Torrent Pharmaceuticals Ltd

NSE:TORNTPHARM

Earnings Call Transcript 2023-Q4

[Operator]

Ladies and gentlemen, good day, and welcome to the Q4 FY '23 Earnings Conference Call of Torrent Pharmaceuticals Limited. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Sudhir Menon, CFO of Torrent Pharma Limited. Thank you, and over to you, sir.

[Sudhir Menon, executive]

Thank you. Good evening, and welcome to quarter 4 FY '23 earnings call. Quarter 4 continued to witness robust growth in branded generic markets, aided by market share gain, performance of the top brands and new launches. The branded generic market, which now constitutes 70% plus of the total revenue has grown 20% plus.The scheme of arrangement for amalgamation of Curatio is approved by NCLT. And pursuant to this, the business combination has been recognized with effect from 14th of October 2022, which was the acquisition date or the appointed date. The financials now reflect the effect of amalgamation effective 14th of October 2022.Curatio is now fully integrated into Torrent. In terms of financial performance during the quarter, revenues were INR 2,491 crores, up by 17% year-on-year. Gross margins were at 72%. Operating EBITDA margins were 29.2%. This quarter, there was a onetime inventory write-off impact of around INR 10 crores for one of the COVID products which we had. Adjusted for that, the operating EBITDA is 29.6% for the quarter.Operating EBITDA was INR 727 crores and grew by 30% on a year-on-year basis. At the end of FY '23, the leverage in terms of net debt to EBITDA stands at 1.55x. The Board of Directors have recommended a final dividend of INR 8 per equity shares.I now hand over to Sanjay for taking us through the performance of the various geographies.

[Sanjay Gupta, executive]

So starting with India. The India revenue was INR 1,257 crores, improved by 22%. As per AIOCD secondary data, Torrent's growth for the quarter was 12% versus IPM growth of 11%. For the full year FY '23, Torrent growth was 16% versus IPM growth of 9%. Growth was aided by the strong performance of top brands in chronic therapies, new launch momentum and the growth synergies bolstered by the integration of Curatio portfolio.During the quarter, we have launched the consumer health care platform with a dedicated trade field force to augment our distribution. Field force strength at the end of the year were 5,500. Consistent with the acquisition of Curatio and consistent market share gain in base business, the company's IPM rank has gained 2 ranks and now is the sixth largest player in the Indian pharmaceutical market.The rank in '21, '22 was 8 and this is now currently 6. Torrent has 18 brands and top 500 brands of IPM with 13 brands more than INR 100 crores. We expect our India business to continue current growth momentum backed by new launches, Curatio synergies, performance of top brands and gradual scale up of consumer health care platform.Moving on to our international territories and starting with Brazil. In Q4, Brazil is the largest revenue territory outside India with revenue of INR 318 crores. This presents a growth of 27%. Constant currency revenue is at BRL 201 million, up by 17%. As per IQVIA for the quarter ending March '23, Torrent growth is 24% versus a market growth of 12%. For '22, '23, IQVIA data shows Torrent growth at 22% as compared to market growth of 15%.We have launched 7 brands in the last 24 months. And as of today, we have double-digit market share in 4 of them. In '23-'24, we plan to launch further 6 brands, 3 in CNS and 3 in cardio. Brazil witnessed an all-round performance with market share gain in base portfolio. In CNS, we have 12 brands that grew faster than the market, out of which 9 grew more than 10%. In cardio diabetes, we have 7 brands that grew faster than the market, out of which 5 grew in double digits.In '22-'23, Torrent added 36 reps to its CNS field force, bringing the total number of sales reps in Brazil to 295. Torrent continues to strengthen the pipeline with 14 filings and 12 approvals in '22-'23. Our plan is to increase our portfolio coverage from the current 28% to 40% of CNS and CND therapeutic areas by fiscal year '25-'26. Our generics business is growing rapidly and now represents 12% of our sales.For Germany, our Q4 revenue was at INR 253 crores, up by 16%. Constant currency revenue was EUR 29 million, up by 11%. Since the last 2 quarters, Germany has been witnessing steady sequential recovery driven by new tender wins and growth in the OTC segment. Incrementally, the company has won certain tenders, which shall complement the recovery trend in future quarters starting in H2 of '23-'24.In '22-'23, we have launched more than 10 new products in Germany and a similar momentum will be maintained in '23-'24. We have also increased the size of our OTC field force in Germany. Torrent's focus areas will include cost optimization to improve our competitiveness in the tender segment, launching new products and developing its OTC segment.In the U.S., our Q4 revenue was at INR 280 crores, down by 1%. Constant currency U.S. revenue is at $34 million, down by 9%. Growth was impacted by the price erosion of the base portfolio and lack of new launches pending inspection of facility. U.S. FDA recently inspected the Dahej facility and issued a Form 483 with 2 observations. None of these observations are related to data integrity and there were no repeat observations.We have also received approval for our first onco products from a new oncology facility. Our plan is to continue to file 2 to 3 onco products every year. Torrent's focus areas for the U.S. shall include getting clearance of its U.S. facilities, continuing to strengthen our product pipeline and building a niche portfolio with a focus on profitability.To conclude, I would like to say that we expect to further deepen our presence in branded generics market, aided by Curatio integration, new launches and following into new therapies and new divisions. Germany shall continue to witness recovery -- continued recovery trend aided by incremental tender wins in OTC and expansion. And until the clearance of our U.S. facilities, our U.S. focus will continue to be to be able to maintain a niche and profitable presence.Operator, we can open the call to questions now. Thank you.

[Operator]

[Operator Instructions] The first question is from the line of [ Akash Agarwal ] from Axis Capital.

[Prakash Agarwal, analyst]

This is Prakash. Question on consumer platform. So if you could just give us some broad color apart from Shelcal, what are the products added or what is the plan ahead in terms of portfolio? And what is the field force today on this?

[Sudhir Menon, executive]

So Prakash, we've just done a pilot study on one brand, which is Shelcal wherein we've invested in the advertisement in 4 states and probably would take it pan-India in the coming year. That's the basic plan. We've also identified a couple of more products, but we'll start talking about it when we actually work on those products in '23-'24. I think in terms of the field force, which is basically the logistics support and ensuring the distribution reach, it's a combination of third-party services plus in-house managers or executives who would manage this. Total combined put together, we are talking about roughly around 250 to 300 foot on the ground.

[Prakash Agarwal, analyst]

Okay. Okay. And so any color that you are adding on what kind of products or brands you will be adding in future?

[Sudhir Menon, executive]

Similar to something similar to Shelcal, I would say, Prakash, another product which can be thought of as Unienzyme. But as I said, I mean, maybe 1 or 2 quarters down the line, we'll provide you with more colors on the number of products which would get added from here on.

[Prakash Agarwal, analyst]

And what's the differentiator here? I mean, in terms of pricing, in terms of -- I mean is OTC, so anybody can take it so it will lead to higher savings in costs and better margins? Or what is the game plan?

[Sudhir Menon, executive]

Yes. So you're right. I mean ultimately, the end price doesn't change, right? I mean, for both the segment, the Rx segment as well as the CHC segment. But as I said, since this is the first quarter, we are getting into this platform. As we go forward, things will become much clearer, I would say. But you're right. I mean at least as far as the discounts which we see in the channel, which is approximately 30% for Rx, could be lower, I would say, as far as OTC is concerned. But as I said, we'll have to wait for 1 or 2 quarters of performance before we can really confirm that whether there is a possible upside coming from this channel.

[Prakash Agarwal, analyst]

Got it. And on the R&D, it's inched up a bit maybe due to rupee dollar. But where are the efforts now since U.S. is subscale now $35 million. So what are the key focus areas, top 3 focus areas for our R&D investments?

[Sudhir Menon, executive]

So essentially, top 3 focus areas includes our branded generics market. So we are doing a little bit incremental innovation products for India. We're doing a larger portfolio, so between 10 and 15 products a year for Brazil. And then we're also doing oncology on a global basis. So there are projects which are -- which will work for U.S., Europe, Germany and also for the out-licensing business in Europe.So these products are consuming more resources than before. And then there are a few U.S.-specific products, I would say about 5 to 6 that are going to be taken up every year. So it's a less U.S.-intensive and more global and more branded generic orientation.

[Prakash Agarwal, analyst]

Okay. And when you said oncology in your opening remarks, 2 to 3 products every year, you meant for global markets, India, ROW...

[Sudhir Menon, executive]

Correct. All the 4 product will be for global markets.

[Prakash Agarwal, analyst]

And currently, you have any portfolio which is in the market and also in ROW and other markets?

[Sudhir Menon, executive]

So we received the first approval from [ Milesherpura ], which is the site of the new plant recently and this product is [ sorapenin ] and it will be launched in the June, July time frame.

[Prakash Agarwal, analyst]

That is across your ROW markets?

[Sudhir Menon, executive]

No, it will be first launched in the U.S. and then subsequently in other markets.

[Operator]

We have the next question from the line of Tushar Manudhane from Motilal Oswal Financial Services.

[Tushar Manudhane, analyst]

Just on the Dahej now that -- just a few observations. So how to think about the product approvals per se? I mean there would be a good number of products where CRS would be primarily on account of compliance not being in place, right?

[Sudhir Menon, executive]

Correct. You're right. So essentially, it's still a few months off, so we have to respond to the concerns of the FDA, the 2 observations. And then hopefully, we would get the EIR in about 3 months, 3 to 4 months after that. And then new approvals would only come 3 to 4 months after the EIR has been received. So we're talking about at least a 6-, 7-month lag from today.So what you would see is that the current portfolio that has been filed from the Dahej can be divided into 3 buckets. The first bucket is products, which would get approved, but which are still some economic value left. So I would say there is -- I mean, others have launched it, but there is still enough pricing power in the market for us to make sense to launch these products. So we will be a single-digit number of products.And then the second bucket will be products which are not economically viable. So these products because there's too much competition and the pricing has gone down to a point where it makes it non-lucrative to launch them. So again, this will be a high single-digit number of products, which we would not launch.And bucket #3 from the Dahej's products, which were anyway scheduled to be launched in 2024, end of 2025 and these will be launched on time. So that's how I would see at it. But it's a little way off.

[Tushar Manudhane, analyst]

Particularly Revlimid, if you could clarify, is it from the Dahej?

[Sudhir Menon, executive]

So Revlimid is not constrained by the plant issue. Revlimid, we have a settlement and [ UP ] in the third batch of people who launch. So it's really not a concern about the plant issue for Revlimid. It is -- Revlimid -- Torrent is not made in the Torrent plants anyway. It's made at a third party.

[Tushar Manudhane, analyst]

Perfect. And just lastly, if you could share Curatio sales EBITDA for FY '23?

[Sudhir Menon, executive]

So Tushar, I wouldn't be able to share the EBITDA because as a policy, we don't talk about geography-wise EBITDA. But in terms of performance, I can say quarter 4 Curatio has grown at around 19%.

[Tushar Manudhane, analyst]

This was just from a reference that at the time of acquisition we had highlighted about or indicated about the overall sales and margins, which we would end up on FY '23. So are we more or less on track?

[Sudhir Menon, executive]

Yes. Yes. We are on track. Last quarter, if -- I don't know if you were there, what we had indicated is there's already an improvement of margin by 4% to 5%. And now with the integration already happening or happened, you will see a faster margin accretion happening on this portfolio, Curatio. So whatever we have said, we are on track to achieve it.

[Operator]

The next question is from the line of Damayanti Kerai from HSBC.

[Damayanti Kerai, analyst]

My question is regarding India business. So first, fourth quarter numbers, you can say like what is base business growth, excluding Curatio? And if you can split that base business growth into volume, price and new launches. So that's my first question.

[Sudhir Menon, executive]

Yes. I have the internal numbers with me. So I think India business, we've grown at around 22%, including Curatio. Excluding Curatio, it is around 15%, the base business. The breakup of the growth drivers for that 15% would be broadly 3% is volume, 7% is price and the rest is new products.

[Damayanti Kerai, analyst]

Okay. And in your opening remarks, you mentioned that new launches will be one of the key drivers for India business next year. So what are your thoughts on volume and price contribution say for '24?

[Sudhir Menon, executive]

I think we should be able to maintain at least 2% of volume growth going forward. But I think additionally, new product contribution, we expect a higher share from the new product introduction is what we had communicated.

[Damayanti Kerai, analyst]

And price part, whether it will be similar to what we have seen in the prior quarters, et cetera? Or there could be some change?

[Sudhir Menon, executive]

No, I would think so it should be around the same number for the next year as well. Because we've already implemented the price increases for '23-'24. So it should be around the same number.

[Damayanti Kerai, analyst]

Okay. And another question is, now you have launched a consumer platform for India business, which you spoke earlier. My question was a few quarters back, you launched trade generic business also, right? What is the status of that? And now like if we look at India bucket, what are your priorities in the Rx part and then the consumer part and then maybe if you can talk about priorities in 3 buckets.

[Sudhir Menon, executive]

Oh, absolutely. So I think as far as the base business is concerned, it's basically following what the market growth is all about, right? I mean -- and as per the historical performance, we try and beat the market by at least 200 basis points. So that's something which would continue. What we also expect is at least some of the new products which we have launched over the last 2 years has really done well for us.And therefore, at least for the next 1 or 2 years, the contribution from these products should inch up a little bit more, I would say. So that's an incremental growth which we see. We've carried out expansion of field force across many of our divisions. That should start playing out now maybe in 2 quarters' time. So that should bring us some incremental growth is what we believe as far as the base business is concerned.I think as far as CSC is concerned, it's too early for me to comment on this at this point in time. All that I can say is that there's a pilot which we have done in 4 states for Shelcal. And probably we are thinking of going pan-India for this particular product in '23-'24. The initial response we see is quite positive and encouraging, I would say.Quarter 1 of this year is also looking positive in whatever initiatives we have taken as far as the CHC platform is concerned. Trade generic perspective, yes, I think that segment is small today. But again, parallelly growing along with the branded generic piece, I would say. So not very large to talk about, but growing nicely, I would say.

[Damayanti Kerai, analyst]

Okay. So say, like 3 to 4 years from now Rx will still be like a major part of your business, right? And these 2 will be, I'll say growing but still smaller segment?

[Sudhir Menon, executive]

Oh, absolutely. I think at least for the foreseeable future, that is how it should be.

[Damayanti Kerai, analyst]

Okay. And my last question is your outlook for Germany. So you mentioned about new tender wins, et cetera. So should we look at current quarter sales as a new base, INR 250 crores to INR 260 crores number?

[Sudhir Menon, executive]

So in rupees, it's difficult. But in terms of euros, so I would say that EUR 28 million, EUR 29 million per quarter seems to be the base for the foreseeable future until new wins or losses kick in down the line.

[Damayanti Kerai, analyst]

Okay. And if I just clarify, these tenders open up like every year? Or like how does that tender cycle work where you intend to participate?

[Sudhir Menon, executive]

So there's about 50 to 75 tenders, and they have rolling opening and closing. So there are tenders which happen every quarter. And the duration of each tender is 2 years. So once you win or lose you're in or out for 2-year duration, but it's happening all the time. There's a lot of insurance companies and each insurance company has multiple tenders.

[Operator]

The next question is from the line of Neha Manpuria from Bank of America.

[Neha Manpuria, analyst]

Sudhir, first, on the consumer health care platform business. Have we earmarked as to how much we want to spend on sort of growing that business given we want to take advertisement pan-India, we are planning to launch more products? So what kind of spend do we think we can have in the consumer business?

[Sudhir Menon, executive]

No, absolutely. So we worked out a budget. I don't know at this point whether I can communicate that to you. What I can tell you is, at least for the next 2 quarters, the spend would be similar to what we have done in quarter 4 of this year.

[Neha Manpuria, analyst]

Okay. Okay. So it's not -- but -- okay, but as we go pan-India, launch new products, it's fair to assume that the spend increases through the course of the year?

[Sudhir Menon, executive]

Depending upon the outcome of what we do at least for the next 2 quarters.

[Neha Manpuria, analyst]

Okay. Got it. In that case, for the margins, given your usual synergies have come through in this quarter, [indiscernible] operating leverage in India, how should we look at margin trajectory for the next year?

[Sudhir Menon, executive]

Yes, I think I would wait for quarter 1 to get reported to actually provide you a guidance. But as of now as we -- as I see, there's nothing which can, I would say, derail the existing margin, which we have in quarter 4. But I would wait for quarter 1 to come in to provide a full clarity on how the full year would look like.

[Neha Manpuria, analyst]

But is this fair to assume that the [indiscernible] synergies that you're still talking about the consumer platform spend remaining the same, hopefully, our remediation cost for the U.S. going away, there is scope for margin improvement next year? Or you would say you'd probably see one more quarter before you guide that?

[Sudhir Menon, executive]

No, no, definitely, there are margin improvement levers. I didn't say that. The only point I'm trying to make is let's wait for quarter 1 to be reported so that directionally it becomes very clear where we are headed for the full year.

[Neha Manpuria, analyst]

Understood. And last on the U.S. business, historically, we had mentioned that we are evaluating now with the Dahej inspection done. When we say profitable growth with niche launches, does this mean we would scale down the business further from here? Or is it in the green or at least in the black and therefore, it's not burning money and we don't need to do too much the U.S. and keep it at the current run rate?

[Sanjay Gupta, executive]

So I think our strategy for the U.S. is firstly to stop the bleeding and which we think we will be successful in doing it through a combination of various initiatives, including cost reduction, outsourcing, discontinuations. So there's a complete effort to reevaluate each SKU and to figure out what makes sense to keep manufacturing in-house, what makes sense to take it outside and what makes sense to reduce. Or are there any levers to reduce costs.So that exercise has been undertaken and it will be an ongoing exercise. In terms of new launches from our own plants, as I mentioned earlier, they're still 6, 9 months away. So we have in-licensed portfolio. So this year, we would be launching 3 to 4 in-licensed products. We've already, I mean, launched some niche products. So let's see what kind of traction that they take, we would be launching our onco portfolio. So I would say the idea in the U.S. is to firstly keep the focus on the bottom line and keep the focus on launching new niche products from internal plants and more commoditized products from third parties or from partners. So that is the way forward.I think in terms of top line, we'll give what we'll give. So it's hard to kind of project top line for the U.S. and to tell you where we would be. But definitely, I would say, the minimum threshold is in broad terms in the area where we are and I see us essentially progressing from here, provided, of course, we get the new launches.

[Neha Manpuria, analyst]

Understood. So what I was trying to understand, Sanjay, is we don't need to, let's say, rationalize our portfolio to at least stop the bleeding from the business, right? That part of it is done. So last part of it would now --

[Sanjay Gupta, executive]

Correct. Correct, correct.

[Neha Manpuria, analyst]

-- come from cost reduction and all of that?

[Sanjay Gupta, executive]

Correct. Correct, correct. So the portfolio strategy is clear. We've already outsourced some products, we've discontinued others. And this will be our ongoing exercises because as the price erosion happens, you need to revisit, right? You cannot just stay [indiscernible]. But the idea is not to -- we don't need any more CapEx for the U.S. business. It's all done, the plants and the capacity.So -- and R&D expenses have already been scaled down. We basically did 5 ANDAs in the -- each year in the last 12 months and then 5 before that. So the part of resource allocation, the orientation has already been done. So I would say that -- but we will continue to find new opportunities in the U.S. and to do opportunistic new products, business development deals and onco products would be launched globally. So if it works in the U.S. fine, if it doesn't, we would recover our costs and make money in other parts of the world.

[Operator]

We have the next question from the line of Bino Pathiparampil from InCred Capital.

[Bino Pathiparampil, analyst]

Just a clarification on Revlimid. If I heard rightly, you said your sector launch with the third wave of launches. As far as I understand, already we have seen 3 waves. One is -- and one was in last March, then in September and again in this March. And I believe there is support round of launches happening in September, October this year. So are you alluding to that September, October wave?

[Sanjay Gupta, executive]

No. later than that.

[Operator]

The next question is from the line of Cyndrella Carvalho from JM Financial.

[Cyndrella Carvalho, analyst]

Yes. Just to understand, the consumer health business is like the objective, can you help us understand? Because at this point in time, you said you have only one product and you would evaluate adding 5, 6 more products to this. But can you help us understand the objective? Is it because you want to focus more on the Indian market? And given that our U.S. business remains at this current stage, so the idea is to go deeper in India, and that's why we are evaluating this or your thought process would be helpful.

[Sudhir Menon, executive]

No. I think we've been thinking of this since long, I would say. So the first thing what we've done is we thought of taking Shelcal as a product to OTC and that's typically because the new products under the Shelcal brand, which is Shelcal XT, has been reasonably doing quite well in the prescription segment, I would say. And Shelcal 500, which is the biggest brand within the Shelcal brand, I would say, is now being taken to the OTC platform for getting higher growth because that's -- because I think the major share of Shelcal 500 has been taken by Shelcal XT.So there's an opportunity for us to really expand the Shelcal 500 franchise, right? So that's something which we have been thinking since long and we have done that in quarter 4 now. As I said, did a pilot thing in 4 states and would be expanding pan-India during '23, '24. With this, I think we're already seeing a positive signs in the initiatives which we have taken for Shelcal 500. And there are total 5 brands -- I mean 5 products, which we have identified as part of the CSC platform. But as I said, that will come -- start coming maybe 2 quarters down the line once we see a positive sign on whatever we do with Shelcal brand.So that's the current thinking, I would say. But I think to really talk about how this is going to look at over a 3-year period or a 5-year period, it would be a little early for us to really guide you on that. So I would say the correct time would be maybe 3 quarters down the line when we get a sense of how this initiative is doing, we'll start talking more about it and give you more clarity on what we are thinking about on this platform over a period of 3 to 5 years, I would say.

[Cyndrella Carvalho, analyst]

And so would it be considered easier to move to a OTC platform in India? You think that is getting easier route nowadays? Or it's still taking time for taking products to the OTC side?

[Sudhir Menon, executive]

No, as I said, as long as you are able to generate good growth from the prescription segment, why would you get into OTC, right? I mean, so I think basically, it's very important for you to establish a brand in the prescription segment, which has an endorsement by the doctor, right? I mean so larger the brand you make, there's already an endorsement by the doctor.With then you start thinking of taking it to OTC, for getting a better access, I would say and making the brand bigger. So that's something which we thought and started off with Shelcal, I would say.

[Cyndrella Carvalho, analyst]

And any update on [ IRAD ], what does the -- like after the OAI, have you interacted with the agency? And what's the update there?

[Sudhir Menon, executive]

Yes. So essentially, we've already had the regulatory meeting with the agency. And we are expecting the agency to have another inspection of IRAD down the line. And for -- until then, we expect the status quo to continue.

[Cyndrella Carvalho, analyst]

And just one more. From the Dahej point of view, you highlighted that 9 months -- kind of 6 to 9 months' time way. But this seems like at least Dahej will be opening up again for U.S. So FY '25, we should be able to see a decent number of launches. You already divided the products in 3 buckets. I heard you, but I'm just saying from a FY '25 perspective, should we keep now U.S. market coming back?

[Sudhir Menon, executive]

Yes. I think there's just one caveat I would add. So bucket number one, which is products with remaining economic value and bucket number 3, which were products which were anyway scheduled to be launched after '25. So those would be -- we would be bringing on to the market, subject to a revalidation of the market at that point in time, right, as to what the economics look like. As of today, I can tell you that there's at least high single-digit number of products that we should launch.But I really don't know where those products will be 12 months down the line, what the economics would look like. So we would reevaluate. But yes, technically, the door would be open.

[Cyndrella Carvalho, analyst]

Okay. And sorry, one small clarification [Technical Difficulty] FY '25 launch?

[Sudhir Menon, executive]

Yes. Yes.

[Operator]

The next question is from the line of Kunal R. from Nuvama Group.

[Kunal Randeria, analyst]

So my question is around the sales force productivity. So in the longer run, do you believe that Curatio sales force could generate the same kind of productivity as your own sales force?

[Sudhir Menon, executive]

Yes, absolutely. I think that's the objective.

[Kunal Randeria, analyst]

So in that case, so let me, okay, rephrase my question in a different way. So you've added 1,000 people of your own this year. Curatio added 600 more and Curatio's productivity will be somewhere around 4 lakhs, I believe, right? Yet you have maintained 29% kind of margin. So without adding a single person, if I were to just add maybe a 9, 9.5 lakh that you used to do earlier, it seems there's a huge runway for domestic growth, top line, but as well as margins. So is it too simplistic a calculation? Or is my understanding correct here?

[Sudhir Menon, executive]

No, I didn't get your question clearly.

[Kunal Randeria, analyst]

Okay. So last year, you had around 3,900 people, right? And you generated somewhere INR 4,300 crores kind of revenue. And your productivity was somewhere over INR 9 lakhs last year, right?

[Sudhir Menon, executive]

I think -- yes.

[Kunal Randeria, analyst]

Yes. So now it would have come off, right? You would have added 1,000 more people off your own and 600 from Curatio. Is that right?

[Sudhir Menon, executive]

Yes, that's right.

[Kunal Randeria, analyst]

Right? So your productivity would have now fallen maybe below around 7.5 lakhs or so. So if I were to assume --

[Sudhir Menon, executive]

Yes.

[Kunal Randeria, analyst]

Yes, yes, so if I were to assume that you go back to your historical levels of INR 9 lakhs and since the new sales but would still be sort of yet to contribute to those -- your historical run rate, it seems there is a huge runway for growth in the domestic business as well as at 29% of margins, there should be still some more upside in the next 2 to 3 years?

[Sudhir Menon, executive]

No, absolutely.

[Kunal Randeria, analyst]

Is it a fair understanding?

[Sudhir Menon, executive]

Yes, yes, it's a correct -- it's a fair understanding, I would say. And you're right actually, the productivity has fallen down one notch, I would say, based on the expansion and Curatio new people getting added, Curatio PCPM being very low, I would say, compared to our base business. So I agree with you, I mean that's the way to look at, I mean, having a double-digit growth from here for the next maybe 3 to 4 years should improve the productivity and improve the margin.That's one of the lever I have been talking about as far as the branded business, more specifically India business is concerned, where the productivity improvement improves your overall margins.

[Kunal Randeria, analyst]

And maybe if I were to sort of do a crystal ball gazing, any kind of margin you would like to project, let's say, about 3 years down the line that you would be comfortable to give at this stage?

[Sudhir Menon, executive]

No, we don't give any guidance. All that I tried to say is that the branded generic business today for us is a 70% plus of our total revenue base. And there are 2 important levers which play out every year for us in terms of margin improvement. One is the price increases, which are quite similar, I would say, across all the markets we take.And the second is the operating leverage playing out. I think both put together on a long-term basis, I'm saying, there is a margin improvement potential of maybe 60 basis to 100 basis points year-on-year.

[Operator]

We have the next question from the line of Akash Agarwal from Axis Capital.

[Prakash Agarwal, analyst]

This is Prakash again. Just one clarification. So Curatio margins last year were around 25%, 28%. So when you mentioned it has increased 400 to 500 bps, so it has crossed the company level, but it is still to touch the domestic level. Is that understanding correct?

[Sudhir Menon, executive]

Correct, Prakash. But it's -- yes, it's above the overall company EBITDA number, I would say, yes.

[Prakash Agarwal, analyst]

Okay. And there's a catch-up to do till the domestic business margins?

[Sudhir Menon, executive]

Absolutely. And now since the integration has happened, it will happen I think at the earliest I would say.

[Prakash Agarwal, analyst]

Okay. And the second one was on the price hike. So the price hike impact comes late Q1 or it has already started to come in Q1?

[Sudhir Menon, executive]

Yes. It happens in Q1, I would say, maybe by May or June. It depends on the product's inventory which we have at the point of taking price increases. But generally, we see a substantial part of it starts flowing from May and June, yes.

[Prakash Agarwal, analyst]

Okay. So why that cautious or conservative outlook on margins? So we already on a adjusted basis, 29.5%. So Curatio inching up and price hikes should go -- take the margins to 30% plus for sure. So why you want to see one quarter -- I mean, what are we missing here? Anything to be cautious of?

[Sudhir Menon, executive]

No, nothing, Prakash. I'm just -- I'm not giving any guidance on the margins for next year. What I'm trying to say is that since there are new initiatives which have been taken, I just want to see what margins we achieve in quarter 1, which could be directional. But at this point, I mean, it would not be correct for me to give you any guidance for the next year.

[Prakash Agarwal, analyst]

Okay. And you mentioned Q4 expenses already account for the consumer business, which is similar -- which you expect similar quarters expenses in the following quarters?

[Sudhir Menon, executive]

For the next 2 quarters at least, yes.

[Prakash Agarwal, analyst]

Okay, okay. And just one more guidance on our understanding on the 2 databases show divergent growth trends. So AIOCD is showing a flattish April data, whereas IQVIA showing of 8%, 10% growth. So I mean, if you could just help us understand how has the growth trend been?

[Sudhir Menon, executive]

Let me come back to you on this, Prakash, maybe properly analyzing it and then commenting on it.

[Prakash Agarwal, analyst]

Okay. And lastly on the debt reduction plan. So what is the expectation for debt reduction for this year? And there's a fundraising resolution, if you could clarify enabling resolution? Are you still looking out for assets?

[Sudhir Menon, executive]

No, no, no. So I think it's a enabling resolution, which we take every year during the same time, right? I mean so just to have a preparedness in case there's some opportunities. Nothing on hand so far. So it's a continuing thing which we do every year. So nothing on -- I think on the leverage, I think today, 31st March, we are at roughly 1.55x of net debt to EBITDA. End of FY '24, we should be less than 1, I would say.

[Prakash Agarwal, analyst]

So about INR 1,000 crores to INR 1,200 crores only?

[Sudhir Menon, executive]

Correct. Correct. Correct.

[Operator]

The next question is from the line of Madhav Marda from Fidelity International.

[Madhav Marda, analyst]

Just had one question. When we guided for about a similar price hike as last year, which was about 6%, 7%, does this come from taking price hikes on the base portfolio? Or are some of the newer products priced higher versus the base portfolio? So overall sort of price movement is positive. Just wanted to understand that.

[Sudhir Menon, executive]

No, no. So the price increase, when we say 7%, we say whichever product is existing on the date when you take a price increase, so that becomes a basket for you. So therefore, on an overall basis, 7% is the price impact, which is going to come. So the new products which are getting launched later on will have its own price depending upon the competition intensity, which is there.

[Madhav Marda, analyst]

Generally, Torrent seems to be at the higher end of the curve when it comes to taking price hikes. Is that just a function of our chronic portfolio or the kind of brands that we have? Is that the right way to think? Or is there some other factors?

[Sudhir Menon, executive]

Yes. All that I can tell you is that if you look at my covered market, you'll generally find the market also taking similar kind of pricing.

[Operator]

The next question is from the line of Mitesh Shah from Nirmal Bang Securities.

[Mitesh Shah, analyst]

I just have one question on the consumer business. We past also started consumer business with the Unienzyme and we closed down that. So just recollect that what went wrong and what we are doing differently this time?

[Sudhir Menon, executive]

Yes. So you're right. I mean, so Unienzyme was an acquired brand from Unichem, right, which was under OTC. But when it came to us, I think what we felt is that it's very important that you have better doctor endorsement on these kind of brands before you take it to OTC. And therefore, we had taken Unienzyme to prescription platform compared to the OTC platform, which it had in the hands of Unichem. So now...

[Mitesh Shah, analyst]

Yes, continue.

[Sudhir Menon, executive]

So I'm saying now since the brand has reached a reasonable size, we feel this is the right time to now get into OTC.

[Mitesh Shah, analyst]

Got it. And also Curatio is one of the key reason that we are looking to the consumer brand now that we can be -- do the same platform for Curatio and the other OTC product or would be a different market altogether?

[Sudhir Menon, executive]

No. So I would say Curatio help enables to create a bigger portfolio under CSC. But as I said, even without Curatio, we already had plans to look at the CSC on some of our products.

[Operator]

[Operator Instructions] As there are no further questions, I would now like to hand the conference over to Mr. Sanjay Gupta, Executive Director of International Business for closing comments. Over to you, sir.

[Sanjay Gupta, executive]

So I would just like to thank all of you for participating in today's call and thank you very much and wish you a good evening. Bye-bye.

[Operator]

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