Ladies and gentlemen, good day, and welcome to the earnings conference call of TD Laboratories Limited for the q four financial year 02/2021. 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 then 0 on your touch tone phone. Please note that this conference is being recorded. I would now like to hand the conference over to mister M Satish Chaudhry.
Thank you, and over to you, sir.
Thank you. Good afternoon to all of you. I am M. Satish Chaudhry, company secretary and chief investor relation officer of Delete Laboratories Limited. I welcome you all to the earnings call of the company for the quarter and year ended thirty first March twenty twenty one.
From Dilip's Lab, we have with us today Doctor. Muralithe Divi, Managing Director Ms. Neelima Prasad Devi, Volt Time Director, Commercial Mr. L. Kishorbahu, Chief Financial Officer and Mr.
Venkatesh Parmalu, General Manager, Finance and Account. During the day, our Board has approved results for the quarter and year ended thirty first March twenty twenty one, 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 DeVis 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 facts 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. Vivi Flag or its official 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 Doctor. Murali Kedali, Managing Director of the company, for opening remarks.
Over to you, sir.
Good afternoon, and 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 severe 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 Debit 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 persuasion during these uncertain times. At this time, we were able to get most of our employees aged 45 plus 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-nineteen, and we have resumed our efforts to doing our part in helping communities around our manufacturing units.
This team is on the ground undertaking sanitation activities in the communities and delays it around its manufacturing units. Support has been provided to government hospitals, community health care centers by providing hundreds of oxygen cylinders, concentrators, several healthcare equipment such as nebulizers, fumigation machines, oxygen cylinder regulators, oximeters, etcetera. In addition to these initiatives, we have also converted two of our PFK 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-nineteen. Together, we can fight the spread of COVID-nineteen.
During the current financial year, assets worth crores have been capitalized. This has reflected the benefit of operations from the CapEx program taken up by the company during the last two years. Capacity included were completed in levodopa, regabalin, 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 has reduced our dependence on key starting materials besides achieving productivity and increase in being a competitive and assured supply in products like Gava Painting, Naproxen, Valsartan, Bezulacam.
Rs. $7.10 crores of capital working process projects of custom synthesis and generic products are still under progress. New generic molecules with current dosage sale of $20,000,000,000 are selected, technologies developed, validations and regulatory submissions are under progress. Patents are expected to be expired between 2023 and 2025. Additional contract media product prospects are under validation.
The new major fast track consultancy 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 SEJ. A third stream of this new API was planned at Unit 1 as the innovator has given clearance to supply to domestic VL partners. Thank you.
Hello, everyone. This is Mirna Divi. I welcome you all to Divi's Lab's earning 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 nineteen pandemic. The second wave has again impacted the operations across various businesses.
I would like to update the scenario with Belize. On 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 lockdown, port conditions, blank sailings, as well as the recent Suez Canal incident. We are anticipating that the challenges will continue as the global effort to roll out vaccine puts pressure on already trained logistics resources. On procurement side, there are slight hiccups in incoming supply chain.
However, 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 API 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 $18.12 crores 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 $6.69 crores, a growth of 42%. We are in the path of INR $5.00 2 crores 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 crores during the year, reflecting a growth of 26% over the previous year.
Profit before tax for the year amounted to INR 2,656 crores, a growth of 47%. We earned a path of INR $19.84 crores during the year, reflecting a growth of 44% over the previous year. We have capitalized assets of INR $11.79 crores for the year, of which capitalization this quarter was INR 173 crores. As of the end of the current period, we have cash on book of INR2156 crores, receivables INR1677 crores and inventories INR2145 crores. Rupee has been quite volatile during the year under review.
We have a ForEx gain of INR 4 crores for the quarter, while we have a ForEx loss of INR 4 crores for the year. Export for the quarter accounted to 90%, and for the year, it's 88%. We continue to have normal business distribution across regions. S.
Accounted to 71% of our revenue. Product mix for generics to custom synthesis is 6040% of the revenue, respectively. Constant currency growth for the quarter has been 3124% for the year. Our nutraceutical business for the quarter amounted to rupees $1.56 crores and rupees $5.94 5 crores for the year. During the year, the company has paid one month salary as incentive amounting to rupees 34 crores to employees in appreciation of their dedication and hard work during the COVID nineteen pandemic who attended to their duties in plants 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 would request the moderator to open the line for q and 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 the touch tone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handset while asking a question.
Ladies and gentlemen, we will wait for a moment while the questions you have assembled. The first question is from the line of Pawish from Abbott Capital. Please go ahead.
Hello? Hello.
Yeah. So, sir, I have two questions. First one is, you said that the ratio of API versus custom synthesis is currently 60 to 40. So what is what are the what is the vision going forward? What will be the segmentation as we are expecting from it?
And my second question is, do we have any price control on generic APIs? Like, how do we manage the pricing of the contract related to generic API?
Thank you. Your first question, the managing between generic and custom sales phase. Our focus our aim is fifty-fifty. 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 customs interface, the customer, the big pharma, he pretty much dictates or he uses their notice that he would like to have in a particular month, particular quarter, or so much of quantity.
So giving the first preference to the big pharma, we can move around our generic product to attain maximum productivity, to apply the equipment to the maximum productivity. Now that's our wish. But what happens is that it can be forty, sixty, either generative 40 or custom sensitive is 40. It keeps moving depending upon which products are moving faster, either custom sensitive or generic. It always keeps fluctuating, and we don't are not focusing in any direction that it should be generic more or custom sensitive more.
Your second question, how do we keep our generic API client and focusing on future API pricing? I thought you were talking about future API. So you are talking about generic API pricing, how we can sustain, how we can thrive. We the products where we entered twenty five years ago, we are still in the same product. We did not need any product.
We only kept on adding more generic products. We started with two products, naproxen, dexamethasone, and chetan adding products. We became leaders in the world, producing anywhere from 60% to 90% of the demand of the world for several generics. The only reason is that we are backward integrated. We make our own starting materials 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. So hence, we are preferred, but the major is that we don't we are the only generic API manufacturer who do not make formulations and who do not compete with the with our own customer. Every other API manufacturer entered into formulation, started competing in the market with the 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, sir.
Thank you.
The next question is from the line of Prakash Agarwal from Active Capital. Please go ahead.
Yeah. Thank you for the opportunity, and congratulations on great set of numbers, sir. Question is on on the CapEx. So how much of the 18,000,000,000 CapEx that we had called out two years back is completed and, you know, and how much of it is is you 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 1,800 crores you mentioned, actually, was 2,500 crores since 2018 when we started capital expansion quite fast. At that time, in 2018, our turnover was INR500 crores, INR5000 crores with a PBT of INR1800 crores and PAT of INR1300 crores. This year, we reached INR6900 crores, a 38% increase, INR2627 crores of PBT, that's 46% increase, and INR1954 crores of 50% increase. Now it's not that we have utilized all the capacity we created.
We have still INR700 crores of CapEx still to go into production. They are either in the depth completion or validation under progress or qualifications are under progress. But the investment that is already done, as Nilma 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%, whereas some of these 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.
The material product only we debottlenecked, We did make our own starting material for assurance of supply and to prevent any threat from China saying that we won't send it or they increase its price, two x, three x.
And the CapEx outlook, sir?
CapEx outlook, the the we the court has the Coconada project is the main one. Court has given the final judgment saying that the farmers have to take the 10 lakhs and they have dismissed all the claims, and we have already paid the 10 lakhs to the Calatrace or to the government. And we are supposed to be this happened in the last one week, and they should be handing over the rest of the land without any dispute. And as soon as the second wave of pandemic comes down, we are able to we will be able to allocate construction teams, whereby we should be investing with crores what we planned one one and a half year ago to invest in Carcanada. That is the immediate investment.
Okay. Perfect. And, sir, secondly, just clarification on the regulatory approval that might be required. So over this you know, of the 2,500, you mentioned 1,800 is already done. So these are currently operational and revenue generating.
So would they not require regulatory approval from the regulators for exporting, or it would, by default, be adjacent? And I think one is a new site. But could you help us talk about the regulatory requirement for these CapEx being used for exports?
Yes. The the product where we expanded, they are not new. We were already producing them, the products like levodopa, the products like dregabalin, methalamine, carbidopa, levtrastam. 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 we 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 minor changes, but sometimes the regulatory agency may give, take three to six months to clear or the customer may make, take two to three months to clear. These do not require years to clear.
These are of few months. And the regular business of quantities will continue. The enhanced quantities may take two or three months.
Okay. So what I
understood was this requires some approvals, but
these are minor approvals which might not include an 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 participants only. You may rejoin the question queue if you have a follow-up. The next question is from the line of Tushar Manudani from Motilal Oswal Financial Services. Please go ahead.
Thanks for the opportunity. So just on, I would like to understand if this is an exclusive API supply agreement with.
Can you be a little louder, please?
Am I audible better?
Yes. Tell me.
Yeah. Just would like to understand on, is this an exclusive type of API supply to MSD, or any other API supplier also can come in? You must be this is the MSG's authorized manufacturer for monopurative API, And we are allowed to supply API to MSD real partners in India. MSD has retained its rights for supply into Americas, EU and other regulated markets. The deal is for rest of the world market.
Now 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 baby stage. So we developed the process, scaled up the process, validated the process, commercialized, exported large quantities, several times. Now the one stream is currently producing day and night, and the second stream gets under validation, and that will go into the production in the coming months for the regular commercial production in the DCV FPG. These two streams are mainly to export to the innovator.
Because of these real partners, because the Innovator has given us that we are allowed to supply to the real partners in India, we have created one more stream at Unit 1, where it is produced for the VL partners in India. The validation already started. The production will continue. Commercial production will continue from middle and June. And between these three streams, one for India, two for export, I think we'll have a I think that gives a clarity that our involvement with MSB.
Understood, sir. Got you. That helps. And just secondly, on the, again, on the CapEx, while 700 crore is capital work in progress and 600 maybe utilized for Kakinada, while we have a cash of good 2,000 crore. So 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. So the opportunity in the some of these APIs, what we are involved, the opportunities are two x, three x requirement. We're only concentrating on x.
So if there is a certain requirement, we are we want to be ready to invite such. Between the 600 crores and 711 crores, we have INR 2,000 crores. So we still will have another INR 700 crores left. But to immediately cater to any certain requirement, subject of any one of these newer ones. I'm not talking about the traditional.
The traditional big generic API, I think we are well covered, but we are talking about the newer ones. Understood. And just lastly, if I may squeeze, on the intracepticals with 100% increase in the capacity, over what period of time this will be utilized? I think the the 100% capacity has just increased. Now we are seeing 10% to 15% growth.
As people are looking at, with this pandemic, nutraceuticals are more and more being lived and being used to increase immunity. The game is immunity improvement, and I think it's nothing but utilizing new certificates. So we expect good business, as I said. We are qualified by all the big players internationally. It's a question of how much of business they would give us as a percentage compared to where how much they have been giving it to their traditional supplier.
Thanks. Thanks a lot, sir. Thanks.
Thank you. The next question is from the line of Cindrella Kirvalho 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 pending time. Sir, just wanted your thought as we have had a Stellar FY '21, and 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.
First, looking at the generic side, how should we look at the top products like naproxen, lexromatopsin, and the newer products which we just talked about, like, Levo, mesmerline, and all other products that we have done the expansion decently? And over the two to three years, again, referring back to your recent comment where you that sky's the limit. So how should we look at these business segments? And if you could allow us some deep understanding over custom synthesis and Nutra and the China plus opportunity, which which must be evolving in our favor when we say that sky is the limit and there are two to three x opportunity in each products that we have, would be very helpful, sir.
Now the generic, we have traditional generic, which are, as you said, the NAPOX and GABA ten team product Dexamethoxen. And here, we are reaching anywhere from 65% to 85% of the market, and the market is growing at the rate of 5% to 15% year on year. And we are talking about products with 5,000 tons of naproxen going at 10%, they need about another 500 tons next year. As people are aging the products of naproxen, gabapentin, valsartan, livvirastam, these are the ones these are lifestyle medicines as well as life saving medicines. So 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 you're off. So as you are aging, people are aging, the existing patients now to continue using and the new ones are being added, especially for as the lifespan is increasing. Now the good point, which I think is that we are backward integrated, and we are the best cost team in the world. The products like levodopa, pregabalin, mesalamine, carbidopa, especially the pregabalin, mesalamine, they are growing. 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 nitrocamine impurities. That's how people have been switched to us. And today, are becoming the leader. And going forward in the next six months to one year, probably we'll be getting majority of the business. The third group, where the Contract Media and other products I mentioned, where we have been investing to increase from where we are not even 10% of the business right now, Contract media is growing at the rate of 15% to 25% as more and more imaging is happening because of the newer issues.
Now we are only not even 10% of the current demand. So there is a great opportunity in the commerce media where I have mentioned last time, the successive how good you can recover the iodine, how good you can recover and reuse all the atoms, and you'll be atomized. That atomized change will prove for the sustainability because iodine is only so much available in the world, and you cannot deplete it. So the challenge is whoever can conserve, whoever can recycle better with the best technology, which we think we have, which have already installed the equipment, technologies are yet proven now. So 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 $20,000,000,000 products like Ticagrelor, nicosamide, VelDAglitz and Revorazband, Zabacatron, Breverance Tam, and there are about 10 products, which are about $25,000,000,000 $20,000,000,000 of funds. Those that come sales, we have completed our technology. We are now we have developed the process. We scaled up. Now they are under qualification and validation.
So these are the future that will go out of parent in 2023 to 2025. So between traditional generic, like a different footing, then generic with the faster growth with less competition and future generic where we will be entering. I think this is the scope.
So on the custom synthesis and on the, traffic, if you could, give a similar understanding, this is very, very helpful.
On the customs interface, I think one needs to understand all the big pharma or, I would say, most of the big pharma do not have any API manufacturing capacity. They were sold out to plants. Very few of them have few of the manufacturing plants to do the n buy the n minus one and do the last stage. That's too probably small quantities. So they need to go somewhere for the discovered compounds for the APH to be manufactured.
This is how we got into this fast track project of the pulmonary vein, where we could make hundreds of tons. What's this? If they go to somebody, somebody will make two tons, somebody will make 10 tons, but if you want large volume, the capacities are readily not available. But digits are good to have such capacity because we have quite large plants with two of them at Unit 1 and Unit 2. The second point is, I think, creation of capacity in a softer time.
Not that we have the capacity, even if we don't have, we can do that within three to six months because we have standardized the equipment whereby it is like to like and scale up is much easier. So the relationship what we have with the big pharma for the last twenty 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.
Yes. Hi. Thank you for taking my question. Good afternoon. Just Just harping upon the opening remarks related to two things.
One, product utilization of 86% and logistics challenges. Sir, just from a near term perspective, if I look at fiscal twenty twenty two growth, how how should we look at it? Would this be clearly, '21 growth rate of 26%. So just want to understand how should we look at growth over the next twelve months?
Logistic challenges. Logistic challenges are going raw materials, solving to our product going out. I think these are the challenges. As Nirima mentioned, I think she has covered under her initial thought that by planning better, by planning, advanced raw materials, following very closely with the suppliers, geographically divesting the supply base, though it's available cheap in China, we said, okay, another 10% extra cost, let's do soak from Europe. Another 15% extra cost, these are key ingredients, let's soak from U.
S. Also. Knowing which we are organized in such a way that we will not be interrupted all of a sudden. So that way, we were able to eliminate challenges of logistics of raw material, starting material. Another good thing with us is that we don't have any working capital, it's just our funds.
So wherever see Nirma's team foresee that there may be a possibility that we may run into trouble, they just go ahead and outsource and keep the stock. Three months, six months, it does not matter. So that way we said 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 have mentioned that 86% of your the capacity of several million liters what we have, It is like several big factories. So if you look at that, probably, can introduce another 10 new products into that into the whatever capacity that is available. So in a way, we are in a good position to expand our product, introduce new products, at the same time, take new opportunities. When you say growth, I have my own dream, at least I wanna make sure that you dream for me also.
Because it's good to dream. If I pay everything, then there's all the money blocked.
Got it, sir. No. No. Very helpful. The second question is on the margin.
We have actually seen again significant expansion in margins during the year, close to now 40% plus margin. So just want to understand what are the drivers for margins as we go forward? Or do you think it would be more mix and the aspiration to do more CMO? Or do you think backward integration, there are those other levers on the cost side that are still left or us to see some margin expansion? Thank you.
One is in the API industry, I always say from the last fifteen years that the most important thing is raw material cost. What is the material cost? So if you see on an average of raw material cost of pharma, dosage form industry, they were from 26% to 33%, and most of the API industry is from 50% to 65%, whereas we have been maintaining lowering lowering to 4038%, 42% till up two years ago. But Somebody come with a better way of doing it. Will somebody comes out doing 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.
The automation we have introduced recently in several buildings is helping us to minimize the yield variation. So we are able to get more towards the upper limit, not in the middle or lower middle. So applying the tools of green chemistry means highest yield, highest recovery, lead to waste, consuming less raw materials at a machine fee. I think these are the key to success and key to maintaining the margins and where you mentioned 26%, 27%, I think it is possible to maintain. And also the most important is the human resource, the dedicated employees.
The employees whom I had twenty, twenty five years ago, they are all with me. There are at least about 500 to 1,000 of Morley Divis in the plant, in the research, in the engineering, in technology, several of whom I trained personally. So it is a different team who are highly dedicated, as Nilma said, during the pandemic, there's not even absenteeism. Either the guy got a COVID issue, went home, got recovered fourteen days, came came back to the factory or office. As it is that is the reason a one month salary was given as a bonus for their dedication.
Thank you, Anal.
Thank you. The next question
No problem.
Is from the line of from Philip Capital. Please go ahead.
Hello? Yeah. Thanks for taking please. Thanks for this opportunity. My first question will be on the margins again.
So because of the kind of global scale that we have achieved for the generic API, as well as the kind of a scale and a process optimization and end to end integration, all that what we have achieved for the established large volume API. So 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 won't say that in every portfolio so we are looking at a basket of products. And in the basket of products, you have high margin products, medium products, and low margin products. Yes. So we need to we always both in custom synthesis and also in the generic. In generic, as you reach as a major supplier, people give you premium.
It doesn't 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. So you get good marketing, good productivity. In the recently entering products into new gen rigs, the margins are good, volumes are less, workouts will be more because you need to carefully watch until it is scaled up to a certain scale. In custom teams, this if it is a lengthy process, if it is difficult to do chemistry, if there are only less number of companies who can handle such chemistry, the margins are going to be very, very high.
If it's a general chemistry, everybody can handle, but still the big pharma wants to work with you, the margins can be average to high. But the challenge here is you need to enter into the product. Correct. Once you enter, you need to apply the tools. What I mentioned, the green chemistry tool, and see that every product becomes at least not average profits or low profits, low margins, at least high margins or very high margins.
It is cajun. That cajun, we follow. One step at a time, climb the ladder, and we make sure that we don't want to jump up. We just want to go one step at a time. That's how we succeeded.
Okay. So, obviously, that means that the average margin for custom synthesis would definitely be ahead of the generic business that is the kind of understanding that we remain there.
I think that you can say that the new entry, newer custom synthesis project will give more margin, and the mature generic products where they already are becoming generic, they can expand, the margins will be slightly lower than that. Yes?
Okay. Sure. So my second question that, see, from the various studies that we are witnessing now, the post COVID era, there is a, meanwhile, it is known that Europe is a manufacturing hub for the global pharma, and their disproportionate dependency on China, what was there. So in the post COVID period era, I think there is a kind of necessity of I mean, so that there is a kind of understanding that people understood the necessity of derisking from 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 intermediate.
So if that is the case, have you seen any kind of enhanced momentum for your custom synthesis business or even, the, any kind of intermediate even for the post patent life cycle 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 shortage of wafer away, everybody jumped into the gun, including US, and said, come on. Let's manufacture our own hydrochloric. I'll give you 500,000,000. I'll give you your 100 and some millions support from the government.
But till now, they couldn't produce a grant because one needs to realize in US, Europe, or Japan To get clearance to set up a facility, a manufacturing facility for these active ingredients, which are considered as highly polluting factory, it will take minimum three to five years. Getting the client approval, product, everything. Then we need the technology. They need to develop. Then we need to manufacture.
Once they manufacture, just like us, they have to wait for the FDA to clear the dosage forms. So the total process is from at least five years, and it may take eight to nine years. If they have some existing factories in US and Europe, and if they want to make these products, still it will take them three to five years. And the cost of investment will be at least to connect than what is to create a capacity than us. The cost of running that plant probably is again 10 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 per kilo. That will immediately jump the dosage from prices in the generic industry, which cannot afford to do that.
Mr. Patra, I'm so sorry to interrupt, but request me to please rejoin the question queue for your follow-up. Sure. Thank you. The next question is from the line of Jitendoshi from InamiMC.
Please go ahead.
Doctor. Devi, I have not too many questions, but first, many congratulations on the rent creation that you have done for your shareholders. Your performance has been very, very impressive, and you have done this with very high integrity. So from all of us at Inam AMC, many, many congratulations to you. I also want to compliment you for the quality of your disclosures, annual reports, the current calls, which has been a sea change from what you have been following a few years ago.
So please keep up that good work. And 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 it from the way I used to be more conservative, the more I used to be, secretive to more open is because of the new blood introduction into the company. It is that Karen Levy and Neenima TV, the major shareholders of the company, their credit might change at least. They are
like, we are
more open now. Pardon?
Many congratulations to Nilma and team. Many, many congratulations.
Thank you so much. So
all the credit goes to both of them, Kiran and Nilma. Having said that, now the payout used to be around 27%, and it went as high as 36, 37%. So we always want to make sure that you know that for the last fifteen, eighteen 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. This is because of the discipline we followed, and we all want to make sure that INR500000 is there, either for a rainy day or for an opportunity into the sudden investment.
That's how we are able to do that. I think the payout, what we have done, 1000%, is about 27%. We could have gone to the 1300%, which is about 35%, 36% normal, but we felt there are a lot of opportunities, which we may want to 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. And, wishing you, Nilima, Kiran, all of you the very best. It is a great, pride of India, a company like yours. And, really, we are privileged to be shareholders of your company.
So keep up the good work to you, Nilema, 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 Shorthy for closing comments.
Thank you all for joining us today for earnings call of Divis Laboratories Limited. Due to lack of time, we have closed. And, in case you need any further clarification, please reach out to our investor relations. Thank you.
Thank you. On behalf of DD Laboratories Limited, that concludes this conference. Thank you all for joining. You may
now
disconnect your lines.