Hester Biosciences Limited (HESTERBIO) Q2 FY23 Earnings Concall Transcript

Hester Biosciences Limited (NSE:HESTERBIO) Q2 FY23 Earnings Concall dated Nov. 04, 2022

Corporate Participants:

Rajiv Gandhi — Chief Executive Officer and Managing Director

Priya Gandhi — Deputy Director – Business Operations

Nikhil Jhanwar — Chief Financial Officer

Analysts:

Rohan John — ICICI Securities — Analyst

Ankit Kanodia — Smart Sync Services — Analyst

Manish Jain — GormalOne — Analyst

Kuntal Shah — Oaklane Capital — Analyst

Presentation:

Operator

Good day, ladies and gentlemen, and welcome to the Q2 FY ’23 Financial Results Conference Call of Hester Biosciences Limited hosted by ICICI Securities. [Operator Instructions]

I now hand the conference over to Mr. Rohan, or I’m sorry, Mr. Rohan John from ICICI Securities. Thank you, and over to you, sir.

Rohan John — ICICI Securities — Analyst

Yes. Thank you, Michelle. Good afternoon, everyone, and welcome to Hester Biosciences Limited Quarter two and Half Year FY ’23 Earnings Conference Call. So today, we have the senior management with us, Mr. Rajiv Gandhi, CEO and Managing Director; Ms. Priya Gandhi, Executive Director; and Mr. Nikhil Jhanwar, CFO, on this call. I thank the management for giving ICICI facilities the opportunity to host this call.

Over to you, sir.

Rajiv Gandhi — Chief Executive Officer and Managing Director

Good afternoon, everybody. This is Rajiv Gandhi from Hester Biosciences. And as always, a pleasure to interact with all of you. And today, we are here to have a talk on the Q2 and H1 results of the financial year ’22, ’23. Coming on to the business, division wise, I’m straight getting on to the points as the press too, has already been released circulated to all. So I’m presuming that at least the press mode is in hand with you with you all for any references, etc. As you are aware, we have actually three divisions: poultry health care, animal health care and pet care. Pet Care division, which is a newly started division. We have currently included that in the Animal Healthcare division — and after the end of this year, this will be a separate stand-alone division.

So for the moment, PET business is included in the animal health care division. If we take our division-wise business, as what it is seen on a quarter-to-quarter basis, we have been down by 14%, and we have been down by 19% on a half-yearly basis as far as the Poultry Healthcare division is concerned. — since quite a few press notes quarters, half-yearly results, yearly audited results, you would have heard me saying as well as our press notes would have repeated the issue that the poultry industry overall in India has been, for the last two years, been going through a stressful condition. The raw material input prices have been going up.

The product — the final product prices that is meat and eggs, are very low, and this has really put the industry in a lot of stress. — input cost hike output revenues coming in low. So — what has happened is that time, and again, the poultry population has diminished, or people have been trying to use less and less of inputs in trying to rear their poultry, which, of course, is a bad and a sad situation as reducing inputs directly impacts the productivity, but this is all a vicious cycle that is been going on. And therefore, for these reasons, our Holtry Healthcare division has shown a negative growth in Q2 as well as in — coming to the Animal Healthcare division, we have seen a jump of 140% on a Q2 to Q2 comparison basis.

And on an H1 to H1, there has been a big spurt of 90%. So Animal Healthcare division, again, it has two bifurcations, both ultra and animal health care, the vaccine and the products. Overall, the Animal Healthcare division has done exceedingly well in terms of top line because the sale of vaccines has also gone up as well as the sale of help products has gone up. Talking about the vaccine sales first, the current situation for the lumpy skin disease outbreak in our country. ester has been the main supplier of this vaccine all across India. In fact, we have supplied more than 80% to 85% of the Botox vaccine, which has been used to immunize cattle against the lumpy skin disease.

And that has given us a very good spot as far as animal health care division is concerned as well as the vaccine sale is concerned. And on the health products side, also, we as a company, I have always been stressing all along in my annual report, in my talk, in my press note that we want to derisk over sero segment in terms of division, in terms of products, in terms of territories. So now we are putting a lot of trust on the health products division, and that has helped us to improve the top line to a great extent.

Therefore, the Health Products division has definitely been a big contributing factor in increasing the top line. and the growth of approximately 30%, which includes, of course, within the poultry, and in the Animal Healthcare division, but most of the growth has come in the animal health care division. Going further, talking about the profitability of the company, I would say that there has been a reduction on the various margins if you take the gross profit, the operating EBITDA, PAT,etc. I’m not getting into all of them in specific details because all our press release has all been absolutely clear and spit out over there. a few reasons which are again listed, but I would like to talk on that, our push on health products has been reasonably very strong. Health product margins are definitely lower than the vaccine margin.

So with the increase on the health product sale, it directly impacts the bottom line. But as you all may be aware, the overall global market, the Indian market of health products, is infinitely bigger than that of the vaccines. Therefore, — it is evident and it is inevitable for us to focus on the health products and make EsterBiosciense a complete one-stop solution for all the health issues as far as the animal husbandry division, the veterinary sector, the poultry package, sheet got, and swine rearing is concerned in the country.

Also, another factor that we would like you to consider is that this quarter having gone well, and it was anticipated because of the lumpy skin disease the quarter will do well because of the spot in the board pox vaccine — we also, in this quarter, aggressively started looking on marketing activities, the results of which will be seen in the following quarters we have pushed our sales team by pushing them on to reach out more clients, more poultry farms, dairy farms, good, the scattered good and sheet fund promotional expenses have been done reasonably where we have, in fact, created videos for all the diseases in poultry as well as in cattle, and we have circulated it to all our customers, the videos are for the Marix disease, the new cast, the Gambro DCs in port for the PCR, lumpy skin disease, classical swine fever, — so — and even the lumpy are lumpy, the PR, both we have also address.

So all these we have pushed in, and we have done a lot of penetration as far as creating market awareness for our products, etc. So that has also been a cause for a little drop in the margins. And we are very confident, extremely sure that these expenses in the second — in the third, fourth quarter and the coming year will be extremely easily recovered more than recovered, I would say. Another factor is health products. Health products are formulations.

We buy raw materials, formulate them, and we sell them. the raw material prices have gone up tremendously. We are not in a position on a month-to-month, year-to-year. I mean, quarter-to-quarter basis, we increase our prices for the end products, we are not dealing in commodities where we can afford to change prices either upwards or downwards. And we have to have consistency in the field. So we have not been able to really pass on the additional raw material costs on to the end user. So that has also added to the issue of our margins being hit at this point of time.

Looking at things going on further from here onwards, what are the things that we are focusing on and on the various segments, how are we going to take things further. One of the things is that the lumpy skin disease is a disease which is now here to stay, and the government of India is also considering to put it in their national immunization program. The vaccine is to be given once a year. So hopefully, with the awareness this is going to happen.

And we are just dependent upon the government to buy through tender or each state buying it, we are also creating awareness and in fact, out of the 85% supply that we have done for the Goat Pox vaccine for [Indecipherable] protection, I would say 15% of it has gone directly into the trade, and we are very confident that this trade business is slowly going to go up. A person what realizes that immunization helps them, they are not necessarily going to wait for the government to come and give them the free vaccine or administer the free vaccine. And the cost of all these vaccines are not so high that should impact any of these farmers.

We are also now looking at various ways. Poultry farmers have been stressed for the last more than two years. We are now pushing hard on technical aspects, more scientific aspects, trying to help poultry farmers move away from conventional way of poultry farming onto a more scientific way, thereby are helping them to improve their efficiency. We have also increased our technical aftersales technical team, which would go around try to talk to poultry farmers, give them scientific inputs through pathological reports of by testing the blood samples, trying to tell them that what is the disease situation in their farm. We do that for cattle farms also. And then accordingly, tell them to medicate, vaccinate, etc. So these are the things that we are looking forward on the vaccine side.

Government of India, and this has already been told to all of you that the government had tendered for the PPR vaccine, Hester Biosciences has won that tender. That immunization should have actually started two months ago. But because of the situation for the lumpy skin disease, government of India upon our request, they have postponed this immunization program by two to three months, it should start from January onwards because we needed the capacity to ensure that the Goat Pox vaccine is available absolutely in the market and it was the need for the R and there should not have been and there was no compromise in immunizing cattle against NSD.

So therefore, the PPR tendering, the supplies will start from January onwards. The government, this is all public information, they have tendered to buy vaccines worth approximately around INR40 crores that would be in around 24 months’ time. So this is what is mentioned in the tender as what I’ve just mentioned to you. So you can take a guess at least INR15 crores to INR18 crores should be the turnover in 12 months each first, as well as the second in all circumstances. So that is an opportunity which we are looking well, which we are looking at.

As health products, I did mention that though our core competence has been vaccine, but the health product is an infinitely bigger market and to take the top line to the next level product segment, and we will continue to grow this, yes, the bottom line does get impacted at times because of the products margins are low. It is our endeavor to try to be more selective in choosing the health products, to trying to ensure that our profitability remains high gross margins per product. And at the same time, over a period of time, the efficiency of each marketing person would increase.

Currently, we are putting a lot of aggression, so there are more people who are trying to sell and slowly the per capita sales would go up, which we are confident, and that is bound to happen and that will give us results in the long run, maybe next year on all the aggression that we have done at this point of time. The launch a few pet products, I will just request Priya to briefly just mention a few sentences on the pet project, and then I will continue on to further.

Over to you, Priya.

Priya Gandhi — Deputy Director – Business Operations

This is Priya. So like Rajiv may have mentioned in the last call that we had launched a couple of products around nine to 10 products in the first quarter. And in the last quarter, which is Q2, we have continued to keep our focus on these 10 products that we launched, mainly divided into two categories. One was therapeutics and the other was specialty nutrition. The first half of the year is usually when the therapeutics products work more than the nutrition products because of the weather monsoon seasons and now in the coming the next half of the year, our focus is mostly going to be on nutrition and grooming product, which is going to be the need of the season. Of course, with a very high focus on the quality and efficacy product because that is something we uncompromisingly worked on throughout our product.

Speaking of market expansion and penetration, we have been focusing on the metro cities by keeping our basis in the four regions, North, South, East, West and focusing on the metro cities, but now moving further, we will be penetrating ourselves a little bit more in the Tier two cities as well or we’ll be looking at other mediums through which we can reach out, either go online or see how else can be further penetrate ourselves and create a distribution network for our products.

In quarter four, we will also be launching a new set of products, which will be into therapeutics to again, sort of for the next year, again, in the coming monsoon season where we will require a couple of the NCIDs or dewormers, which will work more in the first half of the next year. So by quarter four, we aim to launch those products as well. We were supposed to close around a top line of INR1 crore in the first half, which we will meet by this month. So since we’ve not touched that completely, we’ve sort of put that in the animal health care top line.

But by this month, we will touch around INR1 crore of top line. And by the end of the year, as my father mentioned, the pet health care division will be separately strong in the division revenues in the presscon. So this is what it is. And I think India is expected to really grow in terms of the pet industry, considering now the fact that more and more people are going towards adopting pets, especially after COVID. So we are definitely very positive on how this division will grow. And eventually, we also want to look at biologicals, which is the core strength of Hester. So this is a very recent information that I’m giving, and I won’t be able to speak more on it, but we’re also looking at biologicals for pet eventually. Thank you.

Rajiv Gandhi — Chief Executive Officer and Managing Director

Okay. Thank you, Priya. So this concludes the thing on divisions. Talking about our capacity expansion has already been committed earlier, the whole expansion is more or less about to get completed. The bulk drug as well as the fill finished lines with all of this getting completed by Q4, we would have doubled our capacity in the production of bulk antigen as well as in the fill-finish which will give us, again, a big lead towards many other things that we would want to do, specifically in the last few months, we had to slow down on the PPR because of the Goat Pox vaccine. But from January onwards, such situations will not arise because we would have created a lot of extra capacity to address to any such exigencies that would come in the way.

As far as our initiative on the human vaccine is concerned. As you are aware, we have in consortium with the Gujarat Biotechnology Research Center. We have set up drug substance manufacturing unit for co-vaccine, wherein we will produce the bulk antigen and supply to Biotech. This project is on way with estimated capacity to produce around 7 million doses per month. And by the end of this financial year, we should have started commercial production, and we would be able to supply the bulk antigen to bare Biotech. — there would be a question in the minds of people that with Covid receiving what is going to happen to all this investment, etc.

To that, my answer is you might have read in the papers around two days ago, there was a statement made by ICMR and they are short listed companies towards trying to develop the monkeypox vaccine. Hester Biosciences is one of the companies. So, we have such alternatives such options also decide — it’s a biological BSL3 facility. It’s not just that we are limited to one, two or three. There are many, many avenues that are there. And we have already started thinking on all these things, if not this, then what and we rest assured that this facility, one of the most modern BSL-3 laboratories created in the country would be put to use for the best case for producing any biologicals.

Talking about Hester Nepal and about Hester Africa. Hester Nepal, the business is dependent on mainly tenders from that happens in a very sporadic manner, something may not happen in a whole quarter, and we might cover more than a year’s requirement in the next quarter. This is exactly that is happening. We are confident on a year basis, we would be able to meet our targets and make sure that we go as per the forecast, while the last quarter has not been good. At the same time, we have also been starting pushing products domestically, and we are now trying to capture a reasonable good amount of business in the domestic market as far as poultry vaccines are concerned. We have also registered vaccines from Nepal to a few African countries, the small dose countries shifted a few vaccines from here to Nepal. So that also can give business in Nepal for exports that is any when export-oriented unit.

So, all these things are happening as far as Hester Africa is concerned, four vaccines registered nominal sales have begun. We have now geared up all set to push the business and try to get business from Hester Africa it is a little bit of a uphill task at this point of time, the geopolitical situation is very taxing on not only on us all across, for example, our international business, I did not touch upon that, but our international business was also low in the last quarter because some of these countries where we supply like Egypt, Nigeria, Malawi, Zambia, they have extremely high even Ethiopia. They have very high restrictions in international remittances because of their dollar or the amount of dollars that they have in their country.

So some of the supplies have not been made just because of that — but it is a situation now that we have to work with, we have to live with. And we will find out ways and we will take it further this being the best plant in the African continent. There are many who are having a lot of faith and confidence that we will be able to give vaccines, which today have never been made available yet tough situation, but we are extremely confident to turn around things and take it further.

That’s all from my side, and I could now take a few questions over to 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 Ankit Kanodia from Smart Sync Services. Please go ahead.

Ankit Kanodia — Smart Sync Services — Analyst

Thank you for taking my question and congratulations for the all-time high quarterly sales. So, my first question would be related to this sales number only as to happen to see that sales growth coming in after some time. But if I would have to ask you how much of that is sustainable? Because I assume that a significant part of it would have to do with the sporting demand of the good vaccine, which we have used for LED and to control the LSE. So given that the government of India is working on it, how is the competition going to come up in this space? And how do we see this particular Goat pox vaccine sales going through qualitatively, I’m not looking for a number here, but just how do you see the market here in the next few quarters or maybe next year? [Indecipherable]

Operator

I’m so sorry, give me a moment, sir. Sir Rajiv, sir.

Rajiv Gandhi — Chief Executive Officer and Managing Director

Yes

Operator

Can you repeat, please, what you were saying?

Rajiv Gandhi — Chief Executive Officer and Managing Director

Yes, I could not hear him properly, it was muffed as well as it was cutting the whole question — so I have not been able to hear it. In brief, it just can you ma’am just tell me what he wanted to say, and I’ll answer. And one request could we finish the call by 2:45 today, there is an international call I can attend that conference. But I’ll try to be as fast as possible to answer all the questions. Yes, ma’am.

Operator

Mr. Ankit sir, can you please repeat your question?

Ankit Kanodia — Smart Sync Services — Analyst

Sure, I’ll be very brief just quarterly numbers, which we have come up with, how much of that is sustainable or how much of that is onetime because of the sporting the demand for goat pox vaccine that is my question.

Rajiv Gandhi — Chief Executive Officer and Managing Director

Okay. The demand for goat pox vaccine — you cannot say that it is a onetime demand. This vaccine has to be given now once a year. So, government is thinking of making this into its immunization program. So, whatever has actually been supplied, those vaccines and even more would be required on a year-on-year basis, and that is what the future is with the lumpy skin disease protection through the Goat pox vaccine.

And in the meantime, government has also released the technology to make a lumpy skin disease vaccine directly. We are one of the pitchers for acquiring the technology and we would soon acquire the technology and develop the lumpy skin disease itself. And just for the information of all in Hester Africa, we have already registered the lumpy skin disease vaccine over there. So, we anyway have the capability.

Ankit Kanodia — Smart Sync Services — Analyst

Thank you so much, sir. My next question is related to Africa. — if I got it correctly, in the last quarter, we could move on…

Operator

Mr. Ankit Kanodia I would request you to speak on your handset, please. We are not able to hear you properly.

Ankit Kanodia — Smart Sync Services — Analyst

Ma’am, I’m using my handset only. Can you hear me now?

Operator

Sir, the voice is muffled actually. So I was right. We are not able to hear you clearly. We ask the questions are not clear.

Ankit Kanodia — Smart Sync Services — Analyst

Is it clear now?

Operator

Okay. Just try keeping your phone a little bit far from your mouth and then speak, please.

Ankit Kanodia — Smart Sync Services — Analyst

Okay. Okay.

Operator

Thank you.

Ankit Kanodia — Smart Sync Services — Analyst

Thank you. So, my next question would be related to Easter Africa. If I could get the numbers right, last quarter, we have been able to manage 15 lakh look at gaining this up over the next few quarters.

Rajiv Gandhi — Chief Executive Officer and Managing Director

Sales in Hester Africa, that is the question?

Ankit Kanodia — Smart Sync Services — Analyst

Yes, sir.

Rajiv Gandhi — Chief Executive Officer and Managing Director

Yes. Everything is there to scale up at this point. So, there is — I mean that is our whole objective. And slowly, we are trying to work on it, and we are putting in efforts to — on the marketing and the distribution side. Therefore, we will at equity in a distribution company over there. We are registering it all in other countries. Please understand that we are producing it in Africa. But in Africa, we are producing it in in a country, Tanzania and other countries also require registration.

So, there is a process that we need to follow towards actually supplying in other countries. Even FAO tenders, they they accept the supplies after the company has one year of experience in manufacturing, that one year will get over and I think October or November because last year, we had made the first application for the vaccine. So all this is happening, and we are working towards scaling up.

Ankit Kanodia — Smart Sync Services — Analyst

Is it fair to assume, sir? Once these approvals are in, we can see a bump up sometime maybe in the next year.

Rajiv Gandhi — Chief Executive Officer and Managing Director

100%, that is the only objective only focus– that is our goal.

Ankit Kanodia — Smart Sync Services — Analyst

One last question, sir. One last question. In the press release, you mentioned that the Indian Pet Industry is set to touch, if I get it correctly, INR10,000 crores by INR2025, right? And if that is the right number, would you like to share some granularity as to who are the bigger players? And what is the — how much of that is related to medicine and other would be vaccine? If you could throw some light on that.

Rajiv Gandhi — Chief Executive Officer and Managing Director

Yes. So your question is on the Pet, right?

Ankit Kanodia — Smart Sync Services — Analyst

Yes, yes. Yes.

Rajiv Gandhi — Chief Executive Officer and Managing Director

Quite a few companies are now trying to get into the Pet business. We have foreign companies like Virbac, who are already into the Pet business. There are innumerable Indian companies, quite a few veterinary companies are already into the Pet business — so I think this is at a growth phase. And this — in fact, in the United States, Pet business is bigger than the production animal health business. So that is the state of affairs in the West. Your question–I could not understand, because again– your voice was not clear. I hope I’ve answered your question.

Ankit Kanodia — Smart Sync Services — Analyst

Sir, I was asking for — I was asking for how do we look at this sector, in terms of how will we track it when there is a lot of competition? There are so many players, how are we looking to correct this piece? What kind of competitive advantage we have, where we’ll be able to–

Rajiv Gandhi — Chief Executive Officer and Managing Director

–which makes companies like us and many companies succeed without competition. We do not know what would be the situation. It is for us who have created a competitive advantage. Today, please go and see our products on the shelf. Please talk to doctors and ask them how they are performing. On the packaging today, we are better than the best in the country. In terms of performance, I would say that you could correlate our performance with the packaging. And that’s the way we will take it further. That’s all.

Priya Gandhi — Deputy Director – Business Operations

I would– sorry, this is Priya. I would like to sort of, add on to what has already been said. One is, definitely for us, quality is something that we’ve looked at the multinational Zoetis and Virbac are the two big players right now in India good products. And everybody really depends on the pet parents. And we — in terms of quality, that’s the kind of standard we set for ourselves and we are going by it. I think one advantage we have been indigenized companies definitely with respect to the price — so our prices are also something–the price at which we are giving, the same quality is also something which is playing into our favor. So that is also something that kind of can give us an edge.

Ankit Kanodia — Smart Sync Services — Analyst

Okay. Thank you so much, ma’am. That really helped. That’s it from my side.

Operator

Thank you. [Operator Instructions] We have the next question from the line of Manish Jain from GormalOne LLP. Please go ahead.

Manish Jain — GormalOne — Analyst

Yes, hi. The first two questions are for Nikhil, the CFO. We have INR110 crores of capital WIP — by when will this get capitalized? And the second thing — the second part of capex question is, what is the pending capex for the current year ending on March 23 and the likely capex for FY 24?

Nikhil Jhanwar — Chief Financial Officer

So, our current CWIP has been primarily related to the infinis activity and second is the Coaxial project. Both of these projects, as we have set up in the press note that this year, we should complete the concession activity and start the commercial operation. So FY ’23, it should get complete — and FY 24–

Rajiv Gandhi — Chief Executive Officer and Managing Director

–Any details that you have to say–

Nikhil Jhanwar — Chief Financial Officer

So March ’23, there’s certain retention money and all to be paid also that would be not very significant amount. But yes, some time INR1 crore a should be paid out.

Rajiv Gandhi — Chief Executive Officer and Managing Director

Yes. So now coming to the next year’s capex, though at this point of time, there is no declaration or anything that we have made towards it. But we are looking at creating state-of-the-art animal testing facility because that is something which is very much, not only just needed by us, actually, even our country needs that, and we would then be able to do trials on animals even for international companies. So our next objective is to create a state-of-the-art animal testing facility. We are working on it. Once we work that out, we would definitely put a capital outlay plan, approve it in the Board, and then we would take it further. So by next quarter, I would be able to give you a quantitative figure on this.

Manish Jain — GormalOne — Analyst

Wow, that’s very impressive because that’s really the need of the [Indecipherable]. We work on the field, and this is really, really required.

Rajiv Gandhi — Chief Executive Officer and Managing Director

Great. Yes. I think this should work out well.

Manish Jain — GormalOne — Analyst

Moving on to next question, Rajiv–if you can just give insight on– is the registration cycle time for health products in export markets, same or lower compared to vaccines? That is — and question two is, will you get the benefit of learning curve given that your team is fully conversant with registration filings for all the vaccines that they have registered across Africa?

Rajiv Gandhi — Chief Executive Officer and Managing Director

So, the first answer is that health products require lesser time than vaccines. And two is that, yes, we have a reasonable good exposure in terms of registration — in fact, in Africa, now there are three or four, what you call like — three or four organizations. Like one organization, which they are all countries are coming together like the EU, I forgot the name. It is Kenya, Tanzania, Uganda, then Burundi and one more country — so they are all of them like that, even in the West, there is some such an association, and they are trying to harmonize and get centralized registration process.

So, you only register yourself in one of the countries or through this organization and then the registration is automatically need to be in all those countries. So we are working on that, and our team with all the back and forth and all. Yes, their capability to register has definitely improved. And now in Western Africa, we have a regulatory team over there, which also helps us in doing the registration. So overall, yes, our team has become bigger.

Manish Jain — GormalOne — Analyst

And when we go to field, we saw that there was a significant price difference between the selling price of lumpy skin vaccine to private market vis-a-vis government? So going ahead, once higher share of private sales happened in India, assuming same absolute number of vaccines, can the overall value sales be higher for Hester?

Rajiv Gandhi — Chief Executive Officer and Managing Director

There is not much of a difference between our sales in the private market as compared to the government point number one. One thing is that, some of the doctors in the country recommend three ml per dose which the government directed is on one ml. So if you look at that, then the cost goes up to 3 times, but the cost per dose is more or less the same in trade, in private to anybody.

Manish Jain — GormalOne — Analyst

Got it. Perfect. And one last thing is on things like Monkeypox initiative or any other going ahead, will Hester try and take a minimum guaranteed sale before Hester come its time and effort on our initiative?

Rajiv Gandhi — Chief Executive Officer and Managing Director

Point number one is that with the support of Virag, we have created this facility. We definitely have obligation towards the nation to work on what they would want us to work on. But having said that, the government departments are extremely proactive, and they are also aware that being a private entity, there are certain ways in which they work. We have reasons to believe that that should not be an issue for us. And whether you take it as a minimum guarantee or you take it as whichever way we are — we would work out it as I really don’t see that as a sort of a challenge in taking this initiative further.

Manish Jain — GormalOne — Analyst

Brilliant. And best of luck to keep repeating what you’ll have just done in the September quarter.

Rajiv Gandhi — Chief Executive Officer and Managing Director

Thanks, and you have always been a well-wisher, Manish. I can’t thank you more than that.

Manish Jain — GormalOne — Analyst

Thank you.

Operator

We have the next question from the line of Kuntal Shah from Oaklane Capital.

Kuntal Shah — Oaklane Capital — Analyst

Raj. Just one question from my side that — our product mix has changed in favor of animal healthcare products where the margins are lower. — he stated that in press release, — so if you see the gross margin in six months have contracted by 4%, but the EBITDA margin has contracted by almost 11%. Historically, star has enjoyed 30% plus EBITDA margin. And we understand we are in investing phase right now. But when you normalize when the investment phase is over, what do you think the blended EBITDA margin will revert back to accordingly?

Rajiv Gandhi — Chief Executive Officer and Managing Director

See, as a company, we have been so much used to the vaccine margins where we ourselves that this is the way things are panning out. We should definitely make sure that our margins improve. See, at this point, as you mentioned, we are in the growing phase. — once things stabilize in two years time or something, I am pretty sure that we will be able to turn the wheel around and make sure that by a lot of quality sales, we will definitely turn around and make sure if we do not touch the highest margin that we have touched ever in the past.

But quite close to that. Even if you take pet business, there, the margins are definitely better. That is, again, an upcoming growing division. So it is our endeavor. We ourselves as managers of the company, have not overcome this, and this question we ask ourselves in meetings every time.

Kuntal Shah — Oaklane Capital — Analyst

So good to know that. And second question is given that Hester Nepal is dependent on the tender business. Is there a viable see, you had gone to Nepal because certain strains are not allowed to be imported into India. You wanted to export it out and if a was a new jurisdiction. But now, since you are full-fledged operations in Africa, — does it make — is there a case for transferring all the facility to Africa and just have a consolidated base there and something to that effect so that there’s an operationalization or like

Rajiv Gandhi — Chief Executive Officer and Managing Director

No, what you say can be done. PPR can be made in Africa. We can do all these consolidation things — now yes, logically, consolidation is that it looks perfect. But at the end, we have a plant over there. Not just because we have it. So we are going to run it. We will make sure that this plant because in Africa also, where we are going to lease some 35 or 38 vaccines. So at the end of the day. And if PCR actually, even if we are giving 10% of the business, what FOS committed, trust me, both these capacities would be short for us. So it’s too early for us to really talk on bond issue.

Kuntal Shah — Oaklane Capital — Analyst

Thank you, and all the best, and happy to see the revenue growth

Rajiv Gandhi — Chief Executive Officer and Managing Director

And the PPR business I’m talking about, you go to FO website and and you yourself will see. In fact, after this call, there is call by FO, which I’m about to attend, the moment we disconnect that on the preparedness for the supplies because they are wanting to talk to all of the suppliers of the PPR vaccine.

Kuntal Shah — Oaklane Capital — Analyst

Thank you, all of us.

Rajiv Gandhi — Chief Executive Officer and Managing Director

Thank you.

Operator

Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the Management for closing comments.

Rajiv Gandhi — Chief Executive Officer and Managing Director

So thank you all for being patient listeners. And we — our team, we try our best to manage the company diligently and try to get results. But more than that, transparency is definitely in hallmark, and we would live up to eight. And at times, if there are — any questions on the side, you could always talk to our CFO and get answers from them. We all are working hard, and we will make this into a big success. Or we are successful, not that we are not, but we will make this into a big successful story. That’s all from me. Anything from you Priya side.

Priya Gandhi — Deputy Director – Business Operations

Thank you all for joining, and hopefully, we will maintain the trajectory in terms of growing the top line, the way we’ve seen it. Of course, the outbreak were has been a major factor in terms of growing, but even the other divisions is a little bit dip in poultry and the pace at which the pet care is growing, I think we are now definitely going to be focusing on each division very meticulously, and we hope that this growth story keeps continuing. And thank you all for your constant support.

Operator

Thank you. On behalf of ICICI Securities, that concludes this conference.

[Operator Closing Remarks]