INDGNNSEFinancial Year 2025February 06, 2025

Indegene Limited

7,857words
57turns
7analyst exchanges
2executives
Management on call
Manish Gupta
CHAIRMAN & CEO, INDEGENE LIMITED
Suhas Prabhu
CFO, INDEGENE LIMITED
Key numbers — 40 extracted
rs,
few calls, we have taken time to explain the industry we operate in, business model, growth drivers, etc. We believe this was important because of our uniqueness. We are one of its kind in the Indian
0%
Calendar year ‘24 was a period of low to modest growth for the industry. Most players reported a 0% to 10% growth and industry growing at 4% to 5%. Heading into calendar year ‘25, this seems to be
10%
dar year ‘24 was a period of low to modest growth for the industry. Most players reported a 0% to 10% growth and industry growing at 4% to 5%. Heading into calendar year ‘25, this seems to be a year
4%
modest growth for the industry. Most players reported a 0% to 10% growth and industry growing at 4% to 5%. Heading into calendar year ‘25, this seems to be a year of cautious recovery for the indus
5%
t growth for the industry. Most players reported a 0% to 10% growth and industry growing at 4% to 5%. Heading into calendar year ‘25, this seems to be a year of cautious recovery for the industry. M
2 million
on expansion into new regions, adjacent areas with existing and new customers with deal sizes of 2 million to 4 million ACV each, which will go live in the coming month or two and start contributing reven
4 million
into new regions, adjacent areas with existing and new customers with deal sizes of 2 million to 4 million ACV each, which will go live in the coming month or two and start contributing revenues in the up
7,204 million
e now come to the regular commentary on our performance: Q3 for us, Q3 FY25 revenues came in at 7,204 million, which is a growth of 4.9% sequentially quarter-on-quarter. Now this is driven by some of the win
4.9%
on our performance: Q3 for us, Q3 FY25 revenues came in at 7,204 million, which is a growth of 4.9% sequentially quarter-on-quarter. Now this is driven by some of the wins we had earlier during the
INR 1,501 million
Now this is driven by some of the wins we had earlier during the year. Q3 FY25 EBITDA came in at INR 1,501 million. That's a growth of 18.5% quarter-on-quarter. Total number of active clients grew from 68 to 75 a
18.5%
s we had earlier during the year. Q3 FY25 EBITDA came in at INR 1,501 million. That's a growth of 18.5% quarter-on-quarter. Total number of active clients grew from 68 to 75 and the USD1 million client
1 million
growth of 18.5% quarter-on-quarter. Total number of active clients grew from 68 to 75 and the USD1 million clients grew from 37 to 38 in Q3. More than 95% of our revenues continues to come from the US and
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Guidance — 20 items
Abhishek
opening
“The transcript for this call will be available in a week's time on the Company's website.”
Manish Gupta
opening
“Today, apart from our results, I intend to talk about the industry outlook and some commentary on our customer groups.”
Talking about the industry macro
opening
“We believe there will be a continuous pressure on drug pricing.”
Now coming to renewals
opening
“With this broad commentary about the industry, let me now come to the regular commentary on our performance: Q3 for us, Q3 FY25 revenues came in at 7,204 million, which is a growth of 4.9% sequentially quarter-on-quarter.”
Now coming to renewals
opening
“Q3 FY25 EBITDA came in at INR 1,501 million.”
Now coming to renewals
opening
“And this is what has happened in Q3 as well and will be a likely driver of growth in the near term as well.”
Now coming to renewals
opening
“Extending this trend of big pharma top 20 and this one into the medium term, we should see our customer pyramid, the way we report getting healthier across all levels as customers as we move up in terms of value and we keep adding new customers at the base as well.”
Suhas Prabhu
opening
“And as you would recollect here, there is a higher proportion of project revenue, non-enterprise revenue and many of those kicking off this quarter has resulted in that growth.”
Manish Gupta
qa
“Overall if you think about these over a 3-year period, I would call it, you realize that all these deals we would have done will be very sensible deals, what we have paid versus what we have got.”
Shiwani
qa
“One, with respect to the seven new clients that we have added, what are the nature of these clients and what is the revenue potential that we can expect going forward?”
Risks & concerns — 15 flagged
The continued push to cut drug prices will exert pressure on the biopharma business model and margins.
— Talking about the industry macro
We believe there will be a continuous pressure on drug pricing.
— Talking about the industry macro
The regulatory complexity continues to increase across clinical trials, manufacturing and safety, putting increased pressure on in house regulatory teams and driving greater outsourcing as well as adoption of technology.
— Talking about the industry macro
Now coming to the industry growth after a weak Calendar Year of ‘23 which we have spoken about to you earlier, where there was clear degrowth.
— Talking about the industry macro
Heading into calendar year ‘25, this seems to be a year of cautious recovery for the industry.
— Talking about the industry macro
There continue to be a few of the top 20 pharma companies, call it 2 to 4 which are still trying to get over a weak pipeline of new products.
— Talking about the industry macro
Continued productivity improvement initiatives through better capacity management and automation helped absorb the impact of the wage bill hike which was effective July and which you saw reflected in our margins in the last quarter and that impact has been negated and we believe this will continue to play out as we continue these initiatives in the future.
— Coming to the margins
The net impact of the write back which reflects in other income and write off which reflects in other expenses is a positive impact of INR22 million impacting positively both EBITDA and PBT margins.
— Coming to the margins
How do we ensure that the acquired entities due diligence is done, what is the risk governance framework, etc.?
— Abhishek Kumar
Obviously, they want to drive automation, but they are worried about the risk, especially industry like ours.
— Manish Gupta
And risk mitigation happens by domain experts who are in charge of these technologies and can drive as far as automation in non-domain stuff.
— Manish Gupta
I think our point is we still are waiting for clarity on this administration stance on drug pricing, but nevertheless, outside of that, we believe that drug pricing will be on a downward pressure.
— Manish Gupta
There will be downward pressure because the numbers just don't add up at a higher level.
— Manish Gupta
Intensity might vary here or there depending on the government, the stance and these are complex issues, but the pressure will be downward.
— Manish Gupta
With more pressure on drug pricing, typically you don't have an option.
— Manish Gupta
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Q&A — 7 exchanges
Q
Hi, good morning. Thanks for taking my question. You know, one of the IT services players recently indicated that there is kind of a tug of war between Veeva and Salesforce in the life sciences space. I just wanted to pick your brain on what you are seeing and if either of these end up getting higher share, does that impact us in any way?
Manish Gupta
That's a great question, Abhishek. We agree with that thing there is a tug of war between Veeva and Salesforce and from our perspective, actually there could be a net positive, right given this development for us. Because the opportunities play out at two levels. On the technology level, if somebody is changing the platform, then of course there's a lot of technology implementation work which requires your tech capabilities and domain expertise which where we could play in. But also, after that, if you're changing platform, there is a lot of work to be done in terms of triaging, getting the co
Q
Hi. Thank you for the opportunity. I have two questions. One, with respect to the seven new clients that we have added, what are the nature of these clients and what is the revenue potential that we can expect going forward?
Suhas Prabhu
So, Shiwani, Manish had mentioned in his script that these customers are largely beyond what globally are ranked as the top 20 customers by revenue. So, you could classify them as mid-tier companies which would have revenues, I would say north of $2 billion to $4-$5 billion each. And from a potential perspective, while as things stand today, if we were to look at a top 20 globally ranked customer becoming a $75-$100 million account for us over period, I would say these kind of accounts for the same kind of nature of work would have a potential of becoming a $25-$35 and even $50 million in rela
Q
Thank you for giving me the opportunity, sir. Like as we can see our employee count is reducing and we are expecting a modest recovery in the industry. So how are we planning to add the employees and what kind of hiring are we doing? Like we are hiring freshers or lateral hires, can you just highlight that?
Suhas Prabhu
Sure, Nikhil. So, we have been mentioning in the past and even I alluded to briefly in our call earlier today, at Indigene we continue to have initiatives. We are a digital first new age technology led Company. While we have significant domain and industry expertise to make contextualize this and make this come to life. And while doing so, even internally we have initiatives to keep improving on productivity and operating models, our contracts also allow us to do that. We typically have hybrid contracts which are not just time and material or FTE contracts but also output based pricing and whi
Q
Thanks for taking my question. So, I needed one clarification in the trends that I have been observing over the last few quarters, which is that the overall employees in delivery function have been coming down, at the same time the absolute number of delivery employees with healthcare expertise is going up and this is not like a quarter or two when it's been persisting. So, could you just throw some more light on this trend? That's my first question.
Suhas Prabhu
Sure. So, at this point in time, Punit, and maybe I will take a small example to help visualize this better. So, initiative on automation using the GenAI platforms which we have made significant progress in, is HTML code automation. Over period the need for this skill set has reduced in the delivery function, but use of this technology, given the maturity curve that we see on the domain side, which is medical and pharma specific is likely to take longer. The low hanging fruit I would say in this example is the code automation versus say something much more complex from a technology maturity pe
Q
Thank you for the opportunity. Manish and Suhas, good to talk to you in the new year. Manish, I had just only one question. There's a lot of anxiety around the drug pricing under the Trump administration because apparently the new secretary is going after the big pharma in terms of lowering the very high prices of drugs. You mentioned at the start that drug pricing is actually on a downward trend. Maybe you could elaborate, how do you think this will play out in terms of the S&M spending of the big pharma companies and how it will benefit us or be against us in the near to future term?
Manish Gupta
Hi Abhishek. First of all, good to hear from you. I think our point is we still are waiting for clarity on this administration stance on drug pricing, but nevertheless, outside of that, we believe that drug pricing will be on a downward pressure. There will be downward pressure because the numbers just don't add up at a higher level. Intensity might vary here or there depending on the government, the stance and these are complex issues, but the pressure will be downward. The reality is that our business, given that we do offer more effectiveness, efficiency and if you call it the inertia of co
Q
Hi Manish. Congrats on a good quarter. I have a couple of questions. One, is a growth in the top 20 to 100 cohort, is it more driven by first time outsourcing or is it from market share gains from other players? And second is are we continuing to see market share gains in the top 10 customers and is it more broad based against the set of competition or is it more focused on marketing agencies or broad based or BPO providers?
Manish Gupta
First of all, hi Satish. Two things. If I see the 20 to 100 customers, it's a combination of both. It's first-time outsourcing, things they are doing internally, They are figuring out more efficient models. It's also taking share from the others. Some of these models which were done by big pharma of centralization and more efficient operating models, They are implementing those. And now we have created solutions that are much more effective for mid-tier kind of companies other than the larger companies. So that's essentially what is helping in this segment. So, it's a combination of both these
Q
Thank you everyone for your participation on this call today and continued interest in Indegene. We have had an exciting quarter and we are hopeful that the financial performance and growth that we have delivered is something that we continue from a momentum perspective into the new calendar year as well. With that, we conclude this call and thank everyone for your participation and look forward to the next earnings call next quarter. Thank you, everyone.
Management
Speaking time
Suhas Prabhu
15
Moderator
9
Manish Gupta
9
Nikhil
5
Abhishek Bhandari
5
Abhishek Kumar
3
Shiwani
3
Abhishek
1
Talking about the industry macro
1
Now coming to renewals
1
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Opening remarks
Abhishek
Thank you. A very good morning and thank you for joining us today for Indegene's earnings conference call for the 3rd Quarter and Nine Months Ended Financial Year 2025. Today we have with us Mr. Manish Gupta – Indegene's Chairman and CEO and Mr. Suhas Prabhu – CFO to share the highlights of the business and financials of the quarter. I hope you have gone through our Results Release and the Quarterly Investor Presentation which have been uploaded on our website as well as the Stock Exchange Website. The transcript for this call will be available in a week's time on the Company's website. Please note that today's discussion may be forward looking in nature and must be viewed in relation to risks pertaining to our business. After the end of this call, in case you have any further questions, please feel free to reach out to the Investor Relations Team. I now handover the call to Manish to make his opening remarks.
Manish Gupta
Thank you, Abhishek. Good morning, all. Thank you for joining our Q3 Earnings Call. Over the last few calls, we have taken time to explain the industry we operate in, business model, growth drivers, etc. We believe this was important because of our uniqueness. We are one of its kind in the Indian market. A very specialized Company bringing healthcare and medical expertise along with technology expertise. We use this expertise to help life science companies, bring their life saving products from labs to patients more effectively and efficiently. This is a very large industry and the spends in the areas we operate in are large and hence the headroom to grow is immense for us. We have shared details about this. We have spoken about this in many of our meetings with you all in our earlier calls and meetings. Today, apart from our results, I intend to talk about the industry outlook and some commentary on our customer groups. The reason we are bringing this up in our Q3 Earnings Call is tha
Talking about the industry macro
The continued push to cut drug prices will exert pressure on the biopharma business model and margins. Both in the US and the rest of the world, government policies, competitive dynamics and the very rapidly evolving technology landscape, we believe will force biopharma to reimagine how they do commercialization and R&D. This will provide a big impetus to digital first commercial services companies like Indegene in the next few years and we believe this is going to happen irrespective of what administration is in different countries. Although the current administration in the United States’ stance on this needs to emerge. We believe there will be a continuous pressure on drug pricing. Broadly speaking, while the pace of change may vary directionally, there is unlikely to be significant change due to different administrations or even the steps taken by any given administration. The regulatory complexity continues to increase across clinical trials, manufacturing and safety, putting incr
Now coming to renewals
All our major client engagements which were due to renew this quarter have been largely renewed with minor variance without anything being out of line and we enter the calendar year ‘25 with a net positive rate of renewal. Outside of the renewals, if I look at a pipeline compared to last year, it is clearly stronger. Again, this is in line with the macro industry outlook and also the fact that I think now after having consolidated, companies are stepping back and trying to evolve to the next level of progression on their commercial and R&D medical models. Other than the regular renewals and conversion of pipeline in the quarter gone by, I would also like to mention that we won five key deals on expansion into new regions, adjacent areas with existing and new customers with deal sizes of 2 million to 4 million ACV each, which will go live in the coming month or two and start contributing revenues in the upcoming quarters. Our pursuit for large scale expansion with few of our top 10 to 2
I will also touch upon margins a bit
Our margins remain stable. We are a very disciplined Company and hence have stable solid clients where we deliver high value solutions and hence managing margin for us has been a way of doing things at Indegene. Our cash position remains strong. We now have a tad above INR 1,500 crores in cash and cash equivalents. We continue to actively scout for M&A opportunities and have a good pipeline of M&A opportunities. Here again we continue to be disciplined. Pretty much that's what I had to cover. With this I will pass it on to Suhas for a bit more deep dive on our financials.
Suhas Prabhu
Thank you Manish. Once again, a very good morning to everyone on this call and we appreciate your participation here today. Let me straightaway dive into the details of the Financial Performance for the Quarter: Our revenues grew 7% year-on-year and 4.9% sequentially to Rs. 7,204 million. Our enterprise businesses which comprise the Enterprise Commercial Solutions and Enterprise Medical Solutions segments, grew at a healthy rate of 3.7% sequentially and most of this came in from growth in the mid-sized pharma clients which are beyond the top 20 globally ranked pharma as Manish already alluded to. Our other segments, omnichannel activation and others also grew 11.8% sequentially. And as you would recollect here, there is a higher proportion of project revenue, non-enterprise revenue and many of those kicking off this quarter has resulted in that growth. Our geographical split based on location of origination remained in line with the previous quarter. North America revenue came in at 69
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