Q2 24/25

Nov 8, 2024

Summary

Q2 revenue rose 12.5% YoY and PAT increased 52.8%. Jammu commercialization is expected to support INR 400–500 crore revenue next FY, with further growth and margin expansion as the plant ramps up.

Ladies and gentlemen, good day and welcome to Innova Captab Limited Q2 and H1 FY 2025 earnings conference call. This conference call may contain forward-looking statements about the company that are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to the management. Thank you, and over to you. Thank you, Rituja. Good morning, everyone, and thank you for joining us on our earnings call today to discuss the operational and financial performance for Q2 and H1 FY 2025. Joining us today on the call, we have Mr. Vinay Kumar Lohariwala, Managing Director, Mr. Lokesh Bhasin, Chief Financial Officer, and SGA, our Investor Relations Advisor. I hope everyone has had the opportunity to go through the financial results and investor presentation, which was uploaded on the stock exchanges and on the company's website. Now, I would like to hand over the call to Mr. Vinay for his opening remarks. Thank you, and over to you, sir. Thank you, Ayush. Good morning, and thank you everyone for joining us on our Q2 FY 2025 earning call today. Before discussing the business performance, I find immense pleasure to inform you that we have received drug manufacturing license from Government of Jammu and Kashmir Drug Control Organization, Jammu, for our greenfield plant. With our necessary approval already in place, we have begun manufacturing validation and trial batches. Now, with the receipt of the license, we expect commercialization of the facility within Q3 FY 2025. Now, let me take you through our business performance in Q2 and H1 FY 2025, and Mr. Lokesh Bhasin will walk you through the financial performance. We are pleased to announce that Innova Captab has achieved a strong quarter driven by volume growth in CDMO business, sustained momentum in the domestic branded generic sector, increased uptake in the Sharon business, and solid progress in the international market. Our profitability has also seen growth with both margin expansion and a significant improvement in absolute terms. I would also like to take this opportunity to express my sincere gratitude to the leadership team and employees of their unwavering support, as well as their dedication and commitment to improve efficiency in serving our customers. Let me now take you through the performance of each business area. Number one, CDMO business. We cater to some of the largest Indian pharmaceutical companies as our clients with our offerings spanning to 2,900 plus products in various dosage forms, which include oral solids, oral liquids, ointments, dry powder injections, and dry powder syrups. Our client base comprises of more than 190 companies, which includes 14 of the top 15 companies in the pharmaceutical market. Volume growth in the business was very strong, and we delivered year-on-year revenue growth of 10% in this quarter. For H1 FY 2025, we recorded year-on-year revenue growth of 5%. We continue to witness traction in the business and are positive on its growth potential. Domestic branded generic. We are engaged in development, manufacturing, and distribution of generic formulation products through our online and offline channels and have a strong network of 1.5 lakh touchpoints of distributors, stockists, and pharmacies with a diverse portfolio offering of over 600 plus products. This business has expanded at an accelerated pace over the past few years, and this quarter was no less. We clocked the highest-ever revenue in a quarter of INR 59.1 crore, listing year-on-year growth of 19% for H1 FY 2025. The business grew 21%. International branded generic. We export our formulation products to 25 plus countries and have 148 active registrations. We have a strong pipeline of 72 in-process product dossiers for export. The business is also growing at a rapid pace and recorded year-on-year growth of 13% in Q2 FY 2025. For H1 FY 2025, the business registered year-on-year growth of 12%. Sharon. Sharon has strong formulation and API manufacturing capabilities with manufacturing units in Dehradun and Taloja, Maharashtra. Sharon recorded year-on-year revenue growth of 11% in this quarter. For H1 FY 2025, Sharon recorded revenue of INR 97.4 crores. Coming to our innovation endeavor, we boast a dedicated R&D laboratory and pilot equipment located in Baddi, Himachal Pradesh, recognized by DSIR for its in-house R&D work. The state-of-the-art facility is equipped with a comprehensive suite of necessary tools for developing solid oral and liquid dosage forms, including RMG, FBD, compression machines, and auto coater. Along with this, we are setting up a new R&D facility in Panchkula, which will focus on increasing our product offerings and development of complex generic formulations. Moving on to our manufacturing capabilities, we take great pride in the excellence of our production facility. Our manufacturing units are accredited by leading global regulatory bodies, including WHO GMP, EU GMP, and the UK MHRA. These certifications not only reflect the highest standard of quality we maintain, but enable us to reach markets around the world with confidence. Our new facility in Jammu will consist of four blocks, including sterile compounding, BFS, general block, penem, and cephalosporin, allowing us to manufacture a diverse range of products. These will include oral solid doses, dry powder injections, dry syrup, BFS, large volume parenteral, and respiratory expansion in Jammu, backed by a proven track record demonstrated by our strong fixed asset ratio, positions us well to scale operations and generate substantial revenue. As we continue to grow, we remain confident in our ability to leverage this capability and meet the rising demand in the Indian pharmaceutical market, which is poised for sustainable growth. At Innova Captab, we are focused on tapping into the immense opportunity. Our goal is to keep the organization progressing, innovative, and future-ready as we work to provide high-quality healthcare solutions to patients worldwide. This brings me to close my opening remarks, and I would now like to call on Mr. Lokesh Bhasin, our CFO, to share his view on the financial performance for the quarter. Thank you, sir, and good morning, everyone. I will now take you through the financial highlights for Q2 and H1 FY 2025. For Q2 FY 2025, in Q2 FY 2025, we recorded consolidated revenue of INR 318.2 crores with a year-on-year growth of 12.5%. The business mix was as follows: CDMO contributed around 52% for the quarter. Domestic Branded Generics was around 19%. International business was 13%, while Sharon contributed 17%. In absolute terms, business area-wise revenue were as follows. CDMO was INR 165.1 crores vis-à-vis INR 149.6 crores in Q2 FY 2024. Domestic Generic business, we have achieved a sale of INR 59.1 crores versus INR 49.5 crores in Q2 FY 2024. International Branded Generics this quarter revenue was INR 40.5 crores versus INR 35.57 crores last year. Sharon, INR 53.6 crores versus INR 48.1 crores in Q2 FY 2024. EBITDA margins improved by 80 basis points to 15.3% versus 15.5% in Q2 FY 2024. On absolute basis, EBITDA grew 18.6% to INR 51.9 crores. Profits after tax witnessed strong year-on-year growth of 52.8% to INR 35 crores, driven by higher EBITDA margin and reduced finance costs. PAT margins expanded by 290 basis points to 11%. Now coming to H1 FY 2025. Revenue came in at INR 612.5 crores with year-on-year growth of 19%. The business mix was 54% from CDMO business, 18% from Domestic Branded Generic business, 12% from international business, and 13% from Sharon. In absolute terms, business area-wise revenue for H1 FY 2025 were as follows: CDMO, INR 332.8 crores versus INR 316 crores in H1 FY 2024. Domestic Generic business INR 110.5 crores versus INR 91.6 crores in H1 FY 2024. International Branded Generics, INR 71.8 crores versus INR 60.5 crores last year. Sharon, INR 97.4 crores. It's a pleasing audit that Sharon was consolidated in our financials after 30 of June 2023 last year. EBITDA margins increased to 15.7% versus 14.8% during the same period previous year. On an absolute basis, EBITDA grew 26.2% to INR 96.2 crores. Profit after tax for H1 FY 2025, this number was to be INR 64.5 crores with a year-on-year growth of 59%. Our balance sheet continues to remain strong. We have repaid all our debts excluding the term loan borrowed for our Jammu project, which carries an interest subvention benefit of up to 6%. With this, we would like to conclude the presentation and open the floor for questions and answers. Thank you very much. Thank you very much. We will now begin the question and answer session. Participants present on the audio bridge who wish to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press Star and two. Ladies and gentlemen, there is a wait for a moment while the question queue is tended. The first question is from the line of Amey Chalke from JM Financial. Please go ahead. Yeah. Thank you for taking my question, and congrats to Vinay and Lokesh for- Sorry to interrupt you, but can you please speak a bit louder? We cannot hear you, sir. Is it audible now? Yes. Please go ahead. Yeah. My first question is, you have reported 10% growth in CDMO. Is it fair to assume now that 10% is sort of volume growth, what we are delivering and continuing prices are now stabilized? Or is it still very negative impact of prices built in these numbers? Ameya, the growth that we have received, 10% year-on-year on CDMO businesses, is mainly driven by volume growth. You are right, it is mainly driven by volume growth. There is not any negative impact on pricing. Year-on-year pricing impact is more or less even. Sure. My second question is on the trade generics side, the 23% growth which we have reported, is it led by seasonality or should we assume this as a possibly run rate for trade generic going ahead? Yes, there are multiple reasons for growth in a business. But as far as this growth is concerned, it is constituent of mix of both seasonality as well as the organic growth on which our business has been working on quite some time. Okay. Going ahead, there could be slight normalization basically, but we will continue to grow. Yes. I would expect that the growth momentum will increase, and we should be within this range itself. Sure. The third question I have is on the Jammu benefits, which we will be getting, related to GST and interest subvention. How would we report going ahead, just from the modeling perspective, will it come in the revenue line, other operating income, or will you adjust in expenses, that would be helpful. Ameya, yes, we are having a few viewpoints and we are still discussing this with our statutory auditor. As per the applicable Ind AS, we will account for those line items accordingly. Okay. Sure. Any reason for the gross margin improvement this quarter, anything to highlight as far as gross margin sustainable going ahead? This is mainly due to this quarter at a control level. The increasing gross margins are mainly due to the product mix as well as the sales mix. We expect to remain in the range of EBITDA margin. EBITDA margin in the range of 15%-17% on a long-term basis. Excellent. Sure. Thank you so much. I will join back. Thank you. Thank you. Thank you. Participant who wishes to ask a question may press Star and one now. The next question is from the line of Sartak Natial from AKG CJ Capital. Please go ahead. Hello, Vinay sir. Congratulations on the great set of numbers and as we have achieved the highest ever net profit. Thank you. Audible. Yeah. Thank you. Sir, just wanted to know one thing. Sir, can you give us a segregation of gross margin on different segments for CDMO, API, and branded? Hello. Sartak, normally, we do not track gross margin at a business area level. Okay, you don't track that. I just wanted to know why we have the lesser gross margin as compared to our competitors, Akums and Midlane. They are having 35%-38% level of gross margin. It will be difficult for us to comment on the competitor gross margin because everybody is having the different set of product and different style of market. Our is like, we need to be competitive for our customer and as well as we need to generate a good ROE, ROCE for our investor. That is our punchline. Okay. So sir, what kind of gross margin we can expect in future? Gross margin basically depend on the product mix, sales, business area and all that. But largely, if we see historically, that remain the same territory. Like in Innova, if we see our gross margin remain in the territory of, say, 24% to 28%. And due to the Sharon and the Univentis consolidation, our gross margin improved to, let's say, 35% range. 30% to 35% range. So we see the gross margin or the material margin in the same range in the future also. Okay. So, like our API business have better margins, I guess it have a lower margin than other segments, right? As Lokesh informed that we do not track the segment-wise margin, but more or less, what he sees, it is the same range. Usually API gets lesser margins than the other segments, right? Yes, you are right. But in our case, our API is mostly our sales come from the export or regulated or semi-regulated market. Therefore, our margin profile in the API also is in the same range. Okay. Do we have any entry barriers in our kind of business? Of course, the entry barrier is there. If you see our domestic CDMO business, you will find there are only few companies who have crossed the INR 1,000 crore mark. Right? As you see that the regulator also has imposed a lot of things like the revised Schedule M, and now the pharma plant is a big investment. We have now invested INR 450 crores approximately in our Jammu facility. Initially, if you see in our inception, our first plant was. We have the gross block of only INR 5 crores-INR 6 crores. In the last 15-20 years, there is a day-night change in the plant side, investment side, and the technology side. Then you need to have the product dossier, document availability, product development, everything. These all things create an entry barrier in the industry. And of course, the relationships with the big customers, that also matters. Like, we have more than five years or 10 years relationship with our all marquee customers. So that also somehow plays a role in our business relations. Okay. Just the last question. So in 2024, we achieved a revenue of INR 1,085 crore. So are we going to double the revenue in the next three years with our Jammu facility? Yes. If you see, Jammu is having the revenue potential of say INR 1,200, INR 1,300 crore in the next five years. And we see that in the next year we will do approximately, say, INR 500 crore. By starting the facility in the next December, the revenue and the plant will be stabilized in Q4. And from the Q1 to next year, the full four quarter will be available to us. And we expect INR 400, INR 500 crore revenue next year. Right? So, with the help of Jammu and existing business growing at a healthy rate, we see that the revenue could be double from here to INR 2,500 crore in next three years' time. Okay, so we'll be growing at a CAGR of 35%, something. Yeah, 35% plus. So three-year doubling is, I think, 26%. Right. Okay, sir. Thank you for taking my call. Thank you. Michael, next question is from the line of Sudarshan Padmanaban from JM Financial. Please go ahead. Yeah, thank you for taking my question. Yes. Just taking it forward on the Jammu facility that is coming in. Next year, you said that INR 500 crores is possible, and it's my understanding when you say that 3 to 4 times of Innova is possible. Historically, that's what we have done. We should be able to do between INR 1,500 crores to INR 2,000 crores of incremental sales, over the next few years. My question is more to understand on the margin side. Today, when we look at our margin side, probably 15.5% plus, and it has only been increasing over the last few years. When I'm looking at the mix going forward, Sharon has got better margin. Your Jammu, if they add that to GST, it'll obviously have significantly better margins with the current business. My thought process is say, for 2026, that is in the near term, and probably say 2, 3 years down the line, as the capacity utilization goes up with higher margins. Where do you think your margins it should be kind of stabilized? And sir, my second question is, now that our debt is zero, and the next 2 years we are going to generate fair amount of cash. The fact is that we said that Jammu, it will add another INR 1,500 crores to INR 2,000 crores of sales. So where do you plan to deploy the cash for additional? Sure. Yeah. Margin. Go on. Sure. Regarding your first question on margins. On a long-term basis, at a steady state when our Jammu is stabilized, and you are absolutely right. We are having a better margin profile in Sharon. From Jammu, we are also looking forward to carve out certain amount of additional benefit, despite being transferring or passing through some of the benefits to customer. On a long-term basis, we are looking at a gross margin or EBITDA margin in the range of 17%-19%. The second question is regarding the- Next year, sir, I am just trying to understand is the cost of Jammu largely going to impact us in the near term or should we start seeing the margin expansion as we achieve the INR 500 crore instead? Sudarshan, can you please repeat your question? I am just trying to understand, you talked about margin expansion, 18%-19%, which is very strong. But as the Jammu facility comes next year and we achieve the INR 500 crore target, should we start seeing the margin expansion next year itself? I am just trying to understand the thought process there. Yes, Sudarshan, see, when I am saying margin expansion, you would appreciate that there is always a ramp-up phase. First it is a soft stabilization, and then there is a stabilization, then steady state phase. The way I am looking at it, when I am able to reach at a steady state of Jammu, somewhere in the range of INR 700 crore-INR 900 crore, we should be positively looking at a benefit of margin expansion, and from there we should move up our margin also. Sure, sir. And on the capital? Yeah. It is a very good question that there will be a surplus cash when we move forward. This can be deployed towards the acquisition of the greenfield project. The acquisition could be some specific fit for us. Some, say, like we are not present in the multiple section like hormone or the liquid injectable type. If we find some opportunity to acquire some assets in that category, that can be done, or we can look at the greenfield project also. Sure, sir. Thanks a lot. I understand. Thank you. Thank you. The next question is on the line of Ritesh Seth from Rati Investments. Please go ahead. Sir, two questions. One on Jammu. When you are at 30% utilization next year or less than 30%, let's say, so about 20%-35%, will you be having a company-level margin, or based at 35%, Jammu unit will be margin dilutive. That's number one. Number two, the blocks that you're adding at Jammu. Sorry, the blocks that you're creating at Jammu, are these complementary to your existing product offerings in the CDMO or they are expansion of capacity of your existing offerings in CDMO? Yeah. Ritesh, on the Jammu margin standpoint, by next year, most probably when we reach to a level of somewhere around 400 400, INR 500 crore, our margin should be within line of our company-level margin. As I stated earlier also, when we are going to achieve that INR 700 crore, INR 800 crore level, from there, we should see the expansion in our margins. Okay. My second question on blocks that you've created. Yeah. We have four blocks there in Jammu. The one block, that cefoperazone, already we have. That is common in Jammu or Baddi. And the rest three blocks are new to our basket. Additional offerings to your CDMO customer? Pardon. Come again. Hello? Hello. Yeah. You need to repeat. Hello? Mr. Ritesh, Hello. Please go ahead with your question because your line is not clear. Okay. I was saying that the three blocks that you are referring to, one you said is cefoperazone, so I am assuming it is capacity expansion of the existing offering. Everything else is newer offering to your CDMO customers? Yes. Yeah. 75% you can. Yeah, please go ahead. Sorry, sir. Please go ahead, sir. What I am saying, that 75% of the portfolio is new to our basket. Okay. That will be a new offering to our CDMO customer. If you see the cephalosporin, already we have the EU GMP certification. That facility we will dedicate for, say, catering to ROW and regulated markets in export. Jammu facility will cater the domestic business, even for the cephalosporin. There, as you know, that we have the 12% GST incentive for the domestic sales. Okay, I understood, sir. When you said 75%, we are assuming 75% of the INR 1,200 crore revenue, INR 1,200 crore-INR 1,500 crore revenue that these blocks can generate, right? That's how we should take- Correct. Okay. Yeah. Roughly you can say. Yeah. Okay. My last question is, being a CDMO player, where you are selling largely servicing Indian pharma companies, what is the thought process behind creating your own branded generics? Let's say that we see that as an independent vertical of the branded generic business, and that is in name and style of Univentis Medicare, and they are working there independently in the market. Univentis also help us in early identification of products. What you can say, that we are near to market. We have the market intelligence, market insight, because of the Univentis. So we can understand the market better, and we can serve the CDMO customer also, because of that Univentis, in a better way. Will the product lines be similar as what you would supply to a domestic CDMO and what you have as an offering in branded generic? Yes. It could be similar to the offering to the Univentis. We treat Innova, we treat Univentis as a CDMO customer only. Okay. Univentis is where we have direct holding or anything or? It is a 100% subsidiary of Innova Captab. Okay. Okay, sir. Does it Yeah. Yeah. Thank you, sir. Thank you. The next question is from the line of Abdul Puranwala from ICICI Securities. Please go ahead. Yes, hi. Thank you for the opportunity, and congrats on the successful numbers. My first question is on the Jammu facility. Could you please highlight what is the total CapEx you have incurred so far in this plant? The estimated CapEx on this facility is INR 450 crores. Okay. That is entirely spent or is there any investment to happen? Almost completed. We are already on the ballpark of this range. Okay. When we talk about commercializing the facility in Q3, we are commencing operations at quarter four of this year, or that will happen in the target manner? This will be like altogether. Okay. Just one more on Jammu. I mean, we are talking about generating INR 500 crore of sales, and this is almost equivalent to the current CDMO revenues what we have. I mean, what is driving this confidence in terms of the sales which we can achieve? Do we have certain commitments from your existing customers, or what is the plan which can drive this kind of a sales ramp-up there? Yeah. Abdul, as we are in the last leg of starting the facility, we are in discussion with our own marquee customers, and we are getting a very good response. Based on that feedback and requirement, we are confident that we will achieve this target of INR 400 crore-INR 500 crore sales in next year. Okay. Also, just on the incentivization. I mean, how does this work? Is it only applicable on the third-party sales for the products that you would be manufacturing at Jammu, or is it for your subsidiaries also, what you typically do at your Baddi plant? Will that manufacturing also get covered under the incentivization plan? From Jammu, whatever we sell to the domestic customers, including our subsidiary on arm's length basis, that will be covered. Got it, sir. Will get back to you. Will follow that. Yeah. Thank you. Thank you, Abdullah. Thank you. The next question is on the line of Ritel Doricha from Segwent Investments. Please go ahead. Hello. Yeah, good morning, sir. Thanks for the opportunity. My question is again on the Jammu capacity. So, just wanted to understand, you mentioned we are going to do a revenue of around INR 500 crores next year. So at what sales, sir, this Jammu facility comes at breakeven level, sir? The question I am asking is because I wanted to understand this impact on the margin. So if our Jammu facility is starting commercializing in Q3, the cost is going to come in Q3 and Q4 itself, right? Just wanted to understand the impact on margin in H2. Right. It is, if you see, generally it takes, say six months to one year to cross the breakeven level. But in Jammu, what is the beauty that we have the 12% GST incentive, right? Our expectation is that after Q4, even in Q4, there may be some lag, but from the Q1 next year, we will cross the breakeven level and start positive EBITDA generation from the Q1, next financial year. Understood, sir. My answer is not clear. I want to understand if are we going to generate revenue in Q3 and Q4 also? If we are generating the revenue, it will be an EBITDA lock, right? On Jammu facility. Eventually it should impact the 15% margin on blended basis. Right. As we are saying that we will start commercialization in the next month. In December, the revenue number will be very less. But from the Q1, numbers will start updating. Next year it will be EBITDA positive. Okay. There is no cost incurred in H2 from Jammu facility. Is my understanding correct? This 15% margin is going to sustain. At company level, yes. Okay, sir. Yeah. Yeah, understood. Thank you, sir. Thank you. Thank you. The next question is on the line of Bhavin Sheila from Nam Holdings. Please go ahead. Yeah. Congratulations on excellent set of numbers and commercializing the Jammu plant soon. Sir, a few questions. First on Jammu and then the other businesses. On the Jammu plant, sir, will you be doing only CDMO or you would be doing there domestic branded, international generics from that plant? So at Innova Captab level if you see, we will sell to Univentis Medicare also. That is our domestic branded generic arm. Right? We treat that as a CDMO. But in consolidation that revenue go and sit in branded generic business. And this facility, we will target the export business also. We will register in the ROW and semi-regulated, regulated market as well as the time proceeds. So the facility will be replicate of our Baddi facility that we are doing the export business, CDMO business and trade generic, our domestic trade generic, branded generic business also. Sure. Second thing on your guidance of INR 400 crore-INR 500 crore Jammu turnover in next fiscal. This probably would be an incremental turnover, or there would be some cannibalization effect of the Baddi turnover also. Since obviously there are very high incentives from this plant, so obviously when they transfer majority of the sales to be booked from the new plant makes more sense. My question was that, will there be a cannibalization of some part of the turnover from the Baddi plant here? The INR 500 will be the incremental turnover. There will be some cannibalization from the Baddi facility. The domestic cephalosporin business will be transferred to the Jammu facility. But as we have the capacity constraint in our existing cephalosporin facility, this facility will be used for export to the ROW and the regulated market. We are hopeful that in that category, we will get the order there also from the ROW market in our Baddi cephalosporin facility. Overall, what we expect is the INR 500 crore will be the incremental turnover. Sure. On the third question, sir, if I see your CDMO revenues from the presentation, for last three years, it was on a declining trend, whereas the customers were going up. I understand part of this was probably due to pricing pressure, though there would have been volume. But can you throw some light, since last three years, CDMO has declined from 687 to 680 to 622 in FY 2024. We have managed growth in Fostap and this quarter looks to be a very strong 10% growth. I think at the start of the conference call, you mentioned this was purely driven by volume and price has stabilized. So can you throw some light on what happened in last three years where CDMO turnover was declining despite increase in custom accounts, and now it has started growing. What has happened to some accounts, some clients have given big sales, or what has happened in Fostapen? Yeah. Sure, Bhavin. If you see that after COVID, there is a decline in the API prices. As you know that our pricing with our customer is the transfer through model, that if the API price goes up, our price goes up, and if it is reduced, then our transfer price is also reduced. Due to there is a continuous price decline, we see that top line decline in the case of CDMO. But if you see the volume in the CDMO sector, there is a consistent volume growth in the CDMO sector. That's why the margin gets better. If we say there is API price reduced, our transfer price reduced. But our margin, that's why improved. That margin is totally a function of, say, volume. That's why our margin get improved. This quarter, what we are seeing is that there is a normalization in the API price. Now there is no further decrease. More or less the price are in the stability territory. That's why we witness the growth in the top line also. Sure. That will be helpful. Last one on generics. Branded, domestic plus international has reached INR 100 crore run rate in this quarter and also grown at almost like 70%-80% combined, I am saying. Will this continue, and what kind of scalability you are projecting here in 2 to 3 years? Let me take the first domestic branded generic business. Last year we have done almost INR 200 crore, and that business last year also witnessed a 25% growth. We see the same momentum to continue in the near future. So there we can grow at the same level of 20%-25% plus in the near future. As far as the international branded generic is concerned, with the acquisition of Sharon Bio-Medicine. That is 100%, or what we can say, 85% revenue comes from the export only. That covers the regulated, non-regulated market. With the Innova, we are well-focused on our international market presence also. With the Jammu facility, we are going to register that facility also into the export market in the different territory. We feel that the same growth rate will be continued in that segment also. Thank you. Thank you. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants, please limit your questions to two per participant. If you have a follow-up question, you may rejoin the queue. The next question is from the line of Rohan Vora from Envision Capital. Please go ahead. Hello. Thank you for the opportunity. Sorry if the question was already answered; I joined the call a little late. My question was on the interest cost. Basically we see borrowings on the balance sheet. However, interest costs have substantially reduced over the last two quarters. What is the reason for that? Thank you. Yes, sir. The borrowings are still there, but the major part of the borrowing is of INR 230 crore of term loan that we have taken on our Jammu project. That loan carries an interest subvention benefit of up to 6% on the overall rate. Hence, that is the main reason why you are able to see the debt, but the cost is not flowing that much in the P&L. Okay. When does the cost start flowing to the P&L? Post commercialization. Okay. So basically- But even at that time also, the net landed cost of interest would remain at a range of 2%-2.5% only after considering the interest subvention benefit. Okay. So 2%-2.5% will be the impact in the P&L in the coming quarters? Yes. After commercialization of the project. Got it. Thank you. Thank you. The next question is from the line of Kartik Viket from Suez Advisors. Please go ahead. Sir, good afternoon. A couple of clarifications. You were answering the question on pricing for CDMO. Can you elaborate a bit more? How do you benchmark your API prices? What is the benchmark, and how do you determine your markup? Some thoughts on that could be helpful. The API price is the market price. The price is, at least we are buying the APIs. That is available to the customer also and to us also, right? Right. Then, let's say we have the bill of material cost and then the cost of conversion, cost of packing, analytical cost, and then we have the margin markups. Right. How low do you go, sir? Assuming there is competition, how do you work backwards? Do you work on, say, 18% IRR basis, 24%? How exactly do you think about that? I am asking this because if it is a cost-plus model, it seems very attractive for incumbents. This is why I am asking this question. That is in line with the industrial standard. That profit margin, cost of conversion, cost of packing are in line with the industrial practice. Exactly. Okay. The other thing, sir, can you elaborate on what would be your typical, shall we say, market share for a particular customer for a particular molecule? Would you have some sense of that? What is the highest you would be supplying to any customer, and the range in which you would be typically supplying? Sir, basically marketing insight about the detailed data of the CDMO is not available. It is difficult to comment on this question. Sir, you would have some sense of at least what volumes they purchase and therefore how much of that you cater to? No, sir. No. We cannot track that. Okay. Fair enough, sir. Thanks for answering the questions and best wishes. Thank you. Thank you. The next question is from the line of Sagar Dhanna from Alkerny Ventures. Please go ahead. Thank you, sir, for elaborate discussion on Innova. I have one question. What is your capacity utilization in Sharon currently, and what are our thoughts in ramping up that asset? Yes. So our capacity utilization currently is, formulation is around ranging between 45%-50%. And considering a normal formulation business, the optimum capacity range between 70%-75%. Since its recognition, we have already started working on developing the product. As already submitted that, Sharon is into regulated markets in exports. Basically, onboarding a customer or onboarding a product carries a long gestation period. That period, resources and product investment has already been started with the help of our R&D and our strong RA team. Over the next coming months, we are very much positive to ramp up this available capacity through introduction of new customers and new products. Do you expect that you will be able to ramp it up to 70%-75% by 2026? The way we see it, we are looking at a growth of roughly around. The way we are looking is, since I believe that these things, regulated market onboarding, carry some longer gestation time. The way we look at it is that we are looking at growth of Charul in early teens of in coming years. Got it. Second thing, sir, just one clarification. Since we have not commercialized the Jammu plant and hence the CWIP is showing still as of September. Is my understanding correct? Yes, you are absolutely right. We are showing a CWIP of INR 452 crores on 13th of September, and the majority of it carries our Jammu project cost. Since that plant will get commercialized in this quarter, this will move to the gross block. Is that correct? Exactly. This will move to PPE accordingly. Got it. Thank you so much, and all the best, sir. Thank you, sir. Thank you. Thank you. The next question is from the line of Ankit Gupta from Bamboo Capital. Please go ahead. Thanks for the opportunity and congratulations for good set of numbers. My question is on the CDMO side. Sorry, can you please speak a bit louder? We cannot hear you, sir. Sure, I'll do that. Sir, my question was on the CDMO segment. Given the scheduling changes, how is that impacting some of the larger players like us? How has been the movement from a lot of formulation companies, marketing companies to established CDMO players like us? If you can elaborate upon that and how do you see the impact of the same on our growth over the next year or so? Ankit, I'm sorry, but can you please repeat the question? We were not able to hear you properly. Sure, sir. I'll repeat that. My question was on the CDMO segment. Given the changes in the Schedule M which is happening from the government, how do you think this is expected to benefit an established and well-maintained plant player like us? If you can elaborate on that, how has been the inquiry pipeline from the formulation players for these changes are taking place? Yeah. If you see, there is an implementation of revised Schedule M, and due to this new act, new revised Schedule M, there is a strictness in the plant guideline. That is at par with what we can say is the international guideline. Most of our facility is having FDA approvals like EU GMP or MHRA or WHO GMP. We are compliant with all these guidelines. We see it as a positive trigger. The industry will further consolidate to the larger players due to this implementation of the stricter norms. Sure. Have you already started seeing some changes in the inquiries from the formulation players, from the marketers? Yeah, definitely. This is happening since last one or two years that the business is getting consolidated towards the larger players. Sure. Okay. Has there been a few instances of some of the smaller players shutting their shop or available for sale or their plant is available to sell to larger players like you? That is the part and parcel of the business. That always happens, this consolidation and all that. But we need to look at that if the plant is compliant and it is specifically fit, then only we can go ahead with the acquisition. Sure. Our plans to spend almost INR 450 crore in the Jammu plant was also thought about it, keeping in mind the revised guidelines which have happened in Schedule M. Yes. The Jammu facility is designed and in compliance with all international guidelines as well as our local guidelines. It is a state-of-the-art facility compliant with the old guidelines as well as, let's say that all equipment are with the latest technology. Sure. Efficiency-wise also. One is the guideline, other is the operational efficiency. This facility will give the highest efficiency to us, sir. Sure. Okay. Thank you. Thank you. Thank you. Ladies and gentlemen, due to time constraints, that was the last question for today. I would now like to hand the conference over to the management for closing comments. Thank you everyone for joining us in the earning call. We appreciate your time and showing interest in our company. In case of any inquiry, you can get in touch with us or SGA, our investor relation advisor. We look forward to meeting all of you over the next call. Thank you. Thank you. Thank you. On behalf of Innova Captab Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.