Ladies and gentlemen, good day, and welcome to the Q1 FY24 earnings conference call of Divi's Laboratories Limited. As a reminder, all participant lines will be in a 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 0 on your touchtone phone. Please note that this conference is being recorded. I would now like to hand over to Mr. M. Satish Choudhury. Thank you, and over to you, sir.
Good afternoon to all of you. I am M. Satish Choudhury, Company Secretary and Chief Investor Relations Officer of Divi's Laboratories Limited. I welcome you all to the earnings call of the company for the quarter ended 30th June, 2023. From Divi's Labs, we have with us today Dr. Murali K. Divi, Managing Director; Mrs. Nilima Prasad Divi, Whole-time Director, Commercial; Mr. L. Kishore Babu, Chief Financial Officer; and Mr. Venkateshwar Perumalla, General Manager, Finance and Accounts. During the day, our board has approved unaudited financial results for the quarter ended 30th June, 2023, and we have released the same to 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 the conference call is the copyright material of Divi's Laboratories Limited and cannot be copied, rebroadcasted, or attributed in text or media without the specific and written consent. 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. 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 expressed or implied. Divi's Labs 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 for opening remarks. Over to you, sir.
Good afternoon, ladies and gentlemen, and welcome to our first quarter FY24 conference call. It's great to have you all here, and I hope you, your family, and your loved ones are well. I shall begin by updating you on our operational progress. The Indian pharmaceutical industry is rapidly evolving, fueled by technological advancements, and is globally expanding further, driven by increased volumes. While we acknowledge the potential impact of price pressures in the U.S. and European markets on operating margins, we remain optimistic about the broader trajectory, wherein opportunities keep emerging for a quality API manufacturer to contribute in a sustainable manner. We anticipate multiple growth prospects over the next 2, 3 years, particularly in contrast media, Sartans, and soon-to-expire patent products.
Our recently filed DMFs and about to file DMFs in the next six months, are expected to contribute to future growth beyond financially at 25 as we actively pursue our six-domain strategy. Notably, our custom synthesis business is doing well, particularly in phase II and III projects. This enhances production capacity in small volume APIs and reduces lead times. Both the large volume custom synthesis projects are in commercial phase now and are gearing up for full production capacity. Registration for contrast media APIs in various countries are under review, and qualifications by customers are underway. We are progressing well in the development of MRI contrast media and expect to complete validation for some of them by end of this financial year. Differential in contrast media is substantial.
Our cost-effective capacity, established technologies, and iodine recovery advantages, combined with our strong customer relationships, further broaden our horizons in this growing market. On the capacity front, our Unit III construction project is advancing well with an initial investment of INR 1,500 crore for Phase I. The scope for further expansion in the future. Our Unit III greenfield project will initially manufacture starting materials with few new pharmaceutical APIs, advanced intermediates and complex chemistry APIs. Freeing up Unit 1 and Unit 2 facilities are new opportunities for custom synthesis and generic products. Our investments in new technologies, expansion of production capacity, and diversification of product portfolio going towards the company's sustainable future. We are also pleased to report that Divi's has consistently upheld responsible operations, contributing positively to the well-being of the communities surrounding our manufacturing units.
Our initiatives, such as Sugalam and Jal Prashadam, have had a concrete impact on over 225,000 individuals, improving their access to safe drinking water. To support holistic rural development, Divi's has actively contributed to the upgradation of infrastructure, roads, and sanitation systems in villages across Telangana and Andhra Pradesh. We continue to engage in child and women empowerment projects, execute plantation drives, and conduct health camps as part of our CSR endeavors. Now, Nilima will present you with the financial highlights of the quarter. Thank you.
Ladies and gentlemen, I extend my warmest greetings to each one of you. Thank you for joining us today as we convene to discuss the financial outcomes of the first quarter of FY 2024. I trust this message reaches you and your dear ones in good health and spirit. I'm pleased to share that we've sustained uninterrupted customer shipments throughout the quarter, reflecting our resolute commitment to meeting the customer deadlines. The global logistics sector saw positive advancement in sea and air freight during the period. This advancement is mainly seen with respect to ease of availability of shipping space, as well as reduction in logistics costs. Furthermore, raw material prices exhibited a downward trend, and we anticipate continued stabilization in the upcoming quarters. With the ease of availability of material and stability in prices, we are focusing on optimizing our inventory levels.
As part of our ongoing initiative to strengthen the domestic supplier network and mitigate sourcing risks, we have notably reduced our reliance on China compared to the previous year. Moving forward, we are dedicated to optimizing facility utilization to address the uncertainty of the current economic landscape. Our diversification strategy is progressing well and actively pursuing upcoming opportunities while upholding our long-term goals. Empowered by a robust supply base, optimal inventory, and a vigilant understanding of global dynamics, we stand ready to address future challenges. I will now present an overview of the financial performance for the first quarter of the fiscal year 2023, 2024. We have achieved a consolidated total income of INR 1,859 crore for the current quarter, as against the income of INR 2,343 crore the corresponding quarter previous year.
Material consumption for this quarter is lower at about 39% of the sales revenue, as compared to 42% in the immediate previous quarter, due to softening of raw material prices and change in product mix. PBT for the quarter amounted to INR 492 crore, and we have a profit after tax of INR 66 crore for the quarter. Exports for the quarter is about 86%. Exports to Europe and US is about 67%. Product mix for the generics to custom synthesis is 60% and 40%, respectively. We have a Forex gain of INR 3 crore for the quarter, as against a gain of INR 56 crore in the corresponding quarter of the previous year. Our constant currency growth for the quarter has been negative at 29%. Our nutraceutical business amounted to INR 78 crore for this quarter.
We have capitalized assets of INR 33 crore during the quarter. We have a capital work in progress of INR 389 crore as at the end of the quarter, of which Karnataka project accounts for at least INR 130 crore. As of 31st March, we have cash on books of INR 4,208 crore, receivables of INR 1,720 crore, inventories of INR 2,967 crore. You would notice from our annual report the dividend payout of INR 796 crore is scheduled in the first week of September 2023. Thank you.
Thank you, madam. With this, we would request the moderators 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 then one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Tushar Manudhane from Motilal Oswal. Please go ahead.
Yeah, thanks for the opportunity. Sir, on your comments with respect to raw material prices moving down, would there be a scope of passing this to customers? What should be the sustainable gross margin to look for, particularly?
He's not audible.
Can you please repeat the question again?
Yeah. I was referring to your comment with respect to the raw material prices moving down. Just would like to understand, what is the scope of passing this product to our customers, and hence what will be the sustainable gross margin as far as generic API business is concerned?
In the generic portfolio, based on the competition, if the general prices of raw materials have come down, probably the demand from the generic industry may be there to optimize to bring down the prices. Where we are in generic industry, generic products, where there's long-term arrangements, usually we don't have that, so we will be able to retain the extra margin. Whereas in custom synthesis, we can retain the margin when the raw materials goes down or raw materials drop up to a certain percentage, beyond which we will discuss.
Okay. Thank you. That's it from my side.
Thank you. Before we take the next question, I'd like to remind all participants, if you wish to ask a question, please press star then one on your touchtone telephone. The next question is from the line of Cyndrella Carvalho from JM Financial. Please go ahead.
Thanks for the opportunity. Am I audible, sir?
Yes.
First of all, congratulations on the guided gross margin improvement. We have seen this improvement coming, Nilima highlighted that it is driven by, lower raw material, cost, as well as, other improvement in the other expenses that we are seeing is largely logistic costs also coming down. How should we see this, the gross margin, A, is, do we see some improvement in our generic, pricing scenario also, or is this purely by the raw material? The B part is on the expense side, should we see, further scope of improvement as we go ahead?
Yes. Only, not only the some of the there is an improvement in the raw material prices, but also there is an improvement happening in the coming quarters by profit improvement or by yield improvement and reducing manufacturing costs by energy-efficient operation. Because we have to look from the holistic point of view. It's not just raw material prices came down from China or elsewhere, but as a holistic. As Nilima mentioned about the freight outward, carriage outwards being coming down from INR 2,000 a container, went up to INR 3,000 a container and came back to INR 2,000 a container by sea. I think these are kinds of things, sometimes they go up and come down. But the raw material price coming down, the process efficiency going up increasingly, they will help the company to be on elegant footing, making consistent margins.
Any, any thoughts on the overall API pricing scenario? Do you see or you highlighted that there is a pricing pressure across, but you also highlighted that there is scope for an emerging opportunities that you see, coming, going ahead in terms of generic filing that we are doing. How should we see the overall pricing scenario and any new products that you may want to highlight for us to track going ahead?
On the number growth engine, the growth engine on established products where, like Naproxen sodium, Galantamine, products like that, they are stabilized. The price pressures, they're question mark in some of them. As most of the generic, I think they are settled and there are no price pressures now. Going forward, we see a an improvement in terms of margins and the slow growth. On the rare compounds where we improved capacity recently, increased capacity, filings have already taken place by us, and the other customers are waiting for the clearances, new customers. As and when that happens in the coming quarters, we should see improvement.
Sir, that is helpful. One request on my end, that has been requested for an annual school for a very long time. Initially, we used to do that after our AGM. As AGM has shifted on the virtual platform, we are not able to meet you and the entire team for a very long time. Especially if you please consider one annual school for all of us, that is very, very helpful. Thanks a lot for your presentation. Thank you.
Does that answer your question?
Yes. Absolutely, yes.
Thank you. Before we take the next question, I'd like to remind all participants, if you wish to ask a question, please press Star then one on your touchtone telephone. The next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.
Yeah, good afternoon, and thank you for taking my question. Just on the split of generic and custom that was just shared. When I just add generic piece and the nutraceutical pieces together and look at growth on a YOY basis, seems to be still subdued, like low single digit, flattish kind of a YOY trends. Even if I look at it, compared to the quarter before also, it seems to have declined. Just want to understand, and also reflect upon our guidance for fiscal 2024, when we exclude Molnupiravir, where we were-- we are looking at double-digit growth. If you can help us understand that, sir. Thank you.
I won't say there is a decline in the quantity of generic APIs or the. I agree with you, the growth of the matured generic is in the single digits, yes. When you say that they compound the 5,000 tons, even a single digit can be substantial, like 6%, 5% growth. We are talking about, say, 250 tons growth year-on-year. There will be always new entrants to take some of the, some of the capacity or some of the products from the market. Where we are in the advanced market, where it's highly regulated, so there it's after the COVID, which is over towards the end of the last year. Now everything is getting stabilized to see what kind of infection, having antibiotic, anti-infectives, then life-saving medicine, lifestyle medicine.
We are more into the life-saving medicines in the generic market. Now we will see they are stabilized, we will see an improvement, and we are the major player there.
Got it, sir. That's helpful. Just a second question on the custom synthesis. With the current base, I'm assuming, you know, there is no one-off or special opportunities like Molnupiravir in the case anymore. I, I remember you have said that you have shifted some time back, but just trying to understand the path forward for custom synthesis. The 40% number, should we now start assuming that the projects that you mentioned also the commercialization of, say, Sartans and even the second project, you will likely see a sequential or a YOY growth in Q2?
I don't think we should look it on quarter to quarter. They say that Molnupiravir, Molnupiravir is not the only one. We have seen several opportunities. We don't know which one will become, again, all of us when Molnupiravir. We are working on number of projects with number of big pharmas in the small molecule segment. At the same time, we are also in now the peptide building block, which have really become a hot cake. All of a sudden, with requirement to find it from a 100 substance, where we have just started the sample approval qualification of long waiting for 10 years. Because some of the new drugs are coming in the obesity, anti-glycemic compounds with these, synthetic, let me say, peptide drugs. So in custom synthesis, we create opportunity, and we cannot predict in which quarter which blockbuster may happen.
Overall, we have a number of phase two, phase three compounds, and these protected amino acids for the peptides and also the nucleotides for the nucleotide drugs. The opportunity is great. We just have to wait for our customers to come.
Thank you, no other question.
Thank you. Participants, if you wish to ask a question, please press star then one on your touch-tone telephone. The next question is from the line of Surya Patra from PhillipCapital. Please go ahead.
Yeah, thank you for this opportunity, sir. So my first question is on the inventory position that we are having. So earlier that we have indicated, one of the key reasons for the suppressed margins is the high cost inventory what we have been carrying. So from the annual report, if I see, we both are in front of the raw material inventory as well as means the working progress inventory. Both have gone up by INR 500 crore kind of levels from the normalized level. So when do you think that this high cost inventory or what portion of this is a high cost inventory, and when do you think that it would be liquidated so that you can get to your normalized margins?
When we are looking at the high cost inventory, we did mention in our earlier, the last quarter call that the prices have been costing in the earlier call itself.
Correct.
The high cost inventory was being reflected at that time, and that's why, you know, there has been a higher raw material consumption at that point in time. The materials that have been procured at higher price have been diminishing. Right now, what in the quarter Q1 that you have been seeing, the reduced production in the raw material consumption has been taking place mainly because of consuming the lower cost one. Compared to the, it has been a lower trend in some of the materials which we consume in larger quantity. We are definitely seeing the downward trend happening much more in the coming quarter.
This is something that we feel would enhance the, not just the product production cost, but also based on what we are looking at improvement in our own processes. It would be a kind of advantage that the organization would have.
Sure, ma'am. Is it possible to kind of delineate, let's say, what portion of this elevated inventory is relating to the high cost base, so that, you know, the process of blending the low cost one and managing your margins, that process will continue?
Well, as I mentioned earlier, the most of the high cost procured material has been consumed, which has been reflected in the earlier quarter.
Okay, sure. This, this same understand that, the integrated working progress, inventory, that is to do with the inventory restoration that is going on industry-wide, for largely for the APIs. Is that the case?
I wouldn't generalize it as per the entire industry, because each organization has their own strategy and the way of taking these kind of decisions.
See, the difference between the API industry and the pharma industry that are in the formulations is different. Where we, for us, it's the processing industry. When we buy raw materials at high price, they become the API and get sold out. Our inventory of API is not high, it's marginal. Whereas in the dosage forms, they convert and warehouse them in India, abroad and in the store. There's a long gestation period between manufacturing of the dosage form and realizing the sale. Until recently, till that time it will be inventory. For us, once you convert to API and, and out, our inventory is over.
The reason it was more 1 year ago, 2 years ago, is that for securing supplies, we secured extra quantities at higher price, anticipating there could be a substantial shortage because of the explosions that happened in China, because of shortages we have seen. That, that is the reason. The COVID-
Okay.
where there were problems of the transportation of these raw materials. That's the reason we had to store at that time, and have been at minimal consumed now and the APIs are already out.
Okay. There's a second question about the price question. In the general trend, what we are witnessing in terms of the industry and other solvents and all that, that there is a dumping from China that is also happening worldwide, and that has brought down the prices, mostly, I think, helping API sales more. Possibly, we would have also seen some benefit out of that. How sustainable or how, how long that trend can continue? That is one. Secondly, when we are seeing the trend of inventory rationalization across industry, including API, as well as supply chain of API. Do you think a similar kind of trend even for substance into future?
The solvents you gave example...
Okay.
I think there are, what goes down like that, always bounce back. If they really stick to cost, they will be able to supply continuously at that price. It's a difficult question, I think we do not source from one country or we don't, do not source from one supplier. We have got a good distribution. There are certain solvents you want to keep in mind that are very common, like methanol, ethanol, propanol. There are certain solvents like acetonitrile, tetrahydrofuran. These are very rare solvents and only so much is available by production. We have equipment available installed to recover, reuse the right specifications, whereas not many companies are equipped to do that. This is where we have an advantage over other API manufacturers.
Coming back to your question, yes, price variations could be there again in solvents, but we are not dependent on that.
Okay, thank you. Regarding the question, sir, whether the inventory deceleration is happening, even for the custom synthesis, can you respond to?
In custom synthesis, there is nothing like inventory.
Okay.
As and when they are made, the first shipment, the shipment lot is 1 metric ton. If the shipment lot is 5 metric ton, as and when the lot is ready, it will go out.
Okay, this is last question, sir, from Carotenoids. What is the pricing trend, sir? That is one. Secondly, we have been seeing since last few quarters that it is kind of a saturated at that level, and it is very narrow range. Are we operating currently at 100% utilization? Unless until we see expanded facility, we may not see growth in the Carotenoids. That is one question. Secondly, whether the prices of Carotenoids has also seen some impact given because of the current situation. Yeah, these two things about Carotenoids.
We have not seen any price pressures in the Carotenoids. In fact, our plant of Carotenoids is running in the 90%-95% capacity. In fact, we needed more capacity of the API of Carotenoids. Where the Unit 3, we are putting in additional capacity of Carotenoids, which will come in line sometime in the Q1, Q2 of next year.
Okay. Is it fair to believe, sir, that Carotenoids is the one segment which has seen the benefit, benefit of the corrected input prices, and demand is stable and prices are kind of stable. With the corrected input prices, Carotenoids is seeing the best improvement in terms of margin?
I didn't get your question.
Carotenoids is not facing any kind of pricing pressure, and you are operating at a kind of optimal utilization anyway. With the input price correction, the, this is one segment which is seeing the best improvement in terms of margin and price.
No, the import prices coming down will not be Carotenoids raw material, because most of the Carotenoids raw materials we make it ourselves. We start from the basic methods like ethylene, propylene, ethylene. Including now we are putting a plant of ethylene oxide itself. There we are very strong with base materials. It's not again, fact, it's something imported raw materials. As I mentioned that we are installing additional capacities in Unit III, which indicates that the demand is much more than right now what we can do. I'm not saying there are no competitors or the competitors. I think we have enough business to expand and needed more capacity.
Got it. Yeah, this is an issue I noticed.
Thank you. The next question is from the line of Anirudh Shetty from Solidarity Investment. Please go ahead.
Hi, thank you for the opportunity. I have two broad questions. My first question is, you know, in fiscal 2023, we had a gross stock of about INR 6,800 crore, and I presume this is just Unit 1 and 2. Wanted to get a sense of what is the broad range of peak sales, that you can kind of relate to this gross stock? And range is okay, because I understand we have different products and, you know, the asset terms will, you know, depend on what product, product mix you are using. So a broad range is fine. Hello?
We do not calculate because we have a peculiar situation of projects of custom synthesis, projects of, generic and nutraceutical. So we don't. Some of them need more equipment-
Mm-hmm.
which will give more value, less value, like some of our 5,000 tons of methoxy, 3,000 tons of carbamazepine. They may need large equipment. At the same time, some of the products we do in custom synthesis need a smaller equipment in volume, cubic metal capacity, but that will yield higher production value. It's difficult for us to say glass block, metal reactor capacity, and so much of growth of business. I think it's very difficult, never. Also in the last 5-8 years, we have started doing as much as possible automation and bringing a lot of instrumentation into the process, to bring safety, environment control, all these add up into the glass block effect.
Is the right way to look at then, segment-wise, but given the instrument requirements is, say, more in generics, could we try to look at what the asset terms could be for generics and what it could be for custom synthesis? If yes, could you share what it looks like to me?
It is, it's not, we cannot differentiate because we don't have blocks built per, per custom synthesis and buildings built per generics. We have buildings dedicated to type of chemistry, like chlorination, hydrogenation, for different products going to different buildings, different states of chemistry. A product like monocarbyl or alticarbyl, where we have built production buildings as per the requirement of the customer, that is different. Usually that's not the case. We use our custom synthesis, we use our multipurpose plants available for that.
Okay. My final question is, you know, you know, I understand that in the near term there could be some short-term benefits, you know, toward margin, as, you know, how much you did not cost all. How... When you think about more long-term steady-state numbers, what kind of EBITDA margin do you think you can achieve? When you look at your history, I think for a long period of time, you have been between 35%-40%, and 2021 and 2022, you broke that and went, you know, 40%, 43%. What is the steady-state number that, you know, you, you want to get in the stream?
I think we used to be 35%-40% before the COVID, and the COVID up and down, and the COVID just came again, it went up. We see a stable, probably steady 35%-40%. I think that's what we can comfortably say.
Got it. Thank you so much for sharing that information.
Thank you. Next question is from the line of Neha Manpuria from Bank of America. Please go ahead.
Thank you. My question is, so you mentioned that, you know, custom synthesis have a lot of projects that are doing very well. You mentioned the, you know, conversion of these products into, let's say, revenue monetization. You know, based on the progress that you're seeing, would you say some of the start contributing in the FY25, FY26? You know, how should we... Different, what conversion rate of which pipeline?
I think I would like to say in general, based on the strength we have in Sartans, based on the strength we have in contrast media, we should be able to see a good growth in the coming years. This kind of product to the customer, and, and that will be different to the bit among only the contrast media or the Sartans.
Got it, sir. Actually, after this is, again, I think you mentioned about, you know, it's progressing well, we should complete a lot of the different products by the end of this year. Do I hear that correctly, that most of the products will be ready for filing or would be ready for monetization by the end of this year?
Can you please repeat the question again?
I think you mentioned that the MRI contrast media products are also progressing well, and a lot of them should be completed by the end of this year. Would that mean that would be ready for monetization? You know, what is the timeline for that?
What it means is that the contrast media processes are ready for customer sampling.
Okay.
Clearance to public define. That's what it would be.
Okay.
The $2 million contrast media, MRI contrast media or gadolinium compounds, there are only few players, 2 or 3. The same thing, of course, iodine-based contrast media players also, there are only 4 in the world. Already we are in the iodine contrast media. Contrast media for the gadolinium compounds will be ready towards the end of the year. Total process with ready for scale-up. That would result, this will take, take, take 1 more year to filings and commercial.
Got it. Got it. Sir, this would be $2 billion opportunity you said, right? The MRI contrast media.
The formulations of contrast media of MRI is about gadolinium, is about $2 billion.
Okay.
Contrast media for IR is INR 5 billion to plus, maybe plus some, and growing very fast because the contrast media is used quite a bit, and there is really requirement of more, more manufacturing required right now because we are seeing heavy requirement.
Got it. Thank you so much, sir.
Thank you. The next question is from the line of Omkar Kamtekar from Bonanza Portfolio. Well, we just closed the line for the current participant. The next question from the line of Chirag Dagli from DSP BlackRock. Please go ahead.
Yes, sir, thank you for the opportunity. Sir, if I look at the last 4, 5 years, your CAGR in INR terms is about 12%, and in USD terms, US dollar terms, is about 8%. When you think of your business, you think, you know, which of the two numbers kind of broadly indicates the core, core business growth? Because if I look at your EBITDA growth also, it is inching closer to that US dollar, you know, growth rather than the INR terms. Just broadly, how do you think about which number kind of broadly indicates the core growth?
it's very difficult to say about the last 3, 4 years, because first of all, we are fortunate we are alive escaping the COVID. I think that's true with everybody. there are a lot of opportunity with reference to launch of new products of other therapeutic segments, investment into research of other therapeutic segments. the whole world looked, looked at towards a 1 point, anti-COVID drugs, that's all. They forgot that there are other therapeutic segments that would also require newer medicines. now, having COVID, either controlled, disappeared, maybe reduced, now everybody is concentrating on the newer therapies for anti-cancer, anti-diabetic, losing weight, and lifestyle medicine. Our expertise is supply more in lifestyle medicine, where they need amlodipine, valsartan.
I think we see last three, four years cannot be considered normal for any business, not only in the pharma segment, I think in any, in any other segment, because it was very unusual. I think from now, we, whatever growth we are seeing, I think we should start saying this is zero, and look at how much, how, how we are going to grow from now.
Understood. The next few years will be substantially better than the last 5 years we have experienced in reverse.
That's not optimism. I think it should be as much as fact it should be.
Understood. Okay, sir. Fair point. contrast media, is categorizing custom synthesis only, right? There is no generic opportunity, sir?
Contrast media is there in generic market also, is there in India. If you look at the volume of consumption by the innovator, the consumption in the rest of the market is much less, because usually they are connected with the instrument and supplied along with it, or dominated by the innovator. The rest of the world market is there. It is, it's not negligible, but yes, it is much less, but it's growing very fast in the developing and underdeveloped countries.
Okay. For us also, it will reflect in the generic line item as well as the custom consumption synthesis.
It will, yes.
Okay.
Depending upon the name of the contrast media compound. Some of the compound, like Iopamidol, our old product, it is also being supplied into the generic market because it's reflecting both.
Understood, sir. The two projects which you talked about in your opening comments as scaling up in this year, those were both custom synthesis products, and are these both contrast synthesis?
Yes, no. What I meant to say is that, yes, there are the custom synthesis, two projects, very large, and we never disclose what they are. Yes, for your question, I think I would say yes, no.
Okay, sir. Thank you so much.
Thank you. The next question is from the line of Cyndrella Carvalho from JM Financial. Please go ahead.
Thanks for the call, sir. Picking up from the same discussion, I think as we move ahead over the next 3 years, should we see our stock and, 3-year journey of like extra margin and all that, should we see more addition?... India from the patterns and off patent products. I'm so sorry to interrupt, but please use your headset mode while speaking, as you're watching his hand on the other. Is this any better? Is this any better? Yes, ma'am. We'll have to repeat your question, please. Sure, I will. I will. Sorry for this. I am asking that if we look at our top generic API products in amoxicillin, clavulanate, and dutasteride.
Going forward, over 2-3 years ahead, should we see more of pattern contrast media, India and, new optical products to talk out of these top products in over 3-4 years timeframe? Do you see that happening, sir?
If I understand your question right, that our top products in the generic, amoxicillin, clavulanate, and Hexachlorophene, that the number is growing where we are the major players, and if we keep happening as we are updating our technologies, it will give these newer technologies for chemistry, automatic chain chemistry. These will give lower costs and will allow us to produce large volumes, which leads, refrigerant and more environment friendly. That will allow us to be the leaders. They will add up two, three, four, five each year, and we expect a much bigger basket than what we are in now. We are not talking about new products, new generics. We are talking about the generic products where we are already in, where we are at present, and we see that they will grow. People are living longer.
As I said, we, we are more into lifestyle medicines than life-saving medicines or generic products. As people live longer, they have to use for a long time the lifestyle medicines.
That's okay, sir. If I, if I may understand this, from a 3-4 year perspective, what should we add, a goal from a top line and the margin perspective? You mentioned 35%-40% of the margin range, but again, the earlier call also you have mentioned the double digit. Should we affirm these two numbers again?
Barring COVID and any unforeseen incidences or issues of China or any other country, we should be able to see good growth, a double-digit growth. I don't want to talk too much, but we need to prove that, yes, we are on that track, and I think a quarter result towards the INR 2,000 crore plus, I think that's what will give confidence again, coming out of the Molnupiravir, where no sale, coming out of INR 200 crore of sale, going towards the INR 2,000 crore per quarter, then jumping into the INR 2,200 crore per quarter. You know, our fees don't jump. Slow, steady, consistent, and debt-free. These are our models.
That's really helpful, sir. Sir, on the Kakinada, you have highlighted in the annual report, around INR 700 crore in this by 2025, and you're looking at commercialization somewhere second half of 2025, with the intermediate and the advanced, material. Is that the correct timeline to look forward to?
I don't remember that, we did not project any sales from, INR 700 crore in Kakinada unit.
Not...
Pardon?
You took around INR 700 crore.
Correct.
By 2024.
Correct. Anticipated, when we planned the project, it was about INR 700 crore long time ago, when we said it is INR 1,200 crore-INR 1,500 crore per project. Some INR 100 crore being planned to, to be very immediate near future. It's a greenfield project. What it meant is right from boiler, clean heating, cooling systems, the environment heating plant, all need to be built. The total infrastructure, right from the administration, after the total employee situation has to be created, which would take time. We, we cannot say how much of turnover, but we know that capacity is about INR 1,500 crore. On that project, we'll be doing that. We're expanding nutraceutical, just to give you clarification, as I was mentioning, that there are more opportunities. We needed more capacity in nutraceutical.
Intermediates, we have a lot of business, and we are also looking at some of the advanced intermediates and new chemistries and APIs. This will free up a lot of our existing US FDA inspect facilities, both of them, Unit 1, Unit 2, which can immediately. That capacities are available for the custom synthesis projects from our big partners. It has a double-edged advantage.
Yeah. Understood, sir. This is really helpful. Just asking, like, from, from the advanced stage and CS center, should we aim that a formal commercialization to happen mid of FY25 or beyond FY25? That was just my inquiry.
It should be mid of 2025.
Okay. Thank you so much, sir. It's much enormous.
Thank you. The next question is from the line of Ravi Purohit from Securities Investor. Please go ahead.
Yeah. Hi, sir. Most of my questions have been answered. Just one, you know, broadly, I think you mentioned somewhere that a lot of our business in France comes from small molecules. You also speak of, you know, the new obesity drugs, where we are kind of... These are- These look like large molecules. Can you just kind of give us broad, you know, insight into how do we look at small molecules or the large molecules as opportunities going forward?
Yes, we are experts of small molecules. We are not experts of large molecules. When we say small molecules, these are the products like Nitroglycerin, Metformin, Carbamazepine, several APIs, which are produced by synthesis. The large molecules we refer to are peptides, monoclonal antibodies, vaccines. sorry. These are the large molecules where the molecular weights are, goes into thousands of thousands. Whereas usually we work with molecular weights are below 500. These large molecules, with the molecular weights of thousands, they are peptides, they are nucleotides. There also our presence is required. It's like if there is a big building of a facility, it needs the brick, mortar, cement, steel. We supply all the building blocks, the amino acids, protected amino acids, or dipeptides, tripeptides.
They will be assembled together in liquid state, and that's how the peptides will come out, which are large volume, large molecules they are called.
Okay. At the time of our IPO, in IPO, you had mentioned about the work on technologies and, you know, a lot of papers. I think last few years, not much, not heard too much about that, but suddenly Semaglutide family of obesity drugs has become very, very large molecules. Just wondering if we have a, you know, we have been working on these or these are the opportunities that you are, you are looking at the future when they become more generic products.
I'm glad you, you remember all that, what hard work we did, and we were leaders at one time, supplying lot of protected amino acids and coupling agents and protecting agents to the C twenty projects at that time. Of course, everything was silent on the peptide. Now, all of a sudden, people started on peptide. We again, of course, the few customers who are involved in this, they are trying to qualify us, and we should be in good shape to supply these after approvals and properly qualifying us. These are very big volumes. That's what we are thinking in the anti-obesity and anti-diabetes. You may, you may, you may note the difference. The reason it was not successful at that time was they were trying to give it by IV, intravenous.
A large peptide, putting it in oil and giving to intravenous was quite painful, that's how it couldn't succeed. Whereas today you are talking about these drugs, they are oral. By oral, I think it's a capsule. That is much easier.
Right. Is that like a typical timeline to this? As in, you know, process of like approvals or filings or something like that, or, how does it... Because, the opportunity is right there right now. So...
We are not doing any filing. We will be supplying them the building block. We are not doing the API. I think, we don't need to. It's not a waiting period because it's only a customer approval and we meeting customer's requirements on the individual file. That should lead to the business.
Okay. Okay. Okay. Okay, thanks, sir. Thanks a lot. 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 Choudhury for closing comments.
Thank you all for joining us today for the earnings call of Divi's Laboratories Limited. In case you need any further clarification, please reach out to our investor relations. Thank you.
Thank you. On behalf of Divi's Laboratories Limited, we conclude today's conference. Thank you for joining. You may now disconnect.