Ladies and gentlemen. G ood day, and welcome to the Q1 FY 2024 Earnings Conference Call of Alivus Life Sciences. 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 touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Soumi Rao. Thank you. Over to you, ma'am. Good evening, everyone. I welcome you all to the earnings call of Glenmark Life Sciences Limited for the quarter ended June 30th, 2023. From Glenmark Life Sciences, we have with us Dr. Yasir Rawjee, our MD and CEO, and Mr. Tushar Mistry, our CFO. Our board has approved the results for the quarter ended June 30th, 2023. We have released the same to the stock exchanges and updated it on our website as well. Please note that the recording and the transcript of this call will be available on the website of the company. I'd like to draw your attention to the fact that some of the information shared as part of this call, especially information with respect to our plans and strategies, may contain certain forward-looking statements that involve risks and uncertainties. These statements are based on the current expectations, forecasts and assumptions that are subject to risks, which could cause the actual results to differ materially from these statements depending upon the economic conditions, government policies, and other incidental factors. Such statements should not be regarded by the recipient as a substitute of their own judgment. The company undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. Our actual results may differ materially from those expressed in or implied by these forward-looking statements. With that, I invite Dr. Yasir Rawjee to say a few words. Thank you. Over to you, Dr. Yasir. Good afternoon, and welcome to everyone on our earnings call for Q1. It's a nice beginning for the financial year for us, you know, with the revenue from operations growing at 18.1% to INR 579 crore. We can attribute this to efforts of our internal team as well as favorable shifts in the external environment. Let me get into some details here. Firstly, the success that we have seen and hopefully will continue to see, is based on our diversified and niche product basket. With the internal focus on process improvement and tighter controls on operational costs, hopefully, this should, you know, help us to continue this growth momentum. Apart from the internal factors, several external factors are also being favorable to the growth, which do include demand revival from the US market. In addition, we see steady traction in Europe, emerging markets and India. We should also mention that there's an improved supply side environment, which has helped us as well, especially on the margin front. Now, looking at the segmental performance for the quarter, we saw, you know, in the last quarter that the CDMO had picked up very well, that continues and again, very likely to continue. The generic business also has picked up nicely. Like we said, you know, it's growing from the US, Europe, ROW, as well as India. The business traction is very good, CDMO as well as generic API. Interestingly, our GPL business has also started looking up from the last quarter, and the demand looks positive for, you know, the next couple of quarters, right? Our external business has also grown, like we said, substantially. That's on the business side. With respect to R&D, we have added one more molecule to our Iron Complex pipeline, so that takes our total number of products to four. We've also added two high-potent products, high-potent APIs to our Onco grid, which is now nine molecules. The total addressable market for these is about $20 billion for the front end, and we've engaged in a fair number of tie-ups with customers as well. On the filings across countries, our filing number stands at 476. Again, it's, to sum it up, it's a strong pipeline. We continue to add more. on CapEx, we expect to close between INR 150-200 crores for this financial year. A good portion of that will go into Ankleshwar, Dahej, and the Solapur Greenfield. you know, overall, we've got a good visibility for the financial year and with the improved demand and pricing environment, coupled with, you know, better input costs, we expect strong growth in the coming quarters. We continue to guide to, you know, the mid-teens with stable margins for FY 2024. I will now hand over to Tushar Mistry, our Chief Financial Officer. Thank you, Dr. Yasir. Hello, good evening, everyone. Welcome to our Q1 FY 2024 earnings call. I would like to briefly touch upon the key financial highlights for the quarter ended 30 of June, then we'll open the floor for questions and answers. We registered revenue from operations of INR 579 crore for Q1 FY 2024, with a growth of 18.1% year-on-year. While Dr. Yasir has discussed the growth drivers in his opening remarks, I would like to highlight that the product mix has been trending towards more value-added products, which is helping us deliver quality growth. Gross profit for the quarter was at INR 330 crore, up 26.6% year-on-year. Gross profit margin for the quarter was at 57.1%, up 220 basis points on sequential basis, and up 380 basis points compared to the same quarter last year. There were two reasons for higher gross margins for the quarter. One, the better product mix that we saw in Q4 of last year continued in current quarter as well. Two, we have seen softening of raw material prices, including solvents, during the quarter. EBITDA for the quarter was at INR 195 crores, up 24.8% year-on-year. EBITDA margin for the quarter was at 33.7%, flattish on sequential basis and up 180 basis points on year-on-year basis. Profit after tax was at INR 135 crores, a growth of 24.3% year-on-year, and PAT margin for the quarter was at 23.4%. Coming to business performance, external business grew strongly by 17.9% year-over-year. External business was driven by strong growth in regulated markets as well as robust pickup in CDMO business. GPL business also grew by 18.5% year-over-year. GPL contribution to the revenue was close to 34% during the quarter. As mentioned by Dr. Yasir during his speech, we are witnessing a significant rebound in GPL volumes, which is expected to be carry on in the coming quarters of the current financial. Generic API revenue for the quarter was at INR 504 crores, registering a growth of 13.3% year-over-year, on the back of strong growth in the regulated market, supported by steady growth in emerging markets. For the quarter, CDMO business continued strong growth momentum. Revenue from CDMO business was at INR 46 crores, up 21.3% year-on-year. R&D expenditure for the quarter was at INR 72.4 crores, which was 3% of our sales. We anticipate R&D expenditure to stay around 3% for FY 2024 as well. Coming to working capital, we continue to see improvement in working capital, with working capital days for Q1 2024 at 165 days, majorly driven by reduced debtor days. CapEx for the quarter was at INR 35 crores. As Dr. Yasir mentioned, for the full year, we will keep up with our strategy of calibrated CapEx of around INR 150-200 crores for the year. We continue to remain a net debt-free company. I am happy to inform you that we have generated strong cash flow of INR 98 crores during the quarter, which further strengthens our balance sheet with cash and cash equivalents of INR 380 crores on the books as of 30th of June, 2023. Overall, we are hopeful of continuing the growth momentum in coming quarters with stable margins, provided the external environment remains conducive. With that, let us open the floor for Q&A. Thank you. Thank you very much, Sir. We will now begin the Q&A session. Anyone who wishes to ask a question may press star and one on their 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. Ladies and gentlemen, in order to ensure that the management will be able to address questions from all participants in the conference, please limit your questions to two per participant. Should you have a follow-up question, please rejoin the queue. Thank you. The first question is from the line of Neha Manpuria from Bank of America. Please go ahead. Thanks for taking my question. My first question is on the gross margin trend, the, you know, 200+ basis points improvement that we've seen quarter-on-quarter. Could you give us a rough breakup of how much of this was probably because of, you know, product mix versus, you know, RM softening? Also just trying to understand, how sustainable, you know, this product mix benefit is. You know, RM obviously depends on a lot of other factors, but, how should we look at the gross margin trends for the rest of the year? Hi, Neha. See, we saw the group good product mix in Q4 as well. If you see Q4, gross margins were in the range of 54.9%, almost 55%. Mm-hmm. The improvement in, or reduction in, raw material prices was not seen in Q4. Mm. The data that we see currently is purely because of the raw material prices. That's how one should consider that the better product mix was around 55%, and the delta of another 200 basis points is from the raw material softening. This is the current scenario. From an overall perspective for the entire year, we will see as to how this pans out going forward. As of now, we see some good traction on the lower raw material prices as well as on the solvent prices. Are we seeing any risk in terms of potentially raw material prices inching up? You know, it's fair to assume that we have a fair bit of comfort on where raw material prices are. Neha, for the next couple of quarters, I think raw material prices should be fairly stable. I'm sorry, Sir, your audio was not clear. Can you please repeat your answer, question, answer? the question or the answer? The answer, sir. I think your voice was muffled a little bit. Sorry. Okay. We expect the raw material prices to hold for the next couple of quarters, based on the visibility that we have. It should be okay for a couple of quarters. We don't know how, you know, the macroeconomics conditions change, and so we'll see. At least for now, I can say that, you know, it'll be good for the next couple of quarters. In that case, you know, what is the reason for, you know, the stable margin guidance? You know, because we did 30%, we have done close to about, you know, 33% in the current quarter. Just trying to figure, you know, trying to understand the quarter that we've seen, your commentary, and the guidance that we're giving both for top line and margins. Well, there's a mix issue here, too, right? I mean, basically, we've had very good mix, plus, you know, the raw material prices have helped, like Tushar explained. Okay. That's. I mean, if the mix continues to be similar, then I would say, yes, it would go up, but I'd rather, you know, bet on the sort of, you know, be probably closer to what we'd seen in Q4, right? You know, with these reduced raw material prices. I mean, both of them are pulling in the same direction now, we are not so sure that, you know, the mix will continue to be that favorable. Understood. Thank you so much. I have more questions, I'll get back in the queue. Okay. Thank you. Thank you. The next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead. Hi, good evening, and thank you for taking my question. Just two ones on the overall generic API trends, and if you could give us some color from a therapeutic mix perspective. I think, cardiovascular still seems to be coming down, just want to understand how the whole generic pieces, including your own pricing, will this lower RM cost, will it also eventually, one, two quarter later, will it impact your pricing power as well? Just want to understand overall generic industry, how are you fairing and, what is happening in the therapy area mix? Okay. Let me take the therapy first. Again, cardiovascular is very steady, Shyam. CNS has done better, and again, that's because of, you know, existing products doing much better. Plus, we've added one new product on the CNS side. It was launched recently, and the post-launch quantities are very good. The CNS franchise is doing well. On the overall generic, I think we've been fairing pretty reasonably across the quarters. You know, of course, in the last couple of quarters, it was Japan and Latin that had pushed very well, this time it was more the US and India. That has delivered. You know, I mean, since it's not really a quarter-to-quarter business, you know, we have seen a pretty solid demand across, and even we expect Japan and Latin to bounce back. You know, so that's On the generic side. Of course, we did pass on some cost benefits to customers, right? As a result of CIP processes. That does, you know, sort of impact the top line there as well. Considering that the demand has been so solid across the markets, we expect the generic numbers to continue to grow. Understood, Dr. Yasir. Just my second question is just on the CDMO business, right? Again, I know it's volatile, and we shouldn't be looking at it quarter by quarter, but it's probably driven faster than company average growth, right? Any visibility, I know it's down QOQ, but just want to understand how should we look at this CDMO business when we look forward, will it gain in terms of contribution overall, and what are some of the projects that have contributed to this growth? Thank you. CDMO, we've got three commercial projects, right? Last quarter, we got a big shot in the arm with one of them getting an additional indication. Okay? And that bumped it up very significantly. That is something that will continue. Our customer is pretty confident of, you know, more than doubling their volumes on that one project. So, what we have now in terms of three commercial businesses, right, will continue to deliver at this level. We had a fourth, you know, project that continues to get delayed because of regulatory filings at the customer's end. But the good news is that, you know, in the last quarter, we've had traction on two CDMO projects that have now moved into advanced stages with two different innovators, okay? We expect that by Q3, Q4, at least one of them will kick in to a reasonable extent, right? These are recent developments, and we haven't really spoken about these two projects earlier, but we expect that by Q4 latest, we should have at least one of them kicking in very significantly. Apart from the fact that the three we have are going to be fairly stable and from these two new ones also, we expect one to deliver. CDMO will be pretty strong this year. Quarter-on-quarter, it might vary a little bit, but on the year, we expect CDMO to contribute nicely, 8%-9%. Okay, sir. Thank you. Thank you. A reminder to all the participants, anyone who wishes to ask a question may press star and 1 now. The next question is from the line of Tarang Agrawal from Old Bridge Capital. Please go ahead. Good evening, sir, and congratulations for extremely strong set of numbers. Two questions from my side. One, if I look at the growth, for this quarter on a year-on-year basis, how much of it is volume led? Second, how much of it is from the set of molecules or set of APIs that you were supplying in the base quarter, and how much of it is from probably new molecules? That's one. The second, I believe you spoke about an Iron Complex compound that you're working with. Is this in addition to one that you already have? If that is the case, what is the status of DMF filing for the first compound, and how far ahead is your customer in garnering approval for the product? Thank you. Tarang, the growth was largely driven by volumes. Okay. There have been some new products introduced, right. I talked about the CNS molecule, right. The new molecule, the CNS. Plus, both on the generics and CDMO right now, it's a volume driven growth. Okay. As far as old molecules versus new, obviously, the old molecules play a very big role because they continue, I mean, they are commercial businesses, right. The new molecules have also started kicking in. Coming to Iron Complexes, basically, we used to have three in the pipeline, of which one is already filed, and we are in the query stage for both the customer as well as us. We recently answered the query from the DMF side, which is just a few days back. You know, the customer is also likely to, you know, put in their response. Once those responses are acceptable, then, we can look forward to a tentative approval. Okay. Two of the molecules that were in the pipeline are going to be validated before the end of Q3. Then we recently added one new molecule, which is now in early stages of development. That's the status on the iron pipeline. Okay. Thank you. Thank you. Yeah. Thank you. The next question is from the line of Bala Murali Krishna from Oman Investment Advisors. Please go ahead. Good evening, Sir. Regarding CDMO, I would like to know what could be the revenue potential of that fourth project? I'm sorry to interrupt. Sir, your audio is not clear. Can you please. Yeah. Answer? Yeah, I think it's fine now. Regarding CDMO business, the first project which got delayed, since the last two, three quarters, and one more project, we are supposed to add in Q3 or Q4. What could be the revenue potential of these projects on an annual basis, Sir? Once it matures, it should be around $5 million. Fine. Initially in Q4, we may not see that kind of revenue, but once it picks up, the volumes indicated by the innovator, you know, should get us a business of around $5 million. Yeah, that's it. Thank you. Thank you. The next question is from the line of V.P. Rajesh from Banyan Capital Advisors. Please go ahead. Thanks for the opportunity. Just one question. Our gross margin expanded, as you said, Tushar, by 380 basis points, but our EBITDA margin has expanded by about 200 basis points. If you can explain, you know, where that 200 basis points is going, is it being invested in the R&D side, or it's just the SG&A cost is going up? That will be helpful. It was largely driven by manpower and plus, costs, because we added new infrastructure, right, have also gone up on the operation side. That's the reason. Okay. When you say infrastructure, is it for the new capacity that is coming up regarding that, or is it, you know, more with the existing plants or existing operations? Just trying to understand that. In the month of February, we did introduce, plant 6 in Dahej. Uh-huh. Capacity has been utilized in this quarter. Some capacity even in Ankleshwar was added, so there's an increase in expenses there as well. Okay. Okay. Is it fair to assume that in the coming quarters, we will get some operating leverage out of these infrastructure investments as well, or these are just sort of regular costs that are going to be there and the impact is anyway coming up in the revenue from these facilities? How should one think about it? The, it all depends on the utilization, right? I mean, once we get that utilization up, right, then we'll get that operating leverage. Understood. Thank you very much. Thank you. Participants, you may press star and one to ask a question. The next question is from the line of Neha Manpuria from Bank of America. Please go ahead. Thank you so much for taking my question. Yes, sir. You know, I see that we have increased the capacity addition that we had planned. I think last it was about 1,800, you know, kiloliters. There's a new addition that you've added in Dahej and Ankleshwar. Could you give us some color in terms of what businesses, what areas that we are focusing on? Do we have a pipeline that gives us this visibility, you know, for the large addition that we have announced? Neha, yes, you picked that up. We do see some benefit in accelerating some of the Brownfield projects, right. Because Greenfield takes time and, you know, considering that we do have the, you know, space and permissions to build out a little more in Dahej and in Ankleshwar, we've brought those forward. Okay, it'll happen much sooner, and also will happen at a reasonable cost, compared to the Greenfield. You're right, we did make those plans and have brought it forward. Because the demand scenario, clearly, you know, is going up. Hmm. We need to add capacity relatively faster. Understood. you know, has our total CapEx outlook changed for the next two years? you know, given this, we are already spending on Solapur, and we have added Ankleshwar and Dahej. Should we see a step up in spending, you know, by 2025, 2026? There should be a little bit, but then, I mean, this Brownfield expansion is basically happening at a little bit of Solapur's cost in terms of Solapur getting delayed a little bit, right? When, like Prashant said, we'll still try to keep, you know, the CapEx spend between INR 150 crores-200 crores, right? That's still very much the thought process here, right? But we'll see. I mean, we've got to end of the day, we've got to make sure we've got the capacity to service the business. Understood. You know, given that we've had this, you know, CDMO project, where you said, you know, we've seen traction, was this ahead of our expectation in terms of what we were looking for the CDMO pipeline? You know, do we have enough capacity to service, you know, these additional projects that, you know, the acceleration that we've seen in the CDMO business? Yeah. See, like we've been saying for a while now, right, that we've got quite a few irons in the fire, right? Yeah. With respect to CDMO. It's the customer, right, and their regulatory approach that has basically accelerated this. Initially, I mean, we usually do take a bit of a conservative stand with respect to how the customer will file, will make the regulatory filings. Now it seems they want to move faster. You know, that's why, you know, I mean, just we supplied validation batches, you know, in this last quarter for both these projects. Okay. Depending on how, you know, things shape up, at least one of them should get regulatory approvals for commercial to start in Q4. Understood. Thank you so much, Sir. Yeah, sure. Thank you. The next question is from the line of Nitin Agarwal from DAM Capital. Please go ahead. Thank you for taking my question. Yasir, on the, when you look at the business of the generic API business over the next two, three years, from a growth perspective, you see bulk of the growth will be contributed by our existing set of molecules or the newer launches, will play a more important role? Nitin, the new launches are going to play a huge role, right? I mean, in terms of contribution, right? In fact, I mean, you asked for a two-year time horizon, but I mean, on a sort of five-year time horizon, I mean, our plan at least looks like the new molecules will contribute as much, right? In fact, more. They'd be growing much faster, simply because we're starting from a smaller base, right? Plus, the market growth itself is, you know, much more. We expect the new molecules to contribute very significantly to, you know. Just to get that right, when you say over the next five years, 50%, it's 50% incremental sales or 50% of total revenues will be new molecules [crosstalk]? Revenue contribution. Yeah. That's like a very, very sharp, meaningful contribution from some of the newer launches. In that, is it going to be concentrated on a sort of premised on a few specific products, or this is a very broad basket of new launches you're looking at? It's a reasonably big basket, you know, because, you know, we'd explained that apart from the new and the mature products, right, we've also got an expansion basket of existing molecules that are not that big. They are expanding much faster, you know, because of newer markets, having patent expiry and customers getting added as those patent expiries come through in the markets that are opening up. Okay. Secondly, in terms of, you know, onboarding new customers or, you know, what's been your experience, been like, in which customer... If, and in terms of new customers that you're onboarding, what's the typical source of supply, API supplies for them in the past before they approached you? Yeah. Some of them are second wave filers, so the ones that didn't catch the NCE window, right? Are sort of developing it anew, like three years before the patent expiry, right? Want to get in, right. Though, that's one set of customers, but then we've also had traction from customers who are in the molecule, in the business, but then they are looking for an alternate source. Both those are moving pretty nicely. On the latter, if you can just help us understand that a bit. I mean, where are some of these customers largely, typically sourcing from, when they're looking to switch their sources? Yeah. They've got either an existing Chinese source or an Indian source, right? You know, and are looking to, you know, have another source, plus sometimes they're not happy with their existing source, so they want to sort of have a backup or even switch completely. The last question, in terms of over the last year and a half, you know, based upon how the competitive dynamics in some of the existing molecules have progressed, have you taken a decision to drop any, or some of these molecules so that you already, that you were serving in the past? Because we've had some capacity challenges for the less regulated market business, we have you know, deprioritized some molecules that don't have a good margin. There we have been a little, you know, picky in terms of choosing business, right? Wherever the margins have not been great, we kind of deprioritize those and, you know, told the customers that, you know, they need to look elsewhere. We haven't had situations where maybe the pricing has come off so much, that the molecule is not viable for us to be altogether. Could you please repeat, Nitin? I didn't catch that. I'm saying, but we haven't had situations where a molecule per se, the pricing overall has become so sort of unattractive, that it didn't make sense for us to continue it, we chose to drop those products. That, those situations haven't quite occurred? No, that hasn't happened. Okay. Thank you very much. Sure, sure. Thank you. The next question is from the line of Ashwini Agarwal from Demeter Advisors LLP. Please go ahead. Good afternoon. Namaste, Namaste, Ashvin and Tushar, and congratulations on a very solid quarter. Just on, you know, building on what Nitin asked earlier, on the CDMO side, how many products do you have which represents this INR 46 crores in revenue? Is it only these four Iron compounds, or there are R&D services on a bench of products where you are doing some development or some chemistry analysis and providing probably proof of concepts? Can you give some more color in how deep is this CDMO pipeline? Ashwini, firstly, let me clarify. The Iron Complexes do not contribute to our CDMO. I mean, and they will not, because we are working with generic customers on those molecules. That's part of our generic bucket. These are better molecules in terms of, you know, the complexity, and so the entry barrier and even the realization on price and so on is better, right? CDMO right now is driven by three projects, okay, which are not Iron Complexes. This INR 46 crore that you saw this quarter, has basically come from these three projects. With respect to the depth in the pipeline, I can say now, with a lot of confidence that we have quite a few molecules in advanced discussions with innovator players, both on the big pharma as well as the specialty side, of which I mentioned that too have gotten fast-tracked even in our scheme of things. Because the customers want them sooner. Those will come in, and then we've got a fourth one that is a fairly big opportunity, but then the customers are filing in various markets, and so the commercial realization of that fourth project hopefully will come this year, towards the end. Even if it does not, these two other projects that have now come in, and are moving much faster, one of them will definitely, you know, come through in Q4. I mean, when I look at the more advanced projects now, we're talking about three already commercial and three going to happen soon. That would be six, right? We've got a whole number of, like I said, irons in the fire where, you know, we are in discussions with the customers in various stages in terms of supply. If you looked at the CDMO business on a five-year basis, and you zoom out, do you think we can kind of grow 3x in five years? Ashwini Agarwal, your voice is breaking. May I request you to kindly use your handset, please? Is it better now? Yes, Sir. Please continue. What I was asking was that if you were to zoom out and think about the next five years, do you think CDMO can grow 3x in five years on a INR 200 crore run rate? Ashwini, if you recall, I have mentioned this earlier, that in a five-year time horizon, our sort of expectation of CDMO will be, we're at about INR 150-ish crores, right? In five years, we expect to go to about INR 600 crore, which means that our contribution of CDMO will be much bigger, right? It should be about from a current 7%-8%, it should go to about 14%-15% on a five-year time horizon. I mean, that's looking very doable, okay? Based on the traction we've seen, in the last few quarters. I mean, last year, to now, I mean, in just one year, we've had a lot of discussions, both with specialty companies as well as big pharma companies. These are all lifecycle management, okay? Lifecycle management and 505(b)(2) development. We continue to stay focused on that area and not get into, you know, this early phase stuff, because there's a huge amount of attrition in that area, and you really have to do a lot of molecules to make even one succeed. Given my sort of prior experience, you know, working, having worked in the US in big pharma, right, for a good number of years, right, I know that these are not easy, you know, businesses to, you know, make it happen. Much rather work on the life cycle piece and the specialty piece, right? That's the way we are, and really, it's the right way to look at it for a company like ours with such a big portfolio, right? The kind of process development expertise and manufacturing footprint that we have. Long answer, Ashwini, but, I mean, hopefully that gives you clarity. No, thank you so much for that. The second question was on, you know, the softening raw material input costs or solvent costs. I know that in the past you've said that, look, when solvent costs go up, we tend to absorb them a little because we want to keep customer prices stable. In a B2B business, there's always the situation where customers want to capture all the past benefits that a vendor has. Is there a situation where some of the margin uptick that we've seen on account of low costs will need to be passed on over the next couple of quarters? It could happen, right? Customers do study, you know, quite a few things, and it's likely that we may have to give away some of that benefit, but certainly, we won't do it for everything, right? It's a hard-won sort of improvement on the margin side. It would happen, Ashwini. I'm not saying that it doesn't. That's typical in our business. Okay. I mean, it would not be, I mean, we would not reverse the whole thing. Okay. Okay, great. Last question, just clarification, Tushar, you mentioned CapEx for the quarter was INR 53 crores or INR 33 crores? I couldn't hear very well. CapEx for the quarter was INR 35 crores. INR 35 crores. Okay. Yeah, that's all I needed. Thank you so much. All the best, guys. Thank you. The next question is from the line of Sajal Kapoor, an individual investor. Please go ahead. Yeah, hi. Thanks for taking my question, great work on reporting healthy numbers and free cash flow on top of having a net cash balance sheet. Well done. I have two questions. One, the cybersecurity and ransomware incidents have surged globally in recent months, these criminals are well-organized, highly sophisticated hackers targeting profitable companies. Question really is, have we done a detailed risk assessment and an exhaustive penetration testing to identify vulnerabilities in our systems and controls? That's one. Secondly, what makes us a good CDMO partner and the license to win in this niche area? A lot of private equity is also chasing this space, and competitive intensity is increasing. Thank you. On the cybersecurity and on the VAPT team, our IT team does carry out the VAPT test on a regular basis. It's a part of their protocol, that also forms part of our internal ITGC audits. This is a regular process. It's a pretty robust process that we have implemented internally. We haven't seen as yet any threats on our data in a way. It's a regular process, and it is something that is very focused on and very high amount of focus is given on that area, not only by the management, but also by the board. I'll just let doctor answer on the CDMO part. With respect to CDMO, with us, you know, it's important for us to define the space, right? Like I explained to Ashwini, we are staying very much focused on the specialty side and on the life cycle management for our customers, and that's where the products are, right? Now, one may say that the competitive intensity is high, and I would agree that, yes, it is high, there are differentiators, you know, apart from cost and capacity, that help us to win business. One big area is the whole business continuity aspect and how, you know, that is addressed for the customer. As long as we are able to, you know, give customers that comfort, in terms of the business continuity, then you're ahead of the curve in terms of the competition. Dr. Yasir, are we investing in business development? Because relationship is a very key component in the CDMO space, we have to have that sort of development and investment in building those relationships, those longer-term partnerships. Again, we are, right? But then my experience again says that, you know, with the kind of depth in the portfolio, right, and our manufacturing infrastructure and our ability in R&D to, you know, do some level of customization for the customer, I mean, this is a pretty strong combination for us to take to the customer. While contacts are important, right, we are in touch with most innovators anyway, right? Those contacts have been kind of established. In fact, our US office spends more than 50% of its time working only on, you know, this whole, you know, widening the net, basically, of bringing in customers. This is something we, you know, we continue to sort of invest and work on. That's helpful. Thank you. Finally, any update on the US FDA audits? I think all our facilities are due for a re-inspection anytime now, right? Yes, we are overdue. I mean, if you go with a three-year window, we are overdue. I can't comment for when FDA will come, but whenever they come, it'll be good for us, right? Because, you know, we can be, you know, we can be done with this. I mean, they also have a big backlog, is what I understand, because of the COVID years. I don't know where we sit on their priority list, right? We are ready. We are ready for any surprise audit, and we are confident that we should be able to sail through, right? Yeah. In fact, we've had other agencies coming and auditing us. We had Brazilian Anvisa, you know, visit Dahej, and, you know, that was in August of last year, and they cleared us, you know. You know, we've had Anvisa come audit us. We had Cofepris, the Mexican agency, do a pretty detailed audit, which was virtual, but it was a five-day audit of our Ankleshwar facility. I guess that, you know, with these agencies also talking to each other, right, there could be some of that, too, in terms of why FDA hasn't shown up yet, right? I mean, you know. And so I I can't speak for, you know, an agency like FDA. They're welcome to come anytime. Yeah, no, of course, they are. The lens that FDA uses is slightly different, as we have seen in so many cases. Have we got audited recently from PMDA, the Japanese regulator, as well? No. Okay. Okay, right. Okay, thank you for all the responses, and all the very best. Thank you. Thank you. The next question is from the line of Tushar Bora from Emkay. Please go ahead. Thanks for the opportunity, and congratulations to management for a good set of numbers. First, just quick, check. Typically, there's some seasonality at play, right? H2 typically is stronger for us than H1. Is that fair assumption? It's not a quarter-to-quarter business, right? I mean, that's the thing, right? I mean, yeah, it could be, but I mean, we hope it is, right? Because we have a good H1, we'll have a good H2 as well. I hope you're right. Again, we shouldn't read that much into it, right, into the earlier trends. Okay. Management has commented for mid-teens growth, right? The guidance is for mid-teens growth on revenue and margins to be stable to slightly higher, depending on product mix, right? Yes. That is Okay. Sir, regarding the, you know, the stake of parent, you know, the, I think they have to come down from 82% to 75%. Is there any update on that side or anything around any M&A or corporate action that, you know, you may want to highlight where the process is? Yeah. There is a process that is on, okay? You know, of course, the stake belongs to the parent, right? They are running the process, right? Landmark Pharma is running that process. We are contributing, you know, wherever needed. Yeah, they do have that window, you know, by which it has to dilute down to 75%. Okay. we would, where would we be in the process, if you may, qualitatively be able to comment? Like I said, they are the ones who are driving it, right? You know, and wherever, you know, we are needed to sort of contribute, we are, you know, sort of, you know, giving the business view and so on. Really, I would not be able to tell you, right, where exactly things stand. Sure. In terms of timeline. Sir, one quick question on the CDMO business. Given that we are seeing strong traction and guidance for, you know, some more molecules to also come in by end of this year. CDMO in general, it's fair to assume would be, you know, margin accretive, as in, the quarter in which CDMO is strong. Our overall margin profile should be trending on the upward side? Yes. Compared to the others. That is the case, right? CDMO does have better margins. Given that the, you know, relatively, we had a subdued last year, and you know, this year we have had a strong start. That should also be a factor that will drive in the full year margins as, you know, as we expect the CDMO performance to continue? It will have an impact. How much it will have, right, that it remains to be seen because it's still in single digits, right? The overall mix also helps, right? It's not only CDMO that drives the sort of margin on the business side. It does have a contribution, but because it's only, like, 70%, right? You know, I mean, it has that limitation, right? If it was a 20% or a 25% business, then of course, right, it would be very significant. Which we are expecting that over a period of time, anyway, CDMO business will trend up? Yes. For the next two, three years. Yeah, we expect okay. How many projects should we be in active discussions overall, Sir? You mentioned, two projects, but overall, the total number of opportunities that we are in discussion, and which we feel that we'll be able to qualify in this year, have some relationships. That's what. There's a sort of a, you know, a milestone you have to reach, right? That's why we are saying with confidence that for two more projects, we have crossed that milestone, and so we are saying that with confidence. The ones where we haven't got to that milestone, we probably, you know, should not put a number right now, but there's quite a few in discussion, I could say that. It would be safe to assume, sir, say, next year, we could be potentially double-digit in terms of number of active projects, FY 2025, sometime? Double means you're talking 10, 11 projects, right? Yeah. No, I won't go that far, Tushar, okay? I won't go that far. I mean, I like to, you know, we like to be sure and give a reasonable estimate to the market. Okay. Fair enough, sir. Thank you so much. Wish you all the best. I'll get back. Thank you. Thank you. The next question is from the line of Sonal Shah from Paras Investments. Please go ahead. Hi, sir. Congrats on a good set of numbers. My question was similar to the previous participant, that, if we see Y-o-Y, yes, our revenues have gone up, but quarter-on-quarter, it is, slightly down. Any particular reason for that? Sonal, again, right, I mentioned a few times that, right, this is not a quarter-on-quarter business. We shouldn't be looking at it that way, really. you know, I think, I mean, as for the beginning of the year, we've hit it pretty well, right? Mm-hmm. You know, I mean, I think, you know, based on what we can see from the demand side, right, things will continue to look good. Okay. Okay. Previous year, I think we did on a CDMO side, we did a revenue of, say, INR 120 crores. If you say 8%, 9% of our revenue, are we looking to cross INR 200 crores of business for this year for CDMO? I hope so. Okay. Let's see. I mean, you know, but we're definitely trending up, definitely. That would be margin accretive, right? Again, I answered Tushar, right? Because it's a relatively smaller contribution to the overall revenue, there's definitely going to be some impact. How much remains to be seen. Okay. Okay, looking at the raw material prices, is it safe to assume for at least for next one or two quarters of our operating margin would remain at similar levels? There should be a benefit of RM prices, for the next couple of quarters, right? Okay. That would help the margin. I mean, look, the world is a very, you know, different place today, right? Things could suddenly. I mean, solvents, for example, is very unpredictable. I don't know. I mean, based on what we are seeing and how things are trending, you know, on the gas prices and the, you know, crude prices, things should be okay, right? Solvent prices go up very fast and don't come down as fast. Okay, that's it from my side. Thank you. Sure. Thank you. The next question is from the line of Bala Murali Krishna from Oman Investment Advisors. Please go ahead. Thanks for the opportunity. I have one clarification regarding dividends. Are you going to continue the same kind of dividend as this year also, or? That's what we had mentioned earlier, that the surplus cash that we generate will be dividend out during the year or probably at the end of the year. One should expect high amount of dividend on whatever surplus cash. Okay. One more question regarding the previous participant, regarding that parent company stake. There are some news regarding the offloading of interest, like, do you have any thoughts on that? Or they are going to offload till 70% only? Nothing that we can comment on that. It's a parent-run process. What we are aware is that they have to offload another 8% in the next 1 year's time. That process, as far as we are concerned, is on. Nothing beyond that we are aware of. Okay. Thank you. Thanks a lot. Thank you. Ladies and gentlemen, we take that as the last question for today. On behalf of Glenmark Life Sciences, that concludes this conference. We thank you for joining us, and you may now disconnect your line. Thank you.