Full Press Release Details
Stock Exchange of India Ltd.
Transcript of the Earnings call conducted on July 27, 2021
to Regulation 30 of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015,
please find enclosed the transcript of the Earnings call for the quarter ended June 30, 2021, conducted on July 27, 2021. The
same has also been uploaded on our website. The weblink to access it is https://www.drreddys.com/investors/presentations/earnings-call/.
This is for your information
For Dr. Reddy's Laboratories
| /s/ Sandeep Poddar | |
| Sandeep Poddar | |
| Company Secretary |
Dr. Reddy's Laboratories Ltd.
Q1 FY22 Earnings Conference Call
Laboratories Limited
Ladies and gentlemen, good day and welcome
to Dr. Reddy's Laboratories Limited Q1 FY'22 Earnings Conference Call. As a reminder, all participants' lines will be in the listen-only
mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during
the call, please signal an operator by pressing *' then 0' on your touchtone phone. Please note that
this conference is being recorded. I now hand the conference over to Mr. Amit Agarwal. Thank you. And over to you, sir.
Thank you. A very good morning and good
evening to all of you and thank you for joining us today for the Dr. Reddy's Earnings Conference Call for the quarter-ended June
Earlier during the day, we have released
our "Results" and the same are also posted on our website. This call is being recorded and the playback and transcript
shall be made available on our website soon.
All the discussions and analysis of this
call will be based on the IFRS consolidated financial statements.
To discuss the Business Performance and
Outlook, we have the leadership team of Dr. Reddy's comprising, Mr. Erez Israeli - our CEO; Mr. Parag Agarwal - our
CFO; and the Investor Relations team.
Please note that today's call is a copyrighted
material of Dr. Reddy's and cannot be rebroadcasted or attributed in press or media outlet without the company's expressed written
Before I proceed with the call, I would
like to remind everyone that the Safe Harbor contained in today's press release also pertains to this conference call.
Now, I hand over the call to Mr. Parag
Agarwal. Over to you, sir.
Thank you Amit, and greetings to everyone.
I hope you and your families are keeping safe and well.
I'm pleased to take you through our results
for the Q1 of Fiscal 2022. It is yet another quarter of double-digit growth in sales; however, profits were impacted due to higher
price erosion in US and increase in investments towards brand promotions, R&D and digitalization. We believe these investments
are critical for the sustainable long-term growth of the company.
Let me take you through the Key Financial
Highlights for the Quarter in a bit more detail. For this section, all the amounts are translated into US dollar at a convenience
translation rate of Rs.74.33, which is the rate as of June 30th, 2021.
Consolidated revenue for the quarter stood
at Rs.4,919 crores, that is US $662 million and grew by 11% on year-on-year basis and by 4% on a sequential quarter basis. The
growth is mainly driven by new product launches including COVID products, higher base business volumes, full quarter impact of
portfolio acquired from Wockhardt in Q1 FY'2021 and was partly offset with price erosion in some of our products mainly in US and
Laboratories Limited
Consolidated gross profit margin for this
quarter has been 52.2%, a reduction of 380 basis points year-on-year and 150 basis points quarter-on-quarter. Q1 FY'21 gross margins
were high due to higher export benefit and favorable product mix. The gross margins in current quarter were impacted due to higher
price erosion, primarily in US and increase in inventory provisions for a few products. Gross margin for the Global Generics and
PSAI were at 57.7% and 21.6% respectively for the quarter.
The SG&A spend for the quarter is Rs.1,505
crores, that is US$202 million, an increase of 18% year-on-year and 5% quarter-on-quarter. The increase was on account of investments
in brands in India and emerging markets, investments in digitalization, and annual increments. The year-on-year increase is also
due to full quarter impact of the incremental expenses after the integration of Wockhardt acquired portfolio.
The R&D spends for the quarter is Rs.453
crores, that is US$61 million and is at 9.2% of sales. R&D spend increased by 14% year-on-year and 11% quarter-on-quarter and
is in line with the increase in development pipeline in our biosimilars and generics business, including development of COVID-related
The EBITDA for the quarter is Rs.1,019
crores, that is US$137 million and the EBITDA margin is 20.7%. The EBITDA margin was impacted due to lower gross margin and higher
investments in sales and marketing and R&D. We are confident that EBITDA margin would improve in the coming quarters.
Consequently, our profit before tax stood
at Rs.743 crores, that is US$100 million, which is a decline of 16% year-on-year and an increase of 21% quarter-on-quarter.
In June 2021, we received the final arbitration
award pertaining to Xeglyze product in favor of Hatchtech for US$46.25 million, which led to an incremental charge of US$26.25
million for us, which was adjusted in our IFRS financial statements for Q4 and for the full year for FY'21 filed in Form 20-F as
a subsequent adjusting event.
Effective tax rate for the quarter has
been at 23.1%. We expect our normal ETR to be in the range of 25% to 26%
Profit after tax for the quarter stood
at Rs.571 crores, that is US$77 million. Reported EPS for the quarter is Rs.34.34.
Operating working capital increased by
Rs.1,189 crores which is US$160 million, against that on March 31, 2021, mainly driven by increase in inventory and receivables.
Increase in receivables was primarily on account of a planned discontinuance of receivable discounting program in the US.
Our capital investment during the quarter
stood at Rs.320 crores which is US$43 million. The free cash flow generated during this quarter was a net outflow of Rs.683 crores,
which is US$92 million, mainly due to increase in operating working capital. Consequently, we now have a net surplus cash of Rs.45
crores, that is US$6 million as on June 30, 2021.
Foreign currency cash flow hedges in the
form of derivatives for the US dollar are approximately US$555 million, largely hedged around the range of Rs.74.7 to Rs.77.9 to
the dollar, RUB7,725 million at the rate of Rs.0.9921 to the ruble, AUD7 million at the rate of Rs.58.06 to Australian dollar and
South African rand 110 million at the rate of Rs.4.96 to South African rand, maturing in the next 12-months.
With this I now request Erez to take through
the Key Business Highlights.
Laboratories Limited
Good morning and good evening to everyone.
I hope you and your loved ones are keeping safe and healthy in these testing times. While many of our key markets and businesses
including India were severely hit by the second wave of COVID during this quarter, I'm pleased that we have continued to deliver
our purpose of good health cannot wealth by ensuring the continuity of our operations and serving our patients with the relentless
efforts of our employees and business partners.
We continue to make good progress on our
strategy execution by enhancing our development pipeline of both small molecules and biosimilars, continuing with our new products
launch momentum, gaining market share in key products, making inroad into newer sets of markets in Europe, driving productivity
and accelerating our innovation agenda.
Today, we have successfully managed to
expand our business model Beyond the Pill' through digital innovation and true demonstration of that is the launch
of SVAAS, an app-based integrated OPD service delivery platform in India. This will provide simple and high quality healthcare
by addressing patient needs for doctors, pharmacies, laboratories and insurance all under one roof.
This is an unusual quarter for us as we
face price erosion pressure in the US as well as decline in API sales, while the growth in both is expected in the next coming