Full Press Release Details
National Stock Exchange of India Ltd.
New York Stock Exchange Inc.
Sub: Transcript and audio recording of the
Earnings call conducted on January 28, 2022
Pursuant 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 December 31, 2021, conducted on January 28, 2022. Also please note that
this transcript and the audio recording of the call, both have been uploaded on our website.
The weblink to access it:
This is for your information and record.
For Dr. Reddy's Laboratories Limited
| /s/ Vivek Mittal | |
| Vivek Mittal | |
| Global General Counsel and Compliance Officer |
Dr. Reddy's Laboratories Ltd.
Q3 FY22 Earnings Conference Call
Dr. Reddy's Laboratories Ltd.
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
re-broadcasted or attributed in press or media outlets without the company's expressed written consent.
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.
We had yet another quarter of
good performance in terms of year-on-year growth in revenues and profits while maintaining a healthy EBITDA margin and generating
good cash flows. 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 dollars at a convenience translation rate of Rs. 74.39 which is the rate as of December 31st
Consolidated revenue for the
quarter stood at Rs. 5,320 crores, i.e., USD 715 million, and grew by 8% on a year-on-year basis and declined by 8% on a sequential
quarter basis. Year-on-year growth has been supported by growth across most of our businesses and was driven by good base business
performance and recent launches. Sequentially however, our revenues were impacted on a higher base of Q2 which had a higher contribution
from COVID-related products and recognition of out-licensing income in our proprietary products business.
Consolidated gross profit margin
for this quarter has been at 53.8% which is flat over previous year. However, the margin increased by 40 basis points on a quarter-on-quarter
basis. Gross margin for the global generics and PSAI were at 57.8% and 22.5% respectively for the quarter.
Dr. Reddy's Laboratories Ltd.
The SG&A spend for the quarter
is Rs. 1,541 crores, i.e., USD 207 million, an increase of 7% year on year and a decrease of 3% quarter on quarter. The year-on-year
increase is in line with our business growth and on account of continued investments in sales and marketing activities for brands
in India and emerging markets. As a percentage to sales, our SG&A has been at 29% which is lower by 20 basis points year on
The R&D spend for the quarter
is Rs. 416 crores, i.e., USD 56 million and is at 7.8% of sales. R&D spend increased by 1% year on year and declined by 7%
quarter on quarter. The product development activities continued normally during the quarter, and we continue to build a healthy
pipeline of new products across our markets.
The EBITDA for the quarter is
Rs. 1,266 crores, i.e., USD 170 million and the EBITDA margin is 23.8%. The EBITDA margin for the 9 months in this fiscal is at
24% and it's closely tracking our aspiration target of 25%.
Consequently, our profit before
tax stood at Rs. 971 crores, i.e., USD 131 million, which is a growth of 242% year on year and a decrease of 23% quarter on quarter.
Adjusted for the impairment charges, our profits grew by 10.7% over the previous year.
Effective tax rate for the quarter
has been at 27.2%. We expect our normal ETR to be in the range of 25% to 26%. Profit after tax for the quarter stood at Rs. 707
crores, i.e., USD 95 million.
Reported EPS for the quarter
Operating working capital decreased
by Rs. 512 crores which is USD 69 million against that on September 30, 2021. The decrease was primarily driven by a decrease in
receivables of Rs. 616 crores aided by higher collections.
Our capital investment during
the quarter stood at Rs. 414 crores which is USD 56 million. The free cash flow generated during this quarter was a net inflow
of Rs. 1,274 crores which is USD 171 million. Consequently, we now have a net cash surplus of Rs. 998 crores, i.e., USD 134 million
as on December 31st 2021.
Foreign currency cash flow hedges
in the form of derivatives for the US dollar are approximately USD 360 million, largely held around the range of Rs. 75.4 to Rs.
78.9 to the dollar, ruble 5,875 million at the rate of 0.9909 to the ruble, Australian dollar 2.5 million at the rate of Rs. 58.74
to the Australian dollar, and South African rand 36.9 million at the rate of Rs. 4.97 to South African rand maturing in the next
With this, I now request Erez
to take through the key business highlights.
Dr. Reddy's Laboratories Ltd.
I am pleased to share that we
had a strong financial performance during the quarter without any benefits of one-off or COVID-related sales. We have grown year
on year across our key businesses and both EBITDA and RoCE margins are closer to our aspirational target of 25% each while we continue
to invest in our future growth business. We have been able to achieve this despite certain industry level headwinds like higher
level of price erosion across the generic segment in the US market, increase in commodity prices, and higher freight costs. The
sustained performance shows the resilience we have been able to build with a diversified business model to mitigate such external
headwinds. We also generated significant cash flow during the quarter and are now having a net cash surplus which will enable us
to invest for future growth.
Let me take you through the key
business highlights for the quarter: The reference of these numbers in these sections are in respective local currencies.
Our North America generic business
recorded sales of $248 million for the quarter with a year-on-year growth of 6% however a sequential quarter decline of 2%. During
the quarter, we continued to gain market share for some of our key products including the recent launch of icosapent ethyl soft
gels. However, the sales were impacted due to price erosion for some of our products as has been the case for the entire sector
and seasonal demand variation for a few of our key products. We launched 4 new products in the United States during this quarter.
Our Europe business recorded
sales of 47 million euros and was largely flat both year over year and sequentially. During the quarter, we launched 4 new products
in Germany and 1 product each in France and Ireland. We are expecting a few good launches during Q4, which should enable us to
return to growth in this market.
Our emerging market business
recorded sales of Rs. 1,154 crore with a strong year-on-year growth of 20%, however, registered a sequential decline of 11%. Within
the emerging markets, the Russia business grew by 2% on a year-to-year basis and declined by 18% on a quarter-to-quarter basis
in constant currency. As informed earlier, the Q2 performance in Russia was very strong, which was supported by seasonal demand
and launch of biosimilar bevacizumab, and the rest of the world markets, sales were supported by one off sales of the COVID-related
products. During the quarter, we launched 16 new products across various emerging markets.
Our India business recorded sales
of Rs. 1,027 crores with year-over-year growth of 7% and sequential decline of 10%. Adjusted for COVID-related portfolio sales
in the previous year, and in the last quarter, the business performance has been fairly strong and in line with expectations. During
the quarter, we launched 4 new products in the India market. As per IQVIA report of December 2021, we have grown higher than the
market at 23.1% on a MAT basis against market growth of 18.1%.
Our PSAI business recorded sales
of 97 million with year-over-year growth of 2% but sequential quarter decline of 14%. We expect the performance to improve in the