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Edited Transcript of JUBILANT.NSE earnings conference call or presentation 26-Jul-19 11:30am GMT

Q1 2020 Jubilant Life Sciences Ltd Earnings Call

Noida Jul 31, 2019 (Thomson StreetEvents) -- Edited Transcript of Jubilant Life Sciences Ltd earnings conference call or presentation Friday, July 26, 2019 at 11:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* 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

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Conference Call Participants

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* Alankar Garude

Macquarie Research - Analyst

* Amit Goela

Rare Enterprises - Partner

* Rahul Veera;Abakkus Asset Manager LLP;Research Analyst

* Saion Mukherjee

Nomura Securities Co. Ltd., Research Division - Head of India Equity Research

* Srihari Chintalapudy

PCS Securities Ltd., Research Division - Equity Fundamental 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

* Vishal Manchanda

Nirmal Bang Securities Pvt. Ltd., Research Division - Research Analyst

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and a very warm welcome to the Jubilant Life Sciences Q1 FY '20 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 at Jubilant Life Sciences Limited. Thank you, and over to you, sir.

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

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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 Q1 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; Mr. Rajesh Srivastava, CEO, Life Science Ingredients.

I now invite Mr. Bhartia to share his comments.

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

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Thank you, Ravi, and good evening, everyone. Before we discuss the company's performance during the quarter, I have an important announcement to make.

The Board of Jubilant Life Sciences has constituted a committee to evaluate various options, including the reorganization or demerger of certain business undertakings on a going concern basis. The objectives of this exercise are to create a focused entity for Pharmaceuticals and Life Science Ingredients businesses; to manage different risks, rewards and regulatory requirements; to enable strategic growth for these businesses with optimum capital structure; and also to potentially unlock shareholder value with direct ownership in each of business entities. Any decision on this regard by the Board will be after the evaluation and consideration of the recommendations of the committee and subject to all necessary consents and approval. The company will also take necessary steps to comply with all the applicable laws and requirements, including SEBI Listing Obligations and Disclosure Requirements Regulations, 2015.

Now coming to the company's performance in Q1 FY '20. I'm sure you've had a chance to go through our presentations and press release on the quarter.

As you can see, we had steady performance during the quarter. Revenues have been higher by 5% year-on-year while reported EBITDA was lower by 1% year-on-year. The adjusted EBITDA was higher by 9% year-on-year. Pharmaceuticals segment has witnessed sustained revenue growth, mainly in CMO and Specialty Pharma businesses. Reported EBITDA was down 3% year-on-year while adjusted profitability of the segment was higher 7% year-on-year with a margin of 28.1%.

In the Pharma segment, we leveraged our competitive strengths of integrated and efficient manufacturing operations and being closer to customer due to majority of our manufacturing operations team in North America. We are focused on derisking our business model by operating in niche segments like Radiopharma and Allergy Therapy Products with high-entry barriers while growing the Generic business. Going forward, we are investing in building a healthy pipeline of products and capacity in Specialty Pharma and Generic businesses to cater to the better demand.

I'm happy to report there's a recovery in our Life Science Ingredients business during the quarter, especially now at Specialty Intermediates and Nutrition Products businesses which are witnessing both price and volume increases. This helped adjusted profitability on this segment to grow 19% year-on-year with a margin expansion of 320 basis points in the segment. In LSI segment, we are leveraging our global scale and vertically integrated manufacturing capabilities, which allow us to offer diverse product offerings at cost-competitive prices to our customers.

With this, I would like to request Pramod Yadav to share the highlights of the Pharmaceuticals business during the quarter, followed by Rajesh Srivastava on LSI, drug discovery businesses.

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

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Thank you, Mr. Bhartia. A very good evening to all of you.

The revenues in Radiopharmaceutical segment grew 12% year-on-year during the quarter under review with all our key business segments witnessing growth. Specialty Pharma, which includes Radiopharma and Allergy businesses, now contributes 25% of total revenue. In Radiopharma, growth was driven by volumes and better prices in key products such as MAA, DTPA, and I-131. We have also recently received CE certificate allowing Ruby-Fill to be introduced in the European market. We have a very healthy pipeline of around 7 products with an addressable market of around USD 300 million, which we plan to file and launch in the next 2 to 5 years. This includes 505(b)(2) filings and also an NDA as I-131 MIBG. The efforts to increase market share and operational efficiencies continue as planned in Radiopharmacies business to achieve breakeven at the earliest.

In our Allergy business, venom and Allergenic Extracts both saw volume growth. Additionally, we are focusing on catching to venom demand in non-U.S. markets and increased market share in Allergenic Extracts in the U.S. We have recently had a satisfactory inspection of FDA of our lines for which we expect approval in Q2 FY '20, which will help us to increase production of venom.

There has been a strong growth in CMO business led by higher capacities, better on-time delivery and operational efficiencies. The demand continues to remain robust, and we are taking various initiatives to increase capacity in the business. We have already increased shift on one line 24/7 last year and are planning to increase shift 24/7 on another line from Q3 FY '20. We have also installed new Lyo equipment with commercialization expected in H2 FY '20. These initiatives will increase capacity by over 30%, translating into annual additional potential revenue of around USD 30 million.

In the API business, pricing remains strong for key products. However, the production in Sartans was lower during the quarter, a result of additional quality checks on all input raw materials to meet enhanced regulatory requirements. We are confident of recovering these volumes during FY '20.

For the Generic business, revenue growth was moderated due to lower volumes in certain products, which is expected to normalize going forward. The expected capacity in Roorkee is now available for commercial production for both U.S. and non-U.S. markets.

We reported EBITDA of INR 331 crore, 3% lower year-on-year, with margin of 25.1%. While CMO, Allergy and Generic business performance were better, lower volume in API and one-off expenses of INR 40 crore related to exchange fluctuations on restatement of deposits, litigation and penalty of non-supply and site remediation costs impacted segment EBITDA during the quarter. Adjusting for the one-off expenses, Pharma EBITDA was 7% up year-on-year with margin lower by around 130 basis points.

Pharmaceutical R&D spend was INR 57 crore, which is 4.3% of segment sales with R&D debited to P&L of INR 48 crore, which is 3.7% of segment sales.

With regard to regulatory matters, we have submitted comprehensive response to U.S. FDA. We have engaged third-party consultant to help with remediation activities in Roorkee. In the case of Nanjangud Official Action Indicated, we are working diligently with the regulatory agencies U.S. FDA and Health Canada for resolution of the matter. We are also taking all necessary steps to ensure stringent control at all our facilities.

With this, I would like to request Rajesh to share details of Life Science Ingredients and Drug Discovery Solutions segment performance during the quarter.

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

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Thank you, Pramod. Very good evening to all of you.

Our LSI business Q1 revenue was at INR 805 crore, which is decline of 5% year-on-year. While Specialty Intermediate and Nutrition Product business observed robust growth, Life Science Chemicals business revenue has declined. Growth in Specialty Intermediate business was contributed by a robust volume as well as price increase in most of the key products. We have witnessed positive traction for new products which we have launched in last 1 year in Specialty Intermediate business. The GMP multiproduct facility at Bharuch has been successfully commissioned and also contributing to growth. The overall market trend of Specialty Intermediate business is positive, and we are continuously working to maximize output from our existing facilities to service strong demand from our customers.

Growth in Nutritional Products business was led by a mix of higher volume as well as better price within Vitamin B3. Jubilant being backward integrated will ensure consistent supply and volume availability to our customers.

Lower revenue in Life Science Chemicals was on account of significant drop in acetic acid price by around 37% year-on-year and around 21% quarter-on-quarter. This drop in acetic acid price has led to price correction of Life Science Chemicals products.

Molasses price continued to be at a higher level, thereby adversely impacting profitability of our Life Science Chemicals business. We reported EBITDA of INR 122 crore, up 11% year-on-year with margin of 15.1% as compared to 12.9% margin in Q1 last year. This has been led by higher profitability in the Specialty Intermediates as well as Nutritional Product businesses.

We expect growth in LSI to be led by Specialty Intermediates and Nutritional Product businesses. During the year, demand for Life Science Chemicals products is expected to improve in second half of financial year '20.

Coming to our Drug Discovery Solutions business, our Drug Discovery Solutions business grew 8% year-on-year in revenue and 48% year-on-year in profitability led by gaining new customer accounts as well as new projects from existing customers. Focus will continue on securing higher integrated projects from pharma and biotech customers.

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

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

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Thank you, Rajesh. A good evening, and I thank every one of you for taking out time and joining us on our quarterly earning call today. Let me give you a brief of financial highlights for the performance during quarter -- FY -- Q1 FY 2020.

Revenue from operations was up 5% year-on-year to INR 2,182 crores with Pharma revenue up 12% year-on-year to INR 1,321 crore and LSI revenue at INR 805 crores, down 5% year-on-year. Reported EBITDA was INR 444 crore, down by 1% year-on-year, with a margin of 20.4% versus 21.5% in Q1 last year. Adjusted EBITDA after adjusting for onetime expenses was INR 493 crores, a growth of 9% year-on-year, with a margin of 22.6% as compared to EBITDA of INR 452 crores and a margin of 21.8% in Q1 FY 2019.

Effective April 1, 2019, the company has adopted new lease accounting standards, Ind AS 116, using the modified retrospective approach. Consequently, operating lease expenses have been charged by change from the -- rent and other expenses to depreciation and amortization expenses and finance costs. Accordingly, the EBITDA for the quarter is higher by INR 10 crores. However, depreciation and interest for the quarter have also increased by INR 9 crores and INR 2 crores, respectively, resulting in a net impact of INR 1 crore on the profit of the company. Thus, the adoption Ind AS 116 has not had any material impact on the results of the quarter.

Finance costs during the quarter were INR 73 crores, in line with last year. Average blended interest rate Q1 FY '20 was at 6.11%. Our rupee loans were at 8.38% and the foreign currency loans at 5.33%. The company's PAT was at INR 185 crore, a decline of 9% year-on-year with an EPS of INR 11.60 or INR 1 [paisa].

The CapEx was INR 169 crore in Q1 FY '20. The company's net debt was INR 3,286 crore, with, on a constant currency basis, at INR 3,293 crore, a reduction of INR 196 crore as compared to March 2019. We will continue our efforts to strengthen the balance sheet by reducing the debt and improving the financial ratios.

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

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Questions and Answers

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Operator [1]

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(Operator Instructions) First question is from the line of Rahul Veera from Abakkus.

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Rahul Veera;Abakkus Asset Manager LLP;Research Analyst, [2]

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Just a quick question. So these one-off expenses, and thus we have spoken about penalties. So penalties with respect to which products, sir?

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

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Pramod?

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

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So these penalties are for the dosage form business for the U.S. market where it will be difficult to specify the product. It's on 3, 4 products...

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Rahul Veera;Abakkus Asset Manager LLP;Research Analyst, [5]

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Okay. And sir, I mean...

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [6]

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That are being supplied on -- yes, please go ahead.

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Unidentified Analyst, [7]

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Yes. So was it because the issue of the plant's capacity?

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Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [8]

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Well, it is because of the regulatory requirements because we received warning letter. So it is because of that.

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Operator [9]

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Next question is from the line of Alankar Garude from Macquarie.

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Alankar Garude, Macquarie Research - Analyst [10]

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My first question is on -- if you just look at the revenue growth in Allergy, it has been pretty strong over the past few quarters. And in the presentation, you have mentioned about strong volume growth in Allergy in this quarter as well. Now assuming that revenue growth was strong for Allergy in this quarter as well, the overall 9% growth in specialty indicates that Radiopharma grew in low to mid-single digits. So first question, is this a fair assessment? And secondly, should we expect a similar growth in Radiopharma for the entire fiscal?

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [11]

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So in case of Radiopharma, the growth in the volumes as well as prices is very much in place. Here, the business is growing organically as well as price increases happens on the annualized basis. So that organic growth is happening. Other than that, we are also having growth because of the Ruby-Fill installations. That's a product which had a smaller market share, and we are growing the market share rapidly. However, in comparison to Radiopharma, Allergy business in this quarter had grown better. So your assessment on this, frankly right.

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Alankar Garude, Macquarie Research - Analyst [12]

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Understood, sir. This is very helpful. My second question, sir, is, is it possible to elaborate on this issue in Generics business which led to lower volumes? And what gives you confidence that it will normalize in the next few quarters?

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [13]

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So the issue is the industry-wide issues mainly on the Sartans where to ensure that any of the product -- any of the Sartan going out of our manufacturing location is free of any nitrosamine impurity. We have to put some additional controls into the manufacturing process, which led to some delay in release of the batches on time. And also, some additional capacities went away to the cleaning validations and meeting other cGMP requirements, which led to some of the delays in our supplies to the U.S. market.

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Alankar Garude, Macquarie Research - Analyst [14]

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Understood. So also on -- so related to this Generic business, so if we just look at the penalty levels, should we expect a similar run rate for the next -- or for the entire fiscal or maybe even going beyond FY '20? And also, if you could comment on this litigation expense. Because I remember last time, you had said in the call that we are expecting the litigation to get over towards the end of this fiscal. So if you could guide on both these expenses. And should we really construe these expenses as one-off for the next few quarters? That would be really helpful.

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [15]

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So first, on the Generic business. With -- as of now, we are hopeful that all these regulatory issues will get resolved within this financial year. And if that happens, then, of course, we don't expect this cost related to the regulatory issue spilling into next financial year. Similarly, on the litigation on the Ruby-Fill, we expect that the IPR case will get concluded by last quarter of this financial year. But prior to that, there are the various other steps. We expect just to announce a decision in this quarter, and then there will be commission decision and then there will be considerant appeal. Everything we expect to get completed in this financial year. So with that logic, all these expenses are truly as one-off expenses.

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Alankar Garude, Macquarie Research - Analyst [16]

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Okay. But you said there are a few steps pending. So could we expect a similar litigation expense in the -- till [likely fourth quarter?]

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [17]

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No. No. The major litigation expense in this [Board] during the hearing. But yes -- so that has been completed. But yes, because of this pending -- the steps, some litigation expense will continue in the rest of the quarter as well.

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Alankar Garude, Macquarie Research - Analyst [18]

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Understood, sir.

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [19]

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And we expect that to -- yes, yes. And we expect that to be lower than this quarter.

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Alankar Garude, Macquarie Research - Analyst [20]

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Okay. Okay. Fine. Now coming to Life Science Chemicals. So you had mentioned about volume growth for acetic anhydride being on the lower side. But if you could comment for ethyl acetate as well. And do we expect the second half in terms of volumes for both ethyl acetate as well as acetic anhydride to be better?

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Rajesh Kumar Srivastava, Jubilant Life Sciences Limited - Whole-Time Director & CEO of Life Science Ingredients [21]

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Yes. Ethyl acetate also, demand was also subdued, so we expect demand should be better in second half because that's the normal we have been -- we have seen in the past also. And anhydride, yes, I think it is -- this quarter, it is lower, but we expect to be better certainly in second half. That's what we said.

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Alankar Garude, Macquarie Research - Analyst [22]

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Understood. Sir, last question from my side for Mr. Bhartia. Now if, for example, the Board decides to demerge the 2 businesses, LSI and Pharma, would we look to list both the entities in India? Or we are open to exploring other options as well?

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Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [23]

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Firstly, the Board will consider it. But you see, this is -- as we have said in our press release, that both the business will be separated and will be listed in India because they are all listed in India.

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Alankar Garude, Macquarie Research - Analyst [24]

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Understood, sir. Yes, sorry.

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Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [25]

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The Board (inaudible).

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Alankar Garude, Macquarie Research - Analyst [26]

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I missed that part, sir. Can you please repeat it?

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Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [27]

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Yes. if the Board takes this view favorably, the objective is to split the business and both the businesses will be listed in India.

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Operator [28]

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

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T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [29]

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A couple of question. One, On CMO side, can you guide me the order book currently you have?

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [30]

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So for the CMO business, we have stopped declaring the order book because actually, what -- if you see, the entire capacity is more or less sold out. And in this business, the contract runs for the multiple years. And since currently, there's a bit of the tightness on capacity, the contracts are getting renewed. And as and when they get renewed, they get renewed at a better price. So order book with that sense has really lost the -- lost the relevance. And we have informed that we continue to evaluate the opportunities to get more throughput from the same assets, and the plants are in place for that.

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T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [31]

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Okay. So in CMO, just what would be current capacity utilization there?

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [32]

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Yes. In terms of capacity utilization, it's very close to 90%, which is the capacity you can produce. Because you have to take out all the downtime, et cetera, when you made the changes into the batches, et cetera. So we are operating more than 90% of the producible capacity.

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T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [33]

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That include that shifting? You have since increased your shifting or -- so without increasing 24 into 7?

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [34]

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Yes. So shifting of 24/7, as of now we're operating on one line. And when I am saying this capacity, it includes that line additional capacity. The additional shift on the other line will come in Q3. And then I mentioned that we are also installing another Lyo, which will in the second half of this financial year. So those initiatives, capacities will come towards the later part of this year.

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T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [35]

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Okay. And coming to Generic business, and so does this -- and do -- have you seen a growth in this quarter? Or there was a degrowth?

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [36]

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So there was not a degrowth, but the growth was kind of muted.

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T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [37]

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Okay. And so going forward, you said that you expect better growth on higher volume? That's what you're saying, expecting?

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [38]

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Yes. So when is that -- the prices of 2 of the products would be improving. And as we manage all these regulatory issues and more of the production will be available, there will be the volume growth as well. So growth will come on account of both of them.

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T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [39]

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Fine. Fine. And any commentary? You mentioned something currency breakeven on Radiopharma. You were talking about Triad?

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Unidentified Company Representative, [40]

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Yes. Yes...

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Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [41]

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Yes, we are mostly talking about Triad only, I think.

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T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [42]

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Okay. So what is condition with Triad? How much loss currently you're making? I don't know if you could guide something. And when we can see breakeven exactly. In what quarter?

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Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [43]

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Pramod?

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [44]

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And so yes. So I lost the connection in between for 1 minute, so I'm sorry I couldn't hear the question.

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T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [45]

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Yes. So you mentioned in commentary that in Radiopharma, you're reaching your breakeven, we are targeting to reach a breakeven. So I suppose you are talking about Triad, right?

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [46]

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Yes. That was for Radiopharmacy. You get it right. So we have renamed the business of the Triad as the Jubilant Radiopharmacy and Jubilant DraxImage as the Jubilant Radiopharmaceuticals. And both the businesses, under common brand Jubilant Radiopharma.

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T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [47]

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Okay. So this Radiopharmacy, how was the traction like? I just wanted to understand how much loss currently you're making in this thing.

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [48]

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So we are not declaring the -- we are not giving the numbers for the businesses separately because both the businesses have already been merged together. And they, along with the Allergy, are all part of Specialty Pharma.

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T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [49]

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And when can -- when we can see Triad reaching to breakeven?

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [50]

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We indicated that it will be in the next financial year.

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T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [51]

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End of financial year?

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [52]

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No. Next financial year.

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T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [53]

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No. So end of next financial year or...

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [54]

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In FY '21.

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T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [55]

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We can see from...

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [56]

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Yes. It will be towards the end of the next financial year.

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T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [57]

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Okay. Okay, fine. And just on the interest side, I think what are you supposed that after this restructuring of your debts and now IFC-related debts are over, so debt should have been reduced. So this quarter, debt -- sorry, interest cost has increased. So what would be the reason also? Or this level of interest in certain -- in next quarter also?

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Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [58]

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Our interest is on the same level of like previous year, same quarter. As far as the debt is concerned, we were able to reduce the debt in this quarter around INR 96 crore.

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T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [59]

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Yes, that I understand. No, no. Last quarter of -- previous year's quarter, a part of your interest cost was related to provisioning of IFC...

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Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [60]

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No, the gross debt has increased compared to last quarter -- last year same quarter. But there is a cash balance of more than INR 1,300 crore, which is there in the system. That's cash balance and lower interest rates compared to the borrowings.

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T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [61]

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Okay. So going forward, we should take this as the level -- this interest level to continue in the rest of the quarters, that's what you're...

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Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [62]

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Yes. In terms of the -- more or less, there's the same level because we are going on reducing the net debt. But the interest rate will be same or it will go down.

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T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [63]

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Okay. Fine. And any view on -- that acetic acid price has been very volatile, lumpy. So what is on macro level where you see this as price is going to lay? Or this will continue to be lumpy? What is situation there?

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Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [64]

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I think for last 2 months, the acetic acid price is almost stable now. It is not further going down. So there was a sharp drop for almost a month from about INR 450 level to now INR 380 level. But at that level, it is trending for last 12 months. Good enough. So we don't think that it should further go down unless there is further lower demand of the end product. Because this end-product demand in China, that's steadily gone down, which has created the surplus acid. So there is improvement in China production we are observing. And therefore, the acid price further is not going down.

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T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [65]

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Okay. And for past few quarters, our nutrition business was impacted by lower offtake in Vitamin B due to unavailability of Vitamin A. Then you saw stockpiling there. So the improvement we have seen this quarter is likely to continue going forward in subsequent quarter?

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Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [66]

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So in this quarter, we have seen, as we mentioned, both volume increase as well as price increase. So we have seen that volume will sustain because demand is still good. Pricing, we are still seeing that the pricing should remain stable or should be a little better. So we think that the performance is maintained whatever we have done.

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

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The increase in volume, was that...

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Operator [68]

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Ranvir, I'm sorry to interrupt you. You -- may we request you to come back in queue for follow-up questions? Thank you. The next question is from the line of Amit Goela from Rare Enterprises.

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Amit Goela, Rare Enterprises - Partner [69]

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First, I would like to complement the management for taking steps to evaluate whether 2 separate entities can be created, focused entities. We feel it will be very, very good and really want to compliment you on this.

Sir, number two, is there any time frame in which you will be doing the study? Or when you'll be completing your study of this?

And number two, regarding the CMO business, you had just mentioned that this business is completely sold out, so there's no need to give capacities. So what would be the arrangement for price increases in this like if it's a multiyear contract? If you could let me know this, too?

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

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The first question, I'm answering the CMO question. In CMO, we are seeing the volume increases because of our capacity increases. And so as Pramod said, we expect about the capacity of Lyo. And with extra line, we expect extra revenue of $30 million, and both of these are implemented on a yearly basis. And we have a provision of price increase every year in some of our contracts because of the inflation increase, et cetera. So it's inflation -- for inflation, we get a price increase. And sometimes, when you renew a contract after 2 years or 3 years, then we can ask for a higher increase at that time, depending upon the situation and the relationship with the customer at that particular time.

So regarding the second -- your second question on the timing of this Board decision, I think we hope to take in our Board -- in our next Board meeting. And during this period, we have to do a lot of work and the committee has to also evaluate it, and we hope to take in our next Board meeting in October.

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Operator [71]

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The next question is from the line of Saion Mukherjee from Nomura.

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Saion Mukherjee, Nomura Securities Co. Ltd., Research Division - Head of India Equity Research [72]

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Sir, my first question is on the Specialty Intermediates where, I know, we have seen good growth. I'm just wondering, is it because of the newer products you had? And I'm just wondering how sustainable the number that we see this quarter.

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Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [73]

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So in Specialty Intermediate, you're right, some of our -- some of the products which we have been talking last 1 year, we have been introducing. Those works are really looking positive tests. So those products, we are in a position to place in the market, and the volume is expected to grow. That is giving -- and it is sustainable. And as we also mentioned in earlier calls, that we also see a little bit of positive traction on pricing because of the overall global scenario, specifically in China. So that is also contributing to the overall performance, both in revenue and in profitability.

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Saion Mukherjee, Nomura Securities Co. Ltd., Research Division - Head of India Equity Research [74]

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Okay. Okay then. And sir, in the last quarter, I remember you talked about this fall in acetyl prices and that created some mismatch in your revenues and cost. I'm wondering if there is any sort of mismatch in this quarter because you have not called out any such one-off in this quarter.

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Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [75]

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No. You're right. So that -- we -- maybe we always have a lag of 45 days or so. So that lag is almost over. We are at cost. But unfortunately, the demand is subdued. So we are not in a position to take the relevant price increase and volume. So that's why the Life Science Chemicals performance is not as we expected.

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Saion Mukherjee, Nomura Securities Co. Ltd., Research Division - Head of India Equity Research [76]

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Okay. Okay, sir. And sir, on the Pharma side, just one thing I wanted to check, this -- the CDMO business. You mentioned that API has been a bit weak, I think, this quarter, but we still have seen good growth. So it is entirely from the contract manufacturing? And again, the same question, is it sustainable, the number that we see?

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [77]

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Yes. Yes, so because of API being lower, CDMO is still doing good. It definitely has strong -- due to a strong performance on the CMO section on the revenue side. Yes. Your estimation is correct.

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Saion Mukherjee, Nomura Securities Co. Ltd., Research Division - Head of India Equity Research [78]

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Okay. And sir, finally if I can on Ruby-Fill. You -- So one on the U.S. side. So you mentioned that it is as per your plan, but we don't know what your plan is. So can you give some more color? Like how much is the improvement, let's say, year-on-year, quarter-on-quarter? And how far are we from what you think could be the peak sales? And when can that be -- in which year you think it can be achieved?

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [79]

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Yes. So on the Ruby-Fill, when you say how far we are from our peak sales, I'd say, yes, we are probably a couple of years far off from that. We are not there yet. But we are very aggressively growing our market share.

And you asked some indication in terms of comparisons. So the comparison I can give you like our -- this year's -- this quarter, Ruby-Fill revenue in comparison to last year same quarter is almost 3x. So it's a substantial growth that way. And if we look at the projection, probably our -- in FY '20, our revenue will be between 2.5 to 3x of what it was in FY '19. But again, one -- and there's litigation case still going on which did create a confusion in the market. And there's a lot of unmet demand in the market, and that market development takes time. So it will take a few years for us to reach at our peak capacity into the U.S.

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Saion Mukherjee, Nomura Securities Co. Ltd., Research Division - Head of India Equity Research [80]

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Okay. And sir, on this litigation thing, so when do we expect to hear this? I mean, get a verdict on this? And yes, you mentioned this quarter only, right?

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [81]

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Yes. So judge was to announce the decision, but he has held back because of there are some other priorities. So with the -- these regulatory agencies, you can never make the right predictions. But it should happen any time.

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Operator [82]

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(Operator Instructions) The next question is from the line of Vishal Manchanda from Nirmal Bang.

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Vishal Manchanda, Nirmal Bang Securities Pvt. Ltd., Research Division - Research Analyst [83]

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You have announced Ruby-Fill has won a CE mark in Europe. Can you talk about how big is the market there? And how would they now basically launch it up there?

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [84]

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So in the Europe, as of now, the competitor product is not approved. So we are the first one who got this approval. So you can safely assume there's no market as of now. So the market has to be developed. But if you look at the application of this for the aging population and you look at the U.S. market, so there's no -- any reason why the European market should not ultimately develop as big as the U.S. market. But we will have to put the market development efforts into that, and we have to develop the market. But we are very happy that we have won the approval. So the regulatory issues have been resolved, and now we are ready to enter in the European market as well.

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Vishal Manchanda, Nirmal Bang Securities Pvt. Ltd., Research Division - Research Analyst [85]

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So you mean cardiac PET imaging is yet offered in Europe? There's scope for PET scan in Europe?

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [86]

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Cardiac fell through. This -- the rubidium or the strontium versus -- the -- so the rubidium is not there in the Europe as of now. Because this gives a much better clarity and much more additional features through the Ruby-Fill generator and elution system, what we have. That's not there in the offer.

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Vishal Manchanda, Nirmal Bang Securities Pvt. Ltd., Research Division - Research Analyst [87]

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Okay. A question on your API business. Could you talk about -- where are we in terms of capacity utilization? And do we plan any expansion?

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [88]

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So in the last quarter, our capacity was impacted because of these regulatory issues. We had the business and some of the business we couldn't sell because, as I mentioned earlier in the call, we were doing some remediations to come out of the Official Action Indication (sic) [Official Action Indicated] status in the Nanjangud. In terms of -- but the -- where we have the traction of the customers in the business lined up, we do need additional capacity. And for that additional capacity, we are still available whether to do the expansion at the Nanjangud or at some other sites or we'll go for some -- announce any growth opportunities. So that -- the decision is yet to be made. Yes, there is...

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Vishal Manchanda, Nirmal Bang Securities Pvt. Ltd., Research Division - Research Analyst [89]

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Basically then -- so basically then, capacity has expanded. We'll not see any significant growth on the API business except for the -- so basically, we -- except for delivering on the existing business contracts. But there's not going to be major drawback in contracts?

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [90]

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Yes. That will make the correction. You -- the last quarter for the API was like the one-off because we made many corrections in the plant. And because of that, volumes were really down. So if your question is in reference to the last quarter, we should see substantial growth in the API business.

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Vishal Manchanda, Nirmal Bang Securities Pvt. Ltd., Research Division - Research Analyst [91]

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Okay. Okay, okay. And one on your Vitamin B3 business. So a couple of quarters back, you had indicated that you had -- you got a WHO GMP approval for pharma-grade Vitamin B3. So are you -- have you started selling pharma-grade Vitamin B3? Or is it that has not yet happened?

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Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [92]

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Yes. So WHO GMP, we have taken it for pharma grade as well as full grade, and our volumes are growing in these markets. So we expect to grow the volume. But of course, regarding the feed market, these volumes are not as big as feed market. But we are growing.

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Vishal Manchanda, Nirmal Bang Securities Pvt. Ltd., Research Division - Research Analyst [93]

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But the pricing should be much favorable for the pharma one

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Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [94]

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Yes. Yes, you are right, pricing are absolutely better than feed.

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Vishal Manchanda, Nirmal Bang Securities Pvt. Ltd., Research Division - Research Analyst [95]

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So is that going to -- so that is yet to fully step up for pharma-grade business, and we might see a ramp-up in the future?

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Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [96]

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Well, I think -- I don't understand your question.

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Vishal Manchanda, Nirmal Bang Securities Pvt. Ltd., Research Division - Research Analyst [97]

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So I mean, you have to ramp up your volumes in pharma-grade Vitamin B3?

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Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [98]

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Yes. So we are ramping up quarter-on-quarter because this has barely a year to go and get approvals of customers and customers take a long time. So business has started. It is growing, and it will continue to grow.

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Vishal Manchanda, Nirmal Bang Securities Pvt. Ltd., Research Division - Research Analyst [99]

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Okay. Okay. And just one final one on the Roorkee incremental capacity that has come up. So we are filing from that facility?

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [100]

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Sorry, can you please repeat that question about the incremental...

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Vishal Manchanda, Nirmal Bang Securities Pvt. Ltd., Research Division - Research Analyst [101]

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You have a new facility that you implemented in the Roorkee and yet (inaudible). So we are filing from that facility for the U.S. market?

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [102]

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Yes. Yes. So we have done many of the filings from that market into many of the countries into rest of the world. So all those filings and all those business plans are in place. So far, on rest of the world, the non-U.S. market, we were kind of muted because of the capacity issue. Now with this capacity being available, we have quite a lot of good opportunities to grow the market in all those countries. But there are many other parts.

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Vishal Manchanda, Nirmal Bang Securities Pvt. Ltd., Research Division - Research Analyst [103]

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But -- so there no...

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Operator [104]

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Vishal, I'm sorry to interrupt. May we request you to come back in queue for follow-up questions?

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Vishal Manchanda, Nirmal Bang Securities Pvt. Ltd., Research Division - Research Analyst [105]

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Yes.

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Operator [106]

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The next question is from the line of Srihari C. from PCS Securities.

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Srihari Chintalapudy, PCS Securities Ltd., Research Division - Equity Fundamental Analyst [107]

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First, can you please give me the cost of foreign or local currency and foreign currency for the previous fiscal? And secondly, you've taken a price hike in Vitamin B3. What's the development for the entire quarter?

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Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [108]

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Yes. So last quarter, it has gradually increased, the price.

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Srihari Chintalapudy, PCS Securities Ltd., Research Division - Equity Fundamental Analyst [109]

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So I mean how do you measure it? I mean it could have been available for what kind of period?

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Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [110]

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Yes. So it is right now continuing the same pricing. A little improvement we can expect in the coming months. But it is at the same or better level as of now.

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Srihari Chintalapudy, PCS Securities Ltd., Research Division - Equity Fundamental Analyst [111]

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And is it possible to quantify how much of these are again on that front?

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Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [112]

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We can only wish for that, but we don't market -- we don't expect. But yes, we see that the market dynamic defines that. It should sustain. And that's what we have developed on pricing.

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Srihari Chintalapudy, PCS Securities Ltd., Research Division - Equity Fundamental Analyst [113]

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Yes. Because of better pricing, what has been the gain? That's what I wanted to know.

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Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [114]

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Oh, because of pricing, we are almost -- we are -- about 20% to 25% gain is because of pricing.

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Srihari Chintalapudy, PCS Securities Ltd., Research Division - Equity Fundamental Analyst [115]

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Okay. And the second one was pertaining to the cost of debt.

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Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [116]

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Cost of debt this year average of 6.11% the rupee being 8.63% (sic) [8.38%] and the dollar being 5.33%.

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Srihari Chintalapudy, PCS Securities Ltd., Research Division - Equity Fundamental Analyst [117]

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Okay. And what's the corresponding figure for FY '19?

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Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [118]

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Last year, it was about -- if I remember right, it was 3 point -- 6.5%, 6.6%. The average debt has come down, yes, because the cost of debt has declined, yes.

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Srihari Chintalapudy, PCS Securities Ltd., Research Division - Equity Fundamental Analyst [119]

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Then, I mean, why is the finance cost still higher in that case?

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Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [120]

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Now INR 2 crore is on account of restatement of rental to the interest. And second is, we raised $200 million bond. Out of that, we have utilized roughly around $135 million to pay IFC. The balance, $65 million, is lying in cash. So that cash, if you see the total, cash number as of today in the balance sheet is INR 1,310 crores. That INR 1,310 crores use a lower return compared to our borrowing rate. That gives us a return of almost like less than 3% whereas our borrowing rate is almost like 5.6 -- 5.33%. So that differential of $180 million is getting a lower interest rate. That is why the overall interest rate has not -- interest amount has not come down.

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Srihari Chintalapudy, PCS Securities Ltd., Research Division - Equity Fundamental Analyst [121]

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Okay. And finally, during the -- just check the PAT figure. What could that be?

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Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [122]

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Adjusted?

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Srihari Chintalapudy, PCS Securities Ltd., Research Division - Equity Fundamental Analyst [123]

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PAT figure. Net PAT figure.

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Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [124]

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Since we can provide to you the PAT, certainly we can give it later.

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Operator [125]

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(Operator Instructions) The next question is from the line of Saion Mukherjee from Nomura.

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Saion Mukherjee, Nomura Securities Co. Ltd., Research Division - Head of India Equity Research [126]

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Just one query on CapEx. The mindset on the full year guidance, in the INR 169 crore that you have in this quarter, it includes the capitalized portion of R&D?

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Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [127]

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Yes. INR 169 crore includes everything.

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Saion Mukherjee, Nomura Securities Co. Ltd., Research Division - Head of India Equity Research [128]

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Okay. Okay. And what will be your guidance, sir, for this fiscal year?

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Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [129]

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We have given INR 500 crore-plus around INR 200 crore, INR 250 crore for product development.

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Saion Mukherjee, Nomura Securities Co. Ltd., Research Division - Head of India Equity Research [130]

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Okay. Then the acetic anhydride plant, it is kind of delayed. Any specific reason for that?

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Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [131]

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Sorry?

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Saion Mukherjee, Nomura Securities Co. Ltd., Research Division - Head of India Equity Research [132]

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The acetic anhydride plant, sir, is -- I think got delayed again. So any specific reason for that?

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Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [133]

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Yes. There was a delay for a month because we have to take clearance from pollution control board also. That's the process. So now it is in Gujarat, you'll see there are delays in terms of approval. So we were ready. But that's done now. So we are -- this quarter, we are already through in commissioning. So this quarter, we'll finish it.

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Saion Mukherjee, Nomura Securities Co. Ltd., Research Division - Head of India Equity Research [134]

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Okay. That's helpful. And sir, last question from my side. Sir, any commentary on the U.S. generic landscape in terms of pricing that you're seeing there for your portfolio and volume? And so again, also on the volume side?

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [135]

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So the good thing is that the few of the products where we have the leadership position in the U.S. market, either the sole supplier or 1 out of 2, 1 out of 3. In all those products so far we don't see any change. So we continue to command a higher market share and the better margins.

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Operator [136]

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

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Surajit Pal, Prabhudas Lilladher Pvt Ltd., Research Division - Assistant VP & Senior Research Analyst [137]

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My first question is that regarding your penalty. How much of that penalty belongs to a failure to meet the supplier's commitment?

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [138]

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Yes. So all these penalties are on account of the failure meet the supplier commitment. Those are the penalties. So that is under question.

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Surajit Pal, Prabhudas Lilladher Pvt Ltd., Research Division - Assistant VP & Senior Research Analyst [139]

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Okay. So that mean -- yes. So that means that this kind of penalty, until time you resume your normal production schedule, will continue every quarter?

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [140]

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It will vary quarter-to-quarter depending upon how much is the production for which product and what was the supplier commitment. But yes, still all these regulatory issues are not resolved, some penalties will continue.

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Surajit Pal, Prabhudas Lilladher Pvt Ltd., Research Division - Assistant VP & Senior Research Analyst [141]

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Second question is regarding Ruby-Fill. Now see, last time you said is that your Ruby-Fill -- your CapEx just at the Ruby-Fill, the patented one, had a contract which expired with many guys on December -- in December 2018. Now after that, the management of Jubilant was expecting is that the pace of acceptance of Ruby-Fill will increase and they will make good inroads. So it is almost 6 months over. So how much incremental revenue you have, let's say, in the last 6 months post the expiry of competitors' [segment] (inaudible)?

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [142]

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So I mentioned earlier on the call that in this quarter, our Ruby-Fill revenue was almost 3x of the last year same quarter. So what we said earlier, that is definitely getting materialized. But again, we'll be -- this number...

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Surajit Pal, Prabhudas Lilladher Pvt Ltd., Research Division - Assistant VP & Senior Research Analyst [143]

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And what will be -- and what would be -- is that -- but that means -- and how much it will be?

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [144]

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Now I do not have right now the numbers for the 6 months, but it should be more or less in the same range.

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Surajit Pal, Prabhudas Lilladher Pvt Ltd., Research Division - Assistant VP & Senior Research Analyst [145]

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Okay. And how much your total expenditures you have made since you launched the product, I mean, Ruby-Fill? And when do you think that you will be able to achieve breakeven?

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [146]

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So total expense on the Ruby-Fill is into the double-digit million dollars because we took a...

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Surajit Pal, Prabhudas Lilladher Pvt Ltd., Research Division - Assistant VP & Senior Research Analyst [147]

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$26 million, you say?

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [148]

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No. No, I said double-digit million dollars. And because we took a -- well, the development of this product was really very tricky and it took a long time. And in terms of the breakeven, we are hopeful that next year we should achieve the breakeven.

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Operator [149]

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Next question is from the line of Ranvir Singh from IDBI Capital.

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T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [150]

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Sir, on Vitamin B business again, I saw that price increase we have taken for a portion of business. Well, what portion of business is actually a noncontract?

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Rajesh Kumar Srivastava, Jubilant Life Sciences Limited - Whole-Time Director & CEO of Life Science Ingredients [151]

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No. So price increase in Vitamin B3 is across. It is not that in one particular order or in one particular agreement. This is the price increase in the market.

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T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [152]

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Okay. There was some mention of noncontract portion where the increase has been taken. That I wanted to understand.

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Rajesh Kumar Srivastava, Jubilant Life Sciences Limited - Whole-Time Director & CEO of Life Science Ingredients [153]

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Yes. So we don't have any long-term contract in Vitamin B3 business. We normally have quarterly contract and at cost. You know that it -- the price announcement was made only for regulatory reasons. Once -- but we have only 3-months contracts, 1-quarter contracts. Yes. But we mentioned as well normal (inaudible)...

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Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [154]

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It's a separate language.

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Rajesh Kumar Srivastava, Jubilant Life Sciences Limited - Whole-Time Director & CEO of Life Science Ingredients [155]

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It is not that we don't have any long-term contract.

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Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [156]

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Every quarter, we can revise the prices.

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T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [157]

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Okay. Okay. And when we see that we have seen increase in volume, we are talking about Q-on-Q increase in volume or Y-on-Y?

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Rajesh Kumar Srivastava, Jubilant Life Sciences Limited - Whole-Time Director & CEO of Life Science Ingredients [158]

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It was Y-on-Y as well on Q-on-Q.

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T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [159]

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Okay. Okay, fine. And on our CapEx at INR 500 crore, where we are going to expense this?

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Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [160]

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It was like 50-50 in Pharma and LSI, almost like INR 220 crores, INR 230 crores in LSI and almost similar number in Pharma also. As far as the product development is concerned, mainly it is going into Radiopharmaceuticals.

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T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [161]

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So product development, is addition of INR 500 crore, right? So roughly INR 200 crore, INR 250 crore?

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Rajagopal Sankaraiah, Jubilant Life Sciences Limited - CFO & Executive Director of Finance [162]

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Yes. Yes.

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T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [163]

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Yes. Now -- so in Pharma segment, where that -- in case -- the INR 250 crores, where that INR 250 crore is going to? Because most of capacity expansions we have already now finished with. Or something is spending less?

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Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [164]

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Pramod?

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [165]

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No. So the investment is happening at all the places. They're the continuous -- the investment is happening on the CMO side or the installation, commissioning of the Lyo. We are doing investment on the Allergy side. There also some investments happening on Radiopharma side for increase of the Ruby-Fill capacity. In the API and the Generic business, there are other investments happening to ensure that all the compliance there remains in place. So some investments on that front.

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T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [166]

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And in R&D INR 200 crore. How much would be in Radiopharma?

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [167]

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So -- and Mr. Sankaraiah mentioned majority of that is onto Radiopharma side.

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T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [168]

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This is towards developing that 505(b)(2) product?

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [169]

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Yes. So I mentioned we are having a pipeline of 7 products which we plan to launch over the next few years. Investment is going on that.

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T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [170]

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Okay. Because that R&D has been sizable, so I wanted to understand the whole the R&D setup there. So is it on regular yearly receipt of about INR 200 crore-plus kind of R&D expenses? And I believe earlier we had some product development in Generics also. So in R&D side, 5 or 6 products that we have been witnessing the -- in pipeline in Radiopharmaceuticals. We have not added more product there. So in this regular scientist expenses? Or are there some clinical clients are also involved there?

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [171]

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So in Radiopharma, each product development takes almost 3 to 5 years, and our -- all these projects which are going on. This year, the investment is at its peak. So it has really shot up because all those products are coming near to doing more of metal validations and widget battery, et cetera. And next year, 1 and 2, the investments will taper down on Radiopharmacy.

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Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [172]

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Yes. You're right, also part of the expenditure is going towards the clinical -- or for our MIBG orphan product.

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [173]

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Yes.

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T. Ranvir Singh, IDBI Capital Markets & Securities Ltd., Research Division - Pharma Analyst [174]

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Okay. So clinical expense will -- eventually will increase expense but other expenses will taper down. That's what...

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Pramod Yadav, Jubilant Pharma Limited - CEO & Director [175]

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Yes.

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Operator [176]

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That was the last question. I now hand the conference over to the management for their closing comments.

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Shyam Sunder Bhartia, Jubilant Energy Limited - Chairman [177]

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Thank you so much, everybody, for joining on the call. And if you have any further question, we'll happy to get in touch with our Investor Relations, Agrawal, and also Mr. Sankaraiah, and we'll be happy to clarify any questions that you have. Thank you so much.

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Operator [178]

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