Please note that this conference is being recorded. I now hand the conference over to Mr. Irfan Raeen from Orient Capital. Thank you, and over to you, sir. Thank you, Sagar. Good afternoon, everyone. On behalf of Granules India Limited, I extend a very warm welcome to all participants on Q2 and H1 FY 2024 Financial Results Discussion Call. Today on the call, we have Dr. Krishna Prasad, the Chairman and Managing Director; Dr. K.V.S. Ram Rao, Joint Managing Director and Chief Executive Officer; Ms. Priyanka, Executive Director, GPI and GUSA; Mr. Mukesh Surana, Chief Financial Officer; and Mr. Puneet, Head Investor Relations and GM Business Finance. I hope everyone had an opportunity to go through our investor deck and press release that we have uploaded on exchanges and on company's website. A short disclaimer, I would like to say before we begin the call, this call will contain some of the forward-looking statements, which are completely based upon our belief, opinion, expectation as of today. These statements are not guarantees of future performance and involve unforeseen risks and uncertainties. With this, I hand over the call to Krishna Prasad, sir, for his opening remarks. Over to you, sir. Thank you. Thank you, Irfan. A very good evening to all of you, ladies and gentlemen, and thank you very much for attending our Q2 earnings call today. A detailed presentation of our Q2 performance has been uploaded to our website, and I'm sure all of you would have gone through it enough. Our EBITDA, PAT, and other ratios have improved and will further improve in the coming quarters. Some of the launches of the approved products, both in the U.S. and other geographies, were delayed and will be launched in this and the coming quarters, which will contribute to higher revenue and resulting profitability. On the IT incident update, production and sales have almost rebounded to their pre-incident base. We have fortified our cybersecurity measures, establishing a more robust security environment to safeguard our operations, and we have instituted a comprehensive upgrade to our systems and security protocol. While we are trying to recover the business loss, we anticipate a revenue shortfall versus the planned production and sales, as part of the lost sale is irrecoverable. During the quarter, ANVISA'S audit at our Gagillapur formulations plant was successfully completed with zero critical observations. We also received approval from ANVISA for compliance with the guidance of cGMP for our Bonthapally factory. Health Canada audit was completed with zero observations for the Jeedimetla API plant. We also received the accreditation certificate of foreign drug manufacturer from PMDA, Japan, for the Jeedimetla facility. The construction of our new formulation facility at Genome Valley is progressing at a good pace, and we have completed the first phase during October 2023, as communicated in the last con call. We are targeting to complete the next phase by May 2024, with 2.5 billion dosages per annum capacity. Upon completion across all the phases by December 2024, this new plant will add 8 billion doses to our finished dosage capacity. As shared earlier, with this facility, along with the recently launched new greenfield packaging facility in Virginia, U.S.A., we now have capacity in place for us to cater to emerging new opportunities and demand in the near term. Our focus on R&D over the past six quarters with enhanced outlay is geared towards fast-tracking integrated product development, building expertise in the areas of controlled substances, complex products, and biocatalysis and enzymes. As of today, we have 59 approved and two tentatively, tentatively approved U.S. ANDAs, five European dossiers, two in the U.K., six in Canada, and three in other regions. A total of 75 dossiers approved and 21 global dossiers to be approved. We have a total of 33 US DMFs, 24 CEPs, five EDMFs, eight KDMFs, four Canadian DMFs, four China DMFs, two Japanese EDMFs, and 55 across several regions. We have launched four products in the US and one product in the UK in H1 2023, and we expect the launch, expect to launch about seven products in the US, two products in South Africa, two products in the UK, and two products in Europe in H2. The complete effect of which will be seen in quarters going forward. Climate change and sustainability opportunity. Our newly adopted purpose is healing lives responsibly through pioneering dream science. This is guiding us towards transforming healthcare through innovation and sustainability. We are resolute in driving a positive transformation within healthcare. Our commitment is further solidified by our pledge to achieve net zero emissions by the year 2050. Ladies and gentlemen, I would like to once again emphasize, we pledge to achieve net zero emissions by 2050, a very ambitious target, and every person in the company is striving towards this. Earlier this year, we completed the measurement of our Scope 1 and Scope 2 emissions. Now we are in the process of inventorizing our complete Scope 3 emissions as per the GHG Protocol. Making a significant stride in our journey, we have received a BB rating in our first MSCI ESG evaluation, acknowledging our initial efforts in environmental, social, and corporate governance criteria. We aim to improve our ratings in the subsequent years through sustained efforts and excellence in our sustainable practices. In tandem with our strategic vision, we have pledged allegiance to the Science-Based Targets Initiative, SBTi, ensuring that our climate goals are aligned with the latest scientific consensus, sorry. Our dedication to sustainable practices resonates with the ethos of United Nations Global Compact, UNGC, to which we are committed, signifying our support for responsible business practices globally. A major landmark in our sustainable journey is the MoU with NIPER Mohali, heralding the inception of the Center of Excellence in Innovative and Sustainable Pharmaceutical Development. The envisaged outcome is a suite of innovative pharmaceutical products and processes that are resource efficient, as well as optimized for energy conservation. Granules C ZRO. As shared during the last call, at CZRO, we are focused on strengthening our core business for backward integration of paracetamol and metformin in the first phase, as we are putting up a pilot plant for CDA and a small commercial plant for PAP at the Vizag plant. We have received the technical feasibility report, and we are under final review and discussions with AM Green, which is part of Greenko, on the project planning for the Kakinada site, which will be our main facility for CZRO. We are targeting to start the project work at Kakinada during FY 2025. With this, ladies and gentlemen, I'll hand over the call to Dr. K.V.S. Ram Rao. Thank you, Chairman. Good afternoon, everyone. I wish to update you on the progress of the transformation journey. As briefed in my last couple of conversations, there's a paradigm shift in the management of portfolio of our new products. From a traditional Para II filing, the company has shifted its focus to Para III and Para IV filings. The shift in focus is followed by strengthening of portfolio teams, R&D teams, technology transfer teams, to enable smooth integration and filing of the products. The new portfolio of the organization is aimed at not only oral solids, but also other dosage forms, leveraging the capability of Granules' technological capabilities in API and formulations. Significant progress has happened on these dosage forms, and we expect to file new dosage forms in the near future. At present, there are about 41 products which are under various stages of development in Granules' Integrated Product Development Center. All these products are scheduled to be filed in FY 2024 and FY 2025. Out of these 41 products, launch and approval of 16 products, Wave 1, Day 1 launches are around 13 products. The first wave launches are around nine products, and one is an NCE-1. To add to the numbers stated by the chairman in his opening remarks, we are geared up to double-digit filing of DMFs and NDAs that are of strategic importance to us. The program our commitment in execution of our strategy. Yet another significant aspect of strategy is to focus on sustainable new technologies. The technology development team has made significant progress on application of biocatalysis on three products. Two products have completed the pilot scale and commercial production plans, and third molecule has completed optimization in the lab. These three products can give significant and sustainable advantage for Granules when they are commercialized. Global cost leadership has been one of the strategic levers identified by the organization. While the backward integration from CZRO will give us the leadership for paracetamol and metformin, we have started our work on additional 10 products which are critical for the organization in terms of both profit optimization and of protecting market share in geographies of interest. ...The program is expected to bring in the desired results in a year from now. With this, I hand over to Mukesh. Thank you, Chairman and JMD. Let me take you all through the top financial parameters. Revenue. The second quarter revenue were INR 11,895 million, as compared to INR 11,507 million in quarter two, FY 2023, a growth of 3% in value terms. Volume growth year-on-year was higher as compared to the value growth. Sales in the US region grew well, primarily, partially offset by the decline in the LatAm and Europe regions. Revenue grew by 21% as compared to Q1 FY 2024. The sales break up as per the business division and geographic regions in the pres- is presented in our investor presentation, which is available on the website. Value added. Our value added as a percentage of sales for Q2 FY 2024 was 51.7%, as compared to 49.7% in Q2 FY 2023. Value added percentage as compared to Q2 FY 2023 is increased by 2 percentage points, primarily on account of better product mix, increase in sale of formulations. Price erosions were offset by the reduction in rates of key raw materials. Value added as a percentage of sales for Q2 FY 2024 is up by 0.3 percentage points from Q1 FY 2024, primarily on account of better product mix, increase in sales of formulations. Price erosions were offset by the reduction in rates of key raw materials and an increased focus on product level cost reductions. EBITDA and EBITDA margin. EBITDA for the quarter was INR 202.13 million, 17.9% of sales, as compared to INR 2,429 million, 21.1% of sales in Q2 FY 2023, a decrease of 12% in value terms over the previous year, primarily on account of increase in operating expenses such as manpower and R&D. Increase as part of capability and capacity building, which will drive future growth in short to medium term. R&D. Our R&D spend for the quarter was INR 496 million, as compared to INR 246 million in Q2 FY 2023, and INR 413 million in Q1 FY 2024. We are going to continue to spend on R&D in the coming quarters as well. Net debt. Our net debt was INR 9,395 million, as compared to INR 7,671 million at the beginning of the year. The net debt has increased by INR 2,224 million, primarily on account of reduction in operating cash due to reduction in revenues in Q1. Cash to cash cycle. Our cash to cash cycle was 162 days in the current quarter, as compared to 132 days at the beginning of the year and 170 days in the previous quarter. The decrease as compared to Q1 happened because of decrease in inventory days, as sales picked up this quarter post the IT incident in the last quarter. Operational cash flow. Operational cash flow for the quarter was INR 329 million as compared to INR 35 million in Q1 FY 2024. Increase is primarily on account of increase in EBITDA and better cash to cash cycle compared to Q1. CapEx. CapEx spend during the years, during the quarter was INR 1,029 million. ROC. ROC for Q2 FY 2024 is 12.8%, as compared to 9.3% in Q1 FY 2024, primarily on account of increase in EBITDA due to the reasons stated above. With this, I open the floor for questions. 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 their touchtone phone. 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 Megh Shah from Prospero Tree. Please go ahead. Good afternoon, sir. I just have one simple question. Time and again, there have been, you know, many media sources and articles telling us about the sale of the company. Many times, Priyanka and the promoter team both have denied such a possibility and have clarified over the same. But again, in the last one week, we have again begun to hear that you are close to finalization of a sale with some private equity player. And usually, media sources won't keep sharing such things again and again for no reason at all. So can you please comment on the same? Okay, Mr. Shah. I think, I understand your concern. Let me tell you, denying this over and over again, and the rumors erupting over and over again, well, is really disturbing. But in my opinion, just to put this at rest, rather than just denying, I would like to mention the initiatives which we have taken now towards sustainability, the green chemicals, enzymatic reaction, flow chemistry, so many things, formulation development, green developments, and the investments we are making today, are like a dream for us. Everyone in the company is so excited, and they are working towards it. As, they're putting in our best efforts, and if at all there is any intention of doing what you suggested, this is not the way we would be going. We would not be spending our time and effort and our blood and heart into this, what we are doing. It's something what we are trying to achieve is something nobody has done so far. I can even proudly say somebody who has something which has not been attempted so far in the world. We expect to be one of the first few companies to achieve this. And do you think we'll just give up on this grand dream just for a little bit of money? Money doesn't mean much. What we are planning to do, trying to be responsible, trying to save the planet is much more important than a few thousand INR crores. I don't think I can add more than this, and I wish people are convinced when the media stops these type of rumors. We completely understand. It's just that, media reports keep on coming again and again. So as investors, we are just a little bit concerned, that's all. I understand it, but I'm sure I don't know if you are convinced, but I don't know what more convincingly I can say. I think this is the best answer I can put forward. Yeah, I got you. Thank you. That's all from my side. Thank you so much. A reminder to all the participants that if you wish to join the question queue, you may press star and one now. The next question is from the line of Suresh Agarwal, who is an individual investor. Please go ahead. Good evening, sir. Good evening, Suresh. Sir, we are on expansion still from last few years, but it's not generating any profit or rewards for shareholder. We are in the range of INR 100 crore-INR 140 crore profit range. Our expenses are all increasing, but not fruitful. Please throw a light on this. Suresh, if you see, I mean, your statement saying we have not grown may not be right. If you see our last five years of CAGR on both top line and bottom line are about around 25%. So both bottom line and top line are growing at 25%, and I think it's a decent growth in my opinion. Some companies may have a quicker growth, but Granules has been growing sustainably, and this growth is just not over the last five years. Even if you see the last fifteen years, the CAGR is almost like that, and it's in proportion to our investments, too. And without investments, you can never get growth. Some investments may take a little time to pay off, some pay off immediately. So this is what is happening, and we have been investing very responsibly, prudently. Even in CZRO, it could be a dream, but we are also responsible. We are not investing blindly. We are putting pilot clients, demonstrating our ability to make green products, and only after that we're going to the next stage. I think, I have to say that we are growing and we are... our investments are paying off and will continue to pay off. Sir, do we have any dividend policy in the company? We have a dividend policy, which Mukesh will explain. Yeah. We do have a dividend policy, and it is also put out, you know, on our website, you can take it, and it's a pretty standard dividend policy. Can you give some light on that? So, you know, you can take it offline, but it is, you know, it's there in the stock exchange, in our website. But, in the policy, we are not saying specifically percentage payout amount. It depends on all profit and reserves and also availability of cash flow and depending on the future expansion. But, yeah. Sorry. Mr. Agarwal, let me also add. I think we have been one of the. Okay, I don't want to say, but I personally feel we have been very liberal, and we want- we have rewarded our shareholders liberally. In the last three years, four years, if you see, we had two buybacks, which are more interesting than even a dividend. We also had dividend. Last year it was close to about eighty, eighty percent or ninety percent, in addition to the pay in buyback. The buyback was for about INR 270 crore, I think, around INR 220 crore, and that's been very liberal, liberal. And two years before that, we had another buyback. So we've been quite liberal in our rewards to the shareholders. In fact, we have been criticized by many investors for wasting money to some extent. They feel that we should have kept it for our expansion. Thank you, sir. We hope that the company actually in the first few years, actually, actually I'm invested since 2011. It has rewarded us very good in 2017, 2018, but after that the company has become lethargic. Like we are expanding in the America and all this. We have put our plants there, Sri Lanka is looking after that, but only revenue is generating, there's no profit from there. And so I think we are in some vicious circle of expansion and expansion and growth and growth, but not reflecting truly in the balance sheet. So it's my suggestion, please do something like our unit five, we example that one center molecules also, but that has not been materialized. Now the new, like new CMD has come. We will also be going for expansion in some other things. Please, consolidate. We are long-term investors. We are with you. ... Thank you, sir. Thank you very much. We understand, but I think Mukesh, maybe you can wrap up, Mukesh. Sure. So, you know, sir, since 2011, which you are mentioning, our return on capital employed, return on equity, net debt to EBITDA, all the parameters we have done extremely well. So we are ensuring that we are also growing, and also we are ensuring that our balance sheets and financials are healthy. So, you know, it's, that's what I could say. Thank you, sir. Thank you. Thank you so much. The next question is from the line of, Harith Ahmed from Avendus Spark. Please go ahead. Hi, thanks for the opportunity. I'm looking at the segmental breakup of our revenues and the FD sales has increased sharply on a quarter-on-quarter basis. So, and I'm looking at the geographic mix as well. It's the U.S. market, which is also seeing a sharp increase on a quarterly basis. So, it appears that we've done quite well in that market on the formulation side. So what exactly is driving this? Are there some specific launches, or it's the general pricing and demand environment that we're seeing in that market? Okay, I think Priyanka is going to take that. Hi, good evening. Like you rightly said, the U.S. market grew quite significantly this quarter based on the formulation growth. The only thing I'd like to add to that is, while launches, new launches certainly are responsible for some of the growth, I think most of the growth this quarter came from existing products. The one stance that we've always taken is that once we enter a molecule, we don't really exit because we work on constant cost improvement activities. We work on sustainability, which CMD also mentioned earlier in this call about sustainability being a cornerstone of, cornerstone for our growth. Considering all that, I do want to point out that most of this growth came from our existing molecules, where other companies could not sustain or supply some product. That's where the major formulation growth came from. Of the FDs, Harith, you see most of our PFIs have come down a bit. Most of our PFI customers are converting to finished dosages. That's the reason that these are also growing a bit. Okay. And then, so we can, we can look at a similar run rate and, in the coming quarters and, and maybe grow them, top of this level going forward? So that's- There could be changes here and there, but definitely this is the ratio. And like I always mention, FDs will be going up and PFIs and APIs will be coming down as we go up, as we go up the value chain. And this can be seen, quarter-over-quarter. Okay. So I'm looking at the employee costs for the quarter and for the first half. There's a significant increase on a Y-o-Y basis, and this is largely responsible for our EBITDA margin being a bit muted, despite the expansion that we've seen on the gross margin front. So, you know, what is leading to this Y-o-Y increase in employee costs? Have we commissioned some new facilities or... I understand there's an element of higher R&D spend, but it looks quite high even after factoring that. Okay. We basically, our API stock is fully operational now, and we have built for manpower for extra revenue. Because there was still some delay in launches resulting from offshoot of the IT incident, the launches were delayed. And I mentioned in my last call, Q2 also will be hit to some extent. That has happened. So the whole, this manpower is built for higher revenue, and we are working towards higher revenue. And also another reason for extra manpower is, in addition to R&D, is our packaging sites in the US, new packaging sites which were built, built there in Virginia. That is fully operational now. People are there, but it has to stabilize. We expect that, end of Q4, the plant will be generating cash, and then the whole manpower is going to be justified. But we had to put in people ahead of the actual return coming in. And again, Kamra may talk about R&D. R&D manpower has also gone up quite a bit. You want to talk, talk about how many people they have? Yeah. So we have both API and formulation put together. We have ramped up the manpower by almost 50% compared to last year, and that is clearly reflecting in our productivity of R&D. So, I think we are geared up for the future growth, both in operations as well as in our R&D filings. Okay, that's helpful. Thanks for taking my question. Thank you so much. The next question is from the line of Nikhil Yadav from Motilal Oswal Services Limited. You may go ahead. Mr. Yadav, your line is unmuted. You can proceed with your question. Am I audible? Yes, you are. Yeah, Tushar here. Nikhil Yadav. It's Tushar here, sir. Sir, just extending the earlier comment. So with new launches like metoprolol... So metoprolol is launched in first, so first question? No, that's what I was referring to as delayed. Metoprolol is not launched. There are a few other products where validations are just getting completed and will be launched. ... by the end of this quarter or early next quarter. That should then ideally further drive the US sales, going forward? Yeah, that's the whole expectation. It should. Vishal, just to add to that, we have about seven launches planned in the U.S. and the U.K. and one in Europe over the next H2. So the next two quarters, you'll see quite a bit of an increase in formulation growth. Understood. Just on the raw materials or let's say the gross margin side, if you could bifurcate the benefit in terms of due to the segmental mix change and due to the lower raw material cost? Yeah, I'll clarify, Yadav. The, you know, raw material cost benefit and cost improvement benefit is largely offset by price erosions also and product mix also. The major improvement has happened because of increase in the ratio of formulation sales. Okay. And, secondly, even on the other expenses side, it has now moved almost up to INR 250 crore. So now that the MUPS facility is operational and even the packaging site is operational, so should this be considered as a base, going forward? Well, this is to be considered as base, and some of these results will start coming in from Q4, Q1 onwards. I missed the net debt number, if you could just share at the end of first half of FY 2024. Net debt is INR 990 crore. Understood. Thanks. That's it from me. Thank you. Thank you so much. The next question is from the line of Rahul Veera from Abakkus. Please go ahead. Good evening, everyone. Just a quick question on the Genome Valley formulation facility. Has it, are the CapEx on track, sir, to start in this quarter? Yes, Rahul, it's on track, but the first thing that we actually, we did a puja a few days ago. Okay. That was for the pilot plant. So now there is a manufacturing section which will come up in another six months with 2.5 billion capacity, and maybe end of, I mean, the December of calendar year 2024, the entire capacity of 8 billion will be online if everything is on track. We will be making some filings from the pilot plant in the next, next month, and which will trigger off an inspection from the FDA, and by the time the site is approved, we would have had the capacity running. A few months here and there. Sure, sir. So, so over the next six months, other than Metoprolol, which could be the other large key molecule where our expectations are very high in US? I don't think we can share the products, but we do have quite interesting molecules. As and when we launch, maybe you will be understanding, or you, as you keep tracking our approvals, also you would understand, but I don't think we should be naming these products out there. Correct. No, so which are the ones where our expectations are very high, which are in the public domain, but our expectations are very high, like two key molecules? You know, because for H1, we've done INR 2,000 crore of top line, and our ideal guidance in the last quarter was 20% on last year's base. So INR 4,500 crore was the top line FY 2023. So to move to INR 5,400 crore of top line, we have to do, like, INR 1,700 crore over the next two quarters each. This year, there is a loss sale which cannot be recovered. But still, all I can tell you is there are good launches which we are sure we can, because we have already been talking to customers, there's good traction happening. We cannot name what it will be, but definitely it's interesting and exciting. But again, I have to remind you, we cannot keep looking on quarter on quarter. It's a long-term strategy we're playing, even though we are confident of the next few quarters, and we will be seeing good improvement. Sure. Sure, sir. And, our CapEx is INR 700 crore for this full year, FY 2024? So, CapEx is INR 700 crore, you know, the guidance we have given. We have spent so far about close to INR 180 crore, and we probably would spend another INR 400 crore or so in the next two. Sure. Sure. Perfect, sir. Yeah. Thank you so much. Thank you so much. Ladies and gentlemen, I would like to remind that in case if you wish to join the question queue, please press star and one now. The next question is from the line of Madhav Marda from FIL. Please go ahead. Hi, good afternoon. Thank you so much for your time once again. Just wanted to understand on, I think in the beginning, of the call, I think, I think sir mentioned about, the EBITDA issues for us to improve in the coming quarters. Just if you could remind us, what are the key drivers? Is it basically, newer launches which are maybe better margin and then operating leverage, from the fixed costs that we've added? Is that the right way to look at the drivers of the margin improvements? So, Madhav, as I mentioned a little while ago, the entire infrastructure is now built for higher capacity. Now, we need to produce high, which we will, and sell them, and this is also be partly driven by existing molecules in new geographies. Like I said, we have some approvals in Europe, South Africa and all, and also new products in US. So these are the new launches, plus increase in existing products which will drive growth. Got it. And also, if you could just remind us of our basically paracetamol, which we wanted to sell more in outside of the U.S. markets. So how is that scale-up happening for us like Europe, et cetera, or South Africa? ... We've got quite a bit of approvals, more than 50% of those are paracetamol in Europe and South Africa, U.K. So these paracetamol in these geographies is growing in the form of formulations. In the same market, the API sale of paracetamol, we expect will be coming down as formulations increase. Obviously, formulation should be better margin than selling API, right? Of the same form. That's right. That the product mix is what will drive the margin. As we graduate more towards the end, the margins also should keep changing. That's the expectation we had all these years, and we keep harping on that. But without the support of APIs and PFIs, the whole equation will not work too. So now, the IT incident, I think there was some impact in the early part of the Q2 as well. If we—like you all did quantify in Q1, there was about INR 150 crore of sales impact. Anything that you could share for Q2, how much was that impact for us in the earlier part of the quarter? It, it's a little difficult to quantify that, Madhav, because some of the launches got delayed, too. It's not only the production. But, but I'm, I'm happy to say that the last month of the quarter was normal. We have returned to normalcy. That's why we said in my opening statement, we are back to near normalcy. We are in a normal state of running right now. So basically, like Q3, we should see full, like, normalized operations now. There's no, like, issue- Q3 should be a normal operation, as anticipated, in the past. Absolutely. Got it. Thank you. Thank you so much. The next question is from the line of Varun Basrur from Julius Baer. Please go ahead. Good afternoon. I hope I'm audible. Good afternoon. Yeah, good afternoon, sir. So just a couple of questions. Number one is that, you know, there's been some inventory buildup. I'm assuming this is in line, this is, you know, to support whatever launches are happening in H2. Has there been an element of... Will there be some sort of write-off, you know, in line with whatever lost sales has been in done in the first, in the first half? That's my first question. The second question is, you know, there have been issues in the, you know, last couple of last three quarters or so, first with the 3PL changeover and then with the cyberattack. Is there any element of this which is going to come into H2? You know, I just, if you could reiterate over that, and yeah, that's all from my side. Happy Diwali to all the participants. Okay. Mukesh is going to take that. Varun, it's a valid observation. The inventory buildup has happened, and also, largely for the new launches and also to serve the USA region, because we need to carry some inventory in USA to serve there. And, there are no such issues in terms of, you know, inventory write-off and/or anything, or loss of sale or anything in H2. So these are inventory buildup to serve launches and the expected sales. And there is an increase in- Yeah. Sorry. Go ahead. Yeah, sure. And OpEx, that there was some issue with third-party logistics switchover. That entire thing is behind us at this point, right? Or, you know, is there some, some spillover is going to happen? Yeah, the expenditure has substantially come down almost to negligible. I would request Priyanka to add on to it. I just want to add one point, okay, that the transition to our new 3PL has completed, and we've seen a very significant improvement in our open sales. So there might, this past quarter, we might have had a very small spillover and possibly a very small spillover the year, the next quarter, but there's nothing that is, substantial enough to discuss right now. All right, thank you. Thank you so much. The next question is from the line of Vikas Chadha from NT Asset Management. Please go ahead. Yeah, hi. A couple of questions. One is on the product mix. You talked about increasing share of formulations, and this quarter it is over 60%. Any guidance you can give on where do you think the share can go up to, say, in next two to three years? So two to three years should be in that range, but quarter-on-quarter, we should not be tracking. So this quarter, let's say, whatever we show, whether it will be same in Q3, Q4, difficult answer, but year-on-year, it should be in that range, and going forward, it will go beyond 60%. Understood. And, secondly, you said that sales for the IT incident is not like the product- Sorry to interrupt you, sir. There is a lot of disturbance from your line. Still, sir, we are not able to hear you. Could you please come in the better reception area? Why don't we take the next question and come back to Vikas? Yes. So we'll take the next question from the line of Mr. Yash Malhotra from JM Mutual Fund. Please go ahead. Hi, sir, I just would like to know your current optimization levels and where do you plan to take it further? ... So the optimization levels have to kick in Q3 onwards. So, as chairman has explained, you know, we have taken up a higher expenditure in quarter two. The optimization and automation effectiveness will start from Q3 onwards. Is that the question? I will answer what's the question, what you ask? Okay, no levels as in percentage. Sorry? You expect. Sorry. Yeah. Yeah, yeah, go ahead. Okay, I understand. You expect it to kick in Q3 onward. That's right. All right. Mr. Malhotra, you have any more questions? No, that's it. Thank you. Ladies and gentlemen, in order to join the question queue, please press star and one now. The next question is from the line of Nirali Shah from Ashika Group. Please go ahead. Hi, am I audible? Yes, Nirali. Yeah. So in the last call, you had actually mentioned that the legacy, that our top legacy products were no longer the top products, that is, paracetamol, metformin, hydrocodone. And that this second order will change, and probably these products will be replaced by more complex products that are upcoming. So if you could update us on this, more complex products. Nirali, the legacy products will always keep growing. I always maintain there's a lot of market for those products in new geographies, and they continue to grow. While in the new markets, new products when we launch, which will be better profitable and volumes may not be the same level. But going forward, in the next one or two years, we still see that our legacy products will at least be more than 65%, and the rest will be from new products. Even though the margins may vary, but the sales mix will be somewhat like this. Okay, thanks. And my second question is, can you also update us on the backward integration projects, mainly DCDA and PAP? Yeah, DCDA, we have put up a small pilot plant, because this is a technology being implemented by us, first time in the world and patented technology. So we just wanted to start with the pilot plant and then go on to the main plant. The pilot plant will start in February, and meanwhile, the planning for the main plant is on. The equipment also is in order, and that should start sometime in FY 2025 for DCDA. And for PAP, we are planning to start a mini commercial plant in Vizag, along with the DCDA, which should happen next year. The reason of starting in Vizag is our Kakinada site, where we plan to do CZRO and all the green chemicals and intermediates, is still not ready. The power has to come in. Rather than waiting, we just wanted to start something, run it and master the whole art, and then by the time the site is ready, we'll be ready to go there. Okay, understood. Thank you. Thank you. The next question is from the line of Mr. Varun Mishra, who's an investor. Please go ahead. Hello. Yeah, hi, sir. Am I audible? Yes, yes, Varun, you are audible. Yeah, yeah. Hi, sir. Actually, I just had one question. Like, we have seen the raw material prices have come down in this current quarter. So, like, do we see this similar trend to continue for the rest of the year, or it's like the prices have a bit, like, it has stabilized? I think, we see that the raw material prices have come down. We believe that it has touched its bottom plateau and, and we will continue to monitor it as the signals from the external world keep coming in. But as of now, I think it is at a reasonably low level. Okay. Okay, fine. That is why. That's just my question. Thank you, and Happy Diwali in advance, sir. Thank you. Thank you very much to you. Thank you so much. The next question is from the line of Nagesh Pottamari, who is an individual investor. Please go ahead. Good evening. Good evening, Nagesh. Initially, I congratulate the team for the good results of the quarter. I would like to know about the debt component. Is it in Indian rupees or foreign currency debt, and what is the cost of the debt? Before our CFO takes that question, I just want to tell you, Nagesh, thank you very much for the congratulatory message. But we all realize we have a long way to go. We are working towards it, and- Yeah, it's a, it's a continuous process. It's not a destination. Yes, it's a continuing process, and we are trying to make up for lost ground. And- True. Mukesh, you can go ahead and answer that. Our borrowings are in foreign currency, and it's a mix of long-term loan as well as short-term working capital. We are borrowing in so far that's at this rate, so which is, which is at a, you know, very competitive rate. Okay. What is the component of working capital and the term loans? ... Sorry, what is that? The breakdown of the total debt. Yeah. So out of that, out of INR 990 crore, INR 150 crore is long term. Okay. The balance is the working capital? Yeah. Good. By any chance you are in the PLI scheme? Currently we have applied for PLI scheme for our new DCDA project. Other than that, there are no other PLI schemes. Okay. Okay, that's all. No dividend has been declared for this quarter, right? No. We thought we'll be- Quarter, we have been getting some interim dividend. We mentioned we'll go for final dividend, at least, you know, when they pay a sizable amount. Okay, okay. And yeah, all the best. Thank you. Thank you so much. The next question is from the line of Rahul Veera from Abakkus. Please go ahead. Hi, sir. By any chance, any update is there for the DCDA getting the PLI approval for us? It's approved, actually. We have approval for the DCDA. Okay. For 8,000 tons. We didn't want to go beyond that. Now, even though our plan for manufacturing is 30,000 tons, when we applied, we applied only for 8,000, because there's a liability if you don't get to that number first. Right. Right, right. Fair point. Fair point, sir. Thank you, and wish the Granules teams a very, very happy Diwali, sir. Thank you. Thank you. Thank you so much. Before we take the next question, we would like to remind participants that you may press star and one to join the question queue. The next question is from the line of Shivendra NS, who is an investor. Please go ahead. Hi, thanks for the opportunity, and congratulations to Team Granules again on a very good set of numbers. I just have one clarification, not sure if it was already covered in the call. What is the status on the IT issue, and how do you see that... I mean, do you see that impacting margins going forward, or is this done and has it been resolved and in the past? The IT issue? Yeah. I think the IT issue, whatever we have faced in the quarter one, it had a spillover effect till middle of the next quarter. We have currently resolved all the issues, and as pointed out by Chairman in his speech and later, that the last month has been normal, and we are absolutely back on track for the regular production and dispatches, and all operations have become normal. Although it has got its own regularization happened last month, but it had its impact in terms of the revenue, which was also stated in the speech of the Chairman. And going forward, I just, I think the last part of your question was, we have taken enough security measures. We've done a lot, and I think we are at a much, much, much better state of preparedness to face this other attack. We, I mean, people keep getting attacked every day, and we keep monitoring what's happening. Thank you. That helps. Thank you so much for the response, and Happy Diwali to you as well. Happy Diwali to you, too. Thank you so much. The next question is from the line of Tushar Bohra from MK Ventures. Please go ahead. Yeah, thanks for the opportunity, and congratulations to the management for a strong bounce back from the issues of the previous quarter. Wishing Happy Diwali to all the participants to start with. Sir, quickly, couple of questions. First, you know, the last couple of years, you know, something or the other has continued to bog us down in terms of execution. I think we hit a quarterly high somewhere in mid-2020, you know, about INR 164 crore of PAT. Then, you know, obviously, a lot of things have happened since then. But, would it be safe to assume that, you know, with the IT incidents and the third-party logistics issue behind us, we can look at next few quarters, you know, a strong set of execution and on a much higher revenue base? Can we expect that, you know, we can have much better profitability? Like, should we look at, you know, most of these execution challenges or sporadic issues are now behind us, and we can look for a few quarters of very strong execution-led growth for the coming? I think IT issues are almost behind us, and the raw material prices have started stabilizing much lower at a lower level. So, I think it will... The residual impact of some of these issues on the execution will be there for a quarter or so, but as we expect the operations coming back to normalcy, and then the execution going to a higher level, our capacity is coming up in quarter four and quarter one. You can see progressively there will be a very good improvement, and we are all striving to achieve that. Got it, sir. And the sharp formulation growth in U.S. Is it more to do with the, you know, your core molecules, like something to do with the core molecules? Or is it the newer molecules have now started to contribute at a higher run rate? I'll take that question. It's a mix of major products, some of which are some dosage forms of the core molecules, but also a lot of them are from previously launched non-core molecules. This primarily came from GPI. So, ma'am, like, since the new products are typically, you know, they have given the Granules' strategy of gradually looking at market share increases and, you know, sustainably building the products over several years, can we say that we are finally starting to get, you know, meaningful traction from some of our launches over, say, FY 21 to 23? If you look at the IMS numbers, market shares, we picked up market share quite fast for most of our major products. There are some changes that I mentioned earlier, in my discussion, that have happened in the market, which have enabled us to pick up more market share and/or, potentially change some level of pricing with customers. Because, our competitors in the market, the competitive landscape in the market changed a little bit. That- Got it. So to answer your question, yes, we have increased market share quite a bit, but it's not something that has grown gradually. This has... We are seeing the market dynamics change, and because of Granules' backward integration and all the other pillars that we have to support our front end, we've been able to increase prices to a certain extent, very certain extent, and then sustainably grow our market share. Just to complete that, to fully answer your question, some of the new launches, we were able to get a very good market share. Yes. So therefore, sir, just to follow up on this. So therefore, we should be able to see a more consistent increase further from here or, you know, the overall traction in U.S. And, assuming that, the incremental sales also pick up in Europe once you have fully normalized from Q3 and beyond, can we expect that the overall contribution from formulations will continue to trend up or remain strong in percentage terms? Absolutely. You see an increasing trend of formulation in absolute terms. Like I mentioned earlier in this call, we have seven approvals, sorry, seven launches over the second half, most of which, the market share of which will be seen through the next couple of quarters. So outside of that, we also have new products being approved in the next fiscal year. Like Dr. Ram Rao mentioned, we have a double-digit ANDA filings that we're aiming to achieve this year. All those products, some of the products might be approved in FY 2025, and there'll be a continuity of it in FY 2026. So FDs will be a strong pillar of our growth globally, supported very strongly by our growth and investments into PFIs and APIs. Great. Just one last on the overall strategic initiatives going forward. So, you know, we see a lot of emphasis in the last few quarters on R&D and innovation, and also, you know, the work that is being done in controlled substances and new technologies, which was also mentioned earlier in this call. Maybe if you can highlight few more qualitative details and as well as highlight the path to commercialization of these new molecules or these new initiatives across enzymes and biocatalysis, as well as some of the work that is being done at the Pune laboratory. Yeah. It's, I think, highlighting on the qualitative side, definitely, you know, on the enzymes, we have really gone ahead with the three molecules, as I mentioned in my speech. And then, we will be looking forward to commercialization of at least two molecules in the coming 12-14 months, commercialization plan. And then when we really look at the entire portfolio, it is very, very clearly mentioned that we have different type of products, and we are also looking at something slightly outside the oral so, oral, oral solid forms, first wave launches, and also we are looking at NCE-1 filings. All this endeavor is, from the strategic side, is to ensure that we have a very healthy pipeline and, focused on day one launches. So with our propensity to pick up market shares through the global cost leadership, backward integration, I think we will be able to clearly see that as the pipeline keeps filling up year on year, and these are all the launches which are likely to happen if things go well between 26-30. So with that type of a midterm and a short-term plan together in the portfolio, I think as what Priyanka has very clearly stated, that we will be seeing the launches, and we will be seeing the, actually the market share picking up for these new products. And I have also stated in my speech that we are also looking at global cost leadership, and this is very important from the perspective that always the generic pricing in the markets, both U.S. and Europe, is going to go down. So should we need to compete, then I think, cost leadership is an important element. Therefore, as an overall strategy, we have a portfolio, we have launches from approval products to the Para ones, to the NCEs, and then cost leadership. Everything put together should give a lot of value to organization in the next couple of years. Thanks, sir. If just one last, if I may squeeze very quickly. You mentioned on the formulation side, have any of the newer products already surpassed metoprolol and guaifenesin products in terms of contribution to revenues on an annualized basis? Yes. A few products are doing far better than them. Fantastic, sir. Thank you so much. Wish you all the very best. Thank you. Thank you. Thank you. In the interest of time, that was our last question. I now would like to hand the conference to the management for closing comments. Once again, thank you very much, ladies and gentlemen, for attending this call. I would like to end this on a very positive note, saying that we do expect to do better quarter on quarter, and we'll all be seeing better results going forward. So with this, I wish you all a very happy upcoming Diwali. Thank you very much. Thank you.