Q2 21/22

Oct 22, 2021

Ladies and gentlemen, good day and welcome to the Glenfafa Q2 FY 'twenty two Earnings Conference Call. As a reminder, all participants lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Sumanta Bajpai from Plant Pharma. Thank you, and over to you, sir. Thank you, Mahdi. Good evening, everyone, and warm welcome to Glyn Pharma's earnings conference call Q2 of financial year 'twenty one, 'twenty two. I have with me Mr. Srinivas Sadu, Managing Director and Chief Executive Officer Mr. Ravi Shekhar Mitra, our Chief Financial Officer, to discuss the business performance and to answer queries during the call. We will begin the call with opening remarks from management followed by Q and A session. Before we proceed with the call, please note Form the statements made in today's discussion may be forward looking, and this must be viewed in conjunction with the risks and uncertainties involved in our business. The safe harbor language contained in our press release also pertains to this conference call. This call is being recorded and the playback shall be made available on our website shortly after the call. The transcript of this call Will be subject to the stock exchanges and made available on our website as well. I will now hand over the call to Mr. Sadu For his opening remarks, thank you and over to Mr. Faroo. Thank you, Sumota. Good evening, everyone. Welcome to our earnings call for Q2 of fiscal 'twenty two. Wishing you and your family good health. After nearly 18 months, life finally seems to be getting back to normalcy. We had stable manpower availability during the quarter. Some of our equipment vendors were able to travel into the country, and that helped us complete the installation of new lines. Our capacity expansion is coming along in a timely manner to support our future growth. The surge in computer demand across industries was unanticipated And resulted in shortage of power in certain sections. While we saw power shortage resulting in power cuts in China, in India, the supply of power remained Relatively stable, but the industry saw rising prices of power and transportation. We may have seen delay in supply of certain raw materials from China if there remains a prolonged shortage of power. However, we maintained sufficient level of inventory of raw materials. On the R and D front as well, we made good progress As we completed planned submission batches for complex injectables to be filed in this financial year, we are on track to make 4 complex injectable filings in this financial year. The other development projects are also running in line with the plan. We delivered a strong performance this quarter, Q2 FY 'twenty two with a revenue of INR10805 million, that is an year on year revenue growth of 30% for the quarter Q2 FY 'twenty two is well taking also a growth of 30% for the 6 month period first half of FY 'twenty two over H1 FY 'twenty one. With a PAD of INR321 1,000,000, we saw a year on year PAD growth of 38% for the quarter Q2 FY 'twenty two, The royalty also broke up 23% for the 6 month period of H1 FY 'twenty two over H1 FY 'twenty one. We have generated RMB 2,355,000,000 of cash flow from operations for the 6 months FY 2022 despite external stress on supply chain. We continue to focus on revenue diversification across geographies, which is helping us further improve our manufacturing efficiencies Because of benefits from scale as well as de risking the business, we are ensuring that we absorb any declining gross margins by benefits from scale on the operational front, Thereby, maintaining healthy profitability. We have entered into technology transfer agreement for Sputnik Light as well and also completed 3 submission batches. That could be 3, we have completed submission batches for the 1st component, AD26, and technical batches from 2nd component, AD5, with improved yields. As soon as manufacturing license is received and export restrictions are removed, we will initiate manufacturing. We opened our new R and D center and expanded our R and D team having capabilities in development of complex APIs. Our R and D expenditure for Q2 FY 'twenty two was RMB578 1,000,000, which is nearly 5.3% of our revenue from operations. Upon excluding capital R and D expenditure, the R and D expenditure stands at 3.3% of our revenue for the quarter, which is in line with our historical trend. As of 30th September 2021, we along with our partners have 2 91 AMDA filings in the U. S. And 15/30 2 Product registrations globally. Let me take you through the business highlights across various geographies. Our rest of the world markets business continued to show strong demand for our Core portfolio. This business accounted for 21% of our Q2 FY 'twenty two revenue as well as 18% of our Q2 FY 'twenty one revenue. We have seen 50% growth in revenues for the quarter. This has been driven by new product registrations and increased penetration of existing portfolio, Especially from markets such as Brazil, Saudi Arabia and Thailand. Our existing portfolio has seen strong demand for new partnerships enter into during the year. Our key markets, namely U. S, Canada, Europe and Australia accounted for 62% of our revenue during Q2 FY 2022 As against 64% during Q2 FY 2021, we have seen 25% year on year growth in revenues for the quarter, It's a function of both healthy rate of new launches and volume growth in growth portfolio. On including India sales for our core markets, The year on year growth is at 27%. With declining COVID-nineteen hospitalizations, we observed a shift in product mix. Our wide therapeutic portfolio helps us to sustain growth despite changing market demand. Our rich R and D pipeline He's helping us maintain strong momentum of new product launches. We launched 12 molecules in the last quarter We filed 5 NDAs and received 5 ND approvals during the Q3. We also filed 3 DMS during the same period. India market accounts for 17% of our Q2 FY 'twenty two revenue, out of which 9% accounts for domestic market sales And 8% accounts for Indian sales for export markets. We have seen 19% year on year growth in revenues for the quarter on account of volume growth of existing products Like enoxaparin sodium and heparin sodium injection. With COVID hospitalization coming down, the line for our regular critical care products is on the rise. While this portfolio has not gone back to the pre COVID levels, but it's looking positive. Our near term focus remains on establishing the strong portfolio of complex Injectables For which, while we are having an insurance program, we are also looking at acquisition opportunities to help expedite the development process. Installation of new lines, catering the suspension from partner products have been completed. Biosimilar CDMA is the next long term growth driver we are working towards. While your experience with vaccine collaboration has helped us gain the know how and accelerated creating facility and technical team, we are also looking at opportunities to collaborate on the biosimilar front to build a pathway to cement our position in the future. On the quality and the VSP front, all our Plans continue to remain approved by year of the year. Our customers are conducting audits, renaming, and our team continues to remain prepared for any audit. We try to continue delivering strong results for all our stakeholders. I once again wish everyone good help. I'll now hand over the call to our CFO, Mr. Ravi Mitra, who will share some more insights about the financial performance for the quarter. And thank you very much. Thank you, Mr. Salim. Good evening, ladies and gentlemen. Thank you very much for attending our Q2 earnings call. Our earnings presentation has been submitted to the stock exchanges and is also available on our website. Let me begin with sharing the financial performance of second quarter and first half of financial year twenty one-twenty two. Revenue from operations for the Q2 FY 'twenty two stood at between RMB10,805,000,000, a year on year increase of 30%. We achieved robust growth across all markets with our core markets U. S, Canada, Europe and Australia registering 75% year on year growth in ROW market continued to demonstrate a healthy 59% growth. The growth in revenue was driven by a mix of new products and growth in existing products. Revenue from operations for the 1st 6 months of fiscal 'twenty two, INR 22,344,000,000, Year on year increase of 30%. Other income for the Q2 was INR 512,000,000, This includes interest and fixed deposit of INR 352,000,000 and foreign exchange gains and operations of INR 158,000,000. For the H1 FY 'twenty two, the other income was INR 1130 million, of which interest on fixed deposit was RMB691 1,000,000 and foreign exchange gains on operations of RMB435 1,000,000. We have reported an EBITDA of rupees 4,278,000,000 in Q2 FY 'twenty two Compared to INR 3,181,000,000 which is an increase of 35% compared to same period last financial year. EBITDA margin for Q2 FY 2022 stood at 38% as compared to 37% for the same period of previous financial year. We have managed to improve the EBITDA margin in spite of increasing operating expenses such as power and logistics, Primarily due to higher operating leverage achieved on increased capacity utilization. EBITDA for the 6 month ended September 2021 was INR9259 million compared to INR7628 million for the same period last Growth of 21%. We have reported EBITDA margin for H1 FY 'twenty two at 39%. Our net profit for Q2 was INR 3,021,000,000, a growth of 38% compared to Q2 FY 'twenty one. During the quarter, we have recorded PAT margin of 27%, which is an improvement of 100 bps compared to same quarter previous financial year. During the 6 months period of the current financial year, our PAT was INR6527 million, which is an increase of 23% as compared to last year. To further expand R and D capabilities, We have commissioned our new R and D facility during this quarter, which is located at Pashim Aladdin. The total R and D expenses for second quarter were RMB578 1,000,000 including the cost of this new R and D center of RMB211 1,000,000 and stands at 5.3 percent of revenue. Excluding this cost of new R and D center, our R and D expense remains at 3.3%, which is in line with our plan. The total R and D expense for the 6 months period was INR1015 million compared to INR482 million during the same period of the previous financial year. Our effective tax rate remains at about 25% in second quarter and for the first half of the current fiscal year. Cash flow from operations during 6 months period was INR 2355 1,000,000. Cash flow from operations has come down during this period due to higher receivable and inventory levels. Working capital increased and so that rupees RUB 20,334 1,000,000 as on 30th September 2021 as compared to RUB 16,054 1,000,000 As on 31st March 2021, driven by growth in our business, average cash conversion cycle Stood at rupees 198 days for the 6 months ending September 'twenty one as compared to 180 days of same period last financial year. We have maintained similar range for receivable and payable days compared to previous year. But due to increased inventory, our overall Cash conversion cycle has increased. All our planned CapEx plans are progressing well. Total CapEx incurred during 6 months of 2021 was INR 3,286,000,000 used for increasing capacity at our Pashmiral item And BYDAG API facility, our new R and D center at Kashmiralind, our biosimilar and vaccine manufacturing facilities in Hyderabad and for routine maintenance CapEx. Our ROCE on ex cash basis was at 35% On an annualized basis for the 6 months period of this fiscal year, OpEx asset turnover stood at 3.4 times for H1 FY 'twenty two, Increased from 3.0x for the same period last full year due to increased capacity utilization. As of September 2021, we had total INR29,822 million of cash, which we intend to utilize for the CapEx plan and to fund our inorganic growth strategies. With this, I would request the moderator to open the lines for questions. Thank you. Thank you very much. We will now begin the question and answer session. Participants are requested to use handsets while asking their questions. The first question is from the line of Sonal from MT Global. Please go ahead. Good evening. Thank you for the opportunity. So my first question is on the profit share component. So we are aware that it was somewhere around 8% in FY 21. Can you provide some more details in terms of how historically that segment has been for us for the last 3 to 4 years? So our profit share component So our profit share component was around 8% of revenue in FY 'twenty one. But historically, let's say in FY 'nineteen, FY 2020, how that has moved? What was the proportion? Okay. Sorry, Kanika. And it all depends on how many products that's launched in that particular year, normally And how many are new products which are launched in which we expect? For normally, it falls within 80% to 10%. Sure. And is it fair to assume that majority of that gets generated from U. S. And North America? That's correct. Sure. And the last one on that. So as you alluded that 8% to 10% Subtulates with the new product launches. So is it again fair to assume that generally a good portion of that 8% to 10% comes on the new product launches? No. Even for the new old products also, the profit share component is under there, right? So for the Ola products, the profit share might go down over the years because of the once the product gets more competition identified. In terms of debt covered by the nuances, what we do, where the profit share companies normally Sure. Thank you. Thank you. The next question is from the line of Shrey Jain from Iroha Investment Management. Please go ahead. Good evening. Thank you for the opportunity and congratulations to the management for a great set of numbers. I had two questions. The first one was I wanted to understand the ROW market has been growing fantastically for the company. Just wanted to hear from you on what is your steady state view in terms of geographical spread. So here we had started at about 65%, 70% of U. S. We are about 54%. Likewise, for ROW, we were somewhere in the range of 15% to 20%. Now we are over 30%. So how do you see that in the next 2, 3 years going forward? Because of the lower base, you are seeing, I think, The growth rate on a higher percentage, but overall basis, it's still our core markets is contributing about 61%, And the RNW conference was about 21%, which is higher than 18% for the last it's only compared to the last quarter of the last year. So overall, I think it will stabilize over a certain period of time once a day, it's enormously. And the reason why it's going fast is, of course, historically, we didn't have enough capacity to cater to other markets well, we had registrations across the globe. We are focusing more on our capacities to the U. S. Market and the regulated markets. Now with the new facility tidings up and new lines coming online, we are also expanding our portfolio to other markets. So while we're leveraging the old registrations, we're also the products what we are registering in U. S, the newer ones, have Great opportunities in other markets where the margin profile is really better than the older products. And that's one of the reasons why also it's helping the products to grow in other markets. So it's fair to assume that this 59% kind of ROW growth will not continue over a period of time? Any particular range where this would end up stabilizing at? So still, the total as a company revenue, we're looking at ROW to stabilize around 40%. We're still at 21%, right? So still a long way to go. At what rate, it depends on how many products we're able to move From the U. S, what are getting registered there. But I think our own internally, So 5 year should get to the level where it should be to better 40%. So the growth might vary from a quarter to quarter depending on the approvals of Got it. That's clear. My second question was on the movement in working capital. I So there was some increase in trade receivable. Is that just a period end adjustment? Or is there if you could give us any color, because last year, I think the number was around INR 46 crores. Now it's around 370,000,000,000 in fact, crore. Yes. It's more to do with the timing of the sales. I would say, if you see the Preliminary part of this quarter, the logistics were a little difficult. So the sales happened in the second half of the muffin sales happened in the second half thought the one was the availability of the containers and concern back then. Also, it was more expensive, so we're waiting for that So let me settle down from the pricing perspective so that it's not impacting margins. So most of the sales are not due yet, But it will stabilize within the next quarter because of the delay, I think, the late growth that happened. We are seeing this. Got it. Thank you, sir, and all the very best. Thank you. Thank you. The next question is from the line of Taran Agrawal from Aldrich Capital. Please go ahead. Hello, sir. Good evening. Just wanted to check, sir, is there an element of seasonality in your core markets business? Not much, I would say. Of course, it depends on the portfolio we have. It's a concentrated and a certain Set of portfolio, you will see the seasonality, but we have breadth of portfolio. So while some of the products sell more During October to December, this time frame may be more effective. But otherwise, it's spread across the year. Because I was just wondering, on a sequential basis, the sales in the core markets have been softer. And I noticed this In the last Q1 to Q2 last year as well? So I mean, as you see, the larger products in anti infective, right, whether it's microphones, DASM X, these are the larger products compared to the other products. And this adds larger revenue to the revenue percentage. That's why you see this. So few products are adding to that number increase. But otherwise, overall, it's okay. But I think some of the products which are contributing more Sales mode being October, December, Jan to March that timeframe. That's why you see that bump a little bit. Got it. Got it. Thank you, sir. Thank you. The next question is from the line of Achal Pade from Investec India. Please go ahead. Yes. Is this Nikka? There's a lot of background noise, sir, but you can mute yourself while the management gives the answer. Yes. My question was on the complex So as it is an area of focus for us, so would want to understand more on what sort of complexity are we talking What's your like is going to be the target? Is it going to be the complex UPI or the formulation or the complexity around the device? So if you can give some color on If you look at the total basket, the complexity varies from product to product. Some products, the KPIs are difficult, some are formulations. So it's a complex and some are like dosage form itself And somewhere, Dina, can you tell us just the combination of everything? So if you look at our 17 products which we have taken in the 1st phase, I would say It falls into 3 or 4 different categories. What we are firing now is complex in APIs and also in characterization And there are products in suspension mode. They also need a biostudy. So it's not like one product, One complexity for all the products, but it's a mix of everything. Okay. So just to follow-up on this, Is it time bound? Like is the strategy more about time to market here? Or would be the second, third, fourth year here, but Given the shortage or we are planning to jump on the costing side, what will be the strategy behind the complex portfolio? I'm sorry, could you repeat that? There's a lot of disturbance. So, like as other companies are also targeting some of these complex I wanted to understand, is time to market a strategy here? Or would Posh would be our focus here, being the low cost manufacturer and gaining market share. One is, of course, it all depends on the capabilities what every company is looking at. While planning, of course, there's also complexity in manufacturing. There's a complexity in development and the cost as well. So we're also working on internally on certain APIs, which are complex. So that kind of gives you an advantage. And you're creating an infrastructure and these are the products where not too much volumes you could see. So not everybody will go and put up a plan to do this. Since we are in the CDMO space and we are a big to go business, We are listening to that. So this also adds up more business from other partners who are only developing products but going outside to get that manufacturing done. So this is just not for our own products, but by creating the infrastructure to develop our own products, we're also creating a space for other companies to leverage our capabilities To develop a non state product. Okay. So and one last on the ROW market. So We have expanded our footprint into 2, 3 new markets, which has driven growth. So are we looking to target More newer markets or the growth for the next couple of years is to come from deeper penetration into the existing markets? It's a combination of both. Now that we got entry into these markets, we'll expand our portfolio more into this like we have done historically. Some of the markets were very strong. It started off with 3 of our products, but you see 15 products selling in some of these markets. So the same strategy will add up because once We get up we have planned to fill by certain regulatory agencies from a country. It's all the more easy to get more products into that country. So and then we are also looking at Getting into countries like Mexico, where we sell the products, where there's a lot of opportunity left. So we see There are obviously in other markets also, but we are independent in those markets as well. So would these be equally competitive As U. S. Market is or could you give some comparison in pricing competition compared to the U. S. Market for these bunch of ROW markets? So as you see, most of the products, what we are selling in other markets, products which are Which have better competition and better players, which are little bit more complex than other products. That's where we are focusing on in ROW market so that we are not compromising with the margins. Okay, sir. Thank you. Thank you. The next question is from the line of Nithya Balasiramanan from Bernstein Research. Please go ahead. Thank you. So first question is on Sputnik. So did we hear you say that both for AD26 and for AD5, You've actually reached validation scale? That's correct, yes. What would be the steps from here to commercializing the product. So initial idea is to do focus on spudip like, That's where the demand is coming down, especially outside India. So 1st few months, we are trying to manufacture specifically, right? I suppose that we'll shift to the specific rule. But the 2 limitations, one is, of course, The export embargo select this, they are giving special permission for NOCs Once you apply, one of the companies received it. But there are the challenges on that registry front, screens particularly that is not approved in India. We are ready to do Q2 trial now and we are expected to finish off by this month end. So hopefully by November, both in terms of export embargo and clearance on the licensing hedge Should be cleared. So we are estimating November as the month which might give clearance for exports. That's when we start manufacturing. Understood. So if Sparkling Light is what you're going to manufacture first, does the deal still remain 250,000,000 doses or are you likely to go beyond that? No, the deal still is a combination of The second one is on the biosimilar or the biologics CDMO Opportunity that you were talking about, what sort of capacities do you have in mind? What kind of capacities are you going to create? If you can tell us a little bit about what do you think is grand right to win in this segment? As of now, we are creating capacity of I think, Pacific area capacity is being created At the substance side, which we have actually created for the vaccine and then it's getting expanded to the CDMO for the biosimilar space. And that we'll start with. And while we are discussing with companies and if we have enough The size of the plan is enough. If you need, we can actually expand more. That's where we're going to start with. And from the deal perspective, We are talking to companies within the sourcing framework and trying to start up with Then to initially launch some of the substances from the Indian side. And then in parallel, I work with other players because more and more we are seeing the interest coming from lot of generic as well as innovative companies Trying to creating a portfolio and extending the biosimilar portfolio and trying to get into companies like us For the clinical batches, for the trial batches and as we go into the commercial batches. Got it. Is there a kiloliter or a liter number that you can share in terms of capacities? So the capacity what you're creating is about 60 ks, that's what we said. Is that the question? Yes. Yes. No, that's helpful. So I was wondering if there are plans to expand it, but that's where I'm assuming that's where you'll start and then see, then expand later. Thank you so much. All the best. Thank you. Thank you. Thank you. The next question is from the line of Tushar Manu Danik from Nushalal and SaaS Financial Services. Please go ahead. Thanks for the opportunity. Sir, on the core market side, for the past 6 months, you have launched almost 24 molecules. But on the quarter on quarter basis, we do see some reduction in the sales. If you could throw some right there. So it all depends on the size of the molecules that we have launched. See, if you see, last year, the big product got launched. So you're comparing with a product like microfungi and Daphne mentioned with the big products, Which is one of the leading products for us. We got launched that last year and previous to that. So you're comparing those where the products what we launched now with the smaller version. That's one second. We can't really go with this 'twenty one and now because of complete different way this portfolio has worked. So once the complete shift happens, it's getting 100%. The post COVID, I don't think has happened 100%. The shift is the setup of the portfolio. So once that happens, then you'll see a Difference in terms of the revenue breakup between the molecules. So you're still seeing some traction on account of COVID, Which probably may assuming that now that the case is reduced, so it will die down in the coming quarter? Yes, we're already seeing that. So it's moving next quarter, we're seeing actually most of the products which we're selling pre COVID are coming back. And the COVID related drugs, which we saw in the Q1, especially in the year in the revenue market, it's not coming out. The U. S. Has gone away. So I would say we are at 70% level in terms of most of the portfolio. Currently, what we see in the coming quarter as compared to the last last quarter. Got it. So just secondly on this, any update on U. S. Feet inspection given that we do have good number of products in the pipeline which are under shortage, so that kind of should have triggered U. S. F. T. Inspection. We have not heard anything from them yet. Our inspection was in September of 'nineteen. What we are seeing, they are visiting the sites. What we also hear is they are visiting sites where they have earlier Issues or under warning letter or within sites where they have a CAI. So Since our sites are already approved and most of the lines are already approved, maybe you're not heard something, but it's part of life, right, I mean, as being the approved plant. So we get up for that and whenever we hear, we are to face it. And just lastly, if you could just explain this R and D capitalization For the quarter? Yes. So just to clarify, Usha, that we don't capitalize Any revenue expense? What in this quarter, we have opened a new R and D center. And post commissioning with The building and equipment, everything which is sitting in CWIC has now moved into fixed effect. And that is the amount of RMB 2 $11,000,000 But I remember that our R and D expense and the revenue is similar to what Our plan in Malay, quarter is around 3.5% to 4%. Got it. So this again so which effectively mean this is more also kind of a onetime Yes. This is one time. Once the now the equipment and R and D building in the new fund has been capitalized, it will not be again Got it. Thank you. That's it from me. Thank you. The next question is from the line of Fiona Chan from Berenberg Capital Management. Please go ahead. Hello. Good evening. Thank you for the opportunity. My first question is, I think last quarter you mentioned many of your U. S. Customers were facing high inventory levels Due to stockpiling and lower elective procedures, I wanted to check how are your customers' inventory levels now? And have there been changes in customer ordering pattern since COVID? Thank you. Yes. We are seeing that and in fact some of the products are getting the drug shortage situation where We did hear from FDA on certain products. There are also some customers coming out with Some emergency orders because whatever stockpiling happened in U. S, one either sold off or got into that expiry mode. So there is a shift and yes, there is a change in the way the order is acting now compared to last quarter. I see. And would that translate into lower margin for you, due to emergency shipping and higher logistics costs? No, not really because the logistic costs are already there. You could see last quarter also the costs are on the higher side on the logistics side. So it's already embedded in the product supply. I see. And earlier you mentioned there were some logistics issues and delays. Are these related to shipping to the U. S? Or are they also related to sourcing from China? Mostly shipping out, especially the initial part of this quarter. Now it's kind of stabilized. I think I would say August July, August timeframe, there was available containers for the problem, but it It's quarterly on at the later part of August. I see. And to follow-up earlier on the sputumab vaccine, So am I correct in understanding that the production of Sputnik Light also satisfies Your requirements will be RFID on the take or pay contract. So you can produce either one and you would satisfy the terms. Yes. The quantity, what we have agreed with them includes this as well. Okay. And do you have any updates on opportunities in China? So we have filed 1 more product this quarter. So 7 products have been filed now and hopefully we should get we're estimating approvals 1 of the products either this quarter will be Q1 of next year. Okay, wonderful. Thank you so much. Thank you. Thank you. The next question is from the line of Anil Chastri from Hybom Technologies. Please go ahead. Thank you. Thank you for taking my question. Sir, I wanted to know some clarity on the margins going ahead. What What is the trajectory and what would be the key drivers that will help margins to either move up or if It is expected to remain at similar levels going ahead. And the second question I have is the competitive intensity In the injectable space is likely to go up, considering a lot of Indian players are entering in this market. So how do we plan to protect Existing business from such competition, are we looking to do more long term tie ups with hospital, etcetera? Or the backward integration is the key? Thanks. So I think, one is on the competition side. We only see that as an advantage for us because we can actually license our products to BV companies as well. Any company who are entering the, they not have a larger portfolio like what we have. Being the B2B player, every new player coming there actually creates One more opportunity for us to like this product today. So unlike a front end player, our being a model is different. It kind of helps us in spreading our portfolio across more companies. And in terms of margins, we still Estimate to be around 37%, 38% of EBITDA. I think we're able to manage that. In spite of the logistic cost increase and the power and the operation that we had selling More units. And if you look at our business model itself, it's spread across Different thoughts, right, whether it is licensing of doing a tech transfer from other companies to us or whether it's being a contract manufacturing. So I guess it will be every quarter. So while there could be a pressure on margin, which as a B2B company, we absorb little Later on that because it is mostly taken by our content partner. But whatever number it hits us, we are able to Compensate that by doing more volumes because we supply products to different partners at particular. Sure. Thank you so much for taking my question. Thank you. The next question is from the line of Sonal Gupta from L&P Mutual Funds. Please go ahead. Hi. Can you hear me? Yes, sir, you can hear me. Okay. Thank you. Thanks for taking my question and good evening everyone. So just wanted to check, 1, on the India business, I mean like is this service run rate sustainable now or do you see further I'm sorry, you're not audible at all. Is this better? Yes. So just on India, I just wanted to understand that is this I mean the quarterly run rate that you've done this Quarter, does that still have some contribution from COVID? And or do we see this as a sort of a sustainable run rate? No, there's no actually there's no COVID sale at all in Indian business. If you see our Indian business, that is the combination of our own sale to The content business in India. And it also has a complement what goes to the U. S. Through Indian partners. So if you specifically look at the Indian business, what the selling region market is kind of setting down to the previous growth rates. Got it. Got it. So ideally you're saying that the 8%, I think should be actually counted as a part of U. S. That's correct. Okay. And just Again, on ROW, I mean, like there was you did mention last call also there's some contribution from COVID related products as well, But we're seeing that the sales are sustaining at that level. So should we assume that this is sort of that COVID should not really negatively impact this going forward? Even other markets, like I said, while during COVID, we started supplying some COVID related products. The ministries have actually opened our product portfolio there. They've registered other products as well. And actually we started supplying other products, which are just only normal course of time. So in that way, it also helped us We're pushing some of our products into the market and there we never sold any product. Got it. And Just on like in last quarter, you mentioned about in terms of current contracts in the U. S. So have those started and have those ramped up in this quarter? Or do you Fee for the ramp up. You'll be seeing from October to December the major ramp up happening from the next quarter. So this quarter, it's not been, I mean, like that meaningful? I mean, just trying to understand. No, no, not that meaningful. Okay. And just lastly, I mean, your comment on gross margin, I mean, like you mentioned that you're offsetting it with operating leverage. But just trying to understand, so this gross margin pressure is and the raw material cost pressure is more a function of product mix Or it's I mean across markets? Or is it a function of increased raw material cost? Or I mean like I'm just trying to understand what is The reason for gross margin I mean the raw material cost going up further? So our gross margin Conference is a little different than other companies, right? Because if you see our gross margin, it's a combination of our own product sales, a combination of contract manufacturing and the combination of the tech transfer. As you see, my gross margin on a quarter to quarter basis, it changes Depending on the mix I sell, if I sell more of contract manufacturing if I do more of contract manufacturing business, it's 100% gross margin because we don't There will be materials. If I do more of that, then currently my gross margin looks very high. And my test plans are again, some are pass through and some are not pass through. So it all depends on the mix of that and also mix of market by selling products. So it's not a like to like situation Like other companies, they're selling their own product. It's exactly the market where the gross margin is excluding the materials. For us, because of some business model, it's not the right indicator of the price pressure and the cost involved in it. But there is increase in domestic cost It contributed. Now I'll talk about the EBITDA level, probably around 1%, net debt is better off because of now by higher In the last quarter, so there was an impact of 1% at EBITDA level because of the logistic cost. But for the input materials, we didn't see much difference. If you see if you request on our purchases, especially from the API front, only 30% of home materials are imported, 30%, 40%. And there's no maybe difference on the cost of those materials. So from a material perspective, it didn't have much impact. It's only impact was in logistics and powers and the diesel. I think that's what it contributed to impact and that's about 0.8% to 1% at the retail level. Got it. Great, sir. Thank you so much for that detailed explanation. Thanks a lot. Thank you. The next question is from the line of Sushmit Satodiya from Mizuhal Aswan, AIC. Please go ahead. Yes. Hi, good evening. My first question, while you alluded to it at the beginning, your operating cash flow conversion is about 35% for the first half And the historical average has been about 70%. So would we reach to 70% by the end of the year as well? Or is this year going to be a little different? Yes. So a couple of factors for that. One is that what we were discussing that There was a lot of development in the first half of this quarter, which kind of pushed down the sale to later Months of this quarter. That's right. The COO has got increased. There's no overview or anything, but it's just for the timing of it. The other is the inventory where we have been restocking, considering the planned launches we have and as well as the No, enough screen contract. So once that starts inventory shift to the customers, that is Expect it to go down. And by the end of the year, we expect that to come back to our normal operating level of working capital. Got it. And then Sushmit, as you see now, I'm a fast growing company where you're growing at 30%, you also need to catch up with inventory, right? So when you calculate the inventory, it's based on the history that we are gearing up for the next growth for the next quarter. So your inventories are 30% higher than the previous. So that's a delta and that's a problem with the growing companies, right? Yes, yes, Absolutely. The second question is what would be the risk of the Sputnik contract not getting fulfilled. I mean, what are the risks that one should be mindful of? See, I mean, I believe even if you supply 20,000,000 wires or even 15,000,000 wires, We get all the investments that we made on the infrastructure and the materials of the ball. So that way I won't see a big risk. That's one second. The whole idea of getting into this is working towards the biosimilars in the space. So the plant is there and we are creating the infrastructures, keeping in mind the long term growth index in this space. So this is more getting into the space and we took this opportunity so that we fasten our entry into that. What we wanted to do with 2 years down the line, we did it now because there's an opportunity to earn cash when the tax margin will be paid. So I don't see that as the loss for us. It's an investment we made. 1, looking towards long term growth. 2nd, learnings what we get from doing the technology transfer happening for the vaccine project and creating a team who has these capabilities and the experience you're getting from it. Secondly, some investments on this specifically for this project is very limited, I would say. And we are very confident that whenever it starts, even if you Do half of what we have signed up for, simply will be available now. And just to sorry, on this point, there is no take or pay penalty on RFID, right? I mean? No, no, no. There's no penalty on that. There's no penalty on that. Okay. Thank you so much and all the best. Thank you. Thank you. The next question is from the line of Bhagavatharejha from ASA Investment Managers. Please go ahead. Yes. Am I audible? Yes. Yes. Yes, sir. Yes. Good evening. So the first question is around your U. S. Business. You have 244 approved. Hi, Najash. Can you first clarify as to whether all of these are in the market? Have you commercialized all of these? Or what proportion have you seen commercialized? If you actually break it down into molecules, that's Here to start is, the Q4 end is, I think the 13 molecules, if you see, they're about 153, right? And we have launched about 106. And there are tentative approved products above the level. And what we have not launched was approved, which will happen in next quarter is around 14 products. And there are also some tech cancer projects. And there are so I would say out of this, what are launched, out of 1 to 2 molecules, 106 And there are plenty left to about 11, so 170 have gone there and then there are few more products we have to launch in next few quarters. Okay. And the 47 pending approvals, would in molecule terms also be Regarding the question or a different figure? From the molecule level, it's around 22 molecules. Right. So I mean, for a layman like me, if I do a very simplistic sort of an exercise, SEK 47,000,000 pending On a base of 244, although you've already clarified that there are some TAs in pending numbers, If one were to assume that the revenue potential is somewhat better given that there might be complex timing there, It would still look like the pending lander is Around 20% of the base of approved lenders. While it might It might be wrong on my part to look at it in such a simplistic format. Could you give some idea as to what sort of growth potential these 47,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000 So the trial and approved products, if you see the market size is about $4,000,000,000 And what we have approved Already it's around RMB11 1,000,000,000. So that should give you an idea. So RMB11 1,000,000,000 is a true product and around RMB4 1,000,000,000 is filed and waiting for a true product. Okay. And would it also be reasonable to assume that these products have From a competitive standpoint, they are relatively more complex. Market formation would be more in your favor and Yes. So if you see around $11,000,000,000 what we have approved, So we said about RMB 3,500,000,000 is 2.20 gigawatts of new advances waiting for either the product accessories and have Yes. Particular product launch date or waiting for the payment expiry? So I can't really comment on how difficult are these Yes. And how many players will be there? Because like someone was seeing so many players are coming into the I can't really tell who has filed what. But again, these products, we have a breadth of portfolio and we've been in this for long. So hopefully, we should continue the growth and margins that we're showing here. So the right way to look at it is that Actually, you commercialize $7,500,000,000 worth of total addressable market and you have another $7,500,000,000 that is 4 plus 3.5 Left to commercialize, right? Am I correct? That's excellent. And this could happen over what time frame? Probably 3 to 4 years, probably. Okay. 3 to 4 years. Right. All right. And again, if you see the you see the current timeline currently it's faster. If you see a year ago, if you look at our trend in year, it was very high. And they're getting many customers in 9 months to 1 year as we speak. We got one yesterday. So it could be faster also because of So, Naomi, we are doing a catch up to find those products. And that's where our efforts have gone when you're saying you have created this Additional R and D center and creating additional teams is to even catch up with the total speed which we are getting now. So historically, we will be looking at 20Q 'twenty four filings. Now we're seeing how to increase this quick 40%, 50% so that we can get more approvals in a quicker time. Okay. And secondly, on the ROW business, Is the receivables and inventory profile similar to your regulated or U. S. Market? Our cost is very different than if it is. So could you give some idea to what extent? So the retail time is little longer than the U. S. I think it's around 120 days. It's around 120 days. Until I think it's around 120 days. It's around 120 days. Compared to 60 to 80 of the regulated market. But in terms of the payment received and all that, the companies whom we are entering the contracts are mostly Mylan sales not our product in Some countries, Fresenius is in some countries. So we're looking at extending those relationships to other markets so that one is relationship with those companies will grow, other is Business is more standard than one offs. And secondly, we're getting into contracts with companies who are leaders in those markets, because not every product can be sold by everyone. So we're not trying to sell all these Genesis products. We're looking at the margins. And some are like most of the companies have retail market and where their subscription also helps. So we are entering contracts with those companies. We are calling financial background. And the fixed asset turnover, which you indicated is now at 3.6 for you. What could be the peak that you could see on your current gross block for that? So this will further increase when we Start commissioning the existing additional lines which you are putting up in Pashminarayan. So There is ARMY Efficiency line which is coming up, and there are LYO also which is contributing installed. And there is also PFS line, which is coming up. So I'll put together, I think in next year, it should go up further as we apply further capacity. Anything ballpark number to understand the utilization levels currently? Utilization, I know it all depends on which line and which Product we're doing right. So if you look at our patent synergies, it's only around 50% to 60% That's your question. If you look at our some of our wireline is almost running at 80% to 9%, but we also have just added new liquid lines. So overall, I would say around 60% to 65% capacity evaluation. So we still have enough capacity I could go up the next couple of minutes. And when you speak forward to look out 5 years from now, You had given a fair bit of idea of how the U. S. Market will evolve and how the ROW will evolve. If you could give some idea of your aspirations around biologics in China, Both China from your filings and also possibilities from the Fosun Group For us to get some understanding of the prospective size of that opportunity in a 5 year time frame? Are you doing the China market? Yes. China plus biosimilars, both. Biosimilars, we are not developing products and so unlike companies who are working on development of products and marketing, We're only doing on the CDMO side. So it's too early to comment on how large that business will be. But there's almost like The market size is around $30,000,000,000 $40,000,000,000 The biosimilar Okay. Sorry, the $12,000,000,000 to $13,000,000,000 is a CDMO biosimilars business opportunity. So that's where we are entering in. We are not into developing products and licensing those products yet. So we want to work with companies. So looking at Leveraging our substance and finished capabilities. So from China engine, I think we get Converse continues to come with the portfolio and we target it in 4 to 5 years, we want to have at least 10% of our revenue coming from that market. In China, the business economics would be quite comparable to what you currently have The product is that way. We are looking at company products which are completely innovative kind of products in those markets, Not the normal product. So the production is happening like that and the margin profile is far better than any other market. Okay. And the virus immunos capacity you indicated is around 60 kiloliters. I understand everything is down to product selection And you know contracts from CDMO, but could you give us some sort of a Very baseline understanding of what that translates into from a possible revenue potential. I'm not asking for a fixed Number, but maybe a band within which we could understand at optimal utilization where what sort of potential that 60 Again, it's very difficult to tell. It all depends on which Customer, which product and how much utilization they take. I know it's completely What do you call any number I say is not real. So why say a number? So if I flip the question and say if you could give me the idea of what's the investment That's gone in. And what sort of is the fixed asset turn on that investment going to be very different from What you have are materially different or comparable to what you have? So I know I can answer in this way that the investment which we are making in this Biosimilarsi, DMO. Our sales are also with the franchise partners, but that could ensure that we look at IRR of At least 20%. And that's how we take an investment plan. And what is the investment size here? Let me let you know the obvious answers once we Go ahead, Anders, Yanmi. Thank you. I would request Mr. Sarita to rejoin the queue for follow-up questions. The next question is from the line of Sain Mukherjee from Nomura. Please go ahead. Yes. Thanks for taking my question. Sir, you mentioned about ROW market going to around 40% Over a period of time, can you give some color as to what would drive it? I mean, how much would there be from new markets like China? And how much would be from your existing markets? And the second question is if you can also share The contribution from new launches in the first half of this fiscal year? Yes. For China, we're looking at 10% of the revenue contribution in coming years and then the rest 30% from the other markets Can you give a break up? That's what we're looking at. And in terms of contribution of non sales, it's around 9%. 9% of your H1. 7% of the revenue came from re launches in the first half. Okay. Just one more question. You mentioned 8% to 10% is the profit share. I mean, Firstly, like is it the same number for this half or I mean the first half also? And is there any concentration risk there like Half of the profit share coming from one product or something like that, if you want to call that out? No, sir. It's spread across different products. It's not 1 or 2 products, different customers and different And it's around percentage wise, this quarter is around 8%. 8%. Okay. And sir, how much is the total investments we have made on the vaccine biosimilar so far, if you can just share this number? Yes. So, so far, the plan is in with INR 300 crores and we have made that to now about INR230 crores Balance is after September, balance is being made in this month. Okay. Okay. Thank you, sir. I'll just hand it. Thank you. Thank you. The next question is from the line of Vishal Nantanda from Nirmalbank Institutional Equities. Thanks for the opportunity. With respect to the complex injectable filings That you intend to do for the formula products and a complex peptide. Could you share whether these products are patent expired? And whether and if yes, if there is existing players which have approval for the same product? You're referring to the 4 products you're filing? Yes, sir. The 3 hormone products and one complex peptide, which cumulatively represents It was USD983 million. Yes. So I think one product is on the patent and the 3 products Are open and there are 2 products we have, I think, 1 generic. Pardon me? The 3 products? No, the 3 products, 2 have gesticides. So I think 1 player is there for these Okay. Two products. Got it. Thank you. That's all. Thank you. Marisa and Telmin, do the time constraint. That was the last question for today. On behalf of Plant Pharma, that concludes this conference. Thank you for joining us and we will now disconnect your