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Ladies and gentlemen, good day, and welcome to J.B. Pharma's Q3 FY '23 Earnings Conference Call as on the 9th of February, 2023. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Jason D'Souza, Vice President at J.B. Pharma. Thank you, and over to you, sir.
Thank you, Aman. Welcome to the Q3 earnings call of J.B. Pharma. We have with us today Nikhil Chopra, CEO and Whole Time Director; Mr. Kunal Khanna, President Operations; and Mr. Lakshay Kataria, Chief Financial Officer.Before we begin, I would like to state that some of the statements in today's discussion may be forward-looking in nature and may involve certain risks and uncertainties. A detailed statement in this regard is available on the Q3 FY '23 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 for his opening remarks. And after that, Mr. Lakshay Kataria will address the financial highlights. Over to you, sir.
Thank you, Jason, and good afternoon to everyone for joining us on our conference call. We plan to discuss the performance during quarter 3 FY '23. I shall commence with the remarks on the performance and provide updates on the business. I will be followed by our CFO, Lakshay Kataria, who will address the financial perspectives to you. After our remarks, we'll take the queries from the participants.Friends, I'm glad to share a solid performance backed up by expansion in both our domestic and international businesses. In quarter 3 FY '23, we saw 32% increase in our revenues at INR 793 crores. The domestic market saw market-beating growth trends revealing during the quarter, with improvement of 42% year-on-year, witnessing revenue at INR 407 crores. Organic growth came in at mid-teens with J.B. leading the industry on the growth part. As per IQVIA data, we have emerged as the faster-growing company in top 25 India 2022. Thus, for the second consecutive calendar year we have been the fastest-growing company in the industry top 25.In the acquired portfolio, we have witnessed similar growth trends. We have shown 34% growth in quarter 3 FY '23 as per IQVIA data on like-to-like basis. The probiotic range continued to perform well, and Sporlac witnessed good growth rates and is now right at 361 number.Azmarda, which is creating a niche for itself in the cardiac segment saw 50% growth in the quarter. As per MAT December 2022 data, Azmarda appeared in IPM in top 300 list as well, ranking at 270 number. The traction in this brand is healthy, and we continue to bet the brand with the revamped go-to-market model. We have announced a price reduction of 50% in Azmarda in December and are already beginning to see a good volume uptick post the price reduction.We have put in place a cost-effective sourcing model for Azmarda which will focus on delivering high-quality products to the patients. Also wanted to share the competitive intensity has significantly increased in the market for the [indiscernible] combinations.The quarter marked the acquisition of Razel that is Rosuvastatin range, formulizing our entry into the Statin market, which is the largest segment within the cardiology segment. Razel trends among the top 10 brands in Rosuvastatin molecule category. Whereas Rosuvastatin and its combination have delivered 3-year sales CAGR of 14% as per IQVIA data. We are thus present in 3 major segments in cardiology segments, namely anti-hypertension which where we lead with our brands Cilacar and Nicardia, heart failure, where we have Azmarda has created a strong niche for itself and now Statins where we have recently acquired Razel. The combination of being present in all these segments helps capture us into top 10 companies by sales in cardiology as per IQVIA MAT December 2022. I am also proud and happy to share with all of you that we are the fastest-growing company in cardiology segment, among the top 10 players as per IQVIA MAT December 2022. This is indeed an achievement considering the space is dominated by large pharma companies.Moving on to our international business. Our international business recorded good performance overall. The business saw momentum continuing in each of the segments, whether it is CDMO business, which delivered a robust set of numbers with revenues growing at 92% during the quarter, quarter 3 FY '23. And we once again could achieve INR 100 crore revenue for our CDMO business. New launches in specific markets are showing good progress. Export formulations delivered the highest-ever sales during the quarter. Rest of the World and U.S. saw -- U.S. market show marked improvement in sales. Russia and CIS countries also witnessed enhanced traction on the revenues.In South Africa, our public business is witnessing some competitive pressures. Given the prevailing geopolitical scenarios and economic uncertainty, we expect to witness some impact on the demand in South Africa market. I shall draw your attention now towards the outlook of the business for the coming quarters. In domestic business, we are aiming to grow ahead of market. That is what we have been guiding since last 6 to 8 quarters. This will be based on growth in our selected brands where we are leaders in the respective categories and continued traction in our portfolio of acquired brands.In line with our revised go-to-market strategy, we are building in higher productivities of our MR teams on the ground. The outcomes are being tracked through high momentum in prescriptions. Also, what we have been talking in our earlier commentary, our new product contribution is also now close to 5% for the quarter, which is inching up as compared to when we were -- when we started our journey in this. In October 2020, the contribution was only 1.5%. This all shows overall the strength now what J.B. enjoyed in the market with the health care professionals, particularly for the new progressive portfolio.In our international business, we have sharp focus on driving the right market mix with our portfolio of offerings. Demand from export formulations, especially in the ROW business remains good.I must come to the end of my note and would like to invite our CFO, Mr. Lakshay Kataria, to share his views on the financial perspective. Over to Lakshay. And thank you all for patient hearing.
Thank you. Thank you, Nikhil. A very good afternoon to all of you, and welcome to our earnings call.I will now take you through the financial highlights of quarter 3 FY '23. The revenue for the quarter was at INR 793 crores, an overall growth of 32% over same quarter FY '22. The mix of domestic and international business stood at 51% to 49%. Our domestic business reported a revenue of INR 407 crores, a year-on-year growth of 42%. And organically, the business saw growth in mid-teens. Our international business saw a 23% growth year-on-year and another quarter of INR 385 crores of revenue. Performance in this business was particularly supported by international formulations and CMO business, along with strong performance in our Russia operations. Gross margins at 62.3% for the quarter, pretty much closer to where we were last quarter and compared to 65% in the last financial year. The margin saw an impact of cost inflation and higher Azmarda sales during the quarter.During the quarter, we delivered an operating EBITDA before the ESOP costs of INR 193 crores. We saw a growth of 26% year-on-year. Margins came in at 24.3% versus 25.5% in the same quarter last year. During the quarter, other expenses as a percentage of sales improved versus last year to 22.8% vis-a-vis 24.5% last year. As you would have seen, the depreciation during the quarter was higher as it includes amortization charge of INR 11 crores towards acquired brands. The amortization number will move up marginally due to acquisition of Razel franchise towards end of quarter 3. Profit after tax was at INR 106 crores, which increased by 26% year-on-year.Quickly covering the cash part. As of 31st December, we had a debt of INR 571 crores and cash and investments to the tune of INR 142 crores. This debt is after funding acquisitions of the Razel franchise. Our operating cash flows continue to be strong. And in the recently concluded Board meeting, we declared an interim dividend of 8.5 per share.Overall, we continue to remain optimistic about the business, and we see operating leverage increasing for the business as we move forward. With this, I now request the moderator to please open the forum for discussion and questions. Thank you.
[Operator Instructions] First question is from the line of Rashmi Sancheti from Dolat Capital.
Sir, first question on debt. This Razel acquisition amount has been completely funded by debt or it is partly funded by debt? If you can give that number. And what is the cost of debt also?
So, as far as Razel was concerned, we took a further loan of INR 250 crores towards this acquisition. And the balance was funded, roughly about INR 130 crores was funded through internal accruals. This is the total cost with all the applicable taxes and working capital. In terms of cost, it's closer to 8.5%.
Okay. And now what will be the blended cost of debt for your overall debt that is INR 573 crores?
It will be closer to 8.1%, 8.2%.
Okay, sir. And sir, on CMO segment. This quarter also we have seen good run rate and this year probably will be ending with a very high [ rate ] in the CMO segment. From FY '24 and '25, how should we look at this business? Is it that INR 70 crores to INR 80 crores per quarter CMO business would continue to give this kind of base? Or you've seen that on the higher base, we should expect a decline or an over-growth on the [indiscernible] of the business?
Rashmi, this is Nikhil Chopra. Fortunately we were able to take care of the demand, particularly in a world of cough and cold [indiscernible], which [indiscernible] happened this year. And overall, for quarter 4 also, the order book is healthy. But going ahead, the dialogues that we have been having with our partners is you should expect moderate growth probably for next year. And next to next year, there is lot of developmental program which is happening in the world of CDMO, particularly for [indiscernible] where the intention is to add new partners and also widen our portfolio. Today, our major portfolio is in the world of cough and cold. We have developed some new proof of concept, which I've been talking, and that should see some daylight probably 8 to 10 months to 12 months from here, particularly in the world of sleep disorders, motion sickness, oral thrush, all those [indiscernible] we have developed the proof of concept and we have shared those with our partners. These all programs that we are working with our partners takes its own time. It has got its own gestation period. So the short answer is you should expect moderate growth next year. And going ahead, we are very much aspirational in this part of the business. This business today is contributing 12% to our revenue. Going ahead probably 3 years from here, this business should contribute 20% of our revenue.
As you know, we have different [indiscernible] in terms of the cardiology therapy. [indiscernible] which you want to make it big for your domestic business? And their current contribution towards 9 months of FY '23.
So we don't say that we don't measure in terms of contribution from therapy, but just to share with you, we are a dominant player in the world of cardiology. Cilacar being a big brand, close to INR 500 crores. Nicardia being a big brand, close to INR 150 crores as reported in IMS. And now with our venturing into the world of heart failure, getting into the world of statins, overall if I have to talk about the chronic market share, chronic contribution today to India business is close to 50%. The intention is how do we improve this chronic contribution to India business close to 60%. That is short to midterm.
Perfect. And sir, how has this Metrogyl and [indiscernible] done during the quarter in terms of growth?
Metrogyl overall, it is more a seasonal product, if you look at, with summers coming in. I think March onwards we will see the demand ramping up. Overall, from a volume perspective, both the products are flat in terms of what we have achieved in last 6 months. And I think March onwards, March to July, August is a season where we see good traction for [indiscernible] and Metrogyl.
[Operator Instructions] The next question is from the line of Sriraam Rathi from BNP Paribas.
Sir, 2 questions, one on India. I mean, in Azmarda we took the price cut, I mean. So is it fair to assume that the Azmarda sales could have been significantly higher this quarter versus in the normal scenario? And because I'm -- particularly I'm asking this question because Q3 is considered to be seasonally weak quarter in terms of revenue [indiscernible], but we have been able to do [indiscernible] this quarter also.
Sriraam, sorry to interrupt, there is some disturbance in our line, please use the handset.
Okay, sir, my question was on India business. We took price cut in Azmarda. So is it fair to assume that the contribution of Azmarda would have been significantly higher this quarter versus in the normal scenario?
Sriraam, Kunal. It's right, the price cut has been taken effective Jan, right? So we are talking about Q3 numbers, which is reflective of pretty much the same scenario which existed when we actually took the Azmarda brand from the innovator partner. So you really don't see any price cut impact for Azmarda in Q3. What you clearly see is a significant growth, which Nikhil added in his commentary, where we have actually been able to double the volumes and the value at the same price since the time we took this brand from Novartis.
Right, right. Yes. That is helpful. Secondly, a related question on the gross margin. The gross margin in 9 months has been lower because of inflationary pressure on the costs as well as the higher sales of Azmarda. Now going forward, how should we look at it? Because historically, we used to be around 65% gross margin business, and now we're at 63%. So how should we look at this number going forward?
So when you look at our gross margin trend, we are not very different from the industry given the inflationary environment, and there is a product mix impact largely stemming from Azmarda. But of late, very recently, we do see the intermediate cost from China easing out of it. And hopefully, the situation in Europe should also improve going forward. And with the local sourcing of Azmarda already being activated, we see our gross margin profile inching upwards towards 64% and northwards moving ahead.
The next question is from the line of [ Srikanth Kotkar ] from Busan Market Securities.
Congrats on the good set of numbers. Two questions. First question is on the U.S. business. So if you can talk about what has changed for us in the U.S. business in the ongoing quarter? And the second question is, if you can talk about the kind of synergy that exists between our chronic products, which is Cilacar, Azmarda, Nicardia and the recently acquired Rosuvastatin franchisees.
So U.S. business, conceptually, if you see the overall drag over the last 3, 4 years, quarter 2, quarter 3 is a good quarter. That is what [indiscernible] in terms of we as a company today have [indiscernible] and the biggest product being [indiscernible] that is giving us a benefit in terms of the revenues that we are generating for U.S. business. So this was in line with what we had planned for the year. That is where we stand for the U.S. business. And equally, if you are asking about what is happening in the world of chronic synergy of this brand what I shared earlier now. When we started our journey, we were [indiscernible] company in cardio [indiscernible] that is Cilacar and Nicardia. When we acquired Azmarda heart failure pill we were 11th rank company. And with Razel coming in now today we are 8th ranked company and we are the fastest-growing company in the world of cardiology in top 10. Lot of synergy buildup in terms of cardiologists, physicians, nephrologists. These very close specialty where J.B. has strong foothold and with widening our portfolio, I think this gives us benefit in terms of how we can closely work with the this specialty and help more and more patients in terms of getting right diagnosis, that is intention, early stage diagnosis. Just to also share with you with the heart failure pill, Azmarda, that we have launched, J.B. is the only company which is running 200-plus heart failure clinics. And the intention is how do we get more and more patients of heart failure in stage 1 and stage 2 get diagnosed with the help of 2D and 3D echo which is a marker of measuring the patient's severity of heart failure. So all these initiatives have been put in place. Also lot of consumer campaigns with the help of health care professionals we have been running for -- in the world of hypertension because of the burden on the [indiscernible] is so high. Close to 100 million people suffer from hypertension in the country and one in four hypertension patient is undiagnosed. So lot of those emphasis we are giving in building the ecosystem, influencing the ecosystem in collaboration with the health care professionals. So this is what we are trying to do and strengthen our place in the world of chronic, particularly in the world of cardiology.
Okay. Just one follow-up on the U.S. business. So how should I look at the next year from the U.S. revenue or pricing erosion sort of perspective?
So just to add to what Nikhil mentioned, we have always maintained for us it's basically as far as U.S. is concerned, we'll be looking at a very limited set of product opportunities. And the good part is the R&D journey, which we started in the last 4 to 5 months. We have had 3 new filings, right? Now these filings have an approval time line of close to 12 to 18 months. So as we continue to organically scale up our business with [indiscernible] and platform, the recent filings which we have done should ideally be commercially available for the markets 12 to 18 months from here on.
And the last approval that we got was in the form of [indiscernible] in the world of U.S. business [indiscernible] small fish in a big point. So we conceptually are working in [indiscernible] in terms of the products that we manufacture based on the technology backup that we have got, be it extended release, modified release. That is a technology that J.B. has, J.B. owns. So that is a dialogue that we continuously have with our partners in the U.S., and that is how they help us to distribute the product. And that is how we do the business in U.S., it's a [indiscernible] model.
The next question is from the line of Alok Dalal from Jefferies India Private Limited.
Nikhil, a quick question on cardiac and diabetes market from IPM perspective. We have been seeing a remarkable slowdown in growth rate for cardiac and diabetes. So apart from some of the big brands going offsetting and reducing the overall value price, are there some other trend changes that you are seeing in the market on the ground?
Not really, actually. The slowdown is attributed to a few things which are not completely volume-based, right. There have been big molecules and big brands which have been subject to price pressure, which has led to a slowdown in the recent past. With respect to uptake of the molecules, patient adoption, the compliance rates, systemically there is nothing really changing in the market. Yes, there are certain molecule categories where the combinations that the [ SDCs ] are doing much better than the single molecules because the doctors see patients who are already there with co-morbid conditions. Also with respect to Indian market, cost of therapy is a very, very important parameter. So you may see trends that some of the single large molecules are being substituted by SDC. But from an adoption compliance, prescription perspective, there is systemically nothing really changing. Some of the insulins, the large product insulins, which were there in the market historically with large market share have been subject to price pressure, which are reflected in the overall slightly muted growth in the overall therapy area.
Okay. So [indiscernible] no change in prescription trends as such in the market?
No, there is no change in prescription trends. The prescriptions continue to increase. In fact, for most of the product categories in our basket, what we have seen is that the prescription numbers are actually surpassed the pre-COVID levels as well, which clearly indicate that the prescription practicing pattern is all pretty much inching towards normal steady-state levels. And quite honestly, some of the feedback which we have got from a patient perspective, the research work, the patient compliance has improved significantly in the market. So there is nothing really systemically changing out there.
Okay. And second question is on the company. The company has the last 2, 3 years, undergone a significant change. You've breached the portfolio gaps through acquisitions. Do you think now the low-hanging fruits are kind of done? And say, when you want to reach the 50-50 chronic-acute mix, what else the company needs to do to achieve that [indiscernible]?
So what I shared in my earlier context-setting is if you look at what we have built organically, what we have acquired probably gives us confidence in terms of how we can improve the chronic contribution towards India business. And besides, the brands outside the chronic space, there are lot of opportunities in the area of pediatrics, respiratory, GI, antibiotics. We are confident enough in terms of wherever we are present, we want to look at how do we go more in the debt and improve our penetration in terms of prescription. By the way, we may be 22nd, 23rd ranked company in terms of value, but from a prescription perspective, we are 15th ranked company. Also in the area of probiotic that we have acquired, it's a huge opportunity. Probiotic being a INR 2,000 crore market, we are the fifth largest player with 7.5% market share. We are looking at opportunity to double our market share because we have got a good brand in terms of Sporlac. We have the fundamental work of life cycle management getting into women health Sporlac, pediatric Sporlac persons, all those things. So we see opportunity in terms of the portfolio that we have got today in our end.
So, Nikhil, no plans to enter any new therapies, just bridge portfolio gaps within existing therapy area.
Yes, absolutely right.
The next question is from the line of broader Abdulkader Puranwala from Elara Capital.
So my first question was on the price cut what we took on Azmarda. So is this what we had already planned or this was largely because of the competitive pressure that we had to? And secondly, when we talk about some gross margin improvement to happen from next quarter onwards because of the sourcing. So I mean, how should we look at the gross margins, I mean, we guided close to 64%. But with the kind of sales volume we are witnessing currently, would there be any risk to the margin guidance that we have provided?
So we'll take the first question in terms of the price cut. See, when we actually looked at this acquisition, we were very certain that there is going to be price erosion in the market. And we were quite prepared in terms of at what price we'll be kind of positioning our product, at what price point. We continue to maintain that price point. The scenario for us has not changed from what we initially kind of envisaged in terms of how the market will shape up. For all the similar molecules and brands where such LOE has happened, you do see that eventually it's the innovator and the innovator partners who pretty much hold significant majority market share. And for us also, we believe that that's how the market is going to shape up. In fact, the first month post LOE gives us good confidence that we are on the right path of increasing volumes, even if it comes at the cost of price erosion by making the product much more affordable. And in the first month itself, we have seen a volume uptick of closer to 1.25 to 1.3x than what we used to do pre-LOE scenario. Coming to the point of how the margin profile will -- how the margin local sourcing of Azmarda will change the overall gross margin profile, we don't want to comment on product-specific margin and its impact on our overall gross margin profile. But the overall key elements which will play out, which we believe the recent trends with China opening up, some prices easing up. And if the overall situation in Europe further eases out going forward, then there is no reason for us to, not to believe that we'll be closer to 64%, yes.
In terms of gross margins. This will sort of build more towards Q1 and after that. I think Q4 pretty much will be similar in this area.
Because we are still in the transition.
The transitionary quarter. Yes.
Quarter.
Understood. Understood. And sir, my second question is on the CDMO business where we earlier spoken about the revenue contribution increasing from 12% to 30%. So sir, are we indicating that the M&A focus would shift from India to this line of business? Or this would be entirely achievable through the capacities what we have created so far?
Yes. So I think -- so there is -- there are no plans of getting into M&A in the world of CDMO. But our share was the contribution going from 12% to 20%, not 30%. And overall there are twofold strategy. One is the entire journey that we have started to work in the world of CDMO is to add new partners. Here as well when the progress has come, we'll be more than happy to share. And second, what I shared earlier was some new products within the world of lozenges what we have developed should help us probably in this journey, which will -- which is beyond the world of cough and cold where the dialogues -- where there are continuous dialogues with our partners in terms of what do they want in the form of lozenges in their markets. So that is what -- so this entire buildup will be organic and just also share with the teams is the capacity that we have in terms of lozenges that we can manufacture is around close to 2.5 million. This year, we are -- we'll be selling close to 1.1 billion lozenges. Capacity is not an issue, capability we have, good partners we have got. So this is the journey that we would like to travel mid to long term in terms of CDMO business.
The next question is from the line of Aarti Rao from Anand Rathi.
I had a question regarding Sanzyme. How would have that been growing for 9 months? And how do we expect it to grow going for the next 2 years? Because I believe probiotic segment would be growing at 12% to 14%. So are we doing better than that? Or how do we see that?
So this entire Sanzyme business is a part of 3 segments, first is probiotic, second is women health and third is infertility portfolio. Particularly in the world of probiotic the market has been growing at 12% to 14%, and our growth that we have demonstrated for last 2 quarters is 20% plus. Now this has happened because of 3, 4 reasons. Overall, when we acquired this asset, this asset overall was under-penetrated under-represented, and we now coming from the J.B. house we have improved the penetration, we have improved our presence. Secondly, the synergies that we got in in terms of the prescription because generally a probiotic is being prescribed by -- with a antibiotic, for antibiotic-induced [indiscernible] in the world of IBS from gastroenterologist. So that is where J.B. has strong foothold. And third is the life cycle management that we have done. We have launched a couple of more versions of Sporlac, that is Sporlac GG for pediatric and Sporlac [ Eva ] for women health. This [indiscernible] is helping us in terms of [indiscernible] the market and delivering better performance in the world of probotic. Equally, there are steps early on taken in terms of how do we improve our performance in the word of women health and infertility portfolio.
Okay. And I think -- I believe, sir, there was some 320 MRs coming from Sanzyme. So I mean, what's the total MR that we have? And how much of that is kept for Sanzyme?
So you are absolutely right. There are 300-plus people who came from Sanzyme. And today the [indiscernible] on the ground is close to 2,500.
2,500. So how do we see this MR productivity? I mean, particularly for Sanzyme growing ahead in future, I mean, I believe it will be 3 million per MR per year, if I'm not wrong, if I just go by the numbers.
I think it is better than 3 million. It is, I think, close to 3.5 million if I'm not wrong. As we stand now growing at pace of around 20% because if you look at the productivity [indiscernible] as a company now [indiscernible] 6.5 million, that is 6.5 lakhs. So there's a huge scope in terms of how do we [indiscernible]. And with the way we are growing at 20% plus -- and with the expansion in portfolio that we are doing, there is no need that we want to add people, but to penetrate better, widen our portfolio and meet the same set of doctors be it in the world of infertility, be it in the world of [indiscernible] probiotic, be in the world of gynecologist. So that overall will help us in terms of how do we enhance the productivity in the world of [indiscernible].
Okay. And sir, if I may ask, the last question, given that Ranitidine is now out of Ranilium, we used to have like 30% plus kind of exposure on a company level. So how much can that possibly come down to probably 20% is something has been estimating?
So our current exposure to NLEM portfolio is closer to 12% to 13%.
The next question is from the line of Cyndrella Carvalho from JM Financial Limited.
Any color that we can provide on Russia and the ROW business that we have? And what kind of growth estimates should we work with for the coming year?
See, overall, the good thing is that our international business is in outside CMO has kind of trended very well in terms of if you see the Q3 performance. As Nikhil mentioned further, if we really dissect this business, the 2 to 3 key parts are rest of the world, South Africa as well as Russia. Russia, we saw very good demand coming from the cough and cold segment, which is pretty much reflective in our international business going. Our overall ROW markets have also rebounded well. And as we see the order book position, we are quite confident of maintaining that trajectory. South Africa will be -- there is possibly some level of moderation, which we are seeing more on the public side. And as the next 2 quarters progress, we'll have a further form of visibility of how the mix of public and private portfolio will kind of stack up. But we are still looking at, despite all this, we are still looking at closer to a double-digit kind of growth for our international business.
Also just to share one more point in terms of our [ BGS ] market in the world of ROW, which is -- which happens in 4 clusters, that is Sub-Sahara Africa, Latin America, Southeast Asia and Middle East. You should see us launching some progressive portfolio in second part of next -- in second part of next year, H2, because this part of the world was being denied new launches. So the teams have been working in R&D in terms of having defining that right portfolio. And this overall business model is distributor-led where we have been talking to the regulatory bodies of that part of the world. And with the product development that we have done, you should see us doing [indiscernible]. And as and when things progresses we will be more than happy to share.
That's helpful. And one clarification. You mentioned the CDMO contribution from 8% to 20%. Is that 20% for FY '24? Or what's the time line?
This is essentially our long-term aspiration. When we look at the contribution coming in from CDMO and it inching up to closer to 20%, it's a long-term 3-year 3- to 5-year time period which we are looking at.
Okay. And in terms of all the cost efficiencies that we were talking about, considering a majority of the acquisitions and synergies that you have already spoken on the call, how should we see this going ahead in FY '24?
See, there are certain areas where we have got operating leverage and cost synergies on day 1, particularly when we acquired the pediatric portfolio, for example, even when we are looking at [indiscernible] acquisition because there is no real need for us to add incremental [indiscernible]. So cost synergies for those have been kind of already been realized. Our main focus is to drive these brands which we have acquired, right? Some of them were under-invested. If you take an example of Sanzyme, Sporlac, you see what we have done with the pediatric portfolio, Azmarda portfolio. Our main focus [indiscernible] is how do we keep on improving, increasing our market share, get more top line synergies and revenues, which will further kind of help us drive better operating leverage. That's the way we are looking at our acquisition.
But in terms of further synergies or overall cost [indiscernible] we have been working on, we should be able to see some more benefits coming in, in FY '24 as well as we have seen so far?
Certainly, yes. And there is always an area for improvement as far as cost synergies go, be it on the front-end side or the back-end side, right? And the fact that we are not kind of committing to any significant feet-on-street addition here, there'll be certain marginal pockets, territories, but the fact that we are not committing to significant go-to-market addition of numbers, we will certainly see more synergies and benefits coming up.
And if I may ask my last question. On the women's health side, Nikhil was mentioning that we have a good strategy working. But do we see ourselves well in place from a WH category side? Or do we still see some gaps there on the women health, which we may need to address over coming 12 to 18 months timeframe? What are we thinking?
Our main strength on the women health portfolio is basically reproductive health, our IVF portfolio. There we have some very strong relationships with [indiscernible], which we continue to build upon. We don't see ourselves as a company, which will be present in every molecule and every subcategory of women health. We want to continue to expand our presence in areas where we play with, which are essentially reproductive health, IVF portfolio and some hormones category. So as long as we are kind of playing and building on our strength in those categories, and increasing our market share, we'll be kind of pretty much well-placed with respect to our aspiration. But we don't aspire to be there in every molecule within women health portfolio.
[Operator Instructions] The next question is from the line of Alka Katiyar from Centrum Broking.
No, it already got answered.
The next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services.
So just to understand price volume, new launches growth for the domestic formulation base business for the quarter without acquisitions?
So if you look at market, first of all, the market is flat to negative for volume growth. And we are going at volume growth is 4% to 5%. Price growth is close to 7% to 8%, and new introduction contribution is close to 5%.
Got it. And in constant currency terms, how much would have been the growth for international formulations overall, exports?
In terms of top line, if you look at it, there will be an impact roughly of about INR 20 crores on the revenue, right? So what we reported is about 23% growth. That will come down to about 17%, 18% on constant currency.
And just broadly, what could be the gross margin sort of breakdown for domestic formulations and exports?
Sorry, we don't share that number.
Okay. Okay. And just lastly, post these acquisitions and the base business. So in terms of tier of cities of presence as we stand today, if you could just share that detail?
Sorry, could you come again? Didn't get the question?
In terms of presence across, let's say, top 1 or top 2 tier cities or top 3 cities, that way what would be the sort of presence of J.B. [indiscernible]?
So we are talking about our field force presence across metro Tier 1, Tier 2 and Tier 2 and beyond?
Yes, both on the MR side as well as on the brands.
Where the MRs are present, that's where the brands are present. Essentially our presence kind of varies depending on the portfolio which we are -- which we are operating in. So for our acute portfolio and especially where we have our mature brands such as Rantac and Metrogyl, our presence is very strong even in Tier 3 and Tier 4 markets and semi-urban towns. For our chronic portfolio, 70% of our business is essentially coming in from metro Tier 1 and Tier 2. And remaining 25% to 30% comes from Tier 2 and beyond [indiscernible].
[Operator Instructions] The next question is from the line of Neelam Punjabi from Perpetuity Ventures LLP.
My first question is on the CMO business. So we have been -- the business has been quite strong for this year, and we've been sustaining the INR 100 crore quarterly run rate plus minus 5%. Are we confident of sustaining this kind of number for FY '24, about INR 400 crores annually? And how is the order book looking for this business for us?
So, Neelam, this was -- I think one of your colleagues had asked this question and I had -- but let me repeat in terms of the way we see. The order book for quarter 4 looks good, that is point number one. So this year our business almost has doubled for the -- in the world of CDMO, which does not happen in a hurry. And this has happened because of the entire [indiscernible] that we saw in the world of anti-inflammatory, cough, lozenges particularly in South East Asia, Australia, New Zealand, Canada. Now depending upon the seasonal variability, tomorrow, and we'll be able to add more color probably in our next conference call. We may be able to -- we may be close to what we are doing today. We have the capability in terms of giving the output today. We are manufacturing close to around 8 crore to 9 crore lozenges a month. Long-term agenda, that is what we spoke earlier, probably 3 years from here, 2, 3 years from here, you should see us getting into a new portfolio of lozenges. This is a mid-, long-term plan in terms of what I shared earlier, sleep disorders, motion sickness, irritable bowel syndrome, some of the new concepts that we have developed. And equally, the business development team is working in terms of adding new partners across geography. So that is across geography outside India. So those are the plants [indiscernible] in terms of the way we look at this business.
Sure. That's very helpful. Secondly, my question is on the operating EBITDA margin. So could you please give us a guidance for FY '24? Are we planning to be in the range of 24% to 26% or higher?
So in terms of EBITDA margins, our endeavor is to up the level of operating margin next year compared to this year, right? I think we're still sort of working through the plans. This is obviously budget season. So I think probably once we meet in May, I think we'll be able to give you a better sense, but it will surely be upward from where we are standing this year.
Sure. Okay. And lastly on the API business, I'm not sure if this was touched upon earlier, but the business is down about 4% Y-o-Y although it's small for us. Could you highlight what was the reason behind the thing?
It's just got to do with some offtake patterns. Last year there was a significant uptick for us in Q3. So the business, we believe, will end with moderate growth, but there is no real aberration from what we see fundamentally in our business. And Q4, we expect the muted uptick which happened in Q3 to cover up for that.
[Operator Instructions] Next question will be the last question. That is from the line of [ Yash Sinha ] from [ MIPL ].
I just wanted to understand why the purchase of [indiscernible] on the balance sheet has more than doubled from the same period year-on-year?
Sorry, could you repeat the question again?
Yes, I wanted to understand why on the balance sheet purchase of [indiscernible] metric has almost doubled year-on-year?
That is because this heart failure product that we acquired this year is largely being acquired on a P2P basis. That's why you're seeing a significant upsurge.
Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Jason D'Souza for closing comments. Thank you, and over to you.
Thank you. Thank you, Aman. I'd just like to hand over the mic to Nikhil Chopra to say the final remarks.
So first of all, thank you all. Thank you all participants for participating in today's conference call. Closing remarks in terms of what I shared earlier, I think JB continues to deliver performance in terms of market bidding, and the guidance going there is in terms of India business where we will continue to gain market share in terms of the portfolio that we have organically made in organic acquisition that we have done, and equally the new products that we have launched which will help us to deliver market-leading performance, maybe close to mid-teen growth. That is where we see ourselves positioned. International market, if I have to comment, overall, the way we see volatility opportunities, probably our growth should be close to low double digit. That is where we see ourselves in the coming time. And as Lakshay shared, in terms of EBITDA margin guidance, I think we should be better-placed for the coming year in terms of inching up as compared to where we stand in terms of operating EBITDA margin. That is what is the closing remark from my end. And once again, thank you all. And we'll be more than happy to share the proceedings and the development happening in the company as we have been doing it regularly. Thank you. Thank you all.
Thank you very much. Ladies and gentlemen, on behalf of J.B. Pharma, that concludes this conference. Thank you all for joining us. And you may now disconnect your lines. Thank you.