Q1 21/22

Jul 28, 2021

Ladies and gentlemen, good day, welcome to the Granules India Q1 FY 2022 Earnings Conference Call hosted by Emkay Global Financial Services. As a reminder, all 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 star 0 on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Kunal Damecha from Emkay Global Financial Services. Thank you, over to you, sir. Thank you. Good evening, everyone. I would like to welcome the management and thank them for providing this opportunity. We have with us today Mr. Krishna Prasad Chigurupati, Chairman and MD, Ms. Priyanka Chigurupati, Executive Director, GPI, and Mr. Sandip Neogi, Chief Financial Officer. I shall now hand over the call to the management for their opening remarks. Over to you. Thank you, Kunal. A very good afternoon, ladies and gentlemen. Thank you very much for attending our Q1 earnings call. I hope every one of you and your family members are vaccinated and continue to be safe. I'm happy to announce that we have vaccinated all our workforce, and we continue to support our staff and their families with all the needed medical support and psychological counseling. As part of our support to society, we have donated a sizable number of paracetamol tablets to the government of Telangana. We are also setting up an oxygen generator close to our facilities at the government center. Continuing from our last interaction, availability of para-aminophenol, a key raw material for paracetamol, was a great challenge during Q1. We see the situation start to ease up in the current quarter. Domestic production has started with one company, and another company is expected to start in a few months. In addition, a few new plants in China are coming up, and also the plant that had shut down is likely to recommence production in a few months. Our expansion of formulations business into new geographies had started, and as you are aware, we have approvals for two of our existing products in Europe. While we await further approvals of the already filed products and continue to file more, we are close to signing an out-licensing deal with a few companies in Europe for the approved products. We had also received an approval for one product each in Latin America and Canada. They were launched through partners already. We will continue to expand our marketing footprint into Canada, Latin America, and South Africa going forward. This will be a new initiative API and PFI, and also means certain CMO businesses for formulations in the past. We continue to be focused on strengthening our position and growing our core molecules with continuous innovation while launching new products into existing and new geographies. Our strength on our core molecules is driven by vertical integration across the value chain, along with innovation in manufacturing. This has been our philosophy all along. As a continuation of this philosophy, most of our high-volume new products are also fully integrated, and in some cases, right from the KSM level. Needless to say, every product has a certain level of innovation in manufacturing, leading to cost leadership. While our core molecules continue to grow due to expanding wallet share in existing markets and addition of new geographies, we expect our new launches to overtake this growth over a period. We expect the share of other products to be about 40% by FY 2025. I would also like to explain the strategy on our investments in unit 4, the Auctus Pharma plant, which we acquired many years ago, unit 5, which is our multipurpose API facility, and facility for high potent APIs and formulations, too. I will also address the strategy for Granules Pharmaceuticals in the U.S. Coming to unit 4 in Vizag, we have 16 APIs commercialized from here, and four of these are currently used for our existing formulations. Out of the rest, we have filed and will file ANDAs and EU dossiers using five more APIs. The value of this plant will be unleashed through these formulations. This plant contributes a sizable value to the strategy and profitability of the company. Unit 5, the new facility at Vizag, we have filed DMFs or CEPs for 4 APIs in the high potent segment and 6 APIs in the non-high potent segment. On the high potent formulation side, we'll wait for some more time to file our own dossiers and will continue to market only APIs for the time being. We are currently validating some CMO formulations. This site will see decent revenues on both these plants shortly. 5 non-high potent APIs filed from here are for captive consumption for our own formulation filings. More APIs are being filed from here, which will be used for captive consumption. These APIs will help drive the cost efficiencies of our new formulation filings and will help us being more profitable. At Granules Pharmaceuticals in the U.S., I am happy to mention that we had a pre-approval inspection by the U.S. FDA recently and received the EIR within 25 days of completion of the inspection. We expect approval of 3 products covered by the inspection within the goal dates. At GPI, we have 2 arms. 1 is for manufacture of RX formulations, and the other is the front-end for marketing all the formulations from Granules India and GPI, except 1 product which we have licensed out to a partner. The focus at GPI portfolio is products in the Schedule II segment, which is the controlled substances, and a few other products. We have also 2 products approved in the opioid category, but have not launched them due to the current legal and tax uncertainties. We expect to launch them once we have clarity on this situation. These are products based on paracetamol API and will add immense value due to the integration when launched. In addition, we are transferring some of the existing products manufactured at Granules India to the site at GPI to be qualified for bidding for the VA business, which is a government business of the U.S. We have recently expanded capacity at GPI, the VA business will add a great value to GPI. We have another subsidiary, Granules USA, in the U.S. This subsidiary was established in the year 2003 as a front-end marketing arm for APIs and PFIs. GUSA was offering OTC and RX finished dosages to B2B customers in the past. We now transferred all the RX formulations to the GPI front-end marketing, GUSA now handles APIs, PFIs, and OTC formulations. In addition to B2B, GUSA has a separate division, Granules Consumer Health, which handles the front-end private label OTC marketing. This division was started in the year 2015, and the growth has accelerated from last year. We are quite excited about the prospects of this business. On the capacity expansion front, the MUPS block is on schedule and expected to be qualified and ready by Q4. We have two MUPS products approved from this facility, and this will only need a small portion of the capacity of the plant. Till the already filed products and to-be-filed products are approved, we'll be using this block for manufacturing non-MUPS products also. As we start using it for more MUPS products, we'll start seeing the actual potential. We expect the MUPS capacity to be fully utilized by FY 2025. Based on our current strategy and plans, we'll be out of capacity by FY 2025. To be able to cater to our requirements, the new plant at Genome Valley should be FDA-approved and operational by then. Since this is a greenfield facility, the approval period is longer, to meet our deadline, we need to start construction at the earliest. We are taking new initiatives with respect to ESG. CRISIL has ranked us at 53 points, which is the median range among Indian pharmaceutical companies. We have set up a separate team for ESG and are taking up new initiatives to reduce carbon footprint and to reach a higher rating. Before we go into Q&A, Priyanka will take you through a few important numbers and events. Over to you, Priyanka. Thank you. Good evening, everybody. Hope all of you and your families are doing well. We're very happy to announce a good set of numbers for Q1 FY 2022, despite the myriad of challenges posed by various business scenarios in the backdrop of COVID and logistics disruptions, resulting in a shortage of raw material and low utilization of capacities, especially paracetamol. The first quarter revenue was INR 850 crores as compared to INR 736 crores in Q1 FY 2021. Our increased sales from existing products and new launches had compensated for the loss of MEIS benefits. We had a good revenue share from our existing molecules and a sizable revenue share from our new launches, which enabled us to achieve the 16% year-on-year growth. As indicated by CMD in his speech, we expect the raw material shortages on paracetamol to be resolved over the next couple of months, which would enable us to have a better H2 FY 2022. The sales breakup as per the business verticals and regions are presented in our investor presentation, which is available on the website. For the quarter, the gross margins contracted from 59.5% in Q1 FY 2021 to 54.2% in Q1 FY 2022, mainly due to the reduction in margins on paracetamol due to increased KSM pricing. Favorable Forex in Q1 FY 2021 and air freight collected from customers were a part of the top line, which were added to the gross margin in Q1 FY 2021. Those weren't added this quarter. EBITDA and EBITDA margins. EBITDA for the quarter was INR 201 crores when compared to INR 184 crores in Q1 of FY 2021, an increase of 10%. The EBITDA margin drop is on account of lower profitability on paracetamol products and higher logistics expenses. The PAT for the quarter stood at INR 120 crores, an increase of 8% over the previous year, attributed to all the reasons I specified above. ESG. I suggested in the previous quarter that we were committed to grow our company in a responsible way. A certain part of our CapEx spend has been allocated for ESG activities. Focus on ESG is continuing, and as a part of this initiative, the company has identified areas of improvement and initiated a carbon emission, water, and waste footprinting exercise and has taken up an operation excellence project in these areas. We're committed to improving our ESG ratings across the healthcare industry and aspire to be one of the most sustainable businesses by benchmarking the best-in-class practices. Our R&D spend for the quarter stood at INR 27 crore compared to INR 20 crore in the previous year. We will accelerate our R&D spend in the subsequent months. During the quarter, we filed 1 ANDA, 2 EU dossiers, 1 U.K. dossier, and 1 South African dossier. While the EU and South African dossiers and the U.K. dossiers are global extensions of the finished dosages that we are already very strong in the U.S. market, the ANDA we filed in the U.S. is a high-volume hypertensive that we are completely backward-integrated in. This quarter, we have received an approval for 1 dossier, which we have launched already. Within the MUPS category, as stated over the last call, we have 5 products approved with 1 pending a launch. These are within the CII and mineral supplement categories. In addition to this, we have another 15 MUPS products under development in the U.S. and EU regions under different therapeutic areas, including PPIs, antidepressants, and antihypertensives. We will be integrated directly or will have strategic partnerships on all these products with an integration to the KSM level for most products. A breakup of the 69 filings made so far has been made available in the investor presentation. Net debt. Our net debt increased by INR 55 crores on account of increase in our short-term borrowings due to significant increase in our inventories and receivables due to the increased business requirements, both on the raw material and finished goods front. On the raw materials front, we stocked up due to potential COVID disruptions. We have a few high-volume products that we're launching in the U.S. for which we have been carrying a significant amount of inventory. As we keep ramping up to reach our target market share, the inventory will be depleted. I think it's important for us to note that when we bid for our front-end business in the U.S., it's very important to have the product readily available. There is a significant advantage in being able to launch immediately versus having a ramp-up time. Hence, we will build inventory in the U.S. in both packaged and finished formats to ensure we have the best ammunition possible to achieve our target market share. The inventory levels will keep fluctuating as we have new launches and settle to a certain extent on market share for products we have already launched. This is the nature of the business, and we are taking very calculated risks when we make these decisions. Cash to cash cycle. Our cash to cash cycle increased from 117 days to 145 days, mainly on account of increase in inventories, which we are consciously building on account of new launches and also to tide over any crisis due to COVID or other disruptions. Our ratios, as referred to in the earning presentation, are also showing a drop in the current quarter due to the reasons mentioned above. Significant actions have been planned over the next eight months, and we're confident that those ratios will be back on track very soon. Our operational cash flow for the quarter stood at INR 133 crores, and during the previous year, the amount was INR 82 crores, mainly on account of better operational profits over the lower previous year's base. We had a negative free cash of INR 30 crores due to a planned CapEx spend of INR 163 crores versus a budget of INR 400 crores for the entire year. With that, I'd like to open the floor for questions. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the 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 Rashmi Sancheti from InCred Capital. Please go ahead. Yeah, thanks for the opportunity and congratulations on good set of numbers. One question on gross margin. Whatever quarter-on-quarter dip we are seeing, that is completely impacted due to the higher KSM prices of paracetamol, or there is some offset which is done by the new product launches during the quarter. If you can explain the exact impact which is coming from the high KSM prices. Rashmi, it's partly due to high KSM, but as Priyanka has explained, in the Q1 of FY 2021, we had air freights in the sales revenue added up, so the gross margin has gone up. What was the other one? MEIS. MEIS also was there in the Q1. Yes. All these have resulted in a drop in gross margin. One of the main reasons is KSM price increases. Sir, this is on YOY basis. I was asking on quarter-on-quarter basis, like compared to quarter four FY 2021, whatever that 300 basis points which we are seeing the dip, that 300 dip exactly comes from the KSM, or it might be little higher, but it might have offset by some product launches, some good product launches in the U.S. or the other geographies. It's a little higher, Rashmi. I think you got it right. Some margins and other products have increased. Again, a little bit here and there, but mainly it's due to KSM increases. Comes from the KSM part, right? That's right. Yeah. Yeah. Sir, related to paracetamol utilization, it was lower earlier. Can you just let us know, because I think it has contributed 36% of the overall sales. Is it something that the utilization has already gone high now or it is still at 50%-60%? Rashmi, we are talking about the revenue here. As I might have explained during my last call, the increase in KSM prices have also led to an increase in selling prices. Actually, selling prices have gone up as high as 70%. The number you see in revenue is not really reflective of the volume of sales we are doing. Capacity is still at 60. Capacity still is at 60% only. By what time we will see that it will become 100%? I think Q4 definitely, but towards the end of Q3, middle of Q3, we'll see a very good improvement. Sir, lastly, on the PFI growth, last year, FY 2021 was also very strong. First quarter of FY 2022 also, we are seeing the very strong growth in PFI. What is driving this growth? Is it that we are getting some repeat orders or we have added some new products in PFI space, or we have added new geographies? If you can just guide us for the full year also, how it would look like. The main reason is new geographies, Rashmi, and partly, a small %, due to new products. These ratios keep fluctuating quarter-on-quarter, but on the whole year, it will be, I would say, we will maintain the same % growth. Okay. All right, sir. Sir, I have no question. I'll get back in the queue. Okay. Thank you. We would like to remind participants that you may press star one to ask a question. The next question is from the line of Ranveer Singh from Sunidhi Securities. Please go ahead. Yeah, thanks for taking my question. Sir, on paracetamol or ibuprofen, can you help me understand the volume growth during this quarter? Compared to quarter-on-quarter or? Y on Y. If you could give even Q on Q, that is also. Because you have given that breakup this quarter, better to give Y on Y so that I can understand it. Go ahead. Take that Ranveer. paracetamol has kind of quarter one versus quarter one of the last year, from 2,394, it has gone to 2,268. Tons. You are talking about production volume, or this is sales? No, he's talking about sales quantity. In terms of tonnage. Ranveer, the revenue do not mean much because, like I said, paracetamol prices are unrealistically high at this point in time. Even though the margins are not high, their selling prices are very high. The revenue numbers do not make any sense today. Actually, that's why I'm asking this question, because even in ibuprofen, we see a drop in revenue year-on-year basis. Wanted to understand whether it's due to pricing, our volume is intact, we are growing in volume, but price is actually making a difference, or volume has also gone down, especially in ibuprofen? Ibuprofen and the prescription Rx, the volumes have gone down because of COVID. There's an impact on consumption of ibuprofen. Paracetamol has gone up a bit. The demand is there, but ibu has come down, and we expect that it should start improving the situation on ibu as we go forward. Okay. Maybe in offline we will take the production volume of other segments also. If you could give, because in API, we used to have this production volume earlier. If you could give even later, that will help. Maybe we'll do that later. Yeah. Yeah. Secondly, in PFI, the growth has been very good for last few quarters. Which geography is actually contributing? Earlier, the Latin America was the key market, what I understand. This is only addition of geography or in existing geography also, we see in certain pocket growth is being very high? Yeah, Latam has increased to a certain extent in the existing geographies, but new geographies also have been added, like some of the Asian markets and North African markets. This geography is just an opportunistic or strategically we are going to stay there in the geography and grow? In PFI business, there's no opportunistic sale because when people want to use a PFI, they have to register the product with their local authorities, and it takes a long time. Somebody who has invested so much time and effort will not stop buying. We have not actually lost any big sales in any of the customers till date, right from many years. Okay. Thanks a lot. I have more question. I'll get back with you. Thank you. Thank you, Hemanth. Thank you. The next question is from the line of Rashmi Sancheti from InCred Capital. Please go ahead. Yeah, thanks for the opportunity again. Sir, again on talking about the U.S. market, this quarter, how many products we have launched, and what could be the target size for those products? Priyanka, would you like to take this? Sancheti, there's a disturbance coming from your line. Request you to mute your line when the management answers your question. Okay. Priyanka, are you taking that? Hello. Yeah, take that question. This quarter, we only launched one product in the U.S., which was a large volume product, and the market size is north of $100 million. Okay. What would be the R&D guidance and what would be your new launches guidance for this particular year as a whole? One more question on gross margins. Do we see that currently whatever lower gross margins which we were expecting due to high KSM is already done in this quarter or are we going to see the impact coming in second quarter also? Let me take the gross margin question, Rashmi. Gross margins are a result of so many factors, including inventory buildups and so many issues, and also there are so many logistic uncertainties today. I would not be able to say what the gross margins are going to be, but one thing is, by a mix of gross margins or revenues, we definitely have our plan to achieve our bottom line expectations. Gross margins can change here and there, and that's what I've been saying right from beginning. It's the bottom line that matters. Gross margins do not really matter. Okay. Sir, on launches part for U.S.? Priyanka, you want to make a go for that? R&D. The R&D guidance and the total launches in the U.S. market, the guidance for that for this particular year. R&D, we will be spending higher money in terms of R&D spend as we progress for the year. It will not be proportion to this quarter spend. It will be more than that. Definitely, we will be having the R&D budget kind of tweaked in a manner when it is required. The total R&D spend will be in the region of around INR 140-150 crores by the end of the year. Rashmi, on the launches, I think this year we'll be doing anywhere between 8-10 launches. The value of these new products can be upwards of $150 million. Sir, last 1 question. On your core molecules, if you can let us know, out of these 4, 5 products, for which product we are backward integrated in terms of its starting raw materials and all? I think we are not backward integrated for any of these products with regard to KSMs. Okay. Only integration stops at API level. The new products we are launching or filed for already, most of them go back all the way to KSMs. Okay, sir. Thank you. That's it from my side. Thank you. The next question is from the line of Ashwini Agarwal from Ashmore Investment Management. Please go ahead. Hi, good afternoon, the team. Congratulations on a reasonable set of numbers in a very challenging environment. Couple of things. One is that on the MEIS, have you provided for anything in the current quarter? What are you hearing from your sources in the government? We are hearing some very conflicting views. Some people say that 2% will be restored. Some people are saying nothing will be restored. What are you hearing, and what have you provided for in the June quarter? Ashwini, I will take this. We have provided MEIS only based on the government guideline. We have not provided one single paisa which is beyond whatever was the guideline given by the government. That means when they restricted the September to December quarter to the extent of INR 2 crore, we have actually recognized only INR 2 crore. Therefore, the entire amount of money that is lying with the government, we believe that those are collectible amount. You are absolutely right, that there are many kind of things which is going in the market that whether the scheme in the form of RoDTEP, how much benefit it will bring to the table or not. We don't see any reason that why we should be believing that MEIS money will be at risk at this stage. This is consistent with most of the company's practice. From January to June. No, Ashwini, to answer your question straight, this quarter nothing was provided, Ashwini. Yeah. Last two quarters of last year also, nothing was provided. Correct. We are only providing up to December. Up to December. INR 2 crores per month or whatever that guidance was between September and December. What is the receivable from the government on the account of MEIS? Around INR 30 crores. 40? INR 30. 30. Okay. All right. The other question I had on the core of your portfolio, I mean, that's remained reasonably stable around 85%-86% of your revenue. You're right, revenue sometimes can be misleading because prices for various products move up and down quite sharply. paracetamol is high today, ibuprofen was high a couple of years ago, and so on. How do you see the opportunity to grow? Because these are very stable molecules, so obviously you're winning market share from someone. Can you help me understand what's going on in these 2 or 3 major molecules, specifically paracetamol, metformin, ibuprofen, methocarbamol and guaifenesin, which are very big for you. What's happening on a global basis? Who's moving out, allowing you the elbow room to move in, if that is indeed the case? I'll take to answer. Priyanka, you want to go for it? Yes, I'll take that. Hi, Ashwini. Hi. I'll just give you a little bit of a landscape of each of the products. Like you rightfully said, these are products that are here to stay. With COVID, we've seen a little bit of an uptick in a few products and a little bit of a drop in some other products. If you have to talk about metformin has been growing at a higher single-digit rate over the last couple of years. We have launched 1 big product in the U.S. market, and we've done some filings in the other markets. We've been able to penetrate the market not only because we've been able to do our numbers, not only because of the growing market, but also because we've made really good inroads, even at this time when there has been additional competition. I think we've maintained our market share for the IR products, and we've really increased our market share for the other product, the XR, in the U.S. over the last 2 years. A lot of it has to do with our ability to meet the existing pricing demand from that market and also our consistency of supply. Third is the confidence that we've been able to give our customers about the whole NDMA issue. With paracetamol, we have seen an uptick in demand overall globally for the obvious reasons. That has just been limited by currently our ability to supply. The demand will remain, not only because of COVID, but also because we have a few products where we have been able to scale up considerably on the OTC side of the U.S. Same thing with the global presence. We've continued to do a large number of filings for paracetamol in the rest of the world, and that will see an increase in demand as well. Ibuprofen, we've seen a decline primarily because of the COVID-related issues that we had, where overall demand for ibuprofen has dropped about 6%-8% year-on-year over the last year and a half. We are increasing. We've seen this product, the demand going up over the last couple of months, and we see this to be normalized over the next couple of quarters as well. Methocarbamol and well, guaifenesin is another product where we saw a decline in numbers because of the cough and cold season. Now that at least America and some part of Europe has pretty much back to normal, we see this to be normalized again. We have our new launches in the U.S., with which we'll be able to pick up more market share. Finally, methocarbamol, that's a small part of our business, but we still consider that core. We entered the market in a shortage situation. We've given up some market since then. Now, over the last couple of quarters, we've been able to maintain our market share, and now without even trying to enter the market because the other suppliers are not able to supply this product. This is a broad level landscape of the 5 core molecules. Leading from there, Priyanka, if you were to look out, let's say, three years from now, FY 2025 or thereabout, how do you see this 85/15 broad split between core and others shift? That shift is going to be very gradual because your core is also growing quite well. How do you think about this? Priyanka, I'll take that question. Ashwini Yeah The shift actually is partly because the value addition growth is also happening. The shift is happening from API to PFIs and PFIs to formulations, where there is a good value add. Also it is new geographies, like other markets. The future growth is going to come from new geographies. We expect a growth of about 8%-12% on core molecules going forward in the next few years. We expect that non-core molecules should grow around 50%. CAGR. All right. Okay. Lastly, is there any change to your CapEx plans of INR 400 crores for the current year? Despite the relatively large CapEx we've seen in first 1Q, it will remain on track at around INR 400 crores? Right. Yeah, go ahead. Yeah. There is no change in the plan, Ashwini. The only thing is that in quarter one, the spending was INR 163 crores, and by the end of the fiscal, we'll be spending around INR 400 crores as we have planned. Okay. This quarter the spending was a little high side. Yeah. It was planned, actually. Coming back to that RoDTEP MEIS question, any sense you have from industry consultations or from preliminary conversations with the government? I mean, for example, for textiles, we are hearing that it might come in at about 2%. Any sort of hints that you have what it might be, or what would it be if you were to actually add up the duties and taxes that the government should remit back to you? Yeah. Whatever information and the exchange of communication that we have had with our peer group and also some of the government authorities, we believe that RoDTEP will come into existence for sure. Probably the percentage will be a little less than the MEIS, although the data that they collected for kind of understanding that what is the industry's requirement, that was very encouraging and included a lot of things which we are not getting earlier. Probably, reality would be a little bit lower than the MEIS scheme. The scheme will come definitely. Up to September, before they came out with this truncated INR 2 crore number, what was the percentage? It was roughly about 4%, correct? No. It was 3%. 3%. Okay. All right. If you compare year-over-year, when we look at gross margins, 3% is a straightaway MEIS impact on gross margins. Would that be the right way to think about it? Yeah, 3% on export was the thing. Mostly. Yeah. Mostly export. Yeah. Yes. That is a straightforward kind of a deduction. Yes, Ashwini, you're right. Yeah. I mean, assuming that, I don't know, again, when the government will reinstate the RoDTEP plan. It's been overdue for more than 6 months. If it were to come through, we should see a improvement in gross margin profile immediately by whatever 1%, 2%, 3%, whatever they offer. It should. I stand corrected for one figure. It is not 3%, it is 1.5%. 1.5%. On the margin, yes. Margin impact is 1.5%, which is an absolute loss when the scheme is not there. Okay. Awesome. Okay. Thank you for answering my questions. All the best. Take care. Thank you. Thank you. The next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead. Yes, thanks for the opportunity. If you could just recap in terms of non-core molecules, what CAGR are you guiding for? Around 50% is what we are planning. 1, 5, no? 15. 5, 0. 5, 0. Secondly, just considering the working capital needs and the CapEx, the net debt figure for FY 2022 would be how much? Net debt, it could vary depending on so many factors, Tushar. The new launches and so many things will happen. We definitely think it should not increase. We're aiming for that. There could be temporary peaks. Just like this quarter, there's a little increase. It should keep coming down. I am a little bit nervous in giving the number, but it should be INR 700-INR 750, right? There. For FY 2022? Yeah, March. As you know, all this is only working capital debt. Yeah. All right. That helps. Thank you. Thank you. A reminder to the participants. Anyone who wishes to ask a question, please press star and one at this time. The next question is from the line of Mitesh Shah from ICICI Direct. Please go ahead. Thanks for taking my question. Congratulations on the good set of numbers. Your guidance about the top 5 products was 8%-10% going forward. Historically, if I can see that in the last 5 years, the growth was somewhere around 18% CAGR. I think you still have a scope to geographical expansion and new launches. Why the single digit your expectations on these 5 molecules? The base is high today, Mitesh Shah. If really this has to be much more, you can imagine what our overall growth is going to be. That's it from my end. Thank you. Thank you. The next question is from the line of Ashwini Agarwal from Ashmore Investment Management. Please go ahead. Hi. Sorry, there was one question I forgot to ask. What are you seeing on shipping schedules and shipping rates? Are things starting to ease up at all, or it continues to be high shipping rates and patchy shipping schedules? What's the outlook here? It's worsening, Ashwini. It went bad to worse. I don't know from worse to where it will go. Actually, last few days there's been a typhoon in Ningbo Port and the Shanghai Port, there were pictures and videos of containers flying away. Total disruption and costs have drastically gone up. That's why I think Priyanka was mentioning logistics costs. We don't know when it's going to come back to normal. We are learning to live with all these new problems, that's the funny thing. Would it be fair to think about, are you able to pass on these costs or some of these costs you're being forced to keep as a margin hit, shipping costs, higher inventory carrying costs? Raw materials, you did mention that you're starting to see some respite, but obviously it's taken a little bit of a hit on your gross margin. On shipping, eventually it'll normalize. I mean, this is very abnormal, the environment we are living in. How do you think about it? Certain reasonable prior cost increases we were able to pass on in the past. Now overall the situation is, there's a lot of cost increase. I mean, logistics also, it's a big number. Then it's not always possible to pass on because there's always a competitor who is always waiting. Our main target today is to keep defending our business and retain our market share and growing it. We don't want to be too aggressive on trying to pass on costs. APIs to a certain extent, it may be possible. PFIs, to a certain extent, is possible. To a certain extent. Beyond a certain level, people will say, "I don't want to manufacture this product." That's the situation. Then formulation side, of course you know about the U.S. price pressures. We'll have to balance it very carefully. There's no way we can pass on everything to the customers. Is part of the inventory increase also because of longer shipping cycles? Is that also a factor in addition to shortage and uncertainty planning? Yes Ashwini, very much. We want to avoid air freights in case, otherwise the penalties will be high. We are stocking excessively. Also, partly because we are expecting a quick ramp-up of the business. Okay. All right. Thank you. Thank you so much, and all the best again. Thank you. Thank you. The next question is from the line of Abhishek Jain from Arihant Capital. Please go ahead. Thank you for taking my question, sir. Sir, 2 questions. One is, how are the pricing going after June we have seen, especially for the key products or five core products, especially on the paracetamol and ibuprofen, how the realizations are there right now. How much inventories are there right now with the customers right now? The inventories with customers have sort of normalized, Abhishek, long ago. They're only ordering what they need. They're not excessively stocking. Only the inventory seems to be a little high with our side, but customers definitely have normalized their inventory levels of all products. How is the pricing, sir? Especially paracetamol and ibuprofen, sir. Paracetamol, like I said, because of the increase in cost, prices have gone up. No competition can be operating at a total loss, so everybody gets a price increase. Ibuprofen has seen a slight drop, not too much, but volumes of ibuprofen have dropped because there's no demand. Okay. What are the volumes for ibuprofen for Q1? I'm extremely sorry if it's been there in the presentation. It's in the presentation. ibuprofen, not volume, value is there, but volumes we are not sharing at this point of time, Abhishek. Okay, no worries. Thank you, sir. Thank you. Thank you. The next question is from the line of Harit Ahmad from Schwab Capital Advisors. Please go ahead. Hi, good evening. Thanks for taking my questions. In your opening remarks, you commented on your unit five facility at Vizag and your U.S. facility. Could you please repeat those comments? My line got cut off, so I missed that part. Okay. On unit 5, we said that there are 2 blocks there. One is for high potent, which is mostly Onco, APIs and FDs. The other thing is a multipurpose plant, which we are actually expanding capacity right now. Out of this site, we have 4 DMFs or CEPs for APIs in the high potent segment, and 6 APIs in the non-high potent segment. On the formulation side, we have decided not to file any dossiers today on Onco, but we are doing contract manufacturing business for other companies. Validations are going on, and we expect revenues from the contract manufacturing business to come in, and also from some of the Onco API sales to come in. The non-Onco, out of the 6 filed, 5 are for captive consumption, and we have used these APIs to file for our ANDAs and dossiers. Like I said, the entire value of this site will be unleashed through our formulations as and when they are approved. Okay. Granules USA, we said we have 2 areas of operation there. 1 is local manufacturing, and the other 1 is the marketing front end. The front end markets Granules India products and GPI products together. Of course, the focus there for local manufacturing is mostly the controlled substance segment, of which we have a few products already launched, and also some niche products. Also, we are validating, we are transferring some of the ANDAs from this site, existing products from India to U.S. in that site, so that we can address the VA business. As you're aware, these VA contracts are for 3-5 years, and that will be a nice piece of business to have. This business, when it happens, is really going to add a lot of value to GPI. Okay. For the controlled substance products, some of those we've already received approval and launched. How has the ramp-up been for those products? Payal, can you want to take that? Sure. We have launched about 4 to 5 controlled substances so far, and I think we've done really well on most of them. We have a majority of the market on all of them. Okay. Thank you very much. That's all from my side. Thank you. Thank you. The last question is from the line of Madhusudan Kela from MK Ventures. Please go ahead. Good evening, sir, to all of you, and congratulations on a good set of numbers. My question is beyond quarters and all these small issues. I wanted to ask you, sir, what is the strategic intent of you and the whole family? What will Granules look like, let's say, five years down the line? How it will change from the current Granules? We're not talking about numbers. More of a strategy, more of a strategic intent. As you alluded that it will be more formulation company than the API and the PFI, which it's been traditionally. Will we see a lot of other changes than what it looks like? Definitely- Also, for the sake of everyone, can you just confirm once and for all, because these rumors keep coming in, that you are not looking to do any transaction with anyone, at least in any foreseeable future? My God. That makes me nervous personally, sir, because we have invested on you. We don't know who the other person is. Madhu, I don't know how many times we have to keep on refuting this since you've asked me this question. Please do it once again, sir, so that it is clear to everyone. I will. Definitely there is no way we are going to exit. I can tell you, we have our plans made out, our targets set up for the company, and a detailed strategic plan is being worked out for many, many years. At least three years, we have very good visibility. We have our targets, and we are all very serious in working to achieve these targets. On how the company is going to look like, I can tell you, yes, the solid oral business, what we are doing today, there's still a lot of potential left. We'll be extracting all the potential out of this because this has been really our key strength, operational efficiencies, innovative manufacturing. We'll extract everything out of this and move into a few other areas, and it's going to be very complex manufacturing from now onwards. We will be addressing for the future, 3 years from today. We have to start working today on very complex molecules. That work will start, and we'll be making not only these high volume manufacturing efficiency-driven products, but we'll be manufacturing technology-driven products in future. Okay. Sir, aspirationally, pardon me asking you so directly, aspirationally, all of us have aspiration that I will be like that. Do you have any company in India or global where you think Granules could be like that five years from now? I can speak of different companies for different aspects of what we are doing. Yes. There could actually be companies in the non-pharma segment. If you go into nutritional sides or food industry, there we may have some companies which operate like us. Pharma generally, as you can see, our model is a lot differentiated from what others do. I cannot say I want to be like some other company. We have created our own space, our own model, and we want to keep growing in this model. Okay. Okay, sir. Thank you so much. Thank you. All the best. Thank you so much. Thank you. I would now like to hand the conference over to Ms. Gauri for closing comments. Thank you, Mallika. I would like to take this opportunity to remind everyone about the safe harbor related to this conference call. Today's discussion might have been forward-looking in nature based on management's current beliefs and expectations. It must be viewed in conjunction with the risks that the business faces that could cause future results, performance, or achievements to differ from what may have been expressed. Thank you. With this, I now hand over the call to the management for their closing comments. Thank you, and over to you, sir. Once again, thank you a lot, everybody, for attending this call. I know all of you must be extremely busy with so many earnings calls. With this, thanking you once again, I bring this meeting to an end. Thank you. On behalf of Emkay Global Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.