Ladies and gentlemen, good day, and welcome to the earnings conference call of Divi's Laboratories Limited for Q1 FY 2025. 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 then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. M. Satish Choudhury. Thank you, and over to you, sir.
Good afternoon to all of you. I am M. Satish Choudhury, Company Secretary and Chief Investor Relations Officer of Divi's Laboratories Limited. I welcome you all to the earnings call of the company for the quarter ended 30th June 2024. From Divi's Labs, we have with us today Dr. Kiran S. Divi, Whole-Time Director and CEO, Ms. Nilima Prasad Divi, Whole-Time Director, Commercial, Mr. L. Kishore Babu, Chief Financial Officer, and Mr. Venkatesa Perumallu, General Manager, Finance and Accounts. During the day, our board has approved the unaudited financial results for the quarter ended June 30th, 2024, and we have released the same to the stock exchanges, as well as updated the same in our website. Please note that this conference call is being recorded, and a transcript of the same will be made available on the website of the company.
Also, please note that the audio of the conference call is the copyright material of Divi's Laboratories Limited and cannot be copied, rebroadcast, or attributed in the press or media without the specific and written consent. Let me draw your attention to the fact that on this call, our discussions will include certain forward-looking statements, which are predictions, projections, or other estimates about future events. These estimates reflect management's current expectations of the future performance of the company. Please note that these estimates involve several risks and uncertainties that could cause our actual results to differ materially from what is expressed or implied. Divi's Lab or its officials does not undertake any obligation to publicly update any forward-looking statement, whether as a result of future events or otherwise. Now, I hand over the conference to Dr. Kiran Divi for opening remarks. Over to you, sir.
Good afternoon, ladies and gentlemen, and welcome to our Q1 financial year 2024-2025 conference call. We are pleased to have you all here, and I hope that you, along with your families and loved ones, are in good health. I shall begin by updating you on our operational performance. As we reflect on the first quarter of FY 2024-2025, I would like to report that Divi's remained resilient, ensuring another steady quarter. This is despite of persistent worldwide geopolitical events that are leading to volatile trade conditions. We have been diligently meeting our customer requirements through strategic supply chain management and operational excellence. The industry continues to observe pharmaceutical shifts that create room for expanding market opportunities. Building on our six growth engines, Divi's is focused on strategically pursuing new opportunities across various portfolios.
Alongside the tangible results from our previous investments and expansions, we are experiencing stable demand for most of our established generics, which balances the pricing pressure on our product mix. Our emerging generic products continue to gain market share, and our future generics, with filings planned for completion in the next few months, will be commercialized in FY 2026. The custom synthesis, the custom synthesis segment is advancing with several new projects across all clinical phases, and we are working on several phase II and phase III molecules. Our existing major commercial projects with Big Pharma continue to yield positive results. With continued focus on opportunities in the peptide segment, in addition to manufacturing peptide building blocks, we are also pursuing the manufacturing of peptide fragments required for various GLP-1 and GLP-2 compounds.
Our greenfield expansion at Unit 3 is progressing rapidly, and upcoming production activity in the 200 acres phase I is expected to gradually begin during FY 2024-2025. We are pleased to announce that we had a successful USFDA inspection at our Unit 2 production facility. It was a general cGMP inspection, which was completed with one procedural observation. This outcome reflects our commitment to maintaining high regulatory standards and ensuring compliance across all our operations. Complementary to this, Divi's prioritizes environmental sustainability by promoting resource efficiency throughout the supply chain. We are committed to operating our business responsibly in all aspects and we have been implementing initiatives to support ecological balance and nature conservation.
Our CSR initiatives are aimed at making meaningful contributions to the communities we operate, and we are actively working to facilitate their sustainable growth. One of our core initiatives, which focuses on holistic development and empowerment of children, has made a tangible impact on the lives of over 100,000 students in more than 1,100 schools across the states of Telangana and Andhra Pradesh during the year 2023 and 2024. We also remain persistent in our effort to uplift rural community and have successfully empowered nearly 250,000 individuals across 44 villages surrounding our manufacturing units. Now, Ms. Nilima Divi will update you on the financial highlights of the first quarter of the financial year 2024-2025. Thank you.
Good afternoon, ladies and gentlemen. I extend my warmest greetings to each one of you. Thank you for joining us today as we continue to discuss the outcomes of the first quarter of FY 2024-2025. We have been resilient in ensuring efficient supply chain operations and reliably meeting our customer requirements. Despite the ongoing volatility in the current geopolitical landscape, the environment presents growth market opportunities. We have been proactive in navigating these dynamics and optimizing our performance. On the procurement front, we have witnessed a relatively balanced Q1 scenario. Raw material prices remain stable. However, we are monitoring the situation carefully, considering the current global events that may quickly alter. To mitigate risk, we are maintaining safety stocks for extended periods and diversifying our supply base for most of our key raw materials.
Logistics and supply chain challenges continue to persist, resulting in significant freight hikes and long transit times due to rerouting and vessel cancellations. In response, we have been vigilant and are closely monitoring each shipment, diligently implementing our risk mitigation measures. We have been efficiently streamlining inventory management and advancing shipping schedules by three to four weeks. Despite all these global challenges, our teams have been proactive in managing any potential risks and ensuring operational continuity. We remain committed to delivering the highest quality APIs and sustaining our partnerships. I will now provide you with an overview of the financial performance for the first quarter of the fiscal year 2024-2025.
We have achieved a consolidated revenue of INR 2,197 crores for the current quarter, as against the income of INR 1,859 crores for the corresponding quarter of previous year, a growth of 18% year-on-year. Material consumption for this quarter is at about 40% of the sales revenue, as compared to about 39% in the immediate previous quarter, and 39% for the corresponding quarter of previous year, due to change in product mix. PBT for the quarter is INR 604 crores, as against INR 492 crores for the corresponding quarter of previous year. PAT for the current quarter is INR 430 crores, as against INR 356 crores for the corresponding quarter of previous year. Exports for the quarter is about 86%.
Exports to U.S. and Europe is about 70%. Product mix for generics to custom synthesis is 51% and 49%, respectively. We have a forex loss of INR 1 crore for the quarter, as against a gain of INR 3 crores in the corresponding quarter of previous year. Our constant currency growth for the quarter has been at 18%. Our nutraceutical business amounted to INR 178 crore for this quarter. We have capitalized assets of INR 60 crores during the quarter. We have a capital work in progress of INR 1,062 crores as of the end of the quarter, of which Kakinada project accounts for INR 837 crores. Total amount spent on Kakinada project till the end of this current quarter, including advances, is INR 1,018 crores.
As of 30th June 2024, we have cash on books of INR 4,229 crores, receivables of INR 1,942 crores, inventories of INR 3,108 crores. You would notice from our annual report for FY 2023-2024, that the dividend payout for FY 2023-2024, of INR 796 crores, is scheduled in the second fortnight of August 2024. Thank you.
Thank you, madam. With this, we would request the moderator to open the line for Q&A.
Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask questions may press star and one on their touchtone phone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Ladies and gentlemen, in order to ensure that the management will be able to address questions from all the participants in the conference, kindly limit your questions to two per participant. Should you have a follow-up question, please rejoin the queue. We will wait for a moment while the question queue assembles. The first question is from the line of Amit from JM Financial. Please go ahead.
Yeah, thank you for taking my questions, and congratulations on good set of numbers. I have first question on the API pricing environment. We have been witnessing, price deflation in many of these products in the API side. So how has been trend for us, over 4Q to Q1 Q2, if you can guide on the same? The second question I have on the emerging product side, we mentioned that we are gaining market share in emerging API generic products. So if it is possible for the management to name some of these products, and how has been our market share improvement in these products over the last few years? Thank you so much.
Can you please repeat your first question again? It wasn't very clear.
I wanted to know how has been the API pricing environment. We have been seeing a price deflation in the API side for last one year. So how has been the trend in the recent quarters for us, and if any outlook you can give on the API pricing side? Thank you.
Yeah. So coming to your first part, we are experiencing pricing pressure across our large volume products like naproxen, gabapentin, dextromethorphan. But, you know, we being, you know, one of the largest producer and player and having long-term contracts with our customers, we are able to maintain sustainable market share, and in fact, growing in that, in those products. If you look at a product like, you know, dextro, and naproxen, or even naproxen sodium, even a 2%-3% or a 5% growth, in the product itself is a substantial growth. With that being said, the pricing and the volume is actually complementing each other. That's what I told in the speech, where we could balance and not lose, lose the overall numbers.
But yes, we do have pricing pressure, and we feel it should settle down, you know, in the near future.
Coming from-
Pardon me?
Yeah. So from quarter four to quarter one, we did experience pricing pressure, or you think it has been stabilized?
No. We have seen pricing pressure throughout the last, you know, two years, ever since COVID took place, and also with the geopolitical situations across, where there are several factors, like in availability of raw materials to everything. But now, we see that slowly, we believe in the future, that prices will stabilize and normalize again.
Sure. Thank you.
Coming to my second question. Coming to your second question, we have several products in the pipeline, like ticagrelor, a few others, just to name, which are coming off patent, which we have filed our DMFs. Our customers are filing their regulatory approvals and their submissions. So, you know, as when patents expire from 2026, we will start seeing revenues from those products.
Got it. Thank you so much.
Thank you. We'll take the next question from the line of Surya Patra from PhillipCapital. Please go ahead.
Yeah, thank you for this opportunity, sir. First question is on the custom synthesis business. This quarter, we have been continuing to see a kind of a strong, strong performance in terms of growth YoY in the custom synthesis, over 40%. And, one of the key contributor to this is obviously the valsartan API material in the recent period. Given the patent expiry, what we have witnessed there and the generic entry, so whether it will have a temporary impact to the momentum, what we are currently seeing, sir?
I would request that we don't speak about products because we are bound by confidentiality. What I would request, what I would say is, you know, we have several molecules in CS, which are, which are in phase II and phase III. Apart from this, we also produce several molecules for the brand companies in large volumes.
Okay.
Based on this, our results, our sales have been very positive, and we see a lot of growth in either volumes or new opportunities coming our way.
Okay. Then, sir, in the contrast media side, what is the progress that we would have achieved so far, and from the target, whatever that we are trying to achieve, so over a period of time, to what extent that we have progressed on the contrast media side in terms of the volume progression and growth? If you can give some sense, that will be quite rightly.
On the contrast media side, we work on two specific segments, okay? One is the iodine-based compounds, which work towards CT scans. The second one is the gadolinium compounds, which they use in MRIs. On the contrast media, we have we sell both to several of the brand companies and, I mean, the innovators, and also to the generic houses. In some, some of the iodine-based products, we have been successful, and we have been shipping commercial quantities to few of the brand companies. Apart from this, we are also supplying in the regulatory markets, and we are seeing considerable growth in those volumes.
Coming to gadolinium compounds, we are working on several phase III molecules, and as and when the innovators are ready to take it to pilot based on regulatory approvals, we will take that forward.
Just one last question from my side, sir. I think, for some time that we are hearing about the trade challenges, that was because of the, the Red Sea issues impacting, the trade route and, hence the cost. And simultaneously, of late, we are also hearing, availability of container. And, to some extent, from the channel checks and what we are hearing, in the month of June, I think the industry has faced a tremendous pressure in terms of the Red Sea challenges impacting their export activities. So, whether we have faced anything of that sort, and, if that is the case, whether the continuing quarter, means the subsequent quarter, is likely to be impacted to some extent, how should one think about this trade challenge, that you would be facing currently?
I don't think we are immune to something that the industry is currently facing. We did face some challenges, and we are continuing to face those challenges, but we are also making sure that we are planning well in advance. We are taking. We are keeping that in mind. We are taking all these situations into consideration while planning our shipments. So, so far, we have been slightly more careful and consistent in our shipments, wherein we are making sure that the customer is not affected at the end of the day.
Sure, ma'am. I have a couple more questions. I'll, I'll come in the queue.
Thank you. Anyone who wishes to ask questions, may press star and one. The next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.
Yeah, thanks for the opportunity. So I, first of all, I missed your comment on the peptide block. You referred to something additional with respect to the investment. If you could, you know, clarify and elaborate on that first.
Sure. So in the peptide business, initially we were just manufacturing protected amino acids. That's called building blocks for amino acids. And we have been manufacturing that. We had the experience 14 years ago, and then we started again, and we were manufacturing for the customers who are making the GLP-1 and GLP-2. But now we have started working on tetramer and decamer, basically 4-chain amino acids, 10-chain amino acids, either through solid phase or liquid phase. And you know, our pilot plant is almost ready, where we will be producing decent quantities. And also we will be taking this forward commercially. We have already ordered a few 500 L reactors to take this forward.
The interesting thing here is, even the customers who are producing GLP-1 and GLP-2 to finished products are quite interested to work with us on these molecules.
Understood, sir. So this will subsequently go through the, let's say, the exhibit batches to scale-up batches and then the compliance, and so effectively-
Yes, just to point that the building block, we are actively supplying to the company, through, you know, to the innovators and to the companies, the peptide building blocks. Now, we are taking one step forward and building the fragments.
Interesting, sir. Interesting.
From the fragments, they combine two or three fragments and the API comes out.
Understood, sir. That's it. So in contrast media, whatever development that has been happening at the innovator level in terms of those products, the intent is to reduce the concentration of, let's say, iodine or gadolinium, as you know, they are sort of increases the impurity or, as far as the human beings are concerned. So from that point of view, does this still stand as a good volume opportunity, or it is going to be a relatively small volume opportunity for us?
Are you talking about iodine-based compound or gadolinium compound?
Gadolinium compound.
The gadolinium compounds, you know, everyone requires an MRI. The volumes are huge, okay? But now, like, you know, in the olden days, you would take an MRI, you would take a gadolinium compound and have a full body scan. Now, the compounds are specific to the heart, to the brain, to the lungs, okay? And the compound that directly goes and sits there. So, you know, the innovators are now specializing on these, these type of, compounds. So we are a part with them in the journey, and of course, they will have opportunities.
Understood. So you mean to say volume would be there, but the concentration, let's say that, that will continue to reduce in terms of dosage?
No, the dosage will be the same. It doesn't matter. It's just the binding agent that takes the product directly to the area that is required.
Got it, sir. And lastly, if I may just squeeze in one more on API, this, at least the industry feedback has been that the inventory in the channel post-COVID, and given the shelf life of products being 4-5 years, does it mean that we still face another 12-15 months where prices continue to slide and, you know, so we continue to, you know, deliver more volume to at least grow the revenue? Is that also the case for Divi's?
On the generic side of the business, like I explained in my presentation, we have long-term contracts with several customers. That being said, our customers have not lost any market share, but only there is a price erosion, because there are several people trying to destock. At such times, we support our customers. That's why we have a short setback.... Once the prices stabilize, we still cannot give a date on it, but I'm sure it has to stabilize at some point. This happened about 10 years ago. We had this kind of cycle, so we are confident it has to stabilize at some point. Things will be back to normal.
Understood. And just one more, just if you could share the breakup of, let's say, the API business with into the legacy molecules and the new molecules.
Any question?
Can you elaborate on your question, please?
So let's say we have the naproxen, gabapentin, such kind of legacy molecules as a part of API Generics business, and new molecules typically, which you would have launched over the last two years. So if you could, you know, help us break down the sales of API Generics into these two buckets.
We normally wouldn't want to break that up, because, you know, we normally break up and see what we are supplying to U.S. and Europe or what we are doing in the generics and the custom synthesis business. But breaking it up molecule by molecule is not something we would normally like to do, because we need to look at the entire basket. We wouldn't want to be a product-heavy company, wherein we are depending more on one particular product and that would drive the company's growth. So we would want to keep the mix between the products as equal or as balanced as possible.
Okay, madam. Thanks. Thanks for your response.
Thank you. The next question is on the line of Sanjay Kular from ACME Private Limited. Please go ahead.
Okay, thank you. Compliments to you for delivering good set of numbers. I have a couple of questions. One is, what kind of sales we can generate from expansion, but at optimum capacity utilization, since our Kakinada unit is beginning this year. Second question is, what is the update on, you know, tie-up with the multinational for INR 700 crore unit, which will be going to put and our business will start probably from 2027. Are we experiencing new businesses from CDMO opportunities? Because we are hearing that, there are lots of CDMO inquiries are flowing to India. What is your view, sir?
So the expansion in Kakinada, like I explained in the, in my presentation, it will start phase-wise, and then it has to go through regulatory approvals. Okay, regulatory approvals take 1-2 years. Once the approvals and everything we get, okay, we also have to file DMFs from there, do our validations. Our customers have to file their ANDAs or NDAs, and then the whole process will take 1-2 years. But right now we will start doing our validations, and we'll also start certain pre-chemistry products. So I would say, you know, you have to look at any product coming into market. We will require about at least 1-2 years with all the regulatory approvals that are taking place.
Coming to your second question on the INR 700 crore investment, this is an increase in capacity for one of our projects, okay, for a based on the CS side, which the investment is going through, where the growth will happen.
Okay. And how are the inquiries from the U.S. regarding CDMO deals? India is experiencing lot of inquiries from U.S. and European clients. What is your view, sir?
We are. Like I explained in our, in my presentation, we are getting a lot of phase II, phase III molecules, a lot of fast-track molecules where it is in advanced stages and, you know, it's waiting for regulatory approvals from the CS companies, so, and from our multinationals. So we are seeing a lot of opportunities coming our way.
Okay, thank you.
Thank you. We'll take the next question from the line of Sanjay Papti, an individual investor. Please go ahead. Mr. Papti, I have unmuted your line. Kindly proceed. As the current participant is not answering, we'll move on to the next question, which is from the line of Dheeresh from WhiteOak Capital. Please go ahead.
Yeah, thank you. So a couple of questions. If you can share the volume growth in the API business?
Hello, am I audible?
Yes, you're audible.
Yeah, we're just looking at it. One second, please.
Oh, okay.
Yeah, please. Sorry.
Percent approximately.
It's, as I said, like, you know, it is in line with our double-digit growth, which we always say that, you know, that we are very optimistic about our double-digit growth, both volume-based and price-based, which is reflected in our revenue. So I would say it is the same.
Okay. Just to understand it properly, the volume growth in constant currency is flat, but you're seeing volume growth in double-digit in the quarter in the API business. Okay. And second question is on GLP-1, you said you are making building blocks, now you want to make fragments, and then you should move on to final API. So do we have the capability and the aspiration to go into further downstream into making the final API?
See, right now, the final API everything depends on the innovators, right? What they prefer to outsource, what they prefer to give it out. Right now, you know, they're interested in looking at opportunities working with us on fragments, so we are working on the fragment. Before this, if you asked me six months ago, they were looking at working with me only on peptide building blocks. So it is on what they want and, you know, when they need it. When the opportunity comes, of course, definitely we would be interested in it. Right now, we have been asked to look into fragments, and we are investing into fragments.
Understood. So last question. In contrast media, can you just give a rough split of how much of the revenue you book under API and how much you book under custom synthesis?
I can't comment on that because we work with the brand companies. I can't comment on that. I'm sorry.
Is it like, without getting inside, is it fairly, is it equally, like, you know, more skewed toward one, or is it fairly split between the two sides?
You know, see, you. That's a very, very simple question. If you look at the world market itself, the major chunk is controlled by the brand companies, not by the generic houses. The generic houses only hold about 10%-15% market share. Okay? The brand companies are the ones who own about 85%-90% market share even today, because they manufacture the equipment and everything. They have strong control on the product. So, you know, definitely, I can't answer this question.
If you have your own BMS and you're supplying to the brand, you will still classify it under custom synthesis, right? Not under API.
For the brand, I would produce it by his process and his route of synthesis, not by mine.
Understood. Thank you, sir.
Thank you.
Thank you. We'll take the next question from the line of Surya Patra from PhillipCapital. Please go ahead.
Thanks for the comments. And, in fact, I just wanted to have a sense on the this, what could be the implication of this BIOSECURE Act, which is expected to be implemented, later part of the year, to our generic business as well as the custom synthesis? Whether generic is also likely to be benefited, that is my first clarity that I want to have. Secondly, about the custom synthesis-
Surya Patra, your voice is not too audible for us. Can you be a bit louder?
Yes.
Sir, please use your handset to ask questions.
Yeah. Yes. Is it audible, ma'am?
Yes.
Yes, please go ahead.
Yeah, yeah. I want to have a sense about the implication of this BIOSECURE Act, which is expected to be implemented later part of the year by U.S. So impact on the generic business and impact on the custom synthesis. While it is believed that the custom synthesis generally will see the benefit, whether that is restricted to only custom synthesis or even generic can have a benefit. And just an extension to the custom synthesis point, even if this will be implemented, there will be a transition period till 2032. So during that period, whether we'll get a benefit for custom synthesis or not. So your understanding about this BIOSECURE Act and the likely implications, if you can share.
See, you know, the BIOSECURE Act is something what the U.S. has decided, and we have—we are definitely seeing a lot of opportunities, a lot of them in phase II, a lot of them in phase III. Some are already commercialized on the CS side, which they would like us to be their second source, where we are looking at the opportunity and the feasibility over there. So there are several opportunities that are coming on our way. And, you know, in, with several of the brand companies, we are their preferred supplier, and in some of them, we are, we are one of their sites on, where, you know, we get to bid with, with their own sites on the products. So with all that being said, we do have good opportunities on, on the CS side.
Now, with BIOSECURE Act, we are seeing more number of phase II and phase III molecules than what we saw before. Coming to whether it is applicable even to the generic side, yes, we are seeing interest coming on the generic side, too. But, you know, that is a long haul. The generics are something that are price sensitive. We have to see how this will pan out. But right now we are seeing a lot of interest only from the custom synthesis side of the business, more than the generic side.
Okay. It will be visible from now on or itself, implemented?
Yes, we are seeing visibility from now.
Okay.
Just 2032 is only eight years away. For qualifications, for everything to go through, is about three to four years itself for brand companies to get us into their filing and then go forward. So it is a long, long haul.
Okay. Okay. Sure, sir. Just an extension to that itself. In the generic business, while we are expecting, the new pipeline or the new product opportunities are likely to be the key growth driver over the next two to three years for us. So, since you are already prepared for those opportunities. So here I just wanted to have a sense that, okay, what would be the level of your integration there at the API level? So obviously, it would be lesser compared to the existing ones, because there it could be end-to-end integrated. But here, what could be the level of integration?
You know, Divi's as a concept for generic molecules, whenever we enter into a generic product, we look from manufacturing everything from our basic raw materials all the way to the finished API. The reason being, we would like to control all our impurity profiles, thereby we don't have any regulatory issues in the future. So it's not that we buy a key starting material from someone, we will buy, you know, one of the intermediates from someone and then start making it. We prefer to make everything. One, we control our costs, we have better costs, we have better impurity profile management, and we have supply chain continuity in the product.
Even on all the future trends, we are filing right now, which are going to come off patent, some in 2025, some in 2026, some in 2027. All of them, we are completely backward integrated.
Oh, that is nice, sir. Just last one question-
Sir, I'm sorry to interrupt you. You'll have to rejoin the queue for follow-up, sir.
Sure.
There are many-
Yeah, yeah. Thank you.
Participants waiting. Thank you so much.
Sure, sure. Thank you.
Thank you. We'll take the next question from the line of Neha Manpuria from Bank of America. Please go ahead.
Yeah, thanks for taking my question. Sir, since you mentioned that we have a lot of phase II, phase III molecules, you know, with the BIOSECURE draft as being out there, how are we thinking about phase II in Kakinada? You know, given it takes one or two years to get approval, do you think it, there is a need for us to possibly think about fast-tracking the next phase? Or do you think this phase would be enough for us to capture any growth that comes our way over the next three, four years?
See, the way we increase capacity is when we come to about 90% utilization, then we start think about, you know, starting phase II and then fast-tracking it. But right now, based on the customer requirement, based on phase II. See, phase II and phase III, we can run it in our pilot plants. We have sufficient pilot plants because the volumes are small. They're not like tons of volume. But once it goes into commercialization, we will know that in one year in advance. And as we know, we will take it forward, and then we will start, you know, either using it from our existing capacities or we will build new capacities as and when required.
Like, you know, recently we have asked for an investment because we saw huge opportunities with few of the CS projects, and those will be commercialized in the coming years. So in the same fashion, we will have good visibility, and we will invest based on... We won't keep the plant idle.
Understood. Currently, where we are, Kakinada should be enough to, you know, service the projects that we should get in the next 2-3 years.
But now between the three units, the capacity should be sufficient and should maintain us at between 80%-85%. So if any of the products again spike up, we don't know, maybe it may happen in six months or one year, we will look at phase II of Kakinada immediately.
Got it. And so, you know, given you talked about, you know, two or three new DMF opportunities, you know, since they're going off recently in 2025. If you look at the DMF filings, we don't see as many, you know, filings for generic products from Divi's. So are these products that are going to be more back-end weighted rather than, say, in the next twelve months? If that's the case, but a lot of these are coming probably post calendar 2025.
I'm sorry, I didn't understand your question.
So, you know, one of the growth drivers that you talk about for the generic business are the, you know, drugs that are going to go off patent between, you know, twenty, in the next two, three years, 2025-2027. And you said one or two products, you know, one or two of these DMFs should come through for DB. But if we were to look at the DMF filings, the U.S. FDA, we don't see as many DMF filings from DB to show that, you know, the launch pipeline on the generic API side. So are these opportunities more back-end weighted, probably, you know, in calendar 2026-2027? Hence, we are not seeing as many filings.
You know, like I explained, you know, some products are coming off patent in 2025, some are coming off in 2026, some are coming off in 2027. Some finished, we finished the regulatory filings. Now, the customer has to trigger for the DMF to become active. So they have to do their ANDA, their validation, submit stability studies, and then file with FDA, have the deficiencies answered for them to be active.
Uh, sir-
Filing is in process, well in advance. That's all I can say.
Got it, sir. Thank you so much.
Thank you. A reminder to all the participants to kindly limit their questions to two per participant. Should you have a follow-up question, please rejoin the queue. We'll take the next question from the line of Gaurav from Equirus Securities. Please go ahead. Gaurav, you are not audible. May I request you to kindly unmute yourself? I'm sorry, Gaurav, we are not able to hear you. We'll move on to the next question, which is from the line of Girish Bakhru from OrbiMed . Please go ahead.
Yeah, hi. Sorry. Just wanted a bit more clarity on the peptide thing. You commented initially on the pilot plant. Possible to give total reactor capacity you're aiming for?
See, right now, we have set up our pilot plant, which has 50 L reactors, where we will be doing, you know, kg level. And once the pilots have been successful, in the meantime, we have ordered commercial scale, 100 L reactors, where we will produce, you know, larger volumes of the fragments.
These are, you mainly said you are mainly doing solid phase, right? Not liquid.
We are making both solid phase and liquid phase. We have capability both for solid and liquid phase.
Understood. But 500 L is, I mean, I'm just trying to understand, is that, say, sufficient to meet the demand?
GLP-1 s are not large volume products.
So, you know, if you look at them in terms of tonnage, they are not large volume products. So, you know, we will add multiple 100 L reactors, which we have ordered a few reactors now, where the synthesizer will take place. But what we, it's not that you need huge volumes like API, like 10,000 L, 20,000-L reactors.
Understood. And just on a similar line, these fragments, will they attract FDA or any other inspection?
I'm sorry, I didn't understand.
I mean, once you are doing fragments to the peptides, does that come under CGMP and would attract any?
It will come under CGMP, and it will call for an inspection at an appropriate time.
Okay. All right. Thank you so much.
Thank you. The next question is from the line of Alok Dalal from Jefferies India Private Limited. Please go ahead.
Yes, hi. Good afternoon. One question on nutraceutical. Is the revenue for the quarter INR 178 crore? Did I hear that correctly?
Can you repeat that question again, please?
Yeah. Madam, the revenue for nutraceutical segment was INR 178 crore. Is that correct?
Yes.
Okay. So same time last year was also INR 178 crore?
Hello?
Hello. Was the revenue INR 178 crore in 1Q 2024 and then?
Yes.
So there's been no growth in the segment. What could be a reason for that?
See, I would say that, you know, the same quarter of the last year, it was around a similar number. But I would look at it like, you know, just like how we look at our API business, the nutraceutical business, I wouldn't look at it, look at it on quarter-on-quarter basis. I would look at it in the whole year. And I would say, if I'm looking at the whole year of how the business is going to phase out, we are also very confident in that particular segment to have a double-digit growth. But yes, sometimes the shipments would happen more in a certain quarters, and certain quarters it would be a stable business. You would have also noticed that our Q4 is heavy compared to Q1 of last year. So it's a kind of comparison.
Yeah, the comparison should not be taken into consideration quarter-over-quarter. It's something that you should look year-over-year.
Okay, thank you. Second question is on the product mix change. So, from your commentary, it appears that your custom synthesis business will have a much larger share of revenue over the next two, three years. Does that mean that the company goes back to the historical margins of 35% plus, which it used to do when custom synthesis was a larger contributor?
Our custom synthesis and generic business usually are, you know, some quarters it would be 45-55, and some quarters it would be 50/50. But we would, as a company, we would like to have it at 50/50, wherein we are equal in both generics and custom synthesis, and we are not product heavy, or a customer heavy, company. So, I would not look at the organization going heavy on custom synthesis. Rather, I would want it to be on par with the generic business. But yes, the wishful thinking that, you know, what the historic number we had one particular year back in the day, I wouldn't say it's something that we don't desire. We are working towards it, but every product can't be that.
Yes, thank you. Very clear. Thank you for taking my question.
Thank you. The next question is from the line of Amit from JM Financials. Please go ahead.
Hello, thank you for taking my question again. If I missed out during the call, is it possible for the management to give CapEx guidance for next two years?
I think we'll have a new CapEx guidance more towards next quarter or the quarter after, because right now we are trying to complete Kakinada project. Also, we have a few CS projects where we are investing money in. So we would like to first complete the existing projects before we look at new CapEx. And like I explained, as opportunities come, we take CapEx. We don't build plants and keep them idle. We are around 82% occupancy on the plant. Once we reach 90%, or we feel we are reaching there soon, we will start investing again.
Sure. And, what maintenance CapEx should one assume for the year? It will be around INR 250 crore-INR 300 crore, or?
I would say that would be the number, around 250-300.
Sure. And the last question, is it possible to give, like, what has been our CapEx on the GLP-1 block so far? And, the future plan which we have on the fragment side, how much we plan to spend? Thank you so much.
Generally, we wouldn't want to break that up, regarding product by product. We do mention unit by unit, but not product by product.
Sure. If I ask you one more, like, we have been around INR 2,000 crore, kind of, a quarterly revenue run rate. So if we have to break from this number, and what would be that one project which would drive that change in your view? It would be GLP-1 product, or it would be led by some of the custom synthesis opportunity? Thank you.
See, the investment is across our six engines. Okay, we have, we have the sartans, which are growing, you know, at, at almost one of the sartans is growing at 60% growth. Okay, we have a, our increase in capacity for our existing generic products, even from products like levetiracetam or, you know, valsartan, pregabalin, carbidopa, levodopa, they're growing tremendously. Okay, our CS business is growing. We have, several projects, and some of them, you know, their customers are asking us to increase capacity. So even that side, there is, there is a considerable amount of grow, growth. We are having growth in our, contrast media business, where I think one of the contrast media, we almost have to double our capacity now. We're in discussions, on that.
So I cannot point out one product or, you know, one growth engine saying, "We will grow." In GLP-1 is something where we have been doing peptide building blocks. Those were non-regulatory based material. You make individual amino acids, protected amino acids, and you sell them to the innovator or to the, you know, fragmenter, and then he would sell it. Now, because there is huge demand in GLP-1, and we have the expertise in making fragments, innovators are showing interest in working with us, and they have been giving us fragments. Immediately, we have set up an R&D, where we could manage both solid phase and liquid phase, since we have experience in it, and we have manufactured samples.
We have now just almost finished, you know, constructing our pilot plant, and we will start making kilo batches. Commercial volumes, we have ordered a few reactors, and as and when the customers approve, because we have to go into their filing, there's a huge process. When the time is right, we will invest into that and then take it forward.
Sure, sir. Thank you so much. I will join.
Thank you. We'll take the next question from the line of Keshav from Guardian Capital. Please go ahead.
Hi, hi, thank you for taking my question. So my first question-
I'm sorry to interrupt, sir. Your audio is very low, and it's not clear. May I request you to use your handset, please?
Sure. Am I audible now?
Yes, sir. Please proceed.
Hi, am I audible now?
Yes, sir, you may proceed now.
Hi, first of all, congratulations on the great set of numbers. Can you please confirm the existing product mix between API, API and custom synthesis segments, and how do you foresee the profitability in these segments for the upcoming years? If you could give some guidance on that, too.
Our generics to custom synthesis is 51%-49%, this particular quarter. Going forward, like, I would say we are confident that we would be having a double-digit growth.
All right. My second question would be, like, any upcoming CapEx would... Any upcoming CapEx will be towards the custom synthesis segment or towards the API segment?
Well, I think the existing and the future CapEx that we are planning currently is spread across the generics and custom synthesis. I would say we are focusing on all the six growth engines simultaneously, and the expansion plans are spread across all of them.
All right. Thank you. Thank you.
Thank you. The next question is from the line of Kunal Dhamesha from Macquarie. Please go ahead.
Hi, sir, thank you for the opportunity. I think I missed the number of 500 L synthesizers that we have ordered. So can you please share?
For the GLP-1 product. If I'm not wrong, we ordered about, for the commercial scale, about 2 or 3 of them, but I have I think it is 2, but I'm, or 3, I will just check again. But I, to my knowledge, it's about 2.
Sure, sir. And which plant this would be housed in?
This will be in Unit 1. You know, like I explained, once we finish our pilot work, which we have already have equipment, 50 L reactors in, we will start doing commercial scale with the equipment here. We don't need a large number of equipment for peptide. Once we run the pilot batches, then we will go ahead and buy further reactors based on the volume the innovator will be giving us.
Sure. And, sir, we will have the basic infra ready, let's say, if we want to order or install more capacity on this, so do we have enough vacant production suite available in Unit 1 to rapidly scale up?
You're talking about GLP-1, right? The fragments.
Yes, GLP-1. Yes, yes.
These are skid mount units, so there is enough space to put them in the plant.
Okay. So it doesn't require, like, fitment, like the fill-finish line, right? I mean, these are more-
Can you please repeat it again?
So these are not like fill -finish line, which require proper fitment, et cetera. This can be moved around in the production area. Is it, is that what you are suggesting?
No, that. What I'm saying is the unit comes as a skid mount unit. It's not that you have to build a whole block, and then, you know, you have to put it at a certain place. These can be easily accommodated in a row.
And also, you need to understand, like, as we mentioned in the previous con calls, most of our facility is a multipurpose facility. We can use a certain areas in a certain way, and also we do, we can use it in a multipurpose. So the movement shouldn't be a problem.
Sure, sure. And, sir, then is it fair way to understand that some of these innovator companies, you know, scientists would be here at our premises now, you know, helping us with the technology transfer?
I'm sorry, I cannot comment about it.
Sure, sir. Thank you and all the best.
Thank you. The next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.
Yeah, thanks for the opportunity again. So just one more question from my side in terms of the asset turn, if you could elaborate, given that the product makes, generates custom synthesis, you know, and then peptide also getting further higher contribution. So what kind of asset turn can be expected?
If we are looking at a very longer term horizon, then it is 1 to 1 is what we are expecting.
Currently, it is just 0.7, 0.6, if I'm not wrong.
Yes.
So with this Kakinada CapEx, specifically and with the API new products which would come in 2026, 2027, so can that build up to 1? Is that the safe assumption?
I would say in the long term, yes, that, that's a safe assumption to have in the next, 2-3 years.
Very nice. Thanks. Thanks a lot for this.
Thank you. The next question is from the line of Karthik, an individual investor. Please go ahead.
Hi, good afternoon. Can you please provide the physical progress of the Kakinada plant, and are we on schedule for the commissioning and commercialization? That is my first question.
We are, Kakinada plant would be ready for commercialization towards the end of 2024, 2025. And, but it would take time to, like, you know, make it, for the, for the product to, like, you know, be approved, going through all the regulatory requirements. So if you want to really see the benefit from Kakinada plant, it will take another 2 years.
Yeah. Thank you. And one more question. Out of the addressable market, like, as we were discussing, many products are going for loss of exclusivity by 2025, 2026. What is the total addressable market which Divi's is seeing in the products which are going out of exclusivity? And are we ready to capture the market with the capacity which is available with us? In short, will we be able to cater those? This is my second question.
See, if I have to answer this question, if you look at Divi's historically, whether we produce naproxen, dexamethasone, we were not the first player to come in. We might have been the 25th player. In valsartan, we were the last player. But today we hold large volume shares because we start from basic chemistry. We make our own raw materials, we make our own intermediates, and we produce our own products. So we only get into molecules that we are confident we will have a market share in it.
Yes, sir. Yes, useful. Thank you. What is the related to the API pricing effect, how is the competitive intensity now, and do you expect it to go down in the upcoming one year?
See, like I explained, right, as of now, because of our long-term contracts with several of our customers, we're able to sustain market share and actually increase in a few cases, while our pricing pressure is still there. That's how the pricing pressure and with the increase in market, share, we were able to maintain and balance generic, performance. Now, that being said, when will the pricing stabilize? I wish it stabilizes today, but I don't have control on that. It should happen soon. We are hoping in the next, you know, coming few quarters, things should slowly stabilize.
Thank you.
Thank you. Ladies and gentlemen, we will take that as the last question for today. I would now like to hand the conference over to Mr. M. Satish Choudhury for closing comments. Over to you, sir.
Thank you all for joining us today for the earnings call of Divi's Laboratories Limited. In case you need any further clarification, please reach out to our investor relations. Thank you.
Thank you, members of the management. On behalf of Divi's Laboratories Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.