Mankind Pharma Limited — Q3 FY26 earnings call

So the point basically is what, I mean, you're supposed to understand, we have gone for a major kind of a transformation in Mankind, the last, I'll say, 12 to 15 months' time. 2-3 things have happened. Try to understand. One basically is what we started taking a transformation in the form of hiring of approximately 15%-20% field force, reps and managers, leaders as well and then hiring people. In this process, what basically happened, we overestimated our power of executing and making sure that the new people those who join Mankind, understand the culture of Mankind. We overestimated this and we did not understand properly and deeply. I should really confess the problems. Whenever any kind of -- happens and people are being asked that to leave some kind of insecurity creeps in people's mind.

Management candidly explained that the recent growth slowdown was due to internal cultural and integration challenges from hiring a large new field force, leading to insecurity and attrition, rather than external market factors.

Asked by Tushar Manudhane

Yes. So historically, if you see, our CFO to EBITDA ratio has been in the range of 75%-odd or so. In this particular quarter, it is high because of -- one, is that we have been able to optimize on the working capital. So on a year-on-year basis so that has released. Second factor is because we were able to realize some of the government receivables. So because of that also, the cash flow has improved. And if you look at the tax element also, there is a drop in the value term. So these are the 3 factors because of which you see a spike of 25% increase in the CFO to EBITDA ratio. But having said that, it will taper down in the near quarters.

Analyst questioned the sustainability of the very high CFO to EBITDA ratio, and management attributed it to one-time factors like working capital optimization and government receivable realization, indicating it will normalize.

Asked by Tushar Manudhane

So see, net debt is okay because the debt has to be realized over a period because how the debt was structured was that the repayments were coming on a 6 monthly basis. So that is why the net debt is improving, but the overall debt is not, because there is a time gap of 6 months. That's why there is a lag in that.

Analyst observed a discrepancy between significant CP repayment and net debt reduction, which management explained by the 6-monthly repayment structure causing a time lag.

Asked by Chintan Sheth

See, if you just look at our OTC side, the second quarter was approximately minus growth because of this GST and all other things. On the second side, this third quarter. Our growth in e-commerce business is upward of 30%, 40%. In modern trade is upward of 30%, 40%. And at some of the places we have put brakes. And that basically is the reason the growth has not come. There's some business called cash and carry and in that business, what happens, people those who buy instead of selling in the, I'll say, the consumer, they were selling to our own customers. So that basically was creating a kind of rate cuts in the market. That we just taken a, I mean, hard stance on that without taking any other thing in mind.

Management clarified that the divergence between strong secondary sales and lower primary sales in OTC was due to strategic decisions like reducing stockists and stopping 'cash and carry' business to maintain hygiene and prevent rate cuts, despite strong e-commerce and modern trade growth.

Asked by Kunal Dhamesha

Okay, that's a good question, Kunal. So this was a land which was there in the BSV books, okay? And since we are building up the facility at Vadodara. So therefore, this particular piece of land has been classified as a surplus land. So therefore, we are in the process of returning it back to the authorities, this land. So in order to monetize this asset and returning it back. So whatever is the difference between the realizable value and the book value that has been recorded as an impairment cost for this.

Analyst sought clarification on the INR13 crore impairment, which management explained was due to classifying BSV's Hyderabad land as surplus while building a new facility in Vadodara, and the impairment reflects the difference between its realizable and book value.

Asked by Kunal Dhamesha

Neha, hopefully, I mean, all things are done because see, we have always seen, I mean, more growth than the industry always been like that. We are so used to it that when it did not come, it gave us a surprise and rather shock. And once you basically go to that kind of a phase, you go yourself, check everything, recheck it and you do a bit of micro management as well in a sense that why it is not happening, why these things are there. And once we start seeing it, we found out the reasons and started acting faster. And the answer I gave you in the past as well, I mean, just a few minutes back as well. Then we are seeing the traction is right.

Analyst asked about the timeline for Mankind to return to its historical outperformance, and management expressed confidence that corrective actions have been taken, and traction is now visible, indicating a recovery is underway.

Asked by Neha Manpuria

See, it's all a matter of heart only. I mean, for example, if in your office, 20% people are being asked to leave systematically. What kind of energy would be there in total team? Just think about that. That's the right answer. So it's not only numbers that matters. Whatever numbers are left, what kind of a heart and mind they're giving in the work, that also matters a lot. And we are always that kind of organization because where energy is everything. So don't look only numbers, numbers, right? See the force behind numbers. If 80% people start giving 100% kind of their energy, or 110% kind of energy, wonders can be done. If same 80%, only 80% people start giving half of their energy because they're also insecure. They also need some kind of reassurance. So understand that from that perspective, we think from that lines only.

Analyst questioned why a relatively small percentage of new field force (20-25%) had such a significant impact. Management emphasized the psychological impact on the entire team, highlighting that insecurity and lack of reassurance affected overall energy and performance, especially in relationship-driven acute segments.

Asked by Dheeresh