Ajanta Pharma Limited (NSE:AJANTPHARM) Q4 FY23 Earnings Concall dated May. 05, 2023.
Corporate Participants:
Yogesh Agrawal — Managing Director
Rajesh Agrawal — Joint Managing Director
Arvind Agrawal — Chief Financial Officer
Analysts:
Tushar Manudhane — Motilal Oswal Financial Services Limited — Analyst
Rashmi Shetty — Dolat Capital Market Private Ltd. — Analyst
Amar Maurya — AlfAccurate Advisors Private Limited — Analyst
Kunal Randeria — Nuvama Group — Analyst
Bharat Celly — Equirus Securities Private Limited — Analyst
Bino Pathiparampil — Elara Capital Plc — Analyst
Akshat Hariya — Multi-Act Equity Consultancy Pvt. Ltd — Analyst
Abdulkader Puranwala — ICICI Securities Limited — Analyst
Harsh Beria — Private Investor — Analyst
Mitesh Shah — Nirmal Bang Securities — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Ajanta Pharma Q4 FY 2023 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Yogesh Agrawal, Managing Director of Ajanta Pharma Limited. Thank you and over to you, sir.
Yogesh Agrawal — Managing Director
Thank you. Good evening, and welcome to all of you. With me, I have Mr. Rajesh Agrawal, our Joint Managing Director; Mr. Arvind Agrawal, CFO; and Mr. Rajeev Agarwal, our AVP Finance and Investor Relations.
I hope that the results are already there with you. We continued our growth in branded generic business, which is our main trade, and also outperformed the market going ahead. However, the year saw severe pressure on the margins with EBITDA going down sharply from 28% last year to 21% this year. This was due to the factors beyond our control like, increase in material prices, U.S. price erosion, increase in freight costs, etc. We have taken effective steps to contain this impact and are confident of regaining some of the lost margins in coming years.
In spite of pressure on margins, our cash flow generation was quite robust, and hence, once again, we have rewarded shareholders with a payout of INR479 crores, being 81% of the PAT, in the form of dividend and buyback during the quarter. It reaffirms our commitment to pay back any excess cash to the shareholders of the company. I, and our Joint MD, we will take you through business-wise performance for Q4 and 12 months FY 2023, along with comparison of previous year same period.
It was overall a good year with total revenue for 2023 INR3,743 crores, INR3,743 crores against 300 — INR3,341 crores, posting growth of 12%. As you are aware, our business is divided in three verticals, branded generic business, consisting of India and emerging markets, U.S. generic business, and institution business in Africa.
Let us start with branded generic business. During the 12-month period, 73% of the total sales came from the branded generic, which is spread across India, Asia, and Africa. This business has surety, scalability, and sustainability for the long term. During Q4, branded generics sale was INR625 crore against INR644 crores, posting a 3% degrowth. In 12 months, sale was INR2,690 crores against INR2,382 crores, posting a growth of 13%. This growth was in line with our expectations and guidance.
To begin with, I invite Mr. Rajesh Agrawal, Joint MD, to take you through India business. Thank you and over to you, Rajesh.
Rajesh Agrawal — Joint Managing Director
Thank you. Good evening to all of you. Let me discuss some of the key highlights of India business with you now. Our performance has been excellent on the back of new product launches, market-share gain, and price increase. India business contributed 32% in the total revenue during 12 month period. In Q2, sales stood at INR287 crores against INR245 crores, posting a growth of 17%. For 12 months, sales stood at INR1,174 crores against INR982 crores, posting a healthy growth of 20%. India business includes revenue from trade generic of INR42 crores against INR30 crores in Q4, and INR151 crores against INR117 crores in 12 months of FY 2023.
During the year, we launched 23 new products, out of which 6 were first to market. Our MR productivity has gone up by 20% against previous year on the back of consistent growth in business without any increase in our shares. I am delighted to mention that our overall growth was two times to the IPM as per IQVIA MAT March 2023 with Ajanta’s growth of 16% versus IPM growth of 8%. Even in all therapeutic segments we are present in, our growth was much higher than the segment growth. In the covered market, we are fourth largest in IPM. In overall IPM, we gained two ranks in the last 12 months and stood at 27th as of the end of the year. It will be heartening to note that in all our therapeutic segments, our ranking in covered market is amongst the top 10, with 2nd rank in ophthalmology.
As per IQVIA MAT March 2023, cardiology contributed 40%, ophthalmology contributed 31%, dermatology contributed 21% of our business, and the remaining 8% is coming from pain. Four of our brands are appearing in the top 500 list of IPM.
Now, Mr. Yogesh Agrawal, MD, will take you through the other business performance. Thank you and back to you.
Yogesh Agrawal — Managing Director
Thank you. Let me now discuss some of the key highlights of the branded generic business in Asia and Africa, which contributed 41% in the total revenue during the previous year. In Asia — let’s start with Asia. In Asia, our business is spread over Middle-East, Southeast Asia, and Central Asia, covering about 10 countries. During Q4, sale was INR238 crores against INR263 crore, degrowth of 9%. Q4 2022 was elevated against the rest of the quarters as major countries saw increased demand after pandemic. In 12 months, sale was INR957 crore against INR813 crore, posting healthy growth of 18%. We launched 38 new products during the 12-month FY 2023 in the region. We continue to see mid-teens growth on the back of our robust product pipeline, increased productivity, and excellent strategy execution across countries.
Let’s now move to Africa. In Africa, business is spread over West Asia and East — sorry, West and East African countries in 20 countries. During Q4, sale was INR100 crores against INR136 crores, posting 26% degrowth. The growth was adversely impacted due to the strike in France for pension reforms, which led to trouble delays in the supply chain. The situation is slowly improving and we are trying our best to keep up the supply chain going. In FY 2023, sale was INR559 crore against INR587 crore, posting 5% degrowth. The full year degrowth can be attributed to INR depreciation against rupee from previous year by 5%. However, we have seen reversal of this trend and we hope to see mid-to-high teen growth in this market, again, going forward. We launched eight new products during FY 2023 in the region.
Let’s move to U.S. Generics. This is the second vertical of business and contributed 22% to the total revenue. In Q4, sale was INR197 crore against INR168 crore, posting 17% growth. In FY 2023, sale was INR828 crore against INR696 crore, posting 19% growth. We see price erosion stabilizing and it has come down to the high-single-digit of our existing portfolio. At the end of 2023, we filed five ANDAs and also received four final and one tentative approval. We have 21 ANDAs awaiting approval with the U.S. FDA.
Africa Institution, this is third vertical of business comprising of anti-malarial product and contributed 5% in total revenue. In Q4, sale was INR49 crore against INR50 crore, posting 1% degrowth. In 12 month, sale was INR190 crore against INR106 crore, posting 8% degrowth. As mentioned earlier, institution business remains unpredictable and depends on the funds with the procurement agencies.
With this, I will now hand over to Mr. Arvind Agrawal, CFO, to take you through the financial performance. Thank you and over to you.
Arvind Agrawal — Chief Financial Officer
Thank you. Good evening to all of you and warm welcome to this earning call. For ease of discussion, we will look at the consolidated financials and provide a year-on-year comparison. Let me take you through key financial highlights for Q4 and 12 months of financial year 2023.
In Q4, total revenue stood at INR882 crores against INR870 crores, posting 1% growth. In 12 months, total revenue stood at INR3,743 crores against INR3,341 crores, posting growth of 12%. Gross margin was at 73% for Q4 and 72% for the entire financial year. U.S. price erosion, higher material costs, one-time inventory write-off and INR appreciation against euro for major part of the year, adversely impacted it by about 3% in the FY ’23. As the euro-INR exchange rate is back to earlier levels and U.S. price erosion is getting normalized, gross margin is expected to rebound to 74% to 75% in FY 2024.
Personnel cost has seen an increase of 35% in Q4 and 22% in the financial year. The increase during Q4 was on account of some regrouping of related expenses from selling expenses following the best practices. For 12 months, the increase in costs mainly relates to expansion in international field force by 50%, and small addition in production and R&D. All these are the investments for future growth. Other expenses stood at INR268 crores in Q4 and INR1,124 crores in FY ’23. This includes forex derivative loss in Q4 of INR22 crores and INR19 crores during the whole year. However, we closed the year with a net forex gain which is included in other income.
Logistic cost has impacted about 2% on EBITDA in the financial year 2023, however, it has come back to a normal level now and it should really give us a big benefit in the coming financial year. R&D expenses was INR63 crores against INR59 crores for the quarter, and it was INR237 crores against INR204 crores for the whole year, an increase of 16% over the previous year. R&D expenses continue to be at 6% of revenue. With the above impact on gross margin and other expenses, EBITDA margin saw a dip during Q4 and stood at 17% of revenue from operation at INR149 crore. For 12 months, EBITDA was at INR783 crores, or 21% of revenue from operations.
Going forward, the benefit of 2% is from gross margin and logistic cost is expected to take EBITDA back to above 25% in FY 2024. Other income was at INR99 crores for the year, mainly contributed by forex gain of INR62 — INR66 crores without adjusting the unrealized hedge loss of INR19 crores. There was a net gain in forex transaction of INR47 crores for the whole year, after adjusting unrealized loss. This reaffirms our prudent and robust hedge policy. Income tax stood at 20% for quarter four and 21% for the whole year. We expect it to remain at around the same level in FY ’24. PAT in Q4 was at INR122 crores against INR151 crores, 14% of revenue, and for the whole year, it was INR588 crores, which is against INR713 crores last year, which is 16% of revenue.
We incurred capex of INR160 crores for the year 2023. Capex, including maintenance capex for 2024 is expected to be around INR200 crores, which also includes our new corporate growth capex. We are seeing improvement in working capital cycle with both inventory and receivables showing a reduction in number of days. The ROCE stood at 22% and ROE at 18%. With the improvement in working capital cycle, our cash conversion ratio is almost at 99%.
With these highlights, I open the floor for the question-and-answer. Thank you.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.
Tushar Manudhane — Motilal Oswal Financial Services Limited — Analyst
Yeah. Thanks for the opportunity. Sir, first on this employee cost, if you could elaborate this regrouping of related expenses.
Arvind Agrawal — Chief Financial Officer
Yeah. So, actually the cost of incentives, which are being given to the field that staff that was about INR27 crores for the whole year, that has already been announced, it was earlier in selling expenses, but it has been regrouped to this personnel cost. So that is the small change which is there.
Tushar Manudhane — Motilal Oswal Financial Services Limited — Analyst
Okay. And henceforth, it will be in employee expenses only?
Arvind Agrawal — Chief Financial Officer
Pardon me?
Tushar Manudhane — Motilal Oswal Financial Services Limited — Analyst
And henceforth it would be in employee expenses only.
Arvind Agrawal — Chief Financial Officer
Yes. Yes. You are right.
Tushar Manudhane — Motilal Oswal Financial Services Limited — Analyst
So now that we’ve reached 7 — we are at 73% gross margin.
Arvind Agrawal — Chief Financial Officer
Yeah.
Tushar Manudhane — Motilal Oswal Financial Services Limited — Analyst
Maybe another 100 bps, we are guiding for next year, but just trying to bridge the gap of EBITDA margin of 17% in 4Q FY ’23 to almost 24%, 25% for FY ’24, if you could just explain that.
Arvind Agrawal — Chief Financial Officer
See, as far as Q4 is concerned, again…
Yogesh Agrawal — Managing Director
The whole year, sir.
Arvind Agrawal — Chief Financial Officer
You are talking about whole year or — 17% he’s asking. So 17% in Q4, right?
Tushar Manudhane — Motilal Oswal Financial Services Limited — Analyst
Right, sir. 4Q. Yes, sir.
Arvind Agrawal — Chief Financial Officer
So I think 17% includes the INR22 crores of forex loss also. So if you remove that, it will come to 20%.
Tushar Manudhane — Motilal Oswal Financial Services Limited — Analyst
Still 500 bps is there sir? Sir, still — from 20% to 25% is the bridge, so.
Arvind Agrawal — Chief Financial Officer
So as I said, whole year if you talk, then 22% is freight cost, which we are expecting to recoup, and 2% in the COG. So 2% plus 2%, 4% improvement. We are expecting from 21% to go to 25%.
Tushar Manudhane — Motilal Oswal Financial Services Limited — Analyst
Okay. Thank you. Just lastly on this end of — FY ’23 it has been done in terms of filing as well as launches.
Arvind Agrawal — Chief Financial Officer
Yes.
Tushar Manudhane — Motilal Oswal Financial Services Limited — Analyst
But R&D costs have been at that similar level as it was in the last week. So how should one think about the quarter filing and the growth for FY ’24 for international business?
Yogesh Agrawal — Managing Director
So the R&D cost should remain in absolutely on the absolute number on the similar range, but percentage-wise it may decrease a little bit. For the filings, we are looking to file around six to eight ANDAs next year.
Tushar Manudhane — Motilal Oswal Financial Services Limited — Analyst
Okay, sir. Thank you.
Operator
Thank you. The next question is from the line of Rashmi Shetty from Dolat Capital. Please go ahead.
Rashmi Shetty — Dolat Capital Market Private Ltd. — Analyst
Yeah. Thanks for the opportunity. One question again on the employee cost and the other expenses. While I can see that because of the regrouping, your other expenses has come down, but your staff cost has come up. Can you just explain that this INR24 crores of forex loss is sitting in which line item and it is impacting the margins?
Arvind Agrawal — Chief Financial Officer
It is in the other expenses.
Rashmi Shetty — Dolat Capital Market Private Ltd. — Analyst
Okay. And — but there would be some forex — there is some forex gain also right which is sitting in above EBITDA or below EBITDA?
Arvind Agrawal — Chief Financial Officer
Below EBITDA in other income.
Rashmi Shetty — Dolat Capital Market Private Ltd. — Analyst
Okay. And how much is that?
Arvind Agrawal — Chief Financial Officer
That is…
Yogesh Agrawal — Managing Director
For the whole year.
Arvind Agrawal — Chief Financial Officer
For the current quarter. For the quarter?
Rashmi Shetty — Dolat Capital Market Private Ltd. — Analyst
The current quarter.
Arvind Agrawal — Chief Financial Officer
So it is INR25 crores.
Rashmi Shetty — Dolat Capital Market Private Ltd. — Analyst
INR25 crores.
Arvind Agrawal — Chief Financial Officer
Yeah.
Rashmi Shetty — Dolat Capital Market Private Ltd. — Analyst
And before — now what we see is that the staff cost is around 24% to 25% of sales. So going ahead, when we estimate, it should be in this range only, right?
Arvind Agrawal — Chief Financial Officer
Yes. Absolutely.
Rashmi Shetty — Dolat Capital Market Private Ltd. — Analyst
Okay. And does it include the expansion of the sales force which has been taken into the international branded business, Asia and Africa?
Arvind Agrawal — Chief Financial Officer
Partially because some of the additions were done during the year. So the full year, the effect will come next year.
Rashmi Shetty — Dolat Capital Market Private Ltd. — Analyst
Okay. And how much of that partial cost which is pending will come in FY ’24. Any ballpark number which you can give, additional cost?
Arvind Agrawal — Chief Financial Officer
It will be difficult to give you that number. But I think as you rightly said, as the percentage to sales, it should remain in that same range.
Rashmi Shetty — Dolat Capital Market Private Ltd. — Analyst
24% to 25%.
Arvind Agrawal — Chief Financial Officer
Yes. Because we have given the guidance of about increase of the sale being in the mid-teens. So, I think 25% should be there.
Rashmi Shetty — Dolat Capital Market Private Ltd. — Analyst
So from 21% to 25% where we are expecting our EBITDA margin to move, it will majorly come from the gross margin improvement of 2% and logistic cost stabilizing? Am I correct?
Arvind Agrawal — Chief Financial Officer
Yes. You are absolutely right.
Rashmi Shetty — Dolat Capital Market Private Ltd. — Analyst
Okay. Another question is on Africa branded business. I understand that the quarter 4, we had seen some sort of strike in France or Africa, which you mentioned, right? For pension reform and that delayed the sales. So with these delayed sales, is it expected to come in quarter 1? Sir, would it — should we see that quarter 1 will have the deferred sales as well as the sales which is expected to come in quarter 1, so it would be a very strong growth or it would be a — it will not appraise because lost is lost completely. Also, in nine months, we had seen a very subdued growth in Africa branded business, so just want to understand more on this piece of the business because here our supply chain and everything is pretty strong. Also, what actual problems are we facing in terms of growth?
Yogesh Agrawal — Managing Director
So two parts. One is some part of the business will get pushed out to the next quarter, but some lost is lost, it is difficult to recover. So, we will see some part of it spilled over into the next quarter. One is that and second is on the growth. So I think. If you see the last three years CAGR, we have posted mid-teens growth. There has been some pipeline filling at times because of the Covid, because of the opening of the Covid, and launches of the new product. So we’ve seen some strong growth in the previous year, which kind of tapered out in the next year. But overall, on a consistent basis, we are very confident that the health of the business is quite strong and we don’t foresee challenges in posting mid-teens to high-teens growth in the Africa.
Rashmi Shetty — Dolat Capital Market Private Ltd. — Analyst
And how is the Africa pharma industry growing on other respective markets where you are present, the industry?
Yogesh Agrawal — Managing Director
So the industry is also going — growing in the low double-digit.
Rashmi Shetty — Dolat Capital Market Private Ltd. — Analyst
Lower double-digit. So are we confident that we should see a double-digit growth once the phase gets normalized in FY ’24 and ’25?
Yogesh Agrawal — Managing Director
Absolutely. bsolutely. We should outgrow the market at least 11.5 times whereas the market is closing at 4 p.m. We are confident of posting mid-teens to high-teens growth.
Rashmi Shetty — Dolat Capital Market Private Ltd. — Analyst
Okay, sir. Thank you so much. That’s it from my side.
Yogesh Agrawal — Managing Director
Yes.
Operator
Thank you. Next question from the line of Amar Maurya from AlfAccurate Advisors Private Limited. Please go ahead.
Amar Maurya — AlfAccurate Advisors Private Limited — Analyst
Thanks a lot for the opportunity. Sir, just to understand this 25% bridge, again. Let’s say about — if I do like 2% CAGR and 2% logistics cost saving and INR25 crore of forex gains, then also, even if I do this maths for this quarter, we get 23.7% kind of a margin. So if you can help us with 25% margine bridge it will be great. And secondly, I just missed that employee cost increase, what is the reclassification we did there?
Arvind Agrawal — Chief Financial Officer
Okay. So first I repeat the second question. The reclassification is just that there are certain expenses which we have related to employees which we have clubbed at the marketing expenses or selling expenses that has been brought to the employee expenses. So it’s just a reclassification from other expenses to employee cost. But if you put together, it will remain the same. There is no difference at all.
Amar Maurya — AlfAccurate Advisors Private Limited — Analyst
Okay.
Arvind Agrawal — Chief Financial Officer
In terms of the EBITDA reconciliation, what you need to do is you need to work out for the whole year. If you’ve seen FY ’23, we are having a EBITDA margin of 21%.
Amar Maurya — AlfAccurate Advisors Private Limited — Analyst
Correct, sir.
Arvind Agrawal — Chief Financial Officer
Of this 21%, as we mentioned earlier also, that there were these factor which impacted, including the U.S. price erosion, including price raise in the raw material price increase and all those kind of things. But out of that, we will be able to recover in COG about 2% including the euro-INR appreciation. So that also is now normal so that also should help us. So total we should be able to get 2% benefit in cost of goods.
Amar Maurya — AlfAccurate Advisors Private Limited — Analyst
Okay.
Arvind Agrawal — Chief Financial Officer
And another 2% is something which we’ll get in logistics.
Amar Maurya — AlfAccurate Advisors Private Limited — Analyst
Okay.
Arvind Agrawal — Chief Financial Officer
So 21% plus 4%, is about 25%, we will not be able to go to 28% immediately.
Amar Maurya — AlfAccurate Advisors Private Limited — Analyst
Okay.
Arvind Agrawal — Chief Financial Officer
We very clearly told you last quarter also, here also we are saying that we are talking about 25% plus around in 2024 EBITDA margin.
Amar Maurya — AlfAccurate Advisors Private Limited — Analyst
Got it, sir. And second question sir, like if you are targeting for overall a mid-teen kind of a growth, so what would be the growth we are expecting from the export business and primarily from the emerging in the regulated market?
Yogesh Agrawal — Managing Director
The U.S. will be in the low single-digit — mid-single-digit.
Amar Maurya — AlfAccurate Advisors Private Limited — Analyst
Okay.
Yogesh Agrawal — Managing Director
And the overall branded generic business, we are looking to grow at mid-teens, plus-minus kind of — so on a blended basis, we should arrive at around the mid-teens. Africa, Institution business, we are looking at a flattish growth.
Amar Maurya — AlfAccurate Advisors Private Limited — Analyst
Africa business we are looking — so both institution and branded both, overall Africa?
Yogesh Agrawal — Managing Director
No. No. No. No. Branded generic is all put together to look at as one bucket, which has India, Africa, and Asia.
Amar Maurya — AlfAccurate Advisors Private Limited — Analyst
Okay.
Yogesh Agrawal — Managing Director
So all put together, we are looking to grow mid-teen.
Amar Maurya — AlfAccurate Advisors Private Limited — Analyst
Okay.
Yogesh Agrawal — Managing Director
And U.S. will be the mid-single digit and institution we are looking at a flattish growth.
Amar Maurya — AlfAccurate Advisors Private Limited — Analyst
Fine, sir. Thank you, sir.
Operator
Thank you. The next question is from the line of Kunal Randeria from Nuvama. Please go ahead.
Kunal Randeria — Nuvama Group — Analyst
Hi. Good evening. Sir, just in your presentation you mentioned that the price erosion in the U.S. is now normal. So just wanted to understand what do you mean by normal?
Arvind Agrawal — Chief Financial Officer
Normal is about, single — high-single-digit.
Kunal Randeria — Nuvama Group — Analyst
Right. And so maybe if you can just maybe explain what is driving it? Is it maybe some new launches, because you haven’t done a lot of new launches. So I mean have competitors withdrawing from a lot of molecules you were in or you had some benefits from a few products, if you can just explain a bit more.
Yogesh Agrawal — Managing Director
So we are looking to launch five product during the year. And existing portfolio, as we said that, I think we are looking — we are estimating that the price erosion should stabilize through the mid-to-high single-digit. So in combination of the new product launches and the stabilizing of the price erosion on the existing portfolio, we feel comfortable that we should be able to post a similar kind of margins or maybe slightly improve it.
Kunal Randeria — Nuvama Group — Analyst
Sure, sir. But in your existing portfolio also, have you seen an improvement and is it because competitor withdrawn or it’s just that people have become a lot more disciplined than what they were, let’s say, a month — year back or so?
Yogesh Agrawal — Managing Director
Right. Right. Yeah. So we have not seen significant withdrawals of the players. In the product-to-product, there maybe one player withdrawing here and there. But in a market which is five players around one player withdrawing doesn’t have very significant increase in the market share to any of our company. So we’ve not seen such big disruptions in withdrawal, there are some product some companies have withdrawn. But we’ve seen — I think some of the base portfolio we’ve seen I think now the price erosion is pretty much stick to the bottom or at least we feel so. So I think the price erosion should be more disciplined.
Kunal Randeria — Nuvama Group — Analyst
Got it. Got it. The second question is on the India business. Now NPTA has come up with its own list of products there, prices had to be reduced. I think that included Met XL franchise. So has there been any impact in Q4, or do you expect it in the coming year?
Rajesh Agrawal — Joint Managing Director
No. In the Q4 there has been impact in the month of February and March, but it was quite low, insignificant. And now, in April, because of the benefit of WPI, we have been able to increase the prices by close to 11%. So there has been an offset to that extent. The original price reduction done by NLUM was in the range of 18% for Met XL. And we have been able to gain back around 11.3% due to the WPI. So the net impact on us and the industry is about the difference of it.
Kunal Randeria — Nuvama Group — Analyst
Sure. Sure. And just one last question for Arvindji. Arvindji, I still not am able to understand your freight cost escalation. Three years back, your freight costs would have been, let’s say, 4%, 4.5% of revenue, last it was in 5.5% and this time around, you said there has been a 200 bps increase. So just seems that the impact on Ajanta seems a lot more magnified than for the rest of the industry. So just want to get your thoughts on this.
Arvind Agrawal — Chief Financial Officer
This is very simple. See, as far as Ajanta is concerned, we are selling all our material in the refrigerated containers. And…
Yogesh Agrawal — Managing Director
Most part of it.
Arvind Agrawal — Chief Financial Officer
Most part of it.
Yogesh Agrawal — Managing Director
70% is export.
Arvind Agrawal — Chief Financial Officer
Yes. And 70% — see the proportion of our sale is skewed towards export. So naturally freight plays a very important role in our expenses.
Kunal Randeria — Nuvama Group — Analyst
Got it. Okay, sir. So maybe I’ll just continue this in a bit more detail with you offline. Okay. Thanks a lot for answering my questions. Thank you.
Operator
Thank you. The next question is from the line of Bharat Celly from Equirus Securities. Please go ahead.
Bharat Celly — Equirus Securities Private Limited — Analyst
Hi. Thanks for the opportunity, and good evening, everyone. So sir, just wanted to understand on 25% margin. So I believe, large part of the benefit from this trade, which we talked about like 2 percentage points as well as some part out costs related to key raw-material prices would have actually come down and benefited in fourth quarter as well. So from the fourth quarter going towards 25% seems a bit of aggressive, largely because we have seen some benefit this quarter, right?
Arvind Agrawal — Chief Financial Officer
Yeah. But then I think you need to see the whole year. See, quarter-to-quarter there can be variations because of many product mix because of the business mix, etc. But overall, if you see the whole year it is 21% EBITDA margin, which you can see. And with that 21%, we are very confident that we should be able to recoup about 2% in COG.
Bharat Celly — Equirus Securities Private Limited — Analyst
Right. But is it safe to assume that large part of the freight would have normalized in fourth quarter?
Arvind Agrawal — Chief Financial Officer
Yeah. To some extent not in January, but February and March, yes, it has come down quite sharply.
Bharat Celly — Equirus Securities Private Limited — Analyst
And even the input prices, right?
Arvind Agrawal — Chief Financial Officer
Our input prices, not much, but yes, there was — earlier inventory holding was something which was at a higher cost so the benefit of the reduced prices in the first — last quarter, I should be able to get only after May or June.
Bharat Celly — Equirus Securities Private Limited — Analyst
Good. Correct. And sir, second one actually on the U.S. market, we are seeing that there is a sharp decline sequentially. Is there any product, which has seen extra competition or is it just general price erosion which has affected, if you could explain that?
Arvind Agrawal — Chief Financial Officer
Yeah. I think you must have seen, no, in the last quarter, in Q3, we have already mentioned that there was major sale of the product Oseltamivir, which was $10 million. So that is something which has gone away.
Yogesh Agrawal — Managing Director
That was the — that product is a very seasonal product.
Bharat Celly — Equirus Securities Private Limited — Analyst
Right.
Yogesh Agrawal — Managing Director
It comes for the season only. So if you take that out, we are at running quarter trend which is what in the previous two quarters, which has in fact improved from that.
Bharat Celly — Equirus Securities Private Limited — Analyst
Right. Right. Right.
Yogesh Agrawal — Managing Director
Our earlier two quarters were INR180 crores, so this quarter we went INR200 crores.
Bharat Celly — Equirus Securities Private Limited — Analyst
Right.
Yogesh Agrawal — Managing Director
So there is — also, and the part of the existing run rate both put together it’s INR200 crore now.
Bharat Celly — Equirus Securities Private Limited — Analyst
Sure. So, Arvindji mentioned $10 million little bit for that product right?
Arvind Agrawal — Chief Financial Officer
Yes. Yes.
Bharat Celly — Equirus Securities Private Limited — Analyst
Sir, during this quarter, there were hardly any revenue coming out of that?
Arvind Agrawal — Chief Financial Officer
Yeah. Very small.
Bharat Celly — Equirus Securities Private Limited — Analyst
Right. Okay. That’s it. So, sir, last one on the India market is possible for you to break down your growth in terms of pricing, volume, and introduction if that is possible.
Yogesh Agrawal — Managing Director
Yeah. We have that growth. The composition of the growth. I will share with you in a second, let me pull up the data. So the volume growth is 8% for us.
Bharat Celly — Equirus Securities Private Limited — Analyst
Okay.
Yogesh Agrawal — Managing Director
And the price growth is 6% and the growth from new brand launches is 3%.
Bharat Celly — Equirus Securities Private Limited — Analyst
Sure. That helps. Thanks a lot.
Yogesh Agrawal — Managing Director
Yeah, sure.
Operator
Thank you. The next question is from the line of Bino Pathiparampil from Elara Capital. Please go ahead.
Bino Pathiparampil — Elara Capital Plc — Analyst
Hi. Good afternoon. Most questions answered, just a follow up on U.S. Any update on the champion product has FDA come back regarding the API query?
Yogesh Agrawal — Managing Director
Yeah. So we have filed all the required data information asked by the FDA. We are now given the target goal date of Q2 FY ’24. So if all goes well, we could expect approval and launch year after second Q.
Bino Pathiparampil — Elara Capital Plc — Analyst
Understood. When you say you look forward to five launches in FY ’24, do you include this as one of them?
Yogesh Agrawal — Managing Director
We are looking to launch five products, this is one of the five products which has potential coming in.
Bino Pathiparampil — Elara Capital Plc — Analyst
Okay, this is one of one in that five.
Yogesh Agrawal — Managing Director
Yeah. Yeah.
Bino Pathiparampil — Elara Capital Plc — Analyst
Any other limited competition products that could be part of that file?
Yogesh Agrawal — Managing Director
Yes. There are one or two products, immediate competition but that is…
Bino Pathiparampil — Elara Capital Plc — Analyst
Sorry, but?
Yogesh Agrawal — Managing Director
Slightly smaller product, they’re like that.
Bino Pathiparampil — Elara Capital Plc — Analyst
Smaller. Okay. Okay. Okay. You got the approval — tentative approval for the 12 topiramate recently. So is that a near-term launch or is it a couple of years away?
Yogesh Agrawal — Managing Director
It is further ahead. It’s not in the ’24.
Bino Pathiparampil — Elara Capital Plc — Analyst
Okay. Thank you. I’ll turn back.
Yogesh Agrawal — Managing Director
Yeah. Sure.
Operator
Thank you. [Operator Instructions] The next question is from the line of Saurabh Savla from Multi-Act Equity Consultancy Private Limited. Please go ahead.
Akshat Hariya — Multi-Act Equity Consultancy Pvt. Ltd — Analyst
Yeah, hi. This is Akshat from Multi-Act. So, I had this question on employee cost. If you could quantify the amount of regrouping that we have done in employee costs and whether the entire amount has been done in Q4 or we’ve done some regrouping in earlier quarters as well?
Arvind Agrawal — Chief Financial Officer
No. The entire regrouping was done in quarter four and the amount is INR27 crores.
Akshat Hariya — Multi-Act Equity Consultancy Pvt. Ltd — Analyst
Okay. Okay. So out of INR224 crores, INR27 crores is the regrouping so the balance INR197 crores. Just wanted to understand whether the MR addition that we’ve done, in the exit quarter full impact of all the MR addition would have come. So going ahead, the absolute amount of employee cost should not grow significantly.
Arvind Agrawal — Chief Financial Officer
No, there is some addition still going on. So there will be some addition…
Yogesh Agrawal — Managing Director
Normal addition, but more or less. I think most of it is baked in into the Q4. What you will see is normal incremental — yearly increment cost which will come in now.
Akshat Hariya — Multi-Act Equity Consultancy Pvt. Ltd — Analyst
Okay. Okay.
Yogesh Agrawal — Managing Director
But here we’ve seen a significant rise in increase of manpower which is over 40% and above, so I think that kind of increase will not be there.
Akshat Hariya — Multi-Act Equity Consultancy Pvt. Ltd — Analyst
Understood, sir, And sir my one question was on the COGS. Now, we are very confident of recouping 2% gains in COGS. We also mentioned that already in Q4 some of the raw-material prices have already corrected and that would already be in the Q4 exit quarter base. So wanted to understand what gives us confidence to get back this 2% on a full-year number, which on a Q4 basis, looks like a 3% improvement in raw-material costs that we’ll have to do. So if you could just break this 3% up in different factors of improvement, how much will we get from price hikes, from reduction in price erosion and from raw-material cost going down?
Yogesh Agrawal — Managing Director
Two factors. One is that there was some inventory, which we’re carrying, which still was there which we’re depleting in Q4, that was one part of that. And second part of it is, if you see the Branded Generic composition in the Q4, it came slightly lower because of the Africa business is likely depressed which is is a high-margin business for. So that one factor also impacted the EBITDA in Q4. So next year onwards, once we come back on the track on the normal level. And the inventory depletion of the higher-cost, getting it approved in Q4. Both put together, we feel reasonably confident that we should be able to bounce back to the improved — 2% there.
Akshat Hariya — Multi-Act Equity Consultancy Pvt. Ltd — Analyst
Okay. And sir, this 25% EBITDA that we’ve been discussing that we are looking more from a exit quarter perspective or from a full-year point-of-view?
Arvind Agrawal — Chief Financial Officer
Full year point-of-view. Full year.
Yogesh Agrawal — Managing Director
And also will be important to mention here, I think we have to look at our full-year story for the next year, there could be variations quarter-to-quarter because of the export business unlike India where the supply chain is very tight and the transfer happens within three days. In export, it is a longer logistic lead time from inventory, but we are talking of all this guidances for the whole year. I think there could be some variable — variations quarter-to-quarter.
Akshat Hariya — Multi-Act Equity Consultancy Pvt. Ltd — Analyst
And, sir, one last question, if you could elaborate a bit on the Franco Africa issue, so that we could understand what has led to a significant decline in the branded Africa piece. Thank you sir, that’s all from me.
Yogesh Agrawal — Managing Director
The export happens to France and because of pension strike which has been going on for a long-time, the supply-chain has been disrupted bit. There was a lot of backlog, in the container being received and forwarded onwards. So that kind of choke supply chain there a little bit, which we are seeing easing out now.
Akshat Hariya — Multi-Act Equity Consultancy Pvt. Ltd — Analyst
Thank you sir. Very helpful.
Operator
Thank you. The next question is from the line of Rashmi Shetty from Dolat Capital. Please go ahead.
Rashmi Shetty — Dolat Capital Market Private Ltd. — Analyst
Yeah. Thanks for the opportunity again. Just on U.S. business, on the product Vimovo if you can give update because we were just waiting for the EIR on the Dahej plant to get the approvals. So have we received approval on this product?
Yogesh Agrawal — Managing Director
Which product you said?
Rashmi Shetty — Dolat Capital Market Private Ltd. — Analyst
Vimovo.
Yogesh Agrawal — Managing Director
Yes. Yes, we have received approval for that. And we are in the process of launching that product, we are advanced — has reached U.S.
Rashmi Shetty — Dolat Capital Market Private Ltd. — Analyst
So we are expecting to launch in the first quarter?
Yogesh Agrawal — Managing Director
Yes. Yes. Absolutely right.
Rashmi Shetty — Dolat Capital Market Private Ltd. — Analyst
And how do we see competition over — in this particular product? Will it remain —
Yogesh Agrawal — Managing Director
Two products we have, I think just want to positively add into the top line and bottom line.
Rashmi Shetty — Dolat Capital Market Private Ltd. — Analyst
Okay. And on topiramate have you settled the litigation or we are still on that litigation?
Yogesh Agrawal — Managing Director
No, we have settled the litigation now.
Rashmi Shetty — Dolat Capital Market Private Ltd. — Analyst
Settled the litigation. Okay. And just last question, if you can give total number of imports, as on FY ’23, how much was it in India, Asia, branded and Africa branded business?
Yogesh Agrawal — Managing Director
So I think — India is 2,800.
Rashmi Shetty — Dolat Capital Market Private Ltd. — Analyst
2,800 you said?
Yogesh Agrawal — Managing Director
In India.
Rashmi Shetty — Dolat Capital Market Private Ltd. — Analyst
Okay.
Yogesh Agrawal — Managing Director
And 1,300 in the export.
Rashmi Shetty — Dolat Capital Market Private Ltd. — Analyst
1,300 in?
Yogesh Agrawal — Managing Director
Export market.
Rashmi Shetty — Dolat Capital Market Private Ltd. — Analyst
Asia and Africa branded?
Yogesh Agrawal — Managing Director
Yeah, yeah, all put together.
Rashmi Shetty — Dolat Capital Market Private Ltd. — Analyst
Okay, sir. Thank you. That’s it for me.
Operator
Thank you. The next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.
Tushar Manudhane — Motilal Oswal Financial Services Limited — Analyst
Yes, thanks for the opportunity again. So this Africa issue is now just to clarify, is it more or less sorted and we’ll see recovery immediately in 1Q or will we have few more months for the Africa Branded Generics business?
Yogesh Agrawal — Managing Director
So it is by and large pretty much to the maximum — so we don’t expect that going to Q1.
Tushar Manudhane — Motilal Oswal Financial Services Limited — Analyst
Okay. And secondly, on the other expenses side, like INR260 crores, INR270 crores maybe like 4%, 5% sort of a year-on-year increase is that the sort of quantum which one should expect for FY ’24 or do we see meaningful increase in the other expense?
Arvind Agrawal — Chief Financial Officer
This INR268 crore was the lowest. Actually, if you will see this total for the year is about INR1,124.
Tushar Manudhane — Motilal Oswal Financial Services Limited — Analyst
But then there is regrouping no sir?
Yogesh Agrawal — Managing Director
Yeah, after the regroup — so INR1,124 crore is after the regrouping. So if you really see that is INR1,124 crores and then like that INR1,124 crore should really go to about INR1,300 crore or so. I think we should be talking about what INR320 crores to INR325 crores.
Tushar Manudhane — Motilal Oswal Financial Services Limited — Analyst
So what would drive these increase in other expenses?
Yogesh Agrawal — Managing Director
Basically I think sales and promotional expenses will be the the major one.
Tushar Manudhane — Motilal Oswal Financial Services Limited — Analyst
By INR200 crores almost sir?
Rashmi Shetty — Dolat Capital Market Private Ltd. — Analyst
Yeah.
Yogesh Agrawal — Managing Director
Plus regular inflationary increases will be there. Overall, the cost goes up every year.
Arvind Agrawal — Chief Financial Officer
Basically all the costs are there, administration costs are there, manufacturing costs are there. All those costs are also having an increase no.
Tushar Manudhane — Motilal Oswal Financial Services Limited — Analyst
Okay. That helps. Thank you.
Operator
Thank you. The next question is from the line of Abdulkader Puranwala from ICICI Securities Limited. Please go ahead.
Abdulkader Puranwala — ICICI Securities Limited — Analyst
Hi, sir. Thank you for the opportunity. Just if you could share some outlook on the India business and how do you see volume growth coming out for next year as well as what are the kind of launches you’d be doing next year, some color on that, please.
Rajesh Agrawal — Joint Managing Director
The launches we won’t be able to share the sensitive data at this point, but we have couple of product launches lined-up for the domestic, which would be first time in the company. Going back to your earlier one, we are expecting a growth of low-double-digit. The industry is expected to grow between 8% to 9% based on the various reports. We are yet to see how the first-quarter actually really report — the growth as-reported for the first quarter in IPM. But more or less, if it is 8% to 9%, we are — our objective is to grow at low-double-digit growth which would still be much faster than the IPM growth rate. And the composition will again be — it will be driven by volume growth as well as the price increases. The new brand launches, growth will be little lesser than the previous years.
Abdulkader Puranwala — ICICI Securities Limited — Analyst
Sure, sir. Got it. And just one more question on the margin front, so I get it we are guiding for 24% kind of EBITDA margin for FY ’24, but then and also. I mean, how do we look at our businesses now. I mean say, next three to four years, is 30% plus kind of an EBITDA margins still seem to be achievable on the current set of products or we would settle down somewhere below that in the next three to four years?
Yogesh Agrawal — Managing Director
We can’t talk about EBIT guidance, but it should keep on increasing every with the new product launches branded generic composition going up. So it should inch up more than — off the 25% it should inch up keep going up every year. Whether it reaches 30% and if — I think —
Abdulkader Puranwala — ICICI Securities Limited — Analyst
Sure, sir. Got it. Thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Harsh Beria, an individual investor. Please go ahead.
Harsh Beria — Private Investor — Analyst
Hi. Thanks for this opportunity. I have a question about our employee costs and it’s been 24% to 25% of sales. Isn’t it a bit too high for the kind of business model we are in? Most of our peers in the same line of branded generics business would have somewhere around 19% to 20%? So my question is, is this because we have invested a lot upfront in the last couple of years? And sales has come down to 19% and 20% or will this stay at these levels?
Arvind Agrawal — Chief Financial Officer
One thing you should remember, one is that, as I mentioned earlier also for the whole year, our employee cost is 21%. If you calculate, it is 21% for the whole year FY ’23, it’s only in quarter four that there were some reclassification and also sales was down because of which you are seeing it as 25%, but actually for the whole year it is 21%, and we expect this to remain in that range.
Harsh Beria — Private Investor — Analyst
Perfect. That makes sense. My next question, it’s there was a lot of discussion on margin, so it seems from all the commentary that this quarter has seen the lowest possible margins, and going forward, we will start seeing improvement in our margins. Is that a correct understanding?
Arvind Agrawal — Chief Financial Officer
Absolutely correct understanding. Absolutely correct.
Harsh Beria — Private Investor — Analyst
Okay and then last question is on our U.S. business. So in the earlier calls, we have had discussions about capital allocation. However, U.S. being a slightly cyclical business now that we have going through, like, we have gone through a real bad bank cycle, why have we not been more aggressive in pursuing growth, if we are assuming that prices have bottomed out and we have good product approvals, why are we not being more aggressive? What will keep us from the current $90 million and $100 million run rate to the next level of $150 million to $200 million in U.S.?
Rajesh Agrawal — Joint Managing Director
Just because of the nature of business, it can go up in short term, let us say assuming if the competitors, people pull out the products. There could be for a short period, demand for the products, but then again in two to three years, it becomes players commodity kind of market offer, again, it could be players coming in and the price erosion happening significantly. So that is the reason we are we are being very cautious on making the capital allocation on the product, product selection, we want to be sure that the product we select and the money we spend on it has a reasonably good chance of succeeding and making money. So that’s the only outlook. We are being cautious, we’re optimistic not very — we are still continuing with our program for filing the products for the next year and the year after. Just the numbers have reduced.
Harsh Beria — Private Investor — Analyst
And we want to maintain — so as a percentage of our consolidated sales, what is the ideal U.S. contribution for us?
Arvind Agrawal — Chief Financial Officer
Today it is 22%.
Harsh Beria — Private Investor — Analyst
Do you want to keep it around that or do we want to take-up — take it up to 30% at some point?
Rajesh Agrawal — Joint Managing Director
I think it should remain in the same percentage around maybe a percent up and down in the same vicinity.
Harsh Beria — Private Investor — Analyst
Perfect. Thanks for answering my questions. That’s all from my side.
Operator
Thank you. [Operator Instructions] The next question is from the line of Mitesh Shah from Nirmal Bang Securities. Please go ahead.
Mitesh Shah — Nirmal Bang Securities — Analyst
Yeah, thanks for taking my questions. My question is regarding the margins. Till FY ’20 — FY ’18 your margins would be above 30% and then being coming down, actually a couple of reasons might be because of the sharp U.S. price erosion and the your new plant commission that was dragging the margin. I was expecting that thing now utilization would be improving margins would be healthy. Going forward also you’re expecting normalizing the price erosion. So why we are not able to extend to 30 plus percent margins in the next couple of years which we have achieved already in ’18 already?
Arvind Agrawal — Chief Financial Officer
Agreed, you have achieved it, but if you see, really in ’18 it was 31%, but after that it was 27%, 26%, 28% so like it is in the — hovering in the range of 27%-28% and it is not beyond that. Because as you rightly said, the whole business was rebalanced. The U.S. business came in as a bigger component compared to what it was in 2018 and naturally all these things also have its own impact. Manufacturing is like, what are you only said that new facilities have come to cost has gone up all those aspects are there. I think 27%-28% is something which we are really always been talking about and that’s why we gave you elaborate reconciliation from 28% to 21% in this year, that 7% very clearly we gave you — a very clear reconciliation how it has happened. And out of that now, we are expecting that at least in 2024 will be able to recall about 4%. Now balance. 3%, we will be able to recover when we will be able to recover, we are 100% sure that we’ll recover. Question is when? How fast it can be? And that is something which. I think we will not be able to say today, but as MD mentioned it will continuous improvement every year. We are going to see higher EBITDA margins year-after year continuously now going forward.
Mitesh Shah — Nirmal Bang Securities — Analyst
Yeah, I agree with you, but I again fail to understand that the the new plant commissioned and the after three, four years, you are not able to achieve that kind of margins. Initially, definitely it will be higher cost. And again, U.S.. I think so if you are expecting low-single digit kind of growth, it would be coming down in an overall contribution and definitely price erosion are not coming down again. That could there be some mismatch, which I am expecting.
Arvind Agrawal — Chief Financial Officer
I hope that it should happen. If you are expecting towards — I always —
Rajesh Agrawal — Joint Managing Director
I think opex cost of manufacturing facilities, it’s a — it’s here to stay. 2% increase in the RMBM cost because of the circumstances beyond our control, are here to stay. What can one do about it? What can you do about 2% freight going up? So these are the factors which are beyond the control. Earlier, we were low on opex go on opex, because we had very light asset, we had lot of contract manufacturing. That had limitation. And the fact that we put the facilities to get better control on the quality, supply-chain, scaling another business on the future this is all got baked-in. So I cannot say that 30% is a wrong benchmark to put. I think you should benchmark against the industry where we still much better with a 28%, 26% EBITDA also, I think we are in the top tier of the company. So I think that the right benchmark for you to kind of calculate against us.
Mitesh Shah — Nirmal Bang Securities — Analyst
Got it. Got it. Thanks. Thanks for the clarification. That’s it from my end.
Operator
Thank you. [Operator Instructions] The next question is from the line of Harsh Beria, an individual investor. Please go ahead.
Harsh Beria — Private Investor — Analyst
Hi. Thanks for the follow-up opportunity. My question was about the M&A opportunities we were looking for our domestic market. Is there any development on that front given how many acquisitions we’ve seen in the market?
Arvind Agrawal — Chief Financial Officer
Honestly, we have not found anything so-far though, we keep on evaluating every opportunity in the market. We are looking where the activity for that, but on a clear opportunity at this point of time, which is there in front of us. But we are open, definitely open.
Harsh Beria — Private Investor — Analyst
And is it largely because we are more value-conscious while purchasing brands or doing inorganic expansion?
Arvind Agrawal — Chief Financial Officer
We are definitely. I think we are not in a hurry to just pay any price for the — just to acquire or to increase the bottom — the top-line. But we are very conscious about it. We are definitely conservative. Question is what is the right price and how we can add value? That is what we really see and that is what will drive our M&A.
Harsh Beria — Private Investor — Analyst
My next question was about our three generics business. And now we are already at INR40 crore plus quarterly run rate. So, this would imply an annual run-rate of INR160 crores. Is this business line EBITDA-positive for us and how do we see this business going forward? Which has been the fastest-growing business in our business mix?
Rajesh Agrawal — Joint Managing Director
Yes, it is EBITDA-positive. And you’re right, it has been it has grown very, very well. In fact, we have outraced, outsmarted everybody else who’s been in this segment for far too long. We have done exceptionally well. In the last three odd years, we’ve ramped-up the business to the scale of INR150 crores-odd. Going forward, I’m expecting a low-double-digit growth for the trade generic business. Within this business also our product portfolio is slightly more skewed towards the chronic nature of products as against the industry, which is more than 90% acute or around that. We are slightly better place than that intentionally so. So, going forward, I think the growth rate should normalize. Our objective for the next year is to grow in the low-double-digit also in-line with the India business.
Harsh Beria — Private Investor — Analyst
Okay, and my last question was about the capital allocation. So unless we see very-high. Very good. ROIC capex plans, we will be returning most of the incremental free cash flows that we generate to the shareholders, like they have been doing for the last couple of years?
Arvind Agrawal — Chief Financial Officer
Yeah. Absolutely right.
Harsh Beria — Private Investor — Analyst
And I would like to appreciate this viewpoint of the management. Not a lot of companies do this. And I think this is a very, very judicious use of capital, so thanks for that.
Arvind Agrawal — Chief Financial Officer
Thank you.
Operator
Thank you. Ladies and gentlemen, that was our last question for today. I would now like to hand the conference over to Mr. Yogesh Agarwal for closing comments. Over to you, sir.
Yogesh Agrawal — Managing Director
Thank you, everyone, for joining this call. In case if there are any further questions that remain unanswered today, please reach out to our Investor Relations. Thank you so much.
Operator
[Operator Closing Remarks]