CORONA Remedies Limited (CORONA) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to CORONA Remedies Q3 FY '26 Earnings Conference Call hosted by IIFL Capital Services Limited. [Operator Instructions] Please note that this conference is being recorded. Before we begin, I would like to point out that this conference may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. I now hand the conference over to Mr. Rahul Jeewani from IIFL Capital. Thank you, and over to you, sir.

Hi. Good afternoon, everyone. This is Rahul from IIFL Capital. I welcome you all to the third quarter earnings conference call of CORONA Remedies Limited being hosted by IIFL. From CORONA, we have with us today Mr. Nirav Mehta, Managing Director and CEO; Mr. Ankur Mehta, Joint Managing Director; Mr. Bhavin Bhagat, Chief Financial Officer; Mr. Tejas Kothari, Vice President, Corporate Strategy and Business Development; and Mr. Vijay Charlu, President, India Business. Over to you, sir, for your opening comments.

Good afternoon, ladies and gentlemen. Thank you all for joining us on the Q3 and 9 months FY '26 Earnings Call of CORONA Remedies Limited. Along with me on call, I am joined by our Joint Managing Director, Mr. Ankur Mehta; our CFO, Mr. Bhavin Bhagat; other members of the senior management team; and SGA Strategic Growth Advisor, our Investor Relations partner. We have uploaded our results, press release and investor presentation on the stock exchange and on company's website. I hope everybody has the opportunity to go through the same. I would like to begin by giving you all a brief overview of CORONA Remedies Limited. Established in December 2004, CORONA Remedies has been built on 3 core philosophies, which are referred as the CCC philosophy. The first C stands for culture. It focuses on fostering ruthless execution, internal growth, adaptability and humility. The second C represents courage. It reflects our willingness to acknowledge mistakes, learn from them and continuously improve. The third C is commitment. It represents our dedication to deliver global quality products and achieving long-term sustainable growth. CORONA is an India-focused branded pharmaceutical company engaged in development, manufacturing and marketing of formulations across key therapy areas like women's health care, cardiodiabeto, pain management and urology as well as other segments such as VMN, gastrointestinal, respiratory therapies, et cetera. Approximately 96% of our revenue comes from India. CORONA has grown, invested and expanded in disciplined manner over the last 2 decades, creating a diversified product portfolio. It is towards chronic and semichronic segment, which contributes approximately 70% to 72% of our total revenue. Today, we have a portfolio of 70-plus brands with prominent brands like B-29, Myoril, Tricium, Cortel, Obimet, et cetera. In the past few years, we have consistently outpaced the IPM, Indian Pharmaceutical Market. Speaking for this quarter, we are the fastest -- we are #1 fastest-growing pharmaceutical company amongst top 30 pharma companies in India for Q3 FY '26. We have grown at 18.9%, nearly twice as fast as the IPM, which has grown by 9.6% over the same period as per Pharmatrac. This has resulted in CORONA's jumping up 2 ranks from 30th to 28th rank in IPM, Indian Pharmaceutical Market. An important and differentiating factor driving our overall growth is volume. There are 3 growths: volume, price and new introductions or else it is volume plus NI and the price growth. But CORONA has always been differentiating factor in the overall growth with volumes plus NI. CORONA's healthy volume plus NI growth trajectory comes on back of our focus on the chronic and semi-chronic segment. Along our journey, we have also executed strategic brand acquisition and in-licensing arrangements to address therapy gaps in our portfolio and to establish complementary capabilities such as backward integration, marketing arrangements and diversified product offerings. We have a strong track record when it comes to acquired brands after acquiring brands from giants like GlaxoSmithKline, Abbott, Sanofi, et cetera. We have been successful in scaling those brands considerably, and we hope to continue the same trend with several brand acquisition from Bayer in July 2025. The commercialization of the portfolio acquired from the Bayer will begin in Q4 FY '26 with the launch of Noklot+. The Noklot franchisee has significant market opportunities in antiplatelet and combination therapies and will contribute in our growth in years ahead. The EU-GMP approved Gujarat facility has also received EAEU-GMP accreditation. Eurasian GMP accreditation enables CORONA's entry into 5 EAEU member countries like Russia, Kyrgyzstan, Armenia, Belarus and Kazakhstan through a B2B model. It opens assets to a pharmaceutical market valued at approximately USD 25 billion and aligns strongly with CORONA's long-term vision of building and strengthening international partnership. Cash flows has been a cornerstone for our journey and will continue to be so. We have a strong track record of EBITDA to OCF conversion, which has enabled us to reinvest for growth over the past 2 decades. Owing to our disciplined cash flow generation, capital allocation and steady profitability, our returns ratios have been healthy. We are net cash surplus company. The performance is aligned with our annual guidance of 15% revenue growth and 20% PAT growth. Our Engine brand performed in line with the expectation. Going forward, our intent and strategy is to increase our market share across our key therapies areas by focusing on chronic and subchronic segment, offering products across the life cycle of a patient. The strategy is primarily focused on launching new products that address unmet patient need within existing therapy areas. By identifying gaps in patient care and unmet medical needs, we aim to introduce brand line extensions that cater to evolving therapeutic landscapes. Apart from the growing organically brand acquisition and in-licensing arrangements, we remain key growth drivers at CORONA. We are also intensifying our focus with specialist and super specialist prescribers through our medical representative network to enhance our presence in high-value therapeutic segments. Given our diversified and expanding product portfolio, healthy brand strength, wide and growing marketing and distribution network, experienced leadership and financial discipline, we are on track to deliver consistent growth and stable profitability. We expect to continue growing our revenue in mid-teen range and our profit after tax at high-teen range. I would like to hand over the call over to our CFO, Mr. Bhavin Bhagat, to take you through the financial and operational performance. Thank you, and over to Bhavin bhai.

Thank you, Nirav bhai. A warm welcome to everyone to our Q3 and 9 months FY '26 earnings call. I'll take you through the financial performance for the quarter and 9 months ended 31st December 2025. Coming to the quarterly performance first. Revenue for Q3 FY '26 stood at INR 342 crores versus INR 298 crores in Q3 FY '25, reflecting a healthy growth of 15% Y-o-Y. EBITDA stood at INR 83 crores versus INR 69 crores in Q3 FY '25, reflecting a growth of 20% on a Y-o-Y basis. EBITDA margin improved by around 100 bps and stood at 24.3%. Profit after tax adjusted for the onetime impact of new labor codes stood at INR 56 crores compared to INR 45 crores in Q3 FY '25, reflecting a growth of around 24% Y-o-Y. Speaking of our 9 months FY '26 performance. Revenue for 9 months FY '26 stood at INR 1,050 crores compared to INR 903 crores in 9 months FY '25, reflecting a growth of around 16% on a Y-o-Y basis against our guidance of 15%. EBITDA for 9 months FY '26 grew by almost 25% on a Y-o-Y basis and stood at INR 231 crores. EBITDA margin has seen a healthy improvement of around 140 bps. EBITDA margin for 9 months FY '26 stood at 22%. Adjusted profit after tax for 9 months FY '26 stood at INR 154 crores compared to INR 118 crores in 9 months FY '25, reflecting a growth of around 31% Y-o-Y against our guidance of 20%. Our performance for the quarter and 9 months period is broadly in line with our guidance and is on an improving trajectory. On the return ratio front, we continued to maintain a healthy trajectory. Annualized -- our annualized ROE for 9 months FY '26 stood at 31%, whereas annualized ROCE, return on capital employed for 9 months FY '26 stood at 48%. OCF to EBITDA stood strong at 86%. With that, I would like to open the floor for questions. Thank you.

[Operator Instructions] The first question comes from the line of Alankar Garude from Kotak Institutional Equities.

Sir, we have shown a pretty strong outperformance versus the IPM yet again if you look at secondary sales data. However, on a reported basis, our extent of outperformance has narrowed a bit in this quarter. So just wanted to understand what is leading to this difference between primary and secondary sales for us?

I couldn't get your question, Nirav here. But what I understand, you want to understand about difference between primary and secondary. My question -- understanding is correct?

No. Nirav bhai, my question is, if you look at, say, IQVIA data, I mean, if you compare the growth reported by CORONA in the third quarter versus what the industry has reported, there is a very significant outperformance, which you alluded to as well. But if you look at the reported growth of 15%-odd in this quarter, while it's still pretty strong, you've seen some other companies also reporting pretty strong growth in this quarter. So just -- I mean, I wanted to check whether there is any reason for difference between primary and secondary sales specifically in this quarter or there's nothing much to read into this?

Okay. Honestly, there's nothing much to read into it. More or less, this is data captured is just giving you the idea that how market has performed and what you have performed. It has never been possible to match apple-to-apple or pineapple to pineapple. It is always there plus or minus here and there. This is just the guideline, which IQVIA has shown and this outcome -- so you're talking about 15% versus 18.9% and trying to compare that?

Yes, I was just looking at the outperformance on a relative basis. I know...

No, the reported -- I understand. No, there is nothing like any extraordinary price thing on the primary or secondary front. It is more or less data captured things on the pharma track or IQVIA.

Got it. The other question was, if you look at the mix of domestic and international, we do share that percentage contribution from domestic in our presentation. If you look at, say, the second quarter, third quarter and even if I look at, say, first quarter from the RHP, the contribution of international has broadly stayed similar over the last 3 quarters. Now given this recent EU GMP certification for those 5 markets, should we expect a much faster growth in the international market compared to the domestic business?

So yes and no, both the things have been there. See, international business in the pharmaceutical industry has been typical. First, you get the accreditation approved, then you are going to submit the dossier. For dossier to get the approval will take another 1, 2 years and then the business start. So on a long term, if you understand that the CI -- after look at 3, 4, 5 years, the CI of international and India business will be broadly more or less 90% and 10%, but not more than that. So more or less, it's an India-focused industry. And at the same time, if we continue to grow in India business by 15% more or less here and there, it doesn't change the proportionate because there also, you grew by 20%, 25% and here you grew by 15%, but the pie more or less remains same. So this 3%, 4% will go to 7%, 8% and then further move to 8%, 9% in the years to come that has been possible.

Got it, sir. And just one final follow-up. Will we need any incremental investments to drive growth in exports?

No, I think so internal, we have enough cash generated from the business, as Bhavin bhai just spoke about OCF EBITDA is 84%. Today also, we have been INR 100 crores plus net cash positive company. I don't think so that we require any further capital to boost the international business.

Sir, my question also was on the OpEx. So any addition of manpower or any other spends on distribution, et cetera?

So we have just capitalized our 600 kg line, which enhances our 40% capacity as of now. Now we will need of another plant in -- as per our predictions and planning. I think so we required some -- one more plant in FY '28 to FY '29. So we will start thinking on this after a few months, I think.

[Operator Instructions] The next question comes from the line of Shubham Aggarwal from Burman Capital.

Sir, I was just looking at your employee and your MR-related costs and comparing that with some of the other companies that are operating in heavy domestic branded formulations and more specifically in the therapies that you operate, it seems that there is like 14%, 15% kind of difference, which obviously has narrowed down in past -- last 2, 3 years. And that in my analysis seems to be coming out from the PCPM, which for us seems to be lower than IPM. So I just wanted to understand that given you highlight mid-teens kind of growth and your MRs growing at 5% to 7% CAGR, is there a possibility that we will continue to see margin expansion, margins probably reaching high 20s or potentially 30% in medium to long term? So I just wanted to understand what's your ambition on that part.

I request Bhavin bhai to answer the question.

Shubham, your question is bang on. You asked the questions which everyone asked to us, and we answer them in a very clinical manner. Yes, your question is right that our employee cost percentage compared to the other peers seems to be high. But answering that question is that you have to see apple-to-apple growth. In the last 3 years, we have deployed 600 medical reps in the system, which will increase our employee cost in the initial days. And you have also endorsed that in the last 3 years, that cost -- employee cost percentage has reduced. And yes, it will come down in coming years down the line. But because of the heavy expansion, which we did in the last 3 years, because of which the employee cost seems to be high. And resulting your question -- another question towards PCPM is linked with the same things that when you deploy medical reps, as we mentioned in our earlier calls as well, that we would be deploying 5% to 6% medical reps out of the total medical reps on a yearly basis on an average terms. So because of which in the past years, PCPM was low. But now if you see in years down the line, our PCPM will improve because of our leverage in our PCPM improvement and the revenue growth of 15%, what we have committed. Answering your last question about the margin expansion by 30%, what you are seeing and what we are currently at 20%, 21% or 22% from an EBITDA standpoint. Yes, having said that, as my employee costs will reduce, my EBITDA margins will improve. But lastly speaking, our revenue will grow by 15% irrespective of our MR additions and our PAT growth, which we are confident to achieve 20%. That is what we would like to share.

[Operator Instructions] The next question comes from the line of Rishi [indiscernible] from CV Asset Managers LLP.

Congratulations on a good set of numbers. My question is more on the inorganic growth plan. Do we have any deal on the table? Are we evaluating any inorganic acquisitions?

Yes. Thank you. As far as inorganic is concerned, we are constantly evaluating the things. As of now also, we are evaluating on 2 brand acquisitions, but it has always been once out of 100. So we never know that when these things will convert into the reality. But yes, we are bang on. We are working hard into it that if any brand or our portfolio has been in the fitment, we are happy to see it. And we have several examples of success in this fashion. So we are looking into it. As of now, nothing concrete into it.

[Operator Instructions] The next question comes from the line of Amey Chalke from JM Financial.

This is Amey from JM. Nirav bhai, I have one question on basically long-term margins. So in terms of growth, we have been one of the top companies among -- in top 30 companies in India. But when it comes to margins, we are still at around 22%, 24% kind of a range, whereas a similar business mix or product mix companies are also operating at 35% plus EBITDA margin. So at what point you think in terms of scale, we will be able to achieve these kind of margins? And also, what is the difference in terms of the structure, et cetera, between these companies and us when it comes to the margin profile?

Thanks, Amey bhai. Amey bhai, as far as pharmaceutical industry is concerned, more or less, answering your second question first and first a second, more or less, the structure remains same for majority of all top companies. So I'm talking about the peers, the structure more or less remains same. See, what we think at CORONA, we are in the business of revenue growth with specialist and super specialists, prescription-based business and a long-term business. So today, we are in 4 therapies slowly and gradually. As I discussed last time, we are going to enter in infertility. Sometimes we'll enter in rheumatology, spine. So we are trying to enter into the new therapies. Always, we keep in the mind that we will grow with the 15%. And when we talk about 15%, we are talking about double than the market, more or less or 1.8x than the market, right? When market grows about 8%, 9%, 10%, and if you are talking about 15% plus, I think so we are talking about more or less 1.75% to 2% than the market. To do it, we have to enter with new, new therapies. We have to launch new products. We have to go ahead with super specialty focus. Whatever we do, we always remain 2 numbers in the mind, 15% revenue growth and 20% profitability growth. If we continue to achieve in the same blind directions, I think so we will soon be entered with the peers in the years to come. The point is consistently, we have -- at CORONA, we have to achieve 20% profitability growth and 15% revenue growth. If one happens and it doesn't happen, I think so it's not a healthy mix. Revenue growth is equally important as the profitability growth, and our eye is on 15% and 20% revenue and profitability for next few years as a guideline also. And I think so if we achieve, we will be more or less near to the peers.

Sure. So going ahead, investors basically should see that you will continue to maintain -- try to maintain your top line growth, while your margins will keep on gradually improving as you scale achieve?

Absolutely, absolutely. I think so you have sum up my answer.

Sure, sure. And the second question I have is on the seasonality front. Since this is first time we are seeing the quarters of our businesses, is it possible to explain like how the quarters are typically staggered in terms of both expenses because there have been some companies in the market, which typically do tend to spend a lot in terms of marketing in a fourth quarter or something like that or the fourth quarter is typically a weak quarter for many of the Indian -- India-focused companies. So in that aspect, if you can explain the seasonality of our businesses in terms of both revenue as well as the expenses.