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Ladies and gentlemen, good day, and welcome to the Torrent Pharmaceuticals Limited Q1 FY '23 Earnings Conference Call. We have with us today Mr. Aman Mehta, Executive Director and Chief Marketing Officer, India Business; Mr. Sanjay Gupta, Executive Director, International Business; Mr. Sudhir Menon, Executive Director, Finance and Chief Financial Officer. [Operator Instructions]
I now hand the conference over to Mr. Sudhir Menon. Thank you and over to you, sir.
Good evening and welcome everyone to Quarter 1 FY '23 earnings call. Quarter 1 continued to witness strong growth momentum in the branded generic market led by robust India performance. The branded generic markets constituted 70% of our total revenue. And on an overall basis grew by 15% on a Y-o-Y basis, aided by market share gain, performance of top brands and new launches. Sequentially, there is an improvement in EBITDA margin mainly led by the cost initiatives which we had guided earlier in the previous quarter.
In terms of the financial performance during the quarter revenues were INR 2,347 crores, up by 10% on a Y-o-Y basis. Gross margins at 71.9% improved by 1.1% on a sequential basis. EBITDA was INR 742 crores up by 3% on a Y-o-Y basis and up by 21% on a sequential basis. EBITDA margins at 31.6% improved by 2.9% on a sequential basis. The other operating income includes a one-off of INR 38 crores towards a settlement income in the U.S. Adjusted for this, the EBITDA is INR 704 crores and the EBITDA margin is 30.5%. Now I request Aman to take us through the India performance.
Thanks Sudhir. India revenues at INR 1,245 crores grew by 14%. As per AIOCD data Torrent's Q1 FY '23 growth was 17% versus the IPM growth of 2%. Growth was aided by new launch momentum, robust performance of top brands and market share gains across our focused therapies. During the quarter Torrent added 300 MRs bringing the total field force strength to 4,200. At the end of the quarter Torrent has 18 brands in the top 500 of the IPM with 11 brands more than INR 100 crores sales. I'll now hand over to Mr. Sanjay Gupta for the International business.
Thanks, Aman. Let's start with Brazil, our largest branded generics market outside of India. So Brazil revenue was at INR 184 crores up by 20%. Constant currency revenue growth at BRL 117 million up by 8%. Adjusted for the discontinued tender business in the previous year the growth rate is 10%. Our generics business in Brazil now accounts for 12% of our overall Brazilian sales and is growing at a fast pace. For our branded generics business Q1 growth came primarily from our new product launches as well as strong price increases from April onwards. [ IQVIA ] June data is indicating that Torrent's Q1 growth rate is 13% which is in line with the overall BT market growth.
With the market growth of high single digit to double digit we expect Brazil to continue its growth momentum backed by performance of top brand, new launches and our new second field force in the CNS therapeutic area. Going on to Germany, Germany revenues were INR 214 crores were down by 18%. Constant currency revenue were EUR 26 million. Growth was adversely impacted due to the loss of high-value tenders that started in February of 2022. The German generic market has become a lot more competitive due to the entrance of new players.
Future growth at Torrent will come from new tender wins and new launches. We have incremental tender wins on hand which will start adding sales progressively from Q3 onwards. We have launched 4 products in Q1 of which one of them was a day 1 launch and we will be further launching 4 products in Q2 of which we expect 3 of them to be day 1 launches. We're also taking measures to become more cost competitive to be more successful in future tenders. Lastly for the U.S., U.S. revenues were at INR 299 crores were up by 13%.
Constant currency revenue was at $39 million up by 7%. Revenue was as indicated by Sudhir positively impacted by the settlement amount received from an innovator. This was complemented by the strong performance that we are seeing from Dapsone our anti-acne medicine. We continue to await the U.S. FDA's reinspection of our facilities. To conclude our BGx market particularly the 2 largest ones India and Brazil remain on a strong footing and we expect a strong growth momentum to continue. We are optimistic that the initiatives undertaken should progressively revive growth in Germany from Q3 onwards. We can open the call to questions now.
The first question is from the line of Tushar Manudhane from Motilal Oswal.
Based on Germany market while recently there has been certain media news about shortage of medicines in that country. So is this kind of a temporary shortage or you think that there's a good opportunity out here?
I mean honestly, we have not seen impact of any shortages in Germany. So from our side we've been adequately supplied and we've not experienced a onetime bump in sales. On the contrary we've seen the German government reduce reference prices. As you know in Germany a good chunk of our business is non-tender sales of our Pharmaceuticals. And the German government the new reduction in reference prices has had a negative impact on non-tender sale. So that is what we are seeing.
The next question is from the line of Prakash Agarwal from Axis Capital.
The first question is on this clarification this INR 38 crore settlement income where is this sitting? Is it other [indiscernible] what is this relating to?
Yes. This is other operating, Prakash. So it's basically related to some patent settlement which we've done with one of the innovators. So that income is sitting in other operating income.
But this is nonrecurring, right?
Nonrecurring.
Okay, perfect. And just trying to understand this R&D that we are doing every quarter, every year. And I understand a large part of it is for the U.S. So I mean what is the filing run rate here from these existing plants or you already doing some sites which is if you could update on the R&D utilization as these 2 plants are started without any much from the U.S. So correct our understanding and more color would be appreciated.
So in a normal year we file about 10 to 13 NDAs. Last year the filing rate was just 5%. So this year we expect the rate to pick up. And given what is happening with the inspections we have started filing some products from alternate sites. But the impact will be down the road not right now because these filings will get reviewed and then whenever we're supposed to launch them. So I would say that we've taken steps for future filings but the past filings are from the facilities at [indiscernible].
And is there any update in terms of U.S. FDA inspection?
Unfortunately, no. So honestly we have not heard anything.
And fiscal '23 onwards you're expecting double-digit filing again or similar to '22?
I mean either double digit or close to double digit.
And lastly what is our current capacity utilization? As I understand U.S. capacity utilization from these 2 facilities will be low. So what are our capacity utilization and [ asset turns ] ? And how do you anticipate that to improve?
So all the facilities put together we should be around 54%, Prakash.
And is there an expectation of U.S. FDA resolution by end of this year? Any broad plans or [ parts ] you have?
Yes, probably. And the internal understanding which we are carrying is that it should happen over the next 3 to 4 months but I can't say for sure. That's the minimum expectation. I think internally we are guessing.
As you probably have seen and we are seeing also the pace of inspections in September 2021 has been quite robust. And so we kind of keep track of how many and how much they are doing. So since the base has picked up our expectations also risen as that they would be here sooner rather than later. But we have no direct indicator to share.
And lastly, in terms of the breakup of the India growth so very strong growth in India, volume off late was very low. But I think June and for you I think April, May has also rebounded. So what is the broad breakup here for volume and price for you?
So our AIOCD growth reflection is 17%. Breakup is volume at 5%, price at 9% and new products at 3%. But the price reflection is a bit of an over reflection because of product mix change from last year so there's a bit of a base effect. So maybe it would be close to 8%. So that's where there's also a bit of a gap between the AIOCD reflection and the internal growth.
The next question is from the line of Dheeresh Pathak from WhiteOak Capital.
For the Brazil business 12% is generic. There is [indiscernible] tender now and balance is branded generic. Is that the correct understanding?
Yes, that's correct. About 88% is branded generic and 12% generic.
Can you share something like what the share of top brands like you gave for India 11 brands are more than INR 100 crores. So can you share something on Brazil like the skewness towards the top brands?
So essentially, the business is firstly, it's a very specialty business. We do only CNS, diabetic and cardio brands. So about 83% of our prescriptions are generated from specialist. And how we look at it is brands above BRL 20 million, so roughly close to $4 million. So I would say 88% of our business is coming from brands above BRL 20 million. And the number of brands that we have over BRL 20 million is 10.
Germany, what is the tender cycle? And what do you mean by being more cost competitive because the manufacturing would be done in India. So I'm just trying to understand what you mean by that? And what is the tender cycle?
So for the tender market in Germany let's say, there are 10 insurance state-owned or private which issue tenders. And the duration of a tender is 2 years. But each large insurance company will issue tenders 3 or 4 times a year for different sets of products. So it's a perpetual activity. So like the largest insurance company is AOK. They might issue 4 tenders in the year. And each tender will have a set of products but also they will divide Germany into 25 sectors and you can choose which products and which sectors you want to bid for.
Understood. And what do you mean by cost competitive being more cost competitive?
So in the generic markets of Germany and the U.S. one key I would say feature to be successful is continuous cost improvement and cost reduction. So you have to keep working and improving your cost because the competition is increasing and everybody is doing the same thing. So that's what I mean. So essentially, there are ways in pharmaceuticals to improve costs which either come from buying a cheaper API, developing a better route of synthesis or increasing your batch size in your plants or finding shorter manufacturing cycle or doing something where you minimize changeover timing. So there are various ways and it's a continuous process. So for Germany we need to accelerate this cost improvement process so that we can be more competitive I would say in this market where there are more players than ever before.
So what I meant was the competitive positioning is deteriorated for us because somebody else with better cost structure more vertically deteriorated is beating us or the margins in general? Because the market is more competitive, you might win more tenders. But your margins will be lower versus whatever in the past. So what is the case?
So your second statement is correct because any market which has more players there is obviously a higher competition on price which leads to some kind of margin compression.
And U.S. this INR 38 crore settlement income this is part of the U.S. revenue?
Correct.
The next question is from the line of Damayanti Kerai from HSBC.
My first question is what are your observations on some of the macro headwinds which is impacting the sector, such as like raw material prices, feed cost, etc.? So any moderation from last quarter number, any updates from your perspective?
Damayanti you're asking for general cost inflation seen on food material prices?
Yes, broad basis.
So we are not seeing higher cost inflation impact quarter-on-quarter. So there has been an impact general increase we are seeing across the raw material prices but not very significant I would say.
So from your portfolio or from market perspective quarter-on-quarter there has been no notable changes?
Correct.
And what will be key margin driver from current levels? Because you have already I guess, reverted back to the normal level after disruption in the previous quarter.
It's a difficult question actually because I think all the levers are more or less there, right? I mean, from April that's what we had guided. I think from here what can really happen Damayanti is that if the top line growth is better than Quarter 1, that could enable some operating leverage benefit to play out. That's one. And then some amount of cost efficiency which is continuously happening but that won't be significant I would say.
So it's mostly the top line growth which will be driving the [indiscernible].
Yes, absolutely. And some amount of cost efficiency may come in quarter-on-quarter which may not be that significant.
Okay. My second question is on Brazil market. So can you update us on your new launches and MR addition plans there? And how should we look at growth perspective in the Brazilian segment?
So in the last 6 months we've launched 5 products in Brazil. And that is a result of the large number of filings and approvals that we've been able to get in Brazil. So just to give you a background, last year we got 8 approvals. And this year already we've received 2 approvals in Brazil. So currently, we have about 11 products which are under approval. And we will be making a double-digit number of filings in the current fiscal year in Brazil. So all of that results in a good new product momentum. And we've launched 5 products in the last 6 months. Just to share with you 2 of them are in very fairly large markets.
So one is Rivaroxaban which is about $150 million market. But the level of competition is quite high. We have 11 branded generic players that we are competing with. So we'll see how that goes. And secondly, we launched in CNS a very large product called Desvenlafaxine. Again the number of players is 11 which is a fairly large number going by historical trends. But given our past track record in these areas I would not be pessimistic.
So we generally target a market share in branded generics close to double digit at the end of the 12-month period. It's a kind of a generic statement I'm making. And as the quarters go by, we will communicate on market shares as to how they are progressing. Right now it's too early. So most of the new launches have been between November and April and our market shares are less than 5%. So it's kind of too early to comment but we'll see how it goes from there.
In new launches which you have done in the last 6 months you said market share is currently around 5% or less so. And here you expect a pickup to happen in coming quarters or so? But in the established product market share will be in the double digit?
In the core products like the products where we are our market shares are actually pretty. I mean we have to look at product by product but the minimum threshold for it to be a lead build brand in our company is at least 15% market share. And so we have that threshold in quite a few products. And I was mentioning that earlier in the call that one way we measure product is how many of them do more than BRL 20 million which is close to $4 million of revenue in a year. And we have a fairly large number of those brands close to 10.
And in terms of growth any indication?
I think the IMS reflects fairly well with the growth of Torrent. It's a little hard if you look at primary sales quarter-on-quarter because the stocking destocking impacted. But like I mentioned IMS is showing a 13% growth for Torrent branded generics business and which is I would say a reasonable expectation you can have.
The next question is from the line of Saion Mukherjee from Nomura.
Just continuing on Brazil, in the branded market you are focusing on the specialty of CNS, diabetes, cardio. So how large is this market? And how are you positioned in this market? And how much of the market you currently cover?
So our coverage in this market is currently around 22%, 23%. And we are aiming to double it in the next 3 years. I mean that's where we are targeting and that's where the new launches come in. So we are playing in a narrow let's say space in this market but we are playing in our let's say more recent products and we have a good track record of doctor relationships and prescriptions here. You'd say something else we wanted to know?
What's the size of the market? I mean these 3 therapy segments? And what would be your position in the market in the branded generics in these 3 segments? What would be your rank in the market?
So if I take the overall area of cardio, diabetes and CNS, I would say the overall market size I don't have a figure with me so we'll revert to you. The overall branded genic market is roughly $20 million. And a good portion of it. I just don't have the data in front of me. This covered market is growing currently at about 5%. And Torrent's growth in this area is about 13.7% in the last quarter. So we're growing pretty fast. Give a few minutes I'll come back later on the call about what is the exact size of these areas.
Sure. And would you know the rank like who would be the top 10 player or what would be a rank in this?
So currently our rank in the therapeutic area of cardio, diabetes and CNS is 10. Our overall rank in Brazil is 20%.
So then on this INR 38 crore of other operating income that you mentioned about settlement. Can you give some color? Because typically, we don't see this kind of [indiscernible]. Is it like some kind of payment you received or some kind of a litigation. If you can give some color?
These are not litigation-related settlement income. This was basically one of the patent assignment which we had done earlier somewhere in 2010, 2011. So there were certain milestones which were defined based on certain events. And that event happened and therefore the milestone got triggered.
And just one final question, Aman. There has been this news of Torrent group entering into the diagnostics space. We have seen other pharma companies getting there leveraging their pharmaceutical franchise. So why it's not being done through the domestic formulation business if you see synergies for a diagnostic rollout there?
Yes, firstly as you said you're right that this is a group-level venture and not a Torrent pharma venture. And the kind of overall skill set required for this business only a small part of it has to do with the field force and existing customer relations. A large part of it has to do with operations and back-end processing which requires a whole different kind of team and investment mindset. So that's why we haven't really considered having it part of the pharma company.
At a later stage do you think it would make sense to integrate because you already have a large presence on the pharma side and you have the doctor connect?
No, that's not the plan as of now.
So just to complete what I was saying earlier. The size of the CNS market is BRL 8 billion. Diabetes is about 8 and cardio is also between 7 and 8.
The next question is from the line of Kartik Mehta from ICICI Securities.
I'm from Klay Capital. This is Kartik here. This is on India business. This is a slightly longer-term question. You've acquired a few products from a pharma company in India very recently. So if we have to look at it from your perspective for India business 2, 3 years and beyond. Do you feel that there are so lesser opportunities of larger size due to issues of let's say valuation or product mix, etc. wherein which you have to acquire smaller businesses and must scale them up? This is only for the India business.
No. So inorganic remains kind of a core focus for us as we go along now that we've successfully integrated the Unichem acquisition and have also taken over 4 of the brands from Dr. Reddy's in the previous quarter. So it's not about size, it's really about the strategic fit. And any kind of small to midsize acquisition is something that we'll open for in the next couple of years.
I mean all the assets that you've acquired in the past been very well integrated. We're not talking about the ability to do that again. With the India business top line that you have now acquiring smaller assets will take a fair amount of time effort from the top management. And there will be a lot of investments required on the ground. In the past when you have acquired inefficient businesses or businesses which had lower investment from us to owners where we're able to turn around. So we are talking about a different thing here. If you do this, is it fair to assume that you will acquire a lot of these assets? And in the interim your profitability, I mean you will be acquiring it at you will be building it at your cost. But the ROI ROE, whichever metrics you use will take some amount of time for us to see?
If these are brands which are being acquired and goes and sits in existing division then I think the return profile would be much better, right? I mean because we are taking some brands and the gross margin is driving your overall profitability, right? So that's something which plays out. And same thing is happening as far as the BRL brands are concerned where you require a new division, it goes and sits in some existing division. So that with these kind of acquisition which fills up the product portfolio gaps and certain things which we are looking at in terms of smaller therapies we want to enter so on and so forth. This should be a bottom line positive.
Which I understand. Is this definitely because again, just to repeat my question in case I was not clear. Is this something we are looking at because the larger or the more attractive assets are still not available at the right value or probably you see some amount of opportunity here?
Just to speculate the nature to comment on. At least the only kind of guidance that we can give on this point is that an acquisition size something that was of the size of Unichem relative to a market share 4 years ago. Opportunities of that scale if they come up we will certainly be evaluating them.
The next question is from the line of Nitin Agarwal from DAM Capital.
Sudhir, you mentioned that the U.S. plants are currently operating at 54% capacity utilization. So can you give us a sense of if there is any element of under recovery in these plants at this point of time?
Yes. So just a correction to be made. I said all the facilities in India put together the capacity utilization is 54%. So it's not only for the U.S. facilities which we are talking about, right? But having said so I mean, what we try and do Nitin, is on a continuous basis evaluate and try and trim the capacities which are there so that wherever possible, wherever there are pockets of cost optimization we keep on doing that. So for me to say they're still under-absorbed overheads which are still there in the P&L maybe no, at this point in time after we've done all those things starting quarter 4 of last year.
And so from an increase in the capacity utilization the drivers would be what? The U.S. and the German business or any other businesses also can meaningfully impact us?
No, absolutely. I'm with you on that. The volumes can come only from the generic side which is Germany and U.S.
And secondly Aman, on the India business can you just give us some sense of your new product launch plans for the year end?
Yes. So the Q1 new products have contributed to 3% growth overall. Some of the bigger contributors here have been from the CNS and gastro brands which were launched in probably the latter half of last year or January this year. Going ahead of course, there's the wave of launches. One of them has already happened in first week of July, Sitagliptin. There's a few more cardiac launches coming up in the second and third quarters. And additionally, we have some product extensions coming up for the rest of the year end. So about 7 to 8 products per quarter is what we're looking at in India.
7 to 8 products per quarter going forward?
Yes.
And on the Sitagliptin market, I mean in your assessment how has that played out? And does it give a sense of how some of these incremental overall diabetic product [indiscernible] is going to play out?
So obviously this is a competitive market. So it's hard to say how quickly the share is shifting to the new launched brands. But our recent launches in diabetes have been fairly positive indicators of our performance. Vildagliptin to name one example. So we hope that at least our market share should be somewhat in the range of those recent diabetes launches and similar for cardiac going ahead.
The next question is from the line of Shyam Srinivasan from Goldman Sachs.
Just the first one on the medical representatives. I think we have added 300 million for the quarter. Last quarter we added 600. So are we done in terms of the MR additions? I remember you said it's for the new launches that are coming in the pipeline. So are we right sized if I can use the word. And if you can talk about how some of these MRs actually the first quarter or at least the previous quarter one, how are the integrating?
Yes. So the integration has been completed now 600 reps in the last 2 quarters. And our new divisions are all in place and the new products have also been launched in these divisions. So early to say right now but in terms of the launch plan and MR integration plan things are on track. Going ahead from here it will only be incremental expansion that we see for the rest of the year if at all needed. Which will be reviewing probably every quarter or so but that would be small numbers compared to what we've done so far.
And in terms of the cost of the MRs when I look at 1Q, do you think most of those expenses? Or that is maybe they got added later half of the quarter? How should we think of the cost bit of it?
I think substantially in the quarter.
Just going back to your previous quarter guidance of the 300 basis points of margin expansion from 26. I'm just trying to see what has played through and what has not. I remember we had the 150 basis points that was coming from the Leviton shutdown that fixed cost there. We also have higher MRs. We have had this $5 million payment that has come through. So if you could kind of help us understand how much of that organic has come through Sudhir. Maybe what is spending? Or we think the 30.5% is the level that we need to kind of keep in mind.
No Shyam, all those factors, which have been talked about which is what the price increase benefit starting from April for the branded businesses that started playing out. The other what we have said is we had carried out a cost optimization at our plants in India. But maximizing at one side and bringing down the ship working on the other side that's implemented. So that's playing out. The Leviton cash burn out which was there has already started coming into the margins. I would say largely everything playing together except for the freight expenses where the impact in Quarter 3 and Quarter 4 was also around 1%, 1.2%. There's some amount of recovery which is seen in Quarter 1. But still there is a good amount of room to improve on that.
So there is still upside you think?. You're saying just from that particular last bit that you just called out?
Yes. But Shyam I would still wait for that to happen before we really start talking about it. But yes, we've seen a small recovery happening in the freight expenses.
Just going back to the German tenders you've done again some kind of restructuring. You looked at cost options. So what gives us the confidence that from Q3 I think you've got everything right? And can you comment on the competitors? Are these like large Indian manufacturers that you're competing against? So what gives us the right to win against them now versus say non-Indian manufacturers?
No, I won't say that everything is behind us. Cost optimization is a permanent exercise. Maybe we had fallen a little bit behind. But what I was telling is that we would be caught up on a set of products where we expect to win the tenders. In terms of competitors in Germany the biggest competitors are the large local companies. So Sandoz through Hexcel, Teva through a German affiliate and Zentiva, those are the 3 big I would say gorillas in the German market. What we are seeing is an influx of players from India. So legacy players are Aurobindo and Dr. Reddy's from the acquisitions that they've made in the European space.
And then you have a newer crop of companies who are coming. But so far, I would say the highest market share that I've seen Indian companies share is close to 3%. Torrent's the reference market share is usually between 6% and 7%. And the larger 3 players have a market share in Germany closer to 10% to 12%. Torrent is ranked #5 in Germany with a 6% to 7% market share. So we have won a few tenders whose impact will start to come in October onwards. So that was the guidance I was giving because these tenders get renewed every 2 years. So in the last round for these particular tenders we had incremental wins as compared to what was a run rate in the past. And this incremental wins would start to show in our numbers from Q3 onwards.
The next question is from the line of Prakash Agarwal from Axis Capital.
Just a couple of clarifications. So the U.S. business 2Q has actually come down, right? If we remove that INR 38 crores which is about $6 million, $7 million. So it would have come down a bit versus the last quarter? [indiscernible] is coming down. So the base business would be what $30 million to $32 million?
I would not say that. I would say that the business has come down a little bit to a large extent from price erosion and compensated handsomely by Datson.
And moving on to margin levers so you we mentioned about that if we exclude that INR 38 crores again it's 29.2% which is 300 basis point improvement And we are there. But in the past we were at 31% also. So a little bit on the freight but operating leverage is something which can clearly kick in. So what is the time period you're talking about moving to 31st and then 31 as seen in the past?
Prakash, I think I would be able to give a response to that question maybe one quarter down the line.
And lastly on the M&A side in the past, you've talked about net debt to EBITDA around 1. You usually get comfortable looking at assets. You've done smaller deals. How the environment or what do you call the M&A side assets. Are the assets available? Or is it the stretch that's why you are waiting and seeing for the right opportunity? Or you already have few asset which you're looking at?
I think Prakash, as far as the leverage is concerned I think 30th June we should be around 1.2x, right? And that gives us enough room from a balance sheet perspective to look at good assets. So all the assets which are there in the market we do have a look at those assets, no doubt about it. But if something is going to play out only time can tell us that.
And lastly for Aman. VYLDA fairly successful top 3, top 5 generic players in that molecule. How is Sita as the market competition playing out? Is it more competitive? Or is it similar to VYLDA? And do you expect some cannibalization in VYLDA as well?
So it's very early days only 20 days since launch. So let's wait for the AIOCD data to be out in August. But at first glance it does seem that it's probably a bit more competitive than the VYLDA launch. So probably better to see how our performance has been in the end of the July data set.
The next question is from the line of Anubhav Aggarwal from Crédit Suisse.
A question on the Brazil market. When we see this quarter let's say excluding the tender business we've grown about 10%. Would you just break it up between volume and price?
Essentially, in April of this year the government, as usual announced the price increases. So this year we had an inflation-adjusted price increase. The pharmaceutical market is divided into 3 categories in terms of the level of competition that exists in Brazil. For the first time we saw that the price increases allotted by the government was 10.83% for all the 3 categories. So there is a strong recognition on the part of the authorities about the inflation component in our business. And it was reflected in the price increase that was granted. So price is playing an important factor in our business in Brazil.
And then the second component which has played out for us is the new product launches. And volume in this particular quarter I would say is not growing much. And the reason for that is usually when we look at sales, sales in Q1 get impacted particularly in April from the high stocking that wholesalers do in anticipation of price increases. So the business model of wholesalers it usually takes into account this type of a trading profit and they try to buy as much as they can in March so that they can take the price increase on the inventories.
And we control that but to some extent it's part of the partnership that we have with wholesalers as to we have to let them buy some more in March and agree to sell less in April. So far in Q1 you also don't see the full benefit of the price increase that we've taken on the majority of our portfolio. So as we go forward you'll see the growth trend in volume and new product terms normalize and come to reflect more closely what you see in IMS. So that's why I think it's hard to judge 1 quarter performance based on primary sales in Brazil. It's better to use our secondary sales for general evaluation of the trend of business.
So Sanjay for the rest of the year, what kind of price increase at the portfolio level if we're talking about close to 10% or close to 5%, 6%? What kind of price increase at the portfolio level you've taken?
So I would say that generally it's similar to in India in the sense that what you do is you evaluate the competitive scenario for each molecule. So I'll give you an example. So we launched Rivaroxaban, right, which is a big market. It used to be BRL 800 million. But what happened is that we saw the new competitors come in until they reach 11 in terms of branded generics. And the competitors would have their own pricing strategy. So we have to remain cognizant of it while we are doing pricing actions. So we don't necessarily take the price increase allotted by the government on all our products. Generally, our price increase across the portfolio would be between 5% to 10%.
And in the past with the new product momentum, volume growth you will expect to be high single digit to double digit here?
In terms of overall growth?
For the full year just the volume growth.
No, I would not give you guidance on volume and the split. But our volume growth would be in line with the market or greater than the market. And overall, our growth would be in the high double digits figures.
And you mentioned about expanding your coverage, doubling your coverage in the next 2, 3 years. So are you thinking of going beyond these 3 areas you are present in right now cardiac, CNS and diabetes to introduce some more therapies? Or only within these 3 areas you want to double the coverage?
So actually I'm following Aman's steps. So actually what we will do is we will expand our coverage over a period of time. So I'll give you an example. We set up a brand-new oncology facility in India. So ideally I would like to leverage this facility for our business in Brazil also. So it's a progressive journey but we would be expanding. But remaining very close to specialty therapeutic areas which require lesser of footfall. But it also allows us to expand in institutional business.
So basically but largely it looks like from the current areas what's your MR field force in Brazil right now?
Right now, we have 2 teams. Size of a team is generally between 110, 120 people. And so over a period of time without going into specifics, we would need to add additional sales force in Brazil. But we do it in a conservative way. So we would do partial increases and get some results and then expand into other parts of the country. So I would say 3- to 5-year objective would be to have full double teams in CNS and cardio.
And last question on the India business, Aman. The 600 people you added you started a new division. How many divisions you put in case here? And are these largely promoting new products or a combination? I mean there will be some mix but largely new products or largely existing products?
You mean how many new divisions?
Yes.
2 new divisions and it's a mix of both. We've shifted some of our existing brands into the new divisions as well. So it's kind of spread across existing plus new divisions.
And these divisions are targeting which therapy areas largely?
Across CBD and CNS.
The next question is from the line of Saion Mukherjee from Nomura.
Sudhir on the PLI scheme the incentive which starts from FY '23. So how should we think about the incentive? Will it be front loaded, evenly spread over 5 years? And has that started already kicking in the numbers?
Yes. But the number is quite insignificant in Quarter 1. So as we go quarter-on-quarter I think the numbers will keep on increasing.
On an average its around INR 150 crores, INR 160 crores, right Sudhir?
That's the potential Saion. But we'll have to see how much you're eligible for based on the incremental sales on the approved products which you can get. So it just started. It's too early to talk about it. Maybe 1 or 2 quarters down the line, we can try and give you a color around that.
So first year, it will not significant in your view?
It's a very small number Saion.
And then just one more, sir, on the trade generic part. So what's the contribution now in the overall number for India?
Contribution would be around 2.5%. So as the base has gone up for the overall India business it's around this range of 2.5%. But the trade generics business itself is growing quite substantially. So we expect that over the next few quarters which should increase in contribution from here as well, a little bit more from here.
Aman, have you shared any numbers in terms of what is the expectation? Like where you want this number? Where this number would be eventually?
No, we haven't shared anything and I believe that it's a bit still premature to say on what kind of ambition we have yet. But as of now we are quite confident of maintaining this level of contribution and increasing probably incrementally from here.
The next question is from the line of Neha Manpuria from Bank of America. The next question is from the line of Dheeresh Pathak from WhiteOak Capital.
On other countries I have an understanding that U.K. and Philippines are a large part of that. But outside of that which are the other bigger countries just giving a better understanding of some of those?
So of course in terms of revenue U.K. and Philippines but also Mexico is on the same type of size. So you're talking about countries with revenues. Philippines might be a little bigger but mostly between $10 million to $20 million here.
So then there will be like a long good enough tail of countries? Because U.K., Philippines are like 150 cr each and the total size of other countries is close to like INR 1,000 crores. And Mexico is only I think INR 70 crores, INR 80 crores. And these will be largely distributor led? Or do you have your branded presence in these countries?
Presence outside of our 4 major geographies is fairly concentrated. So let's say that in the rest of the world countries we focus on 7 major markets which are all branded generics. And we have our boots on the ground. And usually, these boots on the ground are either Torrent employees or through distributors. In countries like U.K., Mexico, we build up our own subsidiary. For example I can share with you. In Mexico we have close to 50 reps in the CNS space and we're building a specialty company in CNS which is going quite well. But it is still let's say between $10 million to $50 million a year.
And we are trying to build a future Brazil for Torrent in Mexico. In ballpark, Mexican market is 50% of the Brazilian market. So there's no reason why in a few years' time down the road we cannot have a $50 million business in Mexico. At least that's the type of ambition that we fix for ourselves. So we're working on it behind the scenes. And I think as it grows in visibility we will communicate more about this market. But it's a focused effort. It's not a 50 market effort. It's a focus effort in [indiscernible] around a few key strategic markets where we are making investments. And the rest of it is just incremental where we partner or distribute our product.
So U.K., Philippines, Russia, Mexico, Malaysia. These are the 5. Which would be the other 2?
There used to be Sri Lanka until very recently. So I won't comment upon that. But for us like Malaysia, Thailand even Nepal is an important market for us which we consider in this area, Sri Lanka and a couple of others.
The Brazil like you said for you it is 12% generic and 88% branded and 0 tender. But for the market let's say your covered market which is CNS, diabetes, cardio. What would that mix be? It'd be roughly similar or will be more tender and more generic and less branding?
So it's kind of a little bit. What happens is that the volume in branded, direct and generics are fairly similar but the values are very different. So I'll give you an idea about the size of the overall Brazilian market. So in terms of branded generics the size of the market is roughly BRL 42 million. And in terms of the generic market in Brazil it's about BRL 12 million. But also the marketing structures are very different. So in branded generic you have [indiscernible] all kinds of marketing expenses. In generic you have a very small team. When you're looking at these businesses the bottom line might be the same because you're operating in different businesses with different economics and you have learn to operate them in an efficient way.
Size of the tender market or that is included in the generic BRL 12 billion that you told?
Tender market is a separate market which is classified under hospitals and tenders and it's roughly BRL 40 billion. And the retail market is about $90 billion.
This is for the overall market. But like your targeted therapies would have a similar mix I'm assuming? Or tender would be lesser than that?
No. The tender is the separate component which I put you in the tender and [indiscernible] market. The tender is for government hospitals, private hospitals, municipal, district level, state government hospitals. So it's usually that is the business.
The reason I'm asking is some years back, there was this thing, right, where government had run a program and they were giving certain medicines. I'm forgetting the name of the program.
Yes, that's called [indiscernible] program.
So what happened to that? And is it gained more popularity or something like that?
No, they became a victim of government budgetary constraints. So it still exists. And with the portfolio of products which are in it are fairly limited and it is subject to the degree of government budget allocation.
Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Sanjay Gupta for closing comments.
So I'd just like to close today's conference call by thanking all of you for your interest in Torrent, for the insightful questions, and we hope to keep the dialogue going, and we'll be available through our Investor Relations group. Thank you. Good night.
Thank you. Ladies and gentlemen on behalf of Torrent Pharmaceuticals Limited that concludes this conference call.