Ladies and gentlemen, good day and welcome to the discussion on the company's Q2, H1 FY 2022 financial results of Alembic Pharmaceuticals Limited. Joining us on this call today are Mr. Pranav Amin, Managing Director; Mr. Shaunak Amin, Managing Director; Mr. R. K. Baheti, Director Finance and CFO; Mr. Mitanshu Shah, Head Finance; and Mr. Ajay Kumar Desai, Senior VP Finance. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. R. K. Baheti, Director Finance and CFO. Thank you, and over to you, Mr. Baheti. Thank you. Good evening, everyone. Thank you all for joining the second quarter results conference call. I'm sure you have received the results by now. However, let me briefly take you through the highlights for the quarter/half year ended 30th of September 2021. Financials. All of you are aware that H1 of last year, particularly Q2 of last year, was exceptionally good for our U.S. generic business. Steep price erosion in U.S. market since then has impacted the business adversely. The adverse impact got compounded by the fact that with effect from 1st of September 2020, the government reduced export incentives for pharma sector, and also the Indian rupee was trading higher than dollar almost throughout April to September 2021 vis-à-vis H1 of last year. However, the good part is that we have been able to arrest the fall on a sequential Q1 to basis. We did almost 98% of sales, and PBT and PAT are 5% and 3% higher than achieved in Q1. During the quarter, our revenue was down by 11% to INR 1,092 crores, which is in context of previous corresponding quarter, that is September 2020. The revenue was down by 11% to INR 1,292 crores. EBITDA was INR 268 crores, which is 31% of sales. Profit before tax and profit after tax was maybe INR 209 crores and maybe INR 169 crores respectively. EPS for the quarter is INR 8.61 per share versus the INR 17.24 in the corresponding quarter in the previous year. Coming to actual numbers, our total revenue are down by 6% to INR 2,618 crore. EBITDA down by 40% to INR 522 crore, which is 30% of sales. EBITDA for the current H1 is 30% of sales. Profit before tax and profit after tax are down by 47% to INR 408 crore and INR 334 crore respectively. Earnings per share for H1 is INR 16.98 per share versus the INR 33.25 in corresponding H1 of previous year. CapEx for the quarter is INR 133 crore. H1 is INR 237 crore. Cumulative CapEx for ongoing projects under CWIP, including the three operating, is INR 1,981 crore. Financial return to Aleor JV for H1 is INR 55 crores. Borrowings. The gross borrowing at consolidated level is INR 850 crores versus INR 500 crores in June 2021, and the company has INR 329 crores as cash on hand. June was INR 273 crores. At net -net level, we are at similar levels. Net debt equity stands at 0.10. I'll now hand over the discussion to Pranav for his presentation on international business. Thank you, Mr. Baheti. As you all know, the U.S. business continues to remain challenging on account of the price erosion. We filed more because the last three years have been quite phenomenal in terms of the pricing and the opportunities that we had in this market. As we move forward, we look forward to launching new products as well as picking up share in existing products. We remain bullish on the U.S. market in the future and the years to come. Our R&D expense was 13% of sales at INR 168 crore for the quarter. We filed three ANDAs during the quarter. We also received five approvals, including one tentative. We cumulatively have 150 ANDA approvals, including 18 tentative approvals. We launched four products during the quarter, and we plan to launch around 8-10 in the second half. Just minutes back, the FDA concluded a re-inspection at our injectable facility, F3, located at Karakhadi. As you know, the F3 facility had received the EIR about a month back. However, the FDA came for a re-inspection on 20th of October till 11th till today, just up until half an hour back. They've concluded the inspection with 10 observations. None of the observations are related to data integrity, and the management believes that they are all addressable. The inspection also covered two additional products apart from the one which they had come for earlier. Hopefully, we'll get the compliance in place and send our responses shortly as well. As coming to the financials, the U.S. generics was at INR 348 crore for the quarter, which was down about 40%, compared to the last year, which was a phenomenal quarter for us. During the half year it was INR 716 crore. The ex-U.S. generics remained flat at INR 197 crore for the quarter, whereas it grew 6% on the half year to INR 394 crore for the first half. As you know, ex-U.S. generics had a high base of last year where we had again, a phenomenal growth. The API business degrew by 9% to INR 239 crore, and it was down 2% to INR 519 crore for the first half. The API business also, while it continues to do well, it was really accomplished last year because we had a lot of azithromycin API sales, which was used in COVID. Net of that, rest of the business has grown as well. I now request Shaunak to take you through the India branded business. Yeah. Good afternoon, everybody. For the quarter, the India formulations business grew pretty much in line with our expectations with a robust contribution from all our key therapy areas, along with all the key product segments. If I could say this was a key landmark to this quarter's numbers. Very briefly, the areas that were critical to Q2 numbers was based on consistent improvements in a couple of areas. Just key ones of these were, I think, on ground execution and operational efficiencies of the entire sales team have improved tremendously over the last two years. This, you know, complemented with a more evolved approach to how we engage with customer relationships, something that we were in the process of implementing over the last two years, I think enabled us to kind of increase both the quantity of customers we could engage with, along with a more robust quality of engagement with these customers to what people have done in the past. Coming to the numbers, the India business grew by 23% to INR 509 crore for the quarter, and it grew by 37% to INR 989 crore for H1 on a YoY basis. To break this performance down, I think the acute segment recorded a primary growth numbers of 27%. As you guys were aware, last year was an abnormal sales period for its azithromycin oral solid, you know, which had a robust growth in 2021. If I were to take ex of that number, ex of the channel oral solid, the acute business grew by 79%. On the specialty side, we had a 20% growth. Majority of it was driven in all the therapeutic areas. We had 16% growth in gastroenterology, 22% in gynecology, diabetes was 29%, and orthopedics was 34%. Along with that, our animal healthcare business continues its run of great performance now. It recorded a 24% growth over Q2 last year. As you guys were aware, Q2 last year for animal healthcare was a great quarter also. We are quite positive about this business going forward. As we see it today, there are multiple operational levers that we are working on to keep this momentum going. Also along with that, there's a large scope to resource this business adequately. Where in the past we have been extremely conservative and cautious on the resourcing of this business. Along with this, I think, continued optimism about the overall IPM growth, which we've been seeing for a few quarters now, hopefully should add further momentum to these numbers. I will throw the floor open to questions now. Thank you. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on his touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Damayanti Kerai from HSBC Securities and Capital Markets. Please go ahead. Hi. Good afternoon. Thank you for the opportunity. My question is on FDA inspection for the injectable plant. What has triggered FDA re-inspection in such a short interval since you received EIR some time back? Good question. To be honest, I don't know. I think, but they had mentioned that they will come physically to re-verify everything. Apart from the one product, ketorolac, which the inspection was earlier. They came for two additional products as well. Okay. It was product specific as well as the normal GMP re-inspection by the FDA? Well, see, you know, because it's not a commercial facility, it is always product specific to get the product approved. Apart from the first product, they came for two others, and they wanted to come and physically verify some of the other stuff. Okay. You mentioned you received 10 observations, which are addressable as per you in, I'll say, reasonable timeframe. I believe they're all addressable. Okay. My second question is again on the U.S. business. Due to these short-term challenges, do you think the opportunities from the CapEx, which we had invested in last couple of years, the upside is now pushed behind significantly from what we had anticipated earlier? We continue to remain bullish on the U.S. market. I still think it's a very interesting market. As you know, in the last few years, we've had a much higher return in the U.S. market and then at a corporate level, much higher EBITDA because of the shortages in the market. We charged much higher prices, right? That's what's corrected itself now, which we expected it to happen. Of course, it lasted longer than it did, so we're happy about it. I expect that disruptions will restart in the U.S. business in the next six months or so. That will give us more opportunities. As regards to CapEx, it depends which parts of the CapEx. If you see the Aleor CapEx that we are in the JV, that's already started contributing and it's already a commercialized product. F3 will move back a little bit because of this approval, till we get this compliance. F2, the oral solid is already approved. There, as you know, it's not about pushback, it's just that, patent expires later and we want to lock in the platform. That is on track. F2 injectable, we have filed the first of our two products, so that should also trigger an inspection. By and large, it's all to be on track as far as we are concerned, except F3, which has got pushed back due to this FDA observations. Okay. My final question is, when do you expect, you know, bottom for the U.S. business, for us? Because, you know, we have been seeing struggle for last few quarters. We understand pricing situation still remains challenging in the U.S. According to you, when you'll be reaching bottom and we should see recovery from there on? The bottom is when someone stops reducing the prices. Having said that, compared to last year to what we've seen in Q1 and compared to last year, what we've seen in Q2 year-on-year, I think this is where the base or so where what we think is the new base is at right now. You know, it's a very steady product mix, and that's where we are. Okay. This $45 million-$50 million a quarter is a new base, as per you? Q2, what we earn Q2, that's where Q1, Q2 similar numbers. That's what we expect, somewhere around that. Okay. Okay, sir. Thank you. I'll get back in the queue. Thank you. The next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead. Thanks for the opportunity. Sir, again on this Karakhadi inspection, just would like to understand all of these 10 observations. Tushar, we can't hear you. Can Can you just repeat or just if you're on a speaker, could you just pick up the line? We can't hear you. Is it better? Yeah, now it's better. Okay. Just again on Karakhadi inspection, I would like to understand out of these 10 observations, are there anything which were similar or, you know, more or less same as the one which were issued, recently, in the February inspection? You know, it's Tushar, literally the audit just got over. I'm not going into the details. I know there's no data integrity, and I believe they're all addressable. I haven't gone through all the observations as yet. It literally just got over, the audit. Just to clarify, this got again triggered by a product-specific inspection. This was for three products or for two products? They came to verify our compliance is number one. Number two, while they were here, they also came for two additional products, so total three. Okay, sir. Thank you. Thank you. Thank you. The next question is from the line of Vineet Gala from Monarch Networth Capital. Please go ahead. Hello sir. Thanks for the opportunity. I have two questions on this F3 plant. Sir, as per your initial comments, we have been audited for three products altogether now. If you could throw some light in terms of the commercialization timelines, competition, and tell us broadly about the market size of these sales for us to gauge the potential. You know, Vineet, we don't declare that. We don't disclose the name of the products or the market size because it's a little misleading, so I would like to refrain from that. Fair enough, sir. Sir, like what would be the commercialization timeline, like, by when do you expect the remediation to get over? Commercialization is. We just literally completed the audit. We will send our responses and then it depends what the FDA feels. It's tough to say. I can't really give a timeline on that because there may be a back and forth with the FDA. They may recommend some other corrective actions. It's tough to say. Fair enough. Sir, last question on the cost optimization initiatives that we discussed during our last call. If I check most of the expense line items, they are sort of in line on a Q o Q basis with respect to you know, the employee costs or the R&D expenses. What are the cost elements that you are looking at, you know, rationalizing purpose? That's a good point. Yeah. We have done a lot of rationalization of the employee cost. You won't, you will not see it now. You will only see it Q3, Q4 onwards because of the time frame and then the notice period that we have. It's still reflected in our books, but moving forward you will see that. Second thing that happened is in terms of cost, while we have done cost rationalization in terms of employees as well as consumables, efficiency improvements, they've kind of blunted out a little bit because we've seen much higher freight costs during the period as well as the supply chain disruptions that we've seen the shipping costs that have gone up. These have led to some higher costs. We also ship a lot more by air. I mentioned that we've picked up a lot of accounts. Again, you will see the increase in business in Q3, and so we had to airlift a lot of those products, which was a little higher in the last quarter. That kind of blunted out a little bit of the cost reduction initiatives and the profit for that matter of fact. O n the R&D side, my next question is on the R&D side and on this, on the gross margin. Can Q2 be considered as a sustainable base going forward? I think so, yes. Perfect. That's it from my side, sir. Thank you. Thank you. Thank you. Reminder to the participants to ask a question, please press star and one. The next question is from the line of Rashmi Sancheti from InCred Capital. Please go ahead. Yeah, thanks for the opportunity. Just want to understand the reason for the sequential improvement in the gross margin. Was it a product mix or, you know, company had some inventory gain benefits or what exactly it was? As Q1 FY 2022 also had higher COVID sales, and that's why the margins were impacted. This is something, you know, which is going to be a new base. What is shown in Q2, despite higher API prices, we are seeing a pretty good improvement in the gross margin. I do not know what you are referring to because the margins are, g ross margins are flat as far as Q1 is concerned and down as far as Q2 overall margin is concerned. What I meant is basically the raw material cost is pretty low compared to Q1 FY 2022. The previous quarter. Yeah. Like, Rashmi, the reason is that, you know, again, product mix actually, and you will see this fluctuation, but the band is, you know, very small. Like, you know, the band would remain between 2%-5% actually. Essentially in Q2 it is a little lower on account of profit enhancement is higher on account of gross margin. Also because the domestic business has done much better. This is a chronic business and domestic business has done much better there, the margins are higher. My next question is that, excluding Azithral, what is the growth in the domestic business on YoY basis? Ajay, you want to respond to this? Except azithromycin, it is 35%. 35% during the quarter, right? Yeah, yeah. Okay. My last question is that has the operating cost started coming in from the new facility? No, I think it's in the filings and the batches. We cannot commercialize it until we get the final approval from the U.S. FDA. Okay. All right, sir. That's it from my side. Thank you very much. Thank you. Thank you. The next question is from the line of Anmol Ganjoo from JM Financial. Please go ahead. Hi, thanks for taking my question. My question is for Shaunak, but probably Ajay also please respond. If you look at the domestic business, I think, you know, really impressive, especially when you look at in the context of the ex-Azithral number, 6% sequential growth. Also given the fact that, you know, this is a business which has been, you know, waiting to kind of rebound, how do you want us to think about drivers for this quarter which led to this, big beat? On a full year basis, you know, how should we think about, the domestic number? Even if you look at the therapy wise performance, you know, while the growth for Alembic is faster than, the representative market, but obviously that's not enough to explain, such a big outperformance. Yeah. Let me answer it, Anmol, as much as I can. Maybe Ajay can chip in with some data driven also numbers. You know, like I said, I think some of the stuff we've done operationally, and we've been talking about it for some time, I think the impact that we're seeing is not unfolding in one product segment. I think we're seeing some of these operational efficiencies unfolding across the organization. If I could put it's not limited to acute or gastroenterology or gynecology or anti-diabetic. I think it's happening across the board. I think we're seeing pretty much every segment has seen a small strong growth for us, including the ones that are even very tiny for us. For example, derma and ophthalmology were quite small, but those also have seen a good growth. Animal healthcare, which is actually a totally unrelated business, but a lot of these operational r ealignment have happened in that part of the business also. That's how we see the growth going forward. I mean, where are the opportunities for growth to increase? I think that certainly in certain key areas, I think gastroenterology will definitely scope to increase both numbers. I think cardiovascular there's some scope. I think anti-diabetic, there's definitely a lot of scope for us to grow numbers. I think going forward, I think we see this kind of. I wouldn't put it on an absolute basis per se, what I'm expecting because as you're aware, I think market numbers determine our growth numbers also to a fair degree. I think what I can say is that if there's any delta between the market numbers and the internal numbers, taking into account all base effects and things like that, I think we expect a good outperformance versus RPM to happen going forward. I don't know if that answers it. Yeah, that answers the question largely, thanks for that. Anything more granular that you want to call out for in terms of, you know, either lead indicators or products that we should be watching to kind of monitor whether this new impressive number is really sustainable? I think the way I would look at it is that I think we can send you guys a list of products that, you know, is key within each of these therapeutic areas. If you were to see at each product level, I think pretty much in every product we've done well. Just to give you, I think it's azithromycin that has... Sorry, not azithromycin, the wrong example for this quarter. The example is not just a lead product which has done well, it's the number one, number two, number three, number four product. All the four products have done well, and we've been able to kind of find space for all of them to grow and figure out how to do it in a way that suits us. We can send you at a granular level, product-wise, from IMS what you guys can track as a lead indicator for this measure. Thanks. That helps, Shaunak. My next question to Pranav. This quarter, did we see the full impact of incremental competition in theophylline? I think if you ask me, this is a steady state. I think the market shares are steady, and we've seen the full impact of theophylline in this quarter. To that extent, assuming that the current run rate of approvals, even assuming that we don't get injectable approvals, would it be fair to assume that although it's hard to pinpoint the exact number, but we're somewhere around close to the bottom as far as the U.S. quarterly run rate is concerned or you're seeing even further adverse headwinds, with respect to the U.S. platform? That's a good question. I think Anmol, the way I think about the business is compared to last year where we had unusually high prices. Compared to that, I think this is a new base. While we may see erosion, we're not gonna see the massive chunk that we saw on the sartans that happened in the last quarter this year. There may be a little bit, but I think it's marginal. I think this is the new base. At least I think of it as a new base. How do we now grow onto this with new product launches and capturing new opportunities. That's helpful. I know it's been very early since you guys have received the U.S. FDA communication, but anything in particular you want to call out or you think will be a time that we get incremental update on this? Because, you know, I'm feeling very excited that, you know, that this facility had finally gotten an EIR. Yeah. No, us as well, and we were actually hoping that they'd come. But I think it's a learning curve. It's a new area for us, and I'm pretty sure that we will get through this. I think there's nothing particular I can talk about right now because I have to really study it before giving any input. But I believe they're all addressable, and it's a learning curve. I believe as we have our other facilities in compliance, I think this will also get there. I think it's gonna take some time, and this is a real learning curve on it. Thank you. That's helpful, and good luck guys. Thanks. Thanks Anmol. Thank you. The next question is from the line of Mehul Sheth from Axis Capital. Please go ahead. Yeah, thank you for the opportunity. First question on your cost rationalization that you have talked about. When you say you have rationalized the employees. It is for India part or across the business or the U.S. specific, where you have actually rationalized these employees? This is part of the international business, so which is U.S. and API, the international business, not the India business. When we say gross margin is largely led by domestic business, better domestic business. Same scenario was there in Q1 as well. What was the thing that is working our favor in this Q2 to see that improvement in the gross margin? I think it's not directly correlatable. While domestic did well, there's a combination of factors within the product, the product mixes in both the divisions, you know, and various other opportunities. I think it's just too minor in the whole scheme of things. One question on India business. You have reported a very strong insulin growth, but when I see AIOCD data for the October month, for a single month, your growth is almost like a flat, is 0% growth. How do you see the, I mean, such trend going forward from here? I can't comment on AIOCD numbers. We don't subscribe to that data, so I can't. Per policy, I can't just say, I can't comment on that. Just, you can give a monthly trend or the trend that you are seeing from, say, October, November month that growth is picking up or the normalized growth or what kind of growth you are seeing on a month or, we can say in October, November month? I think, I mean, if I could put it, I think growth continues the way it was. I think we don't see any change in that. I think the market growth numbers have come down a touch, but I think maybe that's more seasonal in nature, but we expect this to continue, sir. We can expect, like, more than 20% kind of a growth in FY 2022 in domestic even? Look, I can't predict. I think there's still quite a few months left between now and the end of the year. I think for a 20% kind of growth, I think the market would have to continue with that, with the kind of growth numbers that it's been showing so far. Maybe there might be some easing up of that, but yeah. Okay. One last question if I may. On the U.S. front, I think this quarterly template of around $48 million-$49 million. On the annual front, this will imply more of a like $200 million sales and over that there will be some contribution from the new launches and all. Actually we can see that it can be just $200 miillion+ kind of a sales that we have, we can assume for the FY 2022? We refrain from giving the guidance. I will always say that, we see the last quarter being almost the bottom. If not the bottom, there may be some more erosion, but I think that we expect to set it up against our new launches and some pickup in market share. I think that's all we can say at this point. Okay. Thank you. Thank you for your time, sir. Thank you. Thank you. The next question is from the line of Cyndrella Thomas from Centrum Broking Limited. Please go ahead. Thanks for the opportunity. Team, again, on the U.S. market, if I look at the current base of $47 million, as you are saying, this could be more new base. If you look at the EIR or the upcoming activity from USFDA, how should we look at it from a 12-18 month perspective? What kind of new product basket do we expect over 12-18 months, specifically from the injectable side? And what kind of cushion it can provide to this base? If you could help us understand a bit more color on this. I would not like to segregate injectables per se, and I think we haven't done that. Our filing continues to remain at about 20-25 odd ANDAs per year, closer to 25, and that includes injectables, ophthalmics, everything. It's a mixed bag. In terms of launches, as I've said, this year we launched about 15 odd products, and we'll continue launching about 15-20 products. Some of those in the future, as and when EIR will come, will be from the injectable facility as well. Do you see any incremental cushion coming over next 12-18 months time frame? Yeah, I mean, absolutely. As we see more launches happening, that will keep adding to the base business as we move along. It be it injectables or OSC both. Okay. This quarter we saw only three ANDA filings, so this should pick up as we go ahead? Yeah. As I mentioned, for the year, our intention is to do about 20-25 ANDA filings. Just on the API business, if you could help us understand some more color and outlook, how things are, because is the channel inventory normalizing? How are we seeing things in terms of demand as well as the overall pockets for our API segment? Yeah. The API business continues to do pretty well. I think it's an interesting opportunity. It's an interesting part of the business. It continues to do well. I think we're growing across the board and all the APIs. Just we've shown a decline because last year was a very high base because it was from [azithromycin], which is used for COVID. You take that part out, apart from that, the rest of the portfolio is all growing and, it's doing pretty well. Okay. Thank you so much, and all the best. Thank you. The next question is from the line of Ranvir Singh from Sunidhi Securities. Please go ahead. Yeah, thanks for taking the question. My question on the India business. The growth in ophthalmology and dermatology was due to, we had low base last year, or we have launched new products during this quarter? Both these two segments are very low, small contributions for us. I think there have been no new launches. There's been one new launch in dermatology, but it's nothing, not a big launch. Yeah, I mean, that's it. There'll be no significant launches in either of these two product segments. Okay. How many new products we have launched in India in this quarter? In all. In this quarter? Ajay, you have exact number? Yeah, yeah. It's 10 products. 10 SKUs we have launched. 10 SKUs, not products. 10 SKUs. What was the number in Q1? Q1, five SKUs, so all put together 15 SKUs. Okay. Thank you. I think you alluded in U.S. business in second half, 10 odd products we are going to launch. This rev rate is going to increase in second half? I mean, any of these products are meaningful in nature? No, I think roughly, I think as I mentioned, we launched 15 odd products during the year, and that will remain as is. You know, it may be little lumped in one quarter or the other, but roughly you should look at about 15 odd launches in the year. Okay. I think the last one, what we hear that raw material prices has gone up for some basic materials, and that is percolating into your APIs also. Do you see this volatility in raw material is going to impact the GPM in subsequent quarters? Yes, you're right. I think as far as the industry is concerned, there is increase in raw material prices all across the board. As far as we are concerned, we haven't seen the impact of that. We do carry a little higher inventories to protect for this kind of a thing. We haven't seen that as yet, but yeah, moving forward, we will see it, because not just the raw material prices, even with the higher fuel prices, we've seen solvent prices go up, but we are okay as of now. Fine. This cost rationalization is in which part of our cost structure? Is it on logistics side or the supply chain side, or just maybe employee rationalization you are doing? It's across the board, you know. To be honest, we're looking at cost reduction across the board. We've seen it firstly in terms of the employees, secondly in terms of the operating costs, thirdly in terms of CapEx consumables, and fourthly in terms of R&D as well. The NPL remains the same. The R&D would be lower in terms of percentage? Yeah. I think what will happen is, the filing rate, because there's a time lag, right? I think where we'll feel the impact of this is after a year and a half, where we may see a little lower filing rates. Till then, immediately the filings which are already in place will still continue. Okay. Fine. Thanks a lot. That's just from my side. Thanks a lot. Thank you. The next question is from the line of Ritika from ValueQuest. Please go ahead. Thank you for taking my question, sir. If I heard you correctly, you mentioned to one of the earlier participants that you expect some disruption to happen in the U.S. market in next six months, and to gain from it. Could you highlight more on this opportunity? That was said by one of the participants. We didn't say that. No, I said that I expect this kind of market situation to continue for another six months with erosion and everything else. Will disruption happen? I don't know. I think if everyone knew about it, then it wouldn't be a disruption. I think right now what I'm saying is for the next six months to eight months, 12 months, I don't know, the supply situation where there's excessive supply in the market, I think that will still continue. That's what I meant to say. Right. Okay, sir. Also, we are seeing currently recalls and disruption and new kind of inferiority in other category of products. Could you explain if Alembic has exposure into that and yeah, the disruption seen in that category market currently? Yes, I think we saw with some of the companies there were some disruptions. I think we have not heard anything clearly from FDA yet. Let's see what happens. As you know, as I was saying, you know that the market, the U.S. market is a big market with large volumes, and sometimes you may see these disruptions. If it is there, we'd like to capture those opportunities. Yeah, we're seeing it, but we haven't heard anything concrete from the FDA yet. Okay. That's it from my side, sir. Thank you so much. Thank you. The next question is from the line of Gagan Thareja from ASK Investment Managers. Please go ahead. Yeah. Hello, am I audible? Sorry, sir, but we cannot hear you. Can you speak a bit louder? Am I audible now? Yeah. Yeah. Just two questions. One, given TG Therapeutics guidance around Ukoniq scaling up to $50 million next year and also the PDUFA date for the CLL indication, would it be fair to infer that your income from the Rhizen JV could scale up significantly over the next two years? Yeah. I think, you know, really I agree, as you know, because as I mentioned, Rhizen gets high single-digit royalty on worldwide net sales as well as some milestones on each indication. Let's see how TG scales that up, I think with the new indication once they get that. That should be exciting. I think it's been a little slow. It's been a slow start I think till they get the new indication. That should be interesting moving forward at the Rhizen level. Would it have a material sort of an impact on profit growth starting next year in your opinion? As I mentioned, you know, Rhizen has a high single-digit royalty, so it really is a function of how quickly TG ramps up Ukoniq and what level they get to. You know, I mean, they're competing with additions with the new indication CLL. It's a massive space, so it really is a function of how well they do. Okay. You also have a manufacturing contract for Ukoniq? Yes, we do have a manufacturing contract. Rhizen has a manufacturing contract, and Alembic is doing it for Rhizen. We do have manufacturing for that product as well. As the volumes pick up, there could be a material impact there as well. Second question on the Aleor JV. I mean, it's not scaled up to a level where, I mean, there has been some delay in scaling up that because of the contribution in the derma space. How are you thinking on Aleor? Are there any cost levers, or do you see, you know, an inflection point in the Aleor businesses there? Yeah. You're right. I think, as with all other businesses, the derm business has also seen a lot of competition, and that's why it's becoming competitive. Having said that, Aleor is a very low-cost operation. Having said that, we have also done some cost rationalization at Aleor as well. It is a matter of getting more products and getting the facility running further, which should happen in due course. We're just going through the patient visits, getting filings in place, and that should help us in the future. Lastly, sir, how much of the pre-operative expenses are still on the balance sheet? You know, by when would we be seeing the entire and the full-blown OpEx of the company coming through? That would be dependent on when do I start making the facility commercial, and that I can do only after I get FDA inspection clearance and then the product approvals. Difficult to give you a timeline for me. Just a clarification on that. You know, hypothetically, if the facility starts on a given date, would all the costs pertaining to the facility be running through the P&L or would it be, you know, sort of limited to the product lines which are operational within a given time? I think we intend to charge the entire expenditure the plant starts going commercial. Okay. Thank you, sir. That's all from my side. Thank you. The next question is from the line of Harith Ahamed from Spark Capital Advisors. Please go ahead. Hi, good evening. Thanks for taking my question. My first question is on the CapEx for the first half. We disclosed around INR 270 crore in 1H of FY 2022. Just trying to understand how much of this is capitalized costs, both the operational costs and interest which get capitalized. How much of this INR 270 crore is that component? INR 270 crore includes, like, of which INR 130-odd crore is pre-operative actually. The rest is the other products. Interest, we have a very small requirement actually. We have only INR 500 crore of borrowing, which is attributable to this plant. Okay. Given you know at some point this additional some INR 30-odd crores on a half-yearly basis will be hitting our P&L. Given we are having a high level of R&D spend, when the additional costs hit the P&L and you know at that point we take on some kind of margin pressure we face some sort of margin pressure. Will we look at our R&D spends as a lever which we can use to kind of offset the impact of these additional costs whenever it happens? In terms of lowering the R&D spend from the current rate of around 600% of gross spend annually. [audio distortion] Last one. Our debtor base has increased versus March levels, but it's still on the lower side. I was wondering if normal course of business the factor receivables or, you know, something specific that's leading to the lower receivables that we have. It's more efficiency of business and nothing in that. I think our working capital, both through the debtors and inventory together is in line with the industry. We are slightly smarter in our [inventory] management, and we carry a slightly higher inventory. More is a cultural call. Also, it makes matters. You know, domestic, we have lower debtor days actually. We, if you see the sales mix, we have higher domestic business. That has helped actually. Okay. Got it. Thank you very much. Thank you. The next question is from the line of Charulata Gaidhani from Dalal & Broacha. Please go ahead. Yeah. My question pertains to the domestic business. What could you give a breakup and volume, price, and new products? Ajay, you can go ahead with this. Yeah. Sorry, what you said? Can you be? Breakup between volume growth, price growth and new products. Breakup basically between India business for the quarter? Yes. Yeah, I will give it to you separately. Yeah. Okay. [audio distortion] Right. Okay. Can we, in terms of the specialty business, do you think this is a new base? Specialty business. You are talking of branded India business? Yes. India. Could you repeat the question please? India business is growing now, year-on-year, quarter after quarter after quarter. It will continue to grow and then as shown in history, and it will be, I mean, we expect it to be better than market. Okay. Right. Is it that the major growth is coming from only azithromycin and maybe Wikoryl? We don't get into product-wise. I mean, IMS data is all available out there. Okay. Acute also they should continue? Yeah. Acute is more relevant market. Yeah. We should be outperforming the market. Sorry, Shaunak, you were saying something? No. I said we will outperform in Acute also. Okay. In terms of U.S., of the 15 launches that we are planning, are there any exclusives or first to file? We don't disclose that. Okay. Okay, fine. Yeah. Thank you. Wonderful. I think, maybe we are running out of time. If there are any questions, maybe one last or you can respond to others offline. Okay. Fine. Thank you. Thank you. The next question is from the line of Bharat Celly from Equirus. Please go ahead. Yeah. Hi. Thanks for the opportunity. Baheti sir, actually, in the previous quarter, you had mentioned that gross margins will be in the range of 70%-71%, and this quarter we've seen around 74%. Obviously, there is a component which is largely because of the domestic business which would have helped. Going forward in second half, usually our domestic business is on our softer end. How do you see gross margins panning out to be considering even there is a raw material pricing or the solvent prices which are going to also increase? Bharat, already we responded to this, to a couple of other participants' question. See, these are too small micro details because it depends on at what time you bought the purchase. I mean, you did the purchases of material, inventories are carrying at what cost. 2%-3% on quarter-on-quarter basis is a difficult trajectory to do and difficult explanation to do. Broadly, I'll set the range is now set. Okay. Baheti sir, actually one more question. On the rationalization part, obviously you are doing rationalization from the U.S. as well as API business. Exactly which are the departments where we are doing this rationalization? Is it something to do with R&D division as well? Actually, it is not, department-wise or function-wise. It is on a need-based, wherever we felt that, with the growth, we had no time to really reflect on costs, on other things, and we were just focusing on capturing business opportunity. Some slack was created in the system, and we are now trying to cut that slack. It is across. Right. The last one from my side. Sir, what exactly how big is the room for us to cut down these costs? Do you see that it can further be brought down other expenses rather than thinking obviously employee- Bharat, we'll start seeing the impact from Q3 and Q4 onwards. That was just for the employee expenses. For the other expenses, to what extent we can see the savings? Okay. One is it's a consolidated balance sheet, so it also has domestic business. Now, we will continue to invest in domestic business, both in our marketing promo piece and all of that. To that extent, those expenses will go up. Whereas at the R&D level, some reduction in cost in manufacturing operations and R&D will be visible. Altogether, I think the rationalization will be there where it is needed. Understood. Largely, in a way, we are trying to say that the large part of the savings will be reflected in the employee expenses rather than in other expenses. Am I correct? Yeah. All right. That, that's good. Thanks a lot, sir. Thanks. Thank you. Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. R.K. Baheti, Director Finance and CFO, for closing comments. Yeah, thank you very much and wish you all a very happy new year in our Gujarati tradition. We had [audio distortion] starting and hopefully the new year will bring a lot more stability and prosperity to our business. Thank you for keeping faith in us and supporting us all along. Look forward to seeing you again next quarter. Thank you. Thank you. Ladies and gentlemen, on behalf of Alembic Pharmaceuticals Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.