J B Chemicals and Pharmaceuticals Ltd

NSE:JBCHEPHARM

Ladies and gentlemen, good day, and welcome to JB. Pharma's Q3 FY '25 Earnings Conference Call as on the 5th of February 2025. [Operator Instructions] Please note that this call is being recorded.

I now hand the conference over to Mr. Jason D'Souza, Executive Vice President at JB Pharma. Thank you, and over to you.

Thank you, moderator. Welcome to the earnings call of J.B. Pharma. We have with us today, Nikhil Chopra, CEO and Whole Time Director; Kunal Khanna, President Operation; and Narayan Saraf, the CFO of J.B. Chemicals & Pharmaceuticals Limited.

Before we begin, I would like to state that some of the statements in today's discussion may be forward looking in nature and may involve certain risks and uncertainties. A detailed statement in this regard is available in the Q3 FY '25 results presentation that has been sent to you earlier.

I would like to hand the floor to Mr. Nikhil Chopra to begin the proceedings of the call and for his opening remarks.

Thank you, Jason, and a very warm welcome to all of you. Thank you all for being with us. I will commence with my thoughts on our quarter 3 performance.

I would like to start by saying that J.B. continues to deliver strong profitable growth. The quarter 3 FY '25 performance is a reflection of the statement. While top line has grown by 14% to revenue of INR 963 crores. Operating EBITDA has grown at 15% to INR 270 crores, and net profit has surged to INR 162 crores, growing at 22%. This performance has been enabled by our mix of businesses and markets, specifically our focus on India branded formulations, CDMO and some select international market.

We have maintained the run rate of quarterly performance with revenue of INR 963 crores. This was due to strong momentum in domestic business and improved traction for our CDMO businesses, whereas we had on our gross margin at 67% in the quarter, our operating EBITDA saw improvement in margins to 28.1%.

Over the past couple of years, we have expanded the basket of our key brands. We are consistently enhancing share of our chronic within the mix and rank far ahead of IPM in category growth for our chronic at 24% versus 11% of IPM as per MAT CAGR December 2020 to December 2024.

I will share some perspectives and thoughts on our domestic business. Our domestic business grew by 22% to INR 566 crores year-on-year. The business accounted for majority revenue during 9 months at 60% versus 55% in 9 months for FY '24. So today, domestic business contributes 60% to the overall revenue for J.B. We are one of the fastest-growing companies in the market and have delivered year-on-year 12% growth versus IPM growth of 8%.

Each of our major brands, namely Cilacar, Cilacar-T, Nicardia, Sporlac have gained ranks as per IQVIA MAT December '24.

Excluding ophthalmology portfolio, the domestic business grew at 12% for quarter 3 FY '25. Excluding ophthalmology portfolio, the volume growth for domestic business was 7% for Q3 '25 and 6% for 9 months FY '25. The ophthalmology portfolio sales is progressing well, depicting consistent growth every quarter. We now have a dedicated field force of 120 people deployed to promote the brands that we have in-licensed.

It is interesting to note that 65% of our overall domestic business is now a part of progressive portfolio, which is growing faster than IPM. Around 4 years back, the progressive portfolio was only 35% to the overall domestic business. So 35% has become 65%, which is progressive portfolio that we are placed in, which is doing better than the Indian pharma market. This is a marked change and will enable the domestic business to grow consistently over the next few years.

In December 2020, we had only 6 brands greater than INR 25 crores in the revenue. I'm glad to share that in December '24, we have 25 brands, which have revenue more than INR 25 crores, out of which 5 are in the top 150 in the country.

Moving on to our international operations now. During quarter 3, we recorded 4% improvement in growth to INR 397 crores with our CMO business leading the segment with 33% growth to INR 118 crores. The underlying growth momentum remained strong and is backed up by strong order position. International formulations were impacted die to revenues decline in U.S., Russia whereas South Africa and branded generic showed growth.

In terms of the outlook, although we have emphasis on growth, there's a strong focus on profitable growth. J.B. is now well positioned to deliver continued growth. The strategy and the levers are well defined, and we have a strong team that will execute the plan that we have put in place.

Our India business continues to drive market-bidding growth led by chronic business and progressive portfolio within the acute segment. Our export business continues to be steady with sequential improvement witnessed in our CDMO businesses. Advancement of various new projects in our CDMO business will flow through into growth numbers in near to medium term. And we have a good pipeline of future product commercialization opportunities in international business, which will deliver sustainable value creation for the company.

I would like -- I would now like to conclude my remarks and request our CFO, Mr. Narayan, to share his views. And over to you, Narayan.

Thank you, Nikhil, and very good afternoon to everyone. Welcome to our earnings call. Let me walk you through the key financial highlights for quarter 3 FY '25. For the quarter, we reported revenue of INR 963 crores, reflecting a year-over-year increase of 14%. The revenue mix between domestic and international markets was 60% and 40% respectively.

Our domestic business contributed INR 566 crores, showing a growth of 22% year-on-year. Excluding the ophthalmology portfolio, domestic grew by 12% compared to the same period last year. According to IQVIA MAT December '24 data within the IPM, the company posted a growth of 12%, surpassing the overall IPM growth rate of 8%.

Meanwhile, our international business delivered modest growth of 4% year-on-year with revenues reaching INR 397 crores. The gross profit margin for Q3 stood at 67.1 percentage as compared to 67.6 percentage in Q3 FY '24. Excluding the ophthalmology portfolio, the gross margins improved in Q3 by 160 basis points as well as at YTD level. This was driven by our cost optimization initiatives of favorable product mix and pricing growth.

Operating EBITDA, excluding ESOP expenses, was INR 270 crores, marking a 15% year-on-year increase. The operating margin for quarter 3 FY '25 improved to 28.1 percentage.

On the expense front, other expenditure as a percentage to sales improved to 22.7 percentage versus 23.2% percentage in Q3 FY '24.

We continue to be agile in driving efficiency in our processes and spends resulting in better management of costs. MTM ForEx impact of INR 4 crores was recorded in quarter 3, primarily due to depreciation in rubles currency.

Finance costs saw a significant reduction from INR 12 crores in quarter 3 FY '24 to INR 3 crores, primarily due to the reduction in the gross debt. Depreciation remained the same as the previous quarter at INR 42 crores.

As of 30 December '24, our gross debt stood at INR 54 crores and net cash was at INR 516 crores. We aim to deliver operating margins between 26% and 28% despite inflationary pressures and external market uncertainties. We remain confident about the positive outlook for the business and our ability to deliver value to our stakeholders.

With that, I conclude my opening remarks. I would now like to request the moderator to open the floor for the question-and-answer session. Thank you.

[Operator Instructions] We'll take our first question from the line of Rashmi Shetty from Dolat Capital.

Just on the ESOP side, we have already done around INR 41 crores, INR 42 crores in 9 months. How much are we guiding for quarter 4 or the entire FY '25? And what will be this number in FY '26 and FY '27?

Yes. Thank you, Rashmi. So in quarter 4, we expect another ESOP cost of INR 16 crores. So at the full year level, we are looking at around INR 56 crores kind of ESOP cost for FY '25. In FY '26, we are looking at around INR 40 crores. And in FY '27, it would be around INR 24 crores.

Just on the export side, earlier we had given that export international formulation will be able to do double-digit growth because second half would be better, but I understand that you faced some challenges in Russia because of the currency volatility. What was the Russia constant currency growth? And what challenges have you faced in the U.S. business?

So yes, so Russia, we saw challenges in the growth on 2 sides. One is currency and the second would be muted season in the month November and December. And if I look at the constant growth, it is around minus 5% versus minus 8%.

And the muted season, you mean to say the flu season, right?

Yes.

Yes. So basically, Russia for us, cough and cold season is -- spans out somewhere around November to Jan, Feb. November, December was slightly muted. Having said that, the first 6 months of Russia, we have done phenomenally well, both in terms of revenue and profitability. So it's just a minor seasonal impact and some impact of currency volatility. Nothing apart from that structurally changes for us.

And related to the U.S. business?

U.S., we are inching back. If you look at the current order book situation also, we remain fairly confident of closing the year on a high. And right now, that's what we can comment on. The first 6 months were slightly soft, but otherwise things will be back on track.

And so any guidance change for the export business? Or you still think that we would be able to do double digit assuming quarter 4 to be strong?

Surely, quarter 4 is going to be strong, and we will witness a double-digit growth in quarter 4. We are extremely confident of that. And from a mid- and long-term perspective, also, we'll be closer to high single-digit and double-digit growth as we are...

And just one last question on the domestic piece, excluding ophthal portfolio, we are growing in the range of 12%. Now the inorganic portfolio has also becoming a sizable portion and your progressive portfolio has also -- has increased, which is doing pretty well. So organic, we are doing around 11% to 12% sort of growth. But with this portfolio adding up for next 2 years, do we think that we would come back to around 13%, 14% sort of growth in the entire domestic blended portfolio?

Yes. So Rashmi, Nikhil Chopra here. So what I shared earlier also in my commentary, our organic growth is 12% backed up by volume growth of 6% to 7%. So you should see us growing at mid-teens in India business, backed up by strong volume growth.

Just you're talking about the entire blended portfolio, right?

Yes, because quarter-on-quarter onwards, the base of ophthalmology will also come in.

[Operator Instructions] Next question is from the line of Tausif from BNP Paribas Exane, Research.

My first question on your ophthal portfolio. While you've already shared the revenue run rate for this business, can you share some more insight like what has been the volume growth and what are the strategies you've implemented post-integration?

If you really look at our ophthal portfolio and a reflection of quarter 3 also, the market has grown at close to 9%, whereas our business and portfolio is showing a strong growth of 28% plus. It's largely being driven by our focus on creating more demand for the set of products we have.

During the integration process, also, we maintained our focus was on expanding the coverage of ophthalmologists. As a result of which, we had added more reps on the ground also. Close to 65 to 70 members, that ramp-up happening, we are close to 105 to 110 field members working on the ground. The ophthalmologist coverage increased from 7,000 to currently what we are training at 14,000 to 15,000. Plus what we saw over the last 2 months was addition of a new product as well, which, over the next 6 to 8 months, you will see that every quarter, we'll be adding 1 or 2 SKUs.

So our focus on creating more secondary demand generation, where we have seen almost a 15% to 20% increased uptake in terms of prescription and the units sold in the secondary market, and this being a very, very strong platform for new launches also happening is giving us good results. And we remain extremely confident about how this business is going to shape up for us in the mid-and long term.

So I guess it's fair to assume large part of growth has been volume driven?

Yes. It's a reflection of not only our ophthal but even our overall India business and even ophthal is absolutely is volume-driven, see because beyond a certain point, there is no real opportunity for us to take price growth got beyond 7% to 8%, right? So it's volume driven.

My second question is, can you share the revenue contribution from your top flagship products, excluding the line extension launch we have done in recent years compared to FY '20?

Could you repeat that, sorry?

Can you say the revenue contribution from top 4 to 5 flagship products currently?

From 4 to 5 flagship products?

In the domestic market.

In the domestic market, 5 to 6 flagship products are currently contributing close to 60%, 65% of our overall India business.

And compared to FY '20, it would be lower?

Absolutely. In FY '20, the top 5 to 6 products were contributing more than 75%. And this is exactly the result of new launches, some of the acquisitions which we have made and the fact that Nikhil mentioned that in his commentary as well that in FY '20, there were only close to 6 brands, which were more than INR 25 crores, but now we have a sizable basket and a good progressive portfolio, which is more than INR 25 crores. And over the next 2 to 3 years, there will be set of 10 to 12 brands, which will be inching closer towards INR 50 crores run rate.

And just last question on CMO business. Do we expect this current quarter run rate to continue for this fourth quarter?

So this is what I think if you recollect what we have been commenting on CDMO business. First half of the year was not great. Some orders we had to ship in quarter 3. So 32% growth is not the growth that we have been projecting. But quarter 4 also will be good as we have a strong order book. And you should see this business growing at mid-teens short to medium term.

[Operator Instructions] Next question is from the line of Abdulkader Puranwala from ICICI Securities.

So first on the CDMO business. So last quarter, we talked about coming kind of a spillover to happen in Q3. So is that completely happened or Q4 also, you will see some benefit of that?

So Q3 just completely happened and Q4 will be on its own. But we earlier also had commented that you will see good traction in Q3 and Q4. So Q4, we have a good order book. And just to also share with you on the world of CDMO, if you see next horizon of 18 to 24 months, there's a good visibility of 4 to 5 big global projects which are kicking in. And all the development work is on for all these projects, maybe newer formulations, newer geographies that we have been speaking.

And at the right time, we'll be able to share more light on them. So we are very bullish on this entire world of CDMO, which we have been talking in our commentary in the past.

And sir, secondly on the India business. So I don't know if you have to classify your India portfolio into 3 buckets, so one is your legacy portfolio, and second, whatever you've acquired between '22 to '24 excluding the ophthal brand and last is ophthal, which is you've given a segregation of that. But within your legacy set of brands and the ones which you've acquired, I mean if you could provide some color on how the growth has been in the first 9 months would be very helpful.

So what I gave the commentary, today, 65% of the portfolio is growing better than IPM, is progressive in nature. So whether it is within the cardiology space, whether it is hypertension, heart failure, lipids, our pediatric portfolio, probiotic portfolio, Metrogyl has shown a good growth this year. Fortunately, we had a very good season.

So that portfolio continues to grow at around close to 12% plus, which is much -- 400 bps higher than the Indian pharma market growth. And out of that portfolio, what was shared earlier that there are around 25 brands, which are more than INR 25 crores. So that shows overall the momentum that we have built up over the last 4 years in terms of whether you talk about 4, 5 big brands or what we have acquired or what was shared also about the ophthalmology portfolio backed up by solid volume growth, which we have seen over the last 6 months because fundamentally, we have worked in terms of improving our coverage, whether it is in the world of probiotics, whether it is in the world of ophthalmology, whether -- what we are doing with the cardiologist and physician for our Razel and Azmarda brands, these are all acquired and equally for our organic big brand that is Cilacar. So 65% of our portfolio is growing better than the Indian pharma market, which overall tells about the strength which we have built over a period of time.

Just a final one on a bookkeeping question. Sir, for this quarter because of currency headwinds in Russia, have you booked any kind of ForEx loss or ForEx gain, if at all, in other geographies?

So like I mentioned, the majority of the MTM loss of INR 4 crores that we hit in this quarter came because of the depreciation of the ruble.

INR 4 crores. And that would be in the other expenses?

Yes. And it's a noncash charge. So it will also to that extent, our EBITDA would have been better by INR 4 crores and cash would have been better by INR 4 crores.

We'll take our next question from the line of Girish Bakhru from OrbiMed.

Nikhil, sir, just kind of a couple of questions on Cilacar. I mean, growth has been very impressive. If I look at the market, I mean, plain -- can the previous still growing much faster if you compare with the other molecules like amlodipine. And we know this is partly because you keep saying it has a very strong renal protective effect. And where do you see this market growth slowing on for you in cilnidipine combination as well?

Where do I see market growth slowing down.

No mature -- reaching a maturation growth number for this franchise.

So we see huge opportunities in the world of what we're trying to do with the work in the world of hypertension, being Cilacar, be it Nicardia. Basically, what we are trying to do is not only target to talk about in doctor's clinic for the world of hypertension, but also we are trying to talk -- trying to look at what we can do more in the world of hypertension with comorbidities that is helping us in terms of the enrichment of the discussion that our medical reps are having with the medical fraternity.

And we have got a full portfolio, which is what we spoke earlier also in your question that being the renal protective drug cilnidipine combination of cilnidipine plus metoprolol gives us protection from angina. Combination of plain cilnidipine with Azmarda gives us protection from heart failure. Combination of cilnidipine with Razel protection from high lipid levels. Combination of cilnidipine with telmisartan gives us protection from metabolic.

So we have a whole range of portfolio and equally for uncontrolled hypertension, resistant hypertension, we have Nicardia, and Nicardia XL. So whole gamut of portfolio we have got, and this is not only that we are going and talking in the clinic and generating value, but overall the objective is how to reduce the burden of disease for the patients who are suffering from hypertension and comorbidities. So that is a task that we have taken. That is why you see the entire differential that we as a company bring on the table as compared to other companies.

That's helpful. Sir, if I elaborate on this because, say, lain cilnidipine is better than amlodipine. So in all the combinations, cilnidipine combinations should ideally surpass amlodipine combination. Is that the right inference to draw? Like if I look at the amlodipine telmisartan market, that's probably about INR 1,000 crores market. Should Cilacar T become INR 1,000 crores product?

Girish, that is certainly the endeavor, just to give you some numbers in terms of when you look at it from an anti-hypertensive lens or when you look at it from a diabetic hypertensive lens, right? In anti-hypertension of 200 million-plus patients, 1 out of 3 is suffering from some kind of renal complication, and that is a responsibility we have taken in terms of how do we ensure the prescribing community is ensuring efficacy for renal complications when they're prescribing anti-hypertensive drugs.

Even when you look at it from a lens of diabetic hypertension, 1 out of 2 diabetic patients are already suffering from severe hypertension, which means they need a combination of cilnidipine plus another ARB, which will be required. So for us, the market is big. We are not kind of only looking at amlodipine as a market to be substituted. We are looking at how we can manage the entire anti-hypertensive plus diabetic suffering patients in the country. But that is the endeavor. We see a huge, huge opportunity in the foreseeable future, substituting amlo plus combination is just one part of the overall journey.

So that -- so in a complicated hypertension, let's say, 50% of those cases, which you are saying is Cilacar T first line of treatment now?

In complicated hypertension, if that is diabetic hypertension as per RSSDI guidelines, Cilacar T is the first line of treatment, yes. It's CCB plus ARB and within CCBs, it's clearly mentioned cilnidipine is the preferred molecule.

That's very helpful. And if I can just a related question ask you last, I think you said 600 MRs were behind Cilacar. How many there are now? And how does that number look vis-a-vis Telma and other brands?

We would not want to compare or comment on how does that number look with the competition. What we mentioned in terms of during the last call in terms of reps detailing Cilacar and combination, that number hasn't changed.

And just last one, I mean, you clearly have a good pipeline, 25 brands over INR 25 crores sales, but just from the list, which are the real probable ones which can surpass 100 crores besides these top 6 brands?

For us, the progressive portfolio, we are taking a big bet on all the brands, which are upwards of INR 25 crores. The real growth progress story, we are very, very confident of our Metrogyl ER, Rantac, Bizfer XT, Lobun has another probiotic. So we have a set of 8 to 10 products, which over the next 2.5 to 3 years will be closer to 50 and clearly, from a mid-and long-term perspective will inch towards INR 100 crores as well. So some of these names, which we mentioned in terms of Lobun, Metrogyl, Rantac, Laxolite, these are clearly a progressive bets about which we are extremely bullish.

[Operator Instructions] Next question is from the line of Sumit Gupta from Centrum.

Sir, the first question is on the gross margin. So how do you see the gross margin trajectory going forward over the next -- in Q4 and over the next 2 to 3 years?

So our gross margins continue to be in the range of 66 to 67 percentage at a yearly level. And we see some challenges on API and ForEx impact, which we -- right now, we don't see any impact in the near future, but as we move on, we will continuously monitor them. And in the short and in the medium and long term, we'll find out actions to mitigate those challenge. But however, we continue to hold that it would be in the range of 66% to 60% in the near future. Kunal, do you want to add?

Yes. So we are very confident of the range which we are holding right now as things stand despite the dollar-rupee situation. We are adequately covered with respect to the stock. So for sure, in Q4, we should be pretty much close to the margins which you currently see.

On the long-term situation, despite the volatility, I think over the last 3 years or so, you have seen that we have always work around efficiency measures to improve our gross margin profile. Those efforts will continue to drive from a mid-and long-term perspective and we'll be watchful of the situation.

So I just want to -- hypothetically, if you plan to expand the gross margin to 58% or more than that. So what will be the ideal scenario in that case?

Can you repeat the question, please?

Like if the gross margin is -- let's say, move to 68%, 69% kind of level. So what would be the like ideal scenario in terms of pricing or volume or let's say, competition. So I just want to understand on that aspect.

See, our endeavor has always been, if you really look at how we have shaped up the business, the more profitable parts of our business, which is India and CDMO have always taken priority, which helps us in driving better product mix apart from the efficiencies which we continue to drive and which has been a major part of how you have seen gross margins improve over the last 2 to 3 years.

Currently, India and CDMO business is already inching up towards closer to 70%. We have put an aspiration of over the next 2 to 3 years, how both these segments will contribute 75% to 80%. If -- we are very confident that these segments will continue to drive growth. And if the external market in terms of supplies and API prices remain in the steady state and there is no volatile situation, we would see closer to 125 to 150 bps being added on our margin profile with these 2 segments always improving. So that's what we can comment at this stage.

Second question, sir, on the Azmarda. So what are the sales for third quarter and over 9 months?

So overall, we are already trending at close to 130,000 units per month, which almost 5 to 6 months back was close to 95,000 to 100,000 units. So as we shared last time also, every quarter-on-quarter sequentially, we should be adding close to 15,000 to 20,000 units per month, and the visibility which we have and the trends which we see are very, very positive. The competition of low-cost generics has almost phased out. And now it's become a game of the top 4 to 5 players only. We have consolidated our position over the last 6 to 8 months as well.

We continue to be very confident about this segment in which we have invested. The volume growth will be closer to double digit, and we will progress similarly. So, right now, even on the -- what you see on IQVIA, our trending is closer to INR 70 crores, and we will -- we expect this particular brand to drive almost mid-teens growth for us going forward.

So for this quarter, it was around INR 70 crores.

That is YTD MAT figure is what we are seeing, yes.

And sir, lastly, on the ESOP. Apologies, if it is a repeat. So what were the ESOP charge expected for FY '25 and for the next 2 to 3 years?

So let me just repeat it. So FY '25, we are expecting ESOP charge of INR 56 crores. In FY '26, it could be around INR 40 crores. FY '27, it would be around INR 24 crores.

We take a next question from the line of Umesh Laddha from Nirmal Bang.

Sir, firstly, I also to reconfirm that we are having no plans to launch semaglutide. And if we are not having any plans to launch semaglutide then the launch of semaglutide will affect our diabetic portfolio?

Right now very early to say that whether we will get into some semaglutide market or not, but our presence in diabetic portfolio is almost not there. So what -- it does not impact us.

And also, one more thing is that are you planning for some inorganic growth in FY '26?

We continue to evaluate assets. It is part of our plan as a team. We have a team, team of people who continue to evaluate assets. So as and when anything which comes across, which is suitable, synergistic in line with the category we would like to acquire, good payback period, quality asset, we'll be more than happy to acquire.

We'll take our next question from the line of Amey Chalke from JM Financial.

Most of my questions are answered. Just one more. You said something on M&A as well. But if you see, we have added 3 new therapies, probiotics, ophthal and pediatric over the last 2 to 3 years. Going ahead, your focus would be deepening our presence in these 3 therapies or you would like to add a few more therapies. Would we be opportunistic in adding new therapies.

Given a choice, we would like to deepen our presence in the existing therapies. Not that we will ignore anything new, which is coming in, coming in from newer space. We'll be more than happy to get. All will depend upon the quality of asset. We want to acquire something which is long-lasting, may not be growing as is, but in a growing market. If tomorrow, we have the capability to grow at better than the market like what we have done in the world of ophthalmology or pediatrics or probiotics that is what you have seen, that is our endeavor.

And the second question I have is related to this only, like we have a very good presence in cardiology now. We're almost present across hypertension to heart-related issue, everything, cardiac. So this therapy, you can leverage your presence very well while entering into diabetologists as well because many of these cardiologists also prescribe a lot of diabetes prescriptions as well. So why are we not thinking of going into -- or launching organically the diabetes-related brands?

We tried. We tried. We attempted launching sitagliptin, vildagliptin, dapagliflozin. Not easy, by the way. The competition is intense. And what we have learned over a period of time -- right now dapagliflozin, we are doing around INR 15 crores annually.

What we have learned over a period of time, let us stick to our domain more in the area of cardiology. And within cardiology, we have segments like hypertension, heart failure, lipids. We may get into the world of arrhythmias blood thinner. I think that suits us much better as compared to better getting the old of metabolics because not easy, not easy the way we have seen. That is where we are.

So is it possible like a GLP-1 could be an opportunity to enter because initially, the competition would be low, which could give you a headway to create a brand?

It's not fair to assume that competition will be low in GLP-1. Whenever products go LOE, we are seeing in the Indian market that even if there are a few manufacturers, the market is open for all to source and market the products. Yes, over a period of time the competition kind of eases out.

Given that we are not a dominant leader in this space. We don't currently, as of now, have any plans to make any serious impact on the GLP-1 side, but anything which is closely related to our main strengths like on cardiology, what Nikhil mentioned, we are happy to evaluate other opportunities within cardiology. We are still operating at 70%, 75% of covered market opportunity in cardiology. So there will always be adjacencies, which we can evaluate.

And on metabolic, the organic strategy did not pay a good dividend. But if there are some other opportunities, which we can evaluate from an inorganic perspective, we'll be happy to evaluate them.

[Operator Instructions]

We have a question that is there on the -- just come on to the question. The questions is for Narayan, so the net cash position has been fairly strong. How do we see the net cash position panning out for this financial year?

So very clearly, we see that currently, we are sitting at a net cash flow of around INR 516-odd crores. And we clearly see, after paying off the dividend, which we have announced yesterday, and making ourselves debt-free, we would be the year with around INR 650 crores of cash positive. So we will be paying off all the loans and with dividend payout of almost INR 130 crores plus. In spite of that, we see our cash flow, net cash will be around INR 655-odd crores.

And the second question is, how do you see the Q4 performance panning more for the organization?

So Q4, what I think what we shared earlier in the commentary. First of all, we are bullish in terms of we'll deliver double-digit growth in our international business. And equally, overall, the trend will be strong as we have good order book for our CDMO business.

India may be soft because of the March month. That is why the inventory goes down. But overall, the traction will be maintained, and you will see a good trajectory to be continued in Q4 and will end the year on a high note.

Thank you over to the queue now.

[Operator Instructions] Next question is from the line of Rahul Jeewani from IIFL Securities.

Sir, within the domestic business, can you also talk about how has the traction means for our probiotics portfolio and Sporlac.

Sporlac, already, Rahul, is more than INR 120 crores reflection. Even from an internal perspective, we are just about inching towards the INR 100 crores mark. The category has grown this year for us also the brand and its variants like Sporlac GG have done fairly well. Even in external market reflections, we are pretty much on par with the market growth. So our strategy remains that we do better life cycle management of this brand, and we continue to grow this franchise.

Sure, sir. And within probiotics...

Rahul, sorry, you're very muffled.

So within the probiotics segment, we were also targeting to launch a liquid probiotic formulation. So where are we in terms of launches for some of these product segments within probiotics?

That is poised for launching. And over the next couple of months, those variants are also going to get fully commercialized in the market. Those plans continue to be under implementation.

This month, Rahul, the month of -- for the month of February, you should see a new version of Sporlac being there in the market. That is Sporlac DG, that is for dental health. Then you will see the liquid formulation, then we are launching once again both formulation for women health. And so we'll continue to see the overall mother franchisee expanding with a lot of SKUs for specific indication for the category.

And within the overall India business, what are our rep expansion plan? So with, let's say, some of these launches happening in the probiotics segment, do you think we will need to significantly expand our rep presence in India?

No, no. There is nothing significant, nothing like significant. We have been commenting on, probably next 12 to 15 months, there is more plan to increase any medical rep.

So whatever growth we see would help us to drive productivity improvement?

Yes. We are adequately placed in terms of the representation that we need in the clinic of doctors for our portfolios that we are marketing in the country.

Sir, 2 more questions from my end. Now within the CDMO business, we have been trying to develop some of these newer product concepts as well as expand to newer clients. But till date, we haven't seen some of those initiatives playing out. So when do you expect, let's say, an inflection point to play out in the CDMO business, particularly with respect to some of these newer products segments or the newer clients which we have been targeting?

See, in last quarter commented, Rahul, we had spoken that already the traction has started. If you look at, there are 2 new partners now in Europe. Europe market was not there. So quarter 3 -- quarter 2, we started our presence in Europe with company called Krka, K-R-K-A, in Czech Republic, where our lozenges supply has already started. And also with our existing partner, that is Kenvue which is a consumer of J&J, where we do big business in Russia in the world of CDMO. We have announced our presence in Europe with a brand called [indiscernible], which is for immunity and wellness, which is in the form of lozenges, first time we have manufactured for them. They already have gummies and syrup for [indiscernible]. We have the company, who are manufacturing lozenges for them.

In this quarter, that is now in quarter 4, which we will give a commentary on quarter 1, you will start seeing some new projects kicking in, what we have been -- what we have been speaking in some other than Europe, some new therapeutic dosage forms, which will start supplying. So all this will happen. And you will see traction coming. That is why if you see, overall, we see this business growing at mid-teens, probably from -- for next year. In quarter 4, already, we have a very good order book in place. So you will see good outcome in Q4 also for the CDMO business. So we are very bullish.

And earlier, I've spoken, there are, at the right time, we'll be also sharing with all of you that probably for next 15, 20 months, there are 4, 5 big projects which are kicking in. And all this will require CapEx, which already has been put in place. All this will require the entire facility that we have in our Daman plant and some of the work that we have started doing for our CDMO in our Panoli plant also, all CapEx has been placed, all developmental work which is been on. So at the right time, you'll be hearing more and more positive commentary on this part of the business.

And these 4 to 5 key projects which you are targeting, which might entail incremental CapEx, what could be the quantum of CapEx for the CDMO business then?

Rahul, the quantum of CapEx is not much. We can easily absorb that as part of our regular expansion and maintenance CapEx. So it does not lead into any incremental CapEx levels beyond our current steady-state level.

And last question from my end. So if you see this year, despite the dilutive impact of the ophthal acquisition, so ophthal acquisition diluted our gross margins by roughly 150, 160 basis points. And despite that, our operating EBITDA margins have improved almost 80 basis points in 9 months of FY '25, which implies on the base business, we would have seen almost 200, 250 basis point kind of an EBITDA margin expansion. So what is your outlook in terms of margins going forward, particularly with the fact that our India and CMO revenue share continues to inch up.

Yes. So we clearly expect our margins to be in the range of 26% to 28%, which we have been giving the guidance, EBITDA margins. We would be in that same range. Obviously, we continue -- like I mentioned in note that we will continue to drive the efficiencies, both in terms of cost and drive the mix improvement to enable us to keep on sizing on the EBITDA margin improvement.

See, the way, Rahul, we see this business, overall, you understand, the focus is always on India and CDMO, which are highly profitable and high gross margin business. Now with API prices going up, dollar touching INR 87, INR 88 obviously, some impact will come, and this will be across industry. But right now, immediate, because of the inventory buildup, we don't see any impact. But we have been keeping fingers crossed. Probably if the gross margin improves, we'll be able to mitigate that.

You always will see, Rahul, us being, what guidance we have been giving of 26% to 28%, probably, we will be ending the year on a higher note, on the high side of the guidance. That is what we have been projecting, whether it was 25% to 27%, which was earlier guidance, we closed a 27% plus. Right now, the guidance is 26% to 28%. We'll be closing -- close to 28%. And at the right time, we'll be more than happy to revise our guidance.

I was asking more from a next 2- to 3-year perspective rather than this year assets.

Next 2- to 3-year, once again, Rahul, if you see this entire aspect of ophthalmology will come in, which will give us 200 bps improvement in our overall EBITDA. Where our gross margin from 20% will go up to 70%. So all this calculation will play. But I'm talking in terms of short term volatility, which is in place, probably after 3 months, we may be speaking a different language, with rupee appreciating, API prices being stable, product mix improving, probably our guidance will go up. So right now, let us talk of this year, 28%. At the right time, we'll be more than happy to revise our guidelines which, touch wood, should be an upward trajectory only.

We'll take our next question from the line of Alankar Garude from Kotak Institutional Equities.

Sir, you spoke about healthy Metrogyl sales in 9 months. I need to understand what has been driving growth in the market and how sustainable is this?

Not that I can comment that it is sustainable, but we were -- we -- it helps us in terms of season being better and GI infections being on the rise, that is why we could see healthy Metrogyl uptick for first 9 out of the year, probably quarter 4 is not the right time. But as a company, what we have realized that I think we should more talk about the virtues of metronidazole as a molecule which we want to do, which we are trying to look at, not only plain Metrogyl but the newer versions of Metrogyl, topical applications of Metrogyl.

We put our all efforts in terms of how we can make this brand reach newer peaks, with half a dozen topical applications with Metrogyl, extended release with Metrogyl ofloxacin combination, all the portfolio, what we have bought in which 70%, 80% market share. If season supports should grow at high single digit, otherwise, I think 5%, 6% growth we should get for this portfolio.

Sir, given the high market share, which we already have in solid and liquids, so would it be fair to assume, as you said, more focus on topicals, should that be the key growth driver contributing to this 5%, 6% growth which you mentioned?

This year, what has helped us is overall the peak in tablets. And equally, the focus is more on the topical in terms of the prescription that we generate. So topical still -- so out of 6 topicals, 4 topicals, we sell 100,000 tubes a month. So more and more effort will be there to improve prescription trend for the topical, and if season supports, high single digit. Otherwise, 5%, 6% growth, we'll be more than happy.

Understood. The second question is in our current ESOP plan, all the options are getting vested latest by August 2027. Now this could happen earlier in case of KKR's exit. So to provide greater visibility on management retention, are we evaluating the second ESOP plan?

No I don't think, let us continue to focus on the results part. Not that we have given any thought on this entire part of ESOP. I think first let this entire ESOP scheme get over and at the right time, we'll be thinking in terms of what type of new incentive plan, we want to put in place for our team.

We'll take our next question from the line of Harith Ahamed from Avendus Spark.

Just one question. You talked about progressive therapy areas and how you've targeted segments such as heart failure, ophthalmology, probiotics, et cetera, and how these segments accounts for a significant share of our revenues today. Are there any such areas outside of these that you've identified, which you plan to enter, either organically or inorganically?

We would see -- when we see that there are brands which are growing better than the Indian pharma market, and we see huge opportunity in creating market or capturing market share, given a choice, we'd be more than happy to stick to where we are organically and you will see new launches in that space only. We would not like to launch anything from scratch in any newer category of products in India. That is what we -- earlier also we have commented.

If we acquire anything outside the category where we are present, obviously, we'll have new launches in that category of business like what we are doing today in the world of ophthalmology. We have acquired 10 brands, a couple of brands, we have launched in ophthalmology space. But if you see our new launches, more will be in the area where we are present because we think that the ability of the company, the DNA of the company is that how do you take the big mother franchisees contribute bigger to the business.

Ladies and gentlemen, we'll take that as the last question for today. I would now like to hand the conference over to management for closing comments. Over to you, sir.

Yes. First of all, thank you all for participating in today's conference call. We continue to focus as a company on profitable growth as what I spoke earlier in my commentary. And our major area of good trajectory will continue to be in India, which today we are rightly placed in the categories which is 65% of our business growing better than the market. We are fortunate enough to have that portfolio and also fortunate enough to have our teams on the ground who are doing their best in execution, that is India part. India business today is contributing 60% of the revenue, which 4 year was -- 4 years ago was quarter, 45% of revenue.

So today, 60% of revenue is coming from India. And equally, that has been spoken is in the world of CDMO, which was contributing 5% of the revenue. 4 years ago, it's contributing 12% of the revenue. So India plus CDMO today continues to be -- continues to contribute 72% to the revenue, which have got higher gross margins. And the endeavor going ahead will be in short to medium term how to take this 72% contribution to 80%, which will only help us to create overall value for our stakeholders and serve more and more number of patients in India in the world of CDMO. That is what we had to do overall in the company. Thank you all, thank you all for patiently hearing.

Thank you, on behalf of JB Pharma, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.