Jagsonpal Pharmaceuticals Ltd (NSE: JAGSNPHARM) Q2 2025 Earnings Call dated Oct. 24, 2024
Corporate Participants:
Manish Gupta — Managing Director & Chief Executive Officer
Ashish Lakhotia — Chief Financial Officer
Analysts:
Hashika Mutreja — Analyst
Nirali Shah — Analyst
Aman Saifee — Analyst
Neelam Punjabi — Analyst
Subrata Sarkar — Analyst
Anupam Agarwal
Alisha Mahawla — Analyst
Unidentified Participant
Raaj Makwana — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Q2 FY25 Earnings Call for Jagsonpal Pharmaceuticals Limited, hosted by Go India Advisors. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions]. Please note that this conference is being recorded.
I now hand the conference over to Miss. Hashika Mutreja from Go India Advisors. Thank you. And over to you, ma’am.
Hashika Mutreja — Analyst
Thank you. Good morning, everyone, and welcome to the Q2 and H1 FY25 earnings call of Jagsonpal Pharmaceuticals Limited. We have on call with us Mr. Manish Gupta, he is the Managing Director and CEO; Mr. Ashish Lakhotia, who is the CFO.
We must remind you that the discussion on today’s call may include certain forward-looking statements and must be therefore viewed in conjunction with the risks pertaining to the business.
May I now request the management to take us through the financial and the business outlook subsequent to which we will open the floor to Q&A. Thank you. And over to you Mr. Manish.
Manish Gupta — Managing Director & Chief Executive Officer
Yes, thank you Hashika. And good morning, everyone. Thank you for joining us today for the inaugural earnings call of Jagsonpal Pharmaceuticals Limited. And we are pleased to welcome you all as we share company’s progress and discuss our growth strategy.
Before getting into the purpose of the call which is to discuss the quarterly and half yearly earnings. Since this is our first interaction with investors, I would probably take a couple of minutes to give you a brief on Jagsonpal as also our journey for last two years.
Jagsonpal has its strong track record spanning over four decades with a core focus on gynecology and orthopedics. Our science driven approach and longstanding relationships with healthcare professionals have enabled us to build a strong presence in sub-chronic, doctor driven therapeutic segments. This strategic focus has allowed us to operate efficiently while maintaining our commitment to quality and innovation.
Our business model centers around trust and confidence of doctors, which has been pivotal in driving consistent demand. We have an asset like model with complete outsourcing of manufacturing requirements of course with a very strong QMS oversight.
As some of you are aware, the company underwent a change of control about two years back when Infinity Holdings acquired a majority stake of 43% plus in the company and stepped in as promoters. The erstwhile promoters, the Kochhar family opted to retain a 25% stake although they stepped down from the management responsibilities.
One interesting fact about Kochhar family is that they hold a distinguished reputation amongst doctor fraternity, especially gynecologists. Dr. M Kochhar, a prominent member of the family was actually one of the pioneers in the IVF field in India, contributing to its advancements since the late seventies. In fact, she was involved in the first IVF baby in this country. Consequent to the changes in the cap table, the Board was reconstituted with Harsha Raghavan from Infinity Holdings joining as the Chairman of the Board; Debasis Nandy, who is the CFO of Thomas Cook Group of companies joining us as the Chair of the Audit Committee.
Other Board members include Radhika Dudhat, she is a partner at one of the leading law firms in India, that is Shardul Amarchand Mangaldas; as well as Pallavi Dinodia who is a partner at a leading CA firm, S.R. Dinodia & Company; Mr. Prithipal Singh Kochhar, who represents the Kochhar family on the Board is also part of the Board now. I joined the Board as Managing Director of the company since July 2022. Additionally, we also strengthened our governance framework by appointing Walker Chandiok as statutory auditors, S S Kothari & Mehta [sic- S S Kothari Mehta] as internal auditors and Kirit Mehta & Company as our cost auditors.
As you may notice, the journey over the last two years has been rather mixed. We began with strong momentum of the dydrogesterone franchise, wherein the company was amongst the pioneers in the country. This franchise had emerged as our largest product within 18 months of launch. With significant initiatives around cost and operational efficiencies, we could drive an almost 74% increase in our operational EBITDA with 600 bps margin improvement within the first 12 months of taking over the operations.
Our efficient management of working capital also led to a very high cash to EBITDA conversion of over 100% establishing — or helping us establish a significant war chest of almost INR150 crores by March 2024. However, we faced significant headwinds around August/September of last year with challenges in two of our key products. We faced hyper competition in dydrogesterone while our number two product Indomethacin franchise also saw spurious product availability in the country.
In response, we undertook certain decisive corrective measures that although probably affected our performance in the second half of FY24, we’re strategically aimed at strengthening our competitive position for the future. We commenced the current year on a positive note with our key brands returning to positive growth as also strong recovery across all financial parameters in Q1. We also concluded our first inorganic initiative by acquiring Yash Pharma’s India and Bhutan business in Q1 which expanded our therapeutic presence into dermatology and pediatrics.
Our Q2 performance I believe is the beginning of the reflection of the true potential of Jagsonpal’s franchise with the doctors supported by the capabilities of our team. Our sales for the quarter were almost INR75 crores with a growth of 29% over comparable period. While a significant part of this growth was on account of acquired business, I’m also happy to report that our core business is now back on growth track with a growth of almost 5% over Q2 last year and almost 33% over average quarterly sales for the second half of last year. Our operating margin profile for both Q2 and H1 is of course again reflective of the strength of our brands as well as the quality of our products.
Over the last two years we have also curated our CSR initiatives with a particular emphasis on advancing women’s health. In alignment with this objective, we brought in all our community initiatives under the MySakhi umbrella. Under this initiative, we have already established seven pink toilets in schools and colleges of Punjab, Haryana and Uttarakhand.
We have also launched a dedicated website, mysakhi.in a platform focused on critical aspects of women’s health across all the stages of life from Menarche to Menopause. The website features initiatives led by medical experts to raise awareness about menopause management through interactive virtual discussions. The recordings of these sessions are also available on the website.
We have also been rewarding our shareholders with enhanced dividend of 100% over last two years. In furtherance to that, the Board at their meeting held on the 23rd October that is yesterday, have approved a stock split to change the face value of our equity shares from INR5 to INR2 with a view to create more liquidity in the stock as also make it more investor friendly. Recently we had also entered into a sale agreement to divest our Faridabad facility which housed our manufacturing earlier for a consideration of INR41 crores. We expect to conclude this transaction within next few weeks.
Looking forward, we remain focused on leveraging our science based approach to introduce differentiated products as also expand into newer therapeutic areas through inorganic strategies. We continue to prioritize operational efficiency, disciplined financial management and long-term value creation and stay on course on delivering our guidance for the current year while upping our margin expectations.
I now request Ashish Lakhotia, our CFO to take us through the financial performance for the quarter as also the first half. Over to you Ashish.
Ashish Lakhotia — Chief Financial Officer
Thank you, Manish, and good morning once again to everyone on the call. I am pleased to share the financial highlights for Jagsonpal Pharmaceuticals Limited in Q2 FY25.
In Q2 FY25, we recorded revenues of INR74.7 crores which represents a robust growth of 29.2%. Our operating margin before accounting for ESOP cost expanded by 290 bps to 24.6%. This expansion was instrumental in driving a significant 46.6% growth in operating EBITDA to INR18.4 crores.
Coming on the net profit, our net profit for the quarter grew by 53% to INR11.4 crores translating to a net profit margin of 15.3%. Coming on the H1 FY25, we posted revenues of INR136.1 crores reflecting a healthy growth of 15.3%.
Operating margins pre-ESOP expanded by 130 basis points to 22.8% leading to a 22.4% increase in operating EBITDA to INR31.1 crore. Our net profit also saw a 12% rise to INR16.8 crores resulting in a net profit margin of 12.3%. This growth is slightly lower on account of exceptional accounting of INR3.3 crores in Q1 which was towards acquisition related costs.
Our business performance, supported by strong financial discipline resulted in INR15.8 crores increase in our cash balance which stood at INR93.4 crores on 30th September. In conclusion, our performance this quarter underscores the strength of our strategy supported by operational and financial discipline. We remain committed to our vision of sustained growth and value creation for all our stakeholders.
Thank you all for your attention. I will now open the floor for questions.
Questions and Answers:
Operator
Thank you very much, sir. We will now begin the question-and-answer session. [Operator Instructions]. Our first question is from the line of Nirali Shah from Ashika Stock Broking. Please go ahead.
Nirali Shah
Hi. Congratulations on the strong result this quarter. So, Manish, I have a question. I have two question — I had couple of questions to begin with. On your recent launch of MemUp which is I believe the first bioidentical hormone. Could you just elaborate on the market that you are targeting with this product and what kind of growth prospects and competition are you are expecting in this segment?
Manish Gupta
So Nirali, if I — your line was a little tough to handle in the sense. But I understand your question is on our recent launch of MemUp. Is that right?
Nirali Shah
Yes.
Manish Gupta
So MemUp is the first hormone replacement therapy product or a first product in the country to deal with menopause. Because for whatever — unfortunately this topic is not an area which has been fully understood by the doctors as well as the patient population. They take it as a phase of life and while of course it is a phase of life but the adverse mood swings and the other financial — physical implications of menopause can be handled through these hormone replacement therapies such as MemUp.
So we were the first ones to introduce. It’s a long journey here because we are working on creating an awareness both at the doctor level as also the patient level. And that’s why you will see a lot of efforts are being put through our CSR initiatives under MySakhi website wherein we are engaged with eminent doctors who are addressing and interacting with patients as also their fellow doctors on this subject every fortnight. So it’s a long journey. It’s a concept building product. Something that has not been there in this country. Numbers are very insignificant at this point of time. But I believe it’s the need of this country given that now we have a significant population above 45 years of age.
Does that answer your question, Nirali?
Nirali Shah
Yes. Got it. Got a lot of clarity on that one. Second, I had a question regarding our CDMO of business. So how are we — how well are we prepared for the sector tailwinds that are coming in from the CDMO side and how are we trying to capitalize on these opportunities?
Manish Gupta
Nirali, we are not in CDMO business at all, we are a pure domestic pharmaceutical sales and marketing organization. We do not do any manufacturing, either for ourselves or for anybody else. So, CDMO is not part of our business model at all. Our intent is to leverage our strengths in India, which is a fairly interesting market has it’s own — and there are significant opportunities to in-license products developed by global innovators who do not have presence in India. So, it will be a reverse for us. We are not into CDMO model at all.
Nirali Shah
Okay, I guess I read it in the IP that there’s some kind of partnership in CDMO. So just got a little bit stuck there.
Manish Gupta
So, we’ve partnered with CMOs for manufacturing of our products or CMOs and/or CDMOS to develop and manufacture our products. So it’s the other way. It is only for our new initiatives like MemUp was a product that was conceptualized at our end and therefore we partnered with the CDMO for developing it for us for Indian markets.
Nirali Shah
Okay, understood. And just one last one, on the profitability front. We have seen a very significant jump in EBITDA margins this quarter. So if you could help understand what are the key drivers behind this margin expansion? What kind of margin trajectory are we expecting for the full year FY25? And a view going ahead for the next three to four years?
Manish Gupta
Yeah. So as you would have noticed in our outlook slide, which is the Slide 23 of our investor debt clearly I mean our margins are still below what industry delivers. We believe we have a fair bit of significant headroom that we can cover in next couple of years.
We have also offered guidance for the margins for the current year. Earlier we were talking of 20% plus, now we are confident of 22% plus for sure. Difficult to predict the last number in the sense in terms of whether we’ll — where we will end up. But we are fairly confident on improving our H1 margins in the current year for sure and delivering 100 bps to 150 bps if not more margin expansion year-on-year over the next three years.
Nirali Shah
Got it. Any specific reason? Any specific segment that is contributing and which is the reason why we are seeing this jump or betterment in the margins?
Manish Gupta
It is simply better utilization of our field force. So as the sales grows, a majority of cost in domestic pharma are fixed given that they are related to the field force related expenses. Our gross margins in the business are fairly decent at about 65% if not more and therefore a growth in sale which is where we are guiding towards at 12% to 14% will certainly lead to margin expansion as our costs do not go in proportion to that.
Nirali Shah
Got it. That answers my question. Thank you.
Manish Gupta
Thank you, Nirali.
Operator
Thank you. [Operator Instructions]. Our next question is from line of Aman Saifee from iWealth Management. Please go ahead.
Aman Saifee
Hello sir, I hope I’m audible.
Operator
Yes, Aman. Please go ahead.
Aman Saifee
Yeah. Sir, could you help me with the Yash Pharma revenue and PAT number for this quarter?
Manish Gupta
Yash Pharma’s revenue and PAT, See, Yash Pharma is not a business we — I mean we only acquired the business. We did not acquire the company. So, it operates as a division of the company and not anything more than that. Having said that, as I mentioned, if you look at our INR74.7 crores sales, our core business without Yash Pharma grew by 5% for the current year and rest has been contributed, about INR14 crores out of that INR74.7 crores is contributed by the Yash Pharma related division. We, of course, do not have divisional P&Ls.
Aman Saifee
Understood sir. Sir the reason for me asking this question is because the acquisition, as you said in your opening remarks that this has drive your revenue. So for the past two years, sir, your Jagsonpal Pharma is not really growing. So what is the reason behind that, sir?
Manish Gupta
Aman, can you repeat your question? I could not fully understand.
Aman Saifee
Sir. I was asking that our acquisition of the Yash Pharma has drive the quarters revenue and the profitability. So I wanted to understand sir, why is our standalone business is not really growing for the past two years?
Manish Gupta
I think I addressed in the opening remarks that since last October or September, August or September, we had faced headwinds in two of our key products. Both — and between these two products they accounted for almost a third of our sales, dydrogesterone franchise and Indomethacin, both had different issues. One had hyper competition, and one, of course, we faced with spurious product availability in the country. So that really impacted our performance in last 12 months.
Both these issues are now behind us and therefore, as I mentioned in my opening remark, you see a recovery in our core business. We have grown 5% in our core business in this quarter and this growth rates will now accelerate as we go forward.
Aman Saifee
Okay sir, understood. And sir, could you please elaborate on the specific synergies you realize from acquisition of Yash Pharma? Both operationally and financially. How are these expected to impact on the overall growth and margins in the near term?
Manish Gupta
Yeah. So historically, if you look at Jagsonpal, we were present in very narrow therapeutic area, even within gynecology and orthopedics. So the CVM, as it is called, covered molecules in the entire INR220 lakh crore Indian pharmaceutical market. Jagsonpal was only present in about INR10,000 crore worth of molecules. Now this strategy was fantastic because it gave us a very strong position in the areas we were in, but it limited our growth potential in some form. It was therefore important to expand our therapeutic coverage aligned with our strategy.
So we are not a — as a strategy, we want to stay in sub-chronic segments. By sub-chronic, our therapies or products that require consumption from between one month to a couple of months. So these are neither chronic, which are lifetime therapies, nor very acute, which are few weeks of therapies. These are sub-chronic therapies, and that’s where Yash Pharma portfolio, which was in dermatology and paediatrics, was suitable to our strategy. It helps us expand our therapeutic marketplace. It was an under managed business, so, therefore, we could see opportunities to synergize and create value out of it, and that’s why we went ahead with that acquisition.
Aman Saifee
Understood, sir. And sir, given the rising competition in your, some of the key therapeutic areas like dydrogesterone, how is company strategically position itself to maintain the market share? What are the steps we are taking in terms of maintaining our market share?
Manish Gupta
So dydrogesterone is one unique example and I think we can probably have a little longer offline discussion, but I will try to give you a very quick perspective. This is a molecule which had only Abbott as the sole player for many, many years because of lack of availability of API. This is one of the very few photosynthetic APIs which was first developed by Mankind, second by Emcure and third by Jagsonpal. And they were the three ones to launch. All of the companies did well.
Eventually for some reason the technology got leaked and therefore somewhere last year we ended up with close to 80 players in the market. Given that this molecule was almost 1000 pro molecule in India, that led to hyper competition and clearly a lot of players suffered in the bargain. I believe the market will now stabilize as some of the lesser players will go out, given that it is no longer profitable to be in this molecule with so many competitors. So things will only improve from here on, but for the time being, we are just maintaining ourselves rather than being aggressive in this molecule. However, as I mentioned, this is an area of larger discussion and I will be happy to take this offline with you.
Aman Saifee
Sure, sir. Thank you so much. That’s it from my side.
Manish Gupta
Thank you, Aman.
Operator
Thank you. [Operator Instructions]. Our next question is from the line of Neelam Punjabi from Perpetuity Ventures. Please go ahead.
Neelam Punjabi
Yeah, thanks for the opportunity and many congratulations on some good set of numbers. So my first question is on our guidance of 12% to 14% top line growth over the medium term. So if you could please highlight what are the key growth drivers for this? Is this going to be largely organic? Are we planning to launch any new product introductions and what would be the key therapy areas which would drive this growth?
Manish Gupta
Yeah. So Neelam, thanks for joining in. And clearly the 12% to 14% guidance that we have given is the pure organic growth. Any inorganic growth which is of course part of strategy cannot be predicted and will be additional to what we have indicated.
Now coming to what will drive this organic growth. As is the case with Indian pharmaceutical industry. Fundamentally there are three growth levers. One is volume increase. Of course volume increase in the industry is slightly subdued for the last couple of years. Second is price increase. And third is new products. So I believe the 12% to 14% growth that we have been guiding to will be combination of the three with equal weightage for all of them. So I believe between 3% to 5% will be contributed by each of those. Of course, some products will grow faster than the others.
Our strategy around new products is linked to the therapeutic presence that we are in. And typically we look at launching some 100 crore molecules. So we actually do not go for large opportunities. We believe being a meaningful player in sub 100 crore molecule or sub 100 crore opportunities is far more manageable, profitable and sustainable area of opportunity. So that’s the way we are going to work on.
Fundamentally we are science based company. We are not a pure commerce driven organization in the doctor’s chamber. We deal with the scientific requirements of the doctor and I believe that the space which is less competitive, though — is little more difficult to crack. So that is going to be also the way we choose our products. So you will see, like MemUp, which was the question asked by Nirali. It’s a very conceptual product. It’s going to be a slow, grinding increase in sales, but I believe that will be for keeps for us. And similar is the strategy for all our new products or most of our new products.
Does that answer, Neelam?
Neelam Punjabi
Yes, sir. That’s very helpful and quite elaborative. My second question is on our margins. So we’ve reached 25% margins this quarter. We are guiding for 22% for the whole year with 100 basis points, 150 basis points expansion going forward. So over the medium term, if you could highlight what is the peak potential margins that our business can reach?
Manish Gupta
Yeah. So if you look at pure domestic pharmaceutical businesses, most of them, once you have reasonable scale, operate at 30% plus EBITDA margin. I think what we currently lack is that level of scale. But I believe in three years we should be nudging closer to 30%, if not breaching the 30% mark.
Neelam Punjabi
Got it. Okay. And if I look at our field force, we have about 900 plus MRs right now. So that means as per Q2 numbers, our productivity stands at 2.8 lakhs per MR per month. So whereas the industry operates anywhere between 5 lakhs to 10 lakhs of productivity. So where do we see our number going forward?
Manish Gupta
Yeah, so this is a very, very good question, Neelam. Fundamentally, the reason for guiding towards a margin expansion is actually coming from this only because we believe in the current field force, we have all the coverage that is needed. So most of our growth will actually come from improved field force productivity. The nature of the product that we have will not allow us to get that 5 lakhs and 10 lakhs PCPMs that some of the better companies or bigger companies can command, because, as I mentioned, our strategy is to look after smaller niche molecules. But having said that, I think getting into 4 lakhs to 4.5 lakh range in next three years is what is feasible and that should translate into the guidance that we are giving.
Neelam Punjabi
Got it, Okay. And lastly, my question is on the cash balance of about INR93 crores in our balance sheet right now. So could you outline your capital allocation strategy? How much of this cash is year marked for potential acquisitions versus reinvestment in our business?
Manish Gupta
So our model is such that we actually do not require investments by itself in the business. In fact, our cash-to-EBITDA conversion has been close to 100% or 103% over last five years. I think there were opportunities to reduce our working capital. Most of that is over, I think, but net of tax leakage, everything else will be converted to cash for us. So our business requirements are limited as far as strategies are concerned. So all of this cash and whatever we generate, even going forward, will be used for inorganic strategies only.
Neelam Punjabi
Got it. And lastly, if you can just highlight the strategy around inorganic and acquisitions going forward. What are we looking for there?
Manish Gupta
This is a difficult one because acquisitions are always 80% strategy and I would say 60% strategy and 40% opportunity. So there are — clearly there will be two sets of acquisitions we will be looking at. One is, if we can penetrate deeper in the therapies that we already have. So if there are opportunities to acquire brands in the four therapies that we are already in, will be one part of our strategy.
And second would be to expand into newer therapies, which will be more like a business acquisition. Because that’s where we will need separate field force, like we did in the case of Yash Pharma. So it will be a two pronged acquisition strategy. Brands within the therapies we are in, or businesses with field force. If we were to get into additional therapies, but a therapy choice will be sub-chronic. We shall not get into both acute and/or chronic segments.
Neelam Punjabi
Got it. This is very helpful. And that’s all from my end. All the very best.
Manish Gupta
Thank you, Neelam.
Operator
Thank you. [Operator Instructions]. Our next question is from the line of Subrata Sarkar from Mount Intra Finance. Please go ahead.
Subrata Sarkar
Hello.
Manish Gupta
Yes, Subrata.
Subrata Sarkar
Yeah. Sir, I’m pretty new to this company. So if you can just highlight, like there is a change in the — like there is change in the promoter and shareholding structure. And new co-promoter has kicked in. So what is their background like? If you can highlight that, how they can add value to this company? And after this change, what is the management level change, field level change already being implemented? And what is the plan on that?
Manish Gupta
Yes, this is of course requires a much larger discussion, and I’ll be happy to host you at our office in Mumbai and/or in Delhi.
But having said that, Infinity Holding is a private equity organization. It’s a perpetual fund, unlike time frame funds, which most PEs are, which means typically they invest, they do not have a time frame for investment and they believe in compounding stories, which is where Jagsonpal fits very for them.
This is their first and the only pharmaceutical investment. However, they are of course invested in many other industries like Hindustan Foods, and they have also Fly91, which is an airline industry and all that. You can get more information on their company through their website, Convergent Finance.
In terms of management changes, I think the operating teams remain largely the same, but both — I came in two years back and Ashish joined about a year back. So both have been recent changes in a way, in that context. But rest of the operating team, while we have made it a little leaner structure, but team remains largely the same.
Does that answer your question, and rest I think we can take it offline.
Subrata Sarkar
Yes, sir. Just a small follow-up, sir, if you won’t mind. Like since you have mentioned that this is your first investment in the pharma space. So like what — out of the — let’s say, what is special about Jagsonpal Pharma which you feel like there is some special — like there are — this company is different, number one.
And second, what do you feel like, what kind of value addition? The first point is just to start with, like what make you attracted to this company, number one? And number two is what kind of change, or even — let’s say transition or improvement, which you believe you can do, sir?
Manish Gupta
Yeah, again, I will just address it partially because this requires larger discussion.
First, I’m not a Convergent nominee on the Board or Infinity Holding nominee on the Board, and pharmaceutical is not new to me. I’ve been a career pharmaceutical guy with 25 years in the industry, maybe more. Work experience in two large organizations, largely Wockhardt Group for 12 years and Strides Group for next 12 or 13 years.
So it’s not a new industry for me. Having said that, for Infinity Holdings, it was their first exposure into pharmaceutical industry. And the reason for investing in Jagsonpal was: A, they believe in India story.
B, India is a branded generic market and within that Jagsonpal while it was a smaller company, it was a profitable, but slightly under managed company. And they clearly saw an opportunity to create value here. C, of course, the quality of brand and the corporate image of the organization was very good with the doctors.
And the kind of product range that Jagsonpal had. The branch were fairly well entrenched in the doctors chambers. So clearly — and finally, of course it fitted in this framework of governance which is what I mentioned somewhere in my opening remarks also because it is a science based organization and not a pure commerce driven organization in the doctors chamber.
So all of these parameters I think attracted Convergent, who believes in compounding story, because, I also mentioned that they are a perpetual fund and not a fixed lifetime or life timeframe fund. All of these parameters went behind their decision to invest in Jagsonpal.
Subrata Sarkar
Perfect, sir. Perfect, like I would be in touch with you to understand more, sir. Offline.
Manish Gupta
Thank you.
Operator
Thank you. [Operator Instructions]. Our next question is from the line of Anupam Agarwal from Lucky Investments. Please go ahead.
Anupam Agarwal
Thank you so much for the opportunity and congratulations sir, on a great set of numbers. My first question is sir in the first half of INR136 crores of top line, can you bifurcate between the therapies that we are presenting across the four segments?
Manish Gupta
Yeah, I don’t have perfect numbers but I will give you reasonably accurate numbers in that sense, 50% of our sales would be in the space of gynecology.
Anupam Agarwal
Okay.
Manish Gupta
Another 20% odd will be in ortho. And between Derma and Pedia would be the rest of the sale splitting almost equally.
Anupam Agarwal
Okay. So, fair to assume that in the INR75 crores done in second half, you might — clarifying INR14 crores was Yash Pharm?
Manish Gupta
That’s correct. That’s what I mentioned as well.
Anupam Agarwal
Right. Okay, understood. So going forward three to five years, what and how do you feel split across therapies going forward? I mean, if you can also call out the number of products that are in the pipeline, what are we looking at in terms of launches going forward?
Manish Gupta
Yeah, I’ll give you a little holistic answer here, without giving specificity, given the competitive intelligence here. So, see, we currently operate out of four divisions. And in each division we probably see — we’ll probably see between two to three new launches every year. Okay. And these launches will encompass all the four therapeutic areas that we currently cover. With, of course, a slight bias towards gynecology, because I think this company stands for gynecology in doctors chamber. So that’s a Broad thinking.
I don’t believe without inorganic strategies, this composition will change dramatically from where we are today. But there would be slight increase in gynecology, as would have been the case given the new launches also will have larger bias towards gynecology. So that number may slightly increase, but as a structure, I don’t think it changes unless we do a significant inorganic initiative in either of the therapies or any new therapy.
Anupam Agarwal
Got it. That answers the question very well. My next question is, sir, in terms of coverage across the four therapies that we are in, how is your doctor coverage like, let’s say, if it’s a 50,000 doctor pool for Gyne, how much — how many doctors are we today targeting? What is the plan going forward?
Manish Gupta
So, we cover about 80% of the gynecologist. We cover about 65% to 70% of the orthopedics. Of course, the numbers in Derma would be, again similar Pedia may be little lower because Pedia is more spread out in that sense.
I don’t think we need to change or increase our doctor coverage in terms of percentages, but we need to improve our doctor choice, and that’s an exercise we are undertaking at this point of time. Doctor list needs to be upgraded. Any legacy company always ends up carrying a lot of historical baggage. So that is something which we are undertaking scientifically. How do we improve our doctor list? Not doctor coverage. Coverage, I think is adequate.
Anupam Agarwal
Understood. And are these doctors today largely mixed? Fairly mix of Tier 1, 2, 3, 4 or what is the presence of the doctor like?
Manish Gupta
Yeah, so I think it’s a fair mix. I would say to some extent Jagsonpal, which is probably known also. But Jagsonpal is — there is only one market where Jagsonpal is not present, which is Mumbai. Otherwise we are well established across the country. Jagsonpal has never entered Mumbai. As of now, we don’t see a reason to get into Mumbai because it’s a very competitive market. But otherwise we have a well established presence across all the Tier 1, 2 and 3 kind of markets.
Anupam Agarwal
Understood. Sir, last question from me. So, dydrogesterone, the market you mentioned was a INR1,000 crores market. And because of the competition, they were suffering. Is the end market today even INR1,000 crores or the market has also shrunk?
Manish Gupta
No, no. Market has not at all shrunk, but the hyper competition — so Anupam, this I will take it separately because it’s a very long discussion point. It’s a very, very unique kind of molecule and that’s why it requires a different understanding of this molecule.
Having said that: A, market has not shrunk. It’s just that they were hundred of competitors or 80 plus competitors as per IQVIA that came in within 6 months to 12 months and each one of them were carrying fair bit of inventory. So therefore then you become desperate and dump it in the market.
Anupam Agarwal
Understood.
Manish Gupta
In that context, we took a back seat because we kind of went slow on the market — in the marketplace, I believe this market will kind of clean up as the product that is currently flushed in the market starts expiring or starts losing shelf life, and we will make a comeback in a kind of some period of time.
Anupam Agarwal
Understood. Yeah.
Manish Gupta
But as I said, this is a much larger area of discussion and we can have a separate conversation around it.
Anupam Agarwal
Understood. Just last question, if I may. Just wanted to know your thought process of being a fully outsourced manufacturer for products and not going into the entire value chain, controlling the production and everything. What’s your take on that?
And with respect to Yash Pharma, also, is the product getting manufactured at the same site as where the Jagsonpal Pharma products are being manufactured or it’s a different vendor altogether?
Manish Gupta
So I will address this question in two forms. One is from an overall perspective and one is from a Jagsonpal’s perspective. Clearly, I think you need a blend of both outsourced and in-house manufacturing, especially where if you are also having international business.
Jagsonpal, fortunately, is a pure India centric business. So therefore, technically we do not require manufacturing. Secondly, Jagsonpal’s range of products. See, we fundamentally are a hormone company. So our Gyne presence that I mentioned, almost 50% of our revenues come from Gyne. That’s predominantly hormonal products which require dedicated manufacturing.
Historically, JPL or Jagsonpal had manufacturing at Faridabad which unfortunately, I mean, as the cities expanded, it became part of a metro or urban city of Delhi and therefore there was difficulty in continuing that production and hence it was shut down.
There was a choice to establish a new facility versus doing outsourcing. And I think a very conscious call was taken to outsource simply because at this scale you cannot keep the plant fully occupied and therefore it becomes inefficient.
Okay, so from a Jagsonpal perspective, I think outsourcing is the right strategy. Having said that, we have a very strong QMS organization. I come from a purely regulated market background and therefore for me quality is first, which was also a shared perspective with the Erstwhile promoters. So that gave us the confidence that we do all the right things in ensuring quality.
Yash Pharma business, which we have just acquired. Yash was a manufacturing organization and also they had export business. So the way the transaction is structured, we continue to source from Yash Pharma’s manufacturing setup.
It cannot be manufactured at our current other third-party location simply because the nature of products are very different. One is hormonal, and this is liquids and creams predominantly in the — both the Pedia and Derma are liquids and creams, fundamentally.
Anupam Agarwal
Got it, sir. That answers all my questions. Thank you so much for answering them and wishing you all the best for the festivities coming up. Thank you.
Manish Gupta
Thank you, Anupam.
Operator
Thank you. [Operator Instructions]. Our next question is from the line of Alisha Mahawla from Envision Capital. Please go ahead.
Alisha Mahawla
Hi sir, good morning, this is Alisha. Sir….
Manish Gupta
Can you be a little louder?
Alisha Mahawla
Sure. I hope I’m audible now?
Manish Gupta
Yes.
Alisha Mahawla
Yeah. Sir, with Yash Pharma, the acquisition. Can you just reiterate what did we pay to acquire this division of Yash Pharma and what is the size of portfolio that we acquired in Derma and Pedia?
Manish Gupta
Yeah. So, A, we have not acquired the company. We have acquired the business India and Bhutan business of Yash Pharma as was put up in the — at the time of acquisition. I think the company did about INR48 crores of sales last year. When I say company, I mean the business. The business that we acquired had about INR47. crore something worth of sales in last 12 months, roughly 60-40 split between Derma and Pedia. That was the broad numbers as far as Yash Pharma business was concerned. And their initial operating margins were in the region, when we acquired, were in the region of about 12%. This is based on what we have disclosed and what was the diligence information.
Alisha Mahawla
And what did we pay to acquire this?
Hashika Mutreja
We paid INR94 crores to acquire it.
Alisha Mahawla
Got it. And what kind of MR addition have we done in the last three years?
Hashika Mutreja
Three years is — organically, I think we would have — on our own, probably added 30 to 40 people in the last three years. But, I think a larger increase came out of Yash Pharma because about 220 to 240 odd medical reps got added through that acquisition.
Alisha Mahawla
Got it. With respect to inorganic, while you did mention that it would either be for brand and existing therapies or new therapies, is there any roadmap that we’re planning to maybe do one acquisition every year or every six quarters? Do we have a roadmap internal target like that?
Manish Gupta
Not really. Because as I mentioned, acquisition is always, fair bit of strategy and bit of opportunity. So we are not desperate for acquisition. For me, entry price of any acquisition is very, very important. So, if we get something which is — which fits our strategy and also fits our price, we will go for it. Else we are happy to either sit on cash or even return the cash to our shareholders.
Alisha Mahawla
Understood. And just one last question. What kind of product launches we would have done in the last three years?
Manish Gupta
Come again?
Alisha Mahawla
What kind of product launches we would have done in the last three years?
Manish Gupta
Within the therapies that we are in, we have made. Like dydrogesterone was a new launch about 28 months or 30 months back, which became very big. So it is all within the therapies, predominantly in gynecology, that we have done in last three years. Of course, going forward, we will also see new launches in both Derma and Pedia.
Alisha Mahawla
Okay, thank you.
Manish Gupta
Thank you. ladies and gentlemen, in order to ensure that the management is able to address questions from all participants, please limit your questions to two per participant.
Our next question is from the line of Milan Shah who’s an Individual Investor. Please go ahead.
Unidentified Participant
Good morning, sir. Thank you for the very insightful and transparent discussion that you are conducting.
My question is about the, sort of the competitive moat of the company because you mentioned that we do not want to manufacture any molecule, but we are just in — more or less it’s a kind of a trading company. So, what is our USP which others would not be able to replicate?
Manish Gupta
So, see, India is a branded generic market, okay. And if you see even largest Indian company will be outsourcing more than 80% or 90% of their production for India. So while most of them have manufacturing, but it is predominantly for their international business and not for their Indian business. So therefore, our strategy is not very different from others for India market. Let me put it as point one.
Secondly, most Indian manufacturing that happens for India even in the big companies was purely for tax reasons and not otherwise till those tax holidays existed. That’s why if you recollect, the manufacturing kept swinging from Daman to Goa to Badri and then to Sikkim and now to Jammu and whatnot.
So manufacturing dynamics for India are very different from global manufacturing dynamics. And I don’t think manufacturing has any competitive advantage in the Indian context. What we really own or what is our strength is doctors chamber.
The medical rep of Jagsonpal, given that he has been visiting doctors for over 40 years, I’m not suggesting that people have been around for 40 years, but the company has been around for 40 years.
There is a fair bit of comfort and confidence on the quality systems, on the products and the kind of products that we offer to the doctor. So it’s really our ownership of the doctor chamber that we are good at.
And as I mentioned, this is science based. This is not a commercial discussion that we have in the doctor’s chamber. It’s a science based discussion. Our nature of products are very high doctor intensive, I would say, most of them are gynecology products. Most of them are to support pregnancy in some form or the other.
And therefore, a doctor will never take a chance. It’s a very well thought out strategy, I would say. I was not the originator of this strategy in Jagsonpal, but that is something I loved and that’s why I took this responsibility.
Does that answer your question?
Unidentified Participant
It does. I just have a follow-up question. So I think from what you say, a large part of the Jagsonpal’s success perhaps is determined by the choice of molecule that you go for. So what is our strategy? Do we kind of take it as a license from established international manufacturers and then outsource it? Or these kind of products which anybody can get it outsourced?
Hashika Mutreja
No, no, clearly choice of molecule is very, very critical. Or choice of concept is very, very critical. Most of or many of our products are concept molecules or concept products. As I also mentioned, we pick small niche areas, sub INR100 crores opportunity or things that will not command too much attention from competitors.
Most of the choices that we make are hard choices. When I say hard choices like this menopausal product, we need to establish the concept in India. We know it is going to be a long journey. But we believe time has come for India to have this.
So these are the kind of choices we make which also includes opportunity to in-license products. There are a lot of women healthcare companies globally which do not have presence in India, especially European companies. And we would love to become their partners of choice for marketing their products in India.
So that’s a broad thinking that we are working on.
Unidentified Participant
Right sir, thank you so much and I appreciate all the good work you’re doing.
Manish Gupta
Yeah. Thank you Milan.
Operator
Thank you. [Operator Instructions]. Our next question is from the line of Sriram. R who’s an Individual Investor. Please go ahead.
Unidentified Participant
Thanks for taking my question. It’s a follow-up to the previous question. So from what I understand apart from marketing, I mean where do you — basically you add value in the doctor and doctors’ rep. But that is your basic competitive advantage, right? That is what you said?
So — and also you mentioned that you will be entering sub INR100 crores molecules. So without R&D capability and manufacturing facility, how will you enter these new white spaces? Can you just elaborate that?
Manish Gupta
Yeah. So, I think Indian market is full of CDMO. So, will we own the concept, there are — see first is, even if I had to have my own R&D, I cannot have complete R&D setups which can develop every kind of product. So it is always better to deal with experts in that area, which is what we do.
So there are plenty of CDMO organizations, R&D setups who are happy to develop the product that we have in mind for a cost. And then we have CROs who can undertake the trials or whatever that are required. So I don’t think, manufacturing and/or development capabilities are any restriction for doing business in India or even for most of the world.
World over, if you see, even in US and all, there are plenty of virtual companies which are far more. — it was really the Indian companies who went outside India required manufacturing because plants needed approval. And that’s where this entire origination of discussion comes from. But otherwise, a pure marketing or a country specific operation does not really require manufacturing.
Unidentified Participant
Fine, sir. Understood. And just one more question. What is the name of the product that you mentioned that deals with this menopause? Can you spell that out for me?
Manish Gupta
The brand name is MemUp. M-E-M-U-P.
Unidentified Participant
M-E-M-U-P?
Manish Gupta
Yeah.
Unidentified Participant
Okay. Thank you so much, sir. All the best.
Manish Gupta
Yeah. Thank you.
Operator
Thank you. [Operator Instructions]. Our next question is from the line of Raaj from Arjav Partners. Please go ahead.
Raaj Makwana
Hello, am I audible?
Operator
Yes sir.
Manish Gupta
Yes please.
Raaj Makwana
So, sir, for Q2, FY25, how much is our organic growth, 5%?
Manish Gupta
In the first half, our organic growth is 2% between 2% and 2.5%, largely driven by 5% growth in Q2. Because if you recollect we had our Q1 was almost flat.
Raaj Makwana
Okay. So we are expecting full year organic growth of 12% to 14%, right?
Manish Gupta
This year the organic growth will be higher than 12% to 14%, simply because last year second half was terrible for us. I won’t claim it, we have done a great job that full year growth will be higher than 12% to 14%. It’s just that the base for second half is not too good.
Raaj Makwana
All right. And sir, you have also guided for 22% plus EBITDA, right?
Manish Gupta
That’s correct, right.
Raaj Makwana
And this EBITDA margin is expected to increase 1% to 1.5% year-on-year for at least next three to four years?
Manish Gupta
That’s correct answer.
Raaj Makwana
All right. And sir, are we actively looking at any acquisitions going ahead?
Manish Gupta
So we are always looking and also not never looking. That’s the way I look at it. As I said, bit strategy, bit opportunity. We don’t have to look. Of course people come and offer. There are plenty of bankers in the country so they are always knocking our doors. Everyone knows we are sitting on cash, everyone knows our strategic intent of acquisition and in the scale that we are in, actually we do not have much competition in our country, either they are big buyers, likes of Torrent’s and Mankind and whatnot. But in the space that we are in, I think there is not much competition. So there are bankers who keep knocking at us and we look at if there is a strategic fit.
Raaj Makwana
Understood sir. And sir, the sales per MR is around INR2.8 lakhs per month per MR, around that figure, right? So how will you reach INR4 lakh, INR4.5 lakh in next three years time? Because if I look at the coverage, so coverage is pretty much fine. It’s around 85% in Gynae, 56% in Pediatric. So I wanted to understand what strategy are you planning to adopt to increase the sales per MR?
Manish Gupta
Yeah. So typically if you know each MR. Has a doctor list of either 120 or 150 as the case may be. But unless you do good quality homework, you realize that only 30 to 40 or in some cases 50 will be prescribers in that and 100 are wasted energies. So a lot of — it requires a lot of homework, lot of execution work. And this is something I alluded in the call of getting our doctor list right. There will be overlapping doctors which — so given that we are a legacy company and even Yash Pharma acquired business is a legacy business, there’s a lot of course correction we need to do at our ground level in terms of doctor list and doctor coverage.
Raaj Makwana
Okay. Understood.
Manish Gupta
Yeah, the PCPM growth will come from that. So if we have say 50 prescribing doctors in average territory, how do we take it to 60 or 75? How do we get more prescription from the 50 where we are already entrenched? Are they writing one product or two products or three products? So those kind of things and for which we also need to keep training our MRs better. So that’s an area we are investing.
Raaj Makwana
Understood, sir.
Manish Gupta
No easy answer to be candid, but we are doing a lot of things behind the scenes to make things happen.
Raaj Makwana
Okay. Sir how much is the attrition rate of MRs currently?
Manish Gupta
20% plus close to 30% in last fiscal — I mean, in last year’s second half, we obviously when the going gets tough, people tend to leave, but otherwise we are in between 20% and 30%, which is generally the attrition rate in this industry.
Raaj Makwana
All right. And sir, how to go about the strategy to retain the MRs. Because if I look at….
Operator
Sorry to interrupt Mr. Raaj, we request you to get back to the question queue for any follow-up questions. Our next question is from the line of Saket, who’s an Individual Investor. Please go ahead.
Unidentified Participant
Hi, am I audible?
Operator
Yes, please go ahead.
Unidentified Participant
Yeah. So, thanks for the opportunity. So, Manish, if I look at the deck that you have shared and if we take a look at the branded generic market that say India is, see one of the major success driver is, the brands that you develop right. Now, if I look at your Slide 17, where you have talked about key brand progression, then most of these brands and which I assume are the legacy Jagsonpal brands which account for say 70% of your sales, most of these MATs have declined over the last year or so.
So what would you attribute these decline to? It is largely because of those spurious products or has it been like you are recalibrating some of the strategy around these brands that some of the de-growth in sales has taken place because of that?
Manish Gupta
Yeah. So as I mentioned somewhere during the call, last year, second half we had tough period for both our key brands, Indocap — I mean Indomethacin and Divatrone, which used to be the top two products of our company. Now what happens is moment you lose steam, in that context, the field force tend to give up because a lot of remuneration of the team comes from incentives. Okay.
People are highly incentive driven in field. So when two of your key products are not doing well for various reasons, some of them outside their control, they also tend to give up on the other products, which is why many of our brands declined on a MAT basis, if you see, but if you look at the first half average other than Divatrone, you will see that all of them have made a strong comeback.
And that’s why I’m saying last year second half is what has pulled us down. It has to do with the two key products. But all our key brands are now back on growth track. There is a momentum. The field force is now again back to their highest levels of motivation and which is beginning to reflect in our performance both in the current quarters and also going forward.
Unidentified Participant
Okay, thanks for the clarification. Now, my second question will be, you’re talking about in-organic play. So in-organic, what would be the priority referring in-organic play? Is it like looking at, say, acquiring more brands, say to substitute — either to support, say, because in branded generic, there is a concept of no basket brands like support the existing brands or your focus will be more on, say, entering into new therapy areas or say, acquiring new capabilities like field force, which might be slightly more dynamic than the legacy field force that you are currently dealing with. So what would be the focus area of these equations?
Manish Gupta
Difficult question. I think all three are focus areas. But I think the challenge in acquisition is more pricing than strategy. I mean, strategy wise, clearly, I think the largest positive synergies always from brand acquisition rather than business acquisition. Okay. So priority wise, it will be always a potential brand in the therapies that we are in, followed by business or new therapy. But I think what constraints is the pricing environment currently prevalent in the market. Expectations are so high that it simply doesn’t make sense to acquire any of those targets.
Unidentified Participant
Okay, so when you say price increase, it is valuation here, right? Valuation that some seller….
Manish Gupta
Sorry, come again.
Unidentified Participant
So when you are saying pricing, it is valuation, right. Valuation of the ask for these. [Speech Overlap] Okay. Okay. Now my last question would be, you talked about that furious brand issue that you face. So is it now behind us? Are we now done with and so, and can you talk about some of the initiatives that you undertook like QR code or something like that which you think would now help avoid such fiascos in future?
Manish Gupta
No. So see, our core strategy, as I mentioned, is always to go for sub INR100 crore or lesser size molecules. Now, dydrogesterone was an exception for us as a strategy simply because of the API development that the company undertook. And it was never expected to become a highly competitive molecule. So therefore, I don’t think we’ll have a repeat of that kind of scenario simply because other than dydrogesterone, we do not have a mass molecule or mass market molecule in that context.
Having said that, again, this question — I mean, because it relates to a lot to our strategy, I think I would be happy to take it offline given that it will require a much longer answer.
Unidentified Participant
Sure, sure. Manish, I appreciate your transparency and maybe looking forward to connecting with you sometime.
Manish Gupta
Thank you.
Operator
Thank you, ladies and gentlemen.
Manish Gupta
Can we take last two questions, if any, left, because otherwise we are spilling over time.
Operator
Sure, sir, that was the last question for the day.
Manish Gupta
Perfect. Okay.
Operator
So I would now like to hand the conference over to Mr. Manish Gupta, Managing Director and CEO, for closing comments.
Manish Gupta
Yeah. Thank you all the participants for your valuable questions and engagement today. We appreciate your interest in Jagsonpal and your continued support as we navigate this pivotal phase in our growth journey. As discussed, our recent performance reflects our resilience as also the effectiveness of our strategic initiatives, particularly in light of our recent acquisition and return to growth in our core products.
We remain committed to leveraging our scientific expertise and operational efficiency to create long term value for our stakeholders. Should you have any further inquiries and/or additional information, please do not hesitate to contact our Investor Relations team at Go India Advisors. We remain committed to engaging with all of you, posting transparent communication as we continue advancing our objectives of creating value for our stakeholders.
Thank you once again for your participation and wish you a great day ahead. Thank you.
Operator
[Operator Closing Remarks]