Ladies and gentlemen, good day and welcome to Aarti Drugs Limited Q3 FY 2023 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Adhish Patil, CFO at Aarti Drugs Limited. Thank you, and over to you, sir. Thank you very much. Good evening, everyone. Wishing everyone a happy new year. On behalf of Aarti Drugs Limited, I extend a warm welcome to everyone joining us today to discuss our financial results for the quarter ending December 31, 2022. On this call, we are joined by Mr. Harshit Savla, Joint Managing Director, Mr. Harit Shah, whole-time Director of Aarti Drugs Limited, and Mr. Vishwa Savla, Managing Director, Pinnacle Life Science Private Limited, and SGA, our investor relations advisor. I hope everyone had an opportunity to go through the financial results, press release, and investor presentation, which we have uploaded on the stock exchange and on our company's website. In the quarter gone by, the pace of construction activity for the Gujarat CapEx was ramped up. The construction is expected to get over within scheduled timeline. Tarapur Greenfield CapEx, the construction is expected to get over by the end of Q1 FY 2024, which will be mainly used for dermatology-related APIs. The company is planning to launch products which would be import substitute to this facility. Once the construction is ready, the company is well prepared to take up scaleup batches immediately. As far as Tarapur brownfield specialty chemicals CapEx is concerned, the company had taken scale-up batches during H1 FY 2023. The equipment required to fully scale up this plant are expected to arrive by April 2023. The total CapEx during nine-month FY 2023 stood at INR 115 crores and is expected to be in the range of INR 200-250 crores for the entire FY 2023. Coming to our performance during the quarter, the company achieved API top line growth of 9% during the quarter. However, multiple factors weigh on the margin expansion. Firstly, the API prices corrected for the overall industry, which was mainly on the account of fall in raw material prices. As communicated in the earlier earnings call, the company undertook some price cuts to maintain the market share. Though at the monthly order level we are able to maintain the desired gross margins, the opening stock for the December quarter was at higher rates. To give you some more perspective, if we keep December quarter as a base, the equivalent raw material purchases would have cost INR 33 crore higher in the September quarter and INR 45 crore higher more in the June quarter compared to the December quarter, purely based on rate variance. All this high-cost opening raw material and finished good inventory is used in the December quarter's sale. Owing to API price correction, the company has taken inventory loss of approximately INR 6 crores owing to the factors just explained above. Ideally, we would have brought down raw material inventory days, the company had to keep higher raw material inventory due to an uncertain scenario of sudden spike in COVID-19 cases in December and new year-related holidays in January 2023 in China. The low-cost raw material inventory will be utilized from Q4 FY 2023 onwards, which is expected to improve the gross margins going forward, provided prices don't fall further down. As far as the demand is concerned, the company is expecting volume offtake going forward, which has remained under pressure due to higher API prices and unavailability of the US dollar in lot of export markets, especially the emerging ones. With respect to our performance across our segments, first, API segment, the largest segment of the company in terms of revenue contribution, grew 9% year-on-year. The growth was mainly driven due to increased share of chronic as well as acute therapies. While selling price remained under pressure due to the reason mentioned earlier, we are witnessing improvement in the volume offtake from January 2023 onwards. Revenue from the formulation segment stood at INR 49.9 crores for the quarter. The formulation segment's share of the total revenue for the quarter was 8%. The formulation segment's core focus area continued to remain exports. During the quarter, exports contributed 39% of the total formulation revenue. Third, revenue growth in specialty intermediates and others for nine months FY 2023 stood at 15% year-on-year basis. For specialty chemicals, the company has recently received commitments from the customers for the brownfield expansion products as well as for a campaign-based product. The company is gearing up the capacities to meet this demand and should be able to start delivering the increased demand in next three to six months. With this committed line of orders, the company can easily double the specialty chemicals revenue in next 12 months. Please note that this revenue growth will come only from the existing brownfield facilities, and the greenfield CapEx for specialty chemicals will drive further growth in the upcoming years. Coming to overall standalone performance for the quarter. Standalone revenue for Q3 FY 2023 stood at INR 614.4 crores as against INR 579.9 crores with a year-on-year growth of 6%. The standalone business contributed tentatively 92% to the consolidated revenue for the quarter. According, around 68% of the revenues came from domestic market and 39% from the export market for Q3 FY 2023 for our standalone business. Domestic revenue grew approximately by 8%, while exports grew only by 2% year-on-year for Q3 FY 2023. Within the API business, the antibiotic therapeutic category contributed approximately 45%, antidiabetic approximately 16%, antiprotozoal around 16%, anti-inflammatory around 12%, antifungal around 8%, and the rest contributed approximately 3% to the total API sales of Q3 FY 2023. The company has successfully steered through multiple challenges in the past 12 months in terms of supply chain disruptions, elevated raw material prices, correction in API prices, geopolitical uncertainties, to name a few. We are confident that the worst is behind us. We are witnessing a pickup in chronic as well as acute therapies. The demand is steadily picking up. Volume offtake is expected to return to the growth trajectory within next two to three months. As far as the company's financial management is concerned, the company remains frugal. Leverage stands comfortably at 0.53x as of December 31st, 2022. The company will optimally utilize the mix of debt as well as the internal accruals to fund the ongoing CapEx. The company will also strive to maintain payout to the shareholders while continuing to invest for the next leg of growth. With new facility for dermatology coming up in FY 2024, along with operationalization of the expanded brownfield expansion of specialty chemicals facility at Tarapur, company expects growth in revenue as well as profitability in upcoming year. We can now begin question and answer session. Thank you. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Reminder to the participants, anyone who wishes to ask a question may press star and one. Participants, to ask a question you may press star and one. The first question is from the line of Chirag Dagli from DSP BlackRock. Please go ahead. Yeah, sir. Thank you for the opportunity. Sir, this specialty chemical piece, you talked about doubling of revenue even without the greenfield facility. This is currently about 8%-9% of revenue for us. Two questions there. First is that where are you seeing this number 8%-9% of sales go over the next two to three years, including both greenfield and brownfield expansions that you have? How different is the profitability of this business versus the rest of the business? Hi. Yes. Okay, one thing I would like to correct, right now, the SpecChem and intermediates we are clubbing together. The SpecChem will be around 4%-5%, and that we are expecting to double right now. Gotcha. With the brownfield expansion only. The one of the recent brownfield expansion, what we had done for chlorosulfonation product, that, you know, right now we are just operating at 10%. We are waiting for one equipment, which will arrive in April. After that, you know, immediately we can scale up the production. Okay. Plus we are also expanding one of the contract manufacturing product in this segment, based on the customer's requirement and commitment. Based on that, we can easily double our SpecChem segment. As far as the further greenfield expansion is concerned, we are hoping, you know, going forward, we can take this SpecChem and intermediates to around 20%-25% of the standalone revenue. Understood. In after two, three years. three years. This includes both, specialty chemicals and intermediates. Correct. Correct. Yes. Understood. roughly double the contribution, effectively. Yeah. The margin profile of these products is also slightly higher than our conventional API products. Margins are higher. Understood, sir. Okay. The second question I had, sir, was on the API business. You talked about prices being under pressure. We've still grown 9% YOY. On a net basis, have volumes grown double digit and prices have come down a few percentage points, is how we should think about this? No. See, as of now, on a sequential basis, the prices have definitely come down. On year-on-year basis, still for the December quarter, there was a bit of price growth, rate variance, positive rate variance. This time in the December quarter, the volume was quite flattish actually. Sorry, for the domestic market, there was some flattish marginal volume growth of 2%-3%. For the export, in fact there was slight degrowth in the volume as far as volumes are concerned for the December quarter. The first half year, the volume growth was excellent for the export. For the December quarter, we could see that there was slight lack of demand due to lack of government tenders in the export geography. That has also to do something with the shortage of dollars, US dollars, in those emerging countries. Understood, sir. Sir, any thoughts on margins, where we are? You know, today we are at significantly lower than history, in terms of margins. Correct. How should we think about margins going forward for the API business? Yes. The margins will definitely improve because we base this comment on the information that our current monthly orders which we are taking, they are at significantly higher gross margins. Significantly means, as compared to the financials. They are where we typically want. They are there at the desired gross margin level. It is not reflected in the financials because of this sharp decline in the raw material prices. We started this December quarter with very high inventory, around 100 days. All this inventory was at a very high rate. As I was saying that if we purchase December inventory with the September rates, then it will cost us INR 33 crores higher. If we compare it with respect to June rates, it will cost INR 45 crore higher. My point being, the prices have come down significantly, and the selling prices, with say one-month lag, they follow the raw material prices, but our inventory was more than almost 100 days. That had, you know, really put a squeeze on the gross margin. In fact, we have also taken INR 6 crore of inventory loss for the December end for some of the finished goods where we saw that, you know, the earlier purchases, the cost price was slightly higher than the selling price. We have already taken that loss, which was contributing to around 1% in gross contribution. In addition to that, this FIFO method has also squeezed margins quite a lot. We definitely feel that once the pricing stabilizes of the raw materials, then we can see some healthy margin expansion in our gross contribution. Q4 should be better than Q3 in terms of margins. Of course. That exit, is what should, you know, probably, Will you improve on that exit margin for the full year of next year, sir, FY 2024? Yes. Q4 means definitely ideally should have been better. Only one concern is there that in Q4 also our inventory was high. The reason being in the month of December, there was a lot of uncertainty related to the COVID-19 outbreak, you know, another wave and lockdowns. Because of that, those reasons, we have kept the raw material inventory high, you know, so that we should not face any production losses. That is the only worry that we will be carrying some bit of inventory into this March quarter. Then the thing is this, still this inventory will be significantly lower than the opening rates of the December quarter. As I said, that almost INR 33 crore, difference is there of what we purchased in December versus had we purchased the same with the September rates. Understood. Okay, sir. Thank you so much. Thank you. Thank you. Reminder to the participants, anyone who wishes to ask a question may press star and one. The next question is from the line of Pujan Shah from Congruence Advisers. Please go ahead. Hi, sir. Am I audible? Yes. Yeah. First question would be, can you just give a split for nine months, geographical split for our company? Okay. I don't have it right now, but then, tentatively I can tell you. Yeah, yeah. Based on last year, means, our Asia will be somewhere in, 15. We'll get back to you, though, with this, correct numbers. Oh, okay. Somewhere in 15. Latin America would be somewhere in early 20s. Europe will be late teens or something like that. Africa might be another 10% or something like that. I think, I think we might have published this number in the investor presentation. Yeah, yeah, sir, it is for FY 2022. I just want the nine-month FY 2023 share. Okay. Okay. Okay. Okay. We'll do one thing. We will update that slide and put it again. Okay. Okay, sir. Sir, one of the question would be, as we are exporting in the, like, semi-regulated like Turkey and some of the countries like Mexico, How we are handling the currency crisis that they have been facing to? Yes, we are net exporter to the country, so I understand that. How. Like, what are the steps we have taken for that part, and how you are looking for that countries to evolve in next two to three years for our company? Yes. That is a very relevant question because that is the reason why, you know, we have been facing some trouble as far as the export demand is concerned for in the latest quarter. Not before that, but in the latest quarter. However, one point to note is that we do most of our export contracts in mostly in US dollar and a little bit in euros. That way we are, you know, insulated from the currency variation of the individual countries. That particular forex risk is actually on the client side. Definitely if they don't manage it well, then they will go in financial trouble and that might cause some delays, you know, in payments or something like that. My add-on question would be that only that if they have been getting into financial trouble, are we getting any difficulty on the recovery side for that? Like, are we getting any delay for the debtor side? Yeah. As of now, means December quarter, our numbers looked okay. Means, it was very much in line with the previous averages as far as credit days are concerned for export market. Moreover, we are slightly insulated because of this insurance also, which we have taken, ECGC insurance we have for the exports. That gives a bit of more comfort for receivables. Okay. My broad ask would be on the, let's say we have sales of, currently our API sales is 84% and our revenue has been muted. What I can read is the, we have grown in the volumes, but due to price erosion, we can't get that value for the specific API. The second question, the add-on would be that on the formulation as we are into greenfield and brownfield, we are yet to expand much on that part. Are we, say that in the next 12 months or let's say two years down the line, we are very, not very low, but the dominance for API will start decreasing and the other will be start increasing and what are the broader margins we would recollect for it? In the last quarter, we can see that we are having the gross margin of 34%, right? 34%. Last year, December, we have a 34% gross margin. What are the visions we have been taking to for this specific call that due to this API being somewhat commoditized, how we have been aiming to get into the two, three years of vision for our company? As far as margins are concerned, this 34% gross margin, we believe we can achieve in APIs as well as soon as your rate scenario, the input price rate scenario stabilizes. You're right that API, our Spec Chem and formulation segment will grow at a little higher pace than the API segment. One of the reason will also be because of API is of higher base, you know. It's almost, as I said, in 18, in 80s, it is contributing to the revenues. Percentage growth for SpecChem and formulation will be slightly higher. In formulation also, we are targeting higher margins through more and more exports. SpecChem obviously have slightly higher margin as it is with compared to APIs. The API margins should also grow because once this input rate scenario stabilizes. What we are seeing, if we compare, you know, the monthly sales order contracts and the monthly purchase order contracts, what we are doing every month, we can clearly see there is, you know, there is at least 3%-4% improvement in the gross margins. The problem is, in raw material, what happens is, you know, it takes around, say, 15 days to 30 days for the material to reach the factory, and then we have around 100 days of inventory, you know. There is that certain lag. In the changing input prices scenario, we face squeeze in the gross margin. If it stabilizes, then definitely it will improve, you know, is what we feel. Okay, sir. Do we see this API price erosion have been bottoming out or are there is still place to left for the erosion due to the market structure and the market was being like before the COVID that was spike, due to COVID the spike was being such a high. So are we see still a space to have some price erosion and then it start bottoming out or? The second question would be, as we have said that we have decreased the inventory days. you are like, we are also keeping the inventory due to the COVID related issue, like if there will be a sudden spike in China or something like that. The question is, are we the working capital then it would be very like stringent because like as we are paying for the inventory and we are also keeping the inventory. How you are managing that specific thing for so, yeah? That's the two question. As far as the. Y ou're right about the inventory. The problem with not keeping inventory was uncertainty. If we face production losses then we might lose market share. Market might get stuck for that particular product and we might lose clients to competition. We took a conscious call that we don't want that. Temporary declining margins is okay, but then the production should be at full scale so that we don't lose any market share. The, you know, the natural downside of that was squeezing the gross margin. Definitely in a stable scenario we can easily improve. We feel that we can easily bring down total inventory days by around, you know, 20, at least 20 days, bare minimum. It's quite easy. That will also put, means, you know, reduce pressure on the working capital requirement. Means, right now our working capital debt would be around INR 360 crores and the long term would be around INR 240 crores. Definitely the working capital debt will also go down if we bring down the inventory. Does that answer your question? Thank you, Mr. Shah. May we request that you return to the question queue for follow-up questions. We'll take the next question from the line of Ankit Gupta from Bamboo Capital. Please go ahead. Yeah. Thanks for the opportunity. Can you talk about how is the situation for the inventory destocking? Mr. Gupta, please use the handset mode. The audio is not clear from your line. Yeah. Thanks for the opportunity. Can you please talk about how is the situation for inventory destocking across most of the geographies that we are seeing in API companies, not just in our company but as well as other API companies across the globe? When do you expect this situation to bottom out? Are you asking like when the API prices will stop going further down? No, no. I'm asking about, you know, across companies, across various companies we've been hearing that, you know, there had been some surplus inventory built up during 2021 and 2022 which has actually, you know, impacted the demand during the past few quarters. How is the situation currently and when do you expect the situation to bottom out or and improve from there on? Okay. I will request Harit bhai to answer this question. Actually, the raw material prices, as far as raw material prices are concerned, they are almost at pre-COVID level or lower than that. As far as demand is concerned, we expect demand to pick up in next two or three months, February, March onwards, we expect demand to further move up. All inventory which was in pipeline has come down to very realistic level now. We expect the demand to go up by March, April onwards. Sure. How are the API prices compared to the pre-COVID levels? Like as you were saying, the raw material prices have come down to pre-COVID levels, how are the final API prices? It follows. Like we are also almost coming down to pre-COVID level for API, most of the APIs. It case to case is different, but more or less we are at pre-COVID levels. Sure. Sure. On the CapEx of INR 600 crore that we are implementing over the next three or four, five years, can you talk about, you know, for we have given product-wise CapEx. So when each of these CapEx is expected to be completed and, you know, how do you see the growth panning out for us during FY 2024 and 2025 post completion of this phase-wise CapEx? Okay. As I was saying that, one brownfield expansion, which will be meaningfully scaled up, in the first, coming first quarter, that is June FY 2023, 2024. In the same quarter at towards the end of that quarter, we are expecting our another greenfield facility at Tarapur to be operationalized. We will start taking the scale-up batches. The pilot batches of the same, means the scaled up pilot batches at another location are being taken, right now as we speak. As far as the SpecChem greenfield project is concerned, which is coming up in Gujarat, that we expect by the end of first half, that is towards the end of September, that particular facility will be operationalized. It might take around, you know, a month or two troubleshooting problems like scaling up and on. So those are the tentative timelines as of now. Okay. How much revenue will this, both, you know, brownfield and greenfield API CapEx, plus, you know, the specialty chemical CapEx, you know, what can be the asset and the revenue that we can generate from them? The revenues after completion of this, both these projects, plus we have also planned an expansion of antidiabetic facility. Mm-hmm. When all this put together, you know, our revenue potential can go till around INR 4,500 crore or something like that, all put together, brownfield and greenfield all put together. All this will be completed by end of FY 2024, in worst case? Yes, yes. Okay, okay. Will also, you know, given the kind of slowdown that we are seeing across our existing product portfolio, we'll still also have some room for, you know, increasing capacity utilization at existing plants as well. This will also be. That will also contribute to higher revenue of INR 4,500 crore includes everything, like new CapEx and everything. Correct. Correct. Correct. Correct. Correct. Just, you know, on the specialty chemical side, we have seen that a lot of, you know, companies which are into intermediate specialty chemicals, and especially the one focusing on, you know, China substitute products, we have seen a lot of dumping happening from China in the past, two, three quarters, especially with the demand slowing down, slowing down in their domestic economy because of COVID. That has impacted the prices of the finished good products to such a level that, you know, the cost of production for many of the companies has increased considerably comparable to their finished goods products. Are we seeing the same thing in our specialty chemicals, or how is the scenario because of, you know, China dumping a lot of products in India? Over last one decade, I would say from 2011 till 2020, that decade, it was very much evident, you know. Means many of the SpecChem industry and pollution norms basically has become very strict in China, which earlier was little relaxed. Because of that, even the labor laws were become little more strict. Their operating cost went up because of all these factors. Mm-hmm. Because they started coming, you know, they started complying to adhering to these strict norms. That gave us a lot of opportunity to come into this SpecChem space, intermediate space, and also the API space. Obviously government, our Indian government is promoting through various schemes wherever possible. Definitely, if not directly, at least indirectly it will help the industry. We feel that, you know, China plus one strategy is also playing in some of the cases because more and more export markets, they do want to have an alternate supplier from India. Earlier when they were procuring only from China, at least, you know, 20%, 30% they will start moving to another geography. In this particular space, other than China, India is another country which is very strong as far as manufacturing capabilities are concerned. What we have seen, sorry to interrupt you, but what we have seen is when the prices of the Chinese manufacturer go down below the Indian manufacturer, people still, you know, ship back to the Chinese place because the prices are lower. Do we see that across our products as well? The products in which we are there, because the fact that our capacities are as big as Chinese, if not bigger than them in many of the cases in the top 15 products which we manufacture, that is the reason why we are able to, you know, market our products at par with China. In fact, there are three, four products which we are already exporting and we are adding also couple of products to China for the Chinese market. We are selling our product which is manufactured in India to China. What we have seen that Chinese government protect their industry quite a lot by putting a lot of registrations into place. Means it is not like easy from regulatory standpoint to export our product to China. It is not just about quality and price. It has also to do with the regulatory aspect if you want to export to China. Other way around it is very easy for a Chinese manufacturer to export into India. Another good indicator is that in last six, seven years, Southeast Asian market, which was predominantly occupied by Chinese manufacturers, they had a strong hold in that market, but we were able to penetrate and that is the reason why our Asian market share has gone up significantly higher over last seven, eight years. As far as cost is concerned, we are able to compete with China. It is more to do with other macro factors and other regulatory environment. Sure. My question was more to do with the specialty chemical side. You know, APIs we have a strong hold. We are top five, top three player in many of our molecules. You know, specialty chemical will be some of the products in those will be a new entry for us. How will be the situation there specifically? The products, the products, if we take our two, three specialty chemicals, those products also, that particular business which we are getting more and more market share from a particular contract manufacturer. Earlier they were procuring from China, that particular product, and recently we got 30% bump in that particular contract as well. We are getting market share from China, even in SpecChem products. In some of the cases, in fact, there are even Chinese counterparts who are, you know, talking with us to manufacture certain product over here, and they will then focus further on the, further, you know, higher end of the value chain. Sure. There is collaboration right now. Sure. Last question on the margin side, you know, Rajesh, when you ramp up to let's say 80%-90% of the capacity, including the incremental CapEx that we are doing, and it's, let's say around, you know, INR 3,800- 4,000 crore kind of revenue, what can be the steady-state margin that we can expect from the company? Okay. The current business, I'm not talking of the increased expansion. The current business, once we achieve higher utilization, that can take us around, say 16, 15, 16% EBITDA margin. Sure. Because of the higher exposure to SpecChem and export formulation, slightly we can, you know, at least try. Our target should be, you know, to reach towards 18%. Okay. Okay. At least you know in a normal case, 16%-18% is what we can aspire to achieve or in fact 18% is what you're saying. Yeah. After all the expansions are completed. Sure. Sure. Sure. Thank you so much, and wish you all the best. Thank you. Thank you. Participants, to ask a question you may press star and one. The next question is from the line of Prerit Choudhary from Green Portfolio. Please go ahead. Yeah. good evening. I had a question relating to the previous call. In the previous call, the company mentioned that there had been some delay in delivery of some high margin, high value products. Prerit Choudhary, please use the handset mode, sir. There is some disturbance coming from your line. Okay. Am I audible now? Hello. Quickly. Yes, sir. Hello. Yeah. In the previous call, the company mentioned that there had been some delay in orders for high value, high margin products which have affected the margin. Are there any changes in the current quarter? Are those products delivered? Hello? Yeah. Frankly speaking, I don't recollect to which particular products you are referring to, I mean, as of now. The thing is, those products will be delivered. If it was a API or a SpecChem kind of product, typically, you know. Yes Orders don't get delayed this much. Means, if not in that particular month, by next month they are delivered. Yeah. I imagine the, these products will be delivered, but the main reason for the squeeze in the margin for this quarter was because of the, means, inventory which I was explaining earlier. Okay. All right. Okay. Thank you. Those products, you don't know which all those products were? I mean, if you can some data, what were the order sizes? I will pull up that data, then I will come to know. Fine. Thank you. That's it from my side. Okay. Thank you. Thank you. Participants, to ask a question you may press star one. The next question is from the line of Bhagwan Choudhary from Sunidhi Securities and Finance. Please go ahead. Thanks for the opportunity, sir. Just, a few clarifications, from your starting comments. You said that we lost INR 30 crore kind of the revenue because of the pricing. Is that right? No. Actually, what I was trying to tell. Mm-hmm That the opening inventory as of 1st October, you know. Typically all those purchases were done in the month of September. If we take around, say 90 to 100 days of inventory cycle. Whatever was purchased in that particular quarter, September quarter, would have been sitting in the, by the end of that quarter. Now, if we use the September quarter rates and check the rate variance with respect to the December quarter rate, then we saw that there is INR 33 crores of means negative rate variance. Means the raw material purchases have actually come down by INR 33 crores for a quarter, purely because of the rate variance. When we. We were carrying the stock, that much expensive stock to start the quarter of December, you know. All that particular stock which we purchased in December must be sitting at the, means, you know, 31st December stock that way. Okay. The other way you said that we have the INR 6 crore loss of inventory. Correct. Because of the. That is another thing. That is in addition to this factor, there was INR 6 crore of inventory markdown what we have done for finished goods, wherein the prices have collapsed so much, you know. Because of this 100-day cycle, the cost price is actually higher than the selling price. So we have marked down the inventory to the selling prices. There we further suffered that INR 6 crore of inventory loss. On the other side, when you say the growth was 6% on a standard basis, I'm saying that again, there the volume was flat in domestic and negative in exports, and there was a growth on the pricing. That you are comparing on year-over-year basis. And the other two things, INR 33 crore and INR 6 crore, this was the quarter-over-quarter basis. Correct. The margin squeeze I was explaining, because that is related to what we purchased in the previous quarter, but then we had to sell the inventory at lower prices because the prices collapsed significantly. My next question. Now, if the pricing are the same and we are carrying some inventory of that earlier quarters as well, what would be the impact in this quarter of this entire scenario? This quarter, definitely should be better, provided, you know, right now, it, still, we can see, the January month, you know, January month itself, there was a price reduction. If we compare with the average, realization of the December quarter, there is still further price reduction. On final products. Of final products. Okay. If this price reduction stops here, and the final product is basically based on the raw material, because the raw material prices are also going down, and that is the reason why the final products are going down. At the order level, we are still making decent margins, but the problem is we are carrying this 100 days of inventory. If it stops here, then definitely March quarter will look much better than the December quarter. If month-on-month, if the raw material prices keeps going down, and so will the selling prices, then, you know, then again something like December quarter might repeat. It looks difficult for the prices to go down further from here. Got it, sir. What is the update on this US FDA inspection part? Yes. We furnished the final response in the month of September. In October, for the same plant, we got EDQM audit. In fact, we had a Canadian audit scheduled for the same plant in January end, but then we got information from Canadian authorities that because we have already been inspected by the EDQM authorities recently, so they won't be coming for the audit. This EDQM thing, the certification all should be out by 27th February. Once we get that in hand, with that, we will send a further reminder to the US FDA officials, you know, that after our last communication, another regulatory audit has taken place, and these are the results. We invite you to the plant. My understanding is we were already approved by EDQM in this. We were already approved. After that, means we were approved in 2015. 2017, we had a US FDA audit where, you know, which because of the previous points, the import alert was lifted. Now after that US audit, the Australian audit has taken place last year and EDQM audit, a fresh EDQM audit has taken place this October. We were supplying to Europe from the same facility. We were supplying. The problem, you know, in some of the cases, in some of the multinationals, who are procuring APIs in their formulation plant for both US as well as European markets, they refrain, you know, procuring from us because, their product is going to both the markets, and we are approved only for Europe and not for US That is challenging sometimes. In some cases we were supplying. You can say if we clear US FDA, then even the Europe market will open up fully for us from that facility. I was just trying to understand the significance of current EDQM. Is it going to add something to our kitty in terms of. It should. It should, because that will be the latest audit, no? That is why we feel that it will add to the view. Got it. Thank you. Okay. Thank you. Thank you. you. The next question is from the line of Zain from Dolat Capital. Please go ahead. Zain, your line is in talk mode. Please go ahead with your question. Hello. Yes, you're audible. Please go ahead. Hi. Hello, sir. I just want to know the one question, which is about for formulation. It is 9% decline YOY, so want to know the reason for that. Yes. Formulation, what has happened, we have won a tender in Latin American market and we manufactured in our local plant, local formulation plant for this tender, and we moved our product to our subsidiary in that country. Because it was internal sale, you know, the product has reached the export market, but from there now it will be sold in March quarter, in this quarter, to the final authorities in that country. That is the reason why we had to, you know, remove INR 10 crores of sale and INR 2 crores of profit because it was under consolidation, it got netted off. It will come in March quarter. There were some deferred sales. This time we did not sell more into domestic market for formulations, and that is the reason why, you know, the sales looks low. Even the profit is looking low because it got netted off in the consolidation, but it will come in the March quarter. Okay. Thank you. Okay. Thank you. Participants, to ask a question, you may press star and one. As there are no further questions from the participants, I now hand the conference over to Mr. Adhish Patil for closing comments. Thank you, and over to you, sir. Thank you everyone for joining us today on this earnings call. We appreciate your interest in Aarti Drugs Limited. If you have any further queries, please contact SGA, our investor relations advisor, or us directly. Thank you. Bye. Thank you. Thank you, everyone. Ladies and gentlemen, on behalf of Aarti Drugs Limited, that concludes this conference call. Thank you for joining us. You may now disconnect your lines.