Ladies and gentlemen, good day and welcome to the earnings conference call of Divi's Laboratories Limited for the Q4 financial year 2021. 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 touch-tone phone. Please note that this conference is being recorded. I would now like to hand the conference over to Mr. M. Satish Choudhury. Thank you, and over to you, sir.
Thank you. 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 and year-end at 31st March 2021. From Divi's Lab, we have with us today Dr. Murali K. Divi, Managing Director, Ms. Nilima Prasad Divi, Whole-Time Director Commercial, Mr. L. Kishore Babu, Chief Financial Officer, and Mr. Venkatesh Perumal, General Manager Finance and Accounts. During the day, our board has approved results for the quarter and year ended 31st March 2021, 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 our website.
Please also note that audio of the conference call is the copyright material of Divi's Laboratories Limited and cannot be copied, rebroadcasted, or attributed in press or media without specific and written consent of the company. Let me draw your attention to the fact that on this call, our discussion includes certain forward-looking statements which are predictions, projections, or other estimates about future events. These estimates reflect management's current expectations of 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 expected or implied. Divi's Lab or its officials does not undertake any obligation to publicly update any forward-looking statements, whether as a result of future events or otherwise. Now, I hand over the conference to Dr. Murali K. Divi, Managing Director of the company, for opening remarks. Over to you, sir.
Good afternoon. Thank you everyone for joining us for Q4 and annual results of financial year 2021. I hope that all of you, your families, and friends are safe and well during this serious second wave of the pandemic. While the spread in the second wave is faster due to various mutations of the virus, it is an optimistic and commendable sign that our government is acting swiftly and approving emergency authorizations for multiple treatment regimes.
On another note, vaccination drives have started across the country, which will help us build the much-needed vaccine-induced immunity against hospitalization. Moving on to our operating efficiencies, the company has put in place several measures to ensure business continuity, focusing on the ongoing expansion to create a steady supply platform. Having said this, we at Divi's are highly committed to protecting the health and well-being of our employees and their families.
We are ever grateful and continue to applaud our employees' dedication and perseverance during these uncertain times. At Divi's, we were able to get most of our employees aged 45+ vaccinated. We are implementing rigorous safety measures across all the manufacturing units, and will continue to do so until further guidelines from WHO, CDC, and local governments. Being in the forefront of pharma industry, we clearly understand the need to fight COVID-19 and have resumed our efforts to doing our part in helping communities around our manufacturing units. Divi's team is on the ground undertaking sanitation activities in the communities and villages around its manufacturing units. Support has been provided to government hospitals, community healthcare centers by providing hundreds of oxygen cylinders, concentrators, several healthcare equipment such as nebulizers fumigation machines, oxygen cylinder regulators, oximeters, et cetera.
In addition to these initiatives, we have also converted two of our PSA nitrogen plants to oxygen plants and installed them in two major hospitals. We like to believe that despite all the challenges, there is hope, and we shall continue to take measures to contain COVID-19. Together we can fight the spread of COVID-19. During the current financial year, assets worth INR 1,179 crore have been capitalized, which have reflected the benefit of operations from the CapEx programs taken up by the company during the last two years. Capacity increases were completed in levodopa, pregabalin, mesalamine, carbidopa. These products are stable and are growing.
The debottlenecking and backward integration programs taken up during the last two years have also become fully operational and have reduced our dependence on key starting materials, besides achieving productivity and increase in being a competitive and secured supplier in products like bromocriptine, methoxsalen, valsartan, lesinurad . INR 710 crore of capital works in process projects of custom synthesis and generic products are still under progress. New generic molecules with current dosage scale of $20 billion are selected, technologies developed, validations and regulatory submissions are under progress. Patents are expected to be expired between 2023 and 2025. Additional contrast media products process are under validation. The new major fast-track custom synthesis project with innovator is commercialized. Commercial shipments have taken place from stream one. Validation started at stream two and will be followed by commercial production at DCV SEZ.
A third stream of this new API was planned at Unit one as the innovator has given clearance to supply to domestic VL partners. Thank you.
Hello, everyone. This is Nilima Prasad Divi. I welcome you all to Divi's Labs earnings call to discuss the results for the fourth quarter ending March 2021 and financial year ending 2021. I hope that each one of you, along with your family and friends, are safe considering the continued existence of COVID-19 pandemic. The second wave has again impacted the operations across various businesses. I would like to update the scenario with Divi's. On the manufacturing front, we are currently operating at approximately 86% production capacity while following all the safety protocols.
The second wave has amplified the logistical challenges attributing to lockdowns, port conditions, blank sailings, as well as the recent Suez Canal incident. We are anticipating that the challenges will continue as the global efforts to roll out vaccines puts pressure on already strained logistics resources. On procurement side, there are slight hiccups in incoming supply chains.
We are able to mitigate most of these issues because of the significant investments that were made over the past two years towards backward integration to basic chemicals for most of our generic APIs, as well as geographically diversifying supplier base. Moving on to operational performance, I'm pleased to state that we have achieved a consolidated total income of INR 1,812 crore during the quarter, reflecting a growth of 24% over the corresponding quarter of the previous year. Profit before tax for the quarter amounted to INR 659 crore, a growth of 42%. We earned PAT of INR 502 crore during the quarter, reflecting a growth of 29% year-on-year. Looking at the financials FY 2021, we have achieved a consolidated total income of INR 7,032 crore during the year, reflecting a growth of 26% over the previous year.
Profit before tax for the year amounted to INR 2,666 crore, a growth of 47%. We earned a PAT of INR 1,984 crore during the year, reflecting a growth of 44% over the previous year. We have capitalized assets of INR 1,179 crore for the year, of which capitalization this quarter was INR 173 crore. As of the end of the current period, we have cash on book of INR 2,156 crore, receivables INR 1,677 crore, and inventories INR 2,145 crore.
Rupee has been quite volatile during the year under review. We have a Forex gain of INR 4 crore for the quarter, while we have a Forex loss of INR 4 crore for the year. Exports for the quarter accounted to 90%, and for the year it's 88%. We continue to have normal business distribution across regions. Europe and U.S. accounted to 71% of our revenue.
Product mix for generics to custom synthesis is 60% and 40% of the revenue respectively. Constant currency growth for the quarter has been 31% and 24% for the year. Our nutraceutical business for the quarter amounted to INR 156 crore and INR 595 crore for the year. During the year, the company has paid one month salary as incentive amounting to INR 34 crore to employees in appreciation of their dedication and hard work during the COVID-19 pandemic, who attended to their duties in plant and office following COVID appropriate behavior and safety protocols in order to ensure production of life-saving medicines. Thank you.
Thank you, madam. With this, we will request the moderator to open the lines for Q&A.
Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. 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 Bhavish from Apex Capital, please go ahead.
Hello.
Hello.
I have two questions. First one is, you said that the ratio of API versus custom synthesis is currently 60:40. What is the vision going forward? What will be the segmentation we are expecting from it? My second question is, do we have any price control on generic APIs? How do we manage the pricing of the contracts related to generic APIs?
Thank you. Your first question, the managing between generic and custom synthesis. Our aim is 50/50. The reason, in the generic, we have an opportunity to decide when to make, how much to make, and utilize the equipment when they are idle, or produce the product and stock when we have capacity available. Whereas in custom synthesis, the customer, the big pharma, he pretty much dictates or he gives us a notice that he would like to have in a particular month, particular quarter or so much of quantity. Giving the first preference to the big pharma, we can move around our generic product to attain maximum productivity, utilize the equipment to the maximum productivity. Now, that's our wish. What happens is that it can be 40/60, either generic is 40 or custom synthesis 40.
It keeps moving depending upon which products are moving faster, either custom synthesis or generic. It always keeps fluctuating, and we are not focusing in any direction that it should be generic more or custom synthesis more. Your second question, how do we keep our generic API clients and focusing on future API pricing. I thought you were talking about future APIs. You are talking about generic API pricing, how we can sustain, how we can price. The products where we entered 25 years ago, we are still in the same product. We did not leave any product. We only kept on adding more generic products. We started with two products, naproxen and dexamethasone, and kept on adding products. We became leaders in the world, producing anywhere from 60%-90% of the demand of the world for several generics.
The only reason is that we are backward integrated, we make our own starting material for insurance of supply and for the best cost, and more importantly, for the best quality or the consistent quality. As a result, we will be able to support our generic formulator without interruption. Hence, we are preferred. The major is that we are the only generic API manufacturer who do not make formulations and who do not compete with our own customers. Every other API manufacturer entered into formulation, started competing in the market with their customer. As a result, we are able to command a premium price for not being in formulation and playing a complementary role, not a competing role.
Thank you so much. Thank you. The next question is from the line of Prakash Agarwal from Axis Capital. Please go ahead.
Yeah, thank you for the opportunity and congratulations on great set of numbers, sir. Question is on the CapEx. How much of the INR 18 billion CapEx that we had called out two years back is completed and You mentioned it's operational, but how much of the capacity utilization is happening now, and what is the CapEx outlook for future? That's my first question.
Okay. The INR 1,800 crore you mentioned, actually it was INR 2,500 crore since 2018 when we started the capacity expansion quite fast. At the time, in 2018, our turnover was INR 5,000 crore with a PBT of INR 1,800 crore and PAT of INR 1,300 crore. This year we reached INR 6,900 crore, a 38% increase, INR 2,627 crore of PBT, that's 46% increase, and INR 1,964 crore of 50% increase. It's not that we have utilized all the capacity we created. We have still INR 700 crore of CapEx still to go into production. They are either in the desk completion or validation under progress or qualifications are under progress. The investment that is already done, as Nilima Prasad Divi mentioned, 86% on an overall capacity is the utilization. Maybe some of the older products, matured products, we occupied with the debottlenecking as much as 90%, 95%.
Some of the newer products, we just added capacity and we were able to sell only 10%, 15%, 20%, and still we have to sell maybe another 75% of the capacity. I think that is where the real cake is. If the matured product only being bottlenecked, we did make our own starting materials for assurance of supply and to prevent any threats from China saying that we wouldn't send it or they increased the price 2x, 3x.
The CapEx outlook, sir?
CapEx outlook. The court has the Kakinada project is the main one. Court has given the final judgment saying that the farmers have to take the INR 10 lakh, and they have dismissed all the claims, and we have already paid the INR 10 lakh to the government. We are supposed to be decapping in the last one week, and they should be handing over the rest of the land without any disputes. As soon as the second wave of pandemic comes down, we will be able to allocate construction teams whereby we should be investing the INR 600 million what we planned one and a half year ago to invest in Kakinada. That is immediate investment.
Okay, perfect. Sir, secondly, just clarification on the regulatory approval that might be required. Over this, of the 2,500 you mentioned 1,800 is already done. These are currently operational and revenue generating. Would they not require regulatory approval from the regulators for exporting or it would by default be adjacent? I think one is a new site. Could you help us about the regulatory requirement for these CapEx being used for exports?
Yes. The products where we expanded, they are not new. We were already producing them, the products like levodopa, the products like pregabalin, mesalamine, carbidopa, milnacipran. All these products we have been producing, we have the regulatory approval. The question is, we must have scaled it up. We must have maybe be backward integrated. Maybe we made it more efficient. Maybe we became more atom efficient using solvent recovery, conserving raw materials, increasing yield. These are considered as minor changes. Sometimes the regulatory agency may take three to six months to clear, or the customer may take two to three months to clear. These do not require years to clear. These are of a few months. Our regular business of quantity will continue. The enhanced quantity may take two or three months.
Okay. What I understood was these require some approvals, but these are minor approvals which might not include an inspection, physical inspection.
Yes.
Understood. Fair enough. Thank you, sir. All the best.
Thank you. Before we take the next question, I would like to remind all participants, please limit your question to two per participant only. You may rejoin the question queue if you have a follow-up. The next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.
Thanks for the opportunity. Just on molnupiravir, I would like to understand if this is an exclusive API supply agreement with MSD.
Can you be a little louder, please?
Am I audible better?
Yes, thank you.
Just would like to understand on molnupiravir, is this an exclusive type of API supply to MSD or any other API supplier also can connect?
Divi's is the MSD's authorized manufacturer for molnupiravir API, and we are allowed to supply API to MSD's VL partners in India. MSD has retained its rights for supply into Americas, EU, and other regulated markets. The VL is for rest of the world market. I have been talking about fast-track project since I think about nine months when we entered, and we have developed the process, scaled up the process.
We were involved from the very stage. We developed the process, scaled up the process, validated the process, commercialized, exported large quantities, several tons. The one stream is currently producing day and night, and the second stream just under validation, and that will go into the production in the coming months for the regular commercial production in the DCV SEZ. These two streams are mainly to export to the innovator.
Because of these VL partners, because the innovator has given us that we are allowed to supply to the VL partners in India, we have created one more stream at Unit One, where it is produced for the VL partners in India. The validation already started. The commercial production will continue from mid-June. Between these three streams, one for India, two for export, I think that gives the clarity that our involvement with MSD.
Understood. Got you. That helps. Just secondly, again on the CapEx, while INR 700 crore is capital working progress and INR 600 crore may be utilized for Kakinada, while we have a cash of good INR 2,000 crore. How do we intend to utilize that?
Well, if you want to dream, sky is the limit. I'm a dreamer from day one. At the same time, my feet are on the ground. The opportunity in some of these APIs what we are involved, the opportunities are 2x , 3x requirement. We're only concentrating on x. If there is a sudden requirement, we want to be ready to invest such. Between the INR 600 crore and INR 711 crore, we have INR 2,000 crore. We still will have another INR 700 crore left to immediately cater to any sudden requirements one subjects of any one of these newer ones. I'm not talking about the traditional. The traditional big generic APIs, I think we are well-covered, but we are talking about the newer ones.
Understood. Just lastly, if I may squeeze, on the nutraceutical suite, 100% increase in the capacity, over what period of time this will be utilized?
I think the 100% capacity has just increased. Now we are seeing 10 %- 15% growth. As people are looking at with this pandemic, nutraceuticals are more and more being looked and being used to increase immunity, the gaining immunity improvement, and I think medicine is nothing but utilizing nutraceuticals. We expect good business. As I said, we are certified by all the big players internationally. It's a question of how much of business they would give us as a percentage compared to how much they have been giving it to their traditional suppliers.
Thanks a lot, sir. Thanks.
Thank you. The next question is from the line of Cyndrella Carvalho from Centrum Broking. Please go ahead.
Thanks for the opportunity and congratulations on great set of numbers. Hope the entire team is doing well and safe in this pandemic time. Sir, just wanted your thought as we have had a stellar FY 2021. We look at the API segment, we look at the custom synthesis as well as the Nutra segment. If you could help us understand the key strategic priorities amid all these segments. Just looking at the generic side, how should we look at the top products like naproxen, dexamethasone, and the newer products which we just talked about, like levo, mesalamine, and all other products where we have done the expansion recently. Over the two to three years, again referring back to your recent comment where you said sky is the limit. How should we look at these business segments?
If you could allow us some deep understanding about custom synthesis and Nutra and the China plus opportunities which must be evolving in our favor when we say the sky's the limit, and there are 2x-3x opportunity in each product that we have, would be very helpful, sir.
The generics. We have traditional generics, which are, as you said, the naproxen, gabapentin, dexamethasone. Here, we are reaching anywhere from 65%-85% of the market, the market is growing at the rate of 5%-15% year-on-year. We are talking about product with 5,000 tons of naproxen growing at 10%. They need about another 500 tons next year. As people are aging, the products of naproxen, gabapentin, alprazolam, Levetiracetam, these are lifestyle medicines as well as life-saving medicines. They have to be used. Once you are on them, as you age, you have to keep using them. It's not that you just use it for one week and then you're off.
As you are aging, people are aging, the existing patients now they continue using, and the new ones are being added equally well as the lifespan is increasing. Of the good points because is that we are backward integrated and we are the best costing in the world. The products of like levodopa, pregabalin, mesalamine, carbidopa, especially the pregabalin, mesalamine, they are growing. They are the newer ones where we have 20%-30% of the market, and we can easily reach to 60%-70% of the market. The same thing is good with products like valsartan, where there was a lot of uproar on nitrosamine impurities. That's how people have been switching to us, and today we are becoming the leader. Going forward in the next 6 months to 1 year, probably we'll be getting majority of the business.
The third group, where the contrast media and other products I mentioned where we are investing to increase. We are not even 10% of the business right now. Contrast media is growing at the rate of 15%-25% as more and more imaging is happening because of the newer issues.
Now, we're only not even 10% of the current demand, so there's a great opportunity in the contrast media where I have mentioned last time the success is how good you can recover the iodine, how good you can recover and reuse all the atoms, and you be atom efficient. That atom efficiency is proof for the sustainability because iodine is only so much available in the world, and you cannot deplete it. The challenge is whoever can conserve, whoever can recycle better with the best technology, which we think we have.
We have already installed the equipment. Technologies are getting proven now. We are gearing up to take the market. The next one, the future. I think I mentioned that we have selected products of about today's dosage value of $20 billion. Products like ticagrelor, lacosamide, vildagliptin, rivaroxaban, zonisamide, bremelanotide and there are about 10 products which are about $20 billion of dosage form sales. We have completed our technology. We have developed the process. We've scaled up. Now they are under qualification and validation. These are the future that will go on starting in 2023 to 2025. Between traditional generics, like I differently put it, then generics with faster growth with less competition and future generics where we will be entering, I think this is the scope.
Sir, on the custom synthesis and on the thrust side, if you could give a similar understanding, this is very helpful.
On the custom synthesis, I think one needs to understand all the big pharma, or I say most of the big pharma, do not have any API manufacturing capacity. They have sold off the plant. Very few of them have few of the manufacturing plants to buy the N minus one and do the last stage. That too, probably small quantities. They need to do some way for the discovered compounds for the API to be manufactured. This is how we got into these patch work projects of the [inaudible] way, where we could make hundreds of tons. What's then? If they go to somebody will make two times, somebody will make 10 times, if you want large volume, the capacities are readily not available. Divi's are good.
We have such capacity because we have quite large plants with 2 of them at Unit 1 and Unit 2. The second point is, I think, create enough capacity in a shorter time. Not that we have the capacity. Even if we don't have, we can do that within three to six months. We have standardized the equipment whereby it is like to like and scale up is much easier. The relationship what we have with the big pharma for the last 20 years, where we always played only a complementary role, never violated any patent, never challenged them in anything. That puts us into a very unique position where they would like to work with us and share the technology.
Thank you. The next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.
Yeah. Hi. Thank you for taking my question. Good afternoon. Just harping upon the opening remarks related to two things: One, product utilization at 86% and logistics challenges. Sir, just from a near-term perspective, if I look at fiscal 2022 growth, how should we look at it? Would it be clearly 2021 growth rate of 26%? Just want to understand how should we look at growth over the next 12 months.
Logistics challenges. Logistics challenges are going to raw materials, solvents to our product going out. I think these are the challenges. As Nilima Prasad Divi mentioned, I think she has covered under her initial talk that by planning better, by planning advance of raw materials, following very closely with the suppliers, geographically diverting the supply base, though it's available cheap in China, we said, "Okay, another 10% extra cost, let's source from Europe. Another 15% extra cost, this is a key ingredient, let's source from U.S. also." Knowing this, we have organized in such a way that we will not be interrupted or whatever. That way, we were able to eliminate challenges of logistics of raw materials, starting materials. Another good thing with us is that we don't have any working capital. It's just our funds.
Wherever the team, Nilima's team foresee that there may be a possibility that we may run into trouble, they just go in and outsource and keep the stock. Three months, six months, it does not matter. That way, we say we have less challenges during this last COVID of one year, few months. We never had a problem of interruptions of not having raw materials. The credit goes to that sourcing team. Coming back to the utilization of 86% and going up. I think I mentioned that 86% of the capacity of several million liters what we have. You see it like several big factories. If you look at that, probably we can introduce another 10 new products into the whatever capacity that is available.
In a way, we are in a good position to expand our product, introduce new product, at the same time, take new opportunities. When you say growth, I have my own dream. At least I want to make sure that you dream for me also. It's good to dream. If I say everything, then all the fun is lost.
Got it, sir. No, very helpful. Sir, second question is on the margin. We have actually seen again significant expansion in margins during the year, close to now 40%+ margin. Just want to understand what are the drivers for margins as we go forward. Do you think it would be more mix and the aspiration to do more CMO? Do you think backward integration, there are those other levers on the cost side that are still left for us to see some margin expansion? Thank you.
One is in the API industry. I always say from the last 15 years that the most important thing is raw material cost. What is the material cost? If you see on average of raw material cost of pharma, listed pharma industry, they anywhere from 26%-33%, and most of the API industry is from 50%-65%. Whereas we have been maintaining lowering to 40%, 38%, 42% till last two years ago.
Somebody come with a better way of doing it. Will somebody comes out with raw materials better than us? Will somebody use less solvent than us? Will somebody increase the yields better than us? If so, in future, why not us today? I think that is the always philosophy we follow. In addition to that, the automation we have introduced recently in several buildings is helping us to minimize the yield variation.
We are able to get more towards the upper limits, not in the middle or lower middle. Applying the tools of green chemistry yields highest yields, highest recoveries, least waste, consuming less raw materials at efficiency. I think these are the key to success and key to maintaining the margins. Where you mentioned 26%, 27%, I think it is possible to maintain. Also the most important is the human resource, the dedicated employees. The employees whom I had 20- 25 years ago, they're all with me. There are at least about 500- 1,000 of more ladies in the plant, in the research, in the engineering, in technology, several of whom I trained personally. It is a different team who are highly dedicated. As Nilima Prasad Divi said, during the pandemic, there's not even absenteeism.
Either the guy got a little COVID-19 issue, went home, got recovered 14 days, came back to the factory or office. That is the reason a one-month salary was given as a bonus for their dedication. Thank you, Nilima Prasad Divi.
Thank you. The next question is from Surya Patra from PhillipCapital. Please go ahead.
Hello. Yes, thanks for this opportunity. My first question would be on the margins again. Because of the kind of a global scale that we have achieved for the generic APIs, as well as the kind of a scale and the process optimization and the end-to-end integration, all that what we have achieved for the established large volume APIs. Now having that situation achieved, so is it fair to believe that there will be no margin difference between the custom synthesis as well as the generic business?
I wouldn't say that. In every portfolio, we are looking at a basket of products.
In the basket of products, you have high-margin products, medium products.
low-margin products. Yes. We always, both in custom synthesis and also in the generic. Generic, as you reach as a major supplier, people give you premium.
Right.
You play a complementary role, assurance of supply, not even one shipment is delayed, consistent supply. They give you five years forecast, a guaranteed business day in, day out.
You get good margin, good productivity. In the recently entering products into new generics, the margins are good, volumes are less, wastage will be more, because you need to carefully watch until it is scaled up to a certain scale. In custom synthesis, if it is a lengthy process, if it is a difficult to do chemistry, if there are only less number of companies who can handle such chemistry, the margins are going to be very high. If it is a general chemistry that everybody can handle, but still the big pharma wants to work with you, the margins can be average to high. The challenge here is you need to enter into the product.
Right.
Once you enter, you need to apply the tools, what I mentioned, the green chemistry tools.
Right.
See that every product becomes at least not average profits or low profits, low margins, at least high margins or very high margins. We did kaizen. That kaizen we follow.
Right.
One step at a time, climb the ladder. We don't want to jump up. We just want to go one step at a time. That's how we succeeded.
Okay. Obviously that means that the average margin for custom synthesis will definitely be ahead of the generic business. That is the kind of understanding for me to remain there.
I think you can say that the new entries, newer custom synthesis products will give more margin, and the mature generic products where they already are becoming generic, patents expired, the margins will be slightly lower than that. Yes.
Okay. Sure. My second question is that, see from the various studies that we are witnessing now in the post-COVID-19 era, meanwhile it is known that Europe is a manufacturing hub for the global pharma and their disproportionate dependency on China, what was there. In the post-COVID-19 era, I think there is a kind of understanding that people understood the necessity of de-risking some Chinese supply chain and hence there is a kind of rising dependence on Indian pharma, whether it is for generic APIs intermediate or it is patented APIs or intermediates. If that is the case, have you seen any kind of enhanced momentum for your custom synthesis business or even any kind of intermediate even for the post-patent lifecycle management-based product opportunities?
It's a very good question. I think after the first wave of pandemic, when there was a shortage of hydroxychloroquine, when there is a shortage of ibuprofen, everybody jumped into the gun including U.S. and said, "Come on, let's manufacture our own hydroxychloroquine. I'll give you $500 million. I'll give you Europe, some millions support from the government."
Till now they couldn't produce a gram because one needs to realize in U.S., Europe or Japan to get clearances to set up a facility, a manufacturing facility for these active ingredients which are considered as highly polluting pathways, it will take minimum three to five years. Getting the client approval, product, everything. We need the technology. They need to develop, then they need to manufacture. Once they manufacture, just like us, they have to wait for the FDA to clear the dosage forms.
This total process takes from at least five years and it may take eight to nine years. If they have some existing factories in U.S. and Europe and if they want to make these products, still it will take them three to five years.
The cost of investment will be at least 10x than what to create a capacity than us. The cost of running that plant probably is again ten times more expensive minimum. As it is, if I am selling naproxen at $40 a kilo, if they want to produce naproxen, they cannot do it less than $100 a kilo. That immediately jumps the dosage from prices in the generic industry which cannot afford to do that.
Okay.
Mr. Patra, I'm so sorry to interrupt, but could I see you please rejoin the question queue for your follow-up? Thank you. The next question is from the line of Jiten Doshi from Enam AMC. Please go ahead.
Dr. Divi, I have not too many questions, but first, many congratulations on the wealth creation that you have done for your shareholders. Your performance has been very impressive and you have done this with very high integrity. From all of us at Enam AMC, many congratulations to you. I also want to compliment you for the quality of your disclosures, annual reports, and the current calls, which has been a sea change from what you have been following a few years ago. Please keep up that good work. If I may just one question, have you any thoughts on the longer-term sort of payout policy for the company?
Well, thank you for your compliment public comments. The last compliment comment you made that I have changed. I have changed from the way I used to be more conservative, the way more I used to be secretive to more open is because of the new blood introduction into the company.
Many congratulations.
It is Kiran Divi and Nilima Divi, the major shareholders of the company, they pretty much changed this. We are quite more open now.
Many congratulations.
Pardon?
Many congratulations to Nilima and team. Many congratulations.
Thank you so much.
All the credit goes to both of them, Kiran and Nilima. Having said that, now the payout used to be around 27% and it went up as 36%, 37%. We always want to make sure that you know that for the last 15, 18 years, we never borrowed the money. We borrowed only once in our lifetime, paid back to IDBI, and we never either went to the bank or shareholders for any money. Because of the discipline we followed, and we always want to make sure that INR 500 crore-INR 1000 crore is there, either for a rainy day or for an opportunity into the certain investment. That's how we are able to do that. I think the payout, what we have done 1,000%, is about 27%. We could have gone to the 1,300%, which is about 35%, 36% normal.
We felt there are a lot of opportunities which we may need certain cash, and that's the reason I think Nilima and Kiran wanted to go to 37. Probably, I played a little bit of conservative role. Hope I clarified.
Yeah, absolutely. Wishing you, Nilima, Kiran, all of you the very best. It is a great pride of India, a company like yours. Really, we are privileged to be shareholders of your company. Keep up the good work. To you, Nilima, and Kiran, all the very best.
Thank you very much.
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Satish Choudhury for closing comments.
Thank you all for joining us today for earnings call of Divi's Laboratories Limited. Due to lack of time, we are closed, and in case you need any further clarification, please reach out to our investor relations. Thank you.
Thank you. On behalf of Divi's Laboratories Limited, that concludes this conference. Thank you all for joining. You may now disconnect your lines.