Hester Biosciences Limited has informed the Exchange about Transcript of Analysts/Institutional Investor Meet/Con. Call
23 August 2022
To, BSE Limited Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai - 400 001
To, National Stock Exchange of India Limited Exchange Plaza, Bandra - Kurla Complex, Bandra (E), Mumbai - 400 051
Scrip Code: 524669
Symbol: HESTERBIO
Dear Sir/Madam:
Subject:
Transcripts of earnings conference call held on 10 August 2022
Pursuant to Regulations 30 and 46(2)(oa) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, please find attached the transcript of the earnings conference call held by the Management of the Company with investors on Wednesday, 10 August 2022 at 2:00 p.m. (IST) to discuss the unaudited financial results for the quarter ended 30 June 2022.
This is for your information and records.
Sincerely, For Hester Biosciences Limited
Vinod Mali Company Secretary & Compliance Officer
Enclosure: As above
“Hester Biosciences Limited
Q1 FY2023 Financial Results Conference Call”
10 August 2022
ANALYST:
MR. ROHAN JOHN - ICICI SECURITIES
MANAGEMENT:
MR. RAJIV GANDHI - CEO & MANAGING DIRECTOR, HESTER BIOSCIENCES LIMITED MS. PRIYA GANDHI - EXECUTIVE DIRECTOR, HESTER BIOSCIENCES LIMITED MR. NIKHIL JHANWAR - CHIEF FINANCIAL OFFICER, HESTER BIOSCIENCES LIMITED
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Hester Biosciences Limited 10 August 2022
Moderator:
Ladies and gentlemen, good day, and welcome to Hester Biosciences Limited
Q1 FY2023 Financial Results Conference Call hosted by ICICI Securities. As a
reminder all the participant lines will be in the listen-only mode and there will
be an opportunity for you to ask questions after the presentation concludes.
Should you need assistance during the conference call, please signal an
operator by pressing “*” then “0” on your touchtone phone. Please note that
this conference is being recorded. I now hand the conference over to Mr.
Rohan. Thank you and over to you Sir!
Rohan John:
Thank you Seema. Good afternoon everyone and welcome to Hester
Biosciences Q1 FY2023 Earnings Conference Call. Today, we have the senior
management with us, Mr. Rajiv Gandhi - CEO & Managing Director; Ms. Priya
Gandhi - Executive Director; and Mr. Nikhil Jhanwar - CFO on this call. I thank
the management for giving ICICI Securities team the opportunity to host this
call. Over to you, Sir.
Rajiv Gandhi:
Good afternoon to you. Good afternoon everybody on the call, as always nice
being again once in three months with all of you and present to you the
working of our company Hester Biosciences. The results were declared today,
the press note has also been circulated and I am sure you have both these
documents with you. This is one of those rare times after a very, very long
time that I am addressing everybody with results which show a down in the
revenue as well as a down on the profitability side etc.
Having said that, first let me just go through briefly the financials and then give
you my explanation of the functioning of the company etc. Our sales revenues
have gone down by 14% and in that if you look at the sale of vaccines as
against the health product vaccine sales have gone down by 30% while the
health product sales have gone up by 42%. Now the reason for the profitability
to go down is that the vaccines are much more profitable than the health
products. Therefore a decrease in the vaccine always leads to a decrease on
the profitability in the company. At the same time, if you have noticed since
the last two years I have always been stressing that we as a company would
like to de-risk and make sure that all divisions contribute equally to the top line
as well as to the bottom line and we take on the business further. So that at no
point of time do we get stuck up because of one branch doing bad or one
branch doing good etc.
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Hester Biosciences Limited 10 August 2022
On the vaccine side, the reason for this low sales being on a comparative basis
is that the corresponding quarter last to last year was exceptionally good
because it was a disease situation in the country while there were it was an
impact on COVID, but because of the disease situation we had an
unprecedented sale for a few of our vaccines and that pushed up the sale to an
extremely high level. So one issue is that the last year’s quarter we are
comparing to an exceptionally good poultry vaccine quarter year before last. So
that on a relative basis also that makes a difference.
On looking at it absolutely in this year the poultry industry has been going
through a lot of problem in the last one years’ time or at least nine to ten
months time. Feed prices have gone up, poultry production costs have gone
up. So, inputs everything has gone up, output has not, it is not even just been
stable, but at times it has even gone down. So it has impacted the poultry a lot
and many poultry farmers have reduced the population of the birds at their
farm. So there has been an actual de-growth it is not that we have lost any
market share at all. There has been a de-growth in the poultry industry, which
has led to this lower sales. Also there has not been any exceptional condition
as which was there last year. So these are the reasons due to which the
vaccine sales have gone down.
We have been continuously pushing all the division and the health product
division did well showing a growth of 42%, but on the other side the
profitability of the health product is lower than that of vaccines. So that has
impacted the bottom line. Having said that we are taking things further and
while we will continue to push the health product division harder and harder to
get higher and higher sales. We are definitely looking into the profitability
situation as far as health products are concerned even last year the input costs
on the health product all raw materials went up tremendously. We were not
able to pass on those costs onto the consumers. So by way of that we have
lost in our profitability which otherwise was planned on the last to last year’s
margin, but we could not achieve those margins just because we could not
pass the cost on and it is not that we could not, we did not want to pass on
these costs we are growing our business, we are stabilizing ourselves and at
this point we did not want to unnecessarily rub the board too much by
completely pushing on our costs onto the end user.
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Hester Biosciences Limited 10 August 2022
So these are the reasons for which we have had a downside on the profit and
the sales side because of the less sales in vaccine. Another thing is that we
have also been putting in a lot of effort last year on the market development
side. We have hired people, our team has grown up by one and a half times
over what it was at the beginning of the year. So all these costs have gone in
and the outputs of course on the poultry side we have not been able to get
those outputs. So these are these additional costs that have also put in ahead
that have gone in. Another aspect while comparing the two quarters last year
and last to last year please also keep in mind last to last year because of
COVID there were many restrictions on travel and therefore our cost on sales
was relatively lower and this year it has actually been higher. So at that time
the cost were lower, the sales was very high of poultry vaccines. So everything
fit in last to last year while everything is on the other side as far as the sales is
concerned. But having said all that going further from here we are very
confident that this thing is now going to be arrested I think with this quarter
gone the Q2 gone we have definitely arrested the de-growth, the downtrend
and now we are definitely on an upward swing. This is assured I mean you
could take this as an assurance from me.
Now certain indicators which I can give you at the moment, which would prove
my point that we are now on an upside, lumpy skin disease is a current big
problem throughout the country. We are one of the only suppliers of this
vaccine and it has given us a tremendous sale in this quarter as far as lumpy
skin disease is concerned. We have reasons to believe that this vaccine would
be used now on year-on-year basis. This vaccine is to be given to cattle once in
a year, so the vaccine gives immunity for one year and then you have to again
give it after a year. So we hope that there would be a continuous repeated
business as far as lumpy skin disease is concerned.
Talking about the other vaccine PPR vaccine for sheep and goat the national
tender was already floated we were L1, we have been given the mandate to
supply the PPR vaccine across the country. Unfortunately the supplies did not
start in the last quarter, but we believe that they will start in this quarter in the
next 30 days time that also is going to give us an extremely, extremely big
boost as far as PPR vaccine is concerned for supplies to all over the country.
The tender details are all public there is nothing just known to us the
requirement it specifies approximately 20 Crores of business supplies to be
made by us to the government in 15 to 18 months. These months have already
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Hester Biosciences Limited 10 August 2022
passed by these supplies could go up the time period for which they want the
supplies may be lesser time. So that is one of the very, very big upside that we
are looking at this point of time. Another thing is that you would have recently
read in the paper just it was two days ago the Government of India has now
allowed to manufacture and sell the H9N2 avian influenza vaccine for the
poultry that also is likely to give us some boost not a very big boost but it is
definitely going to help us give some boost because our other vaccines like the
Newcastle disease vaccines etc. We were giving them in a very fortified
manner which was giving a lot of protection to birds against H9N2, but now we
will be making a dedicated vaccine for H9N2 which will reduce the sale of our
Newcastle vaccine to some extent, but it will now directly give us sales in
H9N2. So these are the indicators specifically on the vaccine side which give us
reasons to believe that we have got a very big upwards trend coming up for us
in this quarter as well as in the coming quarters.
Last, but not the least there is the pet care division, we have launched the pet
care division after I finish my talk I will request Priya to talk a little bit on the
pet care division she will give you an idea of the issues in the pet care division.
Other developments that we are working on over here in the companies we are
currently looking at developing the classical swine fever vaccine, the sheep pox
vaccine, the new version of the Brucella Vaccine all these vaccines are under
R&D and hopefully in the next six months time to eight months time we should
be ready with these vaccines as well which would again give us some sales
from all these three vaccines. As you all recollect we have been expanding our
animal vaccines infrastructure there are two expansions that are on the way
which are already fully paid for, I mean, the Capex is already completed in
both of them. One being the bulk antigen production capacity, so that is
something which is about to commence and we should be starting in the next
three months time and that should give us a big boost and it will double the
production capacity of our current vaccine. So this could be used for poultry as
well as a few large animal vaccines. The other expansion was for the fill finish
that has got a bit delayed because we are nothing to do internally, nothing to
do with us, it is just that the supply of equipment we are dependent on
international, we are dependent on a foreign company and therefore there is a
delay by them it is an unprecedented long delay as I said nothing to do with
us. We are just keeping our fingers crossed hoping to get the parts required
and we soon get into it, but that should start in Q4. Sorry the bulk antigen
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Hester Biosciences Limited 10 August 2022
would start in Q3 itself while the fill finish would start in Q4 it was a mistake
that I made. So these are the updates as far as the animal vaccines is
concerned. Looking into the business of our subsidiaries Esther Nepal there
also we went through a tough time in the last quarter because there were zero
tenders from FAO, but we have been talking to FAO, they say that now things
are reviving and they would start because the mandate to FAO is very clear
towards eradication of PPR, so they say that they are working hard towards it,
we have reasons to believe that this tender business should start, but as I
mentioned in my earlier calls, in my earlier quarters, we are also now putting in
a lot of effort from there to get domestic business up. Now that activity is
slowly gathering more and therefore hopefully the local business should also
increase as well as we should start getting the tenders from FAO for the PPR
vaccine to be supplied to all across the globe. Esther Africa five vaccines have
been commercially made we have got the NOC to start marketing three of
them, two we would be getting in the next few weeks time and we are quite
ready to take on the marketing of these vaccines. Today the situation
worldwide being a little bit on the recessionary side due to various reasons
inflation the geopolitical situation, the whole programs of African countries
though they had earlier committed to us they are a little bit slow in that, but all
this has to pick up and has to happen at some point of time. A lot of many of
my comments are that this has not happened, that has not happened in India,
in Nepal, in Africa, but at the end of the day this far, and how much far more,
it cannot just go on and on like this and it is not just wishful thinking that it will
all improve I have full reasons to believe that things should turn around and
we should be able to take things further. So Esther Africa we are more or less
said we manufacture a pure lumpy skin disease vaccine over there and today if
you see on internet worldwide there are problems of lumpy skin. They are
suddenly shot up, we would again be one of the very few companies in the
world through Esther Africa making a lumpy skin disease vaccine Uttarkashi
strain and that also we are hoping that we should get lot of international
inquiries for that and then CBPP and Gumboro vaccine, Newcastle vaccine in
poultry and PPR also from there for the Tanzanian market. So all our efforts
are in and I think all of these efforts should pay off now within the short time.
We have a joint venture with Trishul on the distribution site, that company has
also started performing well in fact though not mentioned in our press node we
have sort of we are 50% owners by Hester India is a 50% owner of Trishul
where we have shown a quarterly profit of equivalent to 1.47 Crore which is
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Hester Biosciences Limited 10 August 2022
50% of the profit that is as much as our shareholding is concerned. So the
actual profit is multiplied by 2 Crore, a little over Rs.3 Crore. So that is catching
up and we are going to be doing a very aggressive distribution in beginning
from Tanzania and then taking it further to first East Africa then to Southern
African countries and then to West Africa. So this is all as far as our animal
vaccines health products business is concerned, talking a little about the COVID
vaccine, the Covaxin drug substance which we have an agreement with Bharat
Biotech for which we have got funding from BIRAC. The project is at the
moment we are having validation of the facility, we just recently had a meeting
with Bharat Biotech and we are putting in a structure so that in the next three
months or so we should be able to go on-stream and take up the first batch for
the Covaxin drug substance for Bharat Biotech for them to produce the Covaxin
vaccine. This facility as I mentioned it is a multipurpose facility, it is not
restricted to Covaccine. There are many questions and even last time what
happens if the Covaxin demand goes down. We have already put in a strong
plan what if and we are ready to implement that plan the moment we get any
indication on the changing demand for the drug substance for the Covaxin
vaccine so we are fully prepared it is not of any concern to us at this point of
time on what will we do with the facility in the event of a drug substance not
being required for the production of Covaccine.
So with this I complete my presentation to you on Hester on all its matters
except for the pet which I now give it I request Priya to talk a little bit on the
pet division. Over to you Priya.
Priya Gandhi:
Thank you. Good afternoon everyone, this is Priya Gandhi. So sometime
around the end of quarter four in financial year 2022 we as a company wanted
to introduce the pet division to become an overall animal health company to
address various species just along with poultry and animal health care. So we
decided to include the pet division. While in quarter one our sales have been
non-consequential, if I speak of the top line, however there has been a lot of
backend working that has gone in the quarter we have established a full-
fledged sales force which works out of Delhi, Calcutta, Bangalore, Bombay to
address all the four regions of the country. We have identified a couple of
products, we already have 11 products which are out in the market. Various
products to address anti-infective, parasites, grooming products, nutritional,
therapeutic products. There are 10 to 11 products which are already out in the
market from quarter two onwards we are also looking at more and more
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Hester Biosciences Limited 10 August 2022
products to address to launch in the pet division. Speaking of the distribution
and supply chain for now it is going to be very similar to what it is for the
poultry as well as animal health care divisions where it is going to primarily be
through secondary sales wherein we have appointed distributors, we sell
through veterinarians because quite a few of our products from the 11
products that I just mentioned are prescription-based products so they will
have to be given via veterinary doctors or retailers through prescriptions so this
is the model that we want to follow for now if I speak of this YouTube
distribution like I mentioned these made sales in the last one, one and a half
months only because before this we were establishing manufacturers with such
that we could keep the product quality intact. So we wanted to identify
manufacturers that could do justice to this one prerequisite that we have. So a
lot of efforts have gone into all this backend planning in the last four months
and hopefully from the second quarter the top line will start shooting up and of
course from Q3, Q4 onwards we are also going to look at launching more and
more products in this division. Thank you.
Rajiv Gandhi:
That completes our presentations. We now await question.
Moderator:
Thank you very much Sir. We will now begin with the question and answer
session. We take the first question from the line of Ankit Kanodia from Smart
Sync Services. Please go ahead.
Ankit Kanodia:
Thank you for taking my question. My first question is related to, if you look at
our revenues. So from FY2019 till today it has been close to that 180, 200
Crores mark and we all know how our planning therefore is Nepal and Africa
has been delayed for whatever reasons we have been and on that we have
scaled up our team to manage the new sort of growth which we expect to
come plus there has also been some expansion plans going forward which is
under the way. So even I think it would be shared within that probably the
markings and the return ratios for FY2023 would take a hit however what
would give you the confidence that maybe in FY2024 things are going to look
up if you can give some color both qualitatively and quantitatively that would
be really helpful.
Rajiv Gandhi:
Was it your observation or is there a question.
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Hester Biosciences Limited 10 August 2022
Ankit Kanodia:
The question is basically how confident we are that FY2023 and FY2024 would
bring back some growth because if you look at the years before FY2019 we
were a highly growing commodity.
Rajiv Gandhi:
What has happened is I agree with you from 2021, I mean, more than that
2019-2020, 2020-2021 yes there has been a little bit of a disruption from what
we should have mean otherwise, but it is somehow and what has happened is
all our expansions also came during that time. So it makes us look even slower
than what otherwise we would have been had there been no expansions today
we would have been in a much more comfortable situation as far as
profitability and all that is concerned, but everything all happened to the same
time, recessionary condition same time, our
investments same time,
geopolitical situation same time, but I am sure in these coming months to
come, coming one year we will be able to completely turn around and we will
be able to reach up to the expectations as what we have built for ourselves
what I have made known to all of you and take it further it is not that I am
trying to not give a specific answer but there is a level of confidence in me to
make sure that all these things will turn around completely.
Ankit Kanodia:
Thank you so much Sir and my next question would be related to the
companion market which we have recently started. Any ballpark number as in
when do we see this becoming a number in terms of sales where it would be
meaningful to our overall total revenue, any guidelines or any target we have
in mind.
Rajiv Gandhi:
Yes, I could take that question instead of Priya. See the pet business is a
completely different marketing as against the other products. Other products
are B2B that is B2C and even creating demand there is an emotional quotient
involved in pet business as against a pure economics for the other production
animals. As per our forecast, as per our financial planning, in this financial year
itself we should be able to break even as far as the sales are concerned and
going further how big we would be yes there are plans made but we would not
really want to get into discussing this at this point of time I mean we have
been passing through tough times for the last two years just let us breathe and
let us just put our head down and take it further trust me this division is also
going to give us a lot of pride and a lot of awareness we would be the only
company in the country that has business for production animals as well as pet
animals.
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Hester Biosciences Limited 10 August 2022
Ankit Kanodia:
My last question would be related to the Africa business. So now that the
commercial commencement has happened and we do have a sizeable capacity
over there. So any ballpark guidance you would want to give I am not looking
at as a number per se, but in terms of capacity utilization any target we have
in mind 80%, 60%, 100%.
Rajiv Gandhi:
See any vaccine plant built anywhere in the world the capacities are always
higher than what it is needed at a point of time because the cost to make it a
little bigger are humongously high. So we have got a good sizeable plant, even
if we are able to achieve around 20% of our production capacity within the
next around six to eight months time we would be more than happy and it
would be as per our forecast.
Ankit Kanodia:
Thank you so much Sir and all the best.
Moderator:
Thank you. We take the next question from the line of Manish Jain from
Gormalone LLP. Please go ahead.
Manish Jain:
Hi! First question was just a housekeeping question for Nikhil Jhanwar on the
pending Capex for FY2023 and planned for FY2024 and what is the current
gross debt and gross cash on consolidated basis.
Nikhil Jhanwar:
The standalone it is 154 Crores and CFS it is 256 Crores, and as regards the
pending Capex maybe I need to also work it out and…
Rajiv Gandhi:
Very nominal Capex, all the Capex has happened over here in Africa everything
it is just that now this Capex has to start giving results including the COVID
drug substance that also Capex has already been incurred.
Nikhil Jhanwar:
I just wanted to know on Avian Influenza we are talking of sales only in
exports or both India and exports.
Rajiv Gandhi:
India and exports start off with India in fact the moment we got this
notification we have floated it out to many countries and we have started
getting inquiries for the H9N2 Avian Influenza vaccine but we will start off by
selling in India and in the meantime of course international countries other
countries you need registration. So that would happen subsequently, but it
would happen.
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Hester Biosciences Limited 10 August 2022
Nikhil Jhanwar:
Moving on to lumpy skin disease given the kind of very aggressive flaring up of
the disease across India especially in Gujarat, Rajasthan, Punjab in other
states. Should the demand come from the market are you able to satisfy all the
demand which can come up.
Rajiv Gandhi:
Yes, it could be a little staggered at this point of time because the rush has just
suddenly commit, but let it be by end of August, mid September we should be
able to give as much quantity as desired.
Nikhil Jhanwar:
And my last question was before I joined in the queue it was on we have
mentioned we are making some change or improvement to the Brucella
vaccine what exactly are we doing in that.
Rajiv Gandhi:
We acquired the technology from Government of India are to produce a
subunit vaccine and they call it Delta Per Brucella vaccine, Delta Per 2 Brucella
vaccine. So that is the technology which we have acquired and government is
also waiting and they are supporting us fully pushing us to if that make that
vaccine and in terms of improvement it would be a little less costlier vaccine in
terms of manufacturing and it would give as much or better production.
Nikhil Jhanwar:
Just one related question on lumpy skin disease, was given the kind of disease
prevalence do we also have a complete lumpy skin disease treatment option
that we offer right now.
Rajiv Gandhi:
See lumpy skin disease is a viral disease and there is no direct cure for the
lumpy skin disease, but as always in us human beings also whenever there is a
viral attack you address the bacterial infection and that reduces the intensity
onto the animal onto the cattle there is no direct treatment for lumpy skin
disease prevention is the only method at this point of time.
Nikhil Jhanwar:
Great thank you so much and I will join back the queue.
Moderator:
Thank you Sir. The next question that is from the line of Yash from
Mandawewala Family Office. Please go ahead Sir.
Yash Mandawewala:
Sir, can you talk a bit more about this lumpy skin disease
outbreak how severe is it and how does it affect the livelihood of the dairy
farmer that is one. Secondly have the vaccine supplies for this disease already
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Hester Biosciences Limited 10 August 2022
started for us this is in India and what could be the revenue potential
opportunity for us from the lumpy skin disease vaccine.
Rajiv Gandhi:
As far as first I will answer your question on lumpy skin disease it is a severe it
is a massive problem to the cattle owners because the cow falls sick and it gets
lumps all across its body it also gets fever and there are other symptoms in
fact if you go on YouTube we have even uploaded a film on lumpy skin disease
so which would help you understand the disease itself it is a viral disease there
is no other cure for it and it also results in complete stoppage of giving milk
and death is the end in many cases. So it is a very big loss-making disease for
the cattle farmers it is a disease which is of very high economical importance
for them. As far as the vaccine is concerned we produce a vaccine called the
goat pox vaccine Uttarkashi strain and the goat pox vaccine is also effective
against lumpy skin disease internationally there is also another goat pox
vaccine which is effective against lumpy skin disease even international animal
health organization also recommends that. So having made the goat pox
vaccines around two years ago the same vaccine is being administered against
lumpy skin disease but at a higher dose in goat you give it as 1 ml in cattle you
give it up to 3 ml against LSD and it is Uttarkashi strain. We have already been
producing this vaccine for 2 years it is just that we have had to ramp up the
manufacturing and we have to supply it, supplies have already started in a
reasonable big way in this month and next month it would be an all time higher
supplies that we would be making on the lumpy skin disease vaccine.
Yash Mandawewala:
And the potential revenue opportunity for us if we just take
those three or four states where the outbreak is.
Rajiv Gandhi:
I mean it could go in a 5 Crores. See it is very difficult to give exact
opportunities in terms of vaccine and we would not even want to get into those
specific details and discussion but it is an opportunity which could take us
absolutely to the next level that is what I can tell you for sure.
Yash Mandawewala:
Great that is very helpful that is it from me. Thank you
very much.
Moderator:
Thank you Sir. We take the next question from the line of Mr Mithun from
Kivah Advisors. Please go ahead Sir.
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Mithun Aswath:
I just wanted to understand the kind of Capex that you have done in Africa
Hester Biosciences Limited 10 August 2022
now also in India you are doubling your capacities I just wanted to understand
by when do you think these will actually get utilized because right now I think
you have the problem of plenty in terms of capacities of both say the COVID
vaccine, the vaccines in Africa as well now even in India you are doubling
capacity but if you are not going to see demand from the poultry and these
other spaces how are you going to manage to grow and optimize these
capacities because it has been quite a long time since you have put up even
the African facility and nothing has actually taken off that was the first
question. Second question was on the 60 Crores in terms of amount that you
will receive as a grant for the Covaxin facility that you have created I just
wanted to understand if Covaxin does not take off would you still be able to
get that grant that was my second question.
Rajiv Gandhi:
Let me answer the second question it is a multi-purpose facility and even if at
the moment it is planned to make the Covaxin drug substance which we will do
it in the next few months and so there is nothing that is going to stop BIRAC
from giving us completing the whole grant I mean we have already received
the first run. So there is nothing that is going to stop us from that and after
producing this vaccine we are ready to even repurpose the facility for any other
vaccine that comes up, but nothing is going to stop BIRAC from giving us the
grant amount, and the first question is capacity utilization across all the plants.
As I mentioned even in my talk that today it appears that we have everything
more capacity, less sales, yes this is a typical phase that we are going through
at this point of time but things are going to change as far as Indian capacity is
concerned we are very sure of the demand that is going to be coming up over
here these new cattle vaccines are going to come up poultry this is only a
temporary situation yes the temporary means it could be sometimes for two
months, it could be some sometimes for six, eight, ten months. But it is surely
a temporary situation with this H9N2 now being allowed in India of course we
would have a marginal sales increase, but internationally it has opened up a
completely new territory and an opportunity for us and our facility was made in
any case without even taking H9N2 or anything it is not that now we have
H9N2 so now we feel that oh now we are secured there is nothing of that sort
we are anyway in good shape and the demand is going to go up and we are
going to be taking it further African continents we have had innumerable
meetings in the last three, four years with all countries all department of
animal husbandry assembling all confirming their requirements everything
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including the meetings have been attended by FAO by the African Union there
is a lot of dependency on this plant, but unfortunately COVID geopolitical
situation everything is just added on together which there was nobody had
even expected this. So give some time and I am sure all this would straighten
out if you ask me exactly when two months, three months, eight months, nine
months, I am not able to give you an absolute picture because nothing of
these things are in my hand but at the same time I would not say anything is
out of control demand is slowly improving let us take the case of Esther Nepal
we never had an idea that we would sell even more than Rs.1 lakh or Rs.2 lakh
material in a month in the country itself over there. Today our local turnover
has reached to nearly approximately 6 Crores or something of that sort and it
is increasing, it is even increasing day by day. So as we are moving as these
situations are changing we are also adapting ourselves and we will make a
headway and we will get through all these things as I said it is not that I am
wishing, it is not that I am optimistic I am reasonably confident when I say I
am confident is that being prepared for the worst and then working for it, it is
not just optimism, we hope for the best so I think we just need a little time and
when things happen for example lumpy skin disease had we not had all these
capacities this vaccine bought goat pox vaccine nobody in the country was
willing to buy the goat pox vaccine three years ago we were the only company
then another company bought the technology and we bought it thinking
sometimes let is at least buy the technology keep it and today look at it I mean
this quarter and the coming quarters are going to be quarters for lumpy skin
disease vaccine never ever we would have experienced thought that we will
have this much of sale. So I mean these are all vaccines diseases COVID the
world rushed to make COVID vaccines the people made millions and billions in
terms of doses in terms of money a lot work got done so I mean we are at it
and this we have created an infrastructure that could help us do many things in
the near future.
Mithun Aswath:
Sure that sounds great. Thank you.
Moderator:
Thank you very much. We take the next question from the line of Mr. Dhanraj
Jain. Please go ahead Sir.
Dhanraj Jain:
As I understand animal health care division includes health care products and
vaccine.
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Hester Biosciences Limited 10 August 2022
Rajiv Gandhi:
Yes.
Dhanraj Jain:
So while going through the results, segment results I see there is a loss in
animal health care in the year ended March 2022 and every quarter there is a
loss. So on 58 Crores sale we are losing 1 Crore 68 lakh something. So what
would be the breakeven since for this.
Rajiv Gandhi:
See what has happened is that with increasing in little sales we have invested a
lot on the marketing and on the distribution side and we recruited nearly 50%
more people than what we had last year and we are now more or less nearing
towards a breakeven analysis and I think around Rs.4 Crores to Rs.5 Crores of
additional sales of health products gives the breakeven for the purpose of
segment of animal health products.
Dhanraj Jain:
And for vaccine.
Rajiv Gandhi:
And vaccine anyway we are profitable.
Dhanraj Jain:
My next question is regarding this consolidated revenue, if we take the
standalone revenue and consolidated revenue for June quarter is almost same
at 5 Crores.
Rajiv Gandhi:
Yes it is the same.
Dhanraj Jain:
Despite there is in note #6 of the auditor they have shown the revenue from
the subsidies at some 9 Crores so this they enter, transfer or like what it is.
Rajiv Gandhi:
No, so what happens is we are required to give the details of all the
subsidiaries Texas Life Sciences which manufactures health products sells it to
Hester and Hester then in turn gets sell to third parties. This turnover of
subsidy gets eliminated both in the sales and purchase and that is the reason it
does not get replicated into the console results but as a procedure related
party transaction…
Nikhil Jhanwar:
Because it is a related party transaction from company of Hester to company b
Hester itself.
Dhanraj Jain:
No, but there is a revenue from Nepal and Africa also because they must not
be supplying to you.
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Hester Biosciences Limited 10 August 2022
Rajiv Gandhi:
No Nepal and they are not supplying but then those sales are very minimal,
low at this point of time.
Dhanraj Jain:
Noted. Thank you sir.
Moderator:
Thank you very much. We take the next question from the line of Mr. Rehaan
from Sicomoro Advisors. Please go ahead, Sir.
Rehaan:
My question is with regards to the consolidated segmental results for the June
2021 quarter you have shown an operating loss of 36 million in the animal
health care segment in these results. So last year this was shown as a profit of
6.8 million just wanted to know what the reason is for this divergence and if it
is reclassification can you please clarify what has been reclassified.
Rajiv Gandhi:
Sorry if you can clarify 6.8 I am not able to get we are looking at the console
results correct.
Rehaan:
Right console results, the segmental results where you have shown animal
healthcare. So the 6.82 was a profit that was shown in last year’s results while
it has not shown in this quarter I think something has been reclassified is what
I assume. So I just wanted clarification on that.
Rajiv Gandhi:
Can I just look into it offline and revert to you on this because right now I do
not have the number with me so maybe let me have a look into this question
and revert to your offline again.
Rehaan:
Sure I would appreciate that. Thank you.
Moderator:
Thank you Sir. We take the next question from the line of Alisha Mahawla from
Envision Capital. Please go ahead.
Alisha Mahawla:
Hi! Sir, good afternoon, thank you for taking my question. I just wanted to
understand that we have multiple levers for growth that all aligning for the
remaining part of this year’s opportunity from lumpy skin disease, the PPR
tender that will start, the Covaxin opportunities if it does will come from Q3, Q4
and also have we commercialized three vaccines so that they are going to
commercialize three vaccines in Africa so what is the kind of growth that the
company is aspiring for this year.
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Rajiv Gandhi:
For Africa we have already commercialized three vaccines or four vaccines.
Hester Biosciences Limited 10 August 2022
Four vaccines we have already commercialized one is about to get
commercialized or that is already commercialized. Yes, two are in the pipeline
sorry I earlier said five, four are commercialized and two are in the pipeline. So
now in terms of sales from Africa concerned we are looking into the sales to a
few governments specifically for the CBPP vaccine as well as the Newcastle
disease in poultry Gamboro in poultry and even the lumpy skin disease
worldwide from there. So these are the opportunities that we are looking at it
would be a little difficult for me to give a quantification of these things at this
point of time, but overall I think by next quarter we should be able to generate
reasonable amount of sales over there and we hope that by mid next year we
are already breakeven as far as Africa is concerned.
Alisha Mahawla:
That is helpful giving us some color on the Africa business I am saying on the
overall consolidated business considering the opportunities in India the lumpy
skin which we are saying in India plus globally plus the PPR tender etc. I think
on a consolidated basis what is the kind of growth that the company is
targeting for this year.
Rajiv Gandhi:
Madam I have the same answer for you what I answered earlier. We are
working towards it and the lumpy skin opportunity is huge I do not want to
give you the figures you can wait for our next quarter results for that. The PPR
tender is 20 Crores, FAO was to buy nearly 0.5 billion b not million, billion in
PPR vaccine the moment that starts I think we would be grappling to even put
in one or two freeze dryers to make sure that we supply to them it is just that
this has not happened at this point of time.
Alisha Mahawla:
And with respect to your margins while you did mention that your gross
margins were impacted because vaccine which is the higher margin business
degrew this year. On an overall basis what is the kind of sustainable margin
that we are working with.
Rajiv Gandhi:
We could go back to our margins which were there a year ago and you could
be rest assured that we would be at the least up to those margins which we
had at the least. So I think we are for sure our gross margins we would
definitely be in the higher 60s up to 70 we should be able to touch those
margins. Our PAT we have been talking at around 35% to 40%, we should be
able to manage those margins. So I think that is what we are looking at.
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Hester Biosciences Limited 10 August 2022
Alisha Mahawla:
Okay thank you.
Moderator:
Thank you very much. We take the next follow-up question from the line of
Mithun from Kiva Advisors. Please go ahead Sir.
Mithun Aswath:
Hi! Just a question on some of your subsidiaries. I think the African you have a
distribution company which is set up where you have only 50% state and you
have Texas life which you have a 50% stake and the Nepal subsidiary also you
are not of 100% any reason for why having minority or majority but not 100%
stakes in these subsidiaries and could it be easier for us to kind of consolidate
some of these entities since we are a small organization why so many entities
have been created. Thank you.
Rajiv Gandhi:
Trishul in Africa Tanzania was an already existing distribution company and we
proposed and they agreed up to 50% so therefore the 50% and we feel that
being a distribution company I mean it is fine as long as we are put in over
there and we are able to distribute we are okay with it. Texas was an existing
company where we used to get our products manufactured we bought in
equity so that we have a larger control of that business. So therefore we
bought up to 55%, as far as Nepal is concerned, we have a local partner and it
would be very interesting for you to know our local partners are there in
electronics who are assembling Samsung TVs over there and it is just that we
went to Nepal and we were at one point of time looking at a 100% subsidiary
but after being there after meeting the local people we did think that there is
value addition in case if we have a local person and therefore we went on with
that model in Nepal and we have a local partner who is absolutely non-
executive in every which manner everything is being managed by our team and
so all these things there has not been a fixed calculation in terms of balance
sheet towards 50%, 55% it is like a partnership evolves and we make that
person as a partner and we go on with it. So that is the way it has been, in
Africa we are 100% owned, I mean, Hester India owned 100% of Hester Africa
we have gone fully our way because there was no reason to look at any
partners and we even were working with the Gates foundation we had a lot of
internal strengths towards that and we went alone so I would not put any logic
it just evolved that way.
Mithun Aswath:
Just one other point I think there was a very large tender the government was
talking about in the order of 100 Crores for the Brucella vaccine and there was
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Hester Biosciences Limited 10 August 2022
a very large development that the government was looking at for the whole
animal’s healthcare and I have recently read even I think you have been
appointed at the senior position for the same I just wanted to understand how
that rollout happening you are talking about this other vaccine PPR where the
size is 20 Crores but can we see that the larger game plan that the government
has for animal healthcare being rolled out quite quickly now as COVID
dissipates the government focus comes back on other issues.
Rajiv Gandhi:
Yes, government focus will come back on it has already rather FMD, Brucella,
Rabies, PPR, now lumpy skin, even goat pox, sheep pox vaccine, it is putting in
a lot of thrust in all these areas and in days to come it is going all these things
are going to become big and we would be there at a time when the moment
comes we would be there and we would take the business forward Brucella
tender last year did come out we did need bid we were L2 and we did not
agree to the terms to supply at the L1 rate therefore we kept ourselves out of
it for this one year now this one year is about to get over and there is going to
be re-tendering again.
Mithun Aswath:
I just wanted to understand because you are part of that national committee
for advisory, I just wanted to understand what is more of a three, four year
strategy of the government in terms of size how clay that could help us kind of
understand the opportunity.
Rajiv Gandhi:
So the committee has been formed I am definitely a part of it, but no meetings
have been called so far. So we are hoping that the meeting would soon be
called, but it is with a clear intention to put a thrust on animal health and
mainly on the prevention side mainly on the vaccine side who may ensure that
the preventive medication, preventive care is taken so that diseases do not
come out because it is always more expensive in terms of treatment as well as
in terms of loss when you are trying to cure for a disease I mean you have
already done the damage you have lost eggs, you have lost milk, you have lost
meat, all these things and then you try to cure it. So government is very clear
in looking at prevention medication, so one of the objectives of this committee
would definitely look into preventive medication which is vaccination.
Mithun Aswath:
Just trying to understand in terms of outlay anything the government has
talked about.
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Hester Biosciences Limited 10 August 2022
Rajiv Gandhi:
No, government has not spoken anything about the outlet they had the earlier
budgets to which they have allotted money but now they have not yet
specifically spoken on the outlet.
Mithun Aswath:
Okay thank you.
Moderator:
Thank you. Ladies and gentlemen that was the last question for the day. I
would now like to hand the conference over to the management for closing
comments. Over to you Sir.
Rajiv Gandhi:
Yes, as always it has been nice to interact with everybody on the call and as it
not only that I am giving information but some of the questions also put our
own minds to think and it gives us also ideas and it keeps us also as much alert
and as usual we will again come back on to the next quarter call and we would
take all the questions etc. There was one question which we were to take
offline, so for that our CFO will take that question offline he has already noted
the name of the person and he has also got the number through the listing
that we get over here when we are addressing the calls. So thank you all very
much and hope to again speak to you in the next 90 days time and I would
also put across I would request Priya if she has anything to say.
Priya Gandhi:
Thank you all for joining today’s call, while our Q1 results have been a little bit
disappointing, but we do have a lot of hope just and we have reasons to
believe that in Q2 and Q3 we will pick up. Also with respect to companion
animals some of you did asked a few questions and in our press note as well
we have not given too much information but, I mean, if I get a chance offline I
will be more than happy to speak about it in detail with any of you, but yes we
are working on this division full-fledgedly such that the dependency on any one
division of the stress on any one division like the poultry or the animal kind of
gets distributed and also it helps us achieve our objective to become an overall
animal healthcare company. So I will see you all and talk to you all in the next
quarter. Thank you very much.
Moderator:
Thank you everyone. On behalf of ICICI Securities that concludes this
conference call. Thank you for joining us and you may now disconnect your
lines.
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