Dr. Reddy's Laboratories Ltd (NSE:RDY) Q3 2020 Earnings Conference Call - Final Transcript

Jan 27, 2020 • 08:00 am ET


Dr. Reddy's Laboratories Ltd (NSE:RDY) Q3 2020 Earnings Conference Call - Final Transcript


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Ladies and gentlemen, good day, and welcome to the Dr. Reddy's Q3 FY '20 Earnings Conference call. [Operator Instructions]. I now hand the conference over to Mr. Amit Agarwal. Thank you, and over to you, sir.

Amit Agarwal

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 31st December 2019. 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. Saumen Chakraborty, 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 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. Saumen Chakraborty. Over to you, sir.

Saumen Chakraborty

Thank you, Amit. Greetings to everyone. The current quarter financial performance has been quite good, with the highest ever quarterly sales without any one-off cited. An improvement in both the gross margin and EBITDA margin and healthy cash generation. However, the profit is impacted by significant amount of impairments kick in due to specific triggers occurred during the quarter.

Let me take you through these and other major items in some more detail. Herein, all the amounts are translated into U.S. dollars at a convenient translation rate of INR71.36, which is the rate as of 31st December 2019.

Consolidated revenues for the quarter are at INR4,384 crores, which is $614 million, registering a growth of 14% on a year-on-year basis. The growth has been supported by a good performance across all our businesses. On a sequential quarter basis, our reported revenue declined by 9%. In Q2 FY '20, we had an amount of INR723 crores recognized as revenue towards the sale of two neurology brands apart from propriety products business. And adjusted for this, the sequential quarter growth would have been 7%.

Consolidated gross profit margin for this quarter is 54.1%. With an improvement of 20 bps on a year-on-year basis. On a quarter-on-quarter basis, while there is a decline of 340 bps in the reported gross margin. However, after adjusting for the one-offs in Q2 FY '20, the normalized gross profit margin has improved by about 260 basis points.

Gross margin for the Global Generics business is 58.2%, with a quarter-on-quarter improvement of 270 basis points. Gross margin for the PSAI business is 30% with a quarter-on-quarter improvement of 540 basis points. The SG&A spend for the quarter is