Ladies and gentlemen, good day, and welcome to the Onyx Conference Call of TV Securities Limited for the Q1 of Financial 2022. 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 would now like to hand the conference over to Mr. M Satish shortly.
Thank you, and over to you, sir.
Good afternoon to all of you. I am Sati Saudhry, company secretary and chief investor relation officer of D. E. Laboratories Limited. I welcome you all to the earnings call of the company for the quarter ended thirtieth June twenty twenty one.
From Divislash, we have with us today, Doctor. Murali K. Giri, Managing Director Doctor. Kunan S. Giri, for the quarter ended thirtieth June twenty twenty one, and we have reached 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. Please also note that audio of the conference call is the copyright material of Dmit Libraries Limited and cannot be copied, rebroadcasted or executed in press or media without the specific and written consent of the company. Let me draw your attention to the fact that on this call, our discussion will include certain forward looking statements, which are predictions, projections or other estimates about future events. The estimate reflects 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.
VIVITAS or if sufficient, 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 Doctor. Nurali Kediri, Managing Director, for opening remarks. Over to you, sir. Good afternoon, and thank you, everyone, for joining us on our Q1 FY 'twenty two earnings conference call.
I hope that all of you, your families and friends are in good health and keeping safe during this pandemic. The health crisis and effects caused by the second wave COVID-nineteen pandemic have been immensely challenging for each one of us. However, with a threat of potential third wave around the corner, based on predictions from various health organizations, along with rising tests in various other countries, it's very important that all of us continue to be vigilant and responsible in the next couple of months. Having said this, we at Zizid are highly committed to safeguarding the health and well-being of our employees and their families. As a part of our focus on the same, we conducted vaccination drives and got most of our employees and their immediate families vaccinated as we believe that vaccination is possibly the best way to invite a sense of support and confidence in fighting COVID-nineteen.
Moving on to our operational efficiencies, the company has put in place several measures to ensure business continuity with uninterrupted production and supplies to our customers, yet focusing on ongoing expansion to create a steady supply platform. We have completed many of the expansion and debottlenecking activities planned during the quarter with slight delay caused by the second wave. During the quarter, we have capitalized INR $2.68 crores, most of it was for the fast track projects and INR $5.79 crores of CWICEs in projects, especially for creating capacities for new genetic molecules and validation for these new genres are progressing very well. Second stream for the new Fast Track project is validated in BTD SEZ and is now producing commercial quantities. Third stream for the new Fast Track project is completed at Unit 1, validated and ready to supply API to real partners.
Being at the forefront of pharmaceutical industry, we have been contributing to fight pandemic since day one and continue to do our part in helping communities around our manufacturing units. Support has been provided to government hospitals, quarantine centers and community health care centers in Andhra Pradesh and Telangana states by providing 1,200 oxygen cylinders and 100 oxygen concentrators. Purpose has been provided for COVID testing and vaccination trials in villages around our manufacturing units. In addition to these initiatives, we have also converted two of our nitrogen plants to oxygen plants and installed them in hospital in Hyderabad and in Wizak. Considering the scarcity of the team, we have also taken several initiatives towards child empowerment, including provincial notebooks in school.
Approximately one lakh 10,000 cost wings were planted along with employing 102 virtual aircraft benefiting 25,000 people in 25 villages. We shall continue to manage our operations responsibly and create a positive impact around the communities we operate. Thank you.
Good afternoon. I'm Doctor. Vukheran Bedi. Hello, and welcome to each and every one of you for the earnings call of D. B.
Laboratories to discuss the results for the quarter ending June. I hope that each one of you, along with your family and friends are safe, considering the continued existence of COVID-nineteen pandemic. On the operational front, we are back to normal and operating at full capacity. Backward integration to basic chemical for majority of our products helped us to minimize the supply risk and avoid production disruption. Significant increase in crude oil price over the past year has resulted in increase in solvent prices.
On the logistics front, existing concerns continue to increase and pose a wide variety of challenges, including unavailability of containers, long sailing time lines, blank sailing and exponential increase in freight costs. As an example, the current freight costs are at least five to 7x higher compared to the pre COVID levels and are expected to increase further, subjected to various factors such as crude oil prices and significant demand of containers. On the procurement side, there are slight hiccups in the incoming supply chain. However, we are able to mitigate most of these issues because of significant investments that we have made over the last two years towards backward integration to basic chemicals for most of our generic APIs as well as geographically diversifying our supplier base. Moving to the financial performance.
For the first quarter of the year 'twenty one-'twenty two, we have achieved a consolidated income of INR $19.97 crores, reflecting a growth of 14% over the corresponding quarter of the previous year. Profit before tax for the quarter amounted to INR $8.14 crores, a growth of 23%. Tax provision for the quarter came higher at INR257 crores. We have earned a profit after tax of INR557 crores for the quarter. We had a ForEx gain of INR19 crores for the quarter as against the ForEx gain of INR 5 crores during the corresponding quarter of last year.
Exports for the quarter accounted to 89%. We continue to have normal business distribution across the regions. U. S. And U.
S. A. Accounted to 7071% of our revenue. Product mix for generic to custom synthesis is 5050% of the revenue, respectively. Constant currency growth for the quarter has been 21%.
Our music critical business for the quarter amounted to INR 138 crores. We have capitalized assets of INR $2.70 crores during the quarter as of the end of the current period. We have cash on book of INR 2,060 crores, receivables of INR $18.97 crores and inventories of INR 2,383 crores. Thank you.
Thank you, sir. With this, I would like to
star and one on your touch tone telephone. If you wish to remove yourself from the question queue, you may press and 2. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Prakash Agarwal from Axis Capital.
Please go ahead.
First question, sir, is on the, you know, strong margin performance. So great job. What is leading to the strong margins? And the second part to that is while we had a very, strong growth last year on low base and with new projects coming up, how do we see the growth shaping up now?
First one on the margin performance. I think there are several things we have taken up in the last one year, investing INR2500 crores in backward integration, in new technology introducing new technology, upgradation of clients, modern and mechanization and improving the cost, revisiting the processes and improving the yield. I think these are some of the things that cause a positive benefit with green chemistry. And I think those are the main ones. And always revisiting, as I said earlier, is there a better way of doing it?
If not, so why don't we do it? So the constant re is being caused the good margins. We think what happens is whatever process we developed three years ago, five years ago, I think it's very difficult with the challenging market to maintain the profits margin. Now the second one you asked is about the how do you see the growth? I think I I used to personally.
I have a dream. I wanna fulfill the dream, and I'm sure I would like you all to continue dreaming about. My dreams are unlimited. So I feel good, but dreams are unlimited. What I can say is that we can say 10% to 15% growth is definitive and the long term probably it will be better.
Okay. And sir, the margin points that you mentioned, three, four points of backward integration, new technology, all these are sustainable points. Right? So there what I understood is there is no one off element of higher pricing or one off element of, you know, shortage of fortune fees or having I mean, given the market conditions, these are also there is what I wanted to do. So how much of this is sustainable of 40% to
46% kind of margins, which is very good?
Actually, you have been seeing in the last few quarters, the margins are getting better and better. It's not one off. It's not just we think they are sustainable. And we always have new projects coming. In the customer centric, when our new products come, the margins can be slightly higher.
But overall, I have been saying from being we have good margins both in generic and customer centric. Sometimes there are more margins in Customs and Strip in two projects. But we need to say the distribution is good. Right now, it is fifty-fifty between Jamfric and custom synthesis. So that will give you more assurance that the profitability probably can be maintained at these levels.
Perfect. That is great. Thank you. I'll join back with you.
Thank you. The next question is from the line of from Motilal Oswal Financial Services. Please go ahead.
Thanks for the opportunity. So just on the Fastrack project, so any of the contribution in this quarter or would that be more 2Q onwards in terms of revenue?
We have shipped commercial quantities to the for the Fast Track project at this point. And there are two streams to meet the innovator's demand. As the commercial production is going on, we have also created a third stream for the innovators, real partners to take care of their demands. Yes, sorry. Please go ahead.
And secondly, just on I mean just asking again on why the long term revenue target remains great, does that given the way FY 'twenty one has stand out, even on that base, 10 to 15% would be possible or more than that? Looking at the position, we can say better on the
growth engines. So we have developed about six growth engines, which we are working simultaneously. One, we have established generic where we already have anywhere from 60% to 70% market share, and we believe that is growing at a 10% growth rate year on year. We are increasing capacity for several of our existing generic molecules, where we have 20% to 30% market share. And we believe with the dynamics and our sales team that we should be reaching the 60% to 70% over there over the next few years.
Compared to the third one, which is a very interesting drive is the start up. We have a huge advantage because of the nitrosamine impurity, the way we can control it and the rhizo impurity in the product, where we are venturing into all the shortcoms. We're already in large production for a few of the shortcoms, and we'll be getting into all of them, like keeping us in a very unique position. The fourth growth engine is the Contract Media, where we are already one of the large players. We have entered into the other segments of Contract Media, where we are signing up innovators and several big companies.
And we believe in the next two, three years, we should see good results. Our fifth one is sorry, the fifth growth engine is there are two big customers into this project apart from the fast track, which are also in a very fast track right now. And we believe we will be seeing huge advantage over the next few years, and these are long term contracts for the company in CF. Our sixth growth engine is our new generic projects, which we have selected for products which are expiring in from the year 2023 all the way to 'twenty five. These are large volume or niche molecules, which requires very specific technologies, and we have already developed them.
And we believe we should be in a good position once the patent expires.
That's really interesting. Just a last question on this chart. And so why you would have good one thing in terms of the utility part, But how is the pricing scenario playing out? Is that still making a good economic sense in terms of continuing to build up on this margin as an opportunity?
So like Doctor. Devi has explained, we are quite strong in backward integration, where we have developed the basic raw materials for all the start ups, the starting materials for the start ups, unlike several players who are buying their intermediate from different vendors across the world. This gives us a huge cost advantage and also helps us in controlling our impurities. And this by doing this, we have not only achieved cost efficiency in start ups in general because the starting material is almost similar for all the start ups. We also were able to control the hydro and the nitro impurities, whereby we are one of the few companies in the world where FDA or EVQM had no objection with us with our files.
Thanks a lot, Sebastian. All the best. Thank you.
Thank you. The next question is from the line of Surya Pulsar from Phillippeyasi. Please go ahead.
Yes. Thanks for the opportunity, sir, and additional set of numbers. Just can I get some sense about the portion of the projects which have already got or which has already started commercial activities as far, let's say, the $1,212,100 INR kind of growth CapEx of last year and last one one or two years? And the first step was the estimate that we were expecting the commission by first quarter of current financial year.
I think we have been talking about the investment of 2,005 crore since 2018 when our revenues were INR 5,000 crores, PBT was INR 1,800 crores and that was INR 1,300 crores. That's when we started implementing these projects. And in 'twenty one, we reached INR 7,000 crores plus revenue with INR 2,627 crores of crore CVC and INR $19.54 crores of prop capture bank. And it is still growing. We expect 10% to 15% growth rate we are seeing.
Sometimes based on the product mix, based on the approval, we still see growth.
Okay. Fine, sir. So given the large or the mega CapEx is what we have just completed, So is it likely, sir, large part of this new capacity additions contribution will be calculated to some extent, let's say FY 'twenty three onwards or something like that, where the growth momentum could be much faster or just like or could be like FY 'twenty one growth?
I think you also want to remember that investment was not only for expanding capacity, introduction of new products, the fast track project, but also were, number one, the debottlenecking for the backward integration, where China was almost controlling all the key raw materials and we would have been out of business or if we had continued to defend for our large volume generate on China. So even in the customs state, we were told by Big Pharma that they asked us to either manufacture a product from Europe or US. Some of these investments also is you have gone into the early jobs where we built in 1994 and 2002 at Unit 1 And 2. We have been upgraded to meet the current, like, the project of the user base or on the. The replacement body.
Sir, one interesting thing what I'm finding in the quarterly numbers is the cost saving on the other expenses front, what we are witnessing this quarter. Despite of the challenges, like what you just mentioned, that multiplying jump in the logistic cost or the additional container cost and possible some impact of the COVID during the peak period what we have just encountered this quarter. And hence, according to high sales spend that we would have done. And also, there are multiple new projects which are in the various stages of implementation. So despite all that, we have seen a kind of meaningful saving in the other expenses sequentially.
So how should we think going ahead? Despite of all these challenges you are doing this, so is it a continuous phenomenon in terms of improved efficiency, in terms of cost?
I think here, this should not be looked at. Of course, we are not a end company. If we are low overhead, I wouldn't say that. We got employees who have already completed twenty twenty five years with a decent salary. So still we are able to maintain low overhead because of the revisiting of the factories, controlling energy, high efficiency, motors and multiple investments we have done to keep the energy cost low, the manpower low, and that's how we are able to control them between anywhere from 20%, 25% compared to 38 other pharma companies going up to 65% of other expenses.
One, we don't have any financial expenditure interest. We are able to get first graduate from the university at the starting salary and adding them and letting them grow their knowledge as well as identify themselves with the company. So as a result, due to the adorable culture, we have an attachment with the company, and that's how we are able to maintain low overheads. Okay.
Sure, sir. Just one clarification, sir. So this logistic cost or the container cost, is it that adjusted from the top line itself while resulting in the resulting in the
No. It's not a business on the
top line. This is part of our expenses. Correct. Sure, sir. Okay.
Thank Before
we take the next question, a reminder to the participants, please limit your questions to the participants only. The The next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.
Hi. Thank you. Good afternoon, and thank you for taking my question. First one is on Sorry, the
Mr. Prabh, may I request you to please speak up a bit louder? Your audio is not very audible.
Sure. Thank you for taking my question. The first one is on the Molokiravir opportunity. Stream one and Stream two, I think you said it's been commercialized and Stream three is for the BL. So I'll just get you through the disclosure from Merck and the agreement that they have with the U.
S. Government for about 1,700,000 treatments. This is obviously contingent on them getting in EUA. So a contribution or a significance to our perspective, given we'll be one of the biggest suppliers to them, how should we look at this as an opportunity? And if I look at the number of this quarter, you said 50% of the minimum So just trying to add, you know, trying to find these two things together.
Once phase three trials are over for and if let's assume they get an approval, then I think the quantities could further ramp up.
Mulkan Adir, I'm sure whatever you have read is what is publicly disclosed by But at this point, because we are bound by confidentiality, we cannot talk about their volumes or numbers or their future projections.
Sure. But I just want to understand the direction. I'm not looking for specific numbers. But would we be a large player in that space if and when things are increasing? Because I'm sure we are not supplying 1,700,000 treatment courses even on a monthly basis.
I'm just curious to understand if the direction are we directionally aligned to that? That's the point.
We are one of the large suppliers for the product. And the total thing, whether the product, when it will get launched and what is the innovator's idea would predominantly depend on this Phase III clinical trial.
Fair enough. But considering it's a T Corp fee, right? Once they get approval, it is obviously looks like they buy the entire thing. Doesn't matter whether there's an actual amount or so?
There is nothing like buying the entire thing. As and when made, we are shipping the product and we get paid.
Got it. Second question, definitely, is on the KPI or the 50 products, 50% of the business, including user profiles. So we have seen, like, I think, Y o Y decline. I don't think it's unique to you. I think many of the other companies have also seen some kind of a decline for the quarter Y o Y, some of them Q o Q.
So just wanted thoughts on the general generic API phase. I know you've said in the past that don't look at '14, but is there some of the euphoria in the generic API last year? Do think that has died down a bit? Or do you still think given the fixed levers of growth that we are talking about, there are still scope to grow even for generic APIs? So
I will answer this. So in yes, it is very difficult for us because of the product mix on quarter on quarter. Sometimes the CS business goes up, sometimes based on the sales, sometimes the generic volume goes up. As such, we have not seen any drop either from our customers worldwide or the demand has not gone down. It's just the product mix and what has been shipped out at this time.
Got it. And last question, if I may, is on the raw material imports. It's now coming on, actually, annual report is 44%. There's been a big significant reduction from, I think, 60 plus percent. Is there more levers to go just on the backward integration going back to basic inputs?
Do you think we can further reduce dependence on inputs?
You are right that the dependency, we wanted to bring it down. That's why we started making the investment year and a half ago. It's true that the more we concentrate on those and as we produce them continuously, we'll have better margins and probably better grip on the product API itself.
Thank you. The next question is from the line of Mr. Dival from DAM Capital. Please go ahead.
Thanks for taking my question.
Sir, on the
Could you please repeat your question? You are not clear, please.
In contrast media. I think Kerem has made it, I think very clear in previous reply that we are already in the contrast media making products and we are bringing stronger based on the technology we developed by consuming and saving the iodine, being able to recycle that's the key to this contract media. Having been successful yet, one of the big products we are entering with a big pharma in the Custom Senses, that's what Kiran said earlier. Yes, it is true. So the growth is coming from both engines, the Customs and Sensors engine for a contrast media project as well as the existing web APIs of contrast media.
And as a overall, when you see your riding efficiency will go much better. I think nutraceutical business, we cannot go by quarter on quarter. It's about INR 600 crores with a project today in a year, and the growth is about 10% to 15%. And I think this is in this COVID time, people are trying to see how to help immunity boosters. And I think going forward, we expect the total physical business to grow better.
Okay. Thank you.
Thank you. The next question from the line of from HSBC Securities. Please go ahead. Hi.
Thank you for the opportunity. Also, my first question is on supply status to the liberating market from the added capacity. So are we supplying to US and Europe from the expanded capacity? And continuation of that, what is the status of Kafikara plant?
Sure. Thank you. Actually, your first question. What see, our product to US and Europe is about 71% of the go to sales, and this is across all both generic and customer sensitive products, both to The U. S.
And EU market.
Sir, my question was whether from the added downstream capacities, are have you started supplies to regulated market? Because I understand we are already supplying to non regulated market, but for regulated market, we are looking for some validation completion and all. So that was my question.
So validation has been completed for the downstream project of BC, SEZ and DCB. The qualifications have gone through to and this quarter, it has commercialized about 20 of the sales. Over the next quarter, once all the JT approvals are in place, we should see a good growth in those FEZs.
Sir, on Sakinada, like how are you seeing?
So in this reference to Sakinada, all cases by the landowners were dismissed by the High Court. The state government has fixed the land cost for which we have already paid the full amount. We think in this month that our the API should be handing over the 500 acres of land to us. All statutory compliances are in place. So maybe by next month, we should be in a better shape to start activity.
Okay. So my second question, quickly on operating costs, like we already discussed, right? In lieu of rising costs of fleet logistics, and you mentioned some price pressure on solving. For next few quarters, are we expecting, I'll say, higher level of expenses to go, or do you think we'll be able to mitigate so that broadly we can maintain our current quarter performance?
I I I you know, the product mix, you know, based on quarter to quarter, some will use low, some are airship, some are deepship. So it's very difficult to say quarter on quarter what other the cost would be. So I don't know we would take a considerable 27% of 2527% of other fixed costs.
Okay. Thank you very much for your answers. I'll keep working the queue.
Thank you. The next question is from the line of Alankar Karuri from Macquarie. Please go ahead.
Hi. Good afternoon, everyone, and thank you so much for sharing details on the growth engine.
Sir, my first question is on the small businesses
ex of
the monociraj opportunity. Had we faced any COVID-nineteen challenges at all over the past one year, like, say, slower chemical activity or slower new engine wins, which could potentially ease out going forward?
We don't we did not see any slowing down on that activity. In fact, you may have noticed that there are several follow-up molecules coming from the Roche, ATF pharmaceutical, AT527, opaganib from the RedHill, the Shinobi is coming with the product, either PF010, three twenty one, three thirty two. These are all left in the following the Mangopurvir products coming up. So there are a lot of opportunity in these segments. And people are pretty much that we may have to live for a few more years with our friendly COVID-nineteen looks like and which probably just the vaccination is not enough because of its changing of the spike.
So the API like monopuravir or the other APIs and merchants coming up from various other big pharmas, these are all the good thing is these are all small molecules. That means we have greatest opportunity. But the biologics is different. So it is in the 20s where we are in and I think they are all going in the right direction. There's no slowdown on this.
Understood, sir. In general, if you look at the general KPI space, there has been lot of expectations from the Indian industry, especially over the last couple of years. Being the industry leader, where do you think the industry is heading towards over the next three to five years? And what would be your expectations from the government to help support the growth?
Well, everybody wants everything free and the government is ready to give. I don't believe that. But I think what wins is the technology. If you are good in technology, I think sky is the limit because as there are more people being referred to medicines in the underdeveloped and developing countries, I think there will be more usage. Now the question is I think the challenge is that are you implementing the new technologies?
Like, are implementing in flow reactors, gases fed reactors, tubular reactors, vapor phase mix batch. These are all the things, and the medical tools, the object map, which can detect for for trillion. Now there are only either FDA and us, we have such instrument. And in the most modern waste treatment plan, these are all you need to investment, you need to invest for the next five, ten years. It's not just enough trying to develop a process and introduce Jumble KPI quickly.
I think there's still very good opportunity for companies to grow in Jumble KPI. As Kiran said, the fixed growth engine is a $43,000,000,000 KPI is going out of patent in 'twenty three, 'twenty four, for which we have developed the technology and are validating and will be filing soon. So I think if you invest in technology, if invest in new plants, there is good scope, good opportunity.
Thank you, sir. And one small question, any reason for
the high tax rate in this
quarter? Tax rate.
We always pay tax. We were never a zero tax payer. It's just a tax in my opinion because it gets the government to run. So some of the opportunities we had, we had made them in the FEZ where there was no benefit. And now going forward, all those products will be made, as Karam said, in the DCV and DC FEZ.
So coming quarters, the tax rate should come down to below 25%. And probably at the end of the year, we expect it to be below 25%.
Sir. That's helpful. Thank you.
Thank you. Before we take the next question, a reminder to the participants to please limit your question to group participants only. The next question is from the line of Param Kratik from Choice Investment Group. Please go ahead.
Hello?
Yes. Please go ahead.
Yeah. Thank you for taking my question, and congratulations on a very good set of numbers. Most of my questions are answered. I just had one question. You said that the mix of custom synthesis and Genvex is now fifty fifty.
So going forward, can we expect that custom synthesis will contribute contribute more
to the revenue and likewise will contribute higher to the EBITDA margin? It is required to go quarter on
product software mix is very, very important. Sometimes the generic products will go in larger volumes and sometimes the custom sensors will also go in larger volume. So this quarter, it has been fifty-fifty. Like you've seen in the previous quarter, it has been fifty-forty. So it should always vary.
Okay. Okay. And sir, can you just guide us on the CapEx plan, on the incremental CapEx over the period of next few years?
We have mentioned that now the capital of TWDIT is about INR500 crores and we think we will be able to we need to spend another INR300 crores as a CapEx, immediate CapEx in the year. And Carcinara plant was projected to be INR 600 crores, this is about three years ago. So we need to relook at the products we planned and what the project cost would be. So in the next two, three years, probably, we should be having based on the and project. It can be delivered from thousand crores to 2,000 crores.
Okay. That's nice, ma'am. Thanks a lot.
Thank you. The next question is from the line of from Quest and Western. Please go ahead.
Hi. Thanks for the opportunity and congratulation on good. Sir in mister elaborated growth engine. So can you provide some light with existing infrastructure will be able to meet all those growth engine or we will need to again go for a substantial CapEx to take care of the top line and the opportunity which is the coming from 2324 onwards. So how do we really see from five years onwards our CapEx plan?
Okay. I think what can be said V six, six engine growth. The first engine, the generic is already invested. The second engine, the generic capacity increase from 20% to 60% is already invested. The short term investment is going on in the CWIT now, where we have another INR500 crores CWIT will be completed.
And the contract media investment, it is also in the part of the CWIT going on right now. And the new generic, which will go out of patent in '23, the investment is already happening now. So the 6,000,000 grow, when we complete this GWIC, we should be already invested for that growth. The Cross Canada growth, the investment where I said INR1000 crores to INR2000 crores is for other products outside the fixed engines. Okay.
And sir, do you have any plan to take the certified business substantially high from this level? Since last two years, we have been renting around 500, 600 and slowly growing. So do we have a sense? What kind of addition do we have for this sub card business? I'm sorry.
Did you say sub side business? I'm sorry. You said sub Yeah. I was wondering because I was a dreamer of sub side business. I was the first one in India who made protected, who made the diopterite, diopterite and for a seat 22, I think it was a rush.
So I was really dreaming at that time. My dream did not come through. It's okay. But now the nutraceutical, we have expanded 100% capacity, and we have geared up to supply. We are at INR600 crores, as we mentioned earlier, growing at a rate of 10%, 15% year on growth we anticipate.
It could be higher based on this COVID and other pandemic. People are more into metaphysical. So we may expect a further growth, but we are being conservative and it's about we think INR600 crores, it's a growth of 10% to 15%. Thank you sir and all the best.
Thank you. The next question is from the line of Pritiya Agarwal from Harikwist. Please go ahead.
Good afternoon to everyone.
So my question
is on API. I wanted to check if they are fully backward integrated in this API.
Well, there are key challenges for other companies in this on the back on the production. So we are fully backward integrated. We have developed our own technology for the very best material. And, yes, we are ready to we do not have any issues with our best material.
Okay. Oh, sure, sir. Thank you so much. That's it from my side.
Thank you. The next question is from the line of from Nomura. Please go ahead.
Hi. Thanks for taking my question. Sir, my first question is on, you know, your comments on this that there was a there's a concerted effort to, you know, increase vertical integration and lower the dependence on China. I just wanted to understand, sir, where we are in that part, how much we have achieved, and how has the dependence on China gone down? If you can share some numbers over the last, say, four, five years.
We just started this two years ago going to the backward integration. As you know, China has very large basic chemical manufacturing and pharmaceutical companies have been importing both API, advanced intermediate, starting materials and the base materials. As a result, I think several of the countries as well as India forgot how to make the key starting materials from the base chemistry. So this is when we identified two, three years ago that we should be producing our own key raw materials for our big products like methoxine, gabapentin, adjectimatopin and other products. So we have invested substantially and now we are totally free of our large volumes under KPI, no dependency on starting materials.
And also where we are still sourcing some raw materials from China, we have alternate source identified alternate sources from Europe, U. S. And we are buying some percentage of quantity to maintain continuity of purchase from the European and U. S. Sources.
Okay. Sir, on Saturn's, you know, I I mean, correct me if I'm wrong. So your current revenue contribution is not much. Right? And, you know, how large is the API Saturn market today globally?
We have a decent share in the Saturn market right now on the generic side of the business. And we with our technology, what we have developed and backward integration of the key starting material, we are now entering into other start ups, and we feel we'll have a good share in the market.
Okay. So I mean, is lower than for large molecules, like, we have 6070% market share. It's lower
than that at this point for certain. At this point, that is lower than that is the right word. Okay.
Okay. And sir, finally, I know you talked about upcoming generic expiry. You also mentioned that you are in the process of filing. Sir, for products which are going off in 'twenty three, 'twenty four, findings have already been made. So how should we think about, is it from a longer term perspective, these are the molecules where you will gain market share, you may not be participating in the first wave effort?
So the strategy has always been we file a product with one of the best processes available. So we can file quickly with a very high cost process or we can look at the long term and play a longer game. So for us, we have two goals. One is we look for the most efficient process, green chemistry and look at at efficiency and see the best process available. The second thing is we do not do any tariff work.
We do not challenge our any innovator. So we wait till the product expires, and then we launch the product. A simple example, if you look at our history, either with valvocantine or naproxen, naproxen sodium, gestaltomethorphan, all these products, some of them we are the twentieth ones who entered into the market, but we became 60% to 70% market share leader. All this comes over good deal, consistency. Our process helps us to do this.
I hope I have the solution.
Yes, yes. That's helpful. Thanks a lot.
Thank you. The next question is from the line of Ankit Agarwal from UTI Mutual Funds. Please go ahead with your question. Miss from UTI Mutual Fund, you will please proceed with your question. If there's no response from the current participant, we take the next question from the line of Sonia Lalwani from Stanford House Advisors.
Please go ahead.
Fine. Thank you. Thank you the opportunity. So this one is on the. So I understand that lot of amount on since last year.
But if you could give us some sense, the question you already answered, but if you can give us some sense on what is the capacity utilization and how much of the capacity is increased over the past years?
It's very difficult to say because when you say we have 1,000,000 liters capacity, we'll have lots capacity and utilized 15% to 20%. But if you take product wise, probably some of the products we are producing at 80% to 90%, 95% capacity. And some of them, we are only utilizing 50% capacity because, one, we are reaching the market two, the customers are slowly taking our product while have to switch from another supplier. So you can say on an average about 30% of the capacity of the plant is we are occupying, okay. Understood.
And also just one clarification, you said you will be spending around INR 1,000 crores of incremental CapEx in next one or two years?
This investment would be predominantly towards Kartinada and Krishnamurtiampur, both are virgin sized greenfield projects. So once we get government approvals and all statutory approvals, which are already in place, once everything is there, we will then, based on the product mix and opportunities, we will start investing.
Understood. Sir, when you spoke about six growth engines, can you elaborate a bit on the third growth engine that you spoke about, and what is this exactly, and what is the strategic value of this?
You may recall that two and a half, three years ago, the FDA has come out quite strong that there is a nitrosamine impurity in the soft arms. And because of that, several of the soft arms started several companies got into trouble. When they did that, they are called Agile impurities. And these impurities, when FDA came and audited us, they could not find those impurities in our process because the way we developed the process, they are not formed. This technology, what we use for platforms, gave us an opportunity to enter into some of the big pharma for base appliance as well as gave opportunities as Kiran said, why not we make new platforms where we were not even present at this moment.
So those are the ones that the capacity is getting created and we should be introducing them during the coming year, both validation and commercial quantities. The advantage of two cores, all the top arms start from a starting material called CotyBN or total albanionitrile. We make in house. We have developed that technology. So from there, all the platforms by controlling the impurity, we can produce.
So the leadership what we have in one platform is giving the benefit of entering into several part time. That's what Karim said.
We'll take the next question from the line
of Nitin Bosha from Imvesco Mutual Fund.
So one question. I was looking at the previous comp plan around for FY 'twenty one. We did mention that the transition of revenue share between CSM and Genentech will shift more towards 68% per CSM and and eventually will sit down at
50%. At this
juncture, have we settled down at 50% or the shift towards 50% retro sales
in KFM? It is very difficult to say. See, the control is not the 50 is not in my hand. The 50 is in the customer's hand. We are creating capacity to increase both for generic products as well as customer centric products.
We prefer maintaining fifty-fifty. At the same time, it may so happen, we always play, it is either forty-sixty or sixty-forty. Depending upon the quarter on quarter or year on year, it may range in that forty-sixty, sixty-forty. But I would like to emphasize once again, we should not say profitability is more in generic or more in substance use. We think that both are profitable depending upon which API or which project we are talking about.
Fair point. At at the
question, sir, we should
see in terms of direction understanding, we should see to change 60% as a possibility. Is that simply for consideration, or we should fulfill on a
50 basis from 30 basis The
fullness is that, yes, we want to maintain more profitability. There's no doubt about that. The first thing is, we take all the opportunities both from generic as well as custom synthesis, which should you maintain flexibility, which will be better for the sustainable future.
Right, sir. Thanks for the answer and all the best. Thank
you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Satish Chaudhry for closing comments. Over to you.
Thank you all for joining us today for the earnings call of Divis Laboratories Limited. In case you need any further clarification, please reach out to our Investor Relations. Thank you.
On behalf of Geeves Laboratories Limited, this concludes this conference. Thank you all for joining. You may now disconnect your lines.