Ladies and gentlemen, good day, and welcome to the earnings conference call of Divi's Laboratories Limited for Q1 FY 2023. 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. M. Satish Choudhury. Thank you, and over to you, sir. Good afternoon to all of you. I am 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, 2022. From Divi's Labs, we have with us today Dr. Murali K. Divi, Managing Director, Ms. Nilima Prasad Divi, Whole-time Director, Commercial, Mr. L. Kishore Babu, Chief Financial Officer, and Mr. Venkatesa Perumallu, General Manager, Finance and Accounts. During the day, our board has approved unaudited results for the quarter ended June 30th, 2022, 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 the audio of the conference call is the copyright material of Divi's Laboratories Limited and cannot be copied, rebroadcast, or attributed in press or media without specific and written consent from 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. These estimates reflect management's current expectations of 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 Labs or its officials does not undertake any obligation to publicly update any forward-looking statements, whether as a result of future events or otherwise. Now, I hand over the call to Dr. Murali K. Divi, Managing Director of the company, for opening remarks. Over to you, sir. Good afternoon, and thank you everyone for joining us at our Q1 FY 2023 earnings call. The COVID-19 continues to pose new challenges with increased infections of new subvariants. We hope you and your family members near and dear ones are staying safe and healthy during this difficult time. At Divi's, all safety protocols are still in place to ensure the well-being of our staff, and we'll continue to do the same. Looking at the global scenario, the demand is just stabilized as compared to the volatility seen during the pandemic. However, the cost pressures and logistical challenges continue to persist. Along with this, the industry is also facing pricing pressures. Now I would like to give operational overview at Divi's Labs. Capacity expansions for commercial generic APIs is now completed. Qualifications for pipeline products are progressing well. We have filed DMFs for three new APIs in multiple countries. Among these three, one is a contrast media API. Additionally, a few new contrast media APIs are currently under development. The new multipurpose facility for custom synthesis projects is now complete and are ready to meet additional requirements for the projects under validation. Divi's, as a responsible pharmaceutical company, has undertaken several CSR activities with the communities surrounding the manufacturing units, providing necessary services to 250,000 people living in the communities surrounding our facilities. Some of these initiatives include providing safe drinking water, empowering women, enhancing infrastructure, conducting health camps. Thank you. Now I request Ms. Nilima Divi to give an operational and financial update. Hello, good afternoon. I welcome everyone to Divi's Labs earnings call to discuss our Q1 FY 2023 results. I hope that each one of you, along with your friends and family, are safe. During the quarter, we continued to be a reliable partner by fulfilling all commitments to our customers despite raw material volatility and uncertainty, logistical challenges, energy crisis, and several geopolitical tensions. Procurement is actively being monitored to maintain certain amount of inventory based on product criticality. We have experienced price increases in raw materials as well as solvents compared to last quarter. The impact of it is felt in the cost of our key products. Some of the cost increases have been contained partially because of the long-term supplier contracts and also due to our recent backward integration. Shipping costs and timelines have increased significantly, particularly shipments towards North and Latin America, where ocean freights increased substantially. Trade disruptions are being caused by container shortages and port conditions as a result of geopolitical tensions and shortage of manpower at the ports. Our logistics team is constantly monitoring the situation and pre-planning ahead of time so that most of the shipments can be delivered on time. We continue to be vigilant about the day-to-day developments globally and try to mitigate risks as much as possible and ensure reliable supply to our customers. Divi's is capable of capitalizing on opportunities ahead with a combination of ready resources, 30+ years of chemistry expertise, and execution excellence. I would now brief you on the financial performance for the first quarter of the financial year 2022-2023. I would like to state that we have achieved a consolidated total revenue of INR 2,343 crores for the year, reflecting a growth of 17% over the corresponding quarter of the previous year. This is on the back of a good growth during the last financial year. Profit before tax for the quarter amounted to INR 851 crores. We earned a profit after tax of INR 702 crores during the quarter. Our EBITDA margin for the quarter accounted to 40%. Exports for the quarter accounted to 90%. Exports to regulated markets is 74% of our total revenue. Product mix for generics to custom synthesis is 47% and 53% respectively for the quarter. Constant currency growth for the quarter has been 9%. Our nutraceutical business for the quarter amounted to INR 186 crores as compared to 138 crores corresponding quarter of last year. We have a Forex gain of INR 56 crores for the quarter. Assets worth INR 87 crores have been capitalized during this quarter. Additionally, INR 512 crores of capital work in progress is underway. As of thirtieth June, we have cash on books of INR 3,431 crores, receivables of INR 2,155 crores, and inventories of INR 2,836 crores. Thank you. Thank you, madam. With this, we would request the moderator to open the line for Q&A. Thank you. We will now begin the question-and-answer 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. We have our first question from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead. Yeah, thanks for the opportunity. Sir, on the generic side, I would like to understand that it's been more or less stable sales for the past three quarters. With this capacity expansion now in place, so would we see the step up in the coming quarters, or it would take some time, based on process validation and then subsequent stability data? Yes. With the generic capacities increased, we will see in the generic portfolio, as we have completed some of the qualifications, and with the major expansion, we will see the increase in sales in the generic compounds. Yes. Got you, sir. Sir, any further update on Kakinada? There is no further news on Kakinada. We are still waiting for the Andhra Pradesh government to hand over the land to us, the 500 acres. Lastly, on the carotenoid sales, it has been a decent jump up compared to INR 155 crore-INR 160 crore to INR 190 crore now, close to. Is this a sustainable number on the back of capacity being expanded or we have some volatility over the near term? Yes. After we expanded 100% capacity, the jump of what we have seen is, yes, there are. It can, it will continue. In fact, we are expecting even business to further grow. Just lastly, if you could share the CapEx number for this year and capital work in progress. No, the working capital work in progress is about INR 500 crores right now. We plan to, in a normal circumstance, since we expanded considerably INR 2,500 crores in the last three years, and we have occupied about 85% of the capacity. Still very large capacity is available. We don't see more than about INR 500 crores-INR 600 crores of further capital expenditure to introduce new technologies of photochemistry, which we were doing earlier, flow chemistry and peptide chemistry. These are the new chemistries where several new products are coming, and also the high-potency antibody-drug conjugates. These are the technologies that are required for the next three-four years with all the molecules that are being developed. You don't need a huge investment for that. This is what is planned between new technology and some debottlenecking if required. Without Kakinada, this is what it is. If there is a Kakinada project running, I think as I mentioned last time, we'll start with about INR 1,000 crore and probably go on investing as we go along. Very nice, sir. Thanks, thanks a lot for your response, and all the best. Thank you. We have our next question from the line of Surya Narayan Patra from PhillipCapital (India) Private Limited. Please go ahead. Yeah, thanks for this opportunity, sir. Just a first question on the margins. Sequentially, is there any major change that we have witnessed in terms of the cost structures? The margin has corrected almost 3%-4%. Either it is coming from the price pressure or it is input logistics or energy costs like that, or it is product mix. What really has changed from the last quarter? Although quarterly variation that we are not judging, but any specific thing that has really resulted in a correction in margins. When you say margins. Yeah. We look at from the point of view of efficiency, profitability and productivity. Productivity, it is still good, nothing, no change. Efficiency, there's no change. What changed is, as Nilima mentioned earlier, the raw material costs have gone up. All solvents have gone up anywhere from 30%-50%. Yeah. Some of them even 100%. Some of the metals like lithium, which we use substantially as a catalyst, it has gone even 100% or 200%, as the world knows. These caused about the increase in material cost. That's what is one impact. Okay. The second one is the energy cost. Coal, what we were buying for around INR 6 a kg, we are now buying for INR 8 to INR 8.5 a kg. As you all know, steam is mainly being the energy consumed in the pharma industry per process. That is where, again, there is a 30% price increase, and it has impacted the utility cost. Another major factor is the power. What used to be about INR 6 a unit, we are now paying about INR 8+ a unit, and pharma industry consumes quite a bit of energy. During the power breaks or on a continuous run, if we have to use the generators, the cost per unit of power generation used to be around INR 30, INR 40. Today it is about INR 70-INR 80 per unit. These are some of the things that are not in our control that has impacted this, what you are seeing as either other expenses or overheads increase or raw materials being increased. It has nothing to do with the functioning of or the efficiency of the plant. Yes, sir. This cost elevation was there even in the fourth quarter, right? Or it has further enhanced and pressurized our profitability in this current quarter? I think we cannot go by quarter by quarter. Yeah. Because maybe we consumed some of those solvents, some of those materials more in one quarter than the other. Okay. Even in the energy, I think, with the way the first come, first out, first use basis, maybe some of the ones recently purchased will get charged on that basis. Sure, sir. Sir, my second question is that on the revenue front, we have maintained even strong performance despite whatever challenges, trade issues and all that. I'm just trying to understand here, whether we are still getting benefited by the limited period supply opportunity. Could be like, molnupiravir and Paxlovid or anything like that this quarter? If that is the case, what is, or, whether this is the revenue quarterly run rate is a sustainable one entire of this? I think one thing I want to bring out, I have been saying from the beginning that it's not a single product that runs the company. Mm-hmm. It's not just the custom synthesis or the generic compound. It's a combination. What we established. Normally, I don't even say the name of the compound. Since the big pharma announced the name of the compound, what became very clear to every big pharma company in the world is that if there is an NCE, if there is a large volume required, a company like Divi's only can do from NCE to launch commercial supply within six months and meet the whole world demand. That is what we have established in the world, which nobody has done in the past. We are looking at a lot of opportunities based on this credibility that came into the world by which every big pharma understood that if there is a small molecule needing large volumes, let us go to Divi's, six months, we can go to the launch. This is what we gained. Coming back to molnupiravir, yes, we had enjoyed the run, and we have completed all the orders which we have received, and we are waiting and discussing further orders. Sure, sir. Sir, just one point I wanted to clarify about, let's say, the six-point growth strategy or drivers that you have been talking about. Having created the major capacity, so for both custom synthesis as well as generics. Out of those six drivers, which are the driver that you think is likely to be the key contributor over current year and next year? I love all the growth engines. Some of the growth engines give me a lot of stability. Some of the growth engines grow like rockets, you know. You want to hear them, but I love the stable growth engines also. Coming back to, I think, your point, the contrast media growth engine, where we already increased the capacities for some of the contrast media, and we have filed DMFs to file. We are stabilizing the process and completing qualifications of other contrast media. I think that is a big growth engine which I can see in the coming two years. This is where we are going to be very strong with the iodine recovery and reuse system, with the least iodine consumption to the atom efficiency. Iodine once used to be $13 a kilo. Today it's about $80 a kg. That is the major cost in the consumption of the contrast media. If somebody has a good efficient process of recovering, reusing, he will be become the king in the game. I think we have an excellent opportunity in one of the fifth growth engine, where I've mentioned that one of the contrast media for one big pharma, which I've mentioned earlier, that we have got the contract and we will be completing. We are just in the process of completing validation and commercial production continues after that without any gap. Now we are into discussions to see there may be an upside of 2x, you know. That's what we have seen. I think these are the two main, if you ask that, the rockets that can take off. The real growth is in the future. Our last growth engine, where we mentioned that the expiry of patents between 2023 to 2025, about $20 billion worth of APIs going out of patent. This is where we have submitted DMFs in some countries and other DMFs are under preparation as we are completing the process validations. These are the ones that we'll do after the two years to take the company further up. Sure, sir. Just last one quick clarification, sir. See, for FY 2022, the export mix, if I see, the U.S. share of export has gone up from, let's say, 24% to 44%. The Europe, which used to be the dominant piece with 47%, until last year it has come down to 33%. Is there anything to read out of these numbers, sir? I don't think you can make out anything from these numbers because the big pharma generic industry usually probably you can calculate based on where it is going. Whereas the big pharma they may want it to be shipped in Europe or they may want it to be shipped to U.S. or into Singapore. It is very difficult to say with the up and down. It mainly depends on where they have formulation capacity available for running these projects. I think it will not make any real understanding to bring any point out of exports to Europe, U.S. or any other country to say what happened to each company or each product. Sure, sir. Thank you, sir. Thanks a lot. Wish you all the best. Thank you. We have our next question from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead. Thank you for taking my question, and good afternoon. Good afternoon. Just the first question around the segmental disclosures of generic versus custom and what the generic API growth, and I'm excluding nutraceuticals out of it. It seems to suggest that generic API has now shown 4% growth for the quarter YoY. I think we saw, if I recollect right, 15% decline in generic API last year, same revenue line item I'm comparing. What's the prognosis here, Dr. Murali and team? You mentioned about long-term contracts, and the ability maybe to reprice. Just going back to the point on margin, you know, are we able to pass on price hikes selectively for some of these products so that we can protect margins? I think that's the first question. I think from last several Q&A, when the questions were asked why the costs custom synthesis is going up, generic going down, generic going up, custom going down, we don't run that game. As I mentioned that we cannot be judged by quarter-on-quarter, even on year-on-year, because opportunities sometimes are lumpy, sometimes they are spread. Our objective is to keep them balanced on 50/50. Because of the large custom synthesis project we did there, probably the numbers change a little bit up and down. Otherwise, coming to the cost, I think yes, in some cases, we were able to convince the customers and save and pass on some of the raw material costs, because everybody knows the lithium that is not available in the world, even it's not available for the chips. Pharma industry is not exempted from that. People understand and compensate for such. For some of the solvents and crude, I think it takes a little more time to convince them. Long-term contracts with a clause saying that if there is a more than 10% increase, maybe it can be discussed and accommodated. Yes, we are able to do that. But I think though more of these increases happened in the last three-six months than really a year ago. Still we are under negotiations for further. Got it, sir. Very helpful. My second question is just again disclosure of some of your fiscal 2022 annual report on top products and top customers. We have seen a significant jump. For 49% top products going to 60%, top five customers, 34% going to 54%. Is there any concentration risk? I know maybe Molnupiravir is one which obviously has pushed up numbers, like you said, but how should we look about it? Are we having other drivers to kind of again go back to a more diversified revenue growth going forward? I think going forward, it will be more diversified, and I think it will, we'll go back to the way we used to be. Again, these six growth engines, what we are concentrating, leaving the first growth engine, the regular generic, I think this will bring the stability. Not to depend on just, one product or, five products. This will bring the stability because each of the growth engine has several products. Got it, sir. My last question is just again on the similar disclosure around imports and how much of it you are dependent from a material consumption perspective. This has reversed in the fiscal 2022, right? We have gone from 44% to 46%. Just trying to see backward integration we did quite a bit, and I was under the impression that this number should keep coming down and as you do in more and more of the intermediate steps. Has it changed or it's just temporary, you think? If we are looking at the imports, it's mostly like it's a situation where, you know, what's happening in the world, currently today. It could be with respect to the geopolitical tensions, or it could be the logistical challenges. Like even if you see from India to U.S., 40-foot container is currently like $11,000, which is 3 times what it used to be a year back. There are many factors that are playing with respect to why the prices are increasing and what's the cost. Yes, we did try to reduce our dependency on imports, mainly China, from about seven years back, wherein we started encouraging domestic manufacturers to produce materials which are like where China is a monopoly. Wherever we could not find a secondary source with respect to geographical diversification, we did our own backward integration. Having said that, the dependency on China is not totally gone because they have the largest capacities in basic chemicals in the industry. If we are looking at the increase in the cost, it's, I believe and I hope that it's going to be a temporary thing, and it's not going to be permanent. Once the situation settles in various factors worldwide, be it logistical or geopolitical tensions, I think the costs would go back to where they were. Thank you, Nilima, and thank you, Dr. Murali, and all the best. Thank you. We have our next question from the line of Cyndrella Thomas Carvalho from JM Financial. Please go ahead. Thanks for the opportunity. Dr. Murali K. Divi, if we understand our growth coming back on the generic side, plus you highlighted that on the contrast media opportunity also. Should we see this 870-odd quarterly run rate improving here onwards? How should we look at the generic pricing perspective for our portfolio existing and the upcoming launches? If you could also bring up what kind of CapEx we will see getting utilized for these newer generic opportunities that we are launching. The newer generic launch is going to bring a change because it's not going to occupy a lot of capacity. The newer generics are high priced, not like $30-$40 a kilo, but they are high priced and medium volume. This will occupy less capacity and produce probably more margin and more value. I think it's good to have a combination of our contrast media, these new generics and also multiple Sartan. I think let's not forget that people still did not forget about the nitrosamine impurities. People still did not forget about azido impurities that came in Sartan. Even I think yesterday we came to know that the Sartan still is the newer one. Some of the old generics may have again problem, and probably we'll have more opportunities of producing more Sartan as we already are commercializing them. I expect that the unstable times of higher raw materials are little bit effect on the margins is going to be temporary, and we should be able to go back to where we were in the next one-two years. This generic run rate of INR 870 crore should be improving as we go from this quarter onwards for the entire year. I have been saying from the beginning, we don't want to say quarter-on-quarter basis. We can talk about. I think I mentioned few times in this call that it is going to be once we complete all these validations. I think even in the generics and featured generics, the next two year, after one year, in the next two years, we should be able to see the upsides and the valuation. Otherwise our regular generics are stable, and whatever capacity we have, we are able to utilize. The amount of new capacity utilization for the entire newer generic, how much CapEx you will be kind of utilizing, which we have already done in past, like almost INR 3,500 crore in the last three years. If you recall that before we invested this 3,250 crores, we were having a revenue of INR 5,000 crores and with a profit after tax of INR 1,300 crores. In the last three years, we were able to complete that and bring it to the INR 9,000 crores of revenue and INR 2,960 crores of profit after tax. The substantive increase in these, both in terms of the sales as well as in terms of the margin, shows that we can quickly recover our investment. I think going forward, the INR 500 crores of what we have CapEx, capital work in progress and what I mentioned, an additional INR 500 crores of investment should see through, I think all the six growth engines what we have identified. Is there any one-off in the other expenses which look, you know, very elevated for this quarter? There is no one-off in this quarter other than whatever, the Fast Track project has contributed in the last one and a half years. Sir, should we assume at least above 40% EBITDA margin sustainable for FY 2023? Always we should be able to maintain the 40% EBITDA margin, yes. Okay. I think we'd like to do better, but I think it's up to 40%. Yeah. That, that's helpful, sir. Thank you. I'll be back in the queue. Thank you. We have our next question from the line of Prakash Agarwal from Axis Capital. Please go ahead. Yeah, thanks for the opportunity. Just one clarification from earlier participant. 40% including other income, I guess, because I think this quarter it was 37.6%. Would that be correct, sir? Yes. Okay, perfect. Sir, question, just trying to understand the changing dynamics as you said in opening remarks, the cost and you know, the freight and input costs have been increasing. Trying to understand this better. Is this the phenomenon we are seeing now, where we contracted at lower rates and we did not feel the pinch in the last two, three quarters? Just trying to understand this better. Can you please repeat the question again? No, I'm just trying to understand that, have we contracted in with newer rates or with higher input costs? Freight, I understand is actually coming down QoQ. So the last few quarters, did we have contracted at lower rates and now we are having higher rates for future contracts? If you could just highlight that. Because the commentary that we are hearing from other pharma companies that QoQ at least the input costs as well as the freights are coming, starting to come down. In the past we haven't heard from you. Were you contracted at lower rates in the past and now at higher rates? In the past we have been like able to you know get the prices into a contract or you know we've been playing safe or we have stocked the material quite a bit wherever necessary. The costing was like slightly better. Yes, if I say currently sitting in August, the costs are we are seeing a little bit better but still volatile. I wouldn't say they're completely back to square one, like how they were two years back. Yes, they are still volatile. Yes, we are seeing in August a slight better pricing. If I'm talking about Q1, we did see quite a price rise around that time. Okay. Fair enough. Secondly, you mentioned that this passing of cost is on a case to case basis. How about the benefits? Rupee dollar from 77-78 is touching 80 now. You have talked about it that a part of it gets passed on, a part of it, we absorb. Does that still hold or how are we placed now with the rupee dollar benefits? If we have to look at, we do a lot of imports in dollars as well. When the price goes up for the dollar, we also pay a higher price. Yeah, yeah. Naturally, I just find the exposure I'm talking about. Yes. We get the benefit of the positive net exposure? That's correct. Okay. Perfect. Great. Lastly, you know, given the investments we have done in the past and generics, given you mentioned that there is a patent cliff, which will benefit the generic, you know, production and sales. We have started to see some growth now 5%. How do we see, you know, 2023 and 2024, given that, you know, capacity utilization is yet to increase, DMF filing is already happening. Just a little color would really help us understand on the growth trajectory for the generic business. The capacity is there. The validations are happening. The drug master file submissions are happening. Once we complete these in the next six months to one year, this is when the qualification by each of the customer happens, and then the trial orders and the annual contracts. This is a process which we started one year ago, two years ago, to develop the process for them. Now it is happening and you will see the real volume after the two years. Meanwhile you will definitely see some income. Some of the approvals come early and some of them will take little time of one, two years. Yes. We have the capacity for all of those. Understood. This is one-two years away, and you are saying near term we will still see some growth. Can you please repeat? What I understood for these complex products which are, you know, heading for patent expiry, we will see in couple of years. In the meantime, the base business generics will still see some growth. Would that be correct understanding? That's part of engines where the work is going on as well. We have our regular business which is happening as well. Yes, growth I would say is something we can't see quarter-over-quarter. It is something that we would see year-over-year. What I can also add to what Nilima said, that because what I mentioned just now is about the new products where patents are going to be expired. That is one business. The second one is the three other growth engines, the contrast media growth engine, Sartans, and where we increase its capacity of some of these generics. These will start yielding as and when the qualifications are complete without waiting for the patent expiry, because these three are already patents expired, these three growth engines. Okay. Perfect. Great. That helps. Thank you so much. Thank you. We have our next question from the line of Neha Manpuria from Bank of America. Please go ahead. Yeah, thank you for taking my question. Nilima, just wanted to understand the comment that you made that costs have started to, you know, come down in August. Has there been a meaningful reduction? And what is your sense in terms of raw material cost improving further? Do you think, you know, there could be more improvement as we go ahead? As I said, while I said like, you know, we are seeing a little cost reduction or stability, we are also seeing volatility with mainly with respect to solvents and where all the solvents are being used. It is quite difficult because we are just at the beginning stages currently to decide upon whether this is going to be the trend for the entire quarter. It could be that, you know, tomorrow there could be another delay or there could be some hiccup that could have happened and the prices would again shoot up. Right now what we are trying to do is we are trying to be cautious. We are trying to take advantage of the situation whenever there is a slight dip in the prices and trying to take advantage of the situation whenever there is logistical ease. The main goal we have currently is to make sure there is no delay to the customer. Whether we have a delay or we have a cost increase is the secondary worry for us. Our primary worry is, are we supplying to the customer on time, on demand? That we are able to fulfill, and that's what our main target is. Understood. From a backward integration aspect, you know, given that, you know, investor has said that all of that benefit is already reflected in our cost, right? Or should we see some incremental benefit or offset coming, you know, from the backward integration project? The backward integration benefit has already come in. What we are trying to see is now that some of these solvents like tetraethyl orthosilicate and acetonitrile and few solvents where the prices went up very high, where moisture content is very, very critical, we are able to apply some new technologies now, membrane technologies, to see how to recover them and reuse them, which we were not doing, let's say, one year ago, two years ago. They would bring some benefit, yes. I think as Nilima said, the main thing is what is this volatility of demand and supply or somebody is just stopping production in China or elsewhere, Russia or Ukraine impacting all of a sudden, increases and I think this is where we cannot comment too much. Understood, sir. That's helpful. My last question, sir, you know, I'm not sure if you touched upon this, but any update on the Krishnapatnam project? We are planning to take up the project in Kakinada. I think only after completing Kakinada, we plan to take up the Krishnapatnam project. Understood, sir. Thank you so much. Thank you. We have our next question from the line of Rahul Jeewani from IIFL. Please go ahead. Yeah. Hi, sir. Thanks for taking my question. Sir, one of your key custom synthesis products is expected to lose patent protection early next year. You know, can you please help us understand when your custom synthesis products lose patent protection, how much of the profitability loss in such products you are able to offset by ramping up volumes on the generic API side? It is not that patent expiry that we lose all the products or we lose profitability. It is not true. Because the patent holder, instead of 100, his demand may be 70 or 80, but he always tries to give us more products. We have to look from that angle. Still, we will enjoy the premium price and the prices change from when you supply, let us say, 100 tons or 500 tons. At 100 tons, your price is much higher, you will realize much better profitability. Even after patent expiry, none of the big pharmas lost total market to the generic industry. There are compounds where they are retaining 90% of the demand still. Of certain impurity profile, which are very critical, where the generic industry may take time to achieve that. Even after patent expiry, we are talking about few years, especially if you take the neuro, the medicines that are used in the neurological, people do not want to change the brand. They want their patients to use the same brand. We have not seen a sudden disappearance of the product or sudden loss of majority of the value. Yes, there will be some loss, but always the big pharmas add more new products. That's how the balance will come. Sure, sir. Typically what we see is that once products go off patent in the U.S. market, generic companies would capture around 85%-90% market share in some of these plain vanilla oral solid products. Would you think that could have an impact on our profitability for some of these products? After the patent expiry, do we have to revise pricing which we charge to the innovator company, or the pricing remains the same as we supply pre-patent expiry? Pricing is based on a contract that we have for the next five years or 10 years, number one. Two, the cost of API in a big pharma dosage form is not like generic compound, so they need not. They do command premium, and we do get premium, number two. Three, we look at a basket of products and adding more number of new products into the basket. I don't know what you are referring to, a single product which can impact a lot, lose a lot of value. I don't recall that we have such product. Sure, sir. Sir, my second question, obviously I know you haven't been indicating the quantum of revenue contribution from some of these COVID-related products. But if you can just directionally tell us how your base custom synthesis would have grown on either a year-over-year basis or a quarter-over-quarter basis, this quarter? Excluding any one-off COVID-related opportunities. See, in the COVID-related opportunities, as you know, we started developing several products in the last three, four years. Several of them, the demand either fell down, was not there no more than few months. I think slowly we stopped all of them, Favipiravir and several other compounds. What we would like to say is that what we established is that from discovery for a new molecule, for an API in phase II, we can bring it to the scale-up and supply commercial volume with all regulatory clearances within six months. This is never heard of, and we have done it. This is what the big pharmas, all of them recognize, and I think this is where we are looking at opportunities to manufacture large volumes with the capacity what we have. See, what happened is none of the big pharmas have any manufacturing capacities of API. They have very little API capacity. If there is a molecule of large volume, and for this kind of COVID or non-COVID product, they need to outsource. If they want to launch quickly, I think they are looking at. We will have more opportunity than others, as we have proven track record. Sure, sir. That's it from my side. Thank you for answering my questions. Thank you. We have our next question from the line of Hardick Bora from Union AMC. Please go ahead. Hi. Thank you for the opportunity. Good afternoon, everyone. Sir, just question on the gross block turnover. Before we embarked on this CapEx from financial year 2020 to 2022, which we have also utilized well over this period, before that period, we used to on average generate 1.7-1.8 times revenue on our gross block for the year. Can we expect this kind of a ratio asset turn efficiency to continue into the future? I am optimistic, one. I'm an optimist. Two, yes, technologies may permit you to do that. Three, what works against us is, one, things like COVID, where we have to take more precautions on, and more delays in operations. Three, and more on the regulatory. You know, the regulatory clearances, quality assurance, quality control, having several restrictions on how the manufacturing should be conducted. There's a large difference between the way we used to conduct manufacturing in 2000, 2010, 2015, and now. We bring more productivity by increasing process yields and process efficiency. These quality assurance with new regulations or revised regulations from the regulatory bodies keep obstacles whereby we have to wait until step one is totally complete, analyzed before we do step two. You said it's a game between quality assurance and the production. Okay, sir. As we keep improving upon this, the efficiency in the system, we have seen that, let's say over the decade, more than a decade, the company's efficiency on turnover has increased. We have been able to better utilize our gross block. This improvement is expected to continue into the future. That's what I wanted to check. Yeah. If we don't get any more new regulatory agencies coming with some new guidelines, probably we should. Yes. Okay. Sir, one more clarification. Last quarter's call you had indicated that about 80%-85% of the capacity is utilized, and we have scope for adding another 10-15%. This was not including the two new SEZ Unit. Can you tell us, including those two new buildings, how much is the capacity available for growth? I think I mentioned that 83% is right now occupied, so we have still 23% available. 83, that is about 17% available right now. Mm-hmm. And again- And- 17% on the huge volume, that means we can accommodate a lot of products or a lot of projects. This does not include the two new SEZ units that are coming up, right? It does not include the two new buildings or semi-ware, semi-construction and coming up, yes. Okay. Is it possible to indicate with those two coming up, how much more capacity headroom you will have? Since they are under implementation, waiting for projects, if we install large volume reactors, then it's different from medium volume reactor equipment. It depends upon the projects online where Fair enough. We needed to increase the capacity. We may go to the 20% capacity if I have to say some number from the company. Got it, sir. We will take an update from you again as those businesses start coming in, and we'll take an update later. Thank you for this. Thank you. All the best. Thank you. Ladies and gentlemen, due to time constraints, that was the last question. I now hand over the conference to Mr. Satish Choudhury for closing comments. Over to you, sir. 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. On behalf of Divi's Laboratories Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. The conference is no longer being recorded.