J B Chemicals and Pharmaceuticals Ltd

NSE:JBCHEPHARM

Earnings Call Analysis

J. B. Pharma Reports Continued Growth with Strong Margins and Positive Outlook

In Q2 FY '25, J. B. Pharma achieved revenues of INR 1,001 crores, growing 13% year-on-year, supported by a robust domestic performance which saw a 22% increase. The company's gross margins held firm at 66.2%, with operating EBITDA margins at 28.4%. Notably, the CDMO sector is expected to see growth in H2 FY '25, recovering from earlier challenges. Looking ahead, the company maintains its guidance for operating margins between 26% and 28%. Key growth drivers include strategic brand positioning and expansion into new markets, particularly for products like Azmarda, expected to grow at 15-20% annually.

A Solid Quarter for J. B. Pharma

In Q2 FY '25, J. B. Pharma maintained its robust revenue performance, reporting revenues of INR 1,001 crores, which is a 13% increase year-on-year. The net profit also rose, climbing 16% to INR 175 crores. This consistent performance is attributed to strong brand momentum and strategic positioning in both domestic and international markets.

Domestic Market Growth

The domestic business has continued to flourish, accounting for approximately 59% of total revenues. The company achieved a remarkable 22% year-on-year growth, totaling INR 588 crores. Notably, excluding the ophthalmology sector, the domestic sales still grew by 12.6%. This growth outpaced the Indian Pharmaceutical Market (IPM), which reported a growth of 7.6%. J. B. Pharma's robust portfolio includes leading brands, now placing them in the top tier across various therapeutic areas, particularly cardiology where they have climbed to the 8th position.

International Revenue Performance

J. B. Pharma’s international business saw modest growth of 3% year-on-year, totaling INR 413 crores. The U.S. and South African markets, however, recorded double-digit growth, underpinned by a strong operational focus. Looking ahead, the company anticipates that this segment will also see a recovery driven by the resolution of earlier material supply challenges.

Strategic Focus Areas and Growth Projections

Management plans to outpace market growth by focusing on chronic and high-growth portfolios. They project steady growth for their CDMO (Contract Development and Manufacturing Organization) business, targeting a future value increase from nearly $50 million to $100 million within the next 3 to 5 years. They have a strong order book and expect to recover deferred sales in the H2 of FY '25.

Margin Management and Cost Optimization

The company's operating EBITDA margin stood at 28.4%, while gross profit margins were maintained at 66.2%. Cost optimization efforts contributed positively, with notable reductions in finance costs, decreasing from INR 10 crores in the prior year to INR 2 crores. The management aims to sustain operating margins between 26% to 28%, despite potential market uncertainties.

Future Outlook and Guidance

Looking forward, J. B. Pharma's management is optimistic about continuing its growth trajectory. They expect strong results in the CDMO business and other new market entries, with projections for the domestic business to outpace market growth rates of approximately 8% to 10%. They also anticipate an overall healthy performance in H2 FY '25, supported by strong operational fundamentals and strategic brand positioning.

Key Growth Drivers

Particular products, such as Azmarda, are expected to drive growth rates between 15% and 20%. The management expressed confidence in sustaining their momentum through strategic acquisitions and continued expansion in therapeutic areas that promise high growth potential.

Earnings Call Transcript 2025-Q2

[Operator]

Ladies and gentlemen, good day, and welcome to the J. B. Pharma's Q2 FY '25 Earnings Conference Call as on the 7th of November 2024. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Jason D’'Souza, Executive Vice President at J. B. Pharma. Over to you, sir.

[Jason D'Souza, executive]

Thank you, operator. 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 Narayan Saraf, the CFO at J. B. Pharma.

Before we begin, I would like to state that some of the statements in today's discussions may be forward-looking in nature and may involve certain risks and uncertainties. A detailed statement in this regard is available in the Q2 FY '25 results 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 and for his opening remarks. Over to you, sir.

[Nikhil Chopra, executive]

Thank you, Jason, and a warm welcome to all of you. Thank you for being with us today. I will commence with my thoughts on our Q2 performance. J. B. Pharma has maintained its pace of performance with INR 1,000 crores revenues are being delivered yet again in quarter 2 FY '25. Our gross margins have held steady at 66.2%, whereas our operating EBITDA margins came in at 28.4 percentage. The operating EBITDA stood at 13% higher than the INR -- at INR 285 crores, while net profit increased by 16% to INR 175 crores.

I'm pleased to share that our domestic business has continued to around 59% of the overall turnover during H1, relative to 55% during H1 FY '24. This is a representative of the consistent momentum in our brand portfolios. We have created leadership positions in the select categories where we operate and continue in turn to expand those categories.

Let me cover this in some details for all of you. The domestic business delivered 22% growth year-on-year to INR 588 crores for quarter 2 FY '25. Excluding ophthalmology, we have increased the business by 12% growth year-on-year from here. We have continued the trend of delivering ahead of market. As per IQVIA MAT September '24. J. B. Pharma has shown 11% growth versus IPM growth of 7.6%. Each of our big brands has witnessed healthy gains. Presently, all our top 5 brands are among the top 150 in the country.

We are within the top 10 players in the cardiology market, whereas we have jumped ranks from 15 as per MAT September '21 to now 8th in MAT's September '24 in the cardiology market. Azmarda and Razel have contributed here along with the Cilacar and Nicardia franchises.

Next, let me expand on our acquired portfolio performance. Azmarda has delivered sales of INR 67 crores as per IQVIA MAT September '24, post-LOE. And this trend is only likely to improve with sacubitril/valsartan market growing at a 15% to 20% CAGR for the foreseeable next 5 years.

Razel franchise has given a strong 28% year-on-year growth as per IQVIA MAT September '24. Sporlac franchise reported a revenue of INR 137 crores as per IQVIA MAT September '24, growing at a 29% CAGR since INR 83 crores as per IQVIA MAT September '22. So from INR 86 crores in September '22 MAT, today we are INR 137 crores, September '24 MAT for Sporlac franchise. Our pediatric portfolio has achieved some notable trends with Z&D pediatric syrup formulation becoming a INR 24 crore brand. Ophthalmology has been well integrated in January '24 and has grown 19% in quarter 2 FY '25 relative to quarter 1 FY '25 as per IQVIA data.

Coming to our international operations. Our international business revenue has grown at 3% to INR 413 crores. Both South Africa and the U.S. business has recorded double-digit growth. Even our Russia and branded generic business in RoW markets had a high single-digit performance.

Our CDMO business remained muted for H1 FY '25 and is expected to recover in H2 FY '25. CDMO sales, that is USD 2 million got deferred to Q3 FY '25 due to material availability challenges, which further impacted our quarter 2 FY '25 performance. As a result, CDMO is expected to report a strong number for Q3 FY '25. We have a robust order book for Q3 and Q4 FY '25.

We are maintaining our margins outlook to 26% to 28% despite the uncertainties in the market where we operate. Cost optimization is a key focus area for us. Looking ahead, we anticipate our domestic business to continue to outgrow the market on the back of our brand focus and market share gains.

The thrust on chronic and high-growth portfolios will also contribute strongly to this performance for the coming time. We expect our CDMO business to show a strong trend in H2, as mentioned earlier, and thereafter on the back of new launches, new partners and expansion into new geographies across the globe.

We are building a strong business that continues to deliver backed up by efficient operating processes and strong brands.

With that, I wish to conclude my opening comments and request our CFO, Mr. Narayan, to continue with his comments. Over to you, Narayan.

[Narayan Saraf, executive]

Thank you, Nikhil. Good afternoon, everyone, and welcome to our Q2 earnings call. I will now take you through the financial highlights for Q2 FY '25. Revenues for the quarter were at INR 1,001 crores, representing an increase of 13% year-on-year. The domestic and international business, which was [ 59-ish ] to 41 percentage, respectively. The domestic business reported revenues of INR 588 crores with a growth of 22% year-on-year.

Not including the ophthalmology portfolio, the domestic business reported a 12.6% year-on-year growth. As per IQVIA MAT September '24 data within the IPM, the company outperformed with a growth of 11% versus IPM growth of 7.6 percentage. The international business saw moderate growth of 3% year-on-year at INR 413 crores.

Gross profit margin for the quarter stood at 66.2 percentage grew by 13%. Excluding ophthalmology portfolio, which currently has limited margin, gross margin improved by more than 150 basis points year-on-year. However, cost optimization efforts, favorable product mix and price growth aided margin. Operating EBITDA, excluding ESOP cost stood at INR 285 crores, with growth of 13% year-on-year. The margins were at 28.4 percentage in Q2 FY '25.

On the expenses, overheads including employee costs was contained, which also aided operating margin. Finance costs reduced from INR 10 crores in Q2 FY '24 to INR 2 crores due to decrease in gross debt. MTM ForEx impact of INR 4 crores was recorded in Q2, primarily due to depreciation in ruble currency. The company's operating cash flow in H1 were at INR 380 crores as against INR 421 crores in H1 FY '24. Cash tax has increased by INR 34 crores due to increased taxable profit and lower accumulation of deferred tax liabilities. The company held inventory because of anticipated GPA costs and ophthalmology inventory.

The company's gross debt as of 30th September 2024 was at INR 82 crores versus INR 358 crores as on 31st March 2024. Net CapEx addition for H1 FY '25 was INR 53 crores (sic) [ INR 49 crores ] versus INR 93 crores in H1 FY '24. We reiterate our guidance for operating margins between 26 to 28 percentage. We remain confident on positive outlook through opportunities for the company and providing value to our stakeholders. That brings me to the end of my opening remarks.

I now request the moderator to open the forum for the question-and-answer session. Thank you.

[Operator]

[Operator Instructions] The first question is from the line of Amey from JM Financial.

[Amey Chalke, analyst]

Am I audible?

[Nikhil Chopra, executive]

Yes, Amey.

[Amey Chalke, analyst]

Two questions from my side. First, given our capacity expansion in our -- for the CDMO business, how do we see this business growing in the future? And what will be the peak potential for this?

[Nikhil Chopra, executive]

So Amey, earlier -- also in my earlier comment also what we have projected, if you look at medium to long term, this business, which is now close to $50 million, we want to take it to $100 million in 3 to 5 years. But in short to medium term, probably what comment we have shared in H2, you should see business ramping up because a couple of million dollars in quarter 3 because of the material availability. There are lot many of new projects that we have put in place, new drug delivery, newer geographies, newer partners, newer category of lozenges, all these are in place.

We'll be more than happy to share the details as and when we are ready to share that. But overall, the momentum that we see in this business is up north. And our guidance in terms of the business that we want to take it to $100 million still stands as is.

[Amey Chalke, analyst]

Okay. Understood. And second question, is it possible to provide the constant currency growth for the International business segment?

[Narayan Saraf, executive]

We'll get back to you. We have not seen the constant currency growth. We don't have the numbers handy right now.

[Operator]

The next question comes from the line of Sumit Gupta from Centrum.

[Sumit Gupta, analyst]

Am I audible?

[Nikhil Chopra, executive]

You're audible.

[Sumit Gupta, analyst]

Sir, there are two questions. So first is on the Azmarda. So what kind of potential do you see in Azmarda and what kind of growth rates, can you reiterate that?

[Nikhil Chopra, executive]

So the Azmarda growth rate in the future, we project growth at 15% to 20%. There is a huge potential in the heart failure market as we maintained earlier, also close to more than 10 million patients, less than 20% diagnosis, the adoption continues to be extremely high for this product.

In the last call also we mentioned that our first goal was that consolidation happens, and we maintain a run rate of 125,000 units, which is close to INR 6 crores monthly value. We are there. We are consistently tracking at that mark, and we continue to maintain a very positive momentum for this particular molecule. It will grow at 15% to 20% from hereon.

[Sumit Gupta, analyst]

Okay. So the demand is like how much? So last quarter, you mentioned at around 125,000 units. So is it a steady? Or like how is it...

[Kunal Khanna, executive]

So quarter-on-quarter, we expect close to 5,000 to 7,000 units gain. So what we are expecting is by the end of this financial year, we'll be close to 140,000 to 145,000 units and from thereon, we should expect close to mid-teens growth for this particular molecule.

[Sumit Gupta, analyst]

Understood. And sir, lastly, on the operating EBITDA. So for first half, you delivered around 29% nearly, and the guidance is still maintained at 26% to 28%. So what will likely lead to a moderation in the margin in second half?

[Kunal Khanna, executive]

We maintain our guidance. We will -- our endeavor is to be on the higher range of the guidance given. While we have delivered that, we are also mindful that Q4 India business in March because of inventory normalization, there is a marginal impact. But having said that, we are fairly confident that we should be at the higher range of the guidance given.

[Operator]

The next question is from the line of Tausif from BNP Paribas Exane, Research.

[Tausif Shaikh, analyst]

Congrats on a good set of numbers. My first question is on India business. Can you provide the price and volume breakup for this quarter?

[Nikhil Chopra, executive]

Yes. So the volume growth was in the range of around 5% and the price growth was also in the range of around 6% for the quarter.

[Tausif Shaikh, analyst]

Second question on CDMO partners. Do you expect this raw material issue to get resolved in coming quarters?

[Nikhil Chopra, executive]

Yes. That is what I shared in my commentary that already this material availability issue has been resolved and a couple of million dollar order, which has been differed in quarter 3, will be -- that is taken.

[Tausif Shaikh, analyst]

Okay. Sir, last question in last 4 to 5 years on a top brand, I mean, what kind of volume growth we have witnessed?

[Kunal Khanna, executive]

Volume growth has been consistently at close to 6% plus. Even if we compare our volume growth of late in quarter 2, we have registered 5% versus IPM of less than 1.5%. And that's what we have always maintained that we'll try to maintain an incremental 3% to 4% delta as far as volume growth in the IPM is concerned, and we continue to trend along. So just to clarify, the volume and price growth, which was given was excluding ophthal portfolio. So we clocked organically 13%, and that was the breakup of volume and price in that.

[Tausif Shaikh, analyst]

And if I'm right, we have launched central line extension, right, for the existing products in the last 4 to 5 years?

[Kunal Khanna, executive]

Yes. Life cycle management has been very critical to our overall growth strategy for the large brands. So big brands like Metrogyl have now extensions like Metrogyl ER, Rantac has Rantac OD. Sporlac, which we acquired. We did significant incremental innovation. So now we have other variants in the form of GG, Sporlac GG. There are other various forms of probiotic which we are looking at. So LCM has been very core and critical to our overall strategy of organic and acquired portfolio.

[Operator]

[Operator Instructions] The next question is from the line of Rashmi S. from Dolat Capital.

[Rashmi Sancheti, analyst]

My call was dropped. So I think I have missed that comment. You mentioned -- did you mention the reason for the nonavailability of the raw materials in the CDMO segment? Was it related to changing any particular vendor because of which it got delayed? Or any specific reason for it?

[Kunal Khanna, executive]

No, no. This is not related to any change in vendor, nothing of concern, just specific excipients got delayed. Some of these excipients, because it's a very unique and differentiated product, come from regulated markets, and there was just a slight delay. So nothing of concern. Overall, we see a very strong traction for our CDMO business in H2, and some of the supply challenges will also get resolved.

[Rashmi Sancheti, analyst]

Okay. So if you expect that growth would come back in H2 and first half, we have seen a decline. So can we expect that for this entire year at least we would close flattish over FY '24?

[Kunal Khanna, executive]

Yes, that's a fair assumption. In fact, CDMO business for H2 will be in very high double-digit growth rate up to 20% plus. So we don't expect any further impact on this business. We are seeing a healthy traction, and it should be as suggested.

[Rashmi Sancheti, analyst]

Okay. And can you quantify like how much sales in this quarter was deferred to quarter 3 in this CDMO part only?

[Nikhil Chopra, executive]

You missed what I gave the commentary. It was a couple of million dollars.

[Rashmi Sancheti, analyst]

Couple of million dollars. Okay. Okay. And in the domestic business, we are seeing Razel franchises showing a very strong growth. Earlier we were anticipating that this franchisee will more or less be in line with the market. And it is outperforming both statins market and the rosuvastatin market. So what are the initiatives which you have taken -- which is leading to this kind of growth? And what do you expect that whether the growth will get normalized or it will continue in this way?

[Kunal Khanna, executive]

See, the good thing is we are in a progressive market. If you just look at the numbers of plain and combination as reflected in IQVIA, our plain has grown at 30% plus for Q2, the market is closer to 20%, and our combinations are also growing at 20% plus, which is higher than market. It's a very focused strategy, which we have. This brand was part of our other second main chronic team where Nicardia was being promoted. We have good space in kind of ensuring that this brand gets P1 priority. And given the expansion of cardiologists and consulting physician in the prescriber base, we have been able to get strong results for this.

[Rashmi Sancheti, analyst]

Okay. But any field force, any dedicated field force for this particular franchisee you have added or it is the same?

[Kunal Khanna, executive]

It was part of our main second flagship chronic team, which was promoting Nicardia. In that particular team, this gets priority 1 positioning.

[Rashmi Sancheti, analyst]

Okay. Got it. Got it. And one question on CapEx. What is the guidance for this year and the allocation for it, like if there is any growth CapEx planned because your ophthalmology product would finally come in with the company from FY '27, FY '28. So any plans for that? So if you can give guidance on that?

[Narayan Saraf, executive]

Yes. So in the second half, we are planning for another INR 50 crores, INR 55-odd crores of CapEx. So totaling this year, we would be investing INR 100-plus crores of CapEx. And obviously, we will keep on investing behind -- besides maintenance into even growth CapEx and supporting for our growth endeavor our future of the business. So we have plans to invest in machineries, which will support our IVF portfolio, which will support our business.

[Nikhil Chopra, executive]

So every year, [indiscernible] CapEx, which is close INR 100 crores to INR 120 crores. You should assume 15% 20% is a growth CapEx.

[Rashmi Sancheti, analyst]

15% to 20%. Okay, okay. And one last question, $160 million, which we will be paying before December '26, that will be entirely paid through the internal accruals or we are going to -- because we have already repaid the debt, but are we going to add the debt in FY '27 or we will be utilizing it through internal cash only?

[Narayan Saraf, executive]

As of now, the intent is that we want to pay it off on the internal accruals also -- only because we would have enough funds to pay off the loan at that point of time.

[Operator]

The next question is from the line of Harith Ahamed from Avendus Spark.

[Harith Mohammed, analyst]

From the ophthalmology portfolio, I think we can calculate revenues of around INR 90 crores in the first half. So can you share some color on the kind of growth that you've seen in this portfolio? And if you can also talk about some of the changes that we've brought in after licensing these brands and including the addition of MRs. So any comment there would be helpful.

[Kunal Khanna, executive]

Purely from a number standpoint, when we acquired this portfolio, the steady-state run rate of the acquired portfolio in the previous organization was close to INR 40 crores. In H1, we had started seeing good growth trends and we were closer to INR 44 crores to INR 45 crores and now we have close to INR 48 crores run rate per quarter.

So we are well aligned to our overall objective of clocking close to INR 185 crores to INR 190 crores for this portfolio. We have seen very strong secondary traction. If you look at the recent numbers for this quarter, even the external market reflection is showing close to 18% to 19% growth, our objectives of expanding the prescriber base has started yielding us results.

So when we took this portfolio under this team, they were close to 7,000 ophthalmologists, which were being covered. We have expanded the team. We took it from 65 to closer to 105, and we are right now covering close to 13,500 ophthalmologists, which in the near future, in the next 12 months that prescriber coverage will also expand to 16,000 to 17,000. So every quarter, we are seeing good sequential growth and with strong secondary trends. We remain extremely confident and optimistic about this.

[Nikhil Chopra, executive]

So a couple of points I would like to add. If you see our presence during the ophthal business, where we are doing around INR 47 crores to INR 48 crores revenue every quarter. Our major presence is in the world of glaucoma, pain, anti-allergic, antibiotic. And last month only, we have launched a new product from J. B. House, which is sodium hyaluronate. So you will continue to see every 3 months, one product that we'll be launching in this portfolio in terms of what are the unmet needs in this market. With now the right coverage and 100-plus people working in this team, we have enough space in terms of we can target newer categories.

[Harith Mohammed, analyst]

Okay. And my second question is on your mature franchises, and I'm referring to Rantac and Metrogyl. So obviously, growth has -- we've seen a slower growth versus the rest of the portfolio. But going forward, how should we think about these 2 large franchises because they continue to account for a reasonable share of overall sales. So are we expecting these 2 deliver growth going forward? Or should we expect a fairly flattish kind of profile?

[Nikhil Chopra, executive]

So the good news was that in first 6 months of the year, let me talk first about Metrogyl. Metrogyl, this year has demonstrated high single-digit growth because of the better uptake in terms of prescriptions. And many of the progressive SKUs within Metrogyl franchisee, there was good uptake in the prescriptions. And same holds true for many of the franchises within Rantac, but the mother brand in Rantac is flat in volume, which we should assume it should be flat in volume. But there are other SKUs within Rantac franchisee, which are showing a good double-digit growth. So basically low single-digit growth, what you should expect for Rantac franchise and Metrogyl probably this year, the season has been good. So that demonstrated a good high single-digit growth. But the focus is more on the progressive prescriptive SKUs within Rantac and Metrogyl franchises.

[Operator]

[Operator Instructions] We have the next question from the line of Rahul Jeewani from IIFL Securities Limited.

[Rahul Jeewani, analyst]

Sir, on the Cilacar portfolio, obviously, we have seen very good growth over the past few years. But if you look at this franchise now, this franchise is almost INR 700 crore franchise for us as per IQVIA data. So what kind of a growth do you see in this franchise going forward? And what would be the drivers for the same? So do you see any doctor coverage gaps as far as the cardiologist or the nephrologist channel is concerned for Cilacar?

[Nikhil Chopra, executive]

So first of all, Rahul, there is no doctor coverage gap. Basically, we have bifurcated the entire focus on this coverage where the focus continues to be on plain cilnidipine, which is a starting prescription for newly diagnosed hypertensive patients with compromised renal function, that is point number one. Point number two is the way we have segmented Cilacar T as a product for patients, who are suffering from comorbid conditions of diabetes with hypertension. That is where the focus continues to be there. .

And equally, there are other 2 franchises where we are focusing, which is a combination of cilnidipine metoprolol and equally cilnidipine telmisartan metoprolol and cilnidipine telmisartan chlorthalidone. These are 5 SKUs within Cilacar franchises, which will continue to be -- which will continue to show a good growth. See, the way we see this market is not only in terms of revenue or what every month, that is what we are generating, but we more look at it in terms of the burden of disease.

If you look at in a country like India, 100 million-plus people suffer from hypertension and 1 in 4 patients is undiagnosed. So we have basically put the entire positioning of segmentation, targeting and positioning for all our different SKUs to different specialty for different indications.

So we seem to be very bullish in terms of what we can do with Cilacar franchise and targeting more from looking at how to reduce the burden of disease. And equally, J. B. being a responsible company, we are closely working with all the specialties be it cardiologist, nephrologists, endocrinologist, MD medicine, not only going and promoting the product in the clinic of doctors, but also helping in dissemination of knowledge where we are also working closely with many of the societies like Cardiology Society of India, also Association of Nephrologist, equally MD Medicine, in terms of what new guidelines can come in place and help in dissemination of knowledge all across, which will help not only in terms of patients being diagnosed early and being given the right treatment for the right ailment that they are suffering.

[Rahul Jeewani, analyst]

Sure, sir. And sir, on this growth which we have seen for Cilacar and Cilacar T, which has been around, let's say, 22%, 28% CAGR for past 3-year period. Can you call out the volume growth for both these brands, specifically over the past 3 years?

[Nikhil Chopra, executive]

The volume growth continues to be between 12% to 14% for Cilacar and Cilacar T.

[Rahul Jeewani, analyst]

Okay. So 12% to 14% is still being driven by volume growth?

[Nikhil Chopra, executive]

Yes.

[Rahul Jeewani, analyst]

Sure, sir. And sir, the second question which I had is on the export business. Now if we see on the export formulation, this quarter, we saw a growth pickup happening because of the fact that the rationalization of the South Africa tender business is now in the base quarter as well. So given that the impact of South Africa tender rationalization in the base, so what kind of growth are you targeting in the export formulation business over the next 2- to 3-year period?

[Nikhil Chopra, executive]

First of all, let us talk about current year. For current year, we are looking at this business -- intentional business to grow double digits, and we should be closing the year high single digit for this business. That is where we stand.

And South Africa, as you told, as you were -- what you were talking about, last 5 quarters, we have come out with a haircut that we have taken of INR 150 crores -- this year -- this quarter, we showed double-digit growth, and this business will grow at double digits around 10%, 12%.

FY '27, you should see better traction in our RoW branded generic business, where we see some traction coming from new launches, which we have been filing. Last year, this year, both put together, we should be able to -- we would be filing around 20 new products. That should also contribute to the business growth for that business, which is once again approximately INR 100 crores a quarter.

So overall, because of this couple of million dollar business of CDMO getting deferred in quarter 3, that is why overall business, you saw muted growth of 3%, but we should close the business with high single-digit growth with double-digit growth happening in H2, and this business overall should go at around double digit in the coming time.

[Rahul Jeewani, analyst]

Sure, sir. And sir, last question from my end. So when the new management team had come in a J. B., we had also expanded our R&D team in terms of a new R&D [ hire ]. But if we see the traction on the exports business in terms of new filings or even new ANDA filings for the U.S. business has been limited. So sir when do you see some of those R&D efforts translating into better growth for the international business?

[Kunal Khanna, executive]

See, we have always maintained -- there are 2 parts of our filing strategy. One is what we will do in our overall international RoW markets and a very selective stage gate approach as far as the U.S. market is concerned, right?

So with respect to the International, Rest of the World markets, as Nikhil was saying, we've already done close to 20 development and filings. The benefits of that and this being international market from the time the dossier is prepared, filed and once you get regulatory approval, it's 18 to 20-month process.

So the first phase of 10 products, which we have filed, we should start seeing benefits and regulatory approvals coming for them somewhere in September, October of calendar year FY -- calendar year '25, which means basically Q3, Q4 FY '26. And for the other set of 10 products, you should start seeing incremental gains coming in, in FY '27.

So we are very confident that the first 2 phases of International filings of 20 products, we should start seeing incremental gains from late FY '26 and full realization in FY '27. Coming to U.S., we have always maintained that it's going to be close to 3 filings a year. We have, over the last 2 years, maintained that, and you should start seeing approvals also coming through in the next 9 to 12 months.

[Rahul Jeewani, analyst]

Sure, sir. And just one follow-up on that. Can you split out this 20 filings across markets, if that is possible?

[Kunal Khanna, executive]

That is -- we would not want kind of give disclosures regarding that. That's a very business-specific strategy, which we have for these products.

[Operator]

We have the next question from the line of [ Sonia ] from [indiscernible].

[Unknown Analyst]

Sir, I wanted to ask the question that is previous con call, you quoted for the new product launches in pediatrics, GI, probiotics, so -- with an expected pace of 1 to 2 launches in every 2 months. So could you please provide an update on whether this guidance has been followed so far? Or if so, could you please share the details of the recent launches?

[Nikhil Chopra, executive]

So first product that we had launched was this [ Rantop ] syrup, which is in the GI franchise also, which should clock around INR 10 crores revenue for the year, almost 6 months of the year has happened. That is point number one. Equally, a couple of launches have happened in the world of Sporlac franchise, what was shared earlier, that is Sporlac GG, a pediatric formulation of Sporlac and equally Sporlac EVA, which is here.

Equally, in Metrogyl franchise, we have launched Metrogyl DG LA gel, which is once again for dental health. You should see a couple of more launches happening, probably we have also launched 1 eye drop that is sodium hyaluronate [indiscernible], which is in the market in the world of ophthalmology. You should -- we have a very good iron supplement that is Bizfer XT tablet, which is close to around INR 15 crores, INR 20 crores product. We are launching a syrup formulation in that. Equally, you should see probiotic for dental health, which should come in probably in the month of December and 1 or 2 more launches you should see in the world of ophthalmology. So this trend will continue.

[Unknown Analyst]

So sir, what has been the outcome of this on the revenue? Has it impacted or not?

[Nikhil Chopra, executive]

Yes. So what was shared earlier by Narayan, if you look at the volume growth, which was 5% and price growth was 6%. New products are contributing around 1.5% to 2% overall growth.

[Operator]

[Operator Instructions] The next question comes from the line of Sumit Gupta from Centrum.

[Sumit Gupta, analyst]

Sir, two questions. First was on the [indiscernible] productivity. How much is MR base as of now?

[Nikhil Chopra, executive]

Today, we have MR base of 2,300 including ophthalmology.

[Sumit Gupta, analyst]

Okay. So going forward, how do you see panning out like MR productivity? Or do you plan to add new MRs?

[Nikhil Chopra, executive]

No. So right now, we don't have plans to add more MR. At least in next 12 to 18 months, there are no plan to add any MR. Today, our productivity stands this year is around INR 7 lakh.

[Sumit Gupta, analyst]

Okay. And sir, secondly on the ESOP. Do you still maintain in FY '25 full year, you will be doing ESOP of [indiscernible] INR 45 crores?

[Nikhil Chopra, executive]

ESOP cost?

[Narayan Saraf, executive]

ESOP cost, yes. So ESOP costs, we have incurred around INR 14 crores this quarter. And yes, we expect it to be another INR 25 crores to INR 30-odd crores in the second half. And annually, it would be around INR 45 crores.

[Operator]

[Operator Instructions]

[Unknown Executive]

Just one second. We have one question which has come on the chart. So in terms of -- which has come on the chat is that operating cash flows have been a little soft in the first half. So the question is what is expected for EBITDA to operating cash flow conversion for the year?

[Narayan Saraf, executive]

Yes. So thanks for the question. So very clearly, we are very confident that our net operating cash for FY '24 as a percentage to EBITDA will be 18% plus like previous years.

[Unknown Executive]

You can take the next question.

[Operator]

The next question on the audio bridge is from the line of Abdulkader Puranwala from ICICI Securities.

[Abdulkader Puranwala, analyst]

In terms of your MR productivity, so could you help us understand where is the scope for further improvement? Is that new set of brands what you have launched in terms of the acquired brands or the line extensions where you believe the next set of productivity improvement would be driven?

[Nikhil Chopra, executive]

All across, all across. If you look at what we are trying to do in the world of cardiology, today our productivity is higher than where all India productivity, so that can also inch up. As what you heard earlier, our volume growth in our biggest 2 franchises is in big teens. Equally, we see huge potential in terms of what we are trying to do in our acquired portfolio.

New launches will continue to contribute to the growth. The productivity will inch up. And also, we have identified around 18, 20 brands across company that is 3 brands in every business unit, which are the anchor brands, which will drive the productivity. So all across we see productivity, our productivity should grow around 10% to 12%.

[Abdulkader Puranwala, analyst]

Understood, sir. Second is on your broader aspiration to becoming the 15th largest company in the domestic pharma market. I mean, while I understand that the bridge is quite significant, but would this be largely met again by few more acquisitions or any particular area where you think you can create a sizable value for yourself?

[Nikhil Chopra, executive]

So first of all, I don't know from where is this coming that we want to become the 15th largest company. Today, we are 22nd by value and 16th by prescription. If you ask aspiration, we want to be -- we want to inch up in terms of where we want to be in terms of prescription. We want to be in top 10, by the way, in terms of prescription. Today, we are 16th ranked. So that is what is in our hand. .

And what was shared earlier, we'll continue to deliver better performance as compared to market. Market will grow at around 8% to 10%, and we should grow better than the market. So very difficult to say in terms of gaining ranks, we are happy where we are today. But we would like to increase our ranking in the prescriptions with all our big brands, Rantac, Metrogyl, Sporlac, Razel, [indiscernible] all those will contribute over a period of time to improve our prescription ranking.

[Abdulkader Puranwala, analyst]

Understood, sir. Sir, final one on your CDMO business. So while I understand that there was a certain disruption in the first half and the second half will be a little stronger, but I think we have previously guided that in the long term, we aspire this to become like $100 million kind of a business segment for us. So I mean, are we still retaining this guidance? Or you'd like update that to us as well?

[Nikhil Chopra, executive]

This question was answered earlier, but let me once again share with you in terms of -- so our aspiration to be $100 million stands as is with -- above that we are trying to expand in new geographies, which is a combination of getting into Brazil market, getting into Europe market, getting into U.S. market, and the other things that we are attempting, which will happen probably in medium term. Equally getting into a newer category of lozenges, which we have been talking -- next year.

Obviously, what we have been talking about getting into lozenges, which are [ merit-only ] in place, which would happen next year. We have been talking about getting into immunity and wellness lozenges, which are already there in our European market, it will -- in 3 European countries, probably next one, it will be available Pan Europe and other more countries. Also, you should see us getting into new dosage of drug delivery, be it a combination of stick pack, throat spray, newer partners that we are trying to get into across the globe. So all these are in place. And what earlier was shared that the aspiration to be a $100 million company in CDMO stands as is with the right partners that we have got and equal the capacity that we have got of 2 billion lozenges, which can happen in 3 years, which can happen in 5 years in the coming time.

[Operator]

[Operator Instructions]

[Unknown Executive]

So there's another question on chat. So the question -- there are two questions. One is how do we see the performance of the India business in the second half of the year? And how has the performance been of the probiotic business in the first half of this year?

[Nikhil Chopra, executive]

So what was shared earlier that Sporlac as a franchise when we acquired was INR 83 crores a couple of years ago, today, it is INR 137 crores as reported in IQVIA MAT. And what we have done is done right life cycle management and better distribution and representation of our people in the clinic with Sporlac franchise. And we are very bullish on this. This is a INR 2,000 crore market. Still we are scratching the surface, huge opportunity in terms of what we can do with this franchise. Probably this is a sixth brand that you, at some given time, will see will be in top 300 from J. B.

And overall, when we look at India business, we'll continue to deliver market-leading performance, which we have been doing for last now 3 consistent years. Because of overall industry practice, you may see a marginal dip happening in quarter 4, but then also it will be in accord to the market delivery. But this business will deliver a good healthy 12% to 14% growth for H2.

[Operator]

We have a follow-up question from the line of Rahul Jeewani from IIFL Securities Limited.

[Rahul Jeewani, analyst]

So sir, did I hear you correctly that the CapEx investments, which have slightly increased is all investments into the IVF segment?

[Kunal Khanna, executive]

Rahul, no, it's not IVF. It's basically injectable IV products. Injectables for our Rest of the World markets, it's basically for our export markets. So from a greenfield perspective, what Nikhil and Narayan was mentioning, there are 2 key dosage forms at least for this year. One, we are investing in throat spray, and the other is expansion in the IV products.

[Rahul Jeewani, analyst]

Sure, sir. And what is the current contribution for, let's say, these new dosage forms in the International business?

[Kunal Khanna, executive]

The throat spray is essentially something which we are going to be doing for the first time. It's largely for our CDMO business with our main principal partner. And as far as IV products go, why we would not want to disclose from a value perspective, just to give you a sense, we do close to -- we have a capacity of close to 54 lakh units per month. That is something which we are expanding to 75 lakh to 78 lakh units per month.

[Rahul Jeewani, analyst]

This is for the injectable products?

[Nikhil Chopra, executive]

Injectable, yes.

[Operator]

We have another question from the line of Sumit Gupta from Centrum.

[Sumit Gupta, analyst]

Sir, I just wanted to understand the lozenges part for merit-only and [ fringe ]. So when do you expect it to enter the market?

[Nikhil Chopra, executive]

Sorry, you're talking about merit-only lozenges?

[Sumit Gupta, analyst]

Yes.

[Nikhil Chopra, executive]

So that would be -- that is what I shared. That will be available in some markets outside India probably next year.

[Sumit Gupta, analyst]

Okay. Okay. Understood. And for [ fringe ] lozenges?

[Nikhil Chopra, executive]

Which one?

[Sumit Gupta, analyst]

[ Fringe ] lozenges.

[Nikhil Chopra, executive]

[ Fringe ], probably you should see that happening probably end of next year starting FY '27 [indiscernible] in Brazil market.

[Sumit Gupta, analyst]

In Brazil in first half FY '27, you are saying.

[Nikhil Chopra, executive]

Yes, yes, yes.

[Operator]

Ladies and gentlemen, that was the last question. I would now like to hand the conference over to the management for closing comments. Over to you, sir.

[Nikhil Chopra, executive]

Thank you all for participating in today's call. I think last 2 quarters, we've been delivering INR 1,000 crores plus revenue every quarter. And our EBITDA margin stands close to around 28%. And we are confident that we end the year on a higher note, which is backed up by what we are trying to do in India business, which is growing better than the market.

Equally, you should see some traction coming back in our CDMO business. And we are all there in the company in terms of how we can chart our future and remain focused on making the organization more progressive and future-ready, and create value for our shareholders. And equally look at how -- what more we can do to improve the quality of life of patients across the globe. Thank you. Thank you all.

[Operator]

On behalf of J. B. Pharma, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.