Q1 21/22

Jul 28, 2021

Ladies and gentlemen, good day, and welcome to the Granite India Q1 FY 2022 Earnings Conference Call hosted by MT 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. Please note that this conference is being recorded. I now hand the conference over to Mr. Kunal Damisha from MK Global Financial Services. Thank you, and 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 Chikurupti, Chairman and MD Ms. Priyanka Chikurupti, Executive Director, GPI and Mr. Sandeep Niyogi, 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 aminos phenol, 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 1 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 has shut down is likely to recommence production in a few months. Our expansion of formulations business into new geographies has started and as you are aware, we have approvals for 2 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 1 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 for BIs and PSIs and also leading certain CMO businesses for formulations in the past. We continue to focus on strengthening our position and growing our core molecules with continuous innovation while launching new products in the existing and new geographies. Our trend to have 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 the manufacturing leading to cost leadership. While our core molecules continue to grow due to expanding valid 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 above 40% by FY 2025. I would also like to explain the strategy on our investments in Unit 4, the Erstwhile Optus 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 WISAC, we have 16 APIs commercialized from here and 4 of these are currently used for our existing formulations. Out of the rest, we have filed and will file ANDAs and EU dosiers using 5 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 WISAC, 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 will wait for some more time to file our own dose years and will continue to market only APIs for the time being. We are currently validating some CMO formulations and this site will see decent revenues on both these trends shortly. 5 non high potent APIs filed from here are for captive consumption for our own formulation filings and 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 Granu Pharmaceuticals in the U. S, I'm 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 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 one product which we have licensed out to our partner. The focus at GPI portfolio is products in the C2 segment, which is the controlled substances and a few other products. We have also 2 products suitable 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 the 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 Ranyuls 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 and the VA business will add a great value to GPI. We have another subsidiary, Vanuels 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 and 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 MUX block is on schedule and expected to be qualified and ready by Q4. We have 2 MUX products approved from this facility and this will only need a small portion of the capacity of the plant. Until the already filed products and to be filed products are approved, we'll be using this block for manufacturing non MOPS products also. As we start using it for more MOPS products, we'll start seeing the actual potential. We expect the MOPS capacity to be fully utilized by FY 2025. Based on our current strategy and plans, we will be out of capacity by FY 2025. To be able to cater to our requirements, the new plant at Janome Valley should be FDA approved and operational by then. Since this is a greenfield facility, the approval period is longer and to meet our deadline, we need to start construction at the earliest. We are taking new initiatives with respect to ESG. CRISAN 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 and A, Priyanka will teach you 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 are 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 capacity, especially paracetamol. The Q1 revenue was INR 850 crores as compared to INR736 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 our CMB in his speech, we expect the raw material shortages on Syracinamol 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 percent 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 airfreight collected from customers were 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 margin. 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 thirocinol products and higher logistics expenses. The path 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. As 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 and emission water and waste footprinting exercise and has taken up an operational excellence project in these areas. We are 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 and D spend for the quarter stood at INR 27 crores compared to INR 20 crores in the previous year. We will accelerate our R and D spend in the subsequent months. During the quarter, we filed 1 ANDA, 2 EU dossiers, 1 UK dossiers and 1 South African dossiers. While the EU and South African dossiers and the UK dossiers are global extensions of the finished dosages that we are already very strong in, in the U. S. Market. The ANDA that 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 mux category, as stated over the last call, we have 5 approved 5 products approved with 1 pending a launch. These are within the C2 and mineral supplement categories. In addition to this, we have another 15 months product under development in the EU and sorry, in the U. S. And EU regions under different therapeutic areas, including CPIs, antidepressants and antihypertensive. 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 home 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 settled 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 earnings presentation, is also showing a drop in the current quarter due to the weakness mentioned above. Significant actions have been planned over the next 8 months, and we are 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 profit 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. The first question is from the line of Rashmi Sanjaythi from Incred Capital. Please go ahead. Yes. Thanks for the opportunity and congratulations on good set of numbers. So one question on gross margin. Whatever quarter on quarter this year has seen, that is completely impacted impact which is coming from the high KSN prices? Rashmi, it's partly due to high KSN. But as Priyanka has explained, in the Q1 of FY 'twenty one, we had air price in the sales revenue added up. So the gross margin has gone up. In addition, what was that, Raman? Raman:] And MEI also was there in the Q1. All these have resulted in a drop in gross margin. But one of the main reasons is KSM price increases. So this is on the ROI basis. I was asking on quarter on quarter basis, like compared to quarter 4 FY 'twenty one, whatever that 300 basis points which we are seeing the dip, that 300 bps exactly comes from the payer front or it might be a little higher, but it might have offset by some product launches, some good product launches in the U. S. Or the other geography? It's a little higher, Rashmi. I think you got it right. But some margins in other products have increased. But again, a little bit here and there, but mainly it's due to KSM increases. From the KSM side, right? That's right. Yes. Yes. And sir, related to Thyatokanone utilization, it was lower earlier. So can you just let us know because I think it has constituted 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 you 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%. So the number you see in revenue is not really reflective of the volume of sales we are doing. Capacity still is at 60% only. And 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 will see a very good improvement. So lastly on the PFI growth, last year FY 2021 was also very strong. Q1 of FY 2022 also we are seeing the very strong growth in PFI. So what is driving this growth? Is it that we are getting some repeat orders or we have added some new molecules in CFI space or we have added new geographies to potentially guide us for the full year also how it would look like? The main reason is new geographies, Rashmi and partly around small percent due to new products. And these ratios keep fluctuating quarter on quarter, but on the whole year, it will be, I would say, we will maintain the same percentage growth. Okay. All right, sir. But I have more question. I'll get back in the queue. Thank you. The next question is from the line of Ranveer Singh from Suniti Securities. Please go ahead. Yes. 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 little so. But because you have given that breakup this quarter, so better to give for Y on Y so that I can understand it. So do you want to go ahead. So So Paracetamol has kind of quarter 1 versus quarter 1 of the last year. From 2,395, it has gone to 2,268. You are talking about products and volume or this is sales of Yes, talking about sales quantity. Sales quantity in terms of bandwidth, the revenues do not mean much because like I said, various small prices are unrealistically high at this point in time. Even though the margins are not high, the selling prices are very high. So the revenue numbers do not make any sense today. Yes. Actually, that's why I'm asking this question because even in IL2 ProFound, we see a drop in revenue Y on Y basis. So 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 have gone up a bit, the demand is there, but Ibuprofen has come down and we expect that it should start improving the situation on AIBO as we go forward. Okay. Well, maybe in offline, we will take the production volume of other segments also or if you could give because in API, we used to have this production volume earlier. So if you could give even later, that will help. Maybe we can do that later, but yes. Yes, yes. And secondly, in PFI, the growth has been very good for last few quarters. So which geography is actually contributing? Earlier the Latin America was a key market, which I understand. So this is only addition of geography or in existing geography also we see in certain pocket growth is being very high? Yes, 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 African markets, not African markets. So this geography is just an opportunistic or strategically we are going to stay there in the geography and grow? In PFI business, there is 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. And somebody who has invested so much time and effort will not stop buying. So we have not actually lost any big sales in any of the customers to date right from many years. Okay. Okay. Thanks a lot. I have more question. I'll get back in the queue. Thank you. Thank you, Sanath. Thank you. The next question is from the line of Rashmi Sanjetti from Incred Capital. Please go ahead. Yes. Thanks for the opportunity again. Sir, again, on talking about the U. S. Market, this quarter, how many products we have launched? And what would be the market size for those products? I think Priyanka, why don't you take this? Sanjiqui, there is a disturbance coming from your line. I request you to mute your line while the management answers your question. Okay. Priyanka, you're taking that? Yes. Take that, Priyanka. This quarter, we only launched one product in the U. S, which is a large volume product and the market size is north of 100,000,000 dollars Okay. And what would be the R and D guidance? And what would be your new launches guidance for this particular year as a whole? And one more question on gross margins. Do we see that this currently whatever lower gross margin which we were expecting with a high case and is already done in this quarter? Or are you going to see the impact coming in the second quarter also? So 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. So I would not be able to say what the gross margins are going to be. But one thing is by mix of gross margins or revenues, we definitely have our plan to achieve our bottom line expectations. So 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. And so on launches for years? Priyanka, you want to make you go for that? So R and D? Yes, R and D guidance and the total launches in the U. S. Market, the guidance for that for this particular year. So R and D will be we will be spending higher money in terms of R and D spend as we progress for the year. And it will not be proportioned to this quarter spend. It will be more than that. And definitely, we will be having the R and D budget kind of tweaked in a manner when it is required. So the total R and D spend will be in the region of around R and D to R and 54 by the end of the year. Rashmi, on the launches, I think this year we'll be doing close to anywhere between 8 to 10 launches. And the value of these new products can be upwards of $150,000,000 $150,000,000 And then last one question on your 4 molecules, if you can let us know out of this CFI product, for this product we are backward integrated in terms of its starting raw materials and all? I think we can we are not backward integrated for any of these products with regard to KSNs. Only integration costs at API level. The new products we are launching are filed for already. Most of them go back all the way to 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 and congratulations on a reasonable set of numbers in a very challenging environment. So a 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 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? P. Vijay Kumar:] Yashree, I will take this. So we have provided EMIS only based on the government's guidelines. So we have not provided 1 single paisa which is beyond whatever was the guidelines given by the government. That means when they restricted the September to December quarter to the extent of to close, we have actually recognized only to close. And therefore, the entire amount of money that is lying with the government, we believe that those are collectible amount. And you are absolutely right that there are many kind of things which is going in the market that whether this scheme in the form of road test, how much benefit you can bring to the table or not. But we don't see any reason that why we believe we should be believing that MEIS money will be at risk at this stage. And this is consistent with most of the company's practice. And from January to June? Ashwini, to answer your question straight, this quarter nothing was provided, Ashwini. And 2 quarters last 2 quarters of last year also nothing was provided. Correct. We have only provision up to December. Up to December, 2 crores per month or whatever that guidance was between September December. And what is the receivable from the government on the account of MEIS? Around 40 crores. 40? 30. 30. 30. Okay. All right. The other question I had on a the core of your portfolio, I mean, that's remained reasonably stable around 85%, 86% of your revenue. And 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 higher 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. So can you help me understand what's going on in these 2 or 3 major molecules specifically paracetamol, metformin, ibuprofen, metacorbomol and guanfacine, 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 the answer. Piyankaj, you want to go for it? Yes, I'll take that. Hi, Srini. So I'll just give you a little bit of a landscape of each of the products. And like you rightfully said, these are products that are here to stay. But 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. So if you have just talked about metformin. Metformin has been growing at a higher single digit rate over the last couple of years. And we have launched 2 1 big product in the U. S. Market, and we've done some filings with other markets. But we've been able to penetrate the market not only because or 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. So I think we've maintained our market share for the IR product and we've really increased our market share for the other product, the XR in the U. S. Over the last couple of years. And a lot of it has to do with our ability to meet the existing pricing demands in that market and also our consistency of supply. And third is the confidence that we've been able to give our customers about the whole NVMA issue. Now with tariff demand, we have seen an uptick in demand in well, overall globally for the obvious reasons. And 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 for on the OTC side of the U. S. Same thing with the global presence. We've continued to do a large number of filings, top products 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 issue that we had where overall demand for our business has about 6% to 8% year on year over the last year and a half. But 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. Now MCBM guanstine is another product where we saw some decline in numbers because of the cough and cold season. But now that at least America and some part of Europe has been pretty much back to normal, we see this to be normalized again. And we have our new launches in the U. S. With which we'll be able to pick up more market share. Finally, metacolamol, that's a small part of our business and still consider that core. We've been we entered the market into in a shortage situation. We've maintained we've given up some markets since then, but now we've over the last couple of quarters, we've been able to maintain our market share and now without even trying to raise the market because the other suppliers are not able to supply this product. So this is a broad level landscape of the 5 core molecules. So leading from there, Priyanka, if you were to look out, let's say, 3 years from now, fiscal 'twenty five or thereabouts, how do you see this 85, 15 broad split between core and others shift or 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, the shift actually is partly because the value added growth is also happening not just because the shift is happening from API to PFIs and PFIs to formulations where there is a good value add. And also it is new geographies like other markets. The future growth is going to come from new geographies. So we expect growth of about 8% to 12% on core molecules going forward in the next few years. And we expect that non core molecule to grow around 50% to ADR. Okay. And lastly, the is there any change to your CapEx plans of INR 400 crores for the current year or despite the relatively large CapEx we've seen in 1Q, it will remain on track at around INR 400 crores? Yes, go ahead. Go ahead. Yes. There is no change in the plan, Ashwin. Only thing is that in quarter 1, the spending was INR163 crores. And by the end of the fiscal, we'll be spending around INR400 crores as we have planned. So this quarter, the spending was a little high, yes. It was planned actually. And coming back to that ROT, DEP, MEIS question, any sense you have from industry consultations or from preliminary conversations with the government. I mean, for example, for textiles, we're hearing that it might come in at about 2%. Any sort of hints that you have, which 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? Yes. I think, taxes that the government should remit back to you? Yes. So whatever information and the exchange of communication that we have had with our peer group and also some of the government facilities, We believe that road table will come into existence for sure. And provided the percentage will be a little less than the AIMI, although the data that they collected for kind of understanding that what is the industry requirement, that was very encouraging and included a lot of things which we are not getting earlier. So but probably reality would be a little bit lower than the MEIS scheme, but the scheme will come definitely. And up to September before they came out with this truncated 2 crore number, what was the percentage? It was roughly about 4%, correct? No, no. It was 3%. 3%. Okay. All right. So that I mean, if you compare year on year when we look at gross margins, 3% is a straightaway MEIS impact on gross margin. Would that be the right way to think about it? Yes. 3% of export was the thing. Most of it is export. Yes. Yes. So that is a straightforward kind of a deduction. Yes, Ashumi, you're right. Yes. So I mean assuming that I don't know again when the government will reinstate the or our debt plan, it's been overdue for more than 6 months. But if it were to come through, we should see improvement in gross margin profile immediately by whatever 1%, 2%, 3%, whatever they offer. It should technically, I said correctly for one figure, it is not 3%, it is 1.5%. 1.5%. On the margin, yes. So margin impact is 1.5%, which is an absolute loss when this scheme is not there. Okay. Awesome. Okay. Thank you. Thank you for answering my questions and all the best. Take care. Thank you. Thank you. The next question is from the line of Tushar Manu Dhanee from Motilal Oswal Financial Services. Please go ahead. Yes. Thanks for the opportunity. Just if you could just recap in terms of non core molecules, what CAGR are you guiding for? Around 50% is what we are planning. 15. 50. 50. And secondly, just considering the working capital needs and the CapEx, the net debt figure for FY 2022 would be how much? It could vary depending on so many factors, Tushar, the new launches and so many things will happen. So we definitely think it should not increase. We are aiming for that. But there could be temporary peaks. Just like this quarter, there is a little increase. It should keep coming down. I am a little bit nervous in giving the number, but it should be 700 to 750, right? For FY 'twenty two? Yes, March. And as you know, all this is only working capital debt, Jim. All right. That is it. Thank you. Thank you. The next question is from the line of Mitesh Shah from ICICI Direct. Please go ahead. Thanks for taking my question. And upon which we have had a good type of number. Your guidance about the top 5 products was 8% to 10% going forward. But historically, if I can see then in the last 5 years, the growth was somewhere around 18% Cancun. And I think you still have a scope to a geographical expansion and new launches. So why this single digit your expectation on these 5 molecules? The base is high today, Natesh. And clearly, this has to be much more. You don't know. You can imagine what our growth 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's 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, Ashuni. It's going it went back to worse. I don't know from worse to where it will go. Actually, last few days, there have been a typhoon in Ningbo port and the Shanghai port. And there were pictures and videos of containers flying away and total disruption and costs have drastically gone up. That's why I think Priyanka was mentioning logistics costs. So 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. So, Amit, would it be fair to think about kind of are you able to pass on these costs or some of these costs you've been forced to keep as a margin hit shipping costs, higher inventory carrying costs? I mean, 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. So on shipping, I mean eventually it will normalize. I mean this is very abnormal the environment we are living in. How do you think about it? We are not able to certain reasonable cost increases we were able to pass on in the past. But now overall, the situation is there is a lot of cost increase. I mean logistics also it's a big, big number. But then it's not always possible to pass on because there's always a competitor who is always ready. So our main target today is to keep defending our business and retain our market share and growing it. So we don't want to be too aggressive on, I mean, trying to pass on costs. API is to a certain extent, it's maybe possible. PFI is to a certain extent is possible to a certain extent. But beyond a certain level, people will say, I don't want to manufacture this product. So that's the situation. And then formulation side, of course, you know about the U. S. Price pressures. So we'll have to balance it very carefully. There's no way we can pass on everything to the customers. And 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, Shuni, very much. And we want to avoid airfreight in case otherwise the penalties will be high. And so we are stocking excessively and 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, two questions. One is how are the pricing going? After June, we have seen especially for the key products, our 5 core products, especially on the paracetamol and Ibuprofen, how the realizations are there right now? And how much inventories are there right now with the customers right now? Customers the inventories with customers have sort of normalized, Abhishek, long ago. So they are only ordering what they need. They are not excessively stocking. So but only the inventory seems to be a little high with our side, but customers definitely have normalized their inventory levels of all products. And how is the pricing, sir, of the especially paracetamol and Ibuprofen? Ibuprofen, like I said, because of the increase in cost, prices have gone up. So no competition can be operating at a total loss. So everybody gets a price increase. Ibuprofen has been a slight drop, not too much, but volumes of Ibuprofen have dropped because there's no demand. Okay. And 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. I think it's open. Not volume, value is there, but volumes we are not sharing at this point of time, Abhishek. Okay. No worries. No worries, sir. Thank you. Thank you. The next question is from the line of Harit Hemat from SWA Capital Advisors. Please go ahead. Hi, good evening. Thanks for taking my questions. In your opening remarks, you commented on your Unit 5 facility at Wazak 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 Hypotient, which is mostly on core, APIs and FDs. And the other thing is a multipurpose plant, which we are actually expanding capacity right now. So out of this site, we have 5, 4 DMFs or CEPs for APIs in the Hypoten segment and 6 APIs in the non Hypoten segment. So on the formulation side, we have decided not to file any doses today on Lonco, but we are doing contract manufacturing business for other companies. So 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. But 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. So like I said, the entire value of this site will be unleashed through our formulations as and when they are approved. And Granules USA, we said we have 2 areas of operation there. 1 is local manufacturing and the other one is the marketing front end. The front end markets Granules India products and GPI products together. And of course, the focus there for local manufacturing is mostly the control 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. And as you are aware, these VA contracts are for 3 to 5 years and that will be a nice piece of business to have. And the GI 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 approvals and launched, How's the ramp up been for those products? Priyanka, do 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 Madhu Kaila from MT Ventures. Please go ahead. Good evening, sir, to all of you and congratulations on a good set of numbers. So my question is beyond quarters and all these small issues. I wanted to ask you, sir, then what is the strategic intent of you and the whole family? What will granules look like, let's say, 5 years down the line? How it will change from the current granules? And we are not talking about numbers, more of a strategy intent. As you alluded that it will be more formulation in the company than the API and the PFI, which has been traditionally. Will we see a lot of other changes than what it looks like? Definitely. 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 for the in any foreseeable future? I don't know personally, sir, because we have invested on you. We don't know who the other person is. Madhu, I think I don't know how many times we have to keep on repeating this since you have asked me to Yes, please do it once again, sir, so that it is clear to everyone. I will, I will. So definitely there is no way we are going to exit. And 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. But at least 3 years, we have very good visibility. We have our targets and we are all very serious in working to achieve these targets. And 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 will 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. Sir, aspirationally, pardon me asking you for 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 Granulph could be like that 5 years from now? So I can speak of different companies for different aspects of what we are doing. And there could actually be companies in the non pharma segment. If you go into nutritional size or food industry, there we may have some companies which operate like us. But pharma generally, as you can see, our model is a lot differentiated from what that is too. And 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, sir. Thank you so much, sir. Thank you so much. Thank you. All the best. Thank you, sir. Thank you. I would now like to hand the conference over to Ms. Gauri for closing comments. Thank you, Malika. 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. So once again, thank you a lot to everybody for attending this call. I know all of you must be extremely busy with so many earnings calls. So with this, thanking you once again, I'll bring this meeting to an end. Thank you. On behalf of MT Global Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.