Ladies and gentlemen, good day, and welcome to the earnings conference call of Divi's Laboratories Limited for the Q1 FY 2022. As a reminder, all participant lines will be in the listen only mode and there will be an option for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal to the operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Meka Satish Choudhury. Thank you. Over to you, sir. Good afternoon to all of you. I'm M. Satish Choudhury, Company Secretary and Chief Investor Relations Officer of Divi's Laboratories Limited. I welcome you all to the earnings call of the company for the quarter ended June 30th, 2021. From Divi's Lab, we have with us today Murali K. Divi, Managing Director, Kiran Divi, Whole-time Director and Chief Executive Officer, L. Kishore Babu, Chief Financial Officer, Venkatesa Perumallu Pasumarthy, Senior Manager, Finance and Accounts. During the day, our board has approved results for the quarter ended June 30th, 2021, and we have released the same to the stock exchanges, as well as updated the same in our website. Please note that this conference call is being recorded and a transcript of the same will be made available on the website of the company. Please also note that audio of the conference call is the copyright material of Divi's Laboratories Limited and cannot be copied, rebroadcasted or executed in press or media without the specific and written consent of the company. Let me draw your attention to the fact that on this call, our discussion will include certain forward-looking statements, which are predictions, projections, or other estimates about future events. The estimate reflects management's current expectations of the future performance of the company. Please note that these estimates involve several risks and uncertainties that could cause our actual results to differ materially from what is expressed or implied. Divi's Lab or its official does not undertake any obligation to publicly update any forward-looking statement, whether as a result of future events or otherwise. Now I hand over the conference to Dr. Murali K. Divi, Managing Director, for opening remarks. Over to you, sir. Good afternoon, thank you everyone for joining us on our Q1 FY 2022 earnings conference call. I hope that all of you, your families, and friends are in good health and keeping safe during this pandemic. The health crisis and effects caused by the second wave of COVID-19 pandemic have been immensely challenging for each one of us. With a threat of potential third wave around the corner based on predictions from various health organizations, along with rising cases in various other countries, it's very important that all of us continue to be vigilant and responsible in the next couple of months. Having said this, we at Divi are highly committed to safeguarding the health and well-being of our employees and their families. As a part of our focus on the same, we conducted vaccination drives and got most of our employees and their immediate families vaccinated as we believe that vaccination is possibly the best way to imbibe a sense of purpose and confidence in fighting COVID-19. Moving on to our operational exchanges, the company has put in place several measures to ensure business continuity with uninterrupted production and supplies to our customers. Focusing on the ongoing expansion to create a steady supply platform. We have completed many of the expansion and debottlenecking activities planned during the quarter with a slight delay caused by the second wave. During the quarter, we have capitalized INR 268 crore. Most of it was for the Fast Track projects and INR 579 crore of CWIP in projects, especially for creating capacities for new generic molecules and validations for these new generics are progressing very well. Second stream for the new Fast Track project is validated in BTB FCZ and is now producing commercial quantities. Third stream for the new Fast Track project is completed at Unit 1, validated and ready to supply API to BL partners. Being at the forefront of pharmaceutical industry, we have been contributing to fight pandemic since day one and continue to do our part in helping communities around our manufacturing units. Support has been provided to government hospitals, quarantine centers, and community healthcare centers in Andhra Pradesh and Telangana states by providing 1,200 oxygen cylinders and 100 oxygen concentrators. Support has been provided for COVID testing and vaccination drives in villages around our manufacturing units. In addition to these initiatives, we have also converted two of our nitrogen plants to oxygen plants and installed them in hospitals in Hyderabad and in Vizag, considering the scarcity of the same. We have also taken up several initiatives towards child empowerment, including providing notebooks in schools. Approximately 110,000 saplings were planted along with employing 102 Vrikshamitras, benefiting 25,000 people in 25 villages. We shall continue to manage our operations responsibly and create a positive impact around the communities we operate. Thank you. Good afternoon. I'm Kiran Divi. Hello, welcome to each and every one of you for the earnings call of Divi's Laboratories to discuss the results for the quarter ending June 2021. I hope that each one of you, along with your family and friends, are safe considering the continued existence of COVID-19 pandemic. On the operational front, we are back to normal and operating at full capacity. Backward integration to basic chemicals for majority of our products helps us to minimize the supply risk and avoid production disruption. Significant increase in crude oil price over the past year has resulted in increase in solvent prices. On the logistics front, existing concerns continue to increase and pose wide variety of challenges, including unavailability of containers, long sailing timelines, blank sailing, and exponential increase in freight cost. As an example, the current freight costs are at least 5x-7x higher compared to the pre-COVID levels and are expected to increase further, subjected to various factors such as crude oil prices and significant demand of containers. On the procurement side, there are slight hiccups in the incoming supply chain. However, we are able to mitigate most of these issues because of significant investments that we have made over the last two years towards backward integration to basic chemicals for most of our generic APIs, as well as logistically diversifying our supplier base. Moving to the financial performance for the first quarter of FY 2021-FY 2022, we have achieved a consolidated income of INR 1,997 crores, reflecting a growth of 14% over the corresponding quarter of the previous year. Profit before tax for the quarter amounted to INR 814 crores, a growth of 23%. Tax provision for the quarter came higher at INR 257 crores. We have earned a profit after tax of INR 557 crores for the quarter. We have a forex gain of INR 19 crores for the quarter, as against the forex gain of INR 5 crores during the corresponding quarter of last year. Exports for the quarter accounted to 89%. We continue to have normal business distribution across the regions. U.S. and U.K. accounted to 71% of our revenue. Product mix for generic to custom synthesis is 50% and 50% of the revenue respectively. Constant currency growth for the quarter has been 21%. Our nutraceutical business for the quarter amounted to INR 138 crores. We have capitalized assets of INR 270 crores during the quarter as of the end of the current period. We have cash on books of INR 2,060 crores, receivables of INR 1,897 crores, and inventories of INR 2,383 crores. Thank you. Thank you, sir. With this, we would like to request the moderator to open lines for Q&A. Thank you very much. Ladies and gentlemen, we will now begin the question answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset 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 Prakash Agarwal from Axis Capital. Please go ahead. First question, sir, is on the strong margin performance. Great job. What is leading to the strong margins? The second part to that is, while we had a very strong growth last year on low base and with new products coming up, how do we see the growth shaping up now? First one on the margin performance. I think there are several things we have taken up in the last one year, investing INR 2,500 crores in backward integration, introducing new technologies, upgradation of plants, modern mechanization, and revisiting the processes and improving the yield. I think these are some of the things that cause a positive benefit with green chemistry, and I think those are the main ones. Always revisiting, as I said earlier, is there a better way of doing it? If not, why don't we do it? The constant revisiting causes the good margins. If we were happy with whatever process we developed three years ago, five years ago, I think it's very difficult with the challenging market to maintain the profit margins. Okay. Now- Sorry. The second one you asked me about the how do you see the growth? I used to mention always, I have a dream. I want to fulfill the dream, and I'm sure I would like you also to continue dreaming about. My dreams are unlimited. I sleep good, but dreams are unlimited. What I can say is that, we can say 10%-15% growth is definitive, and the long-term, probably it will be better. Okay. Sir, the margin points that you mentioned, three, four points of backward integration, new technology, all these are sustainable points, right? What I understood is there is no one-off element of higher pricing or one-off element of shortage of raw materials or Given the market conditions, these are also here, is what I wanted to say. How much of this is sustainable of 40%-42% kind of margins, which is very good. I think you have been seeing in the last few quarters, the margins are getting better and better. It's not one-off. We think they are sustainable, and we always have new projects coming. You know when the custom synthesis are done whenever new products come, our margins can be slightly higher. Overall, I have been saying from beginning, we have good margins both in generic and custom synthesis. Sometimes there are more margins in generic, sometimes there are more margins in custom synthesis in two projects, but we need to say the distribution is good. Right now, it is 50/50 between generic and custom synthesis. That will give you more assurance that the profitability probably can be maintained here at these levels. Perfect. That is great. Thank you. I'll join back with you. 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, just on the Fast Track project, any of the contribution in this quarter or would that be more through Q2 onwards in terms of revenue? We have shipped commercial quantities for the Fast Track project, at this point, and there are two streams to meet the innovators' demand. As the commercial production is going on, we have also created a third stream for the innovators' real partners to take care of their demands. Would you like to share the contribution of the project in? I'm not at the liberty to say that. Okay. Sorry. Please go ahead. Secondly, I'm just asking again on while the long-term revenue target remains great, does that given the way FY 2021 has panned out, even on that base, 10%-15% would be possible or more than that? Looking at the, maybe Kiran can say better on the growth engines. We have developed about 6 growth engines, which we are working simultaneously. One, we have established generic where we already have anywhere from 60%-70% market share, and we believe that is growing at a 10% growth rate year-on-year. We are increasing capacities for several of our existing generic molecules, where we have 20%-30% market share, and we believe with the dynamics and our sales team, that we should be reaching the 60%-70% over there over the next few years. Compared to the third one, which is our very interesting drive, is the sartans. We have a huge advantage because of the nitrosamine impurity, the way we can control it, and the azido impurity in the product, where we are venturing into all the sartans. We're already in large production for a few of the sartans, and we'll be getting into all of them, keeping us in a very unique position. The fourth growth engine is the contrast media, where we are already one of the large players. We have entered into the other segments of contrast media, where we are signing up with innovators and several big companies. We believe in the next two, three years, we should see good results. Our fifth growth engine is there are two big custom synthesis projects apart from the Fast Track, which are also in a very Fast Track right now, and we believe we will be seeing huge advantage over the next few years. These are long-term contracts for the company in CS. Our sixth growth engine is our new generic projects, which we have selected for products which are expiring from the year 2023 all the way to 2025. These are large volume or niche molecules, which require very specific technologies, and we have already developed them, and we believe we should be in a good position once the patent expires. That's really interesting. Just the last question on the sartans. While you would have good advantage in terms of the impurity part, but how is the pricing scenario playing out? Is that still making a good economic sense in terms of company to build upon this sartan as an opportunity? Like Dr. Divi has explained, we are quite strong in backward integration, where we have developed the basic raw materials for all the sartans, the starting materials for the sartans, unlike several players who are buying their intermediates from different vendors across the world. This gives us a huge cost advantage and also helps us in controlling our impurities. By doing this, we have not only achieved cost efficiency in sartans in general, because the starting material is almost similar for all the sartans. We also were able to control the azido and the nitro impurities, whereby we are one of the few companies in the world where FDA or EDQM had no objection with our files. Thanks a lot, Kiran, and all the best. Thank you. Thank you. The next question is from the line of Surya Patra from PhillipCapital. Please go ahead. Yeah. Thanks for the opportunity, sir. Thanks for the good set of numbers. Can I get some sense about the portion of the projects which have already got plugged, or which has already started commercial activities as far, let's say, the INR 1,200 crore kind of a growth CapEx for last year and last one or two years, and the first set of projects that we were expecting to commission by first quarter of current financial year? I think we have been talking about the investment of INR 2,500 crores since 2018, when our revenue was INR 5,000 crores, PBT was INR 1,800 crores, and tax was INR 1,300 crores. That's when we started implementing these projects. In 2021, we reached INR 7,000 crores plus revenue with INR 2,627 crores plus PBT and INR 1,964 crores of profit after tax. It is still growing. We are at 10%-15%. That is the growth rate we are seeing. Sometimes based on the product mix, based on the approval, we still see growth. Okay, fine. Given the large or the mega CapEx spend what we have just completed, is it safe to say, sir, large part of this new capacity addition contribution will be attributed to some extent, let's say FY 2023 onwards or something like that, where the growth momentum could be much faster or could be like FY 2021 growth? I think you also want to remember that investment was not only for expanding capacity, introduction of new products, the Fast Track project, but also was, number one, de-bottleneck for the backward integration, where China was almost controlling all the key raw materials, and we would have been out of business if we had continued to depend for our large volume generics on China. Even in the current case, we were told by Big Pharma that you ask us to either manufacture our products from Europe or U.S. Another investment also is you have gone into the early block where we did in 1994 and 2002, Unit 1 and Unit 2. They have been upgraded to meet the current requirements of USFDA or the regulatory bodies. Okay. Sir, one interesting thing what I'm finding during the quarterly numbers is the cost saving on the other expenses front, what we are witnessing this quarter, despite of the challenges like what you just mentioned, that the multiplying jump in the logistic cost or the shipping container cost and possible some impact of the COVID during this peak period what we have just encountered this quarter. Hence, according to additional spend that we would have done. Also, there are multiple new projects which are in the various stages of implementation. Despite all that, we have seen a kind of meaningful saving in the other expenses sequentially. How should we think going ahead, despite of all these challenges you are doing this, is it a continuous phenomenon in terms of improved efficiency, in terms of cost? I think here it should not be looked at, of course, we are not a young company with low overheads. I wouldn't say that. We have employees who have already completed 25 years with a decent salary. Still we are able to maintain low overheads because of the revisiting of the factories, controlling energy, high efficiency motors, and multiple investments we have done to keep the energy cost low, so the manpower low. That's how we are able to control them between anywhere from 20%-25% compared to various other pharma companies going up to 50%-65% of other expenses. One, we don't have any financial expenditure interest. Two, we are able to take fresh graduates from the university at the starting salaries and adding them and letting them grow their knowledge as well as identify themselves with the company. As a result, we have developed a culture where people have an attachment with the company, and that's how we are able to maintain low overheads. Okay. Sure, sir. Just one clarification, sir. This logistic cost or the container cost, is it that adjusted from the top line itself while reporting in the CA? No, it's not adjusted from the top line. This is part of our expenses. That is correct. Sure, sir. Okay. Thank you, sir. Thanks a lot. Thank you. Before we take the next question, a reminder to the participants, please limit your questions to business participants only. You may rejoin the question queue if you have a follow-up. The next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead. Hi. Thank you. Good afternoon, and thank you for taking my question. The first one is on the. Sir, sorry to interrupt. May I request you to please speak a bit louder? Your audio is not very audible. Sure. Good afternoon. Thank you for taking my question. The first one is on the molnupiravir opportunity. Stream 1 and Stream 2, I think you said it's been commercialized, and Stream 3 is for the DL. I'll just read you through the disclosure from Merck, and the agreement that they have with the U.S. government for about 1.7 million treatments. This is obviously contingent on them getting an EUA. From a contribution or a significance to us or sector, given we'll be one of the bigger suppliers to them, how should we look at this as an opportunity? If I look at the number this quarter, I think you said 50% is coming from Custom Synthesis. Just trying to add, tying these two things together. Once phase III trials are over for molnupiravir and if they get an approval, do you think the quantities could further ramp up? Hi. Molnupiravir, I'm sure whatever you have read is what is publicly disclosed by Merck. At this point, because we are bound by confidentiality, we cannot talk about their volumes or numbers or their future projections. Sir, I just want to understand the direction. I'm not looking for specific numbers. Would we be a large player in that space if and when things are increasing? I'm sure we are not supplying 1.7 million treatment courses even on a monthly basis. I'm just curious to understand if the direction, are we directly aligned to that? That's the point. We are one of the large suppliers for the product. It's a total thing, whether the product, when it will get launched and what is the innovator's idea would predominantly depend on their phase III clinical trials. Very much. It's a take or pay, right? Once they get approval, it means the U.S. will look like they're buying the entire thing. Doesn't matter whether there's an actual demand or not. There is nothing like buying the entire thing. It hasn't been made, we are shipping the product and we get paid. Got it. Second question, Dr. Murali, in terms of API or the 50 products, that's another business including newer chemicals. We have seen, I think, a year-on-year decline. I don't think it's unique to you. I think many of the other companies have also seen some kind of a decline for the quarter year-on-year, some of them QOQ. Just want your thoughts on the general generic API space. I know you have said in the past that don't look at fourteen. Is there some of the euphoria around generic API last year, do you think that has died down a bit? You still think given the six levers of growth that we are talking about, there is still scope to grow even for generic APIs? Thank you. I will answer this. It is very difficult for us because of the product mix on quarter-on-quarter. Sometimes the CS business goes up, sometimes based on the sales, sometimes the generic volume goes up. As such, we have not seen any drop either from our customers worldwide or the demand has not gone down. It's just a product mix and what has been shipped out at this time. Got it. Last question from me is on the raw material imports. It's now come down as per your annual report to 44%. It's been a big significant reduction from, I think, 60%+. Is there more levers to go just on the backward integration, going back to basic inputs? Do you think we can further reduce dependence on imports? You are right that the dependency, we wanted to bring it down. That is why we started making the investment 1.5 years ago. It is true that the more we concentrate on those and as we produce them continuously, we will have better margins and probably a better grip on the product API itself. Got it, sir. Thank you, and all the best. Thank you. The next question is from the line of Nitin Agarwal from DAM Capital. Please go ahead. Thanks for the presentation. On the business you mentioned about one of the growth leaders in the contrast media business. Where the business is today to over next three years, the growth you'll be talking about, what's the primary driver of growth in the business? Is it Is it largely because of the contract manufacturing, the custom synthesis business growth, or the opportunities in the generic space within the contrast media business? Could you please repeat your question? You are not clear, please. On the contrast media business, the growth, it's going to be driven by custom synthesis opportunity, or it's going to be more about making growth with generic products into contrast media? I think Kiran has made it very clear in previous replies that we are already in the contrast media making products, and we are becoming stronger based on the technology we developed by consuming and saving the iodine, being able to recycle. That is the key to this contrast media. Having been successful, now, yes, one of the big products we are entering with a Big Pharma in the custom synthesis. That's what Kiran said earlier. Yes, it is true. The growth is coming from both engines, the custom synthesis engine for a contrast media project as well as the existing API sub-contrast media. As an overall, when you see, your iodine efficiency will go much better. Okay. Just one housekeeping. What is the sales of the nutraceuticals business this quarter? I think nutraceutical business, we cannot go by quarter on quarter. It's about INR 600 crores is what we have projected in a year, the growth is about 10%-15%. I think in these COVID times, people are trying to see how to have immunity boosters, and I think going forward, we expect the nutraceutical business to grow better. Okay, thank you. Thank you. We'll take the next question from the line of Damayanti Kerai from HSBC. Please go ahead. Hi. Thank you for the opportunity. Sir, my first question is on supply status to the regulated market from the added capacity. Are we supplying to U.S. and Europe from the expanded capacity? Continuation of that, what is the status of Kakinada plant? Sure. Thank you. Actually, our supply to the U.S. and Europe is about 71% of the total sale. This is across all both generic and custom synthesis products, both to the U.S. and EU market. Sir, my question was whether from the added downstream capacities, have you started supplies to regulated markets? Because I understand we are already supplying to non-regulated markets, but for regulated markets, we are looking for some validation completion and all. That was my question. Validation has been completed for the downstream projects of BP, FCZ and DCV. The qualifications have gone through, and this quarter it has commercialized about 20% of the sales. Over the next quarter, once all the GTA approvals are in place, we should see a good growth in those FCZ. Okay. Sir, on Kakinada, how is things? In with reference to Kakinada, all cases by the landowners were dismissed by the High Court. The state government has fixed the land cost, for which we have already paid the full amount. We think in this month, the APSEZ should be handing over the 100 acres of land to us. All statutory compliances are in place. Maybe by next month, we should be in a better shape to start activities. Okay, sir. My second question, quickly on operating costs, like we already discussed, in lieu of rising costs of freight, logistics, and you mentioned some price pressure on solvents. For next few quarters, are we expecting, I'll say, a higher level of expenses to go, do you think we'll be able to mitigate so that hopefully we can maintain our current quarter performance? The product mix based on quarter-to-quarter either solvents, some will be low, some are A shift, some are C shift. It's very difficult to say quarter-on-quarter what the other costs would be. As of now, we would say a comfortable 27% to 25%- 27% other fixed costs. Okay, sir. Thank you very much for your answers. I'm done talking to you. Thank you. The next question is from the line of Alankar Garude from Macquarie. Please go ahead. Hi, good morning, everyone, and thank you, sir, for sharing details on the group earnings. Sir, my first question is on the small molecules exposure molnupiravir opportunity. Had we faced any COVID-19 challenges at all over the past one year, like, say, slower clinical trial activity or slower new gene deals, which we could see without going forward? We did not see any slowing down on that activity. You may have noticed that there are several small molecules coming from the Roche, Atea's AT-527, opaganib from RedHill. Shionogi is coming with the product, either PF-07321332. These are all in the following the molnupiravir products coming up. There are a lot of opportunities in this segment, and people are pretty much that we may have to live for a few more years with our friendly COVID-19, it looks like, and which probably just the vaccination is not enough because of it changing up the spike. The API, like molnupiravir, all the other API submissions coming up from various other Big Pharmas. Good thing is these are all small molecules. Means we have greatest opportunity. The biologic is different. It is in the same field where we are in, and I think they all are going in the right direction. There is no slowdown on this. Understood, sir. In general, if you look at the generic API space, there have been a lot of expectations from the Indian industry, especially over the last couple of years. Being the industry leader, where do you think the industry is heading towards over the next three to five years? What would be your expectations from the government to help support the group? Well, everybody wants everything free and the government is ready to give. I don't believe that. I think what wins is the technology. If you are good in technology, I think sky is the limit, because as there are more people being able to afford the medicine in the underdeveloped and developing countries, I think there will be more usage. The question is, I think, the challenge is that, are you implementing the new technologies? Like we are implementing in flow reactors, gaseous fed reactors, tubular reactors, vapor phase mixed bed. These are all the things and analytical tools, the Orbitrap, which can detect per trillion. Now, there are only either FDA and U.S., we have such instruments, and I think the most modern waste treatment plant. These are all you need to investment, you need to invest for the next five, 10 years. It's not just enough trying to develop a process and introduce generic API quickly. I think there's still very good opportunity for companies to grow in generic APIs. As Kiran said, the sixth growth engine is a $20 billion APIs going out of patent in 2023, 2024, for which we have developed the technology and are validating and will be filing soon. I think if you invest in technology, if you invest in new plants, there is good scope, good opportunity. Thank you, sir. One small additional question. Any reason for the high tax rate in this quarter? Sorry? Tax rate. We always pay tax. We were never a zero tax payer. It's good to pay tax, in my opinion, because it helps the government to run. Some of the opportunities we had, we had made them in the SEZ where there was no benefit. Now going forward, all those products will be made as Kiran said in the DCV and the DS-SEZ. In the coming quarters, the tax rate should come down to below 23%. Probably at the end of the year, we expect it to be below 25%. Understood, sir. That's helpful. Thanks and God bless. Thank you. Before we take the next question, a reminder to the participants to please limit your question to two per participant only. The next question is from the line of Param Pratik from Choice Investment Broking. Please go ahead. Am I audible? Yes. Yes, please go ahead. Thank you for taking my question and congratulations on a very good set of numbers. Most of my questions were answered. I just had one question. You said that the mix of Custom Synthesis and generics is now 50/50. Going forward, can we expect that our Custom Synthesis will contribute more to the revenue and likewise, will contribute higher to the EBITDA margin? It is difficult to go quarter-on-quarter, as the product mix is very important. Sometimes the generic products will go in larger volumes, and sometimes the custom synthesis will also go in larger volumes. This quarter has been 50/50. Like you've seen in the previous quarter, it has been 60/40. It will always vary. Okay. Sir, can you give guidance on the CapEx plan, especially on the incremental CapEx over a period of next few years? We have mentioned that now the capital work CWIP is about INR 500 crores. We think we need to spend another INR 300 crores as an immediate CapEx in the year. Kakinada plant was projected to be INR 600 crores. This is about three years ago. We need to re-look at the product we planned and what the project cost would be. In the next two, three years, probably we should be having, based on the Kakinada and Krishnapatnam projects, it can be anywhere from INR 1,000 crores-INR 2,000 crores. Okay. That's helpful. Thank you, sir. Thank you. The next question is from the line of Bharat Sheth from Quest Investment. Please go ahead. Hi. Thanks for the opportunity and congratulations on good set of numbers. Sir, Mr. Kiran Divi elaborated growth engines. Can you throw some light whether existing infrastructure will be able to meet all those growth engines? Or we will need to again go for an expansion CapEx to take care of the top line and the opportunity which Mr. Divi said is coming in from 2023, 2024 onwards. How do we really see from five years onwards our CapEx plan? Okay. I think what Kiran Divi said, we take six engine growth. The first engine, the generics, is already invested. The second engine, the generic capacity increase from 20%- 60%, is already invested. The third engine investment is going on in the CWIP now, where we have another INR 500 crores CWIP to be completed. The contrast media investment, it is also the part of the CWIP going on right now. The new generic, which will go out of patent in 2023, the investment is already happening now. The six-engine growth, when we complete this CWIP, we should be already invested for that growth. The Kakinada growth, the investment, where I said INR 1,000-INR 2,000 crores is for other products outside the six engines. Okay. Sir, do we have any plan to take the peptide business substantially high from this level? Since last few years, we have been maintaining around INR 500, INR 600 and slowly growing. What kind of prediction do we have for the peptide business? I'm sorry, did you say peptide business? I'm sorry. Nutraceutical. I was wondering because I was a dreamer of peptide business. I was the first one in India who made protected amino acids, who made the dipeptide, tripeptide, and after I see 20 products out of rush. I was really dreaming at that time. The dream did not come true. It's okay. Now the nutraceutical, we have expanded 100% capacity, and we have geared up to apply. We are at INR 600 crores, as we mentioned earlier, growing at the rate of 10%-15% year-on growth, we anticipate. It could be higher based on this COVID and other pandemics. People are more into nutraceutical. We may expect a further growth. We are being conservative, and it's about we think INR 600 crores with a growth of 10%-15%. Thank you, sir. All the best. Thank you. The next question is from the line of Ditya Aggarwal from RBL Invest. Please go ahead. Good afternoon to everyone. My question is on molecule API. I wanted to check if you are fully backward integrated in this API. There are key challenges for other companies in this on the production. We are fully backward integrated. We have developed our own technology for the very best material. Yes, we do not have any issues with our base material. Okay. Sure, sir. Thank you. That's it from my side. Thank you. The next question is from the line of Saion Mukherjee from Nomura. Please go ahead. Yeah. Thanks for taking my question. Sir, my first question is on your comments you just said there's a concerted effort to increase vertical integration and lower the dependence on China. I just wanted to understand, sir, where we are in that path, how much we have achieved, and how has the dependence on China gone down, if you can share some numbers over the last, say, four, five years. We just started this two years ago, going through the backward integration. As you know, China has very large basic chemical manufacturing, and pharmaceutical companies have been importing both API, advanced intermediates, starting materials, and the base materials. As a result, I think several of the countries as well as India forgot how to make the key starting materials and the base chemistry. This is when we identified two, three years ago that we should be producing our own key raw materials for our big products like naproxen, gabapentin, dexamethasone and other products. We have invested substantially, and now we are totally free for our large volumes and the API. No dependency on starting materials. Also, where we are still sourcing some raw materials from China, we have identified alternate sources from Europe, U.S., and we are buying some percentage of quantity to maintain continuity of purchase from the European and U.S. sources. Okay. Sir, on Patens, correct me if I'm wrong, your current revenue contribution is not much, right? Yes. How large is the API sartan market today globally? We have a decent share in the satarn market right now on the generic side of the business. With our technology, what we have developed and backward integration of the key starting material, we are now entering into other satarns, and we feel we'll have a good share in the market. Okay. It is lower than for large molecules like we have 60%-70% market share. It's lower than that at this point for sartans. At this point, it is lower than. That is the right word to say. Okay. Sir, finally, I know you talked about upcoming generic expiry. You also mentioned that you are in the process of filing. Sir, for products which are going off patent in 2023, 2024, filings have already been made. How should we think about, is it from a longer-term perspective, these are the molecules where you will gain market share and you may not be participating in the first wave as such? Divi's strategy has always been, we file a product with one of the best processes available. We can file quickly with a very high-cost process, or we can look at the long term and play a longer game. For us, we have two goals. One is we look for the most efficient process, green chemistry, and look at atom-to-atom efficiency and see the best process available. The second thing is we do not do any kind of wars. We do not challenge any innovator. We wait till the product expires, and then we launch the product. A simple example, if you look at our history, whether it is gabapentin or naproxen sodium, dexamethasone, all these products, some of them we are the 20th one to enter into the market, but we became 60%-70% market share leader. All this comes over goodwill, consistency. Our process helps us to do this. I hope I answered your question. Yeah. That's all. Thanks a Thanks a lot. Thank you. The next question is from the line of Ankit Agarwal from UTI Mutual Fund. Ankit Agarwal, your line is open. is open. Please go ahead with your question. question. Ankit Agarwal from UTI Mutual Fund, you may please go ahead with your question. As there's no response from the current participant, we take the next question from the line of Sonia Lalwani from Stratford House Advisors. Please go ahead. Thanks, sir. Thanks for the opportunity. This one is on the CapEx. I understand that a lot of amounts, probably INR 800 crores, have been spent on CapEx since last three years. If you could give us some sense, this question you already answered, but if you can give us some sense on what is the capacity utilization and how much has the capacity increased over the past years? It's very difficult to say because when you say we have a million liters capacity, we have a lot of capacity unutilized, 15%-20%. If you take product-wise, probably some of the products we are producing at 80%-90%, 95% capacity, and some of them we are only utilizing 50% capacity because, one, we are reaching the market. Two, the customers are slowly taking our product while they have to switch from another supplier. We can say on an average, about 30% of the capacity of the plant is occupied. Understood. Also, just one clarification, you said you will be spending around INR 1,000 crores in CapEx this year in the next one or two years. This investment would be predominantly towards Kakinada and Krishnapatnam Port. Both are virgin sites, greenfield projects. Once we get government approvals and all statutory approvals, which are already in place, once everything is there, based on the product mix and opportunities, we will start investing. Understood. Also, when you speak about six growth engines, can you elaborate a bit on what growth engine that you spoke about nitrosamine and impurities control, what is this exactly, and what is the strategic value of this investment? You may recall that 2.5 years, three years ago, the FDA has come out quite strong that there is a nitrosamine impurity in the sartans, and because of that, several companies got into trouble. When they did that, they are called as azido impurities. These impurities, when FDA came and audited us, they could not find those impurities in our process, because the way we developed the process, they are not formed. This technology, what we use for substance, gave us an opportunity to enter into some of the big pharmas for their supply, as well as gave opportunities, as Kiran said, why not we make new platforms where we were not even present at this moment. Those are the ones that the capacity is getting created, and we should be introducing them during the coming year, both validation and commercial quantities. The advantage are twofolds. All the platforms start from a starting material called OTBN, o-tolylbenzonitrile. We make them in-house. We have developed that technology. From there, all the platforms, by controlling the impurity, we can produce. The leadership what we have in one platform is giving the benefit of entering into several platforms. That's what Kiran said. Understood, sir. Thank you so much. Thank you. We take the next question from the line of Nitin Gosar from Invesco Mutual Fund. Please go ahead. Thanks for the opportunity. One question. I was looking at the previous call and around the second quarter of 2021, we did mention that the transition of the revenue share between CS and generic will shift more towards 60% for CS and eventually will settle down at 50/50. At this juncture, have we settled on a 50/50 or the shift towards 60% is yet to come in CS? It is very difficult to say. The switch is not in my hands. The switch is in the customer's hand. We are creating capacity to increase both for generic products as well as custom synthesis products. We prefer maintaining 50/50. At the same time, it may so happen, we always say it is either 40/60 or 60/40, depending upon the quarter on quarter or even year on year, it may range in that 40/60/40. I would like to emphasize once again, we should not say profitability is more in generic or more in custom synthesis. We think that both are profitable depending upon which API or which product we are talking about. Fair point. At this juncture, we should keep ourselves in terms of direction understanding, we should keep ourselves open to seeing 60% as a possibility in the future? Should that simply be a consideration, or we should settle down at 50/50 from 50/50? The wishfulness is that, yes, we want to maintain more profitability. There is no doubt about that. The question is, we take all the opportunities, both from generic as well as custom synthesis, which if you maintain flexibility, it will be better for the sustainable future. Right, sir. Thanks for the answer and all the best. Thank you. Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Meka Satish Choudhury for closing comments. Over to you. Thank you all for joining us today for the earnings call of Divi's Laboratories Limited. In case you need any further clarification, please reach out to our investor relations. Thank you. Thank you. On behalf of Divi’s Laboratories Limited, this concludes this conference. Thank you all for joining. You may now disconnect your lines.