR 6.7 crores in June 2023 as per API.Our portfolio in Care is competed with every product registering a good performance. At this junction, I must say, the acute segment has witnessed several challenges due to demos, while the active business performance was mode during the quarter, we hope the uptick will increase in the second quarter. Moving on to our international business. We have seen healthy numbers.Our international formulations have grown at 12% to INR 275 crores, a strong growth came in CDMO, which has been continued and businesses achieved to 20% growth in the quarter. However, we will need to closely watch the upcoming winter season as that will drive the secondary demand probably for quarter in quarter 4. The pre-milling geopolitical issues continue to cash uncertainty in the markets that we operate, targeting into impacted demand in some of the cases and currency valuation the similar lining here is that logistics and trade costs have stabilized, and we have witnessed some benefits on margins on that account. Operating margins have input for the quarter on account of better business mix, increased efficiency, in-sourcing and higher volumes. The South Africa business is going through a transformation. We have made choices with respect to certain product portfolio in public businesses. This is impacting growth in our international formulation business as overall. Our endeavor able to drive India as of a CDMO business combined to contribute 75% to 80% growth venues, which we have been talking previously in our conference call. Both these businesses give us high items and operate at good margins, which oral helps us to reinvest in the business. The path forward is predicted on driving our core strategies in both domestic as well as international markets. Domestic will see a first on big guns and active product management. We have a sharp focus on senior business and scale-up in our ROW market, will be financed in our intentional operations. As we grow, we are making sure that cost savings are put on priority wherever possible so that we are more resilient to operate in challenging environment. With this, I will hand over to Kataria to walk through in detail about our financial performance for the quarter.Over to you, Lakshay.
Thank you, Nikhil. Good afternoon, everyone, and welcome to our earnings call. I will now keep you through the financial highlights of quarter 1 FY '20. Revenues for the quarter were at INR 896 crores, representing an increase of 14% year-on-year. The domestic-to-international business mix was at 55% to 45%, respectively. The domestic business achieved revenues of INR 489 crores with a growth of 17%. As Nikhil mentioned, acquired plants performed well and continue to deliver healthy returns. The international business demonstrated 11% year-on-year growth, generating revenues of INR 407 crores. This was driven by the CDMO business, which grew by 19% year-on-year, and the international formulation business growing by 12% year-on-year. Reduction in logistics and freight costs have positively impacted our operating margins for this business. We do see some softness on the [ Razel Hanza ] from a currency perspective, which has impacted our reported performance for the quarter. Gross margins for the quarter stood at 65.4%, expanding 270 bps from last year's same quarter. In the quarter, our operating EBITDA, excluding ESOP cost was at INR 243 crores, reflecting a 28% year-on-year growth. The margins were at 27.1%, an expansion of 290 bps as compared to 24.2% in the same quarter last year. On the expenses side, the total employee costs, including ESOP, increased by 11% to INR 149 crores. Employee cost as a percentage to sales improved to 16.6% from 17.1% reflecting operational efficiency. Noncash ESOP cost was at 5% of the reported EBITDA versus 10% year-on-year. Our other expenses increased by 11% to INR 205 crores, and as a percentage to sales improved by about 100 bps. Depreciation included in amortization charge of INR 14 crores on account of acquired brands. Profit after tax was at INR 142 crores, which increased 35% year-on-year. We continue to focus on working capital efficiency and cash generation from the business.Happy to report that our net debt as of 30 June came down to INR 102 crores from INR 266 crores in the prior quarter of 31st March 2023. While our operating margins have improved significantly in Q1 FY '24, we deteriorated our guidance for operating margins between 25% to 27%. On the balance sheet side, we continue to focus on managing our working capital efficiently and improving our ROCE. Our operating cash flow continues to remain healthy, and we expect to become cash positive in FY '23, '24. As we continue on this journey of growth and transformation, we remain confident on a positive outlook through opportunities for the company and providing value to all our stakeholders. That concludes my opening remarks, and I now request the operator to open the question to the forum for Q&A session. Thank you.
We now begin the question-and-answer question. [Operator Instructions] First question is from the line of Rahul Jeewani from IIFL.
Yes. Sir, on the business, have we been able to add any new customers or new product technologies, which we have found about in the plan? And what is the outlook for this business for the rest of the year given that you indicated that we need to watch our other measures in place to?
So, as we have been talking about, we are in terms of about the partner, it's work in progress. We'll be able to add more color for the in coming quarters. There are some developments which have happened. And as I spoke earlier, we had the order book for quarter 2. September, probably mid-September, we'll be able to at least get some inputs from our partners in terms of how the winter season is setting in. That is where we stand. Also what we are trying to do that we are looking at because same partners, newer geographies we are trying to get in. That has happened, which is overall helping us. If you look at in terms of what we have demonstrated overall in quarter 1, close to INR 20 crores delivery. So, that was the initial case which we were working with their geographies for the portfolio that we have that is focus, and that is helping us for the quarter 2. But new products, new partners, still, I think we'll be able to add more color probably going next 2 to 4 months.
So sir, I was asking regarding these new geographies which you have been able to add and are you disclosing the names?
Rahul, we cannot disclose specific geographies, it's confidential information, but it's part of the regions which we already predominantly operate in.
Sure, sir. And then on the domestic business, our traction on the acquired portfolio has been good. So can you quantify in terms of how the trends have been with respect to smart? Because in last quarter, you had indicated that we had seen 25% higher volumes as compared to pre-expiry volumes. So, how are the volume trends sustaining on Azmarda? And what has led to the strong growth in resales well?
So on the [ Amada ] front, post immediately, there was a ramp-up in the volume and this ramp-up you are seeing in the overall RV market and for our product as well. Having said that, the market is also stabilizing a bit and one cannot expect that the sequential growth of 20%, 25% month-on-month will continue. But our overall thesis on the overall market opportunity attractiveness and our day of having an established brand like Azmarda continues. The market is very, very attractive. Adoption across cardiologists and physicians is seeing a massive uptick, and we continue to be extremely bullish on this particular segment.
And on overall, what you are asking is, overall, the focus is more on cutting the prescribers. Because overall, when you see the fabric of the brand, it was more physician-prescribed product when it was from the company in the time been a company close to cardiologist. We are looking at how do we get more and more carbona descriptions for [ Roshini ] combination.So, that work gives in progress, and we are more focusing on secondary demand, generating more prescriptions. So there is what rowed for more and more number of portfolios. And we are confident of at least going this down at double digit as compared to the brand has been flat or growth for the last 3 years CAs where we stand from orient portfolio.
Sure, sir. So double-digit growth on this brand versus flat growth over the past 3 years?
Yes.
Sure, sir. And last question before I come back in the queue. So, our API business sales was sluggish this quarter. So there was a 40% Year-to-Year decent. So anything to call out for in terms of what led to muted sales on the APO business?
Nothing much. It's just a postponement of some orders with one of our key customers. As a business also, we have traditionally seen that H2 tends to be much, much higher. We will be ensuring that we cover a major part of the muted trend which we saw in Q1 over second half of the year.
Okay. Sure, sir.
[Operator Instructions] Next question is from the line of Sriraam from BMT Parana.
Yes. So one question on the gross margin. I mean, it has seen decent improvement this quarter, of course, because of the raw material cost softening and all. So how should we look at this number going forward? I mean is it likely to sustain or may improve prices on ER?
So we look. You want to be closer to the range of 55 to 60, that's the number we're looking at for. And basically, this is the improvement verging account of key drivers. One is the business mix, given the performance improving, the focus on private market in South Africa. That's driving the margin sale. Second, we have driven sourcing initiatives on Azmarda and such parts of our portfolio. So that's a leading to gross margin. And thirdly, our inflation is a little bit soft. So, that's also revenue from the perspective of gross margins. And I think we should be able to be even 65 to 66%.
Okay. Got it. So sir, any reason to maintain the guidance of 25% to 27% EBITDA margin because assuming that gross margin remains around 65% to 66% and our indies have been to increase the chronic contribution as well as in the South Africa market also to focus on the private market. And we are trending higher than the range as of now. Can there be a positive surprise to that? Or how should we look at that?
See, overall, the guidance that we have been given and what we could see this quarter is one of the best quarters that we to deliver mid-teens growth and EBITDA margin was 27%. Now that is why we are doing that age. The gross margin, we are fortunate in all the 3 aspects of what improvement that we wanted to see has worked in our favor in this quarter. And as you know, the markets are so dynamic that the cost of intermediates and APIs just shoot up and you conceptually for the business continue to plan for securing partnerships with some of the big partners that we work for being a responsible company in India for making the products available throughout the year, you have to abide by the regulations that you are working in the environment. So, this is the range that we have given. We'll be more than happy to be on the higher side of the range. But all the 3 aspects have worked for us in terms of top line and mono mix in terms of efficiency, where clearly than the company. So our guidance continues to be between 25% to 21% of EBITDA margin. And for India business, what we have been talking that we should be growing better than the market. If you see today, deals, the higher figures have come for the month of July, when the market is showing 6% growth and J.B. continues to grow at 1%. We are the fastest-growing company in top 25. This fundament of July, we are now the second brand company in the market. And that is what we demonstrated over a period of time. And that is what we demonstrated over the last now 8, 10 quarters. And for intestinal market, we should grow double digit. That is what overall the guidance that we would like to keep for the rest of the year.
Next question is from the line of Abdulkader Puranwala from ICICI Securities.
My first question is on the India business. So we called out that Regal having INR 6.5 crores a monthly run rate. So, if you strip that out, the base business would be growing at close to 12%, 13%, but that, as you mentioned, would have some impact of the price reduction that you have taken in Azmarda. So sir, adjusting to that, could you please help us understand what would be the core brands or the earlier brands growth rate in terms of your base business?
So, we don't get into specific growth business of brand, but I think as I reports, we are sharing our investor presentation, but let me talk about overall the way we look at business. Our chronic portfolio continues to grow at teen. Our entire growth in India probably has been backed by the entire performers that we have demonstrated for our conic portfolio. As earlier also, Mr. [ Page ], we have been commenting on the contribution that we want to take up on chronic part of the business, close to 60%, which is cut around 54% within India business. Unfortunately, in quarter 1, our portfolio in acute part of the business is more gas to intestinal dependence where we have not seen that uptick. That is why my adtech and Metroland sports have not gone in the base that we were expecting. But the entire hard work that we are trying to do more looking at hypertension half the year lipid lowering products. That overall has helped us to demonstrate a 17% growth for the quarter, and that will be the agenda going.
Sure, sir. And my second one is coming the M&A strategy. So I know, clearly, when you have the visibility that we will be coming cash this year. So going ahead, what would be the focus area? Would it be to acquire the right brands, which would sit in the current portfolio or to venture out into some therapies, which will be more inclined to work?
So, agenda M&A continues to remain the same. We continue to evaluate assets. We'll continue to get in terms of what value will suit us in terms of being on the buying side. What we look at three, four aspects, we look at if we can grow the asset at a better pace as compared to where it stands today or we can improve gross margins of the business that we are acquiring by better sourcing or looking at things from in-house manufacturing of APM. And from a perspective, how much synergies that we can build in in consume therapy areas where we want to play and win. Those are the aspects that we have kept in mind for M&A, and we continue to be value if I'm not running away that we are not in the cost. We continue to be very busy. And at the right time, if we see that any opportunities building up, we'll be more than happy to share with all of you [indiscernible].
[Operator Instructions] Next question is from the line of Troy from BNP Paribas.
Once again, one question on domestic business. What would have been your market share at meta in this quarter still at the range of 18%? Or have you seen any improvement over there?
So we are trending in the region of 16% to 18%. That's correct.
Next question is from the line of Alka Katia from Baroda BNP Paribas.
So sir, just wanted to know how is the export formulation business being in the Russia and how the growth been? And also, if you can share some color on the South Africa business?
On the Russia front, despite some of the uncertainties in the market, we have been able to hold demand. And again, given our portfolio mix, we actually see peak happening post-September, October only. That's when the season is. As Nikhil mentioned, that there is a slight concern on the Forex part. But apart from that, for both Russia and CIS region, despite some of the uncertainties, we would say that the secondary demand is still holding up. We just need to be much more cautious about the Forex part. On the South Africa [ Sonata ], we have been very clear, and Nikhil also mentioned in his commentary, the focus going forward clearly is how do we improve the margin profile of the business and therefore, the entire trust on driving better private mix that continues to remain.
Sure. And the number of launches will continue to remain?
For South Africa, will certainly be slightly more aggressive in terms of launches because we want to improve our private mix there. So certainly, that's part of our pipeline strategy. So Russia will be more on the conservative level.
Okay. And lastly, on the U.S. front how have we been going ahead in terms of launches?
Last year, we did four filings and the next 12 to 14 months is about ensuring that the approval for the filing country. In addition to that, we'll be maintaining a run rate of two to three weeks per year.
Sure. And just quickly on the CMO segment. So are we still in the process of launching other Lorenger segment like motion business and all?
So for motor sickness, for sleep lease orders and information, those are some of the passengers immunity. Those are some of the groin more expanding portfolio in the world of Katanold. These all things are working to see what I've been telling in the world of CDMO, the entire business, adding new partners, adding new products, has it got its own gestation period. But we are in a very sweet spot in terms of what we have got very good partners, and the relationship has been here for the last now 2 decades plus. And now with a capacity close to 2 billion lossage that we can manufacture annually. So that overall helps us in terms of sustaining the business, for existing products, looking at doing business with the existing partners in new geographies and also looking at adding more partners and adding more products in the existing partners.These are things we are trying to do. And business stuff has been close to INR 120 crores for the quarter. What I can say at this amount of time that our order book for quarter 2 is also healthy. Equally, we are waiting for some indications from our partners that should come in probably in the month of September, which should help us to give more color on this portfolio. Also existing portfolio, for example, we had last year could conclude our relationship with Reid where we had launched where we could manufacture step since for them, the life cycle management where the team at J.B. and record bankers have done and now we are able to extend that partnership to step in new. So, those were things continue to happen in terms of life cycle management, new geographies, existing product lasing management. That is helping us where we stand from our CDMO business. I think this helps overall because many of our colleagues also will be having questions here. And so we are in the world of CDMO. So this is what I wanted to share.
Next question is from the line of Gary Makro from OrbiMed.
Actually, first question is on clarification Azmarda. You were talking about month-on-month growth still being very strong. But I'm just saying the data Q-o-Q, has the volumes come down a bit? Is the market resetting from that perspective?
The overall market, so what we were maintaining was the overall market when the price was reduced was at an inflection point. And therefore, what you saw sequentially at that point, the growth was much more rapid. Now to maintain that same momentum going forward is not at the same rate is something which may not be possible to sustain. But overall, the market still will continue to grow. So one cannot expect that the volumes, which grew in March and April at almost 30%, 35% or month-by-month. That month-on-month increase in volumes will continue. That's what we are maintaining.
And when you see the market right now, let's say, it's maybe doing about 18 million, 20 million units per month. This was about $10 million before the expiry. So, do you think still that this can potentially double-triple in the next two, three years?
For sure.
So there is a lot of under-diagnosis, which is yet to get covered in the market.
We have always maintained that and we are going in thesis for this brand. The sharp price, which you saw with the price reduction itself is a reflection of what the market opportunity is really. And whatever change you have seen over the past 5 to 6 months has not happened because systemically the market has changed. So suddenly, overnight, the diagnosis rate did not increase. It was only the affordability factor. And over the next three to four years, when you see some of the systemic changes happening in the market, which are more related to therapy shaping diagnosis and all, you will certainly see that the market will continue to grow. And that's where we are taking the lead. So, Nikhil mentioned that our main focus is how do we really influence therapy-shaping initiatives, heart failure clinics, to ensure more diagnosis, that's going to be a cost for the next three to four years.
That's very helpful. And the second question on [quarterback]. I mean last time, of course, we indicated that probably market share is about 10% now, about INR 90 crores sales. How do you see this going? And is it going to be the leading brand within the probiotics?
So for a corset is a leading fan growth and because it is the biggest land that we have got. So when we acquired soared INR 6 crores, 65 crores. Now we stand around close to INR 90 crores and also the market share is 10%. And what has helped us in terms of looking at the entire strength of J.B. as a company from a distribution perspective, from synergy and prescriptions from life cycle management, all those has helped us to scale up this brand to closer INR 90 crores, the brand overall the portfolio for us because there are 0.5 ratings times continue to be our midteens. And if it continue to happen and overall, probably quarter-to-quarter or for this year to year, you should see us only any market share.
So Lakshay, I was literally mentioning its leading brand within the probiotic market. Like is it bigger than Videla right now or.?
It's big was better. And so then the big brands in the overall robotic market [indiscernible]. I think we are almost #3 to #4 brand that is there.
In terms of prescriptions and volumes, we are much bigger. But traditionally, this has been a brand which has been always been much more affordable in the probiotic space. So therefore, value-wise, there is a difference of one of these racks.
And among these top 5, 6 brands, which are in the probiotics, would you say most are covered by J.B. and would be the mix, let's say, Rx versus OTC or most of them?
Just to clarify, we don't operate in the OTC segment. There may be repeat purchases of probiotics, but that's not our trust area. The other three to four players also are operating, every player has a different trade, and we also have our own stream. Now we have done some life cycle management initiatives on the screen, and we'll continue to do that. But at the end of the day, across these 5 brands, there may be overlap of one or two brands where the train is common. Otherwise, they are in different strains and these are prescription brands. We are not talking about OTC category.
And more would be a GP rate in respect of the strain. Most will be?
It's a combination of GP meta addition. It all depends upon the scale, GP, predation, gastro. We have proved out where we go promotion for is also one of the brands which we had loan where we have a INR 50 crore brand, which is basically responsible for halting the progress of COVID disease, which is a INR 20 crore tons. So, depending upon the strain the content depending upon the indication airbase.
[Operator Instructions] Next question is from the line of Ketan Rose from BIS Mutual Fund.
Wanted to understand, sales. The broad understanding was, over the last 2 years, you would have gained more traction assuming some of the payers the global players that would have excited the market. I wanted to understand the size of business for the share carries and B, how do we hedge the ruble piece that's been pretty volatile over the last 3, 4 years?
So we will not certainly disclose a segment-wise revenues, but the business last year also grew at a healthy rate of mates. Of course, the currency played a very perfect time. We have always maintained that we are adopting a cautious approach in this market. So ensuring that whatever we have on the ground, we completely optimize those resources on the ground don't get into any investment mode, but get the best out of what we have. And we have been fairly successful in doing that. Yes, last 6 months, particularly the currency volatility is slightly high. We are keeping a close watch. We hedged some part of it. But yes, we'll have to wait and watch on how the scenario unfolds. We cannot completely undermine the ForEx risk. However, we have a very strong hedging policy. And our exposure to that extent is not significant.
Okay. And would it be fair to assume that the exposure we had 2 years a would be similar to that level? Would it have gone up reduced anything that you can throw some color?
We are cautious on global aging. So even when in 2020, the waste should happen here, it did not significantly impact us. So we continue to maintain a level of the policy in exposure.
Thank you. Next question is from [ Raashi from Management ].
Sir, can you help us understand a little bit more on what's happening for the [ San bank ] portfolio, particularly with regards to begin and Ganagen because that is the conversation that you are having through IFIC? So can you throw some more color on that front?
So that business will be close to 25% of the business that we had close to 20% of the business that we acquired. Fortunately, our teams are able to cover close to 1,500 in for the nets in the country. And both the products, as we mentioned, and [ gang ] are well recognized and well accepted and trusted brands from the IV fertility specialists. So, we continue to revise that strength of [ Santan ] as a company, and we continue to source their products from [ Santan ] that is continue to be plan overall. And overall, if you look at the entire world of infinite demand which is only going up. So we also are doing their portfolio at mine. That is what we can say. That is what we can comment.
We organic J.B. also have launched some supportive therapies for infertility, which is have overall teams to go with a wide portfolio.
Sure. And what would be the volume of the run rate for Enanta right now for the first quarter of this year versus the first quarter of last year, financial year?
We will be let on volumes in terms of --and I think that has been shared in the investor has understand that. It would be close around INR 15 crores to INR 16 crores. That is where we stand as a brand monthly.
20 to 50 lakh units, that's the broad range, which we are operating. -- whenever the season comes up, it goes up to almost INR 65 crores to INR 70 lakhs in terms of what.
And lastly, the broader price to volumes at for the India market for the first quarter, the 18% growth, can you just provide the split?
So if you look at volumes, cost high single digit, that is a stand. Price is close to 5% to 6% and new product introduction is new product contribution close to 2% to 3%. As the market is probably flat or negative in volume for first four times.
Next question is from the line of Maulik from Maran Gati.
I just wanted to learn. Have we increased our number of amount? And what is the MR productivity now in terms of organic business also and acquired business also?
So I will talk to you in totality in terms of the productivity. Last year, our contains around close to INR 6.2. And this year, with 50, 70 people that we added in some of the portfolios, point total number of MR count is close to around 200. Our productivity plan that we have put in place is the aspiration is stores to equities. That is very trend.
Okay, okay. And the third question is, sir, are we more – I understand the go-to-market strategy, which we. So are you more focused and penetrated in the Tier 2 to Tier 6 1,000 or more in the metro simply? Can you throw the on understanding on it?
This was a scenario, I think a couple of years ago. But if you look at today, I think the scenario would have changed building contribution, increasing to metro and tire and part of the country because overall, when you look at the heart failure product, the result portfolio, overall, what launches we have done, we are looking at how do you improve your contribution of prescription from the specialist as company changes. We can't run away from generalist because we rented [ metropoles ] brands, micra. But you are right. I think if a ball mark it is not in black and white. Our contribution was close to 65% maybe from the parts of the country and 35% from the metro and [ Tara ], but that was 2 years ago, but today, I think it will be 30% plus from metro and tier part of the country, and it will be progressively it will only increase. That is where we stand.
Next question is from Reno Dhawan from Jefferies India.
First one, just a clarification on the EBITDA margin guidance of 25% to 27%. Is it operating EBITDA? Or is it after basis?
Operating market.
Okay. Second one, I just wanted to know on your M&A appetite. So do we have any absolute number that we can go up to? Or is there any leverage number that we have in mind and that determines what kind of M&A we could potentially go up to?
So we can go up to 1.5% of our EBITDA, absolute that is tight the threshold we have kept, but it is not -- it is not hard in part yet we have to go to that level. So it all depends upon the quality of asset. And if we, as a team, think that we can turn around and what you have seen what we have been talking about, rather Ensign or whether for heart failure pill, what we want to try to do with rest that confidence we as a team have, then we will look at in terms of how much maximum we can go to this threshold that we have put for ourselves. That is it. And there is no pressure on us to do any M&A just for the sake of being an acquisition and act the J.B. as a company is placed being a dominant player in the world of hypertension, heart failure, we have got a good product, progressive product in the form as approval was a and we are going to put up for an entire range of asserting for DP lowering gene have to go big market. We are the input in the market. We have now a good dominant player in the world of pediatrics. We have got a good range of product portfolio in the field of respiratory. So we have got enough in terms of what we can how at least we can grow the business. In terms of what I spoke our productivity can go up from INR 6 to INR 6 to INR 700. But if there is any good asset available, we do not like to miss on the right valuation that we think will suit us in terms of turning around the asset and at least looking at the payback period close to 6 years.
Okay. Just one last one from my first. What is our current spend on R&D in the U.S.? And what's the factor that determines is will it be the number of filings that we are excited and that will determine the R&D? Or do you have some revenue targets or its investment that the R&D bacterial be the limiting factor? So how do you decide on the investments on the U.S. side? And what are the current R&D spend?
Our R&D spends are up 2%, first of all. Based on re-termination as compared to more than U.S. I think what [ Anerapokeon ] is the progress we work that we are doing in terms of getting into new therapeutic segments in the world of CDMO with gross ages. That also is a part of our R&D spend. Second, I think what was spoken earlier that we continue to file three to four gas every year. And third is the balance that we have been doing. Last year, we could file around close to 10 products in our ROW market, there is best for the world BGX market. which is with the business today is close to $40 million. It is our presence in Sub-Sahara Africa, Latin America, Southeast Asia and Middle East. And this entire model of business is distributed model. So lastly, we'll go buy 10 products. We say also we want to file 10 more products. So that is a part of our R&D investment. It's a combination of the developmental work that we do for CDMO, the filings that we do for ROW market and what we are trying to do in terms of filing 3 to 4 ends in U.S. every year. So, our R&D spend earlier was up 1% when we came in today, at least, it is close to 2%. Progressively, it will go up. [indiscernible].
Okay. And just one last one. I think you made a press release that you have found the Philippines J.B. So can you throw some light on that market? And what's the breakup in terms of whether it's branded and what proportion of the market is branded? Was the growth rate of the market and how we are seeing the scale-up or that we'll be able to do going forward?
So we trained in this market, it's not all through our distributors. So we've not had a direct business. The intent is to take into in and opportunity lie both from the institutional and the B2C. So that's really the opportunity we're looking for. We surely want to invest in new products in the market, build our product portfolio and then invest in direct go-to-market model in possible. Having said this, there is a regulated timing these product registrations in place and making the change in the going market, which should happen somewhere in FY '25. And our aspiration is over the next three to four years, we would at least want to get to about 40 million to 50 million of revenue from this one.
Next question is from the line of Shrikant from Asian Market Securities.
Can you call out capacity utilization at the logins facility?
Sorry?
So on the loan risk capacity utilization, we can manufacture 18 crores loans.
Currently, we are manufacturing and packing close to INR 11 crores loans. From a packaging standpoint, we have our capacity, which will in the next 2 months got close to INR 15 crores loose.
Okay. And because this year, we have done quite well in the [ Lucentis ] business. I was wondering if you need to add any more capability for capacity next fiscal year?
So certainly, our focus is on debottlenecking some of our packaging lines. That does not call for a significant investment. The assets have already been put in there. So as we speak has mentioned that we'll be reaching INR 14 crore packaging capacity that over the next 12 months also, we'll be touching close to INR 18 crores to INR 20 crores losses.
Okay. And any guidance that you would like to provide for the next fiscal on the merchant business?
Right now, we believe that the CDMO business continues to grow healthy double-digit figures. Yes, last year, there was a significant sport, but we really see a very good healthy order book situation. As Nikhil mentioned, that we have to watch out for how the seasonal trends reflect over the next three to four months to give you a formal view of almost next 10 to 12 months. But in respective this is a very important strategic area for us, quite easy over the long term, continue to grow at healthy double-digit range. And in the next 12 to 14 months itself, that's why we have taken the effort of almost taking our manufacturing and packaging capacity to almost INR 18 crores of interest.
All right. And on the domestic business, can you call out the accurate chronic mix during this quarter?
Acute was close, I'm just giving you a broad range, wherein was closer to 44, 45 and the chronic 55.
Okay. Because I was thinking that there has been lower chronic business has done well. So I was just wondering if there was any positive impact because chronic has done well. And at the same time, the acute has changed a slight dip in the contribution. So is that right assumption to make?
Yes. So overall, our I think quarter last year was close to 53% and that is what was I think what [ Kona's ] focus, our contribution should be go to 55% and equity contribution would be.
Understood. And last question. So in because we are putting a significant focus on the chronic business, so what will be our target in 2 to 3 years' time? Where do we see the acute chronic mix heading to? These are so our contribution of chronic business, we want to take it to 60%.
[Operator Instructions] Next question is from the line of Rahul from Myostatin Equities.
Yes. In the domestic business, apart from Sallie, do you see any pricing big pricing distention between your lands and competition? And are there any efforts to narrow the sizing gap versus competition?
Even if there is a pricing difference for all the schedule products, you cannot go beyond 10% range. So while there is a pricing difference or 4 lakh, the axiom include you can take from a price standpoint is not beyond that.
Okay, sir. And apart from [ Salagen ] of your other brands would have a meaningful discount versus competition. So, apart from that, it's pretty much on parity with respect to our...
Sure. And sir, some of your peers have called out the Anaren price per impeding the quarter.
So did we also allow onto our alum exposure has significantly come down to standard getting out of price control, but the ADM side just impact our growth as well on the India resets quarter?
There is a very marginal impact on metasite, very much. Nothing to comment on.
I now hand the conference over to the management for closing comments.
So first of all, let me thank you and all of you for coming for the call today. And as patiently listening to our commentary I'm more than happy well more than have to do at least take your questions and keep the answers in the capacity that we could. Overall, once again, reciting debt, our guidance going ahead for the next 3 quarters should be what we have spoken earlier is bidding overall India pharma market performance by 3 to 400 bps. And that is what we could demonstrate in the month of July also. What I showed earlier, the answers that we have demonstrated for last 4 months in which it will continue.Our entire focus within India would be how to continue to work on the theme of making big brands bigger, particularly in one part of the business and as a to take that contribution to 60%, more than happy in terms of the portfolio that we have acquired and that brands that we have built is only helping us to not improve our ranking and value, but also to also improve our ranking in prescriptions. That is what we fundamentally believe that how do you build your business, which is fundamentally strong. This was on India. International, the focus will continue to be on the CDMO business continues to work with our partners and if looking at what opportunities we can explore in the BGS market.Also, as stated earlier, South Africa this year, the entire aspect of transformation of business, looking at how we can improve our contribution from private market will happen for a period of time. So, international business grows at double digit, touching double-digit growth and India market within IP by 300 to 400 bps. And the margin guidance that we have stated earlier also will be between 25% to 27%. That is where we stand in the company and committed overall, not only in India but globality quality medicines, which comes from the house of J.B. Thank you all once again for coming for today's conference call, and we'll continue to touch this with you in coming quarters. Thank you.
Thank you very much. On behalf of J.B. Pharma, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.