U.S. Markets close in 5 hrs 29 mins

Edited Transcript of JUBILANT.NSE earnings conference call or presentation 25-Oct-19 11:30am GMT

Q2 2020 Jubilant Life Sciences Ltd Earnings Call

Noida Oct 31, 2019 (Thomson StreetEvents) -- Edited Transcript of Jubilant Life Sciences Ltd earnings conference call or presentation Friday, October 25, 2019 at 11:30:00am GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Pramod Yadav

Jubilant Pharma Limited - CEO & Director

* Rajagopal Sankaraiah

Jubilant Life Sciences Limited - CFO & Executive Director of Finance

* Rajesh Kumar Srivastava

Jubilant Life Sciences Limited - Whole-Time Director & CEO of Life Science Ingredients

* Ravi Agrawal

Jubilant Life Sciences Limited - Head of IR

* Shyam Sunder Bhartia

Jubilant Energy Limited - Chairman

================================================================================

Conference Call Participants

================================================================================

* Aditya Khemka

DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare

* Alankar Garude

Macquarie Research - Analyst

* Surajit Pal

Prabhudas Lilladher Pvt Ltd., Research Division - Assistant VP & Senior Research Analyst

* T. Ranvir Singh

IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst

* Tushar Manudhane

Motilal Oswal Securities Limited, Research Division - Research Analyst

* Viraj Mahadevia;IIFL AMC;Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Ladies and gentlemen, good day, and welcome to the Jubilant Life Sciences Limited Earnings Conference Call. (Operator Instructions) Please note that this conference is being recorded.

I now hand the conference over to Mr. Ravi Agrawal, Head of Investor Relations. Thank you, and over to you, Mr. Agrawal.

--------------------------------------------------------------------------------

Ravi Agrawal, Jubilant Life Sciences Limited - Head of IR [2]

--------------------------------------------------------------------------------

Yes. Thank you. Good evening, everybody. I'm Ravi Agrawal, Head of Investor Relations at Jubilant Life Sciences. I thank you again for being with us today on our Q2 and H1 FY '20 earnings conference call.

I would like to remind you that some of the statements made on the call today could be forward-looking in nature, and a detailed disclaimer in this regard has been included in the press release that has been shared on our website.

On the call today, we have Mr. Shyam Bhartia, Chairman; Mr. Hari S. Bhartia, Co-Chairman and Managing Director; Mr. R. Sankaraiah, Executive Director of Finance; Mr. Pramod Yadav, CEO, Jubilant Pharma; and Mr. Rajesh Srivastava, CEO, LSI, Life Science Ingredients.

I now invite Mr. Bhartia to share his comments.

--------------------------------------------------------------------------------

Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [3]

--------------------------------------------------------------------------------

Thank you, Ravi. Good evening, everyone. Before we discuss the company performance, I would like to provide an update on the reorganization for folks as announced in our last interim.

The committee continued to consider the options of reorganization of the company has recommended the following: one, demerger of the Life Science Ingredient business with an objective to create separate and focused entities for our Pharmaceuticals and Life Science Ingredients businesses, respectively, to unlock shareholder value; and two, amalgamation of promoter shareholding company to the JLL with an objective to simplify the holding structure of the promoters with no change in ownership percentage and the number of shares of the promoters in JLL.

The board, after due evaluation and consideration, has approved the recommendations of the committee. The composite scheme of the arrangement will be filed with National Company Law Tribunal (NCLT) for its approval. Post the scheme becoming effective, the Life Science Ingredients business will stand demerged into a resulting entity, which will be listed in NSE and BSE, with mirror shareholding of JLL. We believe that the proposed merger will ensure depth and focus to adopt strategies necessary for growth, unlock shareholder value with direct ownership and attract focused investors in each of the business entities. These distinct (inaudible) undertaking will enable strategic growth with optimal capital structure and deployment of cash flows for investments, capital expenditure and dividend. Also, the proposed amalgamation will simplify the promoter shareholding of JLL.

Now coming to the performance of this quarter. I'm sure you would have had a chance to go through our presentation and press release, which we have shared with you. As you can see, we have maintained our steady performance during the quarter. While revenues have been flat, reported EBITDA has grown 6% year-on-year and 8% quarter-on-quarter with 120 basis points improvement in EBITDA margins to 21.2%. Profit after tax within Q2 FY '20 was at INR 249 crores, up 19% year-on-year. More detail of the respective businesses will be shared by Pramod and Rajesh and financials by Mr. Sankaraiah during their speech.

This consistent performance is a strong testament of the -- our base strategy. 70% of our pharma revenues is coming from niche business segments like specialty pharma and also high-quality services business in CMO and Radiopharmacies. We have highlighted that, yes, from demand conditions and we enjoy a leadership position in many of our key products. We continue to invest in building a healthy pipeline of products and capacity in Specialty pharma and Generic businesses to cater to the anticipated demand. I would like to take this opportunity to provide you with some color on our proprietary drug discovery business and the Jubilant Therapeutics which is the innovative biopharmaceutical company developing breakthrough therapies in the areas of unmet medical needs in serious diseases such as cancer. We are currently working on 7 programs targeting small molecule categories in the area of oncology and autoimmune disorders with potential to fast-track promising assets from discovery to clinical stage.

I would like to reiterate that demand conditions in our businesses remains robust in key segments, and we expect to deliver sustainable growth going forward. Before Pramod shares his insights on Pharmaceutical business performance, I would like to take -- make another announcement. Mr. Sankaraiah will be [separating] from the services of the company on 31st March 2020 and shall continue to be an adviser to the group. The board had at its meeting held today approved the appointment of Mr. Alok Vaish as Chief Financial Officer and key management personnel of the company effective from April 1, 2020. Mr. Vaish has joined the company effective today as Chief Financial Officer designate. We welcome him to the Jubilant family.

I would also like to wish all of you a very happy Diwali and a happy and a prosperous Diwali. With this, I would like to request Pramod Yadav to share his insights on the Pharmaceutical business during the quarter.

--------------------------------------------------------------------------------

Pramod Yadav, Jubilant Pharma Limited - CEO & Director [4]

--------------------------------------------------------------------------------

Thank you, Mr. Bhartia, and a very good evening to all of you. As mentioned by the Chairman, we have witnessed healthy performance during the quarter with revenue in Pharmaceuticals segment growing 9% both year-on-year and quarter-on-quarter during the quarter under review. The Specialty pharma, which includes Radiopharma and Allergy business, which contributes 31% of total revenue, grew 4% year-on-year. In Radiopharma, growth was driven by high volumes in Rubyfill and other key products. We had a very healthy pipeline of around 8 products with an addressable market of approximately USD 300 million, which we plan to file and launch in next 2 to 5 years, including 505(b)(2) filing and also an NDA [environment-driven] MIBG.

In our Allergy businesses, venom and allergenic expense both saw volume growth both on year-on-year basis and also sequentially. We are also focusing on getting together demand in non-U. S. market and increase market share in allergenic access in the U.S. We have recently received FDA approval for one of our existing line, which qualifies it for venom production going forward.

The growth in CMO business has been led by higher capacity and higher volumes from existing customers, better on-time delivery and operational efficiencies. The demand continues to remain robust. And as indicated in our last interaction, we have already increased shift on one line 24/7 last year and are planning on increasing shifts 24/7 on another line from this quarter onwards. We have also installed new line of equipment and commercialization expected in H2 FY '20. This initiative will increase our capacities by over 30%, translating into annual potential revenue around USD 30 million.

In the API business, we have had better performance during the quarter due to better pricing and higher volume in most products, with the exception of Sartans, which were impacted due to additional quality checks on all input raw materials to meet enhanced regulatory requirements. We believe we have results that [end in] pertaining to Sartan impurity and are confident of better performance in our businesses going forward.

After a muted last quarter, we witnessed revenue growth of 20% year-on-year in the Generics business led by higher volumes and better pricing in some products. We have plans to ramp our production on our expanded capacity in Roorkee for both U.S. and non-U. S. market going forward. The reported EBITDA was INR 386 crores, 7% higher year-on-year and 17% higher quarter-on-quarter, with margins of 26.6% as against 27% last year and 24.8% in Q1 FY '20. While Radiopharma and Allergy profitability was better, lower volumes in API and one-off expenses of INR 23 crores, which are related to site remediation and mitigation expenses impacted segment EBITDA during the quarter.

Adjusting for the one-off expenses, Pharma EBITDA was at INR 409 crores, up 11% year-on-year, with margin of 28.1% versus 27.6% last year. Pharmaceutical R&D expense was INR 57 crores versus 3.9% of segment sales, but are already [related] to P&L of INR 53 crores or 3.7% of segment sales.

With regard to regulatory matters, we are committing comprehensive response to USFDA and plan better from time-to-time and site remediation activities in Roorkee and Nanjangud are progressing well. We are also taking all necessary steps to ensure further stringent controls at all of our facilities.

With this, I would like to request Rajesh to share details on Life Science Ingredients and Drug Discovery and Development Solutions segments' performance during the quarter.

--------------------------------------------------------------------------------

Rajesh Kumar Srivastava, Jubilant Life Sciences Limited - Whole-Time Director & CEO of Life Science Ingredients [5]

--------------------------------------------------------------------------------

Thank you, Pramod. Very good evening to all of you. We have had a muted quarter in Life Science Ingredients segment, with revenue of INR 753 crores, which is a decline of 51% year-on-year. While Specialty Intermediates and Nutritional Products businesses witnessed 32% year-on-year and 6% year-on-year growth, respectively. Life Science Chemical business revenue has declined 35% year-on-year impacting overall segment performance during the quarter.

Growth in Specialty Intermediates business was led by strong demand and better price in most of the key products. We have also witnessed positive traction from new products launched in these businesses. The overall market trend of the Specialty Intermediates business is positive, and we are working to maximize output from our existing facilities to service the strong demand from our customers.

Growth in Nutritional Products business was driven by a mix of higher volume and better price in regarding B3. Jubilant team backward integrated ensures consistent supply and volume availability to its customer. Lower revenue in Life Science Chemical was on account of significant drop in estimated price by around 35% year-on-year. This drop in estimated price led to a price correction of Life Science Chemical products.

Demand for a [stick] and high-grade has also remained subdued during the quarter. Molasses price continues to be at higher level, thereby adversely impacting profitability of Life Science Chemicals business. We reported EBITDA of INR 91 crores, down 16% year-on-year with margins of 12.1% as compared to 12.3% last year, primarily due to lower profitability in Life Science Chemicals business from lower estimated price and higher molasses prices. I would like to highlight that there was a healthy growth in profitability in our Specialty Intermediates and Nutritional Product business. We expect growth in Life Sciences Ingredients to be led by Specialty Intermediates and Nutritional Product businesses during the year. In the Life Science Chemicals business, we expect better performance in H2 FY '20 as compared to H1 FY '20.

Coming to our Drug Discovery and Development Solutions segment. Our Drug Discovery Services business, which includes Jubilant Biosys and Jubilant Chemsys, grew 30% year-on-year in revenue, driven by higher demand from biotech companies for integrated services, DMPK biology, chemistry and scale-up. In view of this strong demand being witnessed, we have decided to make significant investments into creating state-of-the-art facility, which is expected to double our capacity in this business over the next 2 to 3 years.

With that, I would request Mr. Sankaraiah to highlight the company's financial performance during the period.

--------------------------------------------------------------------------------

Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [6]

--------------------------------------------------------------------------------

Thank you, Rajesh. A very good evening, and I thank everyone for taking the time on joining us on this quarterly earnings call.

Let me now give you a brief of the financial highlights for the performance during Q2 FY 2020. Revenue from operations were flat INR 2,266 crores versus Q2 FY 2019, with pharma revenue up 9% year-on-year to INR 1,452 crore and LSI revenue down by 15% year-on-year to INR 753 crores. The reported EBITDA was at INR 481 crore, up 6% year-on-year, with a margin of 21.2% versus 20% in Q2 last year. Adjusted EBITDA after adjustment of onetime expenses was at INR 5.4 crores, a growth of 9% year-on-year with a margin of 22.2% as compared to the EBITDA margin of INR 462 crores and a margin of 20.4% in Q2 FY 2019.

Depreciation and amortization expenses during the quarter was at INR 117 crores, up 31% and 14% quarter-on-quarter. A onetime charge in Q2 FY 2020 of INR 9 crores led to higher depreciation during the quarter.

Finance cost during the quarter was INR 72 crores, up 14% year-on-year but lower by 1% quarter-on-quarter. Average blended interest rate for H1 FY '20 was at 6.08%. Rupee loans were at 8.28%, and foreign currency loans were 5.33%. On account of new tax ordinance, there is a difference of taxable liability of INR 50 crores, which has been accounted during the quarter. With this, the company PAT stood at INR 249 crores, with an EPS of INR 15.70 crores per share of INR 1 FV and excluding this, the PAT would be INR 199 crore with an EPS of INR 50 crores per share. For H1 FY '20 financials, I would request you to please refer to investor presentation and press release shared with you. The CapEx was INR 317 crores in H1 2020. The company's net debt on the constant currency basis was INR 3,145 crores, a reduction of INR 149 crores during the quarter and INR 345 crores as compared to 31st March 2019. We will continue our efforts to strengthen the balance sheet by reducing the debt and improving the financial ratio.

With this, I would like to conclude our opening remarks. We will now be happy to address any questions that you may have, please.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) The first question is from the line of Tushar Manudhane from Motilal Oswal.

--------------------------------------------------------------------------------

Tushar Manudhane, Motilal Oswal Securities Limited, Research Division - Research Analyst [2]

--------------------------------------------------------------------------------

Sir, just with respect to this demerger, if you can help us the breakdown of debt into 2 entities?

--------------------------------------------------------------------------------

Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [3]

--------------------------------------------------------------------------------

The effective date? The effective date will be after the court approval, which is expected to be maybe down the line 9 months or so. So at that point of time, whatever the debt which will be there, which will be split between the LSI and the pharma business. So as all of you know, in Jubilant Pharma Singapore, the debt of $500 million is in hold there separately. Only in Jubilant, on a stand-alone basis, the debt of INR 1,600 crores as of today, which is there. That debt will be split between LSI and Pharma. So overall, if you see, we'll be very comfortable with that debt-to-EBITDA level in both the businesses. So the exact number, we'll know only on that -- on the date of the effective date.

--------------------------------------------------------------------------------

Tushar Manudhane, Motilal Oswal Securities Limited, Research Division - Research Analyst [4]

--------------------------------------------------------------------------------

Okay. Secondly, what would be the [time-to-do] timeline to invite USFDA for Roorkee?

--------------------------------------------------------------------------------

Pramod Yadav, Jubilant Pharma Limited - CEO & Director [5]

--------------------------------------------------------------------------------

Yes. So we are working on the remediation, and we almost completed the remediation. In -- on the last call, we mentioned that we expect these activities to be getting completed within this fiscal year, and we are confident, and we feel that we are on track with that.

--------------------------------------------------------------------------------

Operator [6]

--------------------------------------------------------------------------------

(Operator Instructions) The next question is from the line of Ranvir Singh from IDBI.

--------------------------------------------------------------------------------

T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [7]

--------------------------------------------------------------------------------

A couple of quick ones. Sir, on the comment you said H2 would be better in LSI segment. So what element actually is giving you this confidence?

--------------------------------------------------------------------------------

Rajesh Kumar Srivastava, Jubilant Life Sciences Limited - Whole-Time Director & CEO of Life Science Ingredients [8]

--------------------------------------------------------------------------------

Yes. Because the acetic acid pricing has stabilized since last 15, 20 days, and we don't see this further going down. And also, the demand situation of our LSI product, which is a significant drag and highly [fixated] is looking to be better in H2, and that is the reason we are saying it should be better in H2.

--------------------------------------------------------------------------------

T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [9]

--------------------------------------------------------------------------------

And what was scenario on the molasses prices because price seems to be from [Indian] currently?

--------------------------------------------------------------------------------

Rajesh Kumar Srivastava, Jubilant Life Sciences Limited - Whole-Time Director & CEO of Life Science Ingredients [10]

--------------------------------------------------------------------------------

Yes. So molasses, as you know, they start from number, the lifting will be normal. So we don't see that the pricing, which has been in the [nonseason], will remain. But of course, we will watch the pricing, but it should be better than what we have seen in H1.

--------------------------------------------------------------------------------

T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [11]

--------------------------------------------------------------------------------

Okay. And secondly on Generics business, so what's the outlook there? Because in light of Roorkee segment, and you said that it is working. So what would the second half look like?

--------------------------------------------------------------------------------

Rajesh Kumar Srivastava, Jubilant Life Sciences Limited - Whole-Time Director & CEO of Life Science Ingredients [12]

--------------------------------------------------------------------------------

In light of the volume label, it has not much impact on to business except we are incurring all these remediation costs, et cetera. But overall, for the Generics, we feel that the H2 will be much better than H1 in terms of the product pricing and overall volume, both.

--------------------------------------------------------------------------------

T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [13]

--------------------------------------------------------------------------------

From [product] perspective we're talking about, right?

--------------------------------------------------------------------------------

Rajesh Kumar Srivastava, Jubilant Life Sciences Limited - Whole-Time Director & CEO of Life Science Ingredients [14]

--------------------------------------------------------------------------------

Sorry?

--------------------------------------------------------------------------------

T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [15]

--------------------------------------------------------------------------------

They (inaudible) it had nothing to do with API.

--------------------------------------------------------------------------------

Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [16]

--------------------------------------------------------------------------------

Ranvir, your voice is not coming out very clearly. Can you just speak a bit?

--------------------------------------------------------------------------------

T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [17]

--------------------------------------------------------------------------------

Okay. So I wanted clarity that you are talking only about the Formulation business in general?

--------------------------------------------------------------------------------

Rajesh Kumar Srivastava, Jubilant Life Sciences Limited - Whole-Time Director & CEO of Life Science Ingredients [18]

--------------------------------------------------------------------------------

Yes, and I talked about the -- for the formulation business, however, even for API, we -- our H2 will be even better than H1.

--------------------------------------------------------------------------------

T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [19]

--------------------------------------------------------------------------------

Okay. And last one on R&D. Like what would create some headwinds capitalized? And what went in CNM?

--------------------------------------------------------------------------------

Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [20]

--------------------------------------------------------------------------------

The capitalized was about INR 53 crores and the R&D expenditure was INR 56 crores. It is almost at the same level at the capitalization announced and the R&D expenditure incurred. That means we are almost equal to the expansion of trending nowadays.

--------------------------------------------------------------------------------

T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [21]

--------------------------------------------------------------------------------

Okay. That's just fine. And one more if I could. Last participant asked about the debt split. So as of today, end of September, what has been the split there in LSI and Pharma on a stand-alone basis?

--------------------------------------------------------------------------------

Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [22]

--------------------------------------------------------------------------------

That stand-alone in Jubilant Life Sciences is INR 1,053 crores and -- yes, and in Pharma is $500 million bond, and we have about $170 million cash there. So that is why out of that $170 million cash, we already issued a notice to the bondholders exploiting our call option for prepayment of the bond of $100 million, which will be prepaid as per the bond document on 20th November. The date has already been fixed.

--------------------------------------------------------------------------------

Operator [23]

--------------------------------------------------------------------------------

(Operator Instructions) The next question is from the line of Viraj Mahadevia from IIFL AMC.

--------------------------------------------------------------------------------

Viraj Mahadevia;IIFL AMC;Analyst, [24]

--------------------------------------------------------------------------------

I had a question regarding net debt. Our net debt as of September, is that roughly INR 3,200 crore? Prior, you mentioned (inaudible) paid or will be repaying another $100 million. INR 3,200 crores does not include $100 million that will be repaid. It has come down to INR 500 crores, is that correct?

--------------------------------------------------------------------------------

Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [25]

--------------------------------------------------------------------------------

INR 3,145 crores is the net debt on a constant currency basis. Otherwise, it is -- as per the books, it is INR 3,231 crores. That is -- that includes the cash already in the system that is netted off already.

--------------------------------------------------------------------------------

Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [26]

--------------------------------------------------------------------------------

Netted off. Yes.

--------------------------------------------------------------------------------

Viraj Mahadevia;IIFL AMC;Analyst, [27]

--------------------------------------------------------------------------------

So what will happen... a clarification.

--------------------------------------------------------------------------------

Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [28]

--------------------------------------------------------------------------------

The objective, INR 4,594 crore. Then the cash and cash equivalent is INR 1,353 crore. The net debt is INR 3,231 crores.

--------------------------------------------------------------------------------

Unidentified Company Representative, [29]

--------------------------------------------------------------------------------

It will definitely come down.

--------------------------------------------------------------------------------

Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [30]

--------------------------------------------------------------------------------

It will come down from the cash.

--------------------------------------------------------------------------------

Unidentified Company Representative, [31]

--------------------------------------------------------------------------------

Gross debt.

--------------------------------------------------------------------------------

Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [32]

--------------------------------------------------------------------------------

Gross debt will come down and cash also will come down.

--------------------------------------------------------------------------------

Unidentified Company Representative, [33]

--------------------------------------------------------------------------------

And net debt will be the same.

--------------------------------------------------------------------------------

Viraj Mahadevia;IIFL AMC;Analyst, [34]

--------------------------------------------------------------------------------

Net debt will be the same?

--------------------------------------------------------------------------------

Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [35]

--------------------------------------------------------------------------------

Net debt will be the same.

--------------------------------------------------------------------------------

Viraj Mahadevia;IIFL AMC;Analyst, [36]

--------------------------------------------------------------------------------

Okay. And second question is regarding, in your release right now, you mentioned about the promoter Holdco entity amalgamation to simplify the structure and mentioned that there will be no outstanding liabilities at that entity. Can you elaborate a bit on that? You mean that there will be no pledged shares, no promoter or Holdco level debt once that...

--------------------------------------------------------------------------------

Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [37]

--------------------------------------------------------------------------------

Yes. As of today, there is no pledge of shares. And also, all this 5 companies, which is proposed to be merged, amalgamated with JLL is -- doesn't have any other holding, other kind of promoter share.

--------------------------------------------------------------------------------

Viraj Mahadevia;IIFL AMC;Analyst, [38]

--------------------------------------------------------------------------------

And they will have no debt? When you say no liability...

--------------------------------------------------------------------------------

Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [39]

--------------------------------------------------------------------------------

They don't have any debt. They don't have any liability.

--------------------------------------------------------------------------------

Viraj Mahadevia;IIFL AMC;Analyst, [40]

--------------------------------------------------------------------------------

Right. So effectively, promoter level Holdco leverage will be 0 once that is complete?

--------------------------------------------------------------------------------

Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [41]

--------------------------------------------------------------------------------

Yes, that's right.

--------------------------------------------------------------------------------

Operator [42]

--------------------------------------------------------------------------------

The next question is from the line of Alankar Garude from Macquarie.

--------------------------------------------------------------------------------

Alankar Garude, Macquarie Research - Analyst [43]

--------------------------------------------------------------------------------

Sir, my first question is, excluding Triad, can you comment on the growth outlook for Radiopharma? Not just outlook, but even if you could comment on the second quarter performance as well, that would be helpful.

--------------------------------------------------------------------------------

Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [44]

--------------------------------------------------------------------------------

I think we mentioned that the revenue in Specialty have grown by quarter-on-quarter last year versus this year has grown by 2% and year-on-year is 4%. And sorry?

--------------------------------------------------------------------------------

Alankar Garude, Macquarie Research - Analyst [45]

--------------------------------------------------------------------------------

So this is the Radiopharma growth ex of Triad?

--------------------------------------------------------------------------------

Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [46]

--------------------------------------------------------------------------------

No, this is our growth. I'm mentioning about our Specialty segment, which includes Radiopharma, Triad which you have mention is part of the Radiopharma and also allergen sector.

--------------------------------------------------------------------------------

Alankar Garude, Macquarie Research - Analyst [47]

--------------------------------------------------------------------------------

Yes. Sir, but I was more keen on the growth for Radiopharma ex of Triad, if you could qualitatively comment on that, that would be helpful.

--------------------------------------------------------------------------------

Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [48]

--------------------------------------------------------------------------------

So for the top line for Triad was more or less flat. So the growth has come from the rest of the Radiopharma business and the Allergy business.

--------------------------------------------------------------------------------

Alankar Garude, Macquarie Research - Analyst [49]

--------------------------------------------------------------------------------

Understood. And secondly, on the Rubyfill. Similar to last quarter, if you could comment on the traction so far. And do you still expect to achieve -- to end up 2, 3x year-on-year jump in sales in FY '20?

--------------------------------------------------------------------------------

Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [50]

--------------------------------------------------------------------------------

Yes. So we have our internal budgets and the target for FY '20, which are more or less in the range of what you are saying, and we are on track of that.

--------------------------------------------------------------------------------

Alankar Garude, Macquarie Research - Analyst [51]

--------------------------------------------------------------------------------

Okay, sir. And final question on the acetic acid prices. If you could just help us with the acetic acid average prices for the same quarter last year, Q2 FY '19, for Q1 FY '20 and also this quarter Q2 FY '20?

--------------------------------------------------------------------------------

Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [52]

--------------------------------------------------------------------------------

So last year, same quarter, it was almost $640. This quarter, we -- last quarter, we were at around $450, $460. And last quarter has been around $510, $520.

--------------------------------------------------------------------------------

Alankar Garude, Macquarie Research - Analyst [53]

--------------------------------------------------------------------------------

So $500, $520 is for Q2 FY '20?

--------------------------------------------------------------------------------

Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [54]

--------------------------------------------------------------------------------

No, it was Q1 FY '20. Q2, I said about, $450, $460.

--------------------------------------------------------------------------------

Alankar Garude, Macquarie Research - Analyst [55]

--------------------------------------------------------------------------------

Understood. And the prices right now will be similar to what we have seen in Q2, about $440?

--------------------------------------------------------------------------------

Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [56]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Operator [57]

--------------------------------------------------------------------------------

The next question is from the line of [Ahribe Laroche] from [Stephens].

--------------------------------------------------------------------------------

Unidentified Analyst, [58]

--------------------------------------------------------------------------------

This is regarding USFDA observations, as you have mentioned, goal at these API units. So [dwell] observations there and OAI was also issued for this. What is the status of that now?

--------------------------------------------------------------------------------

Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [59]

--------------------------------------------------------------------------------

Yes. So we mentioned after issuing the OAI, we proactively engaged with the USFDA as well as Health Canada. We still continue to remain engaged with them and whatever, as far as the observation, so we have -- we feel that we have completed all the remediations of that.

And since we are actively [fighting on] with them that official action as of now is also remaining as official action. It has not escalated into [volume matter]. And then when Health Canada and USFDA will comment will be audit after the outcome, we will know.

--------------------------------------------------------------------------------

Unidentified Analyst, [60]

--------------------------------------------------------------------------------

Okay. So it's still OAI is enforced on the unit here. This is understanding. Sir, another, this one question is regarding recall of 46,000 bottles of Valsartan tablets from your Roorkee plant. What is basically the problem with these, I mean, this medicine?

--------------------------------------------------------------------------------

Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [61]

--------------------------------------------------------------------------------

Valsartan from Roorkee plant?

--------------------------------------------------------------------------------

Unidentified Analyst, [62]

--------------------------------------------------------------------------------

Yes. Some recall of 46,000 bottles from Roorkee plant in July. Was it there?

--------------------------------------------------------------------------------

Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [63]

--------------------------------------------------------------------------------

I don't think they recalled Valsartan from the market.

--------------------------------------------------------------------------------

Unidentified Analyst, [64]

--------------------------------------------------------------------------------

Okay. It was reported in some news items I was reading going through that. So anyway, if it is not there, then good for the company.

--------------------------------------------------------------------------------

Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [65]

--------------------------------------------------------------------------------

Yes. I don't recall we having recalled Valsartan because of (inaudible) In fact, we are also [talking] we do not have any report that [flag] to determine the impurity of Valsartan from the market.

--------------------------------------------------------------------------------

Operator [66]

--------------------------------------------------------------------------------

The next question is from the line of Surajit Pal from Prabhudas Lilladher. As there's no response from the current participant, we move to the next question from the line of Ranvir Singh from IDBI.

--------------------------------------------------------------------------------

T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [67]

--------------------------------------------------------------------------------

Further follow-up. Sir, the -- some of the remediation cost, we are done with this cost? Or cost is continuing the kind of expenditure we've seen in H1?

--------------------------------------------------------------------------------

Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [68]

--------------------------------------------------------------------------------

So for the remediation work, we have almost completed. In terms of cost booking, it's depending upon how the payments are being made. So probably some more booking with us on this quarter.

--------------------------------------------------------------------------------

T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [69]

--------------------------------------------------------------------------------

And these remediation costs are related to Roorkee facility only? Or part Nanjangud (inaudible) facility?

--------------------------------------------------------------------------------

Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [70]

--------------------------------------------------------------------------------

Both the facilities.

--------------------------------------------------------------------------------

T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [71]

--------------------------------------------------------------------------------

Okay. And from Nanjangud -- the number of observations has been quite high. So what you have stated, is there any chance this may be escalated or you're confident will be resolved at this level only?

--------------------------------------------------------------------------------

Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [72]

--------------------------------------------------------------------------------

Yes. So the number of observations on the Nanjangud plant is not that much of an issue because if we actually look at the observation, out of 12, 11 are related to the (inaudible) and current purity issues, which is (inaudible) for the industry. And as I just mentioned on the call that the other opening that we haven't seen a recall of product from the market because of [methylpyridine]. So everything we have concluded, already efficient and within the system. We have put all the controls in place, and we have done all the remediations on those level of the observation. You asked whether official action would remain or not, that will depend upon the regulating agency. But as of now, since we are engaged with the regulating agency, that has not escalated to [another] level.

--------------------------------------------------------------------------------

Operator [73]

--------------------------------------------------------------------------------

(Operator Instructions) The next question is from the line of Aditya Khemka from DSP Blackrock.

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [74]

--------------------------------------------------------------------------------

Sir, I have 2 questions. First one, the Life Science Ingredient side. Can you help us to understand what caused the price decline of acetic acid [like] from $640 to $450 at this point in time? And therefore, why do you feel that further decline is not possible and that the price will stabilize now?

--------------------------------------------------------------------------------

Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [75]

--------------------------------------------------------------------------------

In last 2 quarters, we have seen some of the kind of product demand in the market reducing drastically. So the consumption of acetic acid has gone down, and therefore, the pricing has very flat. But now the overall demand of those products are stabilizing, and therefore, we don't see -- and the pricing which we have seen last year, which is in the range of $650 to $680 was really not the pricing which we have seen in the past. So that was [moment]. So the pricing which has stabilized now. So we don't think it should further go down. Even if it will go down, it will not be in the same range of what has happened as against last year versus this year.

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [76]

--------------------------------------------------------------------------------

And what is the end product use? And which industry, for what purpose is it used?

--------------------------------------------------------------------------------

Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [77]

--------------------------------------------------------------------------------

So there are various products where acetic acid is used. So if you'll see, there are cellulosic acetates as the end product where it is used. So frankly, there is another use where the Chinese had production was impacted. So these are the products which have impacted production, and therefore, the demand has been lower.

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [78]

--------------------------------------------------------------------------------

But you feel now that when the demand is strengthening, is it because the end -- our end customer is gaining share of the market? Or is it because the overall market of the end customer is growing? Which of the 2 is it?

--------------------------------------------------------------------------------

Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [79]

--------------------------------------------------------------------------------

Overall, global demand is improving.

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [80]

--------------------------------------------------------------------------------

So the overall market is growing. And similar question on the molasses side. So molasses prices has gone up and that has hurt us. But could you explain to me why the molasses prices went up? What caused the increase? What is the more normalized pricing of molasses? What is it right now? And why do we feel that molasses prices may not go up further in the future?

--------------------------------------------------------------------------------

Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [81]

--------------------------------------------------------------------------------

Yes. So the molasses prices mostly depends on the production of corn -- sorry, production of sugarcane. Now the sugarcane production last year has been not as good as it was expected. So therefore, the molasses overall availability was lower, and hence, the prices have gone up. And this season also, the availability is not very good as it was 2 years ago. But obviously, it is definitely looking better than last year. So we expect that this will normalize the pricing, but it will not be as low as we have seen 2 years before. But it will definitely be better than what we have seen in the last 6 months.

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [82]

--------------------------------------------------------------------------------

Understood, sir. On the debt side, Mr. Sankaraiah, so while we have INR 8,200 crores of net debt. We are doing an EBITDA run rate of INR 500 crores each quarter, and we are still sort of reducing debt only by INR 150 crores in the past quarter. So what are the blocks there? So how much is the CapEx this quarter? And what is your expected CapEx in the second half?

--------------------------------------------------------------------------------

Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [83]

--------------------------------------------------------------------------------

The CapEx was, for the first half, was INR 317 crores. INR 148 crores was for this quarter.

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [84]

--------------------------------------------------------------------------------

Right. And what is the expectation for second half, sir?

--------------------------------------------------------------------------------

Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [85]

--------------------------------------------------------------------------------

For the full year, we expect almost like INR 550 crores CapEx.

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [86]

--------------------------------------------------------------------------------

Understood. So fair to say that if you continue to do INR 500 crores of EBITDA and excluding tax, and you do only INR 300 crores of CapEx, let's say, in the next -- or INR 250 crores CapEx in the next 6 months, then ideally you should be able to repay debt by another INR 400 crores, INR 500 crores?

--------------------------------------------------------------------------------

Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [87]

--------------------------------------------------------------------------------

Number, we've not been able again to put exactly, but definitely, we will be able to reduce the debt in the second half also.

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [88]

--------------------------------------------------------------------------------

Understood. And sir, on your effective tax rate given your tax rate was slightly on the higher end, given this recent tax rate change, what would the new effective tax rate be for FY '20 and then '21?

--------------------------------------------------------------------------------

Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [89]

--------------------------------------------------------------------------------

As you know very well that mainly our operations are in U.S. and Canada. So we are going to continue in India the old tax regime only. We are not moving into a new tax regime because there are a lot of advantages of being continuing with the lower tax because the company will be under MAT for a couple of years. So the average tax cash outflow will be about 35% whereas including there are deferred tax and other tax percentage will be around 29% to 30%.

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [90]

--------------------------------------------------------------------------------

So your P&L tax rate will be around 29%, 30%, whereas your effective cash flow will be about 25%?

--------------------------------------------------------------------------------

Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [91]

--------------------------------------------------------------------------------

Correct.

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [92]

--------------------------------------------------------------------------------

But if you were to move to the new tax regime, wouldn't your effective cash flow ex-outflow on the cash would be 25% on your P&L, would be 25% as well?

--------------------------------------------------------------------------------

Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [93]

--------------------------------------------------------------------------------

No, no, no. It is better for us to continue in MAT regime. Going forward, the MAT will be 17% because the company will be MAT.

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [94]

--------------------------------------------------------------------------------

So if your MAT tax is 17%, why would your effective cash flow be 25%?

--------------------------------------------------------------------------------

Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [95]

--------------------------------------------------------------------------------

Because the Canadian tax rate is much higher.

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [96]

--------------------------------------------------------------------------------

And we don't use transfer pricing to retail?

--------------------------------------------------------------------------------

Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [97]

--------------------------------------------------------------------------------

No, no, no. We are being very careful in terms of transfer pricing. We are one company who don't have any disputes on transfer pricing and that we want to maintain that confidently.

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [98]

--------------------------------------------------------------------------------

That's fantastic, sir. Sir, on the Pharma side, you mentioned one point on the Losartan API in your opening remarks where you said that you guys have solved the issue on the Losartan API production and [inter-routine] revenues. So is it fair to assume that your second quarter sales of the API business did not have enough Losartan API sales and third quarter onwards, you would have more Losartan API sales? Is that a fair assessment?

--------------------------------------------------------------------------------

Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [99]

--------------------------------------------------------------------------------

Yes. So while we were making that assessment, it's not for all the Sartans, not specifically to the Losartan. So yes, all those issues are of like some impurities, et cetera, regulatory controls, whatever to do, we have all put in place. And hence, we expect next quarter of our volume of all these Sartans will be more than this quarter.

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [100]

--------------------------------------------------------------------------------

And we already started shipping in the third quarter, sir? Or would you start shipping sometime later during the quarter?

--------------------------------------------------------------------------------

Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [101]

--------------------------------------------------------------------------------

Yes, we started already.

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [102]

--------------------------------------------------------------------------------

And this is for all varieties of Sartans, not only Losartan?

--------------------------------------------------------------------------------

Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [103]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [104]

--------------------------------------------------------------------------------

And this is across all markets, U.S. as well as other markets? Or is it purely for other markets and still being U.S.?

--------------------------------------------------------------------------------

Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [105]

--------------------------------------------------------------------------------

We were -- we already started evaluating depending upon the geography and their regulatory requirement. So it's not that everything was stopped, but all those volumes not really start growing and the [discretion] to U.S. and Europe are picking up now.

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [106]

--------------------------------------------------------------------------------

All right. Sir, just one last question. On these sterile injectable CMO business, could you give us some color on what the revenues were this quarter? How did it grow? And what is the order book looking like right now?

--------------------------------------------------------------------------------

Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [107]

--------------------------------------------------------------------------------

So for CDMO business -- for the CDMO business, which includes the CMO and the API, our revenue year-on-year on this quarter were higher by 11%. And if you look back to the H1, it was higher by about 17%. So both businesses are performing very well.

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [108]

--------------------------------------------------------------------------------

And what is the sterile injectable order book looking like, sir?

--------------------------------------------------------------------------------

Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [109]

--------------------------------------------------------------------------------

We have restored the order book because it is not -- it's relevant. As we mentioned earlier, the entire capacity already sold-out. The plant is running at full capacity through the long-term contracts. And then when the contracts comes up for the renewal, we are able to do the renewal at the back account on the back of commercial terms so...

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [110]

--------------------------------------------------------------------------------

And when does that come up for renewal, sir?

--------------------------------------------------------------------------------

Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [111]

--------------------------------------------------------------------------------

Sorry?

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [112]

--------------------------------------------------------------------------------

When does the contract come up for renewal?

--------------------------------------------------------------------------------

Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [113]

--------------------------------------------------------------------------------

So it's not -- like there are (inaudible) customers and the contract may be anything between 3 to 7 years kind of countries. So every year, 4 or 5 contracts keeps on coming up for renewal.

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [114]

--------------------------------------------------------------------------------

And how much of our CapEx that we are doing this year, INR 550 crores or INR 600 crores, how much of that CapEx is actually going into the CDMO business, and how much is going outside the CDMO business?

--------------------------------------------------------------------------------

Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [115]

--------------------------------------------------------------------------------

It is broadly, and sort of subsegment-wise -- we will say, Pharma will be about INR 300 crores, LSI will be about INR 200 crores and Drug Discovery another INR 50 crores. because they started investing in Drug Discovery in a sizable manner because we see a huge opportunity in that area, so almost like a INR 50 crores will being in Drug Discovery out for this year.

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [116]

--------------------------------------------------------------------------------

Yes, and Mr. Sankaraiah one question, which...

--------------------------------------------------------------------------------

Operator [117]

--------------------------------------------------------------------------------

Mr. Khemka, sorry to interrupt you, but we have several participants waiting in the queue. Can we request you please rejoin the queue for follow-up?

--------------------------------------------------------------------------------

Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [118]

--------------------------------------------------------------------------------

Sure. My pleasure.

--------------------------------------------------------------------------------

Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [119]

--------------------------------------------------------------------------------

Thank you.

--------------------------------------------------------------------------------

Operator [120]

--------------------------------------------------------------------------------

The next question is from the line of Surajit Pal from Prabhudas Lilladher.

--------------------------------------------------------------------------------

Surajit Pal, Prabhudas Lilladher Pvt Ltd., Research Division - Assistant VP & Senior Research Analyst [121]

--------------------------------------------------------------------------------

My question is regarding nonsupply penalties, which is mainly due to OAI and all those issues. How long do you think this will continue for nonsupply penalties?

--------------------------------------------------------------------------------

Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [122]

--------------------------------------------------------------------------------

I'll say most of the impact has come up to this quarter, but some amount will also be coming in Q3.

--------------------------------------------------------------------------------

Surajit Pal, Prabhudas Lilladher Pvt Ltd., Research Division - Assistant VP & Senior Research Analyst [123]

--------------------------------------------------------------------------------

With a similar quantity?

--------------------------------------------------------------------------------

Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [124]

--------------------------------------------------------------------------------

Yes. It may not be similar, it may be lower.

--------------------------------------------------------------------------------

Surajit Pal, Prabhudas Lilladher Pvt Ltd., Research Division - Assistant VP & Senior Research Analyst [125]

--------------------------------------------------------------------------------

Second point is that once you have resolved your Sartan impurities issues, which I'm assuming is that right now, your impurity will be much lower than what was prescribed new prescribed limit. Then the formulation problem in terms of producing Sartans on those impurities will also be resolved, which implies?

--------------------------------------------------------------------------------

Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [126]

--------------------------------------------------------------------------------

Yes. So most of the Sartans are in-house Sartans. So it's produced at the Nanjangud. And from the Nanjangud plant, we -- our supplies to the Roorkee plant as well as they are also supplying to others in the market. So that impact comes at both the places, in the Solid Dosage business as well as within the API business for their merchant sales.

--------------------------------------------------------------------------------

Surajit Pal, Prabhudas Lilladher Pvt Ltd., Research Division - Assistant VP & Senior Research Analyst [127]

--------------------------------------------------------------------------------

Okay. So that means that, that part of the problem is resolved as far as formulation is concerned?

--------------------------------------------------------------------------------

Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [128]

--------------------------------------------------------------------------------

Yes. You're right.

--------------------------------------------------------------------------------

Surajit Pal, Prabhudas Lilladher Pvt Ltd., Research Division - Assistant VP & Senior Research Analyst [129]

--------------------------------------------------------------------------------

Very recently, you've got an approval in formulation. I believe this is from your U.S. plant?

--------------------------------------------------------------------------------

Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [130]

--------------------------------------------------------------------------------

Yes. That is from our U.S. plant. That plant has (inaudible) So that approval are from sales.

--------------------------------------------------------------------------------

Operator [131]

--------------------------------------------------------------------------------

Thank you. Ladies and gentlemen, this was the last question for today. I now hand the conference over to the management for their closing comments. Over to you, sir.

--------------------------------------------------------------------------------

Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [132]

--------------------------------------------------------------------------------

I would like you all -- to thank you for joining us on this conference call. If you have any further questions both Mr. Sankaraiah and Ravi will be happy to answer it. And I would like to, at the same time, wish all of you a very happy and a prosperous Diwali. Wish you a very Happy New Year. Thank you.

--------------------------------------------------------------------------------

Operator [133]

--------------------------------------------------------------------------------

Thank you very much. Ladies and gentlemen, on behalf of Jubilant Life Sciences Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.