Glenmark Life Sciences Limited Q2 FY23 Earnings Conference Call Insights

Key highlights from Glenmark Life Sciences Limited (GLS) Q2 FY23 Earnings Concall

Management Update:

• [00:02:53] GLS said that the demand softness did not impact its business significantly due to the mid-volume and high-value products it offers.

Q&A Highlights:

• [00:14:51] Neha Manpuria from Bank of America asked about the generic API that when the parent business will start improving and what’s the normalized level of supply. Yasir Rawjee MD replied that in first two quarters there was COVID impact and demand was lesser. GLS has reasonable visibility that it should bounce back at least in 3Q23.

• [00:15:16] Neha Manpuria from Bank of America enquired that on Dahej commissioning, if a more phased increase can be seen or the improvement will be more material starting from 3Q23. Yasir Rawjee MD answered that it would be phased but will be pretty quick in terms of the phase. Probably in a year’s time, GLS expects to utilize that capacity at 50-60%.

• [00:17:53] Neha Manpuria from Bank of America asked about the cost implication from the commissioning of Dahej if it will start flowing through from 3Q23. Tushar Mistry CFO answered that some bit of expenses have already started building up in Dahej. But on the utility and others, GLS will start building some costs from Q3 onwards.

• [00:18:36] Neha Manpuria from Bank of America asked about the CDMO business, with demand coming back, if the run rate would reach the INR40-45 crores per quarter or if it will be lower. Yasir Rawjee MD replied that it will pick up. However, it may not jump to INR40-45 crores right away, but will improve and take a couple of quarters to bounce back to that level.

• [00:24:17] Ashwini Agarwal with Demeter Advisors asked that in working capital if the days remain steady and the increase is mainly due to price increases in raw materials. Yasir Rawjee MD answered that it not due to price increase but due to the inventory that’s stocked up strategically.

• [00:25:13] Ashwini Agarwal with Demeter Advisors also enquired about shipping costs and if it provides any margin tailwind of any kind. Yasir Rawjee MD clarified that GLS’ inward freight movement has largely switched to sea shipment. But on the outward bound, GLS is dealing with high-value APIs, so there’s no tailwind.

• [00:29:12] Sajal Kapoor asked about the Europe opportunity. Yasir Rawjee MD answered that GLS has got a significant business out of Europe and demand has picked up, but not as much vs. other markets.

• [00:39:30] Anand Venugopal from BMSPL asked about the reason for guidance given in 1Q of 12% growth on the topline, but in 1H it being down 9%.  Yasir Rawjee MD answered that GLS’ group business contributed about 35%-ish even after COVID which went down significantly in 2Q23. Consequently it has dragged down the overall number that was not anticipated.

• [00:40:50] Sath Sheikh of BOB Capital enquired about the capacity utilization for 2Q23, given the decline in significant business from parent. Yasir Rawjee MD said GLS is running at 95% capacity utilization before Dahej came in.

• [00:51:27] Gurjot Ahluwalia asked about the capital allocation policy since in 2Q last year GLS announced a healthy dividend but not this year. Tushar Mistry CFO answered that the reason being in current year there are capex programs going on and investment in working capital. However from 2H23, expects to continue to distribute dividends but not as healthy as in the past.