Glenmark Life Sciences Limited Q3 FY23 Earnings Conference Call Insights

Key highlights from Glenmark Life Sciences Limited (GLS) Q3 FY23 Earnings Concall

Q&A Highlights:

• [00:13:44] Tarang Agrawal of Old Bridge enquired about the fixed cost accretion expectation on the P&L from 1Q24, given the Ankaleshwar and Dahej ramping up. Tushar Mistry CFO replied that on a QonQ basis, there should be an increase of about INR7-8 crores on the revenue expense. Also about INR2.5 crores of depreciation will also be there.

• [00:17:28] Tarang Agrawal of Old Bridge enquired that as freight is normalizing, if GM will inch up on an ex-PLI basis. Yasir Rawjee MD answered that it will surely have a positive impact.

• [00:17:43] Shyam Srinivasan at Goldman Sachs enquired about growth guidance for 4Q23 and FY23. Yasir Rawjee MD answered that GLS will have a strong 4Q23. However GLS added that how much it will impact is uncertain, but double digit growth is unlikely to be seen. The growth is expected to be single digit.

• [00:21:17] Shyam Srinivasan at Goldman Sachs asked about the pipeline update. Yasir Rawjee MD clarified that GLS’ iron complexes are going on track. On the onco and high potent portfolio, GLS has added one more molecule to total 8 molecules. 4 of that are already validated at the lab level and two are produced in the new Dahej block and other two are in line to be produced.

• [00:24:52] Anand Venugopal from BMSPL queried how does the China’s zero COVID policy bode for prices in general. Yasir Rawjee MD said that depending on the confidence of Chinese govt., GLS can rely on the whole supply base. So GLS is not expecting any major cost escalation.

• [00:26:43] Subrata Sarkar of Mount Intra asked about the GM stand for future looking at current circumstances. Yasir Rawjee MD replied that there is no standard as such. Over the last 3-4 years, despite the world going through lot of challenges, GLS has managed to retain good level of margins for its businesses.

• [00:31:19] Subrata Sarkar of Mount Intra enquired that with Dahej and Ankleshwar completion, what will be GLS’ peak level turnover. Tushar Mistry CFO answered that GLS’ FATRs are in the range of 3 times now. So with the impact of new capex, the asset turns will come down to some extent but not very significantly. It will be retained between 2.5-3 times.

• [00:33:10] Charul Agrawal from Bank of America asked about Ankleshwar plant commissioning in 4Q23, if employee cost is considered in 3Q23. Yasir Rawjee MD clarified that GLS has hired some people. Since it’s an intermediate block, the dynamic of people and capacity addition is different. There is small amount of fixed cost but not significant.

• [00:34:15] Charul Agrawal from Bank of America also enquired about the margin benefit timeline from Ankleshwar plant. Yasir Rawjee MD said that margins will come in two ways from BI project and from better overhead recovery at the product level.

• [00:35:32] Charul Agrawal at Bank of America asked that given the solvent prices have gone down if realizations have impacted. Yasir Rawjee MD replied that the solvent impact will start impacting in 4Q23 and beyond.

• [00:37:15] Imran Khan from Longbow India asked about the revenue target from the capacity expansion on Dahej in the next 1-2 years at 70-80% capacity utilization. Yasir Rawjee MD said that Dahej capacity is going from 140 kl to 380 kl. So the FATR will be in the range if 2.5-3 in revenue terms.

• [00:44:03] Tarang Agrawal of Old Bridge Capital asked about the cash on book at of 31 Dec, 2022.  Tushar Mistry CFO answered that the cash on book was INR420 crores for GLS.

• [00:44:42] Tarang Agrawal of Old Bridge Capital asked that on the CDMO business, if it will be running on the three old contracts or any new additions. Yasir Rawjee MD answered that the three contracts have a good growth pattern and it will grow good.

• [00:47:22] Ashwini Agarwal at Demeter Advisors enquired about the GLS business from a 2-3 year perspective. Yasir Rawjee MD answered that in the next 3-4 years, GLS expects the CDMO business contribution to double from the 7-8% to about 13-14%.

• [00:51:14] Ashwini Agarwal at Demeter Advisors enquired about margins going forward and if it will be the 30% range. Yasir Rawjee MD replied that on a 9-month basis, GLS is at 30% and on a quarter basis, it’s 28%. Therefore, GLS added that it will be more towards the 30% than the 28% of margins.