Ladies and gentlemen, good day and welcome to the Alembic Pharmaceuticals Limited conference call on discussion on company's Q4 and annual FY 23 audited financial results. 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 touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. R.K. Baheti, Director Finance and CFO. Thank you. Over to you, sir.
Thank you. Good evening, everyone. Thank you all for joining the fourth quarter annual results conference call. Let me start with the financials and there are a few non-recurring or one-offs, which I'll try to explain and then, of course, we'll take your questions. Some financials first. During the quarter, the total revenue is INR 1,406 crores. EBITDA is INR 205 crores. Net profit is INR 153 crores. EBITDA margin for the quarter is 14.55%. For the full year, FY 2023, revenue is INR 5,653 crores. I repeat INR 5,653 crores. EBITDA is INR 680 crores, and net profit is INR 342 crores.
The company like in previous few quarters, continued to expense out previously amortized R&D expense in erstwhile and Aleor, amounting to INR 11 crores in the current quarter and INR 155 crores for financial year, full financial year 2023. The company's profit before tax and after tax would have been higher by INR 11 crores in the quarter and INR 155 crores in FY 2023 without this amortization. Of course, the entire amount has been expensed out, and there is no residual intangible books in the intangible assets in the books. Second item, as intimated to stock exchange earlier, the company's board has decided to recognize the impairment of INR 1,150.43 crores.
I repeat INR 1,150.43 crores in respect of capital work in progress, largely consisting of pre-operative expenses of three new manufacturing facilities. Out of above, INR 676.87 crores has been written off in current financial year, that is 2022-2023, and for the balance amount of INR 473.56 crores, provision for impairment has been created. The rationale for this bifurcation has been given in detail in our notes to accounts. Simultaneously, INR 1,025.66 crores, the net of deferred tax asset of INR 124.77 crores has been withdrawn from general reserves of the company. Hence, there is no impact on profit for the year on this account. The company is not required to make any provision for income tax during the year.
The provision for taxation made up to Q3 FY23 has been reversed in Q4 FY23. With effect from January 1, 2023, the company decided to stop all further capitalization of pre-operative expenses of all the new facilities and charge their entire expenses to P&L account. As compared to the previous quarters, the company dedicated additional INR, approximately 65 crores in Q4 under various heads on this account. During the quarter/financial year, PLI benefit of INR 21 crores was received from Government of India. EPS for the quarter before non-recurring items, particularly on, of Aleor is at 8.23 per share versus 8.47, while for FY23 full year it is 25.29 per share versus INR 33.85 per share in the previous year. Borrowings.
The gross borrowing at the consolidated level is INR 636 crores versus INR 630 crores in March 2022. The company has INR 75 crores of cash on hand as on March 31st, 2023 versus INR 61 crores for March 2022. Net debt equity stands comfortably at 0.13. You would see that from cash flow point of view, the company's borrowing remains the same, almost the same as of March 2022. There's no incremental borrowing in March 2023 versus March 2022. Company has met its entire CapEx as well as the dividend payment of almost INR 200 crores out of its internal accruals. Cash flow for the company continues to remain strong. I will now request Shaunak to take you through India Branded business.
Yes, thank you, Mr. Baheti. good evening, everyone. I think for the fourth quarter, I think India Branded business saw a 9% growth with the top line of INR 490 crores. There was a COVID impact in the base of Azithromycin [audio distortion] and lead products in the previous years and Ex of A zithromycin growth. The India Ex of A zithromycin growth in the business performed and grew by 12%. As for IMS in Q4, industry grew by 15%, whereas AWACS projected a growth of 16% in line with our objective of outgrowing industry, matching or outgrowing industry by a few points. In quarter four for specialty segments, the company performance was 13% versus 10% for the industry, mainly driven by therapies in gynecology, antidiabetic, ophthalmology and orthopedics.
In the acute segment, the company performance was 23% growth and Ex of Azithral at 38% growth, which is better than the industry by 28%. Better than the industry, which was at 28%. In respiratory, the company grew by 38% whereas industry grew by 28%. The animal health business continues to maintain its strong run of growth momentum, we call it a growth of 15% over the previous year. For the financial year 2023, the India biobranded business gave a 7% growth with a top line of INR 2,063 crores. Ex of Azithral and also due to India branded growth was at 13% for the year. As for IMS, the industry grew by 8% whereas AWACS reflected a growth of 9%. For specialty segment, the company performance was 15% versus the industry growth of 11%.
Majority of it's driven through therapies like gynecology, antidiabetic, ophthalmology and orthopedics. The acute segments, the company performance Azithral was 10% versus the industry growth of 6% for the year. In respiratory, the company grew by 11% whereas the industry grew by 3%. The animal healthcare recorded a business growth of 21% over previous year, and as a one of the highlights for last year was we have a brand called ISOFIT, which has been the second-best launch in the industry by IMS amongst 3,072 new launches in the industry for the 12 months for the IPM. ISOFIT recorded a growth of INR 28 crores in the first year of launch, majority of our focus brands in the current year have gained market share over the previous year.
Three of our large therapy areas cardiology, gastroenterology and urology have underperformed in the year 2023. Some strategic interventions were taken in the previous year, which kind of led to this underperformance, but the idea was to outperform the markets akin to some of our other high growth segments on a sustainable basis. We expect this kind of growth to start kicking in this year. I'll hand over the discussion to Pranav for his presentation on the international business.
Thank you. The U.S. business continues to remain challenging on account of the competitive intensity. It was a tough year in the U.S.. We did manage to grow our volume as well over the previous year. Our focus is on improving efficiencies and execution in the midterm. The U.S. generics revenue was INR 350 crores during the quarter. The number is not comparable to the same quarter last year, as Q4 of last year had a high sales as we had transitioned to our 3PL. We had done overstocking in that quarter. The ex-U.S. market continues to perform well, and it grew 33% for the quarter and 10% for the year. The API business also is on a strong footing, and it performed very well. It grew 41% for the quarter and 24% for the year.
Importantly, the ex-U.S. formulation and API have both come off a high base over the last couple of years. We're confident of a continued good performance in both these verticals. Our R&D expense was INR 136 crores, which includes INR 11 crores of a one-time non-cash Aleor write-off. Taking this out, it's INR 125 crores, which is about 9% of sales, while for the full year, the total R&D expense is INR 722 crores. Ex of Aleor, it is INR 567 crores, which is 10% of sales. This is a conscious effort that we've been making to get the R&D as percentage and as an absolute amount we want to kind of control it moving forward. We will continue our efforts to optimize R&D expense, particularly on the oral solid dosages in the coming years.
We filed 4 ANDAs during the quarter. We also received seven approvals in the quarter, and we commercialized F2 and F3 plants during the quarter, and the first set of products were dispatched. We launched six products in the quarter. In Q1, we hope to launch up to 10 products at least, and 20 products in the entire year. The U.S. FDA conducted an inspection at our F3 facility in March and issued two observations. We have received three final approvals from this site to date. The U.S. FDA also conducted an inspection of our Karakhadi facility in March with zero 483 observations. An EIR was issued for our Onco facility F2 during the quarter. We have received five final approvals from this site, including the Onco OSD till date.
The U.S. FDA also inspected our new oral solid dosage facility F4 in December and issued five observations. We have received approval of two products from this facility to date. In terms of the numbers, the U.S. generics was at INR 354 crores for the quarter and INR 1,572 crores for the financial year. U.S. Generics, as I mentioned, had a good year, and it grew by 33% to INR 249 crores in the quarter, and by 10% to INR 852 crores for the year. The API business had a fantastic year. It grew by 41% in the quarter to INR 313 crores, and by 24% to INR 1,166 crores for the financial year. I would like to open the floor for Q&A, so let's take some of the queue.
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 their 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. We have our first question from the line of Damayanti Kerai from HSBC. Please go ahead.
Hi, thank you for the opportunity. My first question is to Pranav regarding the U.S. business. Now we are sub $45 million sales in the fourth quarter. What we have heard from some of the players that prices, price erosion in the U.S. has stabilized, but your commentary seems I'll say more cautious. Can you share a bit more detail like where are key challenges from your business perspective, and how should we look at this business in coming year?
There is still price erosion in the U.S. market. Has it slowed down? Yes. Compared to about a year back, it has slowed down. One of the reasons could be because of people are placing less priority in the U.S. business. We've seen some of our peers prioritize U.S. business little lesser. Number two is that there have been inspections, quite a few inspections, there have been some regulatory issues that some companies have faced. We do continue to see pricing pressure in the market. I think as a basket, some of our peers, the ones that have done well, have got a few handful of approvals which have offset those headwinds. For them, it's a little lesser. There is still pricing pressure in the market. It's lesser than a year before, but it's still there.
Damayanti, this Pranav said in his opening statement. This quarter four number is not really comparable because previous year Q4 of March 22 made an exceptionally great quarter because of... Not a heavy quarter because of transition to 3PL where we had asked our distributors to stock up, and this was implemented at that time during the Q4 22 investor call.
Sure, sir. In terms of erosion level, are you still seeing, say, like double digits, if you can like give some indication where it stands?
Yeah, I think it really depends product to product. Yeah, I think it's still in the double digits.
In, say, next, two to three quarters down from here, how do you see, like pricing to pan out? Any relief, any sign like you, see that we'll be seeing better pricing in coming quarters?
I think what happens is, as I mentioned before, right, and historically in the calls I've said, if you see the Sartans opportunity and the kind of prices that we are selling the Sartans at is it comes down. Once it gets beaten down to the ground, then there's not much. How much lower can you keep going, right? At some point, hopefully this will start. We've already seen that erosion has become less. There have been more supply challenges in the market for everyone. Hopefully, prices also should stabilize. I believe there will continue to be erosion because fundamentally there's just a lot more capacity for the U.S. market from India than is warranted, and that's what's causing this.
Sure. My second question is R&D. It seems like you are tracking in line with what you guided, like it will come down substantially.
Yeah.
Say if I annualize fourth quarter R&D number, we are somewhere like INR 500 crore-INR 525 crore kind of R&D expense for next year. That's what like we should be working with?
Yeah. I think that's a good number for you guys to work with. Of course, internally, there'll be a little balance. We'll have switch the balance internally, as I mentioned in my opening statement, that we may reduce some of the OSD spend and we may increase injectables, we may reduce some fixed costs. Yeah, INR 500 crore-INR 525 crore is a good number to work with.
How many filings, like you target with this kind of lower R&D spend?
I think we will still target about, 15-20 filings.
Okay. My last question is for Baheti. Sir, I missed your comment. You said like you won't be capitalizing any pre-operating costs now, and everything will be moving to the P&L. If you can explain that bit, that will be helpful.
Yeah, Damayanti, you heard it right. Up to December 31st, 2022, we were capitalizing all pre-operative expenses of facility F2, F3, and F4. Now, effective from first of. While we are charging off the impairment to P&L, there is no rationale for me to keep further capitalizing. From effective January 1st, 2023, we have the board has decided that all expenses will be charged off to P&L. That's how this quarter of March 2023, bears an additional expense of INR 65 crores in its P&L as compared to the previous quarters.
Okay. fourth quarter numbers are now like, fair, should be fair, representation of, you know, costs we should be seeing in coming quarters without any capitalization?
Yeah, yeah, that's right. Other than that INR 11 crore, which is a residual expense which we have done out of those old annual R&D amortization. There also now it is cleaned up, so you won't find that in next quarters.
Okay, sir. That's helpful. Thank you. I'll get back in the queue.
Thanks.
Thank you. A reminder to participants to press star and one to ask a question. We have our next question from the line of Ankush Mahajan from Axis Securities. Please go ahead.
Thank you, sir, for providing me the opportunity. My question is related to the U.S. business first. How many new molecules that we are expecting to launch this year in the U.S. market for FY 2024?
that's-
sir, we.
sorry, go ahead.
Sir, we have done a very good numbers in API business. Just try to understand, sir, how is the demand for the API and across the geographies. That's just put some thought on it.
Yeah. In terms of U.S. market, as I mentioned earlier, that we will launch about 20 odd products in the financial year, in FY 2024 in the U.S. market. Quarter one will be a little more, but total about 20-25 is what we should look at for the U.S. Q4 was good for the API business, very good. For the year, we would expect API to grow about 10%. It was a good market. I think we had some opportunities. We have some more long-term contracts. We could free up some capacities as well. That's what led to an increase in the API business.
Earlier, sir, these API prices were falling now. Can we say these are stabilized now?
It depends. You know, it's tough to say API prices are falling. I think it really depends who you're supplying to and what. I think we're still seeing some erosion in API prices. There were a lot of supply constraints over the last 2 years, be it with China or intermediates or COVID-related. I think you will see pricing pressure in API prices. I think a lot of the growth is not due to pricing, it's due to volume growth.
we can say that the volume growth, that uptick is there in the, in terms of volume.
Yeah. Yeah. Yeah. Yeah.
Sir, what we are launching now these 20, 25 products in the U.S. market, could you throw some more light at in which therapies or segment that we are looking?
We don't, you know, for US generics, we don't give therapy-wide segments. Probably what will happen as you see.
I mean, in terms of injectables, how many injectables are there?
Yeah. So what will happen is, in terms of injectables, out of 20 odd approvals, I'm assuming about 10-12 will be oral solid dosage and the rest would be ophthalmic injectables and derm.
Sir, pricing scenario in injectables at this moment?
It's too early for us. We've just started launching, so it's still early days for us on the injectables. Maybe next quarter we'll have a better track record to say.
Thank you, sir. Thank you very much.
Thank you. We have our next question from the line of Bharat from Equirus. Please go ahead.
Yeah, hi. Thanks for the opportunity and good evening, everyone. Sir, just wanted to understand on the Opex part. When we look at Opex sequentially ex of R&D, it is declining despite the fact that we have seen new facilities getting commercialized and all the pre-operating expenses are hitting the P&Ls now. What is it leading to this lower expense sequentially, if you could explain that?
If you, Bharat, if you see the screen.
Sir, I'm sorry to interrupt. You're sounding distant.
Okay.
So
just one minute. Yeah. Bharat, if you see this and if you're comparing it with the last year, we had a one-time impact of INR 100 odd crores that, you know, for the earlier actually, right? If you're comparing with that, obviously it will look low, I mean. Otherwise, you know, it is generally.
Actually, I'm comparing, over, third quarter of FY 2023. If I look at, it sequentially.
Yeah
it is also down.
Yes. I was coming to that actually. If you see the last year it was with career and this time it's being impacted largely on account of, you know, the marketing spend and, you know, all those things actually. There has and, you know, bit of the R&D as well is low actually and, you know, all of that culminates down to a lower spend. That's, that's precisely the reason I mean. Yeah.
Sir, still if I look at, right, in first quarter we were doing around INR 330 crore. Second quarter it was INR 340 crore around. If I just talk from that perspective, now what is happening is in third quarter we are still sitting at around similar, I would say INR 330 crore, which includes pre-operating expense of around INR 65 crore. That means our overall expenses have gone down, underlying expenses have gone down far lower. I can't get it because that will mean that we are around INR 265 crore ex of INR 65 crore which we are referring to.
No. You are comparing this with December's number of INR 530 odd crores with INR 460 odd crores, right?
Right. Right.
That's what you're comparing.
Right. After excluding personal expenses.
Exactly. That's what I'm telling you that, you know, you will see some of those promote spends and, you know, all the other expenditures actually those kind of, you know, you'll always see a bit of a variation there. I mean, you know, there will be some quarters which are bumped up quarters and then there would be quarters where it is, you know, the spend is little lower actually. This was one such quarter where we had lower spend.
Okay. Is it safe to assume that it will be again going back to the normal levels which we have seen historically?
Yeah. If you look at the full year number, right?
Yeah.
Full year number is at close to INR 2,000 crores, right?
Right.
Yeah. On that number, you could, and considering that, you know, we had INR 60 odd crores of additional expenditure in Q4, for new plants, you can safely consider that, you know, there would be around 10% increase in that number for next year if you ask. Yeah.
Okay.
2066 also includes new plants with INR 155 crores?
No.
That is not.
No, no.
That's it.
It will not.
Right. The Aleor expense will not be repetitive. I get that. Largely we are saying that Ex of Aleor, we will be seeing a growth and Sorry, INR 180 sort of expenses will also be hitting other expenses considering because of new plants expense, right?
Correct.
Oh, that's helpful. And on the U.S. market, we have been referring that we'll be launching a couple of new drugs. Could you tell us that how many new injectable products have been filed till date out of all the facilities which we have?
You, Bharat, you are, you wanna know the filings actually, right?
Total number of injectables filed.
Yeah, both the plants put together is close to 15 filings.
One file or file?
Yeah. One file.
Okay. 15 injectables are filed till date. Overall, pending approvals are around 40, 45 for us at this moment?
No, overall pending approvals are almost 90 actually. Around 90, if I'm not mistaken.
pending ones, right?
Pending, yeah, yeah.
That's, that's all good. Thanks a lot, sir. I will get back to the queue.
Thank you. Ladies and gentlemen, to ask a question, please press star and 1 on your phone. We have our next question from the line of Tushar Manudhane from Motilal Oswal. Please go ahead.
Sure. Thanks for the opportunity. Considering the number of launches, comprising both oral solids as well as injectables, what kind of sales can we expect in the U.S. for FY 2024 from current $196 million to $100 million?
You know, Tushar, we don't give a forward guidance, and for the U.S. it's very tough, and I'll tell you why. Let's see how the launches happen. It's early days for us on the injectables. We would like to grow the business. The other side, what I answered earlier, to Damayanti, is that there's a lot of erosion as well, right? It's very tough for me to predict, and that's why we don't give a guidance for U.S. sales.
Okay. While price erosions are there, but at the same time compliance issues for competitors or somebody shutting, literally shutting down the plant. We don't see the opportunity.
I believe there are opportunities in the U.S. market and you continue to get opportunities and you have to be a nimble player. To put a number on it is tough. That's why I wouldn't like to give a forward guidance.
All good. All good. In particularly in API, just one more question. While you address that it is most of the growth is volume led there, INR 300 crores sort of or INR 100 is very much possible or there is further scope on account of this significant volume uptick?
Yeah, no, that's the API business is a good business and it'll continue to grow. I expect API and ex U.S. rest of the world generics. I think both should grow by 10% at least this year.
Okay, sir. Thank you.
Thanks.
Thank you. We have our next question from the line of Darshil Jhaveri from Crown Capital. Please go ahead.
Hello. Good evening, sir, thank you so much for taking my question. Sir, I just wanted to ask about what do we feel our margins will be around going forward for the next year?
Darshil, like, you know, margins of course would be in bit of a pressure considering that, we would have all the new plants now commercialized actually. The run rate of that is close to, you know, INR 60 odd crores every quarter actually. You know, again, you will have sales coming in from this. It will do pay out, I mean, you know, over the quarters. If we have to take a guess, I would say that, you know, a number around 15% would be a right number to go with.
Hello? Hello?
Mr. Jhaveri?
Yeah. Sorry, there was a network issue. I missed the last bit. Sorry. Apologies.
Darshil, in interest of everybody, we can take that offline, I mean, you know. We'll look at it.
Okay. Sir, with, sorry, and one more question. I understand U.S. sales would be a bit difficult to guide on, but overall, how much do we could, you know, a range of revenue growth that we could expect in the upcoming few years? Maybe nothing specific, but some kind of color would be helpful.
See, like, you know, domestic, we said that, you know, not giving the number, but you know, we will outsmart the industry growth rate. As far as international generics is concerned, U.S. is, you know, we would have very good launches coming in actually. And there would be growth as far as U.S. territory is concerned. Ex of U.S., you know, other generics, we should grow at around 10%-12%. API business is, you know, 10%-12% of growth is possible.
Okay. Thank you so much, sir. That helped me a lot. All the best for the next quarter.
Thank you.
Thank you. Ladies and gentlemen, to ask a question, please press star and one on your phone. We have a question from the line of Bino Pathiparampil from Elara Capital. Please go ahead.
Hi, good afternoon. You had mentioned that you have taken a write back of tax in Q4.
I'm sorry, can you use your handset, please? Your voice is not clear.
Hello? Hello, is it better?
Please go ahead.
Yeah. Good evening. You had mentioned that you have taken a write back of tax in Q4. Is that related to the write-off of assets?
Yes. Yeah, that's true. Yeah. Whatever provision which was done in the first three quarters gets written back in the quarter four.
Okay. Are there any more deferred tax assets related to this that you are carrying forward into FY 24?
Balance of INR 470 odd crores of impairment for which the provision has been done, depending on how the generic market behaves and how the impairment valuation would be at that time. If required, will be written off in 2024, when those plants, those part of the facilities gets operational.
Understood. Okay.
Impairment of INR 1,150 crore, as I explained, INR 670 odd crore have been charged off in the current year, written off in the current year. We have made full provision so that no further hit comes on PNL of subsequent years.
Understood. basically if the remaining write-off also happens in FY 24, then that tax benefit could come in FY 24. FY 24 tax rate could also be very low.
Yeah.
Okay. FY 2025 onwards, what sort of reported tax rate should be, you know, should we come to? Will we go back to around 25%?
No, I'm not giving you that also.
We will continue. See, before this you know we were in CWIP, so you can safely assume for your calculation purposes that we will be in MAT, which is 17.5 %.
Oh, okay. Got it. Thank you.
Thank you. We have our next question from the line of Tarang Agrawal from Old Bridge Capital. Please go ahead.
Hi. Just wanted to check a couple of things. One, how should we look at your CapEx from FY 2024 onwards? Second, given that INR 65 crores is the additional quarterly hit that we're seeing, would it imply about INR 240 crore-250 crore of additional annual hit on the PNL because of the new facilities?
As we have been sharing with investors, most of the CapEx, most of the new projects are now completed and we are operationalizing it. The CapEx in 2023-2024 largely will be debottlenecking or a little bit of expanding of API capacities. We are also investing in some solar power so that electricity cost goes down because in Vadodara it's pretty high. There'll be some investments in new facility for India branded business, which is at initial stage. Having said all this, I think the CapEx and of course there will be no pre-op capitalization. Having said all this, I think the CapEx should be fairly, I mean the total CapEx should be less than INR 250 crores.
Okay. To my second question.
What is that?
Would we see a digital hit of about INR 250 crores-INR 260 crores?
Yeah, that's right. I mean, that's not a risk of business. Normal routine expenses which will get charged to P&L.
Okay. That's okay. Thank you.
Thank you. We have our next question from the line of Bharat from Equirus. Please go ahead.
Thanks for the follow-up. Sir, Baheti sir, actually, during the last quarter, we were referring that there is total INR 400 crore expense, INR 200 above EBITDA and INR 200 below EBITDA. Since we are referring INR 65 crore above EBITDA, that translates to almost like INR 250 crore-INR 260 crore. Is there any incremental cost which we have realized now? Because earlier we were guiding for almost like INR 180 crore-INR 200 crore above EBITDA.
As these facilities gets operational, I think obviously the operating expenses also goes up as they get into commercial production. Earlier these facilities were being used only for taking exhibit batches and for keen for taking those filings. Now they are being used for regular commercial production.
From here on, whatever the increase would be, that will be largely the inflationary one or there will be some another INR 600 crores which is sitting as CWIP, so there could be any additional increase also which can happen over and above once those are commercialized.
No, I didn't get you.
No.
That would be very incremental, small CapEx, which is just a balancing equipment. You know, that number stays there actually.
What will happen is, as you start commercializing, you're not doing any major CapExs or big [audio distortion]. I think just in the line there'll be balancing maybe IR equipment, size and stuff for commercial batch. That's about it.
Okay. I get that. Since we were referring that there will be another INR 200 crore which will be coming below EBITDA. With new impairment which we have done, what sort of number that will be now?
Bharat, the number would be like, you know, cash would be around INR 200 crores-INR 20 crores and depreciation would be another INR 75 odd crores actually.
All put together would be around between INR 280 crores-INR 290 crores for these new plants.
Can I beg your pardon? You said INR 200 crores will be-
I will repeat again.
Sure.
Cash expense would be between INR 200 crore-INR 220 crore, there would be additional depreciation of around INR 75 crore. That would make the total number between INR 280 crore-INR 290 crore.
Okay. My belief was we were already doing INR 65 crore during this quarter. That was above EBITDA, or that is across the line item?
Bharat, that is exactly what has happened. No, this, I mean arrangement that we have done with CWIP takes care of the depreciation on the pre-operative, and that's like INR 100 crores of the depreciation every year.
No, I get that. What I'm asking is the INR 65 crore which we have charged to the P&L during this quarter, is it spread across above EBITDA and as well as below EBITDA?
There is a depreciation portion into it, yeah.
It has depreciation. Okay. That's, that's helpful. Thank you.
Thank you.
Thanks a lot.
Thank you. We have our next question from the line of Resham Jain from DSP Mutual Fund. Please go ahead.
Yeah, hi, good evening. I have just one question on the margins. You mentioned 15% margin for the full year. Is that right?
Yes, that's what, yeah, ballpark number.
How will this trajectory be? Because you have multiple launches maybe in the first half, and they'll scale up in second half. Do you feel, or what do you expect, the exit run rate would be?
No, you were not very clear. Can you repeat that?
Yeah. Am I audible now?
Yeah.
Yeah. What I was asking is that 15% is a full year margin, so how the margin trajectory will be? Because first half you will have multiple launches and then scale up as year progresses. How will the exit run rate of margins be?
You know, we are talking about, I was talking about year as a whole, I mean, you know, not bisecting that into quarters, actually. I mean, it's overall.
Okay.
Again, I mean, it's just giving a flavor for the year.
Okay. If you look at, before your certain benefits, the kind of margin you were making and, now once the plant scales up, that was the context. Even after scale up, you don't see the exit run rate would be better than what you'd be doing, let's say in first half. That was the context in which I was asking this.
See, that's exactly, you know, because we will not be completely putting. I mean, if you look at the grid and the approval of the products and things like that, you are going to partially keep using the plant and it will gradual, you know, scale up is gonna happen, right? You will have five, seven products then, you know, In second half you will scale it up to, you know, 10 products. At FY 25 you will have 25 products, like that. That's how.
I mean, Baheti is right. You know, one thing is the plants, while we start using them, they're not fully optimally utilized, right? It'll take a year or two till all new approvals come. Second thing is, even before the Spartans, and you know what happened is, the fundamental U.S. business that we had, that the margins have come down in that, right? That is impacted. Even before the Spartans, the margins in the U.S. business for the OSD were much higher. There were continually shortages, and there's very high margin in the U.S. business that time as well. That's the fundamental part that has changed. The rest of the business, India is growing, ROW, API are growing. This is the U.S. that dragged down the margins.
Okay. Perfect. Thank you.
Thank you. We have our next question from the line of Damayanti Kerai from HSBC. Please go ahead.
Hi. Thank you for the call. I have two questions on India business. You mentioned that you'd continue to outperform the market. Can you talk a bit about the core drivers? Like, what are your expectations in terms of volume or price contribution or from the new product introduction, et cetera? Comments around.
Yeah. I don't have a split offhand, but I mean, like I said, I think what we maintain is that if the market grows, whatever the market growth is, we aspire to grow a couple of points higher than the market growth numbers. Which would be a composite of all of new launches, some price increases, some high volume would be a bulk effect. But like I said, it also is depending on the, you know, profile of the market growth. Yes, anywhere from matching market growth to maybe going up four, five points higher than the market growth. I mean, that is what we wish to work, which we are working towards.
Sure. If I understand correctly, volume part will be obviously, you know, following the market trends, et cetera. Should we assume like pricing contribution around 5%-7%, which we generally see? That will be-
Yeah. Like I said, I don't have the exact breakup offhand, but Ajay can share that with you. I think volume would be a bulk of the growth numbers, and there will be smaller components of pricing in this whole thing also.
Okay.
Just so that we're clear, I think the, on the DPC, you know, products, I think there will be no pricing increase versus last year. If you had to take that as, which is a decent chunk of our portfolio, if we keep that as flat. I think except that there will be some price increase, but there will be some price cuts also as a part of that. Yes, I mean, it will be largely volume, and there will be a smaller component of pricing on that.
Okay. Just to clarify, you don't assume any pricing change in the DPCO part of your portfolio, although it's small, around 15%-16%.
Yeah. Because if you see over last year versus this year, I think the prices are the same, if I have to factor in the cut which we had to take last year as well as the opportunity as per the WPI. I think they both... It was a net at even. I don't think there's any increase over the previous financial year at the start of the financial year.
Okay. My last question is on your observation, this is for the broader business. Your observation on the input cost pressure which we witnessed for a few quarters back. All those have normalized the input cost pressure on raw materials or freight, et cetera?
I think, I mean, I think some of the pressure still stays on the packing, on the RMPM side of things. I mean, honestly, with the price in oil coming down, we expect some easing of this hopefully going forward. On the API side, there is some marginal increase but not material.
Okay. Other links, energy or freight costs, et cetera?
No, we don't have large component to India business on that side.
Okay. Not to India business, but from overall business, maybe.
That, that visibility, Mintanshu will know.
No. Yeah, sure. Other energy cost is being increasing, A, because of rate hikes by the State Electricity Board, and B, because of increased unit consumption with operations of additional facility. I mentioned in my note that we will be investing into solar projects for compensating for... It will be one-time CapEx, there'll be a significant amount of savings over next 20 years or so.
Okay. This benefit of solar energy investment will come from this year itself, or it will take some time?
I think it will come from H2 of this year.
Oh. Okay. Thank you.
Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to management for closing comments.
Yeah. Thanks. Thank you everyone for being patiently with us on a week-weekend. I think it was a heavy board and the meeting extended right up to 4:30 P.M. or so. Thank you very much for being with us till late in the evening, and wish you a happy weekend and we'll keep interacting individually and of course after the... in the new financial year. Wish you all the best.
Thank you. Ladies and gentlemen, on behalf of Alembic Pharmaceuticals Limited, that concludes this conference.