Mankind Pharma Ltd

NSE:MANKIND

Earnings Call Analysis

Solid Revenue and Profit Growth; Healthy Margins Maintained

The company reported a 12% year-on-year increase in revenue, reaching INR 2,708 crores. EBITDA rose by 15%, with margins improving to 25.3%, while PAT grew by 21% to INR 511 crores. Margins were boosted by a 2.7% rise in gross margins, though this was partly offset by higher employee costs and increased advertising expenses. R&D expenses were lower than the previous year, and CapEx was INR 114 crores for the quarter. The company maintains a strong net cash position at INR 2,159 crores and expects a CapEx of INR 550 to INR 600 crores for the financial year, with EBITDA margins anticipated to range between 24% to 26%.

Revenue Growth and EBITDA Expansion

For the second quarter of the fiscal year 2024, the company achieved a notable year-on-year revenue increase of 12%, reaching INR 2,708 crores compared to INR 2,425 crores in the same period last year. EBITDA growth was even more impressive at 15%, with margins rising to 25.3% from 24.5%. This improvement in margins is attributed primarily to a 2.7% increase in gross margins due to strategic price hikes, stable API prices, and beneficial sales mix changes.

Cost Dynamics and Profitability

The improved gross margin, which now stands at approximately 69.5%, was partially negated by higher employee costs, mounting by 0.6%, and additional expenditure in advertising and other areas. However, the reduction in research and development expenses, which fell to 1.9% of sales from the previous 2.2%, coupled with a lower effective tax rate of 20.3% compared to last year's 21.6%, has bolstered the bottom line, leading to a profit after tax (PAT) growth of 21% year-on-year and a 3% increase from the previous quarter.

Capital Allocation and Operational Efficiency

The company demonstrated prudence in capital expenditure (CapEx) and operational management, with CapEx totaling INR 114 crores. The net working capital days remained nearly constant at 44 days, ensuring a streamlined operating cycle. Meanwhile, the cash flow from operations stood at a robust INR 481 crores. The firm maintained a healthy net cash position of INR 2,159 crores, significantly higher than the INR 1,366 crores at the close of the previous fiscal year. This financial health is further evidenced by the return on capital employed and equity (excluding cash) climbing to 28% and 24% respectively, reflecting enhanced asset utilization and shareholder returns.

Future Prospects

Looking ahead, the company anticipates a capital expenditure of INR 550 to INR 600 crores for the fiscal year. EBITDA margins are expected to remain stable, with guidance set between 24% and 26%. These projections underscore the company's confidence in sustaining profitability while continuing to invest in growth opportunities.

Earnings Call Transcript 2024-Q2

[Operator]

Ladies and gentlemen, good day, and welcome to the Q2 FY '24 Earnings Conference Call of Mankind Pharma Limited, hosted by Kotak Institutional Equities. As a reminder, all Parisian 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. Alankar Garude from Kotak Institutional Equities. Thank you, and over to you, Mr. Garude

[Alankar Garude, analyst]

Good morning, and good afternoon, everyone. On behalf of Kotak Institutional Equities, I would like to welcome you all to the Second Quarter FY '24 Earnings Conference Call of Mankind Pharma. I would now like to hand over the call to Mr. Abhishek Agarwal, Head of Investor Relations, to introduce the senior management and take the discussion forward. Over to you, Abhishek.

[Abhishek Agarwal, executive]

Thank you, Alankar. Good afternoon, everybody, and a very warm welcome to our Q2 earnings conference call. On the call today, we have Mr. Rajeev Juneja, Vice Chairman and Mankind Director; Mr. Sheetal Arora, Chief Executive Officer and Whole-time Director; Mr. Arjun Juneja, Chief Operating Officer; Dr. Sanjay Koul, Chief Marketing Officer; Mr. Ashutosh Dhawan, Chief Financial Officer; and Mr. Prakash Ababa, President Strategy. So we'll begin with our opening comments with Mr. Rajeev Juneja, providing an overview of the quarter followed by comments from Mr. Sheetal Arora,. Mr. Sheetal will also share key financial highlights, and then we'll leave the forum open for Q&A. I hope you had a chance to access the investor pack shared here today. And however, I'd like to reemphasize on the fact that certain statements made during today's call may pertain to future expectations and plans. A comprehensive disclaimer regarding these forward-looking statements can be found in our investor presentation and the press release uploaded on our website. Now I would like to invite Rajeev, sir to share his comments.

[Rajeev Juneja, executive]

Thank you, Abhishek, and good afternoon everyone. A very, very warm welcome to our quarter 2 '24 earnings call. I'll walk you through the overall performance of Mankind and our vision on how we intend to grow in future. I'll start with overview. In this quarter, we have reported CV performance as our revenue grew by 12% year-on-year during the quarter. EBITDA grew by 15% year-on-year to INR 686 crores with a margin of 25.3%. PAT grew by 21% year-on-year to INR 511 crores base. Our domestic business grew at 7% year-on-year and our bit IPM growth versus our performance earlier due to delayed [ achieved ], and we all know this. According to [indiscernible] growth was 5% for the quarter, which is at PAR with IPM and covered market growth. Mankind lately started is very burn point. So planning to modern trade and e-commerce chance and has witnessed robust fantastic growth, although we understand that IQVIA does not capture this data in their reports. Our chronic segment share increased to 34% in quarter 2 as compared to 32% in last year versus 28% in year '18. We continue to see higher growth in chronic as compared to IPM. We remain committed to increasing our presence in chronic therapeutic areas and has deployed in stronger growth opportunities given the rising prevalence of chronic diseases due to lifestyle changes and rising income levels in India. We are rapidly increasing, expanding our product offerings with this very important initiatives towards the valving of people in the country. This reiterates our vision of providing international quality API products at affordable prices, which is accessible by everyone. It was consumer health dominant leadership in the respective categories, with our 4 of our brands range in the categories. We consistently performing better in all the product categories whilst maintaining our dominant market share. Respond to that this segment, we continue to deliver healthy growth, thereby further expanding our market share. On the R&D front, we remain committed towards consistent product innovation, lower blade resistance and strategic partnership with our investors to strengthen our product offerings. Our successful launching of [indiscernible] our commitment to being a science-based company. I am related to share that we have recently commissioned India's first fully integrated facility catching to that was strong at [indiscernible]. During the quarter, we are in further border our position. I'm glad that the past strategy to...

[Operator]

I'm sorry to interrupt, sir. Sir, your audio is not clear.[Technical Difficulty] Ladies and gentlemen, in the meanwhile, when I connect the management, please hold the line. Ladies and gentlemen, thank you for patiently holding the management's line has been reconnected. Over to you, sir.

[Rajeev Juneja, executive]

On R&D front, we remain committed towards consistent product innovation, lower drug allure system and strategic partnership with innovators to strengthen our product offerings. Our successful launching of [indiscernible] reiterates our commitment to business science-based company. I'm ready to share that we have recently commissioned India's first fully integrated specialty catering to the restaurant, [indiscernible] during the quarter, which will further bolster our position. I'm glad that our past strategic choices in various aspects of our business are showing success. And we have a strong confidence in our ability to consistently surpass the industry growth in future as well. We'll persistently try to attain leadership position in recognized white spaces, specifically in key chronic therapies by means of in-house research and development, acquisition as well as inclusion of externally licensed products. Furthermore, we are committed to maintain our established brand dominance in both our pharmaceuticals and consumer business. With this, I'll hand over to Sheetal, who will provide more details on our business performance.

[Sheetal Arora, executive]

Thank you, Rajeev. Welcome to today's investor call. I am pleased to provide you with an business update on our domestic operations and Consumer Healthcare segment. Let's begin with our domestic business revenue, which reached INR 2,529 crores in the second quarter of the financial year 2024, reflecting a year-on-year growth of 7%. This quarter, our growth was impacted by the delivered acute period, affecting not only anti-infective but also related sub-therapies like respiratory, cough, cold, gastro, vitamins and more. Additionally, regulatory restriction on certain products, and rise in competition in dates has had an adverse effect in our quarterly performance. As you may be aware that our acute product contributes 56% of our days compared to 63% in IPM as delayed feta adversely impacted our overall quarterly performance. Our [indiscernible] pasted a growth of 10% this quarter, also forming the IPM growth by 1.1x and IP and CVM crony growth by 1.4x. With our focus approach, we achieved year-on-year increase of 150 basis points in our chronic share to reach 34% in quarter 2 financial year '24 in Kontra IPM share increased by only 70 bps to 37% in the same period. We are seeing signs of recovery in acute segment from September '23 onwards and noticing visible growth in September and October 2023. And the same is evident in our March-September '23 performance, where in our secondary sales have restored our growth of 13.1% versus IPM growth of 10.3%. Additionally, on Q-on-Q basis, we have maintained our market share of 4.4% in quarter 2 financial year '24 and our market rank of both in value terms and prescription rank of 1 during the quarter. Our higher subscription shares reflect the superior quality and deep penetration of our groups. In fact, our subscriber penetration has also increased from approximately 81% in quarter 2 financial year cores to around 83% in this quarter. I am happy to share that [ Benicia ] revenue continues to show a healthy growth of 30% during the quarter. In our Consumer Healthcare business, we generated revenue of INR 193 crores in quarter 2 financial year '24, indicating modest growth of 2% year-on-year basis due to initiatives taken towards optimization of channel inventory and implementation of IoT tool aimed at facilitating focused consolidation. All our key banks have demonstrated healthy growth across various brand categories and continue to maintain their market share as evidenced by mid-teen growth inventory sales. We are in the process of launching multiple products with substantial growth potential and focus is to raising more and more products from RF to PSP. And we are confident in sustaining strong growth in this segment as we move ahead. Thanks to our team's dedication, passion and customer focal approach, I have full confidence that we will not only try but also reach significant milestone in upcoming quarters. We eagerly anticipate the continued trust of our customers in our products and wish to emphasize our unwavering commitment to enhancing their quality of life. Before I will hand over to Ashutosh Dhawan, CFO of the company, I will highlight some points. Despite a modest growth in Q2 year-on-year, our EBITDA margin. EBITDA has grown to 15%. Gross margin has increased 270 financial revenue growth has grown 30%. Chronic share has increased by 10 bps and [ Mac ] September '23, we have once again outperformed IPM by 1.3 times. Now I will hand over to Ashutosh Dhawan who will provide further insights into our financials. Thank you so much.

[Ashutosh Dhawan, executive]

Thanks, Sheetal. A very good afternoon, and I thank everyone for taking out time and joining us on this quarterly earnings call. I hope all of you would have received our financial results and the press release. Let me give you a brief of the financial highlights of the performance during quarter 2 FY '24. The revenue from operations have increased by 12% year-on-year basis to INR 2,708 crores as compared to INR 2,425 crores in the previous period last year. EBITDA has grown by 15% year-on-year basis to INR 636 crores with margin of 25.3% as compared to INR 594 crores with margins of 24.5% during last year in the same period. There is an increase in margins of 0.8%. This increase of 0.8% is largely driven by a 2.7% increase in gross margins from selected price increases taken in the previous quarters, stable API prices and favorable sales mix changes. The gross margin are now at around 69.5% level as compared to 66.8% in quarter 2 FY '23. However, this gross margin expansion has been offset by increase in employee cost by 0.6% and the balances on account of increased advertisement campaigns and other expenses. R&D expense for the quarter was at 1.9% of sales, which is lower than R&D spend of 2.2% of sales as incurred during financial year '23. The depreciation and amortization expenses for the quarter increased to INR 96 crores as against INR 79 crores last year. This is on account of higher capitalization during the latter half of FY '23, along with commissioning of the Udaipur plant, which has been capitalized within this quarter. Our effective tax rate for this quarter was at 20.3% as compared to 21.6% in financial year '23. PAT for the quarter was at INR 511 crores in representing a growth of 21% year-on-year basis and 3% on a quarter-on-quarter basis with diluted EPS of INR 12.5 per share of INR 1. The cash EPS that is the EPS adjusted for noncash items like depreciation and amortization was INR 14.9. Our net working capital base were at 44 days as compared to 45 days in financial year 2023. The CapEx, including capital work in progress was at INR 114 crores in quarter 2 financial year '24 and cash flow from operations were at INR 481 crores. The company has a healthy net cash position of INR 2,159 crores as at 30th September '23 versus INR 1,366 crores as at 31st March '23. The return on capital employed, excluding cash, increased to 28% on a 12-month trading basis as compared to 25% in financial year '23. The return on equity ROE ex cash increased to 24% on a 12-month trailing basis as compared to 23% in financial year '23. For financial year '24, we expect to incur INR 550 to INR 600 in the CapEx. EBITDA margins are expected to be in the range of 24% to 26%, as mentioned in our previous interactions. With this, I would like to conclude our opening remarks, and we will be happy to address any questions that you may have, please. Over to you.

[Operator]

Thank you very much. [Operator Instructions] We will take the first question from the line of Kunal Dhamesha from Macquarie.

[Kunal Dhamesha, analyst]

First one on the other expenses, which have increased meaningfully on a Q-o-Q and year-on-year basis. And you also alluded that there were some advertisement campaign expenses. But how should we look at for future quarter? Are these level of expenses going to sustain? Or the campaigns are going to be seasonal and should come down?

[Ashutosh Dhawan, executive]

Okay. So as you mentioned that was in the other expenses on a quarter-on-quarter basis as well as if you compare it to the last year, it's rarely driven on account of the advertisement campaign, which we carried out, especially in this quarter. So we expect this campaign and these expenses will normalize in BIG. I would also like to draw your attention that we have given the guidance of having the EBITDA margin in the range of 24% to 26%. Currently, if we look at for H1 EBITDA margins, so they are at 25.5%.

[Kunal Dhamesha, analyst]

So sir, shouldn't then the margin -- margin guidance should be a little bit higher because even with the higher we are running about 25%. And if the other expenses go down in second half, shouldn't the margin guidance be higher?

[Ashutosh Dhawan, executive]

You have a point. So if you look at the H2 is normally softer as compared to H1. So if we look at our H2 of FY '23, so we reported the EBITDA margin close to 21% as well. So currently, in H1, we are 25.5%. And given that we have -- if we take a base of '21, which we reported last year, H2 and our gross margin has improved by 2.3%. So we expect that growth 21%, that 2.3% a plus some rationalization on the other expenses. So we expect it to be in the range of 24% to 26%.

[Kunal Dhamesha, analyst]

And sir, one more question on trade receivables, which have almost doubled from the March level in the September. So any particular reason for that?

[Ashutosh Dhawan, executive]

So if you see the March as the trade receivable is the factor of what is that particular month till has been. So if you look at our March month sale, so that is lower as compared to the sales, which has integer in the current September month.

[Kunal Dhamesha, analyst]

And did exports also played a role here?

[Ashutosh Dhawan, executive]

Exports, yes. Exports also have a bit higher day receivable as we compare it to the domestic sales. So that has also marginally contributed towards increase in the trade receivables. So basically, what has happened is, if you see the last quarter numbers to previous year, so always the fourth quarter numbers in terms of sales are softer. So once you see the trade receivables of that quarter, they always tend to be on the lower side, whereas Q2 numbers are much higher than the Q4 numbers of last year. That's why there is a jump in this trade receivables. However, there is an increase in the export sales, but that has contributed very marginally with these increase in receivables.

[Kunal Dhamesha, analyst]

And the last question is probably for Rajeev. Now that we have almost around INR 220 crore cash, so what is our capital deployment priorities? And have we given a thought to the dividend policy? Where are we on that?

[Rajeev Juneja, executive]

Thank you, Kunal. Good question. I point this is what you just want to preserve the cash, keeping future opportunities in mind. We feel that we are in the process of having something in the near future, near to a long-term solution. So we want to keep that if we are unable, then we'll think of going for dividend. But any given time, we're always been very optimistic because the aggressive company. We're having cash in our hands. We'd like to have a mindset bankers acquisition side. Apart from that, whatever, other expenses are required for your expansion in terms of office and factories and R&D, it is there. So that's the point that we have.

[Operator]

We'll take the next question from the line of Neha Manpuria from Bank of America.

[Neha Manpuria, analyst]

My first question is on the OTC business. I think you mentioned that there's obviously optimization of inventory and certain IT tools that we have implemented. So is that all done? Should we start assuming the growth improved from the next quarter onwards? And also in the OTC, is there some seasonality? Because if I look at your numbers last year, it seems like first half seems to do much better than the second half or that's not the case.

[Ashutosh Dhawan, executive]

So let me answer this question. I mean, first of all, OTC is very, very dear to us. I think this is one particular division which has given a lot of name to Mankind, whatever people know about Mankind even yesterday, if somebody said that Mankind has given this much say, extra profit. So we have built this company from scratch. And if you look at this last 3 years, '21 to '23, our CAGR is 17%. We have always grown very, very fast. And we are in the process of -- and one more thing I just want to add here, the productivity of people, sales efficiency of people have increased around 30% in the last 3 years. Efficiency and productivity of our sales force over the last 3 years have increased by 30%. So we're in the process of adding a few more products, a bit more adding to more people. For example, certain products are -- one product we acquired from [indiscernible]. We are in the process of launching the product. This will be launched next month. Health OK has come from OTX to OTC. We want to just work more on that. So we want to have one more division in this OTC side. So when you start doing something like this, you just go for reach at everything. So when Sheetal talked about a number of things. So to be a modern company, certain systems have been put certain stock is reconciliation has taken place. The consolidation has taken place. Apart from this, we are going for premiumization of products to increase the margins in this size. So when you do that, certain things really happen. And I just want to just maintain market hygiene in that. So going forward, we expect around single-digit growth this year. And hopefully, from January onwards, the process of increasing in 2 divisions and launching more aggressively OTC, Mankind will yield better growth in future next year.

[Neha Manpuria, analyst]

That's helpful, sir. And on the domestic formulation business, chronic, we are doing pretty well from the numbers that you've indicated. The acute part, is it from your commentary, it seems that part of the acute season which wasn't captured in second quarter will probably come through in the third quarter. Therefore, on a full year basis, we won't be as weak as we have seen the quarter. Is that a fair assessment? Or do you think this season is a lost season and therefore, now the focus is in terms of maintaining the chronic growth rate or growth momentum that we are seeing?

[Ashutosh Dhawan, executive]

Last 3, 4 years, we are living in a very different way. I mean, even season has become very, very dynamic. Look at during this COVID time, acute semester sold more second time, chronic sold more. One year, it was the better growth in the Q second year looks better in chronic side. We're absolutely right. We are actually right that we stay quite confident in saying so that there is a shift in the season. Even right now, the last month is very good. [indiscernible] growth is some taxes, around 25% the last month sale. So that really gives give us confidence that we'll do what we basically projecting in our initial commentary.

[Sanjay Koul, executive]

If I can add... Can I add, this is Sanjay. When we talk about acute segment, it majorly involves MTN sectors and [indiscernible] during the season when we have seen of viral infections. So what has happened, if you look at the growth of the 3 segments consolidated in July over last year. Last year growth was and of the last year's July growth was 11%. This year's July growth was minus 5%. Last year, August growth was 12%. This year's August growth was minus 2%. Last year, September grows at 1%. This year, September growth was 12%. So this clearly shows that season came late in the month of September. And one more thing we need to understand. When we talk about healthy incentives, NPL logic and customers, so along with there are live therapy, which also get prescribed under the same prescription, this includes retirement minerals and nutrients as well as GI bugs. So overall, there was an impact on acute segment, more so in [ Mankind ] because NPLs case contribute 24% of our overall base versus 17% of industry.

[Rajeev Juneja, executive]

And if I can add, too, if you see our net performance of September '23, you've restored a growth of 13.7% versus IPM growth of 1.3%.

[Neha Manpuria, analyst]

Understood. And so, sir, on the gross margin expansion that we have seen, how much of this is, let's say, the export benefit, which you've mentioned several times that is only probably for a few quarters and therefore goes away and also the fact that acute was weak. Should this be at a more normalized level of what we saw in the first quarter? Or is the 69.5%, 70% that we're seeing sustainable?

[Ashutosh Dhawan, executive]

So as per the earlier guidance which was given, it should be upward of 68%. And if you look at the expansion in gross margin year-on-year of 0.7%, broadly, it is a factor of increase in the price element, which is the combination of sale price increase as well as the rationalization of the API cost. So both put together has given us a benefit of close to around 2% or so. And the balance has been towards the service mix favorable service mix, which has contributed to the domestic growth.

[Neha Manpuria, analyst]

Okay. we're still maintaining the 60-plus percent...

[Ashutosh Dhawan, executive]

It's going be down. So it's basically not one-off because... This is mostly because of the domestic business and because of the price increases and the reduction in the COGS.

[Operator]

The next question is from the line of [ Chintan Sheth ] from Girik Capital.

[Unknown Analyst]

A couple of questions. If you can talk about the discontinuation of few products. What is the impact on our sales during the quarter? And today, what are our plans in terms of new product launches going forward, you mentioned one of the products in the OTC are planning from the Panacea basket. If you can talk about that in terms of what is the pipeline we are expected to see over the next 12 months or so?

[Ashutosh Dhawan, executive]

So are you talking about this product, which was discontinued because of restrictions?

[Unknown Analyst]

Yes. The press release mentioned that the low softness in activity is also one of the reasons because of few products getting discontinued, if you can talk about what is the impact and what is the reason why those products will come back in our [ paper ]?

[Ashutosh Dhawan, executive]

Sure. So what we have done, so see, as just if you ask me, we started having the sales of those products captured in the month of September only. So in September only, which was the first month, we reached to 50% of what we were doing. And since I have the data for October as well so we are 80% of what we were doing with the earlier composition because we expanded by launching different SKUs, which are allowed, which are not restricted. And we have reached as per number of bottles sold and value concerned, 80% of what we were doing earlier. Having said that, there will be some erosion of price.

[Rajeev Juneja, executive]

The legal explain on this. There is one product. It was [ costers ]. So we have changed a lot that. And we hope that by the end of the year will reach around 70% of what we would do. That's the number one answer the product. I mean, when you say this continuation, it's not discontinuation. It's basically, changing that because existing scale so we change the formula. And we'll reach to this year only 7 people say to what we are doing last year. [ It's time ] to move on. What was your second question?

[Unknown Analyst]

Could you… Pipeline on the new products...

[Rajeev Juneja, executive]

Yes, we do launch it. We talk you about this new site. We'll be launching well this month or in the month of November only. We are just finalizing whatever is to be required to do some USP product as we have done so. And I just reiterated that, again, I can retail that OTC is a most or a division to us. So we are just working on this company only expanding on this in such a manner that we become more -- is still going to be a question more dominant in more new products like Health OK. We shifted from our OTA to OTC. We want just to work on it. We want to launch this eliminate and or so wide infrastructure we are developing because in future, we feel if some acquisition happens, which will happen, hopefully, then we have everything ready for that.

[Unknown Analyst]

And last question on the competition you highlighted during the earlier comment in the digestion formulation, if you can speak about what we are referencing in that segment?

[Ashutosh Dhawan, executive]

So we have leadership position as per prescriptions of concern still has the leadership position, and that is a strong. Of course, because of competition, we have lost a little bit of share, but we already have plans in place where we'll be coming up with some very, very innovative basically line extensions. First time in India, that is going to give us edged which will be very difficult to replicate by other players in the market. So we believe that in the coming 6 months to 1 year, we will be doing much better ahead of the competition because of those new SKUs, which will be first time.

[Operator]

[Operator Instructions] We'll take the next question from the line of [ Devesh Pathak ] from Y2 Capital.

[Unknown Analyst]

I'm listening to Slide 14 and Slide 16 of the deck. I'm just trying to understand this...

[Operator]

Excuse me, sir. Would you mind if I ask you to use your handset, please? Your audio is very [indiscernible].

[Unknown Analyst]

I'm using the handset. Even better and speaker.

[Operator]

Sir, can you increase the volume a little bit because it's too low.

[Unknown Analyst]

Okay. Is this better?

[Operator]

Yes, please continue. Sir, may we request you to kindly rejoin the queue. We'll move on to the next question, which is from the line of Rashmi Shetty from Dolat Capital.

[Rashmi Sancheti Shetty, analyst]

First question related to other expenses. And what I want to understand is that all our new expenses which is signing from the Udaipur plant has already been extended in Q2 which is going to increase from Q3, Q4 onwards?

[Ashutosh Dhawan, executive]

[indiscernible]

[Operator]

Sorry sir, your audio is not clear.

[Ashutosh Dhawan, executive]

Okay. So Rashmi, if I understood your question correctly, you want to understand that what will be the impact of other plant expenses. Yes?

[Rashmi Sancheti Shetty, analyst]

Yes, correct.

[Ashutosh Dhawan, executive]

Correct. So in this quarter, Udaipur plant expenses because we have done the capitalization during the quarter. So that impact is not there. But in the overall EBITDA, it will be value accretive because there will be replay from the COGS to the other expenses with regard to the other market expenses.

[Rashmi Sancheti Shetty, analyst]

And related to Consumer Health segment, we mentioned that you will be doing some launches in some month. If you can just give more color on it, whether there would be a line extension of our major brands like or you will be launching completely new properties. And related to consumer segment only, if you can also give more color on what is our rural and urban rates?

[Ashutosh Dhawan, executive]

So let me start with the set. Whenever we think of OTC, we are very, very careful. So we will be launching, as I mentioned, emulate, which we acquired from [ Asia ]. It's quite a known name and that's one reason we are coming with. We will be ice in this. This is one. The second is in is what we have on product Health OK, which we shifted from our access to OTC the reason we want to just launch a few more variants in that, more line extension to that and aggressively as we remove that. That is second. And third basically is what we said that we just want to create this infrastructure in advance so that in future, acquisition will happen because we have time and again said that we are looking for chronic side and consumer OTC side products to acquire. So for that sake, we are doing it.

[Rashmi Sancheti Shetty, analyst]

And sir, I understand that the growth will be impacted in FY '24. But in FY '25 and '26, how should we look at this consumer segment growth? Will it come back to the mid-teens growth?

[Ashutosh Dhawan, executive]

Yes. You see the growth you were doing in the past will reach that, if I say that in double digit and onwards.

[Rashmi Sancheti Shetty, analyst]

Understood. And sir, on the export side, how many quarters more we will see this one-off opportunity coming in? And where are these one-off opportunities coming from 13 to several products? And is it arising from the shortage opportunities if you can give some color on these things?

[Ashutosh Dhawan, executive]

So this one-off opportunity, I mean, we feel that this one-off opportunity in large -- it's very difficult to predict when others launch this product. But it's coming from one tier product. But however, we have certain other new launches in pipeline, and we have been point in the last quarters to compensate for profitability.

[Rashmi Sancheti Shetty, analyst]

And sir, overall, how do we see export market growth?

[Ashutosh Dhawan, executive]

The overall export market growth would be double digits, like good deals.

[Rashmi Sancheti Shetty, analyst]

This thing excluding one-off opportunity.

[Ashutosh Dhawan, executive]

Correct.

[Rashmi Sancheti Shetty, analyst]

Perfect, sir. And lastly, one question related to the U.S. market, if you can give the total number of products that has been commercialized in days.

[Ashutosh Dhawan, executive]

So total number of products that have been commented so far are around INR 25.

[Operator]

The next question is from the line of [ Devesh Pathak ] from Y2 Capital.

[Unknown Analyst]

Sir, I'm referring to Slide 14 and Slide 15 of the deck. And if I look at Slide 15, what we're showing is that in acute for Q2, market grew at 7%, and we grew at 5%, 4.9% due to underperformance in gastro and vitamins. So if you can explain that, I don't know if you already explained it, but please explain that why in acute, it is lower than the market. And even in chronic, Slide 14, we're showing only 1.1x growth of the chronic outperformance versus if you see, you've had much higher multiplier growth versus the market growing growth rate. So why is this quarter, both on the chronic side, the outperformance was lower. And on the acute side, in Castro and BMN and in overall, why we have done lower than the market?

[Ashutosh Dhawan, executive]

So when we talked about the acute segment, where there is tremendous impact of seasonality, we were referring to anti-infectives and [indiscernible]. We generally depend upon the season. When I said season, it is [indiscernible], right? So the problem with the issue acute segment maintain this contribution of these 3 therapy areas is around 24% versus 17% of [indiscernible]. Now having said that, the season came in September only, and I explained just 10 minutes back only, it is very well explained if you look at the last year's growth pattern of these 3 segments in July as of September versus this year, July or September. Last year, growth was 11%, 12% and 1%, respectively, for July, August, September. And this year, it was unpacked IPM. This year, it was minus 5%, minus 2% and 12%. So that clearly shows that there are very strong season in the month of September. But July, August were not having the same seasonal impact where [indiscernible] all move. Now that's point number 1. Point number 2 was there are some allied therapies which also get the pad along with these sites, such as GI, vitamin, minerals and nutrients. So these segments also got affected because of delayed seasons. So that was a...

[Unknown Analyst]

I understood, but what I'm not able to understand, sir, is that this delay of the season or the season impact is going to impact the market also, right? But if you are showing this data correctly, maybe there is some issue with the data because here we are showing market in gastro 8.4%, we grew only 5.3%. Vitamins market grew 6.9% to 2.3%. Whereas an anti-infective, we've done better, more than 2x the growth of the market. So either we are not showing like-to-like. So this is maybe not the covered market growth is what you're trying to show. Is that the right interpretation? Because the season impact would have impacted the market also, right?

[Ashutosh Dhawan, executive]

Absolutely. But you have to take into convenes the fact that the contribution of these 3 segments, this is the area for maintained is 24%, where for IPM is 17%. So it will have less impact on IPM vis-a-vis an [indiscernible], that is what I was trying to convince and these segments contribute 24% of total sales. For IPM, these 3 segments contributed 17%. So that is why impact is more in mankind in comparison to [indiscernible] there's one more part which you need to take into consideration. That is when we compare with IPM anti-infectives include injectables, injectables contribute 40% of total [indiscernible]. For Mankind, it is less than 1%. So injectables are good growth. If I look at the CVM growth, then in anti-infective orals [ in peso ], we are having 2% growth, whereas tumor anti-infective is having a degrowth. If you see this chart on the same page, anti-infective IPM growth is 1.9% versus [indiscernible] 3.5%.

[Unknown Analyst]

So that's saying would be better as my feedback would be that in this slide, next time when you show if you're instead of showing the IPM, if you show the covered market growth rate of the IPM, where you will make like-to-like adjustments like you just explained, there will be a better representation to understand how you've done versus the market. And if you can also explain, sir, on Slide 14 that why the outperformance on chronic side is not what we are typically used to seeing, your used to seeing 1.4, 1.5x the growth of the market.

[Ashutosh Dhawan, executive]

So for chronic, let me take you through from Q1. So please look at chronic from Q1 length than Q2 and H1. Q1 IPM has grown by 1.4%, Mankind has grown by 33%. Q2 IPM has grown by 9.1%, Mankind has grown [ 9.8% ]. Now please take into consist year. Last year also IPM was 11.3% and Mankind was 11.3%, the same growth. I'm talking last year Q2. Mankind is 9.8%, IPM is 9.1%. Last year same quarter, second quarter, IPM grew by 1.3%. [indiscernible]. Having said that, the sales in case of Mankind increased in second quarter by 1.5% versus 0.6% in GSI. And if you look at H1, then IPM grew by 9.8% and Mankind grew by 13.4%. So one quarter cannot give basically the complete picture. So we have to look at H1. We have to look at 12 months. That gives a better understanding of picture of performance. 1 quarter basically, I showed you quarter this year upturns quarter last sales petition. Last year also, Mankind behaved similarly. This year also IPM in Q2 [indiscernible].

[Unknown Analyst]

Understood. Okay. This is very useful, sir. The one last clarification. This did from molecule, you include in chronic or you include acute?

[Ashutosh Dhawan, executive]

Acute.

[Operator]

Thank you. The next question is from the line of Rahul Jeewani from IIFL Securities Limited.

[Rahul Jeewani, analyst]

Sir, can you please explain this quarter-on-quarter improvement, which we have seen in gross margins? And particularly, given the fact that our chronic revenue share declined during the quarter sequentially. So 1Q chronic revenue share was 36%, which came down to 34%. But despite that, we have seen expansion in gross margins on a sequential basis. So is our price increases largely a contributor to that quarter-on-quarter gross margin improvement?

[Rajeev Juneja, executive]

Yes, Rahul. As you mentioned, yes, there is an increase of 2.7% in gross margin quarter-on-quarter. And if you look at the breakup of this 2.7%, around 2% is the factor of price. So price is the combination of the sale price increase, what we have taken in the previous quarter and some rationalization on the cost front as well. And the balance is towards the favorable mix, which has driven that portion. And promise is one factor and the acute also some of the products have a good margin. So there, the mix has been better, so which has given us the sales mix beneficial of around 0.7% or so.

[Rahul Jeewani, analyst]

Sir, this 2.7%, which you are referring to is on a Y-o-Y basis. And I'm asking on a sequential basis that sequentially also our gross margins have improved despite a lower promise share. So what is the driver of the sequential gross margin improvement?

[Rajeev Juneja, executive]

So basically, the main driver of the gross margin quarter-on-quarter is the price increases and the rationalization of per pricing. We have increased copra price increase in certain products and which is still come as per what the regulatory system allows us. So that has increased the gross margins for one quarter.

[Ashutosh Dhawan, executive]

So Q1, it was not full reflection. Q2, there is a full reflection. That's one. And also anti-infectives softer growth versus chronic. So if you see chronic is 34%. So that also gives you a little extra gross margin. So it's a factor of both.

[Rahul Jeewani, analyst]

Sure, sir. Can you follow that number for the quarter and our productivity?

[Ashutosh Dhawan, executive]

What number, sorry?

[Rahul Jeewani, analyst]

Sales rep number?

[Ashutosh Dhawan, executive]

Sales rep, MR. it largely remains the same, around INR 12,000 is a field rep. Around 3,000 of the managers, around 15,000 is the total number.

[Rajeev Juneja, executive]

Yes. So INR 15,563 crores is a precise number, which is comprising of both the field force as well as the managers, the consolidated number. And if you are comparable to the last quarter, yes. So there is hardly any increase in last quarter was also INR 15,350.

[Rahul Jeewani, analyst]

Okay. Sure. And on this export business, while you indicated that the one-off opportunity might have seen for some period. But on this high base of FY '24, do you think that you will still see growth on the export business in FY '25? Or would we see a decline going into next year?

[Rajeev Juneja, executive]

As I said before, there are several products which we file. Those products will get approval in due course, and we are already launching these products in different quarters in the past. So we see a mid-teen growth going forward.

[Rahul Jeewani, analyst]

So on a reported basis as well you are pointing to on teen growth next year?

[Rajeev Juneja, executive]

Correct.

[Operator]

We'll take the next question from the line of Kunal Dhamesha from Macquarie.

[Kunal Dhamesha, analyst]

So on the M&A front, [indiscernible], if we do some deal, what would be our comfort in terms of leverage, while we have strong cash flow, but are we looking for a bigger target? Or would it be more tuck-in than what would be a comfort level with the leverage?

[Rajeev Juneja, executive]

We're a very, very conservative company. Lever is really -- I mean, we basically trying to not go for, honestly, not very big. We will ever go. Major would be, the kind of company we can chew swallow. And again, on the lines of cramming on the lines of consumer side, that's also a point plus this should really add something value in Mankind, but we should not have those products, the sieve and just bring something which duplicate your products, we cannibalize our own products. So we just try to see everything and keeping them in future of our duties in Mankind as well.

[Kunal Dhamesha, analyst]

Sure, sir. And second one on the prescriber penetration, which has increased on a year-on-year basis to now 82.7%. Now within that increase, what type of doctor it is coming from, is it general physician, especially super specialized?

[Rajeev Juneja, executive]

So if you look at the increase in prescriber concentration, so we launched single specialty divisions for the last 1.5 years. We will have then the big of special editions. So it is because of these single specialty division, we have been able to add more consultants in the areas of oncology, cardiology, diabetology, neurology, respiratory. So the addition is this prescriber base increasing is skewed towards consumers, and it is not firm efficient, but other [indiscernible].

[Kunal Dhamesha, analyst]

Okay. And last one on the advertisement campaign that we are running for the DMS trade API quality, what are some of the internal metrics that we are tracking for the success of that campaign? And what are benefits that we have realized till now? And what are we expecting?

[Rajeev Juneja, executive]

These are very intensive in long-term step. Somehow just to bring world-class products to Indian in it. So that's the point. Wages believe in long term 3,000. And this is quite important for [indiscernible]. And we see in the future, we have seen a good factor in the products we have on the MSI.

[Operator]

We'll take the next question from the line of [ Madhu Prashant ] an Individual Investor.

[Unknown Analyst]

My question is the acquisition [indiscernible]. Is it on the debt? Or is it fully cash.

[Rajeev Juneja, executive]

So we are not taking on any acquisitions right now. There is various opportunities that we are evaluating. So once something [indiscernible], we will move forward with it. It will be mostly our own funded.

[Unknown Analyst]

Okay. If I say you leaving [indiscernible] is it okay to see that...

[Rajeev Juneja, executive]

Yes. Debt free, yes.

[Ashutosh Dhawan, executive]

We are a net cash company with about INR 2,000-plus crores of cash balance.

[Unknown Analyst]

Okay. In future, is there anything that you believe to take a debt in the long term as well as in the short term?

[Ashutosh Dhawan, executive]

These are futuristic statements. If we take any acquisition, we'll come back to it.

[Unknown Analyst]

Okay. Recently, [indiscernible]. I saw an increase in loans in the curable business. Is there any focus of Mankind Pharma on that?

[Ashutosh Dhawan, executive]

So focus is on increasing the chronic share as we already have a large acute share, so increasing focus in chronic and consumer business.

[Unknown Analyst]

Okay. And my last question is, as Pfizer as Vigra kind of thing is Mankind Pharma also focusing on that...

[Ashutosh Dhawan, executive]

We already have [indiscernible].

[Unknown Analyst]

Any new segment for a future perspective?

[Rajeev Juneja, executive]

We'll come back to you. Next question, please.

[Operator]

Thank you. Ladies and gentlemen, due to time constraint, that was the last question. On behalf of Kotak Institutional Equities, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you, members of the management.

[Ashutosh Dhawan, executive]

Thank you.