Marksans Pharma Ltd

NSE:MARKSANS

Earnings Call Analysis

Marksans Pharma Posts Robust Q2 Growth

Marksans Pharma reported a strong second quarter in FY24, with revenues and profit both surging by around 17% and 40% year-over-year, respectively. Improved margins were fueled by cost-saving measures and lower raw material and freight costs. The company has seen expanded market share and launched new products, alongside securing key approvals in pain, cough and cold, and digestive segments. Operationally, demand is up across all markets, and pricing pressures in the U.S. have eased. The integration and expansion of the newly acquired Teva manufacturing unit in Goa are progressing, aiming to significantly contribute to revenue from April '24 on. The company remains debt-free with INR 661 crores in cash, despite a capex of INR 119.9 crores mainly for the Teva unit expansion.

Revenue and Profitability Expansion

The company reported a solid quarter, with revenue growing by roughly 17% year-over-year, and Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) and Profit After Tax (PAT) rising around 40% compared to the same period last year. This impressive growth was attributed to an expansion in market share, customer base, and product launches. The company's strategic focus on four key therapeutic segments – pain, cough and cold, gastro, and anti-energy – has been further reinforced by new product approvals from the USFDA and U.K. MHRA.

Operational Excellence and Margin Improvement

As demand and volume grew across key markets, the company observed normalization in pricing pressure for its prescription products in the U.S. Further contributing to improved margins were cost efficiency measures, including reduced raw material and freight costs. The company remains on track with the expansion and integration of a key manufacturing unit and anticipates an increasing contribution to its revenues from this unit over the coming quarters.

Financial Performance Breakdown

The Q2 financials reveal a 17.4% increase in operating revenue year-over-year, reaching INR 531 crores. Specific growth in geographical segments includes the U.S. and North America at 16.8%, the U.K. and EU formulation market at 20.6%, Australia and New Zealand market at 10.3%, and rest of the world sales at INR 27.3 crores. This growth translated into a gross margin improvement by 174 basis points, EBITDA rising by 41.9% and PAT by 39.5%, with an EPS of INR 1.84 for the quarter.

First Half-Year Growth Overview

In the first half of FY '24, the company's operating revenue increased by 16.4% compared to the previous year, with a notable 28.3% rise in PAT. Gross margin also saw an increase, and EBITDA rose by 41% with a margin standing at 20.9%. An underlying narrative of consistent growth can be observed, despite a notable uptick in the U.K. tax rate from 19% to 25%.

Cash Flow and Capital Expenditure

The company reported a positive cash flow from operations at INR 9.6 crores, although there was a negative free cash flow due to higher capital expenditures, which amounted to INR 119.9 crores for the period. These investments reflect the company's active efforts in scaling an acquired manufacturing unit and maintaining a robust research and development (R&D) spending at 1.6% of sales. The company also reported a healthy cash position, remaining debt-free with INR 661 crores in cash reserves as of September 30, 2023.

Future Growth Anticipations

The integration of Teva facility is ongoing with revenue expected to increase quarter-on-quarter, and full revenue potential anticipated by April '24. Continued investments in facility upgrades underscore the company's commitment to growth and capacity expansion.

Earnings Call Transcript 2024-Q2

[Operator]

Ladies and gentlemen, good day and welcome to the Marksans Pharma Q2 FY '24 Earnings Conference Call hosted by Elara Securities Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Dr. Bino from Elara Securities Private Limited. Thank you and over to you, sir.

[Bino Pathiparampil, analyst]

Thank you, Sudha. A very good afternoon to all of you. On behalf of Elara Securities, I, Dr. Bino Pathiparampil, welcome you to the quarter 2 FY '24 earnings call of Marksans Pharma. We have on the call from Marksans Pharma, Mr. Mark Saldanha, Chairman and Managing Director; and Mr. Jitendra Sharma, Chief Financial Officer. We will start with the opening remarks from the management. After that, we will have a Q&A session.

Over to you, Mr. Saldanha.

[Mark Saldanha, executive]

Thank you, Dr. Bino. Welcome, everyone and thank you for joining us in our Q2 and H1 FY '24 Earning Conference Call. We appreciate your continuous interest and support for the company. We've had another strong quarter with our revenues expanding by nearly 17% year-on-year and EBITDA and PAT expanding around 40% year-on-year. This is attributed to the market share expansion along with our existing customers and some new product launches. The improved margin in the quarter resulted from the focus on cost efficiencies and reduction in raw material and freight cost.

We recently received a key product approvals from USFDA and market authorization from U.K. MHRA in the pain segment, cough and cold segment and digestive. Our continued focus remains on strengthening our product pipeline and creating a complete offering in our 4 key therapeutic segments that is pain, cough and cold, gastro and anti-energy. On the compliance front, the U.S. FDA inspection, which was conducted in October 2023 for our wholly owned subsidiary Time-Cap Laboratories was completed with EIR status.

Moving on to our operational environment. We saw improved demand and volume growth across all our key markets and the pricing pressure has normalized for our Rx products in the U.S. We witnessed a reduction in rates of few raw materials and freight rates compared to the last year, resulting in improved margin in the quarter.

An update on the newly acquired Teva manufacturing unit in Goa. We are presently on track with the expansion capacity and integration of the manufacturing unit. And a recent audit from the German health authorities was successfully completed with no major observation. We expect our revenue contribution from this unit to increase quarter-on-quarter. Building our momentum, we are optimistic about driving growth through our base business and strategic initiatives, which will maximize shareholder value.

With this, I'd like to turn it over to Jitendra who will update you on the financials and then we can start with our Q&A.

[Jitendra Sharma, executive]

Thank you, sir. For Q2 of FY '24, our operating revenue was at INR 531 crores, an increase of 17.4% compared with INR 452 crores in the same quarter of last year. The U.S. and North America was at INR 222.3 crores, representing a 16.8% increase year-on-year basis. U.K. and EU formulation market grew by 20.6% year-on-year basis to INR 233 crores. This was on account of new launches and incremental market share. Australia and New Zealand formulation market recorded revenue of INR 48.4 crores, an increase of 10.3% on year-on-year basis. The rest of world recorded sales of INR 27.3 crores in the Q2 of FY '24.

Gross profit was at INR 278 crores, up 21.4% year-on-year basis. Gross margin increased by 174 basis points from 50.7% to 52.4% in Q2 of current year. EBITDA for the quarter was at INR 113.9 crores, an increase of 41.9% year-on-year basis and an increase of 11.7% on quarter-on-quarter basis. EBITDA margin for the quarter was 21.4%. Improvement in EBITDA margin was led by cost optimization initiatives and the reduction of freight expenses compared to last year's same quarter. Profit after tax was at INR 83.9 crores compared to INR 60.1 crores in Q2 of FY '23, a growth of 39.5%. EPS for the quarter was INR 1.84.

Talking about half year financial performance. For the H1 of FY '24, our operating revenue was at INR 1,031.3 crores, an increase of 16.4% compared with INR 886 crores in the same period last year. The U.S. and North America was at INR 415 crores, representing a 14.1% increase year-on-year. U.K. and EU formulation market grew by 22.6% on a Y-o-Y basis to INR 459 crores. Australia and New Zealand formulation market recorded revenue of INR 107 crores, an increase of 10.9%. The rest of the world recorded sales of INR 49.5 crores in the Q2 of FY '24. Gross profit for the first half of the year was at INR 535 crores, up 19.5%. Gross margin increased by 137 basis points from 50.5% to 52% in H1 of FY '24. EBITDA for the period was at INR 215.9 crores, an increase of 41% year-on-year. EBITDA margin stood at 20.9%. Profit after tax was at INR 154.3 crores compared to INR 120.3 crores in H1 of FY '23, a growth of 28.3%.

Growth is attributed to improved performance. However, there is an increase in tax rate in U.K. from 19% last year to 25% in the current year. EPS for the H1 of FY '24 was at INR 3.4 per share. In H1 of FY '24, the cash from operation is at INR 9.6 crores. And the free cash flow is at minus INR 29.3 crores. This is on account of higher CapEx in the quarter. The CapEx incurred during the period was INR 119.9 crores. The investment is in line with our plan for scaling the acquired manufacturing unit from Teva Pharma in Goa. And we spent INR 16.89 crores in the R&D, which amounts to 1.6% of the sales. We continue to remain debt-free and had a total of INR 661 crores of cash as of 30th September 2023.

With this, I would like to open the floor to question and answer. Thank you very much.

[Operator]

[Operator Instructions] We take the first question from the line of [ Sudhir Bheda ] from [ Bheda ] Family Office.

[Unknown Attendee]

Yes. Good afternoon, sir and hearty congratulation on superb performance in Q2 as well as H1. I have a couple of questions. Like, see, our EBITDA margin is clocked at 21.4%, led by increase in the gross profit margin to 52.4%. So this kind of trend as the raw material continues to remain soft and freight rates are also soft, so this kind of margin we are able to do in the Q -- H2 as well?

[Mark Saldanha, executive]

We are hoping for that. Obviously, we continue to work towards that and we are hoping that this trend continues.

[Unknown Attendee]

Great. And sir, my second question is now I believe that Teva facility is now completely integrated. And now the revenue can flow from that facility. So I think -- do you expect that growth rate could be higher in H2 as well because of Teva facility coming into operation?

[Mark Saldanha, executive]

Yes. So the Teva facility is in operation but the integration is still going on. We have invested only -- we've invested a decent amount and we have to continue investing to ensure we upgrade the facility in terms of capacity. Like I mentioned in my introduction that we do expect growth quarter-on-quarter basis as far as Teva is concerned but you will see the full potential of revenue generation only somewhere in April '24 onwards.

[Unknown Attendee]

And can you throw some light on the -- firstly, the new product launches and the demand scenario in U.K. and U.S.? If you can throw color on that, these 2 aspects?

[Mark Saldanha, executive]

Well, new product launches, obviously, we are into segments, different segments. So there are a lot of new products that are -- and as and when a product does get approved, like we've received Esomeprazole approvals, or we have received Cyanocobalamin and few other approvals. So we basically -- we launched it in the respective markets and we basically take market share through our distribution channels that already existing. So it increases the product portfolio and obviously increases our revenue and penetration into the market. So we do see with the product approvals coming in, our revenue generation happening on those segments in respective markets.

[Unknown Attendee]

And demand scenario for -- in the U.S. and Europe in view of recessionary kind of trend going on there?

[Mark Saldanha, executive]

So did you say demand scenario?

[Unknown Attendee]

Yes. In U.S. and Europe market.

[Mark Saldanha, executive]

So we do see our growth drivers being in U.S. and in Europe. We do believe this trend will continue for the coming year also. So we are quite optimistic on both these markets.

[Operator]

We take the next question from the line of Sriram, an individual investor.

[Unknown Attendee]

Yes. So just wanted to understand, can we expect a buyback in FY '24?

[Mark Saldanha, executive]

We have to yet work on that. But we -- like in the last conferences, based on free cash flow determination, we will basically be splitting it between potential buyback or dividends.

[Unknown Attendee]

Okay. Great. Another thing I would like to know is, how is the competition scenario in U.K. and U.S. markets for OTC products?

[Mark Saldanha, executive]

Well, it's crowded and tough as always. That's the nature of the beast. So it is not simple. Just that we -- whatever we do, we accelerate it and we basically work hard towards getting market share penetration into that segment and we've got a bit of a longer history where that product portfolio segments are concerned.

[Operator]

We'll take the next question from the line of Ishita Jain from Ashika Stock Broking.

[Ishita Kothari Jain, analyst]

Congrats on a good quarter. So my first question is, so, for our backward integration plans and subsequent DMF filing, can you talk about which products -- for which products is backward integration a priority? So which are the raw materials that are more sensitive or strategically more important for us to backward integrate?

[Mark Saldanha, executive]

So we've taken, obviously the -- our wish list is quite large but we have basically selected 1 item on each category. So we picked up 1 item in pain and we are working on ibuprofen. Then we have -- in anti-allergy we have picked up another product and in digestive, we picked up a product. So there are 3 categories that we are targeting so that we have a single product in every category and then we can expand our product portfolio from there on.

[Ishita Kothari Jain, analyst]

Okay. Makes sense. Second question, so we are expecting U.S. to be a major growth driver going forward, especially when operating leverage kicks in. Can you comment on what is the time line on this? And how many more launches are we expecting in the U.S. this year? And finally, from a geography mix standpoint, what is the percentage of our revenue that we think is going to be U.S., say by end of FY '25?

[Mark Saldanha, executive]

I think U.S. will be -- I mean, it's a very close call because both are -- both the markets are very strong. So I think the U.S. will be very close to 48%, maybe and between 45% to 48% by FY '25. And U.K. will be around -- pretty much around the same 40% or 42%, 45%.

[Ishita Kothari Jain, analyst]

Got it. If I could just squeeze in one more. So cash on books is about approximately INR 700 crores. Can you comment on our capital allocation strategy going forward? I know it's mentioned in the investor presentation. So I just want to know what kind of inorganic growth opportunity that we're looking for from a product or a geography mix perspective?

[Mark Saldanha, executive]

Well, obviously, the first part of the CapEx deployment is to expand the capacity in the newly acquired plant, which was concluded only in April this year. So we are still working exhaustively and at a very rapid pace to scale up that capabilities to meet with our demand. So I do see some decent amount of CapEx going there. And obviously, then we have M&As that we are planning in a couple of geographies, Europe being one of that. Our plan is to expand our geographies. It's always been there. We have been in dialogue but nothing concrete or nothing to put pen to paper or discuss about. But there are -- we are exploring M&As in Europe basically.

[Operator]

[Operator Instructions] We take the next question from the line of Dr. Bino from Elara Capital.

[Bino Pathiparampil, analyst]

Mark, couple of questions. In the U.S., how many ANDAs do we file per year now on an ongoing basis? And what are your plans? Do you plan to increase that number? And similarly, the filings for U.K. as well.

[Mark Saldanha, executive]

So in U.S., we are averaging -- or we are targeting very close to 5 ANDAs. So you can see between 4 to 5. And in Europe, we are talking of nearly 20 -- around 20 authorizations you can say, 15 to 20.

[Bino Pathiparampil, analyst]

Sorry. So you're basically saying that you are going to triple the rate of filings in a year's time?

[Mark Saldanha, executive]

Yes, total filings, I mean we have a big product portfolio in Europe, in U.K. So it is quite an exhaustive -- it's -- many market authorizations we have. So it will not be tripling it but we are looking at -- definitely, we have already been working on 60, 70-odd products. So we are planning to file very close to maybe, like I said, 20-odd products year-on-year.

[Bino Pathiparampil, analyst]

Sorry, I didn't quite understand. So in the U.S., you are filing 5 ANDAs in a year. Will that run rate increase going forward to 15, 20 or you're saying...

[Mark Saldanha, executive]

No, no. U.S. will be 5 only every year. And I was talking of Europe.

[Bino Pathiparampil, analyst]

Okay. Fine. Great. Second question, our own brands in these markets, roughly, what sort of revenue would that be contributing in each of these markets in U.S. and U.K.?

[Mark Saldanha, executive]

So we are not into brands. We are into generic formulations. But I mean, we have segments that we talk about. Obviously, we have the pain segment, which is still the largest for us. Then we have the digestive and common cold, which contributes. Then we have a substantial amount of -- I mean, we have about 30% odd on our prescription related prescription-related segments that we pursue. And we do have certain brands, small -- we have brands in Australia. We have brands in our Dubai markets -- in Dubai regions. And obviously, we are very active in the Amazon segment also.

[Bino Pathiparampil, analyst]

Understood. A couple of housekeeping questions. For the first half, you have given a CapEx figure of INR 120 crores. Does that include the payment given to Teva for the facility?

[Mark Saldanha, executive]

Yes, it does.

[Bino Pathiparampil, analyst]

And I have seen a jump in depreciation this quarter. Is that related to the Teva facility? And does it fully capture the impact?

[Jitendra Sharma, executive]

Yes. Bino, this is Jitendra here. Yes, this depreciation for the quarter includes the Teva facility depreciation. So we started depreciating it from this quarter onwards.

[Operator]

We take the next question from the line of [ Viraj Mahadevia ], an individual investor.

[Unknown Attendee]

Mark, Jitendra, congratulations. Good, encouraging results. Mark, you mentioned briefly ago that you were looking at 3 molecules across different therapeutic areas for potential backward integration. These 3 molecules represent what percentage of your overall revenue of your total revenues that you're looking to backward integrate?

[Mark Saldanha, executive]

So, about -- very close to 30%.

[Unknown Attendee]

Okay. And when is the impact of that backward integration likely to kick through in terms of lower raw material benefits as a result of these agreements?

[Mark Saldanha, executive]

Maybe mid of or maybe mid or latter part of 2024.

[Unknown Attendee]

Calendar year?

[Mark Saldanha, executive]

Yes.

[Operator]

We take the next question from the line of [ Vilin ], an individual investor.

[Unknown Attendee]

Mark, congratulations on good set of number. So Mark, considering the additional CapEx that we are doing for the new facility and for the backward integration, how much additional CapEx do you see, we are going to make an investment in the next 6 months to 12 months?

[Mark Saldanha, executive]

We are looking between INR 80 crores, INR 100 crores.

[Unknown Attendee]

Okay. So is that for any future growth, then is that the full capacity for the Teva or we can still add a few more plants and make a few more investment at the same facility?

[Mark Saldanha, executive]

No, obviously, we can make some more investments but this is the initial onset that we had planned, like I mentioned, very close to INR 200 crores was going to go into facility, including the acquisition cost. So that's pretty much what we are planning to do. And then obviously, maybe after 1.5 years, we may have to invest more to increase our capacity further on.

[Unknown Attendee]

Okay. And I think in the past con call, you referred to filing Europe, spending more on the filing of ANDAs and the percentage of R&D going to increase. So do you see it's going to be a significant jump or it's going to be a gradual increase?

[Mark Saldanha, executive]

It is going to be a gradual increase but it will be an increase for sure.

[Unknown Attendee]

Okay. And the last question from my side. I think most of the -- do you see most of the tailwind from the raw material cost are there now. So any future growth will be driven by more operating leverage and the product portfolio. Would that be a safe assumption?

[Mark Saldanha, executive]

Yes, that's fair enough to say.

[Operator]

[Operator Instructions] We'll take the next question from the line of Prerit Choudhary from Green Portfolio.

[Prerit Choudhary, analyst]

Congratulations for good set of numbers. I just had 2 questions. First one is, so we are planning to file DMF for backward integration on September. Any updates on that, if you can provide?

[Mark Saldanha, executive]

We are still in -- working towards that.

[Prerit Choudhary, analyst]

Okay. All right. So any tentative dates, I mean by the month we can file those DMFs.

[Mark Saldanha, executive]

I think, hopefully, we are optimistic by the end of this financial year.

[Prerit Choudhary, analyst]

Okay. Okay. Great. And my last question is that what would be the total expense number for our Teva facility for this quarter?

[Mark Saldanha, executive]

You are talking of the expense?

[Prerit Choudhary, analyst]

Yes, expense amount for the whole Teva facility for this quarter.

[Mark Saldanha, executive]

Around INR 10 crores.

[Operator]

The next question is from the line of Ishita Jain from Ashika Stock Broking.

[Ishita Kothari Jain, analyst]

And so, given the product mix, we must have not faced very high price erosion in the U.S. Can you quantify the price erosion, if any?

[Mark Saldanha, executive]

It's difficult to quantify exactly. But obviously, we are not immune to price erosion. There's always some price erosion happening because when raw material prices come down, so do finished products come down. So we are not immune to it. But definitely, we didn't suffer as compared to the prescription segments but there was some price erosion but not dramatic.

[Ishita Kothari Jain, analyst]

Do you think that we will be able to cushion this even further with backward integration at least for the molecules we are considering backward integration for?

[Mark Saldanha, executive]

Yes. I mean, obviously, we do believe in that and we do believe it will basically strengthen our sourcing capabilities and reliability of ensuring materials available on key molecules. So that was the objective more than anything else that because when prices go up or when circumstances happen in the market, manufacturers tend to exploit the situation. So we've -- that's the reason why we wanted to backward integrate ourselves.

[Ishita Kothari Jain, analyst]

Perfect. Makes sense. And so Teva plant breaks even first quarter '25. Is this time line still intact?

[Mark Saldanha, executive]

Definitely.

[Ishita Kothari Jain, analyst]

Fantastic. And last question, if I may. So R&D spend on a consolidated level was 1.6%. Do you have any guidance for R&D spend, say, for FY '25, FY '26?

[Mark Saldanha, executive]

About 2%, may go slightly higher but I would conservatively say 2%.

[Operator]

[Operator Instructions] The next question is from the line of [ Vilin ], an individual investor.

[Unknown Attendee]

Yes. Mark, I think there are confluence of all these good tailwinds that are coming together. Between these, do see any risk that you should be -- which you might be considering the geopolitical situation and all?

[Mark Saldanha, executive]

Geopolitical situation. I mean, there's not much of control we have out there. Geopolitical is something which I think globally is always a risk from the global scenario. The overall countries and industry that will have a pretty much a proportionate impact if things go south. But I think pharma industry basically is quite immune because at the end of the day, people still need medications. And we are optimistic that whatever geopolitical scenarios do arise, we'll probably be the least impacted out there.

[Operator]

The next question is from the line of Nitin Agarwal from DAM Capital.

[Nitin Agarwal, analyst]

Mark, 2 questions. One is, if you can just only recap the proportion of OTC business for U.S. and U.K. for us [indiscernible]?

[Mark Saldanha, executive]

We are right now trending at very close to 70% to 30% -- and 70% and 30%, U.S. is 70% and Rx is about 30%.

[Nitin Agarwal, analyst]

In the U.S.?

[Mark Saldanha, executive]

U.S. is maybe, I'm talking of globally. U.S. is may be slightly more, maybe 78%.

[Nitin Agarwal, analyst]

And U.K. would be similar about 70%, 30%?

[Mark Saldanha, executive]

Yes. I mean, U.K., the Rx portfolio is slightly larger. So that's where the average comes down to 70%, 30%.

[Nitin Agarwal, analyst]

Okay. And do you see this proportion sort of changing over the next 3-odd years, 3 to 5 years.

[Mark Saldanha, executive]

I think it will be pretty much standard, maybe 5% here and there, OTC may be 75%, Rx maybe 25%.

[Nitin Agarwal, analyst]

Okay. And lastly, with the Teva plant capacity available for us, I mean what -- what degrees of freedom it just give you from a planning perspective? I mean can you -- are you looking to push anymore volumes in the existing products in the same geography or are you looking to go out to more geographies, what are you thinking about it?

[Mark Saldanha, executive]

So basically, we are looking at the same geographies and pushing more volumes and products, both because of new product launches into similar geographies that we're already existing. So obviously, that -- I mean we are talking of nearly looking at potentially doubling our supplies into the geographies that we are already investing, thereby -- that's -- the growth is going to be generated because while the front end, we have a strong order book status, we need to ensure infrastructure supports those initiatives and fuels the growth out there. So we do see Teva giving us equivalent amount of our revenue, like our existing old plant. So -- and that's where we are investing on this CapEx out there. So -- and it will also help us and assist us in any new geographies we basically venture into.

[Nitin Agarwal, analyst]

And just last one, in terms of the current portfolio that you're supplying to U.S. and U.K., I mean how much -- even if I get -- once you get more capacity from Teva, I mean, are there opportunities for you to take significantly higher market share than you already have and what would drive that?

[Mark Saldanha, executive]

Yes, that's pretty much it, right? So we will be able to get more market share. We'll be able to service more market share because we have additional capacity and we are a reliable supplier. So we already have penetration. We already have distribution and all we need to do is expand our product portfolio and also expand our products within the same clientage and that can happen with additional capacity.

[Nitin Agarwal, analyst]

Sorry, in pursuit of that but over the last year or so, you've had situations where you didn't take up business because you didn't have capacity or was it like a widespread thing for us?

[Mark Saldanha, executive]

No, it wasn't that. Nitin, it's basically -- we could foresee that, okay, our existing plant is reaching to its optimum, and we need more facility to service increasing demand. Order book status pretty much for next year, a decent amount of that is going to be -- will be basically coming out from the new facility. So we could foresee that after a certain amount, we would need additional capacity to service increased growth -- increased demand and growth. So that's where the Teva facility comes into play.

[Nitin Agarwal, analyst]

And lastly, on this one, when you're taking higher market share or higher volumes, so in your current products, so is it more about -- it's more about -- is it just -- it's a market which is growing that you are participating in or you're taking market share? And if you're taking market share, what are the typical kind of players you're taking the market share from?

[Mark Saldanha, executive]

So obviously, I don't think the market is going to the tune of our growth but we are taking market share. And again, product portfolio, new products added to the portfolio helps us to also add to the basket of our market share and our revenue. And when you talk of taking market share from competitors or from lead companies, you're looking like Perrigo and PLDs and various other top companies that are existing already there.

[Operator]

[Operator Instructions] We take the next question from the line of Hiral Nandu from Kalpvruksh Capital.

[Hiral Nandu, analyst]

Congratulations for Mark and Jitendra ji for the good set of numbers. Just one question on the brand thing, I just -- if I heard something and correct me if I got wrong, I just wanted to understand how we are planning to expand our own brand in the various geographies. I heard that we're having presence in Australia and Dubai, I think, on the branded side. What about the other geography?

[Mark Saldanha, executive]

Presently, obviously, we have a few markets that branding business can -- those markets are more branded than generics, looking at India, for example. So that is a huge possibility. Then you're looking at certain markets in Europe, which basically encourages branding and you're looking at certain other -- like within the U.S., you have looking at Amazons or the e-retail type of opportunities that exist. But I would say in branded business, the markets that we are presently in or when we talk of U.S. or we talk of U.K. or Europe, they are more generic driven and our focus is there We may explore brands but they are relatively very small in terms of the revenue contribution. And the big markets are obviously, India and we would explore M&As as and when we get an opportunity for that.

[Hiral Nandu, analyst]

So the margin profile will certainly be higher in the branded products, right, or even the generic brand will give a similar margin?

[Mark Saldanha, executive]

Well, Hiral, we always look at expanding our margins and we are always working towards that. The branded business does give definitely lucrative bottom lines but that is once it reaches a certain level of revenue and optimization, till then, you have to invest a lot of money into marketing and sales and everything. So it's a chicken and egg situation. It's not like from day one branded business gives you business bottom line and it's actually -- a lot of investments go into branding.

[Hiral Nandu, analyst]

Correct. Correct. And as you rightly said, even the M&A could help it to cut down that cost and the time line, so which might help you.

[Mark Saldanha, executive]

Yes. Definitely.

[Operator]

[Operator Instructions] As there are no further questions, I would now like to hand the conference over to the management for closing comments.

[Mark Saldanha, executive]

I'd like to take this opportunity to wish everyone on the call and all our shareholders a very Happy Diwali and have a great year ahead and be safe. Thank you.

[Jitendra Sharma, executive]

Thank you.

[Operator]

Thank you. On behalf of Elara Securities Private Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.