Ladies and gentlemen, good day, and welcome to the Q4 and FY 2021 earnings call for Granules India Limited, hosted by InCred Capital. 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 hand the conference over to Ms. Rashmi Sancheti. Thank you, and over to you, ma'am. Thank you, Rashmi. Before we proceed with this call today, I would like to take this opportunity to remind everyone about the safe harbor related to this conference call. Today's discussion may be forward-looking in nature, based on management, current beliefs, and expectations. It must be viewed in conjunction with the risks that our business faces and cause future results, performance, and achievements. With this, I would like to hand over the call to Mr. Krishna Prasad, Chairman and Managing Director. Over to you, sir. Thank you, Richa. Good afternoon, ladies and gentlemen. Thank you very much for attending our Q4 earnings call. Unfortunately, our CFO, Sandip Neogi, is suffering from COVID and is not able to join us today. Instead, we have Krishna Raghunathan, our Vice President, Finance and Accounts, with us today. When we met last time for the Q3 earnings call, the COVID situation looked like it was improving, but unfortunately, it turned out to be worse than we can imagine, even in our wildest dreams. We as a country, and all of us at Granules, are facing a huge challenge, and I'm grateful to all our employees for braving this situation and managing to keep the operations going without any disruptions. I wish that you and all your families continue to stay safe. We faced a lot of challenges during Q4 with regards to shortages of certain raw materials, drastic increases in prices of some key raw materials, and general price increase across the board, including logistics. There was a huge global disruption in the supply of para-aminophenol, the key starting material for paracetamol, due to a major manufacturer in China shutting down temporarily. The situation is slowly improving as new capacities are coming up in India, and the Chinese company also will start operations shortly. This had resulted in us working only at 45% capacity. There was about 225% increase in the cost of PAP and 60% increase in the cost of acetic anhydride, another starting material for paracetamol. This was again the result of a global shortage of acetic acid. The resultant increase in cost of paracet- The conference is now being recorded. We were able to pass on only a part of this to our customers. This situation is expected to normalize in Q2 or Q3 of this fiscal. Despite this situation, which resulted in a decline in PAT sequentially, I am happy to state that we had achieved a 64% bottom line growth for FY 2021 as compared to FY 2020. This was possible due to increased sales of our other products, product mix, and new launches. We have very challenging times ahead of us, but are confident that we will be able to overcome these and keep growing. Construction of our MUPS formulation facility and API expansion at Vizag are on track, and the new capacities will take care of our revenue growth for a few more years. The planning for a greenfield formulation site is on, and we expect to break ground in the current fiscal year. The capacity expansion at GPI, our U.S. subsidiary, is completed, and production from this will start in this quarter. All of you have seen the financial posted on our website. Before we go into Q&A, Priyanka will take you through a few important numbers and events. Over to you, Priyanka. Thank you. Good evening, everybody. Moving on to the financials for Q4 FY 2021 and full year FY 2021. We are happy to announce a good set of numbers, despite the challenges posed by various business scenarios in the backdrop of COVID and logistics disruptions, resulting in shortage of raw material and lower utilization of capacities, especially in paracetamol. Revenue. The fourth quarter revenue stood at INR 799 crore compared to around INR 599 crore in Q4 of fiscal 2020. Our increased sales from the existing products and new launches had compensated for the loss of MEIS benefits. On a full year basis, sales increased by 24.6%, from INR 2,598 crore to INR 3,237 crore. Increased contributions from our existing products and sizable contributions from new launches catapulted this growth. There is a drop in revenue and profit from Q3 FY 2021 to Q4 FY 2021, mainly on account of reduction in paracetamol sales due to KSM shortages. This situation, like CMD said, is likely to improve from Q4 to Q3 of fiscal 2022. We are also in discussions with various partners in India to alleviate this shortage. We have a short-term and medium-term plan in place to address the PAP situation. The sales break up as per business verticals and regions are presented in our investor presentation, which is available on the website. For the quarter, the gross margins moved from 53.5% to 57.3% on better realizations across our existing molecules and increased stocks for our new launches and higher volumes over the previous year same quarter contributed to the increase in margins. On a full year basis, the gross margin moved from 50.7% to 57%, mainly on our higher PFI and finished dosage volumes, which have grown by around 50% over the previous year. EBITDA for the quarter stood at INR 202 crores when compared to INR 100 crores in Q4 FY 2020, an increase of 102%, mainly on account of higher sales and volumes over a lower base of the previous year, which were affected due to lockdowns and export ban of paracetamol. EBITDA for the full quarter improved from 20.2% to 26.4% in the current year, mainly on higher volumes at lower investment and new launches. Our operational efficiencies in combination with our added capacities have increased our finished dosages volume by nearly 50%, which translated into a higher EBITDA. In addition to this, our focus on product rationalization based on profitability enabled us to achieve this growth. PAT for this quarter stood at INR 127 crores, a 38.2% increase over that of the previous year same quarter, attributed to all regions as specified above. On a full year basis, our PAT increased by 63.8%, from INR 335 crores to INR 549 crores. ESG. Granules has always been on the forefront when it comes to taking care of the environment and the society around which we operate and with sustained governance. In a bid to enhance our ESG footprint further, we have hired a senior ESG professional under whose guidance various teams have been formed to enhance our focus on ESG and its various pillars. We will be able to give you regular updates on our sustained ESG over the next couple of quarters. Our R&D spend for the quarter stood at INR 36 crores compared to INR 21 crores in the previous year. During the full year, we had filed five ANDAs, two EU dossiers, three Canadian dossiers, and one South African filing. We've also filed four U.S. DMFs and three CEPs. We received approval for 14 ANDAs and two dossiers, and we've launched 12 products this fiscal across various regions. Our R&D spend for the full year stood at INR 100 crores or 3% of the revenue compared to INR 79 crores the year before. The entire amount has been written off for this year. A lot of R&D activities in India had to be spilled over to this fiscal due to COVID-related delays. Otherwise, our spend as a percentage of revenue would have been higher than what it is today. We also acquired seven ANDAs, which we will be looking to launch over the next couple of quarters. With this, we have a total of 58 filed ANDAs or dossiers across different markets, 18 pending approval, and seven pending tech transfer. We also have over 35 ANDAs or dossiers at different stages of development. Our gross debt reduced on account of reduction of our long-term loans by 83%, while our short-term loans went up a bit due to an increase in inventory buildup for new launches. Our net debt too reduced from INR 605 crore in the previous year to INR 575 crore in the current year, mainly on account of better realizations of receivables and factoring some part of our receivables at competitive rates. Our cash to cash cycle increased from 109 days to 117 days YOY, mainly on account of increase in inventories, which we are consciously building up on account of new launches and also to tide over any crisis due to the COVID second wave. Our operational cash flow for the year was at INR 432 crore versus INR 476 crore in the previous year, mainly on account of increase in working capital changes for the increased business and also an increase in inventory buildup for the new product launches. Our free cash flow fell from INR 292 crore in the previous year to INR 162 crore in the current year for the higher CapEx spend to cater to future business needs. With this, I would like to open the floor for questions. I hope all of you and your families remain safe. 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. The first question is from the line of Sudarshan Padmanaban from Sundaram Mutual Fund. Please go ahead. Hello. Thank you for taking my question. My question is to understand a little bit more about the raw material issues that you talked about on PAP side. You said that primarily from the second half of this year you see things reverting back to normal. I believe that there is also some capacity coming across, with Sadhana Nitrochem and Valiant, et cetera. How do you see? Do you see that things getting a little tighter in the intermediate term before it actually gets a little lighter? Apart from PAP, do you see pressure in any other raw material? Okay, Vansh. Maybe it is good for me to give a little background. The largest manufacturer of PAP in the world, in China, has shut down due to pollution issues. They are moving to a new site, and we expect this to start in the next two or three quarters. Meanwhile, like you said, a lot of new capacity is coming up in India. Sadhana Nitrochem, you said, is one of them. There are a few others like Aarti and also another company called Kutch Chemical Industries. They are also coming up. They are in trial production. We expect that the situation will start easing in end of Q2 and Q3 a little bit. Meanwhile, Q1 and early Q2, we see a terrible shortage that is going to come up. Once the Chinese plant also starts up or all the capacity in India comes up, there will be a very decent capacity worldwide. In addition to PAP, there's another material called acetic anhydride, which is another key raw material, which is also made from acetic acid. There's a global shortage of acetic acid, again, because of one of the major manufacturers in China shutting down and also due to one of their plants in south of the U.S. which got damaged during a snowstorm. They're about still to come back to normalcy. This also will take maybe a quarter to streamline. Like you said, there will be a tough situation for at least a few months. Sure. With respect to specifically, you talked about the products that you have filed globally, I mean, across markets. Specifically with respect to the U.S., how many ANDAs do we have filed to date, and how many are we planning to file? Yeah, I think Priyanka will take that question. Priyanka? Yeah. Sorry, can you hear me? Yes. Specifically, in the U.S., we filed 49 ANDAs, out of which we have about 37 approved and the remaining pending approval. We have about 23 under development and seven that we just acquired that are still pending tech transfer. One final question from my side is to understand a bit more about the CapEx. I think, going through the notes, it clearly shows a lot of confidence. I think we have upped our CapEx, what we are planning for the next three years, I mean, INR 1,000 crores across various legs. Between the two quarters and now, clearly it looks like there is a lot more confidence with the tone and the magnitude of CapEx. What has changed in the last two quarters to, number one, show confidence in a qualitative manner as well as to increase the CapEx absolutely on a quantitative manner as well? Okay, Vansh. As our products are getting approved, we see the necessity for more capacity. We were planning for actually INR 800 crores between last year, this year, and the next year. Anyway, there's more clarity on our needs today, and we see there's a very clear visibility on our growth. It's like this. MUPS block that is going on, still we need to spend about INR 180 crores on that. Unit 5, we are expanding in Vizag. We are expanding API capacity. We see the need for a lot of APIs to feed our finished dosages. This is essential for us. We are also building some packaging facilities in the U.S. That is going to take up some amount. We are also very excited that in the next three years, we need a lot of API capacity, and that we are earmarking about INR 250 crores. The new formulation plant, greenfield, which we were talking about, that is going to take about INR 320 crore. Also in our Bonthapally plant, where we have paracetamol and metformin, we are planning some expansions, adding another product and also expansion of metformin. That will take about INR 30 crore-INR 40 crore, then there is maintenance CapEx. This is a broad breakup of what we are doing. There is very clear visibility, and we are very excited that we are going to invest all this cash. All this, like I have been repeatedly saying, we are very confident we can meet without internal accruals. I do not see the need for any debt going forward. Thanks a lot. I am done, thank you. Thank you. The next question is from the line of Anil Sarin from Centrum Wealth. Please go ahead. Thanks for the opportunity and congratulations on an actually elevated margin despite the PAP problem that you have been facing. I wanted to know if there is a way of quantifying the revenue loss on the paracetamol front? Paracetamol front, it's about INR 40 crores loss just on paracetamol. Okay. To understand the- It is a revenue loss, Anil. It's also a loss in profitability. Even though we were able to get some high prices, but we were not able to pass on the full price increases to our customers. The impact of loss of profitability is a little more than loss on revenue. It's not proportional. Okay, I get it. That makes it all the more commendable. You are saying that this is a reduced profitability, but what one is seeing is actually a good gross margin. One can only imagine the gross margin would have been higher still had this PAP, the raw material problem not been there. Am I right on that? It would have been higher. Again, I would say not in real proportion. It would have been higher, definitely. Okay. Great. What I like about Granules is that there is this large component of your older generation molecules, which keep on giving you the cash flow with which you can go and build some forward-looking or more interesting kind of products on a going-forward basis. We have reached around 26% EBITDA margin. Considering bulk of your margins are assured in nature because of the older products that you have, which continue to have good, strong demand and continue to deliver good margins. Going forward, as you add more highly value-added or higher value-added products, what is the EBITDA margin outlook, let us say, by fiscal 2023 or maybe for the next two, three years, if you can give a guidance. We've always been talking about EBITDA margins of about 25%, 26%. New launches are definitely contributing, but we need to experience how these things are going. Volumes of the new launches, while some of them are very good, everything need not be in the volumes or magnitude of our existing products. We need to really test the waters. 2025, 2026, by 2023, 2024, and all, we are quite confident. However, this year for FY 2022, we see a lot of challenges and 25% looks like a little aggressive number to us. I will feel comfortable saying for this year alone, around 20%, I would stand by as of today, looking at the current scenario worldwide and the situation around us. That's where we are running, yes. Okay. Thank you very much. Thank you. The next question is from the line of Tushar Manudhane from Motilal Oswal. Please go ahead. Sir. Good evening, sir. Just as a clarification, you said FY 2022, 20%-25% margin range? If you could please repeat. For the current fiscal, we expect that the EBITDA also will be around 20%, and growth also over the base of 2021 will be 20%. The scope of passing on the raw material price hike to the customers, how do we see that changing? Let's say products like paracetamol, where the cost has gone up by 200%, there's no way everything can be passed on to our customers. Customers, we are actually partners, we would like to share some of the losses and not expect just one person to bear the entire thing. We can partially pass on the price increases. And I just want to say that we do have an element of B2C and B2B. When it comes to B2B, we work more closely as partners, there is a scope for a little bit of an increase or pass through of cost. When it comes to B2B business, it's not possible at all to pass on any price increases. We have seen a significant cost increase in a lot of our products, passing those on to B2B customers will be very difficult. Is that because of? The market has changed quite a bit. It's mostly moving towards B2C from B2B. There is a bigger percentage of B2C customers today. Got it. Is it because of the long-term contracts in place where prices are kind of fixed in nature or is it to do more with. The prices are not fixed in nature when it comes to B2B customers. B2C. You essentially tried B2C customers, apologies. If you increase the prices, your product will go into an RFP situation. That's precisely why we can't really increase the prices. At Granules, we do have the wherewithal to take this short-term hit in profitability, but we do want to protect our volume because that's the nature of our business. Got you. Just lastly on this same aspect, while we are doing the good amount of CapEx or capacity expansion on the paracetamol as well, is there any scope for doing the backward integration and have this PAP in-house manufacturing to some extent so that we avoid or rather reduce this risk going forward? PAP is a chemical, Tushar, this is made from PNCB. There are a lot of people who are integrated into PNCB. They start with chlorobenzene and then they make PNCB. When they make PNCB, you get ONCB. There is a downstream product in ONCB. Just an individual company making PAP from bought out PNCB cannot be competitive as we go by. We have clarified this before. If we want to be integrated in PAP, we need to have a different technology, which we have, where we start from nitrobenzene. We don't get any byproducts. However, the cost of a plant, the scale has to be very high. Also, the cost of that plant is going to be very high. We were encouraging the other partners to start production for us, and we were in the process of discussing buybacks with them. It's in advanced stages. We will be partnering with people rather than integrating backwards. It's a chemical, and we want to be competitive and use our cash judiciously rather than going into backward integration just for the sake of that. We know we are going to be secure in future. Understood. A good amount of this cost increase is already factored fully in the fourth quarter performance, right? Not fully. There were some raw materials which were negotiated a few months in advance, so they were not fully accounted for. This quarter we'll have to encounter higher price increases. That's the reason why we are factoring We are indicating the lower margins overall for FY 2022. That's right. The first quarter is going to be not that great. It will pick up in the subsequent quarters. The whole year, we want to be cautious. We don't know what's going to happen. Very well. Thank you and all the best. Thank you. Thank you. The next question is from the line of Abdul Puranwala from Anand Rathi. Please go ahead. Hi. Thank you for the opportunity. My first question is with regards to the U.S. launch. In the last six to nine months, you have got couple of approval for MUPS products, potassium chloride being one of those. What is the status on launch of this product? Have you already launched this in U.S. or is it planned? Mr. Pudanwala, there's a disturbance coming from your line, sir. Yeah. Is it better now? Yes, sir. Yes. My question was on the MUPS product. We had got a couple of approvals in the last six to nine months. Have we launched this product or this has been lined up for FY 2022 or FY 2023? Where, sir? I don't want to talk about product specifics here, but we have launched the MUPS products that we have received approval for. We still have one that's pending launch, which we'll launch in Q1, Q2 of this fiscal. Apart from that, we also have other MUPS-based products in our U.S. side, which have all been launched. Sure. Yeah. My second question is with regards to this margin guidance of somewhere around 20%, which is close to our historical range. Are we building any cost elements coming up from the MUPS side toward the Vizag plant, which will be up and running next year? Are we factoring some cost increase on that front as well in guidance? There will be some cost increases there because the plant will come up, but it will only be the last quarter possibly, and there would not be too much production coming through the plant. Sure, sir. One final question Mainly, it will be due to cost of increases in raw material prices. Sure. Shortage of raw materials and lesser capacity utilization. All right. Yeah, the final question is from me. In your opening remarks, you mentioned that the paracetamol capacity is operating at 45% capacity. How do we see an improvement in this utilization from Q2, Q3 onwards, considering that there will be still some uncertainties with the supply side. By when would we expect the supply or the capacity utilization to resume back to the previous level? I would say end of Q4, they would be back to normal and it will be a slow ramp-up. Q2 will be a little possibly better than Q1, and Q3 will be better. That's how it's going to go on. We are reassured that we're going to get some materials from domestic capacities that are coming up. There'll be a slow ramp-up. Sure, sir. That will be all from my end. Thank you so much. Thank you. Thank you. Thank you. The next question is from the line of Ranveer Singh from Suniti Securities. Please go ahead. Yeah. Thanks for taking my question. Congratulations for good number despite the challenges. My question is around the guidance you gave us earlier of having PAT growth of 20%-25% during 2021 to 2023 on CAGR basis. Are you still standing with it? If you take a three-year CAGR, yes, Ranveer, if you just see this year, we are saying it's going to be around 20%. Okay. 22 versus 21. For one year growth, you're saying in 22 Yes. Three-year CAGR, we expect we'll definitely do Yes, we are very confident of 20 to 25. Okay. Any ballpark number on the revenue growth in 2022? 2022, we see about 15%-20% revenue growth from 2021. Over 21. Okay. Just for clarity, you said that one MUP product has been launched. That potassium chloride has been launched? Priyanka? I don't want to get into product specifics at this point, Ranveer. No. With your perspective in last call, you had mentioned that by April will be launching potassium chloride. No, I don't think we took the names of any products, we have launched the one product from India that we got approval for. That's MUPS-based. That answers your question, Ranveer. Yeah. Okay. Just one more, if I can. I see that on margin wise, we had around loss on API due to paracetamol and bigger loss on EBITDA also on API segment. Still we have a higher EBITDA. I think its formulation segment has contributed more on EBITDA or it's a PFI. Both have contributed. Formulations more than PFI, but both have contributed. APIs have actually gone down and these two PFIs and FDs have contributed. Okay. I think there was a slide in our presentation which clearly depicts this. Okay. Yeah, thanks a lot, sir. That's it from me. Thank you. Thank you. We would like to remind participants that you may press star one to ask a question. The next question is from the line of Kunal Gamitya from Emkay Global. Please go ahead. Thank you for taking my question. The first question is related to the para-aminophenol. Our guidance of 20% EBITDA margin, does that assume significant deflation in PAP prices in, let's say, quarter three or quarter four? Does that assume similar pricing which we are getting on PAP right now? Quarter four, we are optimistic that the prices are going to come down. It's based on a little optimism for Q4. Sure. Secondly, when we say we are partnering with some of the local players for PAP, the contracts that we are entering in right now, are those kind of a fixed price contract in terms of we'll buy at certain price because they'll also be incurring CapEx or maybe for us and maybe two, three other players. Are we entering into a fixed price contract with them on PAP or it will be a market-based price, at which we'll buy PAP from them? It will be a combination of many things. It will be a combination of raw material prices formula and also market pricing. It is a little complex way we operate this. Okay, maybe a certain part will be raw material plus the margin and then there'll be some caveat saying if the market prices are above this, then something like that. I think, yes, you're right. You're close to the idea. Okay. Sure. Thank you. Thank you. Thank you. The next question is from the line of Mitesh Shah from ICICI Direct. Please go ahead. Thanks for taking my question. MD, just looking your guidance about the 20%+ CAGR for next three years and the FY 2021, you're expecting 20% kind of margin. Are you expect that from the FY 2023 onward or if the raw material pricings are cooling down or it's normalizing, can we achieve the FY 2021 kind of margins in FY 2023? Yeah, 25% EBITDA is what we always plan. I've been saying that is what we are optimistic about. Definitely considering that FY 2022 is going to be 20%, and we are expecting between 20% and 25% in three-year CAGR. 2023 and 2024 are going to be close to 25%. Okay. MD, about your INR 1,000 crore CapEx plan for next three years. I believe that major CapEx will be coming in FY 2022, right, MD? Can you give any guidance about that? Not major. FY 2022, we expect to spend INR 400 crore in 2022. The rest of the INR 600 crore is spread over 2023 and 2024. The new domestic capacity is coming, raw material capacity for paracetamol. It is sufficient that largely to replace the Chinese player? Definitely, I won't say replace. It will be close to the capacity of the Chinese player, which should make sure that there's enough raw material around. There will also be the Chinese player coming back. There's going to be, I would say, a lot of surplus material in the market. Okay. Thanks a lot. Thanks. That's it from my end. Thank you. The next question is from the line of Praful Bohra from Systematix. Please go ahead. Yeah. Hi, sir. Sir, on one of the previous points that you mentioned about price increase is not possible in B2C segment. I'm just trying to understand this a little better because, see, typically the PAP price increase would be true for the entire market and all your contracts would have some price escalation clauses there, right? I mean, how does it exactly work that we're still not able to take any pricing increases? Priyanka, you want to answer that? The contracts that you have with B2C customers are definitely different than the contracts that you have with your B2B partners. The flexibility of passing on any cost increases is highly unlikely. It's not that there's a fixed cost, but if you need to be competitive in the market, you have to make sure that you don't increase prices. Because if you do, like I said earlier, there is a chance that the product will go into an RFP, which essentially means that they put it out to bid, and you might lose the volume because you don't know what your competition will necessarily bid at. This can be true if it is a company-specific issue and the prices are increasing only for one company. If the prices are increasing for the entire market, then logically, the market price itself should go up. Yeah, sorry. Price increases for the market, in that if your cost increases are different than price increases. In that, if my cost is increasing, I might not necessarily, as XYZ supplier, if I have a big basket of products, for example, I might not necessarily want to pass it on this product. I might pass it on to another product, or I might just ask for a higher price, or you look at the entire basket as a whole. When it comes to product specific, you might not necessarily raise the prices because my profitability threshold can be completely different than what XYZ other company's profitability threshold might be. For us, we look more at the volumes that we're getting from specific products. Like I said, any short-term hit we can certainly take. If it continues going for a much longer period, then we'll have to look at how the situation will play out. Okay. Also say, suppose if the situation continues for another quarter or so, do we run the risk of non-supply in the U.S.? No. Hence the penalties? No. We are actually proactively building our inventories to up to six months of inventory right now because of the uncertainties involved. Our production at the Indian sites and the U.S. sites are going on at close to 100%. It's sourcing, being able to source the raw materials on time, logistics, et cetera, that could delay having product in here, in stock and in our warehouse here. We are proactively building up inventory for the near future. I don't see any disruptions happening at the moment. Okay. Thanks. Yes. Thank you. Thank you. The next question is from the line of Darshit Shah from Nirvana Capital. Please go ahead. Hi, sir. Thanks for the opportunity. Sir, on the PAP side, you said one of the largest Chinese customer is shifting. Sir, can you just update on how much production is coming up in India over next one or two quarters, you said? You're talking of in India, you said, right? Yeah. I think it could be close to the total capacity what the Chinese supplier had, it could be somewhere around, I would say, 35,000-40,000 tons. For now. With the Indian players, we know that Sadhana Nitro Chem and there's another Aarti Group company, Valiant Organics, which are coming up. Are we top with them for supplying PAP to us? This is a priority thing. We are on top of it. Again, we have short-term plans, medium-term, and long-term plans for the whole thing. Got it, sir. Sir, on the margin guidance which we have given and on FY 2020, what we are saying is probably we might end up doing 20% PAT growth over FY 2021. Sir, if the margin are going to fall from 26% to 20% this year, I don't know. The revenues have to grow quite a bit to outpace the PAT growth over FY 2021. I don't know. Either you're conserving on the margin side this year or probably, there is some kind of mismatch I see. Not a great mismatch. It may be a few percentage points, Abhishek. Not a great mismatch. If you have some clear numbers, I think send it to us, we can clearly come back and explain them better. Sure, sir. No problem. All the best, sir, for future. Thank you, Abhishek. Thank you. The next question is from the line of Tushar Bohra from MKVentures. Please go ahead. Thank you so much for the opportunity. Commend the management for a steady performance in light of all the troubles on the PAP side. Sir, a couple of points. First, just on the gross margin, just for you to quickly clarify, is there any positive one-off on the gross margin side for any of the other products? If I may, once the paracetamol situation eases out, do we expect that the gross margins actually should be higher if there is no one-off in the other parts? There is I won't say one-off, but one of the reasons for gross margin increase is also buildup of inventory. As Priyanka mentioned some time ago, we built up a lot of inventory in India and in the U.S. As you know, the overheads on the inventory make the difference that adds to the gross margin a bit. That's one of the reasons, also overall the product mix and the new launches have made a little positive contribution. To answer your question, we'll have to see how things go. As of today, this is the situation, it's a very dynamic world in B2C marketing, we are trying to be a little conservative. Fair enough, sir. Second, on the U.S. business itself, on the new launches, how have they performed? Any qualitative or quantitative comments in terms of market share or whether it's been better than expectation and so on? Priyanka? I'll take that question, Tushar. I think we have been able to launch every product that we have worked on launching. We still have a couple of approvals that are still pending launch. Again, it's all because we do want to take a conservative approach when it comes to COVID. We want to make sure that we line up our supply chain well ahead of being able to launch into the market. In terms of all the products that we have launched, we do have a decent market share. I think we'll continue to keep growing the market share as we go forward, but not at the cost of profitability. We're not in the game of just slashing prices and getting into the market. Yeah. If I read the bunching up of new launches combined with the ANDAs that you are also sort of taking on from others, I see an aggression overall in approaching the U.S. market in terms of building the formulation side. If you can just help us understand the strategy on these other products that you have, the tech transfer is happening for seven products you mentioned. What is the strategy for these complementing additions to the portfolio? Overall, what is the strategy for next couple of years, how we see Granules formulation building up in U.S. and Europe as well? This actually ties into somebody's question earlier on CapEx and what gives us the confidence of incurring this much CapEx. See, I think the game, especially now, with how dynamic the finished dosage industry is in the U.S. market, that we do have competitors. At Granules, we do have competitive advantage on a lot of products. There are other factors that kind of come into play when it comes to getting market share. Like I said, we're not in the game of just reducing prices and crashing the market to be able to get in. Sometimes your pickup might be a little bit later than you expect it to be. In that if you expect to get to a certain level of market share this year, it might take you an additional six months or one year to get to that point. We do believe that you need a basket of products to play very strongly in the U.S. market, primarily because, end of the day, there is a lot of consolidation in the U.S. market, the bigger suppliers do take the cake because they do have a basket of products to play with then. That said, we're not diverting too much from our strategy that we have set of focusing on a few molecules where there is a competitive advantage. We are linking all the acquisitions that we have and all the future products that are under development, which together comes to about 44 products, to some level of backward integration, some level of complexity on a finished dosage front or some level of strategic partnerships that we're building on a KSM front. Everything is linked, we will have some products in the basket that are going to just sit in the basket that we might not launch immediately, but as we see the need for them to be launched, we will launch them. I hope I've been clear. Yeah. What I also understand from your response is that overall, as we are looking at building a much stronger formulation piece, also as we are backward integrating on most of our critical products, especially in light of what has happened last with PAP also now. Overall, I think as we scale up the business, our margins, gross margins in particular, should start to look more like they are for some of the larger generic players in U.S. from India, where the gross margin profile is much stronger. We should be moving in that direction? We are moving in that direction. We do have some more complex generics also coming in, but if you look at any of our large competitors, they have a mix of different regions. They're not just talking about the U.S. market when they talk about gross margins, right? The U.S. market, while it is very helpful when it comes to margins, it still is highly competitive. Yeah, I do think the gross margin profile will certainly improve, but if you ask me about competitive landscape, we'll have to look at specific companies and the mix of markets that they have versus the mix of markets we have. If I were to squeeze in one last very quickly. Just back of the hand calculation, next three years, if the profit guidance that we're giving, say between 20%-25% CAGRs, we should generate somewhere in the vicinity of INR 2,300 crore-INR 2,500 crore PAT and adding depreciation will put it closer to INR 3,000 crores of operating free cash. Ex of CapEx and working capital, we should still have about anywhere between INR 800 crore-INR 1,000 crore of free cash flow. Any sense on where that money can incrementally be invested? Any specific areas that you guys are very interested in beyond MUPS from a 3 to 5 year horizon? Now let me take that. There's also a payback of the long-term debt which we have, and there will be some as business grows, there will also be a working capital need. After taking care of all these things, I don't think we will have the INR 3,000 crores like you said, but we will be in a comfortable cash position. Like I repeatedly say, we don't need debt to fund our expansions. As we see more opportunities and we see cash available, we will utilize the cash. We are not going to just build up cash. We are going to make productive use of the cash which we generate. We are always looking for newer opportunities. We are looking for other areas of growth, like other dosage forms. We are working on our strategy. This is an ongoing thing. Right. Thank you so much, sir. Thank you. Thank you. The next question is from the line of Mohit Mansana from Fidelity. Please go ahead. Hi. Good evening, sir. Good evening, Mohit. I have actually the same question which one of the other participants asked on FY 2022 guidance. What we are saying is 20% revenue growth, and we are seeing EBITDA margins go down from, let's say, 26% or so to 20%. In that scenario, how can our PAT growth be 20% in FY 2022? It depends on the product mix, Mohit. The product mix changes, the margins also will change in certain products. Like I said, we can have a very detailed working on this, and we can interact. Definitely. Okay. Mohit Mansana, your voice is not audible. Sorry. The product mix changes, et cetera, are all factored in this 20% EBITDA margin guidance. You're right. There could be a little variation in what we are saying. One of these things like the previous question, there could be a little mismatch, but we will give exact details. That's not an issue. There is a slight mismatch. Okay. You are still sticking to sort of 20% kind of PAT growth in FY 2022. Yeah. Topline is never a very important thing for us. Yeah, PAT growth of 20%, yes, we are very confident. Okay. EBITDA could be fluctuating here and there. We'll see how it goes. 20% PAT growth in FY 2022, over the next three years, CAGR of 20%-25%. That's right. That is something which we are very clear about. Understood. Thanks a lot, sir. Thank you. Thank you. The next question is from the line of Mithun Soni from Geecee Investments. Please go ahead. Yeah. Most of the questions have been answered. One question on paracetamol. How much of the cost increase would have been passed on this quarter, and how much more price increase you will still need to take in Q1? Also, if you can just give broadly the trajectory of how do you see the volume ramp up as well as the margin impact for Q1, Q2, Q3? If you can just give us some ballpark idea. First of all, passing on any more increases is not possible. The prices have gone up so high, I don't think the market can absorb anything more. Okay. That is ruled out. We did pass on some increases last quarter, but not the full increase, like we said. That's why we see the margins going to be under pressure in this current quarter as raw material prices go up and we are not able to pass on. If I can interrupt here. Yeah. Let's say in Q4, let's say your average raw material cost for PAP and all the other raw materials for paracetamol was a base of 100. How much will that be in Q1? The raw material cost. Your price will not increase, but you said that you still had some low price raw material, and the full impact will only come in Q1. How much should the base increase be in the raw material cost in Q1? Maybe another 20% or so the cost will increase. Okay. Q1 will be the least of the margins. Sir, if in Q1, if it's only 20%, and in Q4, we have seen about 25% EBITDA margin, then can we see a sharp drop all the way to, even if I take 20% cost increase in the raw material only for one portion of the product? We cannot make the arithmetic so into much detail. Okay. There is a lot of uncertainties around. Okay. We cannot say it will be only 20% or whatever. Right. We just have to take it as it comes. Okay. Just one, what is the current Q1 utilization of the plant we are expecting for paracetamol? Sir, it will be around the same. Maybe 2% more because some domestic plant is coming in. Yeah. It may be 2%, 3% more, but around the same level. Okay. Thank you very much. A little increase. Perfect. Okay, sir. Thank you. Thank you. Thank you. The next question is from the line of Deepan Sankaranarayanan from Trustline PMS. Please go ahead. Thanks a lot for the opportunity, congratulations for good set of numbers. Firstly, wanted to understand what is the contribution of GPI for full year in terms of revenue and EBITDA? GPI was Yeah, go ahead, Priyanka. GPI was about 15%-17% of the overall top line. EBITDA, I don't think we're getting into EBITDA specifics right now. Okay. Overall yearly revenue is about INR 500 crores. I think let's not talk about it. Okay. We are quite happy to see that promoter pledging has come down from 38% to 10% currently. Any guidance on pledging when it will be removed fully? It's less than 10%. It's around 5%-6%. It's actually 3.8% of the overall shareholding right now. Out of the promoter shareholding, it's about 6% of my shareholding. I don't think this is a serious issue. When it was an issue, we were very cautious, and we were doing our best by every means to reduce it. Not a pressing issue, but maybe in the next one or two quarters, it will actually extinguish itself without any great efforts. Okay. Thanks a lot and all the best. Thank you. The next question is from the line of Rashmi Sancheti. Please go ahead. Yeah, thanks for the opportunity. Just want to understand more on the R&D part. How much are we planning to spend in FY 2022? This year, the R&D overall activity was very low. If you can guide for FY 2022 and FY 2023. I don't think the R&D was necessarily very low in terms of spend. We guided to a total R&D spend of about INR 150 crores for this year, out of which we spent about INR 100 crores. We did about six to nine filings depending on the region, and we also have another 37 products that are under development now. Going forward, at the moment, we plan on spending about a minimum of INR 150 crores every year. Okay, ma'am. Basically, this would be more towards the GPI. If you can give some kind of breakup, like how much it would be spent on GPI products and how much on the India. I wouldn't necessarily say GPI and India products, R&D is pretty much the same for us. I would talk maybe in terms of medium to high volume integrated products versus the more, I would say, opportunity products. The split, like we mentioned in our investor presentation a few quarters ago, would be between 70%-75% for the former and 20%-25% towards GPI products. Sorry, low volume opportunity products. 70%, 75% you said on the medium- High volume integrated, medium high volume integrated products. Okay. Again, little bit again on gross margins. I think we ended this year giving 57% gross margins. I understand that there was a favorable business mix as well as the product mix. From Q1 would be back. For FY 2022, are we going to see a very steep fall of, say, 600-700 basis points from the current gross margin level, or it would be just 200-300 basis points? We will be doing a good number of launches also, right? I guess it will be- Go ahead. Go ahead. Sorry, go ahead. Around 52% or so. Okay, 52%, 53% is something which is sustainable, even though if the raw material prices are high. That's right. This is all a very hypothetical situation today. That's why we are erring on the conservative side and giving the bottom line number. Exact arithmetic cannot be predicted here. Around 52% or so is, yeah, that's where we will get to. Or maybe 51, maybe. Okay. Sir, what is happening on the PFI business? I think this year we have seen a very sharp growth. Is it something that this growth is sustainable or it is not sustainable? Is it that we have received some one-time orders which is not going to be recurrent in the future? I have no reason to believe it's not sustainable. It is sustainable and most of the growth has come in from LATAM and Europe. LATAM and Europe. You mean to say that this? New customers and definitely it's an effect of the result of a lot of BD in the past few years. Okay, this kind of growth, which is like 40%-45% is something which is sustainable even in the future? Yes. PFI may not really keep growing to that level, but we will be making growth in the every area. PFI will definitely grow at a lesser pace. Okay. Sir, last- Like I said, new customers were added, it happened. Let's see how many customers will be added in the next coming few years. Okay. Sir, last one question. Priyanka, if you can just tell me, with FY 2021 close, how many total products are currently in the U.S.? I mean total number of launched products in the U.S. market. Cumulative. U.S. market, obviously North American market, we have 31. 31. Okay, thanks. That's it from my side. Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to the management for closing comments. Ladies and gentlemen, once again thank you very much for attending the call. Again, in these stressful times, I wish all of you stay safe. Thank you very much. Thank you. Thank you. On behalf of InCred Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.