Q1 21/22

Jul 30, 2021

Ladies and gentlemen, good day, and welcome to Loras Labs Limited Q1 FY 2022 Earnings Conference Call hosted by Ambit Capital Private Limited. 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. Please note that this conference is being recorded. I now hand the conference over to Mr. Nikhil Mathur from Ahmed Capital. Thank you, and over to you, sir. Yes, hi. Good morning, everyone. On behalf of Ambit Capital, I thank the LOTUS management for giving us the opportunity to host their 1Q FY 'twenty two earnings call. Today on the call, we have Doctor. Satyanarayan Chawba, Founder and CEO Mr. VV Ravi Kumar, ED and CFO and Mr. Vivek Kumar, Senior GM, Investor Relations. I now hand over the call to Doctor. Satya for his opening remarks. Over to you, sir. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] Thank you, Nikit. Thank you for joining us on our Quarter 1 FY 2022 results conference call. We are pleased to have this opportunity to update on our progress and answer your queries. I hope everyone and their family members, colleagues and friends are safe during this 2nd wave of COVID-nineteen pandemic. The 2nd wave of COVID pandemic was more severe, impactful when compared to the 1st wave in terms of infections and fatality across regions. The recent lockdowns during the Q1 had some temporary impact, but the agility and resilience that our teams have shown in the face of this challenge help us to maintain normal operations across all locations. We are very thankful to our colleagues for rising to this challenge and ensuring business continuity. At Clarus, we are committed to protecting the health and well-being of our employees and their families. We continue to implement rigorous safety and hygiene practices across all locations without any complacency. We continue to conduct regular testing for all the employees and provide flexibility to work from home for employees wherever Coming to the results of Q1 FY 2022, these results reflect A very healthy start to the financial year. We increased our focus on having a better product mix and focusing on margin sustainability. We achieved these results despite the pandemic induced Operation challenges. And we stand reaffirmed on our aspirational revenue target of $1,000,000,000 by FY2023. And this was supported by healthy demand outlook and capacity expansion plans lined up across all our business segments. We achieved 12.79 percent growth revenue in Q1 FY 2022 with a 31% growth year on year. Our antiviral segment showed a growth of 23% and oncology 16%, whereas non ERV, non oncology product sales decreased by 40%. Whereas overall generic KPIs have shown more than 27% around 5% growth. The Synthesis division has shown robust growth with over 95% growth From INR 100 crores to INR 195 crores. This is the first time we are also reporting numbers for our Bio division with INR 14 crores coming from quarter 1 after 20. To begin, I would like to share key updates on our Formulations business. The Formulations division reported highest ever revenue of INR 5.21 crores, Strong growth of 48% year on year. The contribution from Farmers segment has improved during the quarter to 41% to our revenues compared to 35% for the financial year FY 2021. We have seen good growth in regions supported by ramp up in global funds and PEPFAR supplies in the LMIC markets. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] And we are also in the process of obtaining in country approvals for our 10 ocular alafenamide based fixed dose combination. And we are on track to launch this product in the current quarter. Apart from LMSC ARV business, we have also seen growth in developed markets in North America and EU. To leverage our front end in the U. S, we commenced marketing of in license products. We have done 6 products in license. And out of those, 3 were launched, and we are in the process of launching the remaining 3 during the current financial year. We filed 2 ANDAs during the Q1 FY 2022. With those, we have a total of 28 ANDAs with PSFDA, 9 final approvals and 9 22 approvals. In Canada, we have 10 product approvals and we have launched 5 of those already And we intend to launch 2 more in the Q2 and Q3. In the EU, we have validated 2 additional products as part of our contract manufacturing partnership, and we expect a significant upside in FY 2023 from these products. Out of 5 approved products, we have launched 2 products, and we are in the process of launching 1 more product across many countries in Europe. With the robust outlook and order book, we continue to invest in our FDI FDF infrastructure. We have commercialized the debottlenecking project during the quarter 1. This is expected to add 1,000,000,000 units capacity to the current. With that, we have 6,000,000,000 units capacity operational right now. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] Further, our brownfield expansion to the same site, which is expected to add another 4,000,000,000 units capacity, With that, we will have by end of the financial year 10,000,000,000 units sorry, overall capacity. On the R and D front, we continue to allocate critical resources to our research initiatives and investing in portfolio based on complexity and scale. Our overall R and D expense to the sales for the quarter was at 4%. We have a total of 60 6 products in R and D pipeline either under development or under priority review with an overall market, industrial market size of over RMB 37,000,000,000. As we also mentioned in our investor presentation, the current basket what we're looking at, Only 20% is ARV and 80% is non ARV. This is in line with our expectation to diversify our revenue base FY 2025. So we are investing into non ARE product development, both in APA as well as in the population. Of the 28 ANDAs filed in U. S, we believe that 2 para force and 7 fa2 file opportunities having a Big addressable market size. As you have seen, our approach always remains product specific, not market specific. That is clearly visible in our dossier filing. We have 11 dosiers in Europe, 5 15 in Canada, 8 with WLO, 2 in South Africa and 4 in India and 15 products filed in various rest of the world markets. When it comes to the generic API, our ARV API recorded healthy growth when compared to the quarter on quarter. This was led by higher volumes of our first line APIs. On sequential basis, sales were moderately impacted partly due to demand normalization, which is in line with our expectations. 2nd line ARV APIs continue to see healthy sales during the Q1. We continue to maintain leadership in our key products, while we expect to increase our Supplies to developed markets in Europe and U. S. Revenues from Anko APIs were INR59 crores for the Q1. This segment recorded a growth of over 16% quarter on quarter. Larus Labs, As you're aware, we are the one of the largest high potent APA capacities in the world. And we are adding more capacity to augment our offerings and also meet the customer demand. We have hypoten capabilities now in Unit 1, Unit 3, Unit 4, Unit 5 and we are adding more capacities in Unit 4. When it comes to non oncology, non ARB APIs, we have seen a decline of sales. This will be back on track from Q2. During the 1st quarter, we have filed 5 DMFs in non ARB category, taking the total number of DMFs filed to 66. We also initiated the validations for the few other APIs and expect to see significant growth from Q4 FY 2022 onwards. We have very good order book visibility in non onco, non ARB APIs. And we are investing into Capacity enhancement to meet our demand in these APIs. When it comes to synthesis business, This division delivered robust growth for the quarter and grew over 95% to INR 193 crores. The strong growth was led by sustained new client addition and increased business from existing customers and commercial supply power for existing products. We are pursuing several interesting active projects in the late stage clinical programs. We are also doing capacity expansion to support this division's growth plans. We commercialized the LSPL, Larus Synthesis Private Limited Unit 1 during the quarter 1 FY 2022. Also, our proposed greenfield investment to set up a dedicated R and D center for synthesis division at Genome Valley, Hyderabad and 2 manufacturing units in Wijag under LSPL is progressing as per our plan. All these units are expected to be operational by FY23. The site will have the capabilities to handle steroids hormones, Ipotent Molecules apart from other large volume products. Lars Bio recorded as sales of 14 crores for the quarter. As a reminder, Glitchcore was renamed as LARS Payo and transaction was closed during the month of February 2021 and sequential numbers reported for this quarter are not comparable. On an average basis, quarter on quarter on rate was very stable. During the quarter, we commissioned 2 of the 4 segmentation vessels and all the 4 segmenters will be operational from Q2 onwards. So we expect full benefit of ramp up of building capacity from Q3 onwards. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] We're also in the process of acquiring additional land to further expand our manufacturing capabilities in the fermentation. With that, I would like to hand it over to Mr. Anil Kumar to share financial highlights. Yes. Thank you, Doctor. Satya, And very warm welcome to everyone on our quarter 1 earning call. Total income from operations for the quarter is at INR 12.79 crores Again, it's 974 growth with a growth of 31% year on year. With a better product mix, gross margin, We could able to improve almost by 2%. Our EBITDA for the quarter came at around INR 400 crores and EBITDA margin is 30% on a full year basis. And diluted EPS is at INR 4.5 on a non annualized basis, which grew over 41% growth over the corresponding quarter. Our ROCE improved to 32.6 percent on an annual basis on the back of sustained operating leverage across units. So as you're aware that we have embarked on our CapEx plan of INR 1500 to INR 1700 crores for the 2 years, FY 2022 and FY2023. The all the projects are in track except maybe some of the projects maybe in 4 to 8 weeks delay. And we have invested around INR 2.13 crores in the quarter 1 for the CapEx. With this, I would request moderator to Open the lines for the Q and A. Thank you very much. We will now begin the question and answer session. Participants have requested to use handsets while asking a question. Ladies and gentlemen, We'll wait for a moment while the question queue assembles. The first question is from the line of Krish Mehta from NAM Holdings. Please go ahead. Hi, thank you for taking my question. So I had two questions. The first is on Richcore. So we have incremental capacity addition of for 1,000,000 tonnes as we spoke about. So could you tell us what the revenue contribution would be from this incremental capacity? In the quarter 1, [SPEAKER SRINIVASAN VENKATAKRISHNAN:] We commissioned 2 fermenters, 45,000 each. And in the quarter 2, we will complete the The 2 fermenters are for 45,000 liters again. So with those 4 fermenters coming online by end of September, The R2 where the 4 new segment base are located, We're able to deliver about INR 20 crores revenue per quarter. Okay. Thank you. And the other question I had was on the breakup of non ARB revenue as a whole for Q1. Ma'am, yes, we have done. We have this as About 33% of revenue In quarter 1 came from ARV APIs. Sorry, I was asking for ARV as a whole including FDF, APIs, everything. Two thirds of revenue came from ARVs, both APS and formulations. Okay. And if I could ask a last question, I just wanted to know on the CDMO business, as you've seen tremendous growth this quarter, Are there any one off impacts in terms of orders that you've got in this quarter? Or is this a sustainable run rate going forward? We don't have any one offs in the Q1 for our CDMO division. We expect That this division will positively surprise us as well as you all of you, yes. Okay. Thank you. I'll get back in queue. Thank you. The next question is from the line of Doval Shah from Giddick Capital. Please go ahead. Yes. Hi, sir. So a couple of questions from my side. So first, the doubling of FDF revenue post our expansion. So the sales would double from the FY 2021 base? P. Vijay Kumar:] The sales [SPEAKER SRINIVASAN VENKATAKRISHNAN:] For the unit of tablets, where is so we can't do the arithmetic way of we are increasing capacity so the revenue will increase. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] All depends on what products we make. So currently, we have 6,000,000,000 tablet capacity, which is operational. And additional DKK4 billion will be operational in a phased manner from November to March current financial year. And The significant revenue upside from the expanded capacity will come in FY 2023. And the expanded capacity is will be primarily used for non ARB. Non ARB, correct, correct, Sir, our finance cost is higher quarter on quarter. So what is the increase in the debt? And what is our current debt Virostek, as on today. Yes. And also with this, so last call, we had given a range for the CapEx for the 2020 to 2023 because you were finalizing certain projects. So have we finalized the exact CapEx number? CapEx, as we mentioned just now, we believe we will invest anywhere between INR 1500 to INR 700,000,000 a crores during FY 2022 and 2023. In the Q1 FY 2022, we already have done INR 213 crore CapEx. Okay. But that's in CapEx is a range only at this juncture Because it's a very subtle. And finance cost is concerned, actually, there is an exchange rate adjustment That is one contributor for the additional finance cost. And second is we also borrowed an additional loans in the Q1. Okay. What is the gross debt as on today? It's in a couple of INR 100 crores So higher debt in the Q1. Okay. And on Page 25 in the presentation, You mentioned about renewed market share gains in the ARV portfolio in LMIC. So can you elaborate on this line, what does it mean? So we've gained market Share or what is it? So gain market share in the first line, We have significant presence in the DLT based first line. And we Our expanding our registration footprint in various countries for TLE-four hundred and our triple combination products. So thereby, we will strengthen our position in the first line. As a reminder, we don't have any product in the second line right now. So we will start getting registrations for 2nd line products also. With those, we will increase our share of Market in the both first line and second line. Okay, okay, okay. Okay. Fine, sir. That's for right now. I will come back in the queue. Thank you. The next question is from the line of Amish Kanani from JM Financial. Please go ahead. Yes. Hi, Am I audible? Yes. Sir, if you can Elaborate on the mention that we have made about the business where we said multiple partnership proposal is in collaborative space. If you can elaborate on that, what are the plans or what are the discussions and Is it the part of the CapEx that you're planning and stuff like that? We Are investing into 2 new locations as part of our Growth plan and the business negotiations what we're having with our current partners. The new greenfield units which will come up in Waijan will be to service our Offerings, so we saw what partner is needing. That is the reason we are investing heavily into CDM. We can't give you more details of what products and what customers right now. Okay. And sir, also if you can give us some color and sense on the first two files and those 7 products, as you know, we have Well done. I think 2 were more exclusive opportunity. So can you give us some flavor there in terms of The size or the timing of those potential launches, if any? And what is the status of FDA approval for those set of products? Is it getting delayed because of FDA not being able to approach and compromise? Thanks. Out of 7 first two filings before opportunities, we got 22 approvals for 3 of those already. And we expect to get TEN22 approved for 2 more and asked during the current financial year. Okay. And for the 2022 of course what we got 3, we are Well positioned in 2 of those because there the number of FTF Companies are limited. So those products' current brand value is about $5,000,000,000 Okay. And sir, any tentative time line for it's not quarter, say, first half, second half of which [SPEAKER SRINIVASAN VENKATAKRISHNAN:] No, no. These launches will happen after 2025. These are all 2025. These launches will after 2025. Okay. Okay, sir. And Suneet, in that context, the RMB11 1,000,000,000 of which 85 percent ARB opportunities of the 33 approved, Is this marketable addressable opportunity for us for say next 2 to 3 years? Is that the way we can think? Can you repeat your question? We didn't get exactly what you're looking for. So we say approved, we have about 33 products approved with an $11,000,000,000 market opportunity, right, in ES and EU, addressable market opportunity that we have shown. My question is, is this the short term short to medium term next 2 to 3 year addressable market opportunity for us in EU and U. S? These products which are in development where Fro mentioned the $37,000,000,000 opportunity, This will be long term. I don't see these will have benefit in FY 2022 or FY 2023. So for product which you have to get revenue in FY 2023, you might have filed already and you might have got approval or about to get approval? Yes, that's the clarification I was asking, sir. So that is RMB37 billion is for the long term, which is 66 projects under development and pending. Yes, I was asking there was a $11,000,000,000 opportunity that we are showing in a presentation where 33 products are being approved. So at least those are the ones where we can get the benefits of market share and approval and this thing in medium term, which is 2 to 3 years. Is that the way to look at it? One product where we expect to launch in FY 2023 out of the opportunity that we have mentioned. 1 product in the launch in 'twenty three. Sure. Okay. Thanks a lot, sir, and I'm the best. I'll come back in the next. Thanks, sir. Thank you. The next question is from the line of Nimesh Mehta from Research Data Advisors. Please go ahead. Yes. Thanks for the opportunity and congrats on the inside of numbers. Sir, picking up on the previous participant, You know, is it fair to I mean, we have seen the generic FDS growth sequentially much better than I mean, on generic FDS on ARV Much better than API ARV, no, on a sequential basis. On a sequential basis, API ARV is down. You mentioned that even Daltagra will Pickup probably is one of the reasons I'm going to get there. So why is it not also translating into API growth? I mean, so what is the disconnect? I'm trying to understand that. Very interesting question. So our API sale depends on how much of our partners are getting market share And their inventory level, their under book. We can't sell more than what our customer needs. Whereas in the case of formulations, we know what orders we want and when to supply to which region we need to supply. But we do expect this API supplies to our other third party Yes, Ravi, customers, we'll resume to normal level soon, yes. So I mean, I'm assuming that the products are overlapping, I mean, when it comes to API ARV and the generic Yes, ARV. In that case, because we have leadership, cost leadership in most of the ARV products, Is it not fair to assume that we will always have higher growth in ARV formulations than ARV API? Because we will get bulk of the market share also other competitor. I mean that's what I'm essentially trying to understand. In most of the ARB formulation business, the tender split It's very even. So tenders are not awarded to the lowest bidder 100%. Vindar doesn't take out. So there will be a distribution between L1, L2, L3, L4. And there are certain Capacity is allocated for the new entrants. So even somebody wants to crash price doesn't mean you will get 100% of the tender. At the best, you will get 40%. So it is not easy to assume we'll able to garner all the market. There will be opportunity for us to Play a good get a good share while we continue to supply APIs to our partners. Understood. So the next question actually probably partially you would have answered, but let me just reiterate in case of anything. The other thing I wanted to know is that while we are expanding into other products, the second line treatment in terms of capacity, So because there is enough competition already there in those products, how do we see ourselves gaining more market share? Because Like what is the uniqueness? Again, it's the cost leadership or what is it which will help us gain market share? Our focus in other therapy areas, especially is on anti diabetic segment and the cardiovascular. In the anti diabetic segment, the new class of drugs, Especially the DPP-four inhibitors, vildaglutin, sitarliptin and our glutins will go off patent from next year onwards. So we have a full basket of products in the diabetes segment. So there we have created capacity for both APS and formulations. And when it comes to the cardiovascular segment, the nitrosoamine impurities disrupted the market share in the cardiovascular for this. So we invested during this crisis to Enhanced capacity and the best quality product. And we do see the opportunities for a fully integrated player in both cardiovascular as well as the diabetic segment because these are large volume products And the capacity demands are also high. Quality demands are also equally high. There, we believe we can play a role. We have capacity. We have right quality material to get to the market. Understood. Actually, I was asking more about the ERV products where we are expanding into second line treatment, especially in line with us. Okay. So I'll answer that question as well. The second line, The product market is limited and the competition is also limited. Not all the ARV players Arriving integrated second line therapy offering. So we Are creating or we're developing ANDAs to capture market not only in the LMIC region But also in Europe and U. S. And that is on the base of, again, we being the Least cost because we are integrated. Is that the right way to understand? Yes. Yes. Okay. Thank you very much. This is very good. Thank you. Thank you. The next question is from the line of Nathan Agarwal from DAMP Capital Advisors. Please go ahead. Hi. Thanks for taking the question. Sir, you mentioned that FY 2025 Sorry to interrupt you. May I request you to speak a little louder? Hello. Can you hear me now? Yes. Thank you. Sir, on you mentioned in FY 2025, you're looking to diversify it away from the ARV business. Right now, as you mentioned, we are about 65% ARV Business and the overall revenue mix, how do you see this proportion changing by FY 2025? We can only guide you, but we can't give you the exact number. We do believe by FY 2025, the ARBs, both the APS and formulation business should come down from 2 thirds to 1 third. Okay. And sir Okay. That is fair enough. And Zaf, on we are right now doing about $500,000,000 of revenues on the YAVI business on an annualized basis, give or take. In your assessment, what is how big can this business really get over a period of time given the size of the market and the way that competition is essentially is There are some challenges in terms of some maybe competitors are not very aggressive in this business. How big can this piece get for us from $500,000,000 where it is today? Everyone could Grow single digit, I would say. It's not easy to grow. Teens are higher growth Because market the number of patients coming on treatment is not increasing like in the previous years. So there will be a shift from the weaker players to stronger players. But otherwise, if you look at the entire ARV Formulation business is between KRW 1,500,000,000 to KRW 1,800,000,000 And the $500,000,000 is almost 33% of revenues coming to us. We do believe we have the ability to gain market share, but it will not be significant. That is the reason we are investing our resources both in R and D as well as in CapEx to non ARV, non oncology. Got it. And lastly, on that point, so on the non ARB business, since you've talked about, obviously, a very large significant growth in the business Because this business, as you said, has almost become 2 thirds of from 1 third where it is today over the next 4 years, apart from oncology Apart from diabetes and CVS, which you mentioned, where the integrated play for us will come in handy, what are the other these will Primary drivers, are there any other drivers of business which will sort of reduce this which will drive this non AIB piece of business for us? We have a reasonably Developed portfolio apart from anti diabetic and cardiovascular disease. We have few other APIs being developed and ANDA is being developed. Those are Complex and scale projects, maybe we'll let you know at an appropriate time. Okay. Thank you and best of luck. Thank you. The next question is from the line of Tushar Manugane from Motilal Oswal Financial Service. Please go ahead. Yes. Thanks for the opportunity. So just on this bio business, At the time of acquisition, first half FY 2020 had sales of about INR 30 crores, which was without commercialization of 2 fermenters. And now for the Q1 with commercialization, we are at INR 14 crores. So just to understand this disconnect. I think the 2 fermenters which came into operational 1 in June. So there is no not significant revenue generated in the Q1 from the new carmakers. You will see the full fledged revenue also for 2nd unit from probably from 3rd quarter. Understood. Secondly, on the formulation side, if you could share how much is in licensed product products contributed for the quarter? And we have the similar profitability as we make in the products which we manufacture. Revenue from in license 1st in years is not that significant in Q1. Yes, that's it, Sannin. Thanks. And just lastly, we were looking also is Benefit is there in 1Q or that would come from 2Q onwards from the formulation side? Formulation side, the debottlenecking was Done by end of June and put into operation only in July, yes. So that revenue will also be a reflection in 2Q? In the current quarter, in Q2. Thank you, sir. That's it from me. Thank you. Thank you. The next question is from the line of Harit Saimad from Smart Travel Advisors. Please go ahead. Hi, good morning. Thanks for taking my questions. My first question is on the CDMO business. How much of this business will be coming from supplies to Aspen? And what exactly the nature of these supplies? And similarly, what is the contribution from what we Previously used to call ingredients supplies in global cereal pie. The custom ingredients and supplies to Aspen, Cerro del intermediates, about 30% of our CDMO revenues in Q1. Okay. And the nutraceuticals part of CDMO or what should that be? Put together. The both Aspen And On the formulation side, what is our PLD market share in LMIC currently? And for the quarter, what would be the breakup of FD sales between LMI CRE and U. S./Europe, is it the Split the same as what we have seen in recent quarters around 75% to 85%. Yes, around that, seventy-thirty ratios, yes. And then our market share for TLD and LMIC? TLD LMIC is in higher teens. Okay. Thank you. That's all for me, Ajay. Thank you. Thank you. The next question is from the line of Naresh Suthar from SBI Life Insurance. Please go ahead. Yes. Thank you for taking my question. Sir, my question you have answered partly already. So I just wanted to That's here. From here on, Majority of your non yearly CapEx and benefit of that is coming more towards So end of this year and more in upper 2023. So next 9 months, can I say that our EBITDA revenue will be broadly in our range till the non ARB picks up significantly from next year? Is it right to understand? We have added the ABA capacity became operational in Q4. And we will we are expecting One more API block will be operational by end of December. So we are Putting capacity into commercialization on a regular basis. So when we are saying our formation capacity will be ready by March, That means the revenues from that expanded capacity will come in FY 2020, you're right. But as we mentioned, we our debottlenecking activity also gave a 20% more capacity, Which became operational by end of Q1. Right. But that for that you said the LMIC I mean the ERV So there will not be significant growth, but there will be some growth. That's P. Vijay Kumar:] There will be growth. So see, we can ramp up production depending on opportunity. So our RMB6 billion current capacity is not Utilize 100% even in this month. So there is a scope for us to take more orders and service. Okay. And sir, one more question. On Cellimo side, can you help us for the amount which we are investing in terms of CapEx in particularly for that segment? In the formulation, we're investing around INR 400 crores CapEx for this new capacity expansion. In CDMO, CDMO family? No, in CDMO, In CDMO, CDMO family. So in CDMO, we will be investing in FY 2022 and 2023. But we were maybe around INR 500 crores. Thank you. The next question is from the line of Forum Parekh from Choice Investments. Please go ahead. Due to no response? Hello? Hello? Am I audible? Yes, ma'am. Now you are. Yes. So my question is on Lourdes Bio. I understand that the contribution to the EBITDA would be niche in this quarter. But going forward, just wanted to understand how much would Lalus Bio contribute to the EBITDA? And second question is on The CDMO side, I see that we have commercialized 4 projects as on Q1. So going forward, how many projects do we intend to commercialize out of these 50 clients? We will continue to supply these 4 commercialized products in FY 2023 and thereafter as well. New commercial launches will happen in FY 2023. We don't expect anything in FY22, yes. Okay. And Laurence, by your contribution to the EBITDA? We are not giving division wise EBITDA contributions. But when we are in a position to give, we'll provide, yes. Okay. And sir, just last question, if I may. FDF capacity utilization, if you can just give us an idea. We are at about 80% capacity utilization in FDF right now. Okay. And we have any scope for improvement, I mean, expansion in that? We can take more Adders and service with the current capacity itself. Okay. Thank you. That's helpful. Thank you. Thank you. The next question is from the line of Tushar Maungavane from Motilal Oswal. Please go ahead. Yes. Thanks for the follow-up. Sir, just on the CDMO piece on the investment of INR 500 crores. What kind of asset count can we expect there? These are greenfield projects. These are not brownfield. The groundbreaking will happen next quarter. These investments will Giving revenues probably FY 2023 last quarter of FY 2023 onwards, not before. Yes. And what is the kind of an asset earnings we can expect from this industry? Difficult to predict right now, but this will be in line with industry or better than industry. Yes. As you see, our current asset ratio is closer to 1.4. So we'll be in that range. And the next question is from the line of Omkar from Sree Consultancy. Please go ahead. Yes. One of my questions has been answered. The second question is regarding do you have any plans for debt reduction given the Cash you are generating from the profits? No, you made our plans. So we see the business opportunities in front of us and we're investing. And our cost of debt is not that huge where we will stop CapEx and return debt. What's your debt to equity currently? Debt to EBITDA is less than 1. Debt to EBITDA is less than? Debt to EBITDA is 0.58. Okay. All right. Thank you. Thank you. Thank you. The next question is from the line of Sameer Palod from AUM Fund Advisors. Please go ahead. Hello. So one clarification, you had mentioned that you are looking to split this contribution of ARB. Just want to recheck, sir, by which year do you expect to do that? FY 2025, you're saying. 125, so which means that and so how do you see the ERV business growing for the next 4 years? It will grow single digit. We don't expect it will grow significantly. See, as you have seen, ARV Contribution both the APS and formulations was very significant in FY 2020, FY 2021 and FY 2022. So this growth will moderate FY 2023 onwards. And the new investments that we're making in non ARV will start giving revenues from April 23 itself. Understood. So the other question was in the CDMO business, do you [SPEAKER SRINIVASAN VENKATAKRISHNAN:] In CDM or no? [SPEAKER SRINIVASAN VENKATAKRISHNAN:] In Biologics, sir? [SPEAKER SRINIVASAN VENKATAKRISHNAN:] No, no, no. See, contract manufacturing, I wanted to clarify. We do contract manufacturing in generic APIs. We do contract manufacturing in generic formulations. We'll do contract land pricing in NCEs. See, when we are talking about CDMO business, it is primarily in the [SPEAKER SRINIVASAN VENKATAKRISHNAN:] And see, so our generic APIs, generic formulation, contract manufacturing is not added yet. So that way, Today, revenue contribution from contract manufacturing as a whole is 28% or little more than 20% when we add APIs, formulations and NCS. So when we are talking about the CDMO business, this is primarily meant for MCEs, Customer ingredients, 1 product to 1 customer in the MCE space. And they are both in the non ARV space, right? Yes. The incidence of the combination of both of the non ARB space? Yes. Okay. Thank you, sir. Thank you. The next question is from the line of Navin from Kotak. Please go ahead. Yes. Hello. Am I audible? Yes, sir. You are now. Go ahead. Yes. My first question is around the capacity that you have for Formulations of the 6,000,000,000 tablets. Can you give a split of how much of this is going for your ARV formulations and how much is going for Your generic contract manufacturing of formulations? About Yes, I'll give you a broad number about 20% of capacity utilized for contract manufacturing. Okay. And 40% is utilized for ARVs and 40% for other products. So out of that CHF 6,000,000,000 40% is for ARVs, 20% is for generic formulations, contract manufacturing, And the rest is for around 40% goes to? The non ARB formulations. Okay. Whereas from a value perspective, the ARV performance It's a significant. It's a significant. Okay. And for the additional RMB4 1,000,000,000 I wanted to clarify here When we're talking of the ARVs, the ARVs we do 3.80 grams in 1 kilo. So our 40% units may consume more equipment than Abra, 40% believe we use 1 API only. So when we are talking just to I gave the 20, twenty-twenty in number of units, but the number of equipments used to get this are much larger for this ARVs. So we In other APIs, in other pharmacies, we use either 1 API or 2 APIs put together. P. Vijay Kumar:] Yes. In the year, we have used 3 APIs. So the number of equipments used is much more than the other tablets or capsules. Okay. I get your point, Biren. And for the additional 4,000,000,000 tablet capacity, could you just give us A gold patch, Shlikh, because as you said, by and large, this will go for generic CMO, if I understood it correctly. Maybe you could give some idea, A numerical sort of Q2 assess how much of this CLUB 4,000,000,000 for generic CME? In the new Expanded capacity, about $1,000,000,000 will be used for CMO and then remaining $3,000,000,000 will be used for non ARVs. Yes. Okay. Let me say I'll request you to come back in the question queue for a follow-up question. Thank you. The next question is from the line of Devarat Mota from Capital Group. Please go ahead. Hi, doctor. Hope all well. Just two questions, Puneet. Firstly, on the CDMO, was there any one off in the quarter or this is just kind of business as usual clients ramping up to projects commercializing? As we clarified, there is no one off in CDMO revenues in Q1. This is done as usual. Got it. And secondly, can you just talk to what happened on the other APIs? Is this just timing mismatch or is there something else to Because the other API segment kind of declined quite a bit. So just curious to know what happened there? There is no mismatch. There is only Shifting couple of schedules. Okay. Got it. And other last question, if I can squeeze in one more. On the margin, so if I look at the margin sequentially, gross margins have gone up, but the EBITDA margin has gone down. Can you just talk through what's caused the gross margin to And what's called the EBITDA margin to go down sequentially? Because of our preoperative expenditure or increased R and A expenditure, We were down by a little bit of cash from the EBITDA. But at the same time, we were almost 100 crores less Revenue from Q4 to Q1. That's for EBITDA. But the gross margin, it is in mix, so More synthesis revenue we have. So that contributed in a better gross margin. Perfect. So if I understood correctly, gross margin is because of mix. The EBITDA margin is primarily negative operating leverage and pre operative expenses. So basically FY 2023 onwards, a lot of these pre operative expenses will go away because, I mean, as your transformation this year, there will be some cost this But next year you won't have the TIPT operative expense drag on EBITDA. Yes. Thank you. Those are my questions. Thank you. Good luck. Thank you. The next question is from the line of Tarang from Woolworths Capital. Please go ahead. Alisa, just wanted to check what would be your conversion costs per 1,000,000 tablets in case of formulations and maybe per kilo liter in case of And maybe per kiloliter in case of APIs. Those details are well, I'm afraid we can't give you. Sure. Thank you. Thank you. The next question is from the line of Nitin Agarwal from Dham Capital. Please go ahead. So thanks for taking the question. Again, on the CDMO business, obviously, we've come a long way from where we started largely with Aspen to where the plans that we have for this business. So if you can probably give us a little qualitative sense on how have you seen the business evolving? What kind of opportunities are you beginning to see now? And what is it I mean what is the USP that we bring to the table which is getting clients attracted to us for this business? So if some company looking to outsource their activity, if they write to Five names in India with technical capabilities and scale, I'm sure Lara's Labs will figure out there. So that is one way we are attracting customers. We have 4,600,000 liters reactor volume right now, And we're adding almost 1,000,000 liters more in the next 18 months. So we are one of the top 5 companies with react volume. And we have demonstrated our expertise in certain type of chemistries, especially the chiral chemistry, Large scale Chem Manufacturing, large scale chromatography capabilities, I ported capabilities. So there we have a earned lot of reputation with our customers. So that is helping us to bring more new projects into CDMO. Right. And so most of these projects that we're talking about like also the 2 greenfield projects that we talked about, these are what, These are products which are in already commercialized or they are in late phase of development and will get commercialized. What is the typical nature of the business that you're looking to get incrementally? We have commercialized 4 products, 3 APIs and 1 advanced intermediate. Those are placed going on as planned. And we have several projects in Phase II and actually, we have 2 projects in Phase II, which are oncology. And We have one in Phase III right now. So we have a mix of 5 potent molecules in various clinical phases. And we have a few in Where we have used our large scale manufacturing expertise. And this is you talked about the greenfield projects, This is our clinical phase. And then you mentioned about you putting up 2 new greenfield projects where you did consultation with the clients. What would be the typical nature of these kind of these would be, again, large scale volume manufacturing contracts that you are getting for which you need to be able to We'll give more details At an appropriate amount, those. So it is premature for us to view more details. Yes. We will share those details when appropriate. Okay, sir. Thank you. Thank you. The next question is from the line of Krish Mehta from Manheim Holdings. Please go ahead. Yes. I wanted to ask on the net debt as of 30th June 2021. INR 170 crores increase. Yes. And the CapEx for this quarter, as you said, was INR 2.3 crores. So what's the guidance for the remaining 9 months going forward for FY 2022 as well as FY 2023, if you could share that for CapEx? For CapEx, actually for 2 years, we gave a guidance of INR 1500 crores to INR 1700 crores. Right. But just to get a like can we use this 213 as a run rate for the rest of the year? In an average, Maybe around that actually. We can't say exactly INR 200, but when I say INR 17,000,000 or INR 1500 to INR 1700 crores, it is similar. Okay. Thank you. Thank you. Thank you. I guess the approval for global tenders in FDA formulation is valid for 3 years. And I think the approval you got in 2018 for this Global tenders would be expiring this year. Can you please let us know if this approval is getting renewed now? So the Global Fund tender was for 3 years, you are right. And due to this pandemic, they extended the tender Period from 3 to 4 years. Okay. So it's still for next year, Yes. These standards are valid until end of next year. Okay. And my second question Regarding ARV API revenue, may I know whether you anticipate any growth in FY 2022 compared to FY 2021? I'm asking because in last call, you were like guided for single digit growth for FY 2022 for ARV API. Is this guidance still valid? We do expect so, yes. Okay. And my last question, Renee. In the recent interview with 1 of the international media channel, When you were asked on question on what excites you in future in Laurence, you said that you expect there would be an oral drug for COVID. And if it comes, it will be a good opportunity for Laurence. May I know if there has any COVID oral drugs in pipeline like 1 of Pravit or Yes, sir. We in licensed 2 DRT glucose from DRDVO, for which we are gearing up for launch in the next few weeks. We're in the regulatory approval process. And other than that, We are working on other drugs, but we don't know when the approval from It's too early to predict. Okay. Yes, thank you. Thank you very much. Yes, that's it from me. Thank you. Next question is from the line of Jeevan Paddwa from CandiFLO. Please go ahead. Good afternoon, sir. Just one question. So in your presentation, you basically said we are basically going for 1,000,000 fermentation capacity in Phase 1. So are you thinking of any Phase II as well? Currently, the R2 will give 180,000 liters new current diesel capacity. And we are looking for a land Because we can't go to a new site for every 1,000,000 liter. So the new land, what we are looking at is fairly big, about 20 to 30 Acre Land Bank. And there we can go to 3000000 to 4000000 liters per liters capacity, but we'll start with 1,000,000 liter. Perfect. Thanks a lot, sir. Thanks a lot and all the best, sir. Thanks, sir. Thank you very much. Ladies and gentlemen, I now hand the conference over to the management for closing comments. Thank you, everyone, for participating in this conference call and also for your very insightful questions. And Please do keep safe. Thanks. Thank you. Thank you very much. On behalf of Ambit Capital Private Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.