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Ladies and gentlemen, good day, and welcome to Mankind Pharma Limited Q4 FY '24 Earnings Conference Call. [Operator Instructions]
Please note that this conference is being recorded.
I now hand the conference over to Mr. Abhishek Agarwal from Mankind Pharma. Thank you, and over to you, Mr. Abhishek.
Hi. Good afternoon, everyone. A very warm welcome to our Q4 and FY '24 earnings conference call on there today. On the call today, we have Mr. Rajeev Juneja, Vice Chairman and Managing Director; Mr. Shital Arora, Chief Executive Officer and Whole-time Director; Mr. Arjun Juneja, Chief Operating Officer; Mr. Sanjay Koul, Chief Marketing Officer; Mr. Ashutosh Dhawan, Chief Financial Officer; and Mr. Prakash Agarwal, President, Strategy.
We will begin with opening remarks from Rajeev Juneja, providing an overview of the quarter the fiscal year 2024, followed by detailed insights of the business performance from Mr. Shital Arora; and Mr. Ashutosh Dhawan, will be sharing the key financial performance. Post which, we will leave the forum open for Q&A.
I hope by now you had access to the investor pack shared yesterday, and I'd like to reiterate that certain statements made during today's call may be forward-looking. A comprehensive disclaimer regarding the same is uploaded on our investor presentation and website and press release already uploaded on our website.
Now I would like to invite Rajeev to share his comments.
Thank you, Abhishek, and good afternoon, everyone, and a very warm welcome to our Q4 and this year for [indiscernible].
I want to acknowledge that last week, we have celebrated our first year of listing. Thanks to the unwavering trust and support of our stakeholders. Mankind has simply [indiscernible] to become...
Sir, you're not audible?
Additionally, during the year gone by, we have crossed the annual revenue milestone of INR 10,000 crores and our revenue in 5 years despite of multiple industry headwinds. This remarkable achievement is a testament of unwavering passion and our form commitment of serving Mankind.
Speaking of quarterly performance, we witnessed a strong quarter as our revenue increased by 19% year-on-year to INR 2,441 crores.
EBITDA grew significantly by 42% year-on-year to INR 594 crores, with EBITDA margin over 24%, and PAT grew by 62% year-on-year to INR 477 crores.
On an annual basis as well, the company reported a strong revenue growth of 8%, increasing the revenue to INR 10,335 crores.
EBITDA increased to INR 2,550 crores, up by 33%, and PAT grew to INR 1,942 crores, up by 48%, primarily driven by robust growth in modern trade, hospital sales and expansion in chronic share by 160 bps year-on-year to 36%.
We have outperformed the IPM chronic by 1.4x and CVM IPM chronic by 1.7x. With a strong net cash disposition of INR 3,260 crores, we are consistently evaluating multiple opportunities with a high entry barrier to enhance our presence in chronic, consumer and other health care efficiencies.
With our commitment to provide international quality health care products to every citizen of the country, we have recently entered into in-licensing agreement with AstraZeneca for their world-class brand, Symbicort. In recent years, developing nations have experienced a notable rise in the number of initial suffering from asthma and COPD commission largely attributed to safe industry growth and substandard air quality. Presently, India accounts for approximately 13% o worldwide [indiscernible]impacting the reasons of all ages, thereby [indiscernible] superior quality products to tackle this challenge.
Symbicort is a dual combination inhaler brand known globally for its higher efficacy used for the treatment of asthma. We aim to grow this brand by leveraging our extensive import a strong doctor reach.
On the operational front, we have adopted various digital and technology-led business transformation initiatives. These initiatives are aimed at improving automation and digitilization of processes across functions to further enhance our operational productivity and efficacy, which has also resulted in reduction in our working capital from 45 days in March '23 to 42 days in March '24. Further, we are revamping the packaging of all our products to enhance customer experience and create better consumer awareness.
In financial year '24, the Consumer Healthcare segment grew by 2% year-on-year due to multiple business transformation initiatives undertaken during the year, while secondary sales were healthy. We are now observing a robust in primary sales, instilling confidence that this segment will resume its past growth trajectory.
Recently, we have carved out our OTC business into a new legal entity as a wholly owned subsidiary of Mankind. This said more aim to sharpen our focus on this reason and maximize its potential.
On the R&D front, our focus remains on developing differentiated products to cater to the unmet needs to the issues.
I would like to conclude my -- by expressing my heartfelt appreciation to all our shareholders for placing their trust in us.
With this, I will hand over to Sheetal, who will provide more details on our business performance.
Yes. Good afternoon, everyone. Today, I will be providing key insights into our quarterly and annual business performance. Let's begin the our performance for the quarter.
In this quarter, our Domestic business revenue rose to INR 2,174 crores, marking a 10% increase. This growth was driven primarily by strong performance in our chronic segment and recovery in the gynecology segment.
According to IQVIA, our secondary sales grew by 8%, outperforming the Indian pharmaceutical market by 1.4x. Our [indiscernible] segment growth was notable at 16%, surpassing the IPM chronic growth by 1.6x. This robust performance has led to an increase in our chronic market share to 37.4%.
Significant contribution came from our Cardiac and Antidiabetic segment. which raised a impressive growth rate of 21% and 18%, respectively. These segments outperformed their IPM counterpart by 1.9x and 2.6x, achieving all-time high market share in their respective therapy.
I would also like to highlight that our Insulin brand, [indiscernible] has been recognized as a launch of the year in the antidiabetic category. Despite a modest 4% growth in our acute segment, we still managed to outperform the IPM acute growth by 1.2x.
Additionally, adjusting for the impact of our regulatory change affecting one of our growth in at segment would have been even more impressive, exceeding IPM equity growth by 1.3x.
Starting with our Consumer Healthcare business, we achieved a revenue of INR 156 crores, marking a more or less year-on-year growth of 3%. We have observed some recovery in this quarter and are projecting mid-teens growth for financial year '25. We have strengthened our portfolio with strategic product launches, including [indiscernible] which leverages the pregnant to detect menstrual cycles.
In our International business, we saw a significant growth in quarterly revenue, profiled by one-off opportunities in the U.S. and selective product launches over the past 12 to 18 months.
Turning to our annual performance. Our Domestic revenue climbed to INR 9,522 crore, up by 13% from last year, with secondary sales growing 8.5% compared to 7.6% IPM growth. Despite one of the youngest companies and our sectors, we have scaled our brand remarkably [indiscernible].
This year, we added 3 new brand families to INR 100 crore category, bringing the total to 23. We are confident that we will continue to outperform IPM by 1.3 to 1.4x.
We have also received the British base commercial service for one of our facilities, reaffirming our commitment to providing globally plan quality products.
Also in previous quarters, we have outlined a detailed roadmap of ESG towards increasing our sustainable footprint aligned with. It gives me a nice pleasure to share with you all that during the year. We achieved a remarkable milestone towards [indiscernible] as we have successfully collected 100% post-code protect base and stand for recycling.
Additionally, we have reduced our carbon emission significantly by 55% as compared to financial year '22. We are dedicated to contributing to a healthy [indiscernible] by making market disruptors and setting ourselves apart from the competition.
I will now hand over to Mr. Ashutosh, who will provide more details on our financial performance. Thank you so much.
A very good afternoon, everyone. Thank you for taking out time to join our quarter 4 and financial year '24 earnings call. Today, I will be sharing detailed insight on our financial performance, both for the fourth quarter and the full fiscal FY '24.
In quarter 4 FY '24, our revenue from operations increased to INR 2,441 crores as compared to INR 2,053 crores in quarter 4 FY '23, signifying a healthy growth of 18.9% year-on-year basis.
For FY 2024, our revenue has grown by 18.1% year-on-year to INR 10,335 crores versus INR 8,749 crores in financial year 2023.
The gross margins of the company has increased by 2.6% year-on-year to 69.8% in quarter 4 FY '24 as compared to 67.2% in quarter 4 last year. This increase is primarily due to 3 factors. Firstly, if the full year price increase has provided a benefit of 1.4%. Secondly, the favorable sales mix has contributed 60 basis points to the gross margin. And thirdly, last year, we had inventory-related write-offs and approval towards COVID products, which compressed quarter 4 FY '23 gross margins by 60 basis points, which has normalized in this year.
For the full year, the gross margin increased by 2.2% year-on-year basis to 68.9% as compared to 66.7% in financial year 2023. This is majorly on account of favorable sales mix including increase in chronic share and the price increase [indiscernible], as we highlighted before.
During the quarter, EBITDA increased significantly by 42% year-on-year to INR 594 crores as compared to INR 419 crores in quarter 4 FY '23. The EBITDA margin increased by 3.9% to 24.3% versus 20.4% in quarter 4 FY '23. This increase in EBITDA margin is on account of increasing gross margin of 2.6%, further aided by operational leverage due to strong revenue growth for the quarter.
For FY '24, we have reported an EBITDA of INR 2,550 crores, which is up by 33% year-on-year basis with an EBITDA margin of 24.7% as compared to 21.9% for financial year '23. This increase of 2.8% is primarily driven by increase in gross margin of 2.2%, and the balance is due to operating leverage and certain cost savings in the current fiscal.
The R&D expenses for the year are at INR 223 crores, which is 2.2% of the revenue, and this is in line with our guidance of 2% to 2.5% of sales.
In quarter 4 FY '24, the depreciation and amortization expenses increased to INR 105 crores from INR 85 crores in quarter 4 of the last year.
And if you look at for the full year, the depreciation and amortization expenses increased to INR 398 crores versus INR 326 crores in financial year '23, which is primarily due to higher capitalization of completed projects, which included depo plants getting operationalized in quarter 2 of financial year '24.
Further, we have taken some accelerated depreciation related to upgradation and expansion of existing R&D site monitor to support future growth.
The effective tax rate for financial year '24 is close to 19.1% as compared to 21.6% during financial year 2023. The profit after tax for quarter 4 FY '24 increased by 62% year-on-year basis to INR 477 crores with diluted EPS of INR 11.7 per share of INR 1.
The cash EPS, which is EPS adjusted for noncash items like depreciation and amortization was INR 14.4.
For financial year 24%, PAT increased by 48% year-on-year to INR 1,942 crores with diluted EPS of INR 47.7 per share of INR 1, and the cash EPS stood at INR 57.6.
During the year, we witnessed strong cash flow from operations of INR 2,152 crore due to operational efficiency supported by a reduction in the net operating working capital base. As on March 31, 2024, the net cash position of the company stands at INR 3,260 crores.
The return on capital employed, excluding cash increased to 34% in FY '24 as compared to 25% in FY '23. This is due to improvement in EBIT and cash generation during the financial year '24.
The return on equity ex cash increased to 29% in FY '24 as compared to 23% last year, primarily due to increase in PAT percentage during financial year '24. The total CapEx spending for financial year '24 was at INR 389 crores, which is less than 4% of the total revenue.
For FY '25, we are retaining our guidance of EBITDA margin for the full year to be in the range of 25% to 26%.
With this, I would like to conclude our opening remarks, and now we can begin with the Q&A. thank you.
[Operator Instructions] The first question is from the line of Kunal Dhamesha from Macquarie Capital.
The first question on the...
Sorry, a bit loud.
Am I audible now?
A bit better, but loud would be better.
Okay, sure. So the EBITDA margin improvement that we have seen in this year, around 280 basis points for FY '24. Would you be able to provide details as to how much would have come from the significant growth in export business versus the domestic business?
So we haven't called out the segmentation forward business and the export business has contributed to the top line. But if we compare it at the EBITDA margin the impact is not quite significant.
But the margin in that business would have improved, right, whatever it would have been in FY '23? Would that have improved meaningfully in FY '24, sir?
There is an improvement in the margins. But as we mentioned, it is not significant to be at that we highlighted.
And let's say, if we look at export business, so you're saying that the margin in export business is lower than the overall average?
I think the margin in the export business is almost at par with the company [indiscernible]. It is a thing which is significantly overall margin of [indiscernible] par with the company average of the EBITDA margins.
And at the gross margin level, would it be accretive, export business?
Export business at gross margin level is slightly lower than the Domestic business, but the expenses in the Export business are not as high as the Domestic business. That's why at EBITDA level, it's almost at par.
Perfect. And on outlook, yes, you're saying something.
So Kunal, the way to look at it is we should draw comfort from the guidance. So there is -- as Ashutosh said, there is not much contribution or significant contribution on the base business. Otherwise, we wouldn't have been comfortable there.
Sure. And the outlook for the domestic formulation and Consumer business but on the export business, what is our expectation? What is built into our budget in terms of growth?
Since the last couple of years [indiscernible] products wasn't that big. That's why you're seeing a significant growth in the export business. But moving forward, we will get about 5 to 7 approvals every year. So we can expect about a growth of mid-teens to the export business.
Sure. And in terms of the -- last question, if I may. In terms of capital deployment, in terms of, let's say, adding a new plant, et cetera would -- for the export business, is there anything in [indiscernible] or we would just focus on the plan that we have?
So there is no capital deployment, which is on the cards for export business.
The next question is from the line of Bansi from JPMorgan.
So firstly, on the modern trade you've highlighted this year's modern trade has grown by 50%, was this more skewed towards second half? And therefore, how should we think about growth in fiscal '25? So would it be more normalized? And therefore, would the number track more closely to the secondary number that is reported in IQVIA?
So Bansi, FY '24, we grew by 15%. FY '25, it will be normalized and aligned with whatever the growth of IPM, whatever is the growth has modern trade in IPM. It will be aligned with them around 15% that is we guided to.
We were under-indexed. Now we are reaching the index. So we should be aligned with the IPM.
Okay. Understood. That's clear. And on the growth breakup, the -- so IQVIA number shows our volume growth is still negative for the full year, but if you can guide what do you see internally on your primary numbers as your volume growth fiscal '24?
So we have not done that exercise. But what we understand, if you look at the last 3 years, our volume growth is higher than the IPM volume growth. And last year, because of reasons -- so one reason was there was a regulatory restriction on the sale of that product, number one.
Number two, modern trade grew by 50%, where our contribution is only 6%. So this is probably not covered by IQVIA. So that is why our volume looks a little bit subdued. But having said that, if you look at April this year, we are again back to our origin growth. That is 1.3% of IPM.
The next question is from the line of Neha Manpuria from Bank of America.
First question is on the Consumer Healthcare business. I know you mentioned this mid-teens growth in the next year. If you could you just give us some color on the confidence given the 2% growth that we have done this year? I mean what was the business transformation that impacted? And if that -- if I were to adjust for that business transformation, probably what was the growth in Consumer Healthcare? Just trying to understand the confidence on the mid-teens.
Like the confidence of maintained by saying that we are starting out our Consumer business [indiscernible]. I'm so confident that this particular division will do being very good, number one.
Number -- second, in the past, we formed earlier as well that the reason was we had taken care of pharma and consumer side. So we did a lot last year, which changed the traction. Now [indiscernible] specific guys do only consumer side. And by carving out, what basically happens in this particular division is different kind of DNA, different kind of working, some kind of automation, some kind of digitization. We have done that.
At the same time, there are certain products in the pipeline, which gives us some of the confidence that this particular division will do good mid-teens kind of a growth to us.
I mean the confidence is so much that we are carving it out. That is what the numbers will [indiscernible]. That gives confidence to us. So it is too confident that this would be very, very good. And a number of days we have said that this particular event are very close because this has been maintain a lot of [indiscernible]. This will be [indiscernible]
From a profitability perspective, would the Consumer Healthcare business margins be lower than corporate average? Would that be a right assumption? And as that ramps up, probably that margin gap narrows?
Yes. If you compare the EBITDA margins as compared to our company [indiscernible], yes, they are lower than the company average. Having said that, there is some potential to match up to the company [indiscernible] in the future for this business.
Okay. And the second question is on the export number. If I were to just look at the launches that you have done in the U.S. and the IQVIA data, is it fair to assume that all of the growth that we've seen in FY '24 has been driven by the U.S. or at least bulk of the incremental growth in year-on-year in FY '24 in the U.S.? Just trying to understand the U.S., non-U.S. mix in that number?
So if you were to just talk about the numbers, the incremental growth is majorly from the U.S. number.
But just to add, the ROW business has also grown. And in the U.S. business -- within the U.S. business, the base business is growing quarter-on-quarter every quarter. So that's the confidence in that.
Yes. And if that is the case, if bulk of the bus one has come from the U.S., wouldn't the margins, EBITDA margins be higher because there's not too much cost that is sitting below gross margins, right, for that U.S. growth? So I didn't quite understand the reason why the margins are similar to our corporate average.
I mean because there are certain products which are [indiscernible] products were very significant competition. So that's why -- and there is a certain one-off product, which is able to compensate for that. So that's what we are saying that margins are more or less [indiscernible]
The next question is from the line of Rashmi Shetty from Dolat Capital.
Just again on the export business, do you think or foresee any competition for your one-off product in the coming year?
It's a very good question. It's very difficult to foresee condition because it's a product. It's not a patented or [indiscernible] kind of a product. So I mean we can't say that there will be no competition, but it would be safe to assume that competition can come in every time. We can't predict.
Okay, perfect. And sir, second question is...
And at the same time, we need to understand that the base business in the U.S. is growing. So even if the comp in there will be some impact on the growth in the U.S. business, but that will get compensated by the U.S. base business. And secondly, launches that.
Okay. So the mix of U.S., what is the stuff [indiscernible] more towards the U.S. in FY '24. But in FY '25, you're saying that the rest of world markets will also pick up or it will be still the contribution from the U.S. is still higher?
The contribution from the U.S. will be still higher, but the growth from rest of the world would increase. So it would be safe to assume that the contribution from rest of the world would increase, but U.S. would still be significant.
Got it. And sir, on [indiscernible] utilization capacity, if you can comment on that and how the demand is picking up for the product in the market? And what is your -- what are your users -- if you can comment on the export market also if you're planning to do that?
So I'll answer for the plant first. So the plant was started last year. It started in September of [indiscernible]. And the demand is fully serviced from this plant, where we have reached capacity about 60% or so utilization.
In terms of exports, we are in the process of filing this product in different markets, which, I mean, couple -- will take about a couple of years before we start selling them commercially. So yes, the plant is still the [indiscernible] and there is enough capacity to sell for the export market as well as the [indiscernible] market.
And one more question, if I may. The fund raising of INR 7,500 crores the Board has approved. Any inorganic opportunity, you are find? In case of it is, yes, anything is on [indiscernible] or you're just looking at it? And what kind of size of acquisition you're looking at? If you can comment on that, it would be helpful.
These are just a market speculation. The thing is [indiscernible] set up in the letter. And I think that it doesn't do that [indiscernible] in market for more than acquisitions. We were definitely looking for the acquisition. But when the right time and right opportunity will come, definitely, will go for it right in the market.
The next question is from the line of Atul Mehra from Motilal Oswal Asset Management.
So just a follow-up on the previous...
You're not clear.
So basically, we are just on this [indiscernible] of INR 7,500 crores. So normally, if you are a specific -- could you provide a specific number of INR 7,500 crores? It is implied that there is some calculation that is wrong in this number. Maybe you are eyeing a particular target, which is in [indiscernible]et cetera, et cetera. Can you please walk us through what is the thought process of this immediate resolution of INR 7,500 crores?
Yes. So the way we look at this tatt we already had a resolution for investments of about INR 10,500 crores in there. So we've raised, first of all, the debt resolution from INR 10,500 crores to INR 12,500 crores. In addition, we have added an enabling resolution for INR 7,500 crores. So we want to keep the watchers ready.
As Sheetal mentioned, if there's an asset that will come to us, we will evaluate, big and small assets. So in the past, you have seen we have acquired a large acquisition of [indiscernible], but look at some very small but very strategic acquisition like [indiscernible], which is working very well from the which is for stability that is working it well. So the landscape approval and as well as resolution, which will help us to be ready for any acquisition.
Right. Got it, sir. Just one small follow-up on that. I think in the past, the largest acquisition that we have done is about INR 60-odd crores. So is there a unit to the kind of acquisition that you might do in the future, like any particular number beyond which you would not go ahead and the size will be too big for us to absorb? Is there an outer limit to the acquisition size that we can go with?
Yes. So as we mentioned that it's a mix both. So some [indiscernible] the equity. And [indiscernible] enabling the resolution which has been passed. The thought was not to over leverage the balance sheet of the company. It should be the right mix of that and equity. So that's how this should be perceived in that [indiscernible] perspective.
Let me add something here. I mean, see, whenever [indiscernible] in the past strong, what we have said that we are in lookout for certain entities. But again, there is [indiscernible] to this chronic side to consumer side, there was certainty which can really add value to Mankind for Our future growth and making sure that these products or these acquisition will have high entry barriers. But at no given time, it's [indiscernible]. It's not industry practice, then pharma companies, they are the same say. They basically recreate [indiscernible] provision. So we are just learning the tricks of those people so that any time, anything comes, occupying those the information that. We don't come back again and speak about these things. That's the reason.
I mean this is the first year of Mankind, and we see a lot of IPO companies how they practice, so we keep levy from these companies. That's the only thing. No hate. No [indiscernible]. Any time. Our investors sweet with Mankind.
[indiscernible] companies that basically something like by size of how big acquisition that we it able to do?
So from that perspective, I was checking like is there an outer limit on, for example, if you were to ask something if the entity, it should [indiscernible] Is there a limit to...
Your audio is not clear.
No. I'd understand that. See, I think these new outer limit is always. I mean depends upon opportunities. It can be INR 100 crore [indiscernible] to INR 1,000 crores [indiscernible]. But again, any demand everything which would add some kind of, [indiscernible] and you will say some kind of a product which is an antibarrier, chronic size, consumer size. You can look out for that.
I mean why should we put some benefit limit? I mean this is not kind of a shopping spree we are on. Right opportunity. Look in the past, [indiscernible] is the biggest one in the past. I mean, people forget [indiscernible] other product, [indiscernible] which at very, very manner, as the financial basically like [indiscernible] mentioned, so just to avoid over leverage, we are below not enabling resolution for equity. So any given point of time, the debt-to-equity and debt-to-EBITDA ratios will be well within the limits. That's the financial comfort we can give.
[Operator Instructions]
The next question is from the line of Amey Chalke from JM Financial.
Congratulations to the management for good set of numbers. The first question I have is on the new product launches as growth contribution has been around 3% for last consecutive 2 years. So is it possible for you to give more color on the new product launches in terms of volume, et cetera, and how it looks like for the next 2, 3 years?
And the second question I have on the pricing side. We are already -- I believe we must have taken very for this year or -- but last year, you understood that royalty prices had gone up. Components may have been on the higher side. So this year, the prices have gone down significantly. So how does it look like for this year, the growth component for our business?
So this is Sanjay. I'll take one on the consumer. So if you look at the new launches, which we have planned. So we believe that 3.5% to 4% contribution in growth is going to come from new products [indiscernible] products, which have been launched or in the process of being launched. [indiscernible] an entered a that is first of its kind analgesic, anti-inflammatory analgesic. Besides this, we are big cost, which we believe is going to -- it is a big bucks for us. So we have another for [indiscernible] management that recently awarded in the INR 50 crore bracket, and we believe these are the products which are going to be big [indiscernible]test for us. This is the answer to your query #1.
Second was a price in last year because of posterior [indiscernible] more than 5% of [indiscernible] growth in [indiscernible].
I would say that controlling 2% inflation was much or the launch of just, so the pricing or less.
The next question is from the line of Harsh from [indiscernible].
Most of the questions have been answered, but if you could understand the growth the last quarter happening on the ground of moving some numbers.
Rate growth almost 25% plus 1 product that's sales but brand, which is the [indiscernible] on that specific for it as well.
It's all on a very successful acquisition of all the line of [indiscernible]. Even the transplant believe them. It's also doing fantastic. It has been niche. When we talk to Panacea, we asked ourselves can we make this? The answer was no that's [indiscernible] for this. So we [indiscernible] into the brand. The fact that we can build ourselves, then only we look out. Otherwise, no. It is [indiscernible] to impose anytime for a new product or a simple product, you can go for it.
So we asked this one thing that we should call 1 product, which is the only [indiscernible] doing the company to which AstraZeneca has given their global brand [indiscernible]. That's the kind of the company accepting us. Last year, it was a different brand in licensed products and very soon give me in the next quarter as well. One more and I think will happen.
So people see us as a very vibrant aggressive company. That's one reason they keep giving a good name like this in future as well.
Sure. And just to sort of, again, push the gap between the FY '25 margin guidance. Let's say, even if your export sales because it is generics and heavy cyclically dependent number. Let's say, we know that the numbers were to remain flattish, we would still be able to achieve that threshold of 25% to 26% margin, right? Because a lot of the levers that we might be building in might be India driven to that extent.
Yes. I think the observation is correct. See, 90% plus business still domestic. If you see the growth already highlighted is outperforming IPM by about 1.3x. So you'll definitely see a better growth and operating leverage to kick in through that. And that's why the margin guidance is 1 notch above versus what was given '24 to '26 now this '25 to '26, and the levers to that is higher chronics. So chronic, as you know, that we already see a 160 basis point improvement Y-o-Y. This will every year see some improvement, which is higher-margin portfolio.
We are seeing increase in number of INR 100 crores and INR 50 crore brand. Once it reaches a threshold of INR 50 crore, INR 100 crore brand and incremental [indiscernible] with productivity and profitability in [indiscernible]. Like the third metric is important making MR productivity. So there also, it has improved from 6.1 last year to now 6.5. And as we speak with higher growth, that metric will continue to grow and that typically gone down to the EBITDA margin. So these are the 3 big levers in the Domestic business apart from the new launches, the in-licensing, et cetera, which will give a better flavor and also the new divisions.
I think you asked about Panacea. So apart from transplant where it's already access to new set of doctors, we have now recently launched over new set of products, new set of doctors. So these are the new white space we are address sing, which will help us grow and eventually have better margins.
The next question is from the line of [indiscernible] from Warman Capital.
Congrats again on a good set of numbers. I have a question on our manufacturing strategy. So I think it was mentioned in the RHP that roughly 25% of our manufacturing is by a contract manufacturer. I want to understand number, is it still at similar levels? And do we want to maintain the mix or increased outsourcing? And second, is that split amongst a lot of players sort of fragmented supply base? Or is it consolidated amongst a few large suppliers for?
Correct. I mean, our manufacturing strategy is still the same. More than 35% of our products are manufactured in-house. And we keep continuing to shift the products from contract manufacturers become slightly [indiscernible] in-house because of 2, 3 reasons. We have better control over the supply chain. We have better control over the pricing of the product.
But having said that, there will be about 20%, 25% of our products, which will continue to be manufactured at contract manufacturer because where we could -- we might not be having those manufacturing those types of manufacturing facilities in-house. We might not be having those kind of spaces in-house. But having said that, we ensure that quality standards of these contract manufacturers are at par with our in-house manufacturing facilities. We have a lot of big contract manufactures who manufacture for us, where the quality standards are as per scheduled, and [indiscernible].
Sir, how many partners would be particularly have?
It would be difficult to say right now. I don't have any revised number, but there is a good set of partners that we have.
The next question is from the line of Tarang from Old Bridge Mutual Funds.
Congrats on an extremely set of Q4 and full year numbers. I'm perhaps extending a line of questions around capital allocation. The business has about INR 3,000 crores cash and books.
Going forward, what business segments and geographies could this and perhaps additional capital be put to use to grow a business from here on?
And second, given the traction in the Exports business, how serious are you about this business? Would you be open to, say, an international acquisition?
So I will answer the second question first on the export business. I mean if you see our R&D expenses are about 2%, 2.5% of our revenues every year. If one were to really ramp up the export business, these R&D expenses need to go significantly up as you must have seen in the books of our peers. So we've always maintained in the past that majority of the business, more than 90% or 90% of the business will continue to be domestic.
Export business would be less than 10% of the overall numbers of Mankind. And we are not looking at acquisition outside of India.
Okay. And within India, I mean, overall, I mean, within what business segments, what are the -- from a strategic standpoint, if you could give us some direction, what you want to probably move in towards therapies, which increased chronic share in your business, just some light?
So if you see overall, I mean, to more a few years back, Mankind's covered market share was about 60% But in the last few years, our total market share has increased from 67 at the time when we are [indiscernible]. And now it is about 69%. So you've seen that there are white spaces in the portfolio, which Prakash mentioned, which were in the field of neuropsychiatry which we're trying to fill out, which was urology, which was filled up now to nephrology, and there are certain oncology critical care products were there. So we're trying to fill up the white spaces and launching products in those business segments. And the endeavor is to reach the covered market share of around 72% to 75%, where most of our peers [indiscernible].
And one more point, if I may. So within the therapy like diabetes, we didn't have the insulin pens. So fiscal '24, we introduced the pen. So if you are present in therapy, but not the sub-therapy, we are doing that also. So in respiratory, we were not there in [indiscernible]. Now we are significantly present in [indiscernible]loss. So that's also the white space within the therapy that we are expanding.
Okay. Last, I mean, gross merchant expansion has been pretty decent for FY '24? Do you intend for this to stay here? Or do you think probably cool off a bit?
So if you see historically, our gross margins have increased year-on-year, barring a couple of years where the raw material prices significantly went up. We are taking the price increases wherever possible. If you see our price increase was also to the tune of 4% to 5%. So I mean we don't see any significant jump in the RM prices over the next couple of quarters. So we see some jump in the gross margins, as you might have seen over the last couple of years.
So no significant jump in RM prices for the next 2 quarters, and we'll continue to take price increases where you can, correct?
Correct.
The next question is from the line of Kunal Dhamesha from Macquarie Capital.
So on the EBITDA margin, while we have given the guidance for the next year, but let's say when we think beyond FY '25, '26, '27, how do you expect profitability to move in the next 3, 4 years? Some of our peers with a good chronic contribution, could be meaningfully higher currently as compared to us. Do we aspire to be in that league where our EBITDA margin could be 35% plus 5 years down the line?
So Kunal, I mean if you see our chronic portfolio delivered a few years back was around 30% or so. I mean there is significant work which is going on to improve our chronic share. Even the [indiscernible] chronic share has gone up to 36%. And in the chronic margins are definitely better than the acute margins.
And with the chronic share going up in the near term to about 40%, in the long term about 45%, 50%, we see improvement in the EBITDA margins happening, and there will be operating leverage because the productivity increase that you are seeing which is happening around here.
So definitely, there is going to be improvement in the EBITDA margins. But having said that, if you not just look at Mankind with EBITDA margin improvement, there is going to improvement in the EBITDA margin, but we, as a company, would always want to go for growth, and we will invest for growth. So there has to be a balance between investment into growth and the EBITDA margin's improvement in a steady way.
Sure. So do we expect our field force, et cetera, increase, at least in the next couple of years? And what is the current number.
You see, I mean, whatever the increase that we put, it has always been balanced, taking whichever therapy areas we are not there, we go for it. On the basis of that, we expect approximately, I mean, 700 to 900 [indiscernible] increase this year as [indiscernible]. I'm seeing as well -- I mean not [indiscernible] in the current quarter.
Sure, sure. And what is the current number, sir?
Again, again not to forget that. Whenever there's increase, we make sure one thing that the productivity at no point should go down. Look at last year, productivity is 6.5 versus last, last year, it was 6.1% despite of increase in [indiscernible]. So we maintain this kind of a balance that we should number of people in productivity and mind as well and in the area of therapy in which we are not present.
And to add to this point, in last 2019 until now, we haven't increased 3,000 [indiscernible] but our 2 years gone up in the last 3, 4 years.
For 16,000, including the first-line managers?
Yes.
And without that, the pure number?
12,000.
[Operator Instructions] The next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services. The participant got disconnected. Next question is from the line of Alankar Garude from Kotak Institutional Equities.
Sir, historically, if we look at our track record before Panacea, we have always had a slightly conservative mindset when it comes to M&A and now we believe that there is no to limit for any potential acquisition. So it would helpful if you can elaborate on what has driven this change in approach?
Yes, you are absolutely right, being a company which has a conservative mindset but after acquisition Panacea, [indiscernible] we have seen -- we have become very successful. And to -- because we have been very successful, so the right now the time has come that definitely we will go for a merger and acquisition.
And let me add on this. One thing you must have seen that we are very, very conservative. So that DNA would never go away, one. Any time we think of any kind of an M&A, one is thing is clear in our head that it should really add value to Mankind's product. It should not be just to add revenue, which would have some entry barrier for us, which we have chronic side, if you have consumer side. And whatever we had said in the past, whether it's consumer, chronic, whatever, you see that outcome is there in front of you, a few years back to 3 -- every year, we are adding 1.5% share increase in our chronic side. But as we've said that, we acquire those companies like that. So we are really strategical in this. It can be small. It can be big. But depending upon the opportunity. Sometimes the opportunity is imminent. That's one reason. Again, we have taken inspiration from some of the pharma companies, which just keep this batches ready so that we don't really end up wasting time. That's the only thing. We are not in a hurry. I will not do something rash. We are always cognizant of the fact that a lot of investors have an amazing faith in Mankind. So that time is really making us more responsible.
That's reassuring. And maybe one follow-up, there is any outer limit on debt-to-equity or debt-to-EBITDA when it comes to any M&A?
So I mean, again, I suppose mentioned, you will always make sure that at no given time, the EBITDA of Mankind is being impacted by the interest. So being a conservative company will make sure that it will always be 50-50. That's what I think.
Yes. I mean in terms of numbers, we are talking about debt-to-EBITDA not exceeding around 2, 2.5x. So that disciplined, financial discipline will maintain...
Sorry, sir, you were saying something I missed that.
Just to add to what [indiscernible]Patti has said that we will be mindful in overleveraging to the sense that it should not impact the ratings of the company. So that financial strength should be [indiscernible]. So it's going to be a combination of cash on the books, the debt and the equity.
The next question is from the line of Amit Kadam from Canara Robeco.
So my question is, again, in the extension at Alankar asked. Again, on that particular capital allocation strategy because this is something which we are really curious about to know. The question is on the payback side. So assuming because we don't know the kind of acquisition you desire to do this because there is no outer limit. But also, you mentioned about the debt-to-EBITDA kind of thing Prakash just mentioned. But just wanted to understand, based on your previous acquisitions, small and large, whatever, what was the payback periods you usually target from such kind of acquisition? That's the only question from my end.
So we are commenting on one thing, which is from a qualitative side, which is high entry barriers, synergistic benefits as well as complementary catering to the white space that we discussed.
On the quantitive side, we have talked about that will not overleverage will maintain the debt-to-EBITDA and debt-to-equity ratio.
From other financial parameters, I think it's a combination of all these things put together that will lead to that digital. And there is nothing meant. I think you're reading too much into it. At the right time and the right thing comes, then only we are going to take it. Otherwise, the financial discipline is very, very important for this company.
Yes. So basically, that number, we are not right now calling out. That's a fair assumption? Or should...
Yes, I mean, it depends on the asset, the size, the cash flows. I mean there are multiple things. So nothing on imminent, so we can't call it out.
Just to complement Prakash has said that we are mindful that whatever the opportunities are there. It should not be EBITDA dilutive. It should not be a return on capital employed value. So those are the parameters we give very high weightage while evaluating the assets.
Okay. That's okay in that...
Had one more thing that as Prakash said. The Street is reading too much. We have not gone for anything until now. I mean, sometimes, I mean there are lots of speculation in the market. I mean start reporting certain things. And that really happens. I mean that's just to create some that buzz in the market for their own kind of reasons and benefits. We have not gone for anything.
That current EBITDA of INR 2,500 crores to INR 3,000-odd crores will do. And then are mentioning that where our debt sellings are in terms of debt-to-EBITDA of 2 to 2.5x. It just gives me a particular indication that that requirement, if at all, for any acquisition, shouldn't be more than INR 5,000 cores to INR 6,000-odd crores. And then when we are taking such kind of enabling resolution of like INR 12,500 crores, it just confused me. And then along with it, with equity when for all those things. And just on a sideline, if there is something news article has been floated, it just confused the investors, just wanted more clarity about how our capital allocation strategy because you also, on one hand, says that we are -- we don't want to go too much into export exposure less than 10%, where usually those kind of acquisitions are asset heavy domestic side usually are more on the acquisition of brands and et cetera, which are like intangible.
So then where the search kind of large enabling resolution was heading us to? Was a little confusion from the investor's point of view. But I guess I got part of my answers, and then we'll just take it later.
Thank you.
The next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services.
Sir, just on this respiratory revision, which was launched in 2021. So currently, how many months would be there, and it's heartening to note that we've got this [indiscernible] in the portfolio. So if you could just elaborate in terms of number of MRs? And what kind of positioning made AstraZeneca do have a deal with us?
So one point, respiratory is not a new division for us. We are a top 5 player in respiratory. In fact, that we are more on the oral solid side setups, where we have a lot of cost and other products, which we were talking about the new chronic respiratory where apart from these products, there are a lot of chronic products and inhaler products that has been introduced. Energy products have been introduced. So it's very difficult to call, say that respiratory has this many MRs.
We can give you on a one-to-one what is the new division of respiratory. Just give a number about, I think it should be around 300, 200 to 300, but we'll come back to you. That's not an issue.
But let's be clear that the revision was not 2021. It will be one of the chronic respiratory that came in 2021. I hope it's clear.
Got you. But even on the size wise, at least as far as the therapeutic composition is given in the presentation, respirators 5% of sales, Domestic business, which comes to almost about INR 500 crores, right? So is that the right way to understand respiratory?
It is 9%. Yes. If you see the presentation, it is 9%.
Maybe color similar to spot comes. Okay.
Thank you. We can close the call.
Yes, sir. Due to time concern, that will be the last question. I would now like to hand the conference over to the management for closing comments. Over to you, sir.
Thank you so much for all the questions and answers and for your patient listening. Thank you so much.
If there are any follow-ups, you can reach to Abhishek myself or Ashutosh. Thank you so much.
Thank you. On behalf of Mankind Pharma Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.