Please note that this conference is being recorded. I now hand the conference over to Mr. Irfan Raeen from Orient Capital. Thank you, and over to you, sir.
Thank you, Ria. Good evening, everyone. On behalf of Granules India Limited, I extend a very warm welcome to all participants on Q3 and nine-month FY 2024 financial results discussion call. Today on the call, we have Dr. Krishna Prasad, sir, Chairman and Managing Director, Dr. K.V.S. Ramrao, sir, Joint Managing Director and Chief Executive Officer, Ms. Priyanka, ma'am, Executive Director, GPI and GUSA, Mr. Mukesh Surana, Chief Financial Officer, and Mr. Puneet, Head, Investor Relations, and GM Finance. Before beginning with the call, I would like to give a just short disclaimer. This call may contain some of the forward-looking statements, which are completely based upon our belief, opinion, and expectation as of today. These statements are not a guarantee of our future performance and involve unforeseen risks and uncertainties.
With this, I would like to hand over the call to Krishna Prasad, sir, for his opening remarks. Over to you, sir. Thank you.
Thank you, Irfan. A very good evening to all of you, ladies and gentlemen, and thank you very much for attending our Q3 earnings call today. A detailed presentation of our Q3 FY 2024 performance has been uploaded on our website, and I'm sure all of you must have gone through it by now. We had a stable Q3 after the IT incident had an impact on our previous two quarters' performance. Our finished dosage contribution during the quarter had increased to 66%, resulting in an improved VA of 57% and improved EBITDA of 21.7% for the quarter. Our operating cash flow for Q3 stood at INR 188 crore, driven by better collections and an improved EBITDA margin. Our operational excellence expenditure is higher compared to the previous year, driven by higher manpower costs, which is built for higher revenue and growth.
We expect the formulation segment to drive the volume growth in the short to near terms, primarily in North America and Europe. We are gearing up our finished dosage capacity to cater to this incremental demand. The construction of the new formulation facility at Genome Valley as part of Granules Life Sciences is progressing at a good pace. This plant, when fully completed, will add another 8 billion dosages to our finished dosage capacity. We had inaugurated the pilot plant at this site in the month of November 2023. In addition to new filings, commercial supply of monograph tablets is expected to start in Q3. In Q2 FY 2025, which will gradually be ramped up during the coming year to go up to 2.5 billion capacity in the first phase. We expect the second phase to be completed by Q3.
During the quarter, we had received approvals for three ANDAs from USFDA and one EU approval. Launches of these and a few previously approved products were delayed, and we expect to catch up in the next few quarters. During this quarter, we filed two ANDAs for the US. As of today, we have 62 approved and tentatively approved US ANDAs, eight European dossiers, two in the U.K., six in Canada, and three in other geographies. A total of 75 dossiers approved and 21 global dossiers to be approved. We have a total of 36 US DMFs, 24 CEPs, five EDMFs, nine KDMFs, five Canadian DMFs, five Chinese DMFs, two Japanese DMFs, and over 50 files across several regions. We are anticipating higher number of ANDAs filing during Q4 FY 2024, and accordingly, a higher R&D outlay.
At Granules India Limited, sustainability is a core element of our DNA. We are committed to healing lives sustainably through pioneering green science. I'm happy to share that Granules India Limited had been honored with the prestigious Economic Times Repharma Award for Excellence in Contribution towards Sustainability. This recognition is not just an honor, but a significant motivator, bolstering our confidence to continue our journey with conviction. At C ZRO, our Green Pharma initiative, we are focusing on strengthening our core business for backward integration of paracetamol and metformin in a sustainable manner. In the first phase at Vizag, we are putting up a pilot plant for DCDA and commercial production of PAP. The DCDA plant at Vizag, with a capacity of 108 tons per annum, is expected to start by Q4 FY 2024.
The PAP plant at Vizag, with 10,000-ton capacity, is expected to be completed by end of FY 2025. The project work at the main Kakinada plant is expected to start in FY 2025. Over the past two years of organizational transformation, we have strengthened the organization and the leadership at R&D, operations, and other functions. The focus now turns to further strengthening the sales and marketing or organization. I'm pleased to announce the joining of Mr. David Gonzalez as CMO of B2B business. David joins us from Polpharma, and he has been previously associated with Teva and Glenmark Life Sciences in global roles. Most importantly, we have also strengthened our board by inducting Mr. Sethurathnam Ravi as Independent Director. Mr. Ravi was and is on boards of many prestigious companies in the public and private sectors in various capacities, including chairman in some of them.
We have also inducted Miss Priyanka Chigurupati as Executive Director. Priyanka will be responsible for global marketing, portfolio, and new product launches. With this, ladies and gentlemen, I hand over the call to Dr. K.V.S. Ramrao.
Thank you, Chairman. Good evening, everyone. As briefed in my last couple of conversations, there's a paradigm shift in the management of portfolio of new products. From the traditional Para II filings, the company has shifted its focus to Para III and Para IV filings. The shift in focus is followed by strengthening of portfolio teams, R&D teams, and technology transfer teams to enable smooth integration and filings of the pro- products. The new portfolio of the organization is aimed at not only oral solids but also other dosage forms, leveraging the capability of Granules, technological capabilities in API and formulations. Significant progress has happened on these dosage forms, and we expect to file new dosage form ANDAs in the next financial year. The mix of portfolio includes launch and approval, Day 181, first-to-launch, and NCE -1 products. Most of these products are in the area of non-oncology.
Granules has built excellent infrastructure in API and formulations in oncology at our Vizag facility. We have started building a very strong portfolio of oncology products. The dosage forms of oncology products include oral solids and others. The portfolio again is focused on Day One, NCE-1, and first-to-launch products. The approach here is also global product development. This should enable us to leverage our infrastructural and R&D capabilities and build a very strong oncology pipeline for the organization. This strategic shift in portfolio has led us to build platforms around the strength of Granules, and the global product development should enable us to become a strong player in most of the chosen geographies, including U.S. I'm happy to say that for double-digit filing of DMFs and ANDAs in quarter four, including quarter four, the progress demonstrates our commitment in execution of our strategy.
This is going to increase the R&D spend in quarter four. Yet another significant aspect of strategy is to focus on sustainable new technologies. The technology development team has made significant progress on application of biocatalysis. Two products have completed the pilot scale, and commercial production plants are under preparation, and third molecule has done the optimization in the lab, and we are planning to commercialize the product then. Global cost leadership has been one of the strategic levers identified by the organization. While the backward integration from CZRO will give us leadership for paracetamol and metformin, we have started our work on additional 10 products which are critical for the organization in terms of both profit optimization and protecting market share in geographies of interest. The program is expected to bring in the desired results a year from now.
With global product development as a chosen portfolio in oncology and non-oncology products, we have now embarked on a commercial excellence program. This program will serve as a catalyst for our business growth and business building in both new and existing commercial portfolios across the chosen geographies. To accomplish this, we have recently appointed new Chief Sales and Marketing, Chief of Sales and Marketing, as explained by Chairman earlier. We are also actively reinforcing our commercial team to ensure we have necessary talent and expertise to expand in these chosen geographies. This also includes our capabilities in regulatory filings and addressing the nuances of regulatory requirements across the geographies to enable smooth market entry and long-term success. This leadership capability building, excellence in our commercial processes, and customer centricity will be instrumental in the success of this program.
This should result in larger market opportunities and drive profitability and growth for the organization. With this, I hand over to Mukesh, CFO.
Thank you, CMD and JMD. Let me take you all through the top financial parameters now. Revenue. The third quarter revenues were INR 11,556 million, as compared to INR 11,461 million in Q3 FY 2023, a growth of 1% in value terms. Sales in the US region grew well, led by both existing and new products. Revenue declined by 3% as compared to Q2 FY 2024. The sales breakup as per business division and geographic destinations, presented in our investor presentation, which is available on the website. You can see that the focus on formulation sales has increased, resulting in the momentum shifting from API and PFI to formulations. Value added. Our value added as a percentage of sales for Q3 FY 2024 was 57%, as compared to 48.4% in Q3 FY 2023.
Value added percentage as compared to Q3 FY 2023 has increased by 8.6 percentage points, primarily on account of better product mix, increase in sales of formulations. Price erosions were more than offset by the reduction in prices of key raw materials. Value added as a percentage of sales for Q3 FY 2024 is up by 5.3 percentage points from Q2 FY 2024 as well, primarily on account of better product mix, increase in sales of formulation, coupled with the reductions in rates and prices of key raw materials. EBITDA and EBITDA margin. EBITDA for the quarter was INR 2,505 million, which is 21.7% of sales, as compared to INR 2,313 million, 20.2% of sales in Q3 FY 2023.
A value growth of 8% over the previous year, primarily on account of better product mix. EBITDA for Q3 FY 2024 is up by 3.8 percentage points from Q2 FY 2024, with a value growth of 18%, primarily on account of better product mix, increase in sales of formulations, coupled with reduction in price of key raw materials. R&D. Our R&D spend for the quarter was INR 4,608 million, as compared to INR 2,229 million in Q3 FY 2023, and INR 496 million in Q2 FY 2024. We are going to continue to spend on R&D in the coming quarters as well. Net debt.
Our net debt was INR 9,285 million, as compared to INR 7,671 million at the beginning of the year. The net debt has increased by INR 1,614 million, primarily on account of reduction in operating cash flow. Net debt has decreased by INR 610 million from September 2023, primarily on account of improvement in operating cash flow in Q3. Cash to cash cycle. Our cash to cash cycle was 162 days in the current quarter, as compared to 132 days at the beginning of the year, and 162 days in the previous quarter. Operational cash flow. Operational cash flow for the quarter was INR 1,880 million, as compared to INR 329 million in Q2 FY 2024.
Higher EBITDA and improved cash realization from receivables resulted in higher operating cash flow. CapEx spend during the year was INR 1,047 million. ROC. ROC for Q3 FY 2024 is 15.3%, as compared to 12.9% in Q2 FY 2024, primarily on account of increase in EBITDA due to the reasons stated earlier. With this, I open the floor for questions.
Thank you very much. We will now begin the question and answer session. Anyone who wished to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.
Yep, thanks for the opportunity. So based on this, DCDA, now that plant is expected to start in Q2 FY 2024, so effectively stabilization and then meaningful contribution to profitability, when should we start it, you know?
Tushar, like I said in my remarks, the pilot plant, from where we'll be doing filings and also site transfers, has already been inaugurated. We'll keep going on the filings. Meanwhile, in the same block, in another floor, we're putting up some compression machines and coating machines, where we will be doing monograph products for the US, which doesn't need an inspection to start with. They'll come later. Meanwhile, when we do new product filing and also site transfers, the FDA will come to inspect us even before the main block is ready. Once they inspect this pilot plant, where there's some products running, the site is approved, and when we are ready to go, which will be in Q3, Q4 of next fiscal, then we can straightaway start production. Meanwhile, we'll also look for expediting the European approval.
Rather than waiting for 1.5 years, two years, after applying, after the site starts, we are applying for an FDA approval from the pilot plant itself, and also some production will happen there from Q2 of next fiscal, Q2 or end of Q1.
Also, this is to do with DCDA, right? Not the FDA.
Sorry, DCDA. DCDA, I'm sorry, I didn't get. I, I'm so sorry. I went into the new pilot plant, new, new formulation facility. DCDA will start, pilot plant runs, trial runs will start in March, March of, this quarter.
Got it. So effectively, the commercial meaningful benefit should start kicking in?
The commercial will, again, after the pilot plant run, we'll have to possibly modify the equipment a little bit, the main equipment is required, and then erection and all that will go into FY 2026, Tushar. That will start in 2025, but this will go into 2026.
Okay. Mm-hmm.
That will happen in the site in Kakinada, with renewable power.
... Understood. And sir, now this Latin business with this inventory in the channel, is that largely that correction done, or can we expect some more in the coming quarters?
It's a mix of inventory correction and also some of our important customers have lost certain government tenders. So it will. I'm not sure it will come back to normal, but it will definitely improve. And as of today, we are a little tight on capacity. In case we don't have too much PFI from Latin, we'll make it up for PFI from some other markets. That's not a big issue. That's not going to hit us too bad.
Understood. Likewise, on the Europe side, for paracetamol, if you could share some outlook there.
Sorry, to share from the European side?
paracetamol as a product, given that this quarter was not great as far as paracetamol in Europe is concerned, but how do you think about in the coming quarters?
I think I'll let dr. Ramrao answer this one.
Yeah. So I think our paracetamol, again, the inventories which have been built up by our customers, include Europe. And, as we, as we see, and move into quarter four and quarter one, I think the inventory levels are expected to come down, and then we start picking up the business in Europe for paracetamol. So the trend will continue for some time in quarter four before we come the most back to the normal.
But basically, there's also been a price decrease in sale price decrease in paracetamol. So when you look at revenue numbers, they will come down, but the margins are intact, and raw material prices have come down.
Got it. Just lastly, Metoprolol, when do you expect to launch in U.S.?
It's on the sea, delayed by the ship going around the cape. Once it reaches there, I think they'll start.
Understood. Understood. All the best, sir. All the best. Thank you.
Thank you.
Thank you.
Thank you. The next question is from the line of Tarang Agarwal from Old Bridge Asset Management. Please go ahead.
Hi, good evening. Just a couple of questions. You know, there's recent dichotomy seen in your performance in your U.S. and ex-U.S. business. While I understand the situation with Latin, and the general trend of raw material prices going down, I just wanted to get a sense on, you know, your comment on both U.S. as well as ex-U.S. business. You know, in U.S., if you could give us a sense on, you know, how have your volumes grown this quarter and some of the key products that have contributed to that? And similarly, if you could give us a sense on, you know, what really has happened in Europe and, the ROW business, maybe some commentary on the volumes there.
Okay, Mr. Agarwal. Actually, the U.S., the finished doses business has grown and continues to grow, mainly driven by new products and made fully from India, and also products made at our U.S. facility. The controlled substances business is growing, and some of our new launches are also contributing. And as we launch a few more products, the revenues of entities in the U.S. are going to increase. Europe was mainly a paracetamol-driven market and especially API. So we had the price reduction, the same price reduction in the paracetamol, and that's why the revenues have come down. And while volumes will be there, the revenue will definitely not catch up to the old level, where after COVID, the revenues, the prices were very high. I don't expect the price to go there.
However, our formulations that we are launching in Europe are going to drive the growth in this, region, and we see a steady increase in Europe, too. So while U.S. will be doing better than Europe in the short term, like I say, one year or 1.5 years, after that, the growth rate in both the entities should sort of be equalized. Latin, we are now trying to get into finished dosages in Latin, and, it's going to take some time. So while it will improve, as a percentage of revenue, I don't think it will go back to those old levels because the U.S. and Europe are very fast, they're growing very fast, and as a percentage, Latin will continue to be low.
Okay. Just to follow up, I mean, if I look at your dossier filings for Europe, you know, right from June 2021 till December 2023, almost two and a half years, the number has moved up from, say, you know, five total filings to about nine filings. How should we see this? I mean, should the intensity or the speed of these filings increase as we move forward?
I think Dr. Ramrao will take this question.
Yeah. As I spoke in my brief, the focus is on global product development, and we are getting into the filings across the chosen geographies in the globe. Europe is our preferred destination. Already, we have started working on more filings in Europe, and you will see this number increasing very rapidly each quarter from quarter four onwards. And we will be able to see a lot of traction in Europe on the dossiers and also a lot of focus on the launches of these dossiers, which we have filed some time back.
... So Europe is going to be definitely a value-added formulation supply business through those years, and that should be, that is the focus of the organization and also the portfolio that we have created in the last one and a half years. I think all those are also destined to be filed in Europe in the next two to three quarters of time. Thank you. All the best. Thank you.
Thank you. The next question is from the line of Sajal Kapur, an individual investor. Please go ahead.
Yeah, hi. Thanks for taking my questions. How much of the gross block is not optimally utilized today or waiting for ramp up, but we are incurring fixed costs there?
The numbers, Mr. Kapur, the numbers will be given by Mukesh in terms of rupees. But the Vizag site, unit number five, the onco and the other APIs, due to delay in approvals of some of our formulations, which will be using APIs from that site, that has been idle for a long, long time, and also onco block has been idle. You just heard Dr. Rao say that there are lots of very exciting plans for onco, APIs and FTs. And we also expect with some approvals for some of the MUPS products formulations we have filed, the APIs will start being manufactured in that site. And maybe within a year or so, we should start seeing some good revenues from there. Now, in terms of gross, gross block, I think Mukesh will answer that question. Yeah.
So, the net block is about INR 350 odd crores, where we use commercial as well as R&D. So from, you know, partially it is commercial, partially it is R&D.
Yeah. Dr. Prasad, I just wanted to understand, as a percentage, by the sound of what you just explained, in the response, it seems like a significant, or a material part, if not significant, of the gross block is still fairly underutilized, but the fixed costs are already flowing through the PNL. Is that a fair assumption?
You're perfectly right, Mr. Kapur. You're perfectly right.
Okay.
That still forms a tangible portion of our gross, net block.
Yeah. Yeah, yeah. That. I thought so. So, thank you for that. And, second related question is, what could be the EBITDA on about 70% capacity utilization, assuming no material change in, product mix, and no material change in the cost of raw material? With 70% capacity utilization, we keep the same product mix as in the current quarter, let's say, assumption, of course, and the cost of material is also, remains kind of largely stable. I'm just trying to get a sense on, you know, what could be the optimal, EBITDA margins and an ROCE, because the current numbers are not giving a true reflection of the business potential. Thank you.
If we... Oh, go ahead, Mukesh.
Yeah. So currently, you know, we still have a lot of room for capacity utilization, both in Gagillapur as well as Bonthapally, which are our largest plants. And you know, there, the utilization is you know, higher than 70%, but still we have room to go up to you know, 90%-95%. And you know, we are continuously investing on debottlenecking and also improving the product chain. So that's a continuous process. And you know, currently, we are telling Gagillapur is in the range of INR 23 billion-INR 24 billion. With various improvements, we can further increase. And we are also adding one more facility, Granules Life Sciences. So it's always, it will be ever-evolving.
We will continuously add capacity and, you know, the potential, we will always have some capacity to be placed. Mr. Kapur, I think, I will add something to that, or maybe you can ask your question again.
Yeah, just a small clarification. So yeah, I get that, Mukesh. And so on a dedicated capacity, we expect no less than 95% steady state utilization, right? But on the fungible capacities, it's difficult to go beyond, let's say, 85%. So capacity utilization on a blended basis will be, on a steady state, hovering between, let's say, 85% and 95%, including both fungible and dedicated capacities. Assuming we don't do any fresh CapEx, which is not correct, I know that. What I'm trying to understand is, can we get to 25% EBITDA margin when we get to optimal capacity utilizations across dedicated and fungible capacities? Or can we even breach 25% with the improvement in the product mix?
That's the sense I'm trying to get here.
Yes, I understood that, Mr. Kapur. And, basically, with optimal product mix, it can definitely go up to, a, a few percentage than what we are doing now, not to infer, but close to that. But the product mix will happen with the new launches. So new launches, we have to see how they go in the market. We are quite excited, but we have to see how they perform. Definitely, the margins will go up. And again, another thing to add here is if you, if we remove the unit five, where you rightly said a lot of asset is not being utilized, definitely our EBITDA levels will be higher than what you're saying. That means when that asset is utilized, we can see some much better numbers.
... Right. Okay, that's helpful, Dr. Prasad. Thank you. All the best.
Thank you.
Thank you. The next question is from the line of CA Nihar Shah from Crown Capital. Please go ahead.
Yeah, good evening, sir. I have two questions. One is on margin. So our margin has seen a good jump this quarter, like we are around 21.5%-22% level. So what are the sustainable rate are, which we are looking at going ahead?
It will be around this number, Nihar, definitely, and like I always said, it'll be, we are always aiming for above 20%. And every quarter or maybe year-on-year, we'll see the EBITDA levels going up. Definitely, and as like I said, as when discussing with Mr. Kapoor, the product mix, which when it becomes optimal, definitely the margins will go up. But it will take maybe a few quarters to see the effects.
Understood. Also our revenue this quarter went down, like, on quarter-on-quarter basis, like, slightly. So are we looking to improve from this? At what rate and how can we look at the revenue outlook for next year?
Next year should be quite decent. But again, to answer your question for this quarter, the revenue, I won't say degrowth, no growth in revenue was caused because of prices of paracetamol. Like I said, the margins are there. If you see the value add, value add was fairly good. So but the revenue came down, and next year definitely, we will see an upward trend. Also, this year if you see, we also lost the first quarter. So this quarter, this year is going to be not so exciting, but next year seems to be going great.
Any ballpark figure, what kind of revenue are we looking for next year or any year-on-year growth rate which you would like to give?
No, I think we made it clear a few quarters ago that we will stop giving guidance, but you will see the improvement, Nihar.
Okay. Okay. All the best, sir. Thank you.
Thank you.
Thank you. A reminder to all participants, you may press star and one to ask questions. The next question is from the line of Rashmmi Shetty from Dolat Capital. Please go ahead.
Yeah, thanks for the opportunity. So, sir, on, basically on the U.S. business and, you know, just to understand more on the gross margin side, the entire gross margin expansion, you know, that we are seeing, you know, a sharp, sharp jump from quarter to quarter as well as on YoY basis, it is mainly driven by this, U.S. business only, or, you know, it is also some other factors are also contributing it?
It's a mix. Actually, it's a mix of, it's a product mix, but which we are selling in the U.S. So you are right. It's the U.S. business that's giving us a higher value add.
Okay. So, if I try and understand, you know, what is the volume growth currently which you are seeing in the U.S. business, and what is the kind of price erosion that we are seeing in the U.S.?
Yeah. So, you know, we have multiple products. Some are in liquid and some are in, you know, tablets. So it is difficult to, you know, give one-
On an average, if you can give something, you know, some ballpark number, just to understand.
So, currently, you know, we are much higher in terms of volume, you know, as compared to the value. So,
Okay.
Just, yeah, just to give some ballpark number, the price erosion range ranges from 6%-10% at selling price level. Raw material level is much higher.
Got it. And, you know, what I understand that, you know, the FD sales contribution has seen a sharp jump. If I just compare nine months data to nine months data of FY 2023, you know, from 50% contribution, it has gone to 61%, and our API and PFI segment has actually come down. So, you know, whether, you know, this kind of performance will be there in the subsequent quarters also, or we will see some fluctuation going ahead?
There will be some fluctuations, Rashmmi, but definitely they are, they will be at the same sort of, at these levels with minor fluctuations.
Okay. But just from 61%, you know, any aim or anything, you know, which you are targeting that in next two years, the FD contribution to overall sales to go to any particular number?
I cannot give you a number, but definitely the FD cont... Our objective is to have an increased FD contribution, because, you know, the FDs give the best margin. So we are aiming for a higher percentage, and we definitely see the number growing. I cannot give an exact number.
Okay. And what is the outlook on the API and PFI business? Because, you know, we have, we have seen a big decline this quarter, this year, which I understand that, you know, it is due to the pricing and also due to the paracetamol pricing on higher base. But going ahead, you know, have you seen that most of the impact has already come in and, you know, now, the prices are stable, or you feel that, you know, we are going to see, much more impact in the coming quarters also?
Again, our objective is to convert APIs and PFIs into FDs. We just started. So you will not see any, I mean, as a percentage, the APIs, PFIs would stay approximately around this range.
Okay. So you feel that. Add to that, Rashmmi, just to add to that.
Yeah.
Like CMD said, the percentages might remain same, but the volume growth will be quite significant, which means in terms of absolute numbers, we will see an increase, primarily on the larger volume APIs. There has been a little bit of inventory stockouts that happened because of COVID with some molecules, which as we grow, increase because there will be our customers will be depleting the existing inventory. So we do have some capacity ready for them, and we will be utilizing that going forward.
Okay. And in your FD business, you know, how much does U.S. geography contributes? You know, as of now, I think now U.S. has become a big business, so you know, you can at least give some idea. Only in your FD segment, how much is the U.S. contribution, followed by Europe?
The majority of our revenue business is from U.S. customers, so a major part. Europe is growing now.
Okay. How many launches have we done till date?
Sorry-
I mean, till date, in the sense for this year. Yeah, in the U.S. business, only for this year.
We've done about four to five launches this year, but some of them have been soft launches, like Sandy indicated in his speech earlier. Some of them have been delayed because of logistics issues, but those will be resolved because we are building inventory in the U.S. before we take on new businesses, and we will see a continuous stream of launches going forward. In Q3, we estimate to launch between three to four products and... Sorry, in Q4 and Q1, in addition to gaining more market share from the existing products, we'll be getting, we'll be launching about three to four products.
This year you will end up by eight to 10 launches?
No, we'll have about four to five launches, plus another three launches . About seven launches.
Seven to eight launches. Next year, how much are we targeting?
I'm sorry, ma'am. Sorry to interrupt. May we request you that you return to the question queue for follow-up?
Yeah. Can you just answer this last question and then we can return back to the queue?
Sure, ma'am. Thank you.
With the visibility we have across the regions, we'll have between four to eight launches with the current visibility.
Okay, ma'am. Thank you.
Thank you. Our next question is from the line of Harith Ahamed from Avendus Spark. Please go ahead.
Hi, thanks for the opportunity. So in recent months, you've had some interesting approvals, like, generics of two products, Nexium, PROTONIX, and a few others. So, can you give an update on launches of these products and, also trying to understand if there is a change in the contribution from our top five core molecules, which has historically been above 80%.
I'll take that question.
Launches? Yeah.
Sure. Sure. So like I mentioned, just now, when Rashmmi was speaking to us, we have delayed a few launches intentionally because of logistics issues. Now, that said, we have already launched four to five products. We will be launching, doing a soft launch of three products in this, well, Q4, and going forward, we'll be doing the remaining launches. Sorry, what was the second half of your question?
Given these are molecules outside our core top five molecules,
Yes.
I was trying to understand if, you know, there'll be a change in the contribution or a decrease in the contribution from top five molecules when we launch these products?
So as we've always committed, if you see our numbers over the last couple of years and quarters, our core contribution has always been around 85%. As of this quarter, it's about 72%. So the goal is always to increase contribution from the new products, and you'll see that going forward as well.
Harit, to add to that, also the margin contribution from the newer products is quite decent compared to older products as of today.
Okay. Did I hear correctly that the core molecules, this quarter contributed 72%?
Priyanka, yes.
Sorry, you cut off for me.
No, no.
You are right. He's right, Harit, it's 72, around 72%.
72%. 72% of the overall revenues?
That's right.
Not the FD revenues.
Okay.
Okay. When I think of CapEx in FY 2025, in FY 2024, we're tracking around INR 400 crore, estimated for the full year. Now that we are starting phase two at Kakinada, how should we think about our CapEx in FY 2025? And the phase two at Kakinada, approximately how much will be the overall spend, and then over what timelines?
Harit, I will give you a, you know, complete perspective on the CapEx. As of now, for first three quarters, we have spent INR 283 crore, and we are expecting, you know, to spend for the full year around INR 500 crore. So there is a reduction in the CapEx venture, primarily, you know, in Granules CZRO. And, you know, the Kakinada, as Jamna has explained, it will start in 2025, and, you know, commercial will start in 2025. So there will be some, you know, deferral, deferment of capital expenditure, so not so much substantial in the next year as well.
Next year, we have planned for over INR 600 crore CapEx, INR 200 crore would be regular and, INR 400 crore would be on the growth project, like Granules Life Sciences and Granules CZRO and few other projects which we are exploring.
Okay. Thanks for taking my question.
Thank you. The next question is from the line of Bino Pathip arampil from Elara Capital. Please go ahead.
Hi. Good evening. Just a quick one on raw material. So when you say the decline in raw material prices helped margins, are there any two or three key raw materials which have mainly contributed to this?
The main thing is that the biggest products for us today are paracetamol and metformin, which have raw materials for paracetamol is PAP, para-aminophenol, and metformin is DCDA. So both these things, both these products have prices have come down drastically. Of course, so has the selling price, too, but these are the two main products that have contributed.
Understood. What do you attribute this reduction in prices to, and how do you think it will remain there?
Sorry, I lost you. I didn't get you.
What would you ascribe this reduction in prices of these raw materials to? Is there any specific reason and how you think it will sustain at those levels?
It was during COVID that these prices shot up. There were shortages, and now after COVID, new capacities also were added, and as of today, there's surplus material, and I do have every reason to believe that the surplus capacity available, the prices should hold on for a few years, plus or minus something.
I understand. Thank you very much.
Thank you. The next question is from the line of Nagesh M, an individual investor. Please go ahead.
Hi, good evening, sir.
Good evening.
Congratulations for the very good set of numbers, for the increase in the bottom line. Just wanted to know your viewpoints on dollar INR, how it works in future, and what is your hedging policy? Because for the last 6-8 months, the dollar is stagnating at around 83 only.
I think the right person, Mukesh, will answer that.
So, dollar INR, you know, there are divergent views. Our internal view is it will be in this range for next quarter and also next year, in this range of 82-83. And as a hedging policy, we have our risk management policy, and also we have a clear hedging policy in terms of whatever net exposures are there. We take time to time coverage.
Okay. What will be the average dollar rupee for your entire nine months period this year? Realization...
It would be around 82.5, around that range.
Okay. Okay. One more question is, any chances of getting a bonus shares? Because, the company has not issued any bonus since at all.
Nagesh, we did two buybacks, and that was really something, we thought we were doing something very good. So now with all the CapEx and other things that we are doing, we may not do a buyback at least another year or two. Bonus shares, we have not thought of it, and we, I don't think I can comment at this point in time.
Okay. Any chances of the pledge of shares being totally released, because you have done a reduction for a very long time, and now it is stagnating?
Yeah, it will, it will be totally released. You will see that shortly.
Okay. Okay. Thank you very much.
Thank you.
All the best.
Thank you.
The next question is from the line of Vikas Sharda from NT Asset Management. Please go ahead.
Yeah, hi, good evening. You mentioned that the raw material prices for, like, PAP and DCDA has fallen quite sharply this year. So I was just wondering that, when you're talking about backward integration in your, the CZRO subsidiary, so, how does the viability of those projects change with, say, the changes in the prices or are these not really linked? How do you look at the, the prospects of that backward integration?
Yeah, even though the price have dropped, when we make our product, going based on current yields and other data we have now, we should still be profitable. Not an exorbitant profit, but we will be profitable, and we will be able to justify our investment. More than just this, I think I've mentioned many times, the entire world is dependent on China for DCDA, and a geopolitical crisis somewhere there can lead to global shortages of metformin. So once we make DCDA ourselves, it's a lot of self-reliance, and our customers would prefer to buy from a company which is fully integrated. And the other advantage is, we will have the lowest carbon footprint when we make our DCDA. Our product, metformin, will be green compared to anybody else.
Even though you don't see it today, few years from today, you'll see the effect. And people, every company in the world, pharma company, every distribution company, including Walmart and all, have taken targets for achieving net zero. And the only way they can achieve that number is to buy products with least carbon footprint, and we do believe there will also be a premium for having products with carbon footprint. So to sum it, it's self-reliability, and also premium price based on green, green chemistry, in addition to normal margin. Thank you. Thank you. One more question that, like when one looks at, say, the revenue growth for this quarter overall, let's say 1%, how would you look at the volume growth versus, say, the price movement, mix?
So, you know, it depends on a lot of product combinations and also, you know, medicine and tablets. But as I told you, on an average, you know, from lower side to the higher side, 5%-6% to 10% range of price erosion has been there. Okay, perfect. Thank you very much. Thank you.
Thank you. A reminder to all participants, you may press star and one to ask questions. The next question is from the line of Saurabh Shukla, an individual investor. Please go ahead.
Yeah, thank you so much for this opportunity. And actually I have two question. The first one is, I mean, like related to this R&D section, that is research and development. So may I know, like, how much increase we can see, like, you know, in the R&D spending in the upcoming quarters or the financial years? And in addition to this, like, is there any specific new products in the pipeline that is going to be adding your portfolios?
R&D expenditure? Yeah, R&D expenditure, you know, we are spending over 2% of sales. You know, this quarter we have spent about INR 47 crore. The Q4, we are, you know, probably will be spending much more than the INR 47 crore. As a percentage to sales also, we will increase our spend in Q4. Lot of filings are in process in the next two months. So expenditure is going to go up and some of the new launches. So on the new product launches, Priyanka has just spoken. So we have done about four to five launches now, and— Sorry, this is on? New products in R&D. New products in R&D. So as I told in my brief, the new products in R&D, we are doing 10-12 filings every year.
This you will see, based on our R&D expenditure that we have already stated for Q4. We will be ramping up around 10-12 every year, not only in the U.S., but I've also mentioned that this will be a global product development. And, we will be looking at not only filing in the U.S., but extending these filings into the chosen geographies, including Europe. So overall, I think, we will be looking at, as Chairman has pointed out earlier, more of converting ourselves into a good finished dose player in markets outside the U.S., along with the API sales. So it will be 10-12 products every year in the R&D for at least coming couple of years.
A lot of development on quality also is happening in the R&D as of today, and will continue.
Okay. One more question. I mean, like, as I said, as I saw, like, you know, there are two sites that is, I think I just like, you know, Vizag and, Kakinada. Apart from that, is there any other, like, you know, other new sites that is Granules India basically going to, I mean, like, you know, find out in India or any other geographies in the upcoming years or upcoming quarter itself? And, so I just wanted to, like, you know, please emphasize on that part only. Yeah, that is the question.
Let me try to understand your question a little better. It wasn't clear. So are you asking, other than Kakinada, are we having any other expansions in different geographies?
Yes. Correct. Correct. Correct. Yeah.
Okay. I think we have a lot of investments going on right now, and even though Kakinada is delayed, it's not going to be small. Also we have this in Genome Valley, which is a different site other than our current formulation facility. Over INR 400 crore of investment is going on that. And recently we have started a packaging unit at a fairly high investment in Virginia, in addition to our GPI facility. So we have already invested, and we have plans for some more. And as I see it today, I don't think any other geography is visible.
Okay. Thank you so much. Thank you so much, and congratulations, and all the best for the future. Yeah. Thank you so much.
Thank you. Ladies and gentlemen, that was the last question of the day. I now hand the conference over to Mr. Krishna Prasad for closing comments.
Ladies and gentlemen, thank you very much for attending this call, and I hope that you have got all your answers. If you have any other questions, please feel free to reach out to our team, Puneet, or Mukesh, and we'll be glad to clarify. Once again, thank you very much, and have a good evening.
On behalf of Granules India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.