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Edited Transcript of GRANULES.NSE earnings conference call or presentation 23-Oct-19 6:30am GMT

Q2 2020 Granules India Ltd Earnings Call

Hyderabad Oct 24, 2019 (Thomson StreetEvents) -- Edited Transcript of Granules India Ltd earnings conference call or presentation Wednesday, October 23, 2019 at 6:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Krishna Prasad Chigurupati

Granules India Limited - Chairman & MD

* Priyanka Chigurupati

Granules India Limited - Executive Director of Granules Pharmaceuticals Inc.

* Sumanta Bajpayee

Granules India Limited - Head of Corporate Finance, Treasury & IR

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Conference Call Participants

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* Ashwini Agarwal

Ashmore Equities Investment Management (US) LLC - Non-Discretionary Strategic Advisor

* Charulata Gaidhani

Dalal & Broacha Stock Broking Pvt Ltd., Research Division - Analyst

* Chirag Dagli;HDFC Asset Management Company Ltd.

* Dipan Anil Mehta

Elixir Capital Limited - Chairman of the Board

* Nimish Nagindas Mehta

Research Delta Advisors, Research Division - Research Analyst

* Praful Bohra

Emkay Global Financial Services Ltd., Research Division - Senior Research Analyst

* Prateeksha Malpani;Equirus Securities Private Limited, Research Division

* Srihari Chintalapudy

PCS Securities Ltd., Research Division - Equity Fundamental Analyst

* Tushar Manudhane

Motilal Oswal Securities Limited, Research Division - Research Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, good day, and welcome to the Granules India Limited Q2 FY '20 Earnings Conference Call. (Operator Instructions) Please note that this conference is being recorded.

I would now like to hand the conference over to Sumanta Bajpayee. Thank you, and over to you.

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Sumanta Bajpayee, Granules India Limited - Head of Corporate Finance, Treasury & IR [2]

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Thank you, Janice. Good afternoon, everyone. I welcome you all for our earnings call of second quarter financial year 2020. I have Mr. Krishna Prasad Chigurupati, Chairman and Managing Director of Granules India Limited; and Ms. Priyanka Chigurupati, Executive Director of Granules Pharmaceutical Inc., with me to explain any business parameters and outlook.

Before I start with the call, I would like to request everyone that we have shared the business data as well as other details through our investor presentation, which is currently available on our website as well as it is available in the stock market -- stock exchange. Please refer the breakups so that we can continue to focus more on business-oriented and strategy-oriented questions during the Q&A session.

I also would like to highlight here that some of the statements made in today's call could be forward-looking in nature. The safe harbor statement contained in our press release is also applicable for this call.

I'll now hand over the call to Mr. Krishna Prasad Chigurupati for his opening remarks. Thank you all. Sir, over to you.

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [3]

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Thank you, Sumanta. Ladies and gentlemen, thank you very much for attending our earnings call for the second quarter of FY '20 During this quarter, we continued and built on the performance of Q1, achieving a stronger performance. This again validates our confidence in exceeding our target of INR 300 crores PAT for the current financial year and 25% CAGR in PAT over the next 3 years.

In this quarter, we have achieved a revenue of INR 700 crores, which is 20% growth year-on-year basis. The revenue growth for H1 for FY '20 was 25% on a year-on-year basis.

The growth on a yearly basis was driven by higher sale of FDs and PFIs, which stood at 34% and 37%, respectively. The FD growth was due to new launches in North America. FDs constituted 50% of the total revenue, PFIs 19% and APIs, 31%. North America was the key driver constituting 53% of the revenue, followed by Europe and LATAM. The growth in North America was 39% on a year-on-year basis.

Gross profit in this quarter has improved both on a yearly and sequential basis. Gross margin has increased year-on-year by 3.3%. The increase is the outcome of increased revenues, especially in the FD and PFI verticals. We are confident that our gross margins at this level are sustainable.

We have achieved an EBITDA of INR 144 crores compared to INR 101 crores, which is an increase of 43% compared to the same period last financial year. This shift in EBITDA is on account of a positive contribution at gross margin level with minimal increase in fixed operational expenses. I'm very happy to state that during this quarter, our EBITDA margin has grown to 20.5% as compared to 17.3%, which is very close to our historic high of 21%. We have targeted to achieve 19% EBITDA for this year, whereas we believe we can maintain more than 20% for the year.

Regarding net profit, this quarter does not have any share of profit from JVs, but our net profit for this quarter was still at INR 96 crores, which is a 59% increase from INR 60 crores during Q2 of FY '19. If you do not consider the INR 13 crores profit from JVs during Q2 of FY '19, the net profit growth would have been 103%. Current tax and deferred tax liability reversal put together has contributed INR 17 crores for this quarter to net profit.

Free cash flow during this quarter was INR 35 crores. Operating profit was INR 158 crores, out of which INR 15 crores was spent on working capital requirement, advanced taxes INR 32 crores, dividend was INR 15 crores, CapEx was INR 49 crores, capitalized R&D was INR 11 crores. As compared to Q1 FY '20, working capital had increased by INR 21 crores due to increased sales, advanced taxes increased by INR 18 crores, dividend outflow increased by INR 15 crores, as no dividend was paid in Q1. R&D capitalized decreased by INR 7 crores and regular CapEx went up by INR 13 crores. For the first half of the current fiscal, we generated a free cash flow of INR 96 crores, and we will definitely keep up the momentum for the balance of the year.

Gross debt by end of Q2 FY '20 was INR 928 crores as compared to INR 1,120 crores at the end of Q2 FY '19. Net debt by Q2 FY '20 was INR 827 crores as compared to INR 1,008 crores at the end of Q2 FY '19.

Net debt-to-EBITDA by end of current quarter was 1.6 as compared to 2.9 by end of Q2 FY '19. We are already close to our year-end target of 1.5% and are confident that we will keep on improving on those metrics.

ROCE at the end of the quarter -- of the current quarter was 21.7% while considering the JVs as compared to 17.6% by end of Q2 FY '19. Cash-to-cash cycle was 106 days during the current quarter as compared to 112 by the end of Q1 of the current fiscal year.

The total R&D expenses for this quarter were INR 30 crores compared to INR 25 crores during the same period of the previous fiscal year. It stands at 4.28% of sales for the quarter. Out of the total R&D expense, we have expensed out INR 19 crores and the balance INR 11 crores was capitalized. I'm happy to inform you that we have delivered an improved EBITDA margin despite increased R&D expenses.

We have received approval for one ANDA in this quarter and filed for 2. As it stands today, there are a total of 22 filed ANDAs awaiting approval. We expect to receive 4 to 5 approvals by the end of the current fiscal year. We had launched one product from GPI during this quarter.

On the JV front, in order to strengthen our current strategy and focus on our core capabilities and generate free cash, we decided to exit both our joint ventures. Regarding Granules Omnichem, we felt CRAMS is not a core strength and getting out of this will help us in focusing on our current strategy, which has evolved differently from the time of the beginning of the JV. We entered into an agreement for this divestment for a consideration of INR 109.85 crores and filed for permission to the government for the divestment. We expect to close the transaction during Q4.

Regarding Granules Biocause, we entered into this JV in the year 2007 to ensure a consistent supply of Ibuprofen API. The JV had worked well all these years, and in times of shortages, we got benefited by peak supplies. However, the ever-increasing environmental compliance standards in China have led to the JV investing heavily in CapEx in the past and also currently as we speak. We expect the CapEx to continue in future too. The current focus on reduced CapEx and increased free cash flow led us to this decision.

Our Board has recently approved exit from the JV, and we will be starting discussions with our partners on the valuation shortly. We had a supply agreement for the JV and do not see any supply issues even after divestment. Moreover, Ibuprofen supply had shortened and manufacturers in India have increased capacities. We also have other sources approved for most of our products. Our decision to exit the JVs will not impact our commitment to achieving our profitability targets but will help us in generating free cash generation -- in generating free cash and a reduction in net debt.

At GPI, our newest subsidiary, we achieved a revenue of INR 63 crores, an increase of INR 36 crores from the corresponding quarter of the last fiscal. EBITDA stood at INR 7.8 crores and PAT at INR 4.8 crores.

On the pledged shares, since our last call, the pledged shares as a percentage of the total shares I own have come down from 43% to 37%. As a percentage of pledged shares to the total outstanding shares of the company, it currently stands at 16%. Currently, I'm in the process of repaying some more amounts, and we will see a bit shortly.

With this, ladies and gentlemen, I would like to open the call for questions.

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Questions and Answers

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Operator [1]

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Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions) We take the first question from the line of Vaibhav from Ashmore.

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Ashwini Agarwal, Ashmore Equities Investment Management (US) LLC - Non-Discretionary Strategic Advisor [2]

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This is Ashwini here. My heartiest congratulations on a wonderful set of numbers. It's truly heartening that everything that the company has been working towards over the last few years is now starting to become visible, such as improvement in return ratios, improvement in asset turn ratios and return on equity ratios. So many, many congratulations for that and for generating the FCF and paying down debt. So I had a couple of questions. One is that we've obviously seen a significant reduction in your working capital days or a cash conversion cycle down to 106 days. And if I look at the trend over the last several years, this is the lowest number that I have seen. Is there something one-off that's driving it? What should be the sustainable number of days that we should use as the cash conversion days?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [3]

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Definitely, there's no one-off, Ashwini. It's been a constant effort that we've been putting on, and this is showing results. We are working on reducing our payables -- receivables and also receivable days and also concentrating on inventory and inventory control. And if you actually see, the inventory days are 54 as compared to 59 days, receivable days reduced from 115 days to 102 days and the payable days stood stationary at 50 days. So the cash cycle has come down due to all these efforts. And we are striving our best to make sure we'll be able to reduce this a little better as we go by.

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Ashwini Agarwal, Ashmore Equities Investment Management (US) LLC - Non-Discretionary Strategic Advisor [4]

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Okay. The other thing is that I was just trying to figure out, I mean, thanks to your opening remarks on the exits from the JV, regarding your Biocause JV, you said that you will be commencing the discussions shortly. Do you think that it will be possible to exit in the current financial year? Or do you think it might stretch a little bit longer?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [5]

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No, we are fairly confident we'll be able to close this by Q4. Both JVs we'll be able to close by Q4.

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Ashwini Agarwal, Ashmore Equities Investment Management (US) LLC - Non-Discretionary Strategic Advisor [6]

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Okay. And if I'm not mistaken, this should actually significantly improve your return ratios further because roughly these 2 assets, which are showing up as assets held for sale as of 30 September will take away about INR 200 crores worth of assets from your balance sheet. And the return ratio that you are seeing at least in the September quarter are without any contribution from the JVs. So this should further help to bolster the return ratios. Would that understanding be right?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [7]

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Definitely -- Ashwini, it will definitely help us to do that.

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Ashwini Agarwal, Ashmore Equities Investment Management (US) LLC - Non-Discretionary Strategic Advisor [8]

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And what's your plan? I mean you'll get roughly, say, INR 110-odd crores from your first JV, which you've already concluded. I don't know the amount for the second JV. What's the plan for the cash utilization? Payment of debt? Or do you have any other application of these funds in mind?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [9]

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We just would like to hold the assets in fixed deposits and generate some treasury income rather than paying down debt. Debt, as I've always mentioned, is cheaper than the income we would be making on these amounts. And then going forward, this will effectively reduce our net debt. But going forward, we will see where -- what we should do with this amount. But currently, we do not have any plans for CapEx.

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Ashwini Agarwal, Ashmore Equities Investment Management (US) LLC - Non-Discretionary Strategic Advisor [10]

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Okay. So my next question is that if I look at your gross margin profile, your gross margin profile on a quarter-to-quarter basis is reasonably volatile. I mean we've seen a number which is as low as 43% in quarter 3 last year and then we saw 50% in quarter 1. I mean is it just a revenue mix? Or is there an interplay of raw materials also here? Because what we are hearing from many other people is that raw material tightness that was prevailing in China and causing a lot of disturbance seems to have abated significantly. So how should we view this number? I mean you're in the vicinity of 50% or so for the first half this year. I mean how will this number look on a sustainable basis?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [11]

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Ashwini, the 45%, 43% gross margin we were making in the past was mainly due to the ever-increasing prices at that period of time of raw materials. However, the raw material prices are stable now, and in a few cases, they're coming down, but that doesn't necessarily improve our margin because the sales from our side also would slightly go down. And last quarter, we had a gross margin of 50%. And this quarter, it went down slightly by -- to 48.6%, which is mainly due to the product mix. We had more sales of APIs in India. And when we sell in the domestic market, the margins are low. So -- and if we have more sales to export markets, the margins would get better. But -- however, I'm sure we'll definitely manage and sustain margins of around 48% going forward. I don't see any risk of that going down.

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Ashwini Agarwal, Ashmore Equities Investment Management (US) LLC - Non-Discretionary Strategic Advisor [12]

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Okay. Sir, last question from my side before I fall back in the queue. The other income number of INR 8.7 crores, could you give me the breakup of that?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [13]

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Yes. That's about INR 2.6 crores on account of ForEx. And we had a settlement that -- on a litigation with a company in the U.S. for one of our products. And as part of the settlement, where we agreed on a launch date, they have given us INR 4.2 crores as compensation, and the rest of the money is from treasury.

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Ashwini Agarwal, Ashmore Equities Investment Management (US) LLC - Non-Discretionary Strategic Advisor [14]

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Okay. Congratulations, once again. Wonderful numbers. And I'll come back with more questions.

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [15]

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Thank you.

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Operator [16]

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We take the next question from the line of Prashant (sic) [Praful] Bohra from Emkay Ventures.

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Praful Bohra, Emkay Global Financial Services Ltd., Research Division - Senior Research Analyst [17]

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Congratulations, sir, for an excellent set of numbers. Just a couple of points. First, if you see even quarter-on-quarter, there's been a very sharp buildup on the core business. So I believe your PAT in the core business was about INR 60 crores in Q1, which is now INR 96 crores. If you could just help us qualitatively understand where this difference has come in the business and how sustainable is it? Or is this -- is there an element of seasonality or a one-off or a spillover between quarters? How sustainable is this delta that's come up and from a guidance perspective as well qualitatively?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [18]

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Definitely, it is sustainable, Prashant. And the growth has been mainly due to growth in the markets, U.S. and Europe, and also at finished dosages and PFIs. As you are all aware, finished dosages and PFIs have better margins, and that is what has contributed to the increase in profit. And also, increased revenues with the same overhead which -- same or a little more overheads have contributed to this extra margin. From here on, every increase in revenue would contribute at least 40% or 35% to the bottom line. So the key is to keep growing a little bit or at least maintaining the levels here and that will definitely sustain the margins.

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Praful Bohra, Emkay Global Financial Services Ltd., Research Division - Senior Research Analyst [19]

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As in the increase in formulation revenue, has it been driven by your existing core molecules, say, metformin or paracetamol? Or is it being driven by the new launches? If you can just help us understand where the delta has come from in formulations also.

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [20]

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It's mostly from existing molecules. And where they have added is just not sufficed. We have been adding a few more products into this core strategy where we are integrated from API to FD. So that is the main thing. But we have also got good gross margins from new launches in the U.S. However, we have been getting ready to scale up operations. We have been hiring people. And so the overheads there have gone up. So the net margin from GPI has not increased. So mainly, it comes from the core molecules. And also, Prashant, there's another thing, the margin has also improved due to partly the tax -- the reduced taxes and the effective tax rate, where there was also a little deferred tax income.

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Praful Bohra, Emkay Global Financial Services Ltd., Research Division - Senior Research Analyst [21]

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So has the metformin new capacity, for which we got EIR last quarter, is that operational now? And is that reflecting also in the overall margins? Or should we expect the benefit from that to kick going forward?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [22]

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It is operational, Prashant. And maybe it would have been about 15 days of benefit we would have got from that in the past quarter. But this quarter, we will get the full benefit of the new capacity.

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Praful Bohra, Emkay Global Financial Services Ltd., Research Division - Senior Research Analyst [23]

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Sir, in light of the -- let's say, we did about INR 60 crores in Q1, about INR 96 crores in Q2, so about INR 155 crores, INR 160 crores vicinity in H1. So your guidance for the full year was INR 300 crores. I think that was including the JVs at the start of the year. Right now, if we analyze the H1 number, we touched INR 300 crores without the JVs. If we analyze Q2 number, we are significantly higher than that INR 300 crores guidance. So would you -- what would be the revised guidance from the management? What should we look at when we're trying to project for '20 and '21?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [24]

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Prashant, the Q1 had the JV income. Q2 doesn't have JV income.

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Praful Bohra, Emkay Global Financial Services Ltd., Research Division - Senior Research Analyst [25]

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So the INR 60 crores is without JV. Is it what I'm considering?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [26]

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Yes, you're right. Okay. So we will sustain this profit even without the JV. And we are very, very confident that we can easily cross the INR 300 crores.

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Praful Bohra, Emkay Global Financial Services Ltd., Research Division - Senior Research Analyst [27]

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And sir, when you say sustaining, are we looking at Q2 number as a baseline number now? Or are we looking at Q1? Or what should be the baseline number for core business when you say sustaining?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [28]

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Core business, I would say, it's somewhere in between. We will grow. We will grow, but would we grow at the same rate quarter-on-quarter, I'm not sure, but definitely getting that 25% growth in PAT, I don't see it at all as a problem. Hopefully, we'll do better than that.

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Praful Bohra, Emkay Global Financial Services Ltd., Research Division - Senior Research Analyst [29]

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Sir, can you also throw some light on the oncology block? What is the status now?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [30]

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Oncology there, it's a long drawn process. We have been filing DMFs for APIs, and we are also working on formulations. And also, we are discussing with certain companies for doing contract manufacturing. So all these things will fall in place only into the next fiscal. And we can expect some revenue in the next fiscal, but I think the fiscal '22 would be a proper year for generating profits from the onco facility.

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Operator [31]

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Next question is from the line of [Nithin Ranjit] from [Capstock].

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Unidentified Analyst, [32]

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I would like to, first of all, congratulate you on a great set of numbers. My question was with respect to the Biocause exit, which we have recently concluded. So how much was it contributing to your PAT on a yearly basis last year?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [33]

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Can you come again, please?

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Unidentified Analyst, [34]

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Sir, my question was with respect to the Biocause exit, which we have planned. So how much of our PAT last year was it contributing to?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [35]

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Okay. How much was the PAT last year from Biocause contribution? One minute, I'll just give it to you. From this last year. While they work on the actual numbers, vaguely, I would say, it will be around 70 -- okay, I've got the actual number. Okay. Our share has been INR 44 crores for the whole year.

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Unidentified Analyst, [36]

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Okay, sir. Sir, my question regarding the -- okay, so again, this question arises, so are we like -- have we like decided to exit this really because the Ibuprofen prices have kind of softened over the last 4, 5 months and you yourself have said that? So is it because our JV has decided to expand -- further expand our Ibuprofen API capacity over there in China? Is it -- is that the (inaudible) one must get from that?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [37]

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The main reason, listen, is, we -- I mean there's a lot of investment going. When we started the JV, we started with a very low amount. So whatever that was generated as profits over all these years had gone towards building of working capital. Initially, the working capital was given as a loan by our partner. So as we had some profit, it was -- we were building the working capital. And then later in the last few years, the environmental standards -- compliance standards in China have become very tough and continuously they're becoming tougher and tougher. What was done, we took a shutdown last year. We spent a lot of money on building a new effluent treatment plant, and it met the compliance standards. But within 6 months, the government comes back and comes back with tougher standards. Again, we took a shutdown recently, and we again spent a lot of money. So there's a lot of uncertainty going on in China. So they may still tighten the standards, and in some places they may even want to shut down some facilities. Even though you are clean, they say this entire area has to be free of industries.

So there's something called the Blue Sky, lot of uncertainty happening there. So under these circumstances, we felt it's not a good idea. And then the idea of getting into JV was to get a security of supply for our API. So this served -- the JV has served its purpose. Many times during this long period -- during periods of shortage, the JV was able to support us, and we benefited drastically by having Ibuprofen. We were able to get good market share in the U.S. just because we had access to the API. And now today, that doesn't stand as important as it was before because lot of expansion is going on in India and outside India. In India, there's almost like more than doubling of capacity that has happened. And we've also approved other sources for our formulations, and we don't see supplies as a major issue.

Moreover Biocause, and we have a -- the JV and we have a supply agreement, and supplies would continue to come from the JV. So we don't see any risk. That's the reason we felt that when there's no cash being generated and coming to us as a profit, so we felt we should exit it. And whatever proceeds come from the sales, that would help us in reducing our net debt and building up cash in the company.

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Unidentified Analyst, [38]

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Okay. Fair enough. But sir, since we have exited the JV, do we have any plans for building up additional capacity domestically for Ibuprofen API? Because we've already quitting the JV, right? So are we like planning to increase the capacity of Ibuprofen domestically on our own? Do we have any plans for that?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [39]

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Right now we have no plans to start manufacturing Ibuprofen because there's already a surplus capacity that has come up. However, we would be entering into some sort of understanding with a few suppliers on pricing and supply. So that's what we would do, but definitely we would not -- we do not have any plans right now.

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Unidentified Analyst, [40]

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Just one last question. Sir, we have launched our generic ibuprofen formulations in the U.S. in the year 2015. So how much sales does -- how much sales does that product actually bring us? I mean the Ibuprofen...

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [41]

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Nithin, I cannot share the number -- revenue number, but all I can tell you is we have about 35% of the U.S. market.

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Unidentified Analyst, [42]

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Okay. Now that we are a customer, how do you, like, see the Ibuprofen prices moving from here? Because we are no longer the manufacturing unit, right? So what's your outlook on that? Because BASF has kind of restarting their facility in Texas. So how do you read the overall market situation on Ibuprofen?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [43]

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Ibuprofen prices have already started softening. And they can only soften as we go by. And definitely, we will see an improvement in the next few quarters.

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Operator [44]

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We take the next question from the line of Chirag Dagli from HDFC Mutual Fund.

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Chirag Dagli;HDFC Asset Management Company Ltd., [45]

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Sir, what is the tax outflow for the divestments that we will do, both these JVs? Is there a tax angle to it?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [46]

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There's going to be a tax angle because if you see the Biocause JV, we invested only INR 18 crores in 2007, which is, like, 12 years ago. There will be long-term capital gains. And it also -- the amount depends on what we agree as a valuation between our partners and us. And same thing with Omnichem JV. There also, we invested over INR 43 crores. And since we are getting about INR 109 crores now, on the balance, there will be a long-term capital gain. And I think it is around 15% -- 20% long-term capital gains.

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Chirag Dagli;HDFC Asset Management Company Ltd., [47]

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Okay, sir. And sir, is there a guidance for depreciation that you have for the next year? Because next year, you will have to sort of take amortization on some of the capitalized R&D as well as the new CWIP as well. So some thoughts there?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [48]

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Definitely, Chirag, yes, if we know what's coming ahead. So we would just stick to our guidance of 25% CAGR over the next 3 years. That we are very confident we can achieve, and maybe we can do better.

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Chirag Dagli;HDFC Asset Management Company Ltd., [49]

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Okay, sir. And sir, what is the capitalized R&D for first half of FY '20?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [50]

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First half of FY '20, it's INR 29 crores. Out of INR 64 crores, it's INR 29 crores.

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Chirag Dagli;HDFC Asset Management Company Ltd., [51]

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And should we extrapolate this for the full year, sir?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [52]

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It will be more or less the same. We go by a formula, but I don't think it will change.

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Operator [53]

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Next question is from the line of Tushar Manudhane from Motilal Oswal Securities.

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Tushar Manudhane, Motilal Oswal Securities Limited, Research Division - Research Analyst [54]

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Sir, just to the formulation segment where you referred the growth has been coming from the core molecules, the good part being that's been now 3 quarters where the volume growth itself has been at a number of 25% on a year-on-year basis, plus driven by the double-digit price growth. So these core molecules being the matured molecules in their respective markets, I just would like to understand the sustainability of such kind of growth.

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [55]

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Okay. If you have seen the last few years, there has been a steady growth in the core molecules. And again, definition of core molecules is in the past, we had just 5 molecules. Today, we have 8, which we call core. So these are also increasing. So it's an addition to the core molecules and also growth of the initial molecules that is causing this, and we are very confident it is sustainable. We have a very efficient manufacturer, and we are able to compete in the market, and this will be sustained.

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Tushar Manudhane, Motilal Oswal Securities Limited, Research Division - Research Analyst [56]

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Sir -- but -- so is it just coming from more of a market share gain from -- or it's like the inherent growth in those markets?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [57]

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It's partly market share and partly addition of new molecules. As said, we have added 3 products. It's a mix of both. And also partly, the geography addition. In other geographies also, we have started selling a little bit more. It's a combination of all those.

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Operator [58]

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Next question is from the line of Prateeksha Malpani from Equirus Securities. Prateeksha, your line is unmuted, please go ahead with your question.

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Prateeksha Malpani;Equirus Securities Private Limited, Research Division, [59]

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Hello, am I audible?

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Operator [60]

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No, ma'am, we are unable to hear you. Can you please use the handset mode while speaking?

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Prateeksha Malpani;Equirus Securities Private Limited, Research Division, [61]

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Am I audible now?

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Operator [62]

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Yes, you can go ahead.

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Prateeksha Malpani;Equirus Securities Private Limited, Research Division, [63]

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I had a question regarding the core molecules. Can you please throw some light on -- which is the key contributor to the core molecule business growth this quarter?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [64]

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Are you talking of products? Or are you talking of any other factor?

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Prateeksha Malpani;Equirus Securities Private Limited, Research Division, [65]

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No, I'm talking about the products. Which of the molecule is -- can you throw some light on that, which molecule is key contributor to this growth?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [66]

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I'm sorry, this is sensitive information. And in the last few calls, we mentioned that we would not be able to share this.

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Prateeksha Malpani;Equirus Securities Private Limited, Research Division, [67]

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Okay. Okay. And apart from that, as you mentioned previously in the call that Ibuprofen prices have started softening. So what is your outlook on the pricing going ahead? Like will it stabilize at the current level? Or will we be seeing more softening going ahead?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [68]

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No, there will be more softening going ahead. We see prices coming down.

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Prateeksha Malpani;Equirus Securities Private Limited, Research Division, [69]

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Okay. Okay. Apart from that, one more question. What is the update on the ramp-up in the new facility?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [70]

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The new facility, if you're talking about GPI as it's getting commercialized, and we have increased GPI in the U.S. We are increasing capacities. We are preparing for new launches. We expect 4 to 5 more products approval in this fiscal year, and we're getting ready for that. However, if we talk of the Unit V in Vizag, which has got an onco and a multipurpose facility, the ramp-up is going slow. It's a long haul. And like I've answered the gentleman before, we will expect to see some revenues in next fiscal, but proper revenues and proper profitability in fiscal '22. And we have taken all that into account for our target of INR 300 crores plus.

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Operator [71]

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We'll take the next question from the line of C. Srihari from PCS Securities.

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Srihari Chintalapudy, PCS Securities Ltd., Research Division - Equity Fundamental Analyst [72]

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Firstly, if I look at the sales mix, the share of FPIs and FDs is at 69%, and even the capacity utilization is close to 70% of both the verticals. So don't you see this as a challenge? And what could be the optimal levels in terms of capacity utilization? Secondly, regarding Biocause, is there any number you have in mind? The first one was done at 2.2x book. So do you have any kind of a target for that? And how would it impact the pricing? I presume the pricing policies may change once we exit the JV. So what would -- what is the implication of that? And thirdly, on the -- you mentioned the litigation settlement inflow of INR 4.2 crores. So if you could please throw some light on that.

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [73]

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Okay. Let me address the Biocause first. The price, we have an agreement where we will be the lowest the JV supplies to. And whatever has been happening now, the same policy will continue, and we don't see any increase in prices.

And regarding the sale value, it all depends on many factors. So there are many issues there. The uncertainty is an issue. And so the partner also may not be very excited about giving us a great valuation. But definitely, I can say it will be a decent valuation, and we will see once the negotiations are over. Maybe in the next quarter, I'll be able to share the number with you.

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Srihari Chintalapudy, PCS Securities Ltd., Research Division - Equity Fundamental Analyst [74]

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Could it be on par with Omnichem or better?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [75]

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Let's see, Srihari. We'll see. Let's not make some guesses.

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Srihari Chintalapudy, PCS Securities Ltd., Research Division - Equity Fundamental Analyst [76]

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Okay. Okay. And the agreement of litigation settlement?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [77]

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And the settlement, this is -- this is confidential between the settler -- both of us. I don't think I'll be openly sharing this. But Priyanka, I think, can shed some more light on this. You want to explain where they can get information if they want to?

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Priyanka Chigurupati, Granules India Limited - Executive Director of Granules Pharmaceuticals Inc. [78]

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It's just available in the public domain if you do a little bit of digging. But because of the CDA we have in place with the company that we settled with, we can't give you more information at this point.

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Srihari Chintalapudy, PCS Securities Ltd., Research Division - Equity Fundamental Analyst [79]

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At least what is the addressable market size? What is the launch time line? How many settlers are there?

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Priyanka Chigurupati, Granules India Limited - Executive Director of Granules Pharmaceuticals Inc. [80]

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Again, the launch time line and such are details that are confidential between us and settlers. The size of the -- addressable size of the market is above 60 million brand and generic put together.

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Srihari Chintalapudy, PCS Securities Ltd., Research Division - Equity Fundamental Analyst [81]

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I'm sorry, how much is that?

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Priyanka Chigurupati, Granules India Limited - Executive Director of Granules Pharmaceuticals Inc. [82]

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Above 60 million brand and generic put together.

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Srihari Chintalapudy, PCS Securities Ltd., Research Division - Equity Fundamental Analyst [83]

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Okay. And you are the only settler?

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Priyanka Chigurupati, Granules India Limited - Executive Director of Granules Pharmaceuticals Inc. [84]

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Again, I don't want to give you more information at this time. We have -- we're bound by the CDA.

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Operator [85]

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Next question is from the line of Nimish Mehta from Research Delta Advisors.

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Nimish Nagindas Mehta, Research Delta Advisors, Research Division - Research Analyst [86]

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Just a question for my understanding. Why have you not booked the JV profit this quarter? Because we already have it still in the balance sheet. I mean it is not completely endorsed. What is the reason of that not being getting reflected at this time?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [87]

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Nimish, by accounting standards, I understand that anything where you have decided to sell is treated as an asset for sale, and as an asset for sale and the accounting standards do not permit us to fit the income into our accounts.

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Nimish Nagindas Mehta, Research Delta Advisors, Research Division - Research Analyst [88]

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Okay. So that income...

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [89]

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And again, let me explain, we have not been getting any dividends or income from the JV. Whatever profits that are coming in are being shown as -- it's mainly a book profit. So we thought it's better that we go ahead and divest.

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Nimish Nagindas Mehta, Research Delta Advisors, Research Division - Research Analyst [90]

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That I understand. Just trying to understand the accounting side of it. So the books...

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [91]

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Accounting -- our auditors have advised us not to take it into accounts. And moreover, we don't want to add on to more paper money. It's not real cash.

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Nimish Nagindas Mehta, Research Delta Advisors, Research Division - Research Analyst [92]

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Okay. So till the time, it is held as asset for sale, the book profit, which is not the cash profit, will be booked in those assets or something like that? How will you treat the book profit figure?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [93]

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The book profit. Sorry, I couldn't -- can you come again?

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Nimish Nagindas Mehta, Research Delta Advisors, Research Division - Research Analyst [94]

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Listen, there was a book profit -- I mean there is -- let's say, this quarter -- I mean the last quarter, we had shown some INR 13 crores of book profit from the JV that used to generally come to us on a regular basis. So now that the assets are very much assets for sale, the book profit, whichever is -- whatever is generated in one year should be treated how? Or it will just be shown as 0 from now on? Is that how it has been?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [95]

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That's what our auditors have advised us. It will be treated as 0. It will not appear in any form.

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Nimish Nagindas Mehta, Research Delta Advisors, Research Division - Research Analyst [96]

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Right. Okay. Okay. Second, just wanted to know the sales of U.S. geographies from the finished dosage if that is possible. I understand the U.S. sales that you have mentioned in the presentation includes API as well. So I just wanted to know what is the sales from U.S. from finished dosage and the growth in that if you can show.

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [97]

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Sales of FDs in the U.S. as a percentage of FDs, I don't have these numbers straight away, but maybe Sumanta can see -- if you can get in touch with him, he would be able to furnish that number. However, U.S. -- I'm sure you are aware, U.S. has contributed a major portion, 53% of our gross revenue.

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Nimish Nagindas Mehta, Research Delta Advisors, Research Division - Research Analyst [98]

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Right. Right. Okay. How has been the U.S. growth? If you can just guide on that. I mean a lot of the growth that we've seen in FD is because of U.S. Is that a fair understanding?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [99]

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It is from the U.S. Yes, you are right. U.S. growth all together was above 36% and mainly from FDs.

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Operator [100]

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Next question is from the line of Charulata Gaidhani from Dalal & Broacha.

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Charulata Gaidhani, Dalal & Broacha Stock Broking Pvt Ltd., Research Division - Analyst [101]

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My question was pertaining to fexofenadine. How much would be the market size? And how would you compete with so many players in the market?

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Priyanka Chigurupati, Granules India Limited - Executive Director of Granules Pharmaceuticals Inc. [102]

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First of all, the market size at this point, I don't have the exact details, but in terms of how to compete with competition is clearly due to the fact that we are an integrated player. We do have a certain market share already in the U.S. market because of the integration, and we also have several other sources (inaudible). Now we also have our own internal approval for our ANDA. So going forward, we are going to strengthen our position as a finished dosage supplier in the U.S.

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Charulata Gaidhani, Dalal & Broacha Stock Broking Pvt Ltd., Research Division - Analyst [103]

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Okay. You have got approval, right, recently?

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Priyanka Chigurupati, Granules India Limited - Executive Director of Granules Pharmaceuticals Inc. [104]

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Yes, our own ANDA, we got our approval recently. And earlier, we had licensed this product from another partner, and we were manufacturing the product and selling to the market.

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Charulata Gaidhani, Dalal & Broacha Stock Broking Pvt Ltd., Research Division - Analyst [105]

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Okay. So are you manufacturing in India or in the U.S.?

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Priyanka Chigurupati, Granules India Limited - Executive Director of Granules Pharmaceuticals Inc. [106]

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It's being manufactured in India.

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Charulata Gaidhani, Dalal & Broacha Stock Broking Pvt Ltd., Research Division - Analyst [107]

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Okay. Okay. And how many ANDAs do you have pending approvals?

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Priyanka Chigurupati, Granules India Limited - Executive Director of Granules Pharmaceuticals Inc. [108]

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We have 22 ANDAs pending approval.

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Charulata Gaidhani, Dalal & Broacha Stock Broking Pvt Ltd., Research Division - Analyst [109]

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Okay. And are there any limited competition production goals?

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Priyanka Chigurupati, Granules India Limited - Executive Director of Granules Pharmaceuticals Inc. [110]

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Immediate -- limited competition, yes, of course. Most of our GPI products -- about 80% of our GPI products have less than 3 to 4 players at this point.

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Operator [111]

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Next question is from the line of Dipan Mehta from Elixir Equity.

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Dipan Anil Mehta, Elixir Capital Limited - Chairman of the Board [112]

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Dipan Mehta from Elixir Equity. Just wanted to confirm that the pledged shares are on account of the warrant issue which you made to the promoters. Is that a correct understanding?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [113]

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That's right. While we were doing expansion of facilities, we were doing a lot of CapEx. I had to take some borrowings and pay for that. And to pay for that, I had to pledge my shares. So again, I would like to rephrase, all the money raised by pledging the shares had gone into the company.

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Dipan Anil Mehta, Elixir Capital Limited - Chairman of the Board [114]

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Okay. And sir, are you disclosing the top 3 or 4 drugs, how much they're contributing to the turnover either segment-wise or otherwise? Because product concentration is definitely a concern as far as the company is concerned.

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [115]

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Product concentration -- I mean, definitely, the top 5-6 products contribute to a major part of our revenue. But what has happened is if you see the history, over the last 5, 6 years, we have been steadily growing in these molecules. Even though there is a concentration, these are first-line -- these products are first-line defense where margins have been totally run down and where people are not really excited about continuing in these products, whereas with our efficiencies and backward integration, we were able to generate margins, and the history shows that the risk of concentration is minimal. However, we continue to add more products. Like I said, the 5 core products have now become 8. So in the same range of high volume products, we will keep adding continuously. We have filed some more products, and we will be filing for some more products. And also our low volume products from the U.S. also will start contributing to the entire gross revenue.

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Priyanka Chigurupati, Granules India Limited - Executive Director of Granules Pharmaceuticals Inc. [116]

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And just to add to that. In terms of contribution from our core molecules, we also expanded into different ROEs, basically -- for example, paracetamol. We had paracetamol 500, but now we have paracetamol 650. So within the core molecules itself, there's multiple products that we're filing, but expand the number of products that we have marketing. In metformin, we had metformin IR earlier, now we have metformin XR, and we have some more products going forward. In addition to all this, apart -- we're also expanding the presence of our core molecule across geographies. So we're also mitigating our concentration in the U.S. for the core molecules. But to answer your question, in addition to these products (inaudible), I think we are pretty well protected.

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Dipan Anil Mehta, Elixir Capital Limited - Chairman of the Board [117]

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And then last question about the CapEx for this year that's fiscal '20 and if you can have a plan for the next 2, 3 years as well?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [118]

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2, 3 years is a little difficult, but as a policy, we have decided to not to have any CapEx in the short term. But going forward, without any CapEx, it's just not possible to have growth. So at which point of time we will do more CapEx is what we will go forward -- we will decide as we go forward. However, total CapEx so far for H1 has been INR 84 crores as against our guidance of INR 150 crores. And we expect to be within the INR 150 crores or a little above -- slightly above, around that number.

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Operator [119]

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Next question is from the line of Vaibhav from Ashmore.

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Ashwini Agarwal, Ashmore Equities Investment Management (US) LLC - Non-Discretionary Strategic Advisor [120]

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This is Ashwini here once again. Just looking at your revenue guidance and the limited CapEx that's coming through, the ratio of revenues divided by capital employed or capital turns, which is currently at about 1, should go up to 1.2, 1.3. Given the business that you have built over the years, we've seen this ratio at a peak of 1.4 back in 2014, '15, which progressively came down to 0.8 or 0.9 because you had a lot of capital work-in-progress. So alluding to the earlier question that you answered, at what point are you comfortable that your capital turn should not go up beyond such a number? Because then you will start compromising on future growth prospects. So say, 1 -- are you comfortable with 1.2, 1.3 and then CapEx starts to kick in? How do you think about these numbers?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [121]

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More than asset turns, what I would like to -- okay, asset turns is the right way of looking at it. But the way I look at it is I look at capacity leftover for the next 1 year or 1.5 years, and I plan at least -- if I think I'm running out of capacity 1.5 years from today, maybe in the next 6 months, I will start construction or investing into CapEx. And mostly, these CapExs will be on bad line balancing. We may not make a new building. We may just get some equipment. In the same footprint, we may remove inefficient equipment and put some high capacity equipment in there. So that will reduce our CapEx and that generates more revenue and more output. So maybe sometime during next quarter next year, we may look at some CapEx. We will see how it goes. You are perfectly right we cannot risk future growth by restricting our CapEx. It all depends on our cash flows and other things. And we have every reason to be comfortable and get comfortable as we go back. On this again, Ashwini, I would like to say, we still have enough capacity left, but we expect to ramp up our sales also. So depending on how the ramp-up is happening, we'll decide on CapEx.

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Ashwini Agarwal, Ashmore Equities Investment Management (US) LLC - Non-Discretionary Strategic Advisor [122]

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So continuing with that thought, your -- if I look at your first half numbers, your revenue to capital employed is roughly 1x. I mean if it goes to 1.2 or 1.3x, which is what your guidance of 20% revenue growth over the next couple of years suggests, and if you take into account that your profit growth guidance is 25% per year, that means your capital utilization continues to become more efficient and, therefore, we should expect expansion in ROCs and ROEs from here. But how comfortable are you with that? At what point do you think that we are running ahead of ourselves in making these assumptions? Or let me ask you very simply, sir, at what ROE do you think we should say that, look, 23%, 24%, 25%, that's a very, very good number, reasonable number and then CapEx starts to kick in after that?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [123]

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I do not have a straight answer on this, Ashwini. But let me work on this and maybe we can send you this data.

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Ashwini Agarwal, Ashmore Equities Investment Management (US) LLC - Non-Discretionary Strategic Advisor [124]

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Okay. Okay. But 20% revenue growth based on existing capacity or existing plant and machinery and whatever have you with the CapEx plans that you have, including onco for the next couple of years and 25% profit growth is pretty much in the bag.

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [125]

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Yes, it's possible, Ashwini. I think we can definitely stretch up to financial year 2022 without any CapEx.

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Ashwini Agarwal, Ashmore Equities Investment Management (US) LLC - Non-Discretionary Strategic Advisor [126]

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And your future growth prospects, whatever you pursue, you aim to keep net debt to EBITDA at or below 1.5x, which is pretty much where you will get to in the next quarter or maybe 2 quarters.

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [127]

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1.5 is the peak. We will never allow it to cross 1.5. But we aim to get to 1. And at 1, we would feel comfortable in putting some cash into whatever expansion we have.

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Ashwini Agarwal, Ashmore Equities Investment Management (US) LLC - Non-Discretionary Strategic Advisor [128]

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Okay. That's very useful, sir. So I think that's the answer that I was looking for. So yes, I have that one.

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Operator [129]

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Next question is from the line of [Sachin Kasera] from Span Investment.

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Unidentified Analyst, [130]

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Just one clarification on this discussion that you are having on peak revenues and capacity. So broadly from what I could understand, you are saying that maybe up to INR 3,800 crores to INR 4,000 crores type of revenue we can achieve with minor CapEx. Is that a proper understanding maybe till FY '22?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [131]

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That will also depend on how quickly the onco business sets off. And -- but I think somewhere around that number, yes, we could.

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Unidentified Analyst, [132]

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And as we keep ramping for today, we are at roughly 25 (inaudible) first half numbers. Do we see efficiency measures other than gross margins starting to flow in terms of operating leverage and some more upside possible from there?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [133]

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We always aim for upside, and we have a continuous program on operational efficiencies. So -- however, I would not commit to that, but these numbers of 20% plus EBITDA, we can definitely, definitely sustain. There's no issue on that. And like I said, the 25% over the next 3 years is given on the patch. Going forward also, I don't see any reason, if we plan well, why we won't be able to maintain that.

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Unidentified Analyst, [134]

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Sir, second question was regarding the product concentration. Again, it was asked by one of the earlier participants and it was mentioned under management. So if you can just tell us what is the revenue from the top 5 products as of now.

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [135]

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I would say, not [just for fact], the core products, which I said are 8 products, the percentage is 83, 83% from the core products.

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Unidentified Analyst, [136]

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And sir, what was this number 4, 5 years back, the core products, it was the [TAM of 85]? Or...

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [137]

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It was almost 100.

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Unidentified Analyst, [138]

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Almost 100. Okay. Second question is regarding the segment mix. So as you have been seeing in the last few years, the ratio of APIs has continued to come down. How do we see this ratio in the last 3 years of the mix between API and FDs and PFIs?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [139]

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FD sales, we have added new capacities -- sorry, API sales, we have added new capacities. They are going -- API sales have gone up. However, slowly the conversion happens. From APIs, customers are going to PFIs and PFIs to FDs. So as we go by, we see reduced API sales and possibly steady PFI sales and then increasing FD sales.

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Unidentified Analyst, [140]

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Okay. So fair assumption that API as a percentage of revenue should come down by 5% to 10% in the next 3 years from the current...

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [141]

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Definitely.

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Unidentified Analyst, [142]

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Sir, next question is regarding ANDAs. Sir, what is the type of ANDA you plan to file this year and approvals you're expecting? And are we looking to any attractive or meaningful approvals in the second half?

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Priyanka Chigurupati, Granules India Limited - Executive Director of Granules Pharmaceuticals Inc. [143]

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I'll take that question. We've only had between 4 and 5 approvals within the next 2 quarters. Most of them are going to be limited competition, some extended releases and some controlled substances. We've already filed 3 plus 2 ANDAs this year, and we're going to be filing another between 4 and 6 ANDAs by the end of this year.

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Unidentified Analyst, [144]

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So a total of around 10 ANDAs we are looking at, from 10-12?

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Priyanka Chigurupati, Granules India Limited - Executive Director of Granules Pharmaceuticals Inc. [145]

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Yes.

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Unidentified Analyst, [146]

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And this R&D budget, which is roughly around INR 30 crores in the first half, does it move up in the second half? And how is it going to grow in the next quarter? Is it going to improve significantly from being at 4% of sales?

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Priyanka Chigurupati, Granules India Limited - Executive Director of Granules Pharmaceuticals Inc. [147]

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The guidance given for R&D is INR 150 crores for the whole year, and we should be within that limit.

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Unidentified Analyst, [148]

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Okay. One last question on the working capital. We have seen some improvement, sir. Is there still scope for improvement in the working capital? Or we have almost done with that program?

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [149]

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No, we are always striving to do that. But actually, it's -- we had started our front-end in the United States. And we are selling directly to distributors, whereas in the past, we used to work with partners. In case of a partner, it was just we used to receive the cash less than 60 days or so. But today, we need to keep a lot of inventory in the U.S. and also the credit terms to the distributors are a little longer. So there is a need for extra working capital. However, in spite of our sales in the U.S. being about INR 60 crores for quarter, we are trying to maintain this as low as possible. And we will see where we go. There could be a slight increase, but we will strive our best to maintain it or maybe bring it down.

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Unidentified Analyst, [150]

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Okay. So basically, it should remain somewhere closer to the levels we are seeing today, maybe slight increase or slight dip, that's it.

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [151]

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We will have to see where -- if there's a very profitable business in the U.S., I don't see any reason just to look at inventories. So we'll have to see as we go back, but definitely we'll keep these things within reasonable limits. Ratios, we will definitely maintain good ratios.

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Unidentified Analyst, [152]

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Sir, just last question on this cash flow from the divestment of the JVs. You mentioned that you intend to not repeat that as it's a very low rate of interest. And you also mentioned that we are not looking at more than INR 150 crores of CapEx this year. So then that only means that -- are we looking at rewarding shareholders either in terms of various options by adding higher dividend or buyback? Or the other option could probably also be acquisition. So if you could just tell us a little more on that.

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [153]

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So right now, the thought is just to keep it in the bank and keep the cash in the company. But anything is possible. We will take a decision as we go forward. We'll sit with the Board and see what to do next.

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Unidentified Analyst, [154]

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When can we expect, sir, clarity on this, maybe by next quarter or it will take some time for the Board to...

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Krishna Prasad Chigurupati, Granules India Limited - Chairman & MD [155]

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After the money comes in, we can start talking about it. We don't want to talk ahead.

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Operator [156]

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Ladies and gentlemen, that seems to be the last question for today. I would now like to hand the conference back to Mr. Prasad (sic) [Mr. Bajpayee] for his closing comments. Over to you, sir.

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Sumanta Bajpayee, Granules India Limited - Head of Corporate Finance, Treasury & IR [157]

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Thank you, everyone, for attending today our earnings call. Thank you again. Just want to highlight one point. We have taken the help of EY to further strengthen our IR practice. And in this regard, I request everyone, if any question we have not been able to answer fully or any future contact, please get in touch with Jill Deviprasad. She and Richa, they can definitely help you to reach out to management, and Richa's e-mail IDs also we have shared in our investor presentation. So thank you, again. Thank you all.

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Operator [158]

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Thank you very much. Ladies and gentlemen, on behalf of Granules India Limited, we conclude today's conference. Thank you all for joining us. You may disconnect your lines now.