Ladies and gentlemen, good day and welcome to the earnings conference call of Divi's Laboratories Limited for Q3 FY 2023. As a reminder, all participant lines will be in 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 and 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 and nine months ended December 31st, 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; Mr. Venkatesa Perumallu, General Manager of Finance and Accounts. During the day, our board has approved unaudited financial results for the quarter and nine months ended December 31st, 2022. 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 note that the audio of the conference call is the copyright material of Divi's Laboratories Limited and cannot be copied, rebroadcasted, or attributed in the 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. These estimates reflect 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 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 conference to Dr. Murali K. Divi, Managing Director, for opening remarks. Over to you, sir. Good morning, ladies and gentlemen. Welcome to our earnings call for the Q3 of financial year 2023. I hope that all of you, your family, and your friends are in good health. I am pleased to report that our manufacturing operations have been running smoothly despite the volatile global market scenarios, including the global recession, energy crisis, and geopolitical uncertainty. After having a great opportunity to service COVID products during last year, we are seeing normalization of our core API product portfolio, which is growing, and with addition of new product opportunities that continue to grow further. We have implemented various strategies to ensure uninterrupted supply and maintain normal operations despite COVID surge in various parts of the world. We are continuing to maintain leadership position in our core products. Our top generic products continue to grow. This growth is primarily driven by volume despite pricing pressures. INR 275 crore has been capitalized for the first nine months of this financial year. We have a capital work in progress of about INR 575 crore as at the end of the quarter. We would like to inform you that the Unit III facility near Kakinada has received the necessary clearances from government officials, and we are prepared for the prospective development of the same. We are currently finalizing the plan, and we'll give you an update in the coming quarter. We are happy to report that Divi's has continued to operate responsibly and make a positive impact in the communities where our business operates. During the last quarter, we implemented various CSR and sustainability initiatives, including infrastructure improvements in the areas surrounding our manufacturing facilities, which benefited thousands of people. With that, I'll hand over to Ms. Nilima to share some operational and financial highlights of the quarter. Thank you. Ladies and gentlemen, a very good afternoon to all of you, and thank you very much for joining us today to discuss the results for the third quarter FY 2023. I hope that everyone, along with your friends and family, is in good health. Considering the operational front, we had no disruptions to our customer shipments during the quarter, and we are operating with a commitment to fulfilling all our customer requirements on time. The global logistics scenario showed improvement with respect to sea and air freight costs during the quarter. However, minor disruptions in matters pertaining to manpower shortages continued, and we are being cautious about inbound and outbound logistics management to keep our operations smooth and meet our customer commitment. Raw material procurement and availability have been stabilized, and the material prices have slightly softened compared to the last quarter. However, the prices for some base metals, like lithium and iodine, have increased over the past quarters, and we are expecting this trend to continue. We are also continue to monitor the ever-changing energy situation. With a strong and reliable supply base and inventory control, we are confident in facing challenges that may come our way. As the world continues to change, our team stays vigilant. We are mindful of the global developments, tracking geopolitical tensions and energy prices. We are diversifying our supply base and working to mitigate risks so that we can keep our customer shipments on track and our supply chain stable. I would now brief you on financial performance for the third quarter of financial year 2022, 2023. We have achieved a consolidated total revenue of INR 1,822 crores for the current quarter, as against the revenue of INR 2,510 crores for the corresponding quarter of previous year. Material consumption for this quarter came to be about 43% of the sales revenue due to change in product mix. Profit before tax for the quarter amounted to INR 436 crores. Our effective tax rate for the quarter is 29%. We have a profit after tax of INR 307 crores for this quarter. For the nine-month period, we have a consolidated revenue of about INR 6,100 crores and profit after tax of INR 1,502 crores. Exports for the quarter continue to be around 87%. Export to Europe and America is about 69% of our revenue for the quarter and 70% for the nine-month period. Product mix for generics to custom synthesis is 55% and 45% for nine months. It is 60%- 40% for the quarter. We have a Forex gain of INR 47 crores for the quarter and a gain of INR 134 crores for the nine-month period. As we have a lower sales revenue during the quarter, our constant currency growth for the quarter has been -40%, while it has been -17% for nine-month period. Our nutraceutical business amounted to INR 160 crores for the quarter and INR 509 crores for nine months. As of 31st December, we have cash on books of INR 3,849 crores, receivables of INR 1,669 crores, and inventories of INR 2,981 crores. Thank you. Thank you, madam. With this, we would request the moderator to open the line for Q&A. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use answers 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 Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead. Thanks for the opportunity. First on the gross margin thing. The kind of product mix there. Is it a sustainable gross margin to look for, going forward? This is significantly down if you look at the historical trends. If you could elaborate on that. Could you please repeat the question again? The gross margin for the quarter has been significantly lower. While you alluded to the change in product mix being one of the reasons, but, if I look at it the historical trend rate, it has been significantly down. Again, considering the product mix, should the 3Q gross margin to be taken as a sustainable rate going forward, or this is there is more one-off or inventory write-off for the quarter? It will improve in the coming quarters. It so happened in this quarter the raw material prices have gone up and there were pressures on the sales prices of the APIs. We anticipate in the coming quarters it should be better. There should be a growth and also a profitability growth. I think you said growth, even when it came to the next, because of the high tax rate of 29%, it has impacted naturally, dropped after tax. Okay. Sir, secondly, if you can highlight further in terms of the role played by Nilima madam and Kiran, so, you know, even, in terms of, you know, shifting of gears or role to the second generation. Somehow the voice is not clear. Can you please repeat? Is it better? It's better. Yeah. My question was, while at considering the considering your age and considering the second generation also into the business, Nilima madam and Kiran. Would like to understand in further details in terms of the roles taken up by each of these and, you know, how to look at this going forward? I think the roles are clear that the finance, accounting, the material purchases or supply chain management will be done by Nilima. The production planning, marketing, sales, technology development, what we call R&D, will be handled by Kiran S. Divi. It's also being followed like, this is, this has been happening for the last five years. They both are heavily involved. I just see foreseen the new products, new pipelines, new chemistries, what else can be introduced like the vapor phase chemistry, continuous flow chemistry, photochemistry, gadolinium compounds, peptides. These are the new chemistry I'm trying to see what can be introduced. In addition to the regular generics, custom synthesis, that's all being handled by the by both Kiran and Nilima. We are also having the professionals who are experts, who have been with us for number of years. Understood, sir. Thanks, sir. Thanks, sir. Thanks, sir. Just lastly, sir, when do we expect Kakinada, basically the construction to sort of start or let's say in over the next 12-15 months, how much money you plan to invest at Kakinada? Finally, after five years since we started the first attempt to start our work in Kakinada, we got all the clearances and the land of 500 acres is handed over to us. The project planning is under progress. Product planning, some of them are starting materials, some of them are intermediates, some of them are APIs, an investment of about INR 1,000 crores. I think we will update in the very near future because we have been handed over the land in the last couple of weeks. We are protecting the land by constructing the wall around. We have moved the team, construction team and fabrication team. The whole, I think we will be updating in the coming we'll be going forward. Thanks a lot, [Vissens]. Thank you. The next question is from the line of Prakash Agarwal from Axis Capital. Please go ahead. Yeah, thanks for the opportunity, sir. Good afternoon. Sir, trying to understand, you know, definitely the, you know, the product mix has changed, the mix has gone up. Within generics, is there a pricing pressure that you are seeing because this kind of gross margin and EBITDA margin we have never seen before? I mean, we have, you have talked about raw material pressures in the past, but is it more related to pricing in the generics that you are seeing or that is fairly stable? It is mainly from the generic compounds, where we have seen the price pressures, because during the COVID, several of the companies, probably, with generics did not get opportunity to sell. Now, the growth is there, but there is price pressure. Going forward, we see the price pressure will ease up and probably the raw material prices also may ease up and come down. We are seeing that. The profitability should increase. We cannot compare with the previous five, six quarters, where we had exceptional opportunity. We used speed, took challenges. Executed. It resulted in the upside during the last six, seven quarters, the anti-COVID drug. If you see the pre-COVID business, I think we are seeing normal growth in the coming quarters and profitability should improve, quarter- on- quarter. Just one point on the generics. You mentioned there is some pricing pressure, but you're also saying that you would see pricing to improve. What gives us confidence? Are we seeing it already? Or, I mean, what gives us that confidence that generics pricing will improve? We're already seeing prices improving and also the volumes improving. In several of the generics we are seeing even a 50%, 60%, 70% of volumes improving. Naturally when volumes improve, prices also improve. There is a change and also the our new generic and the contrast media where there is no price pressure, I think, we should look better in the coming quarters. Fair enough. Secondly, sir, given the cash pile we have, are we considering any large buyouts, especially in the contract manufacturing side, injectables, something like that? We are not planning to buy any injectable or anything like that. We are planning to invest in new technologies, as I mentioned a few minutes ago, in the vapor phase chemistry, continuous flow chemistry, photochemistry, and in some of the newer compounds called gadolinium compounds, which are the MRI contrast media, where we have already developed a process. We are trying to fab with some big name people in that. Again, there's large interest in the peptide building block. There is good demand in the expanded contrast media business. I think we are going to be very busy in the coming six- eight quarters in implementing all these projects. That's great to know. Lastly, on the Kakinada, you said INR 1,000 crore yet to be invested or within the CWIP, what is the share of Kakinada, sir? One second. We have planned Kakinada almost in the last five years at least 5x,6x as if we are going ahead, but there was always a roadblock not getting the full clearances. Now we got full clearances. Based on our current requirements or demand for starting materials, intermediates, and APIs, we are grouping them and creating the infrastructure of utilities. I think in the next quarter to two quarters, we should be totally. The project should be going to full swing of construction. INR 1,000 crore is the CapEx we want to do going ahead? That is what we planned initially, a INR 1,000 crore investment as a phase I. We waited a long time, we have substantially invested both Unit I and Unit II. Those projects where we invested in the new block, they are getting occupied, validations being completed, and commercial production will be starting. Some of them just started. Some of them are planned in a phased manner as we get regulatory clearances. We don't immediately need such capacity, but we see foresee the capacity requirement as we have the new projects coming in. I understand, sir. I was asking on the INR 575 crore CWIP, how much is Kakinada? That's what I wanted to understand. Kakinada is not in that INR 5 and INR 75 crore. It's a small amount that is there in the, it is in the existing SEZ and EOU. That is where the investment is. Okay. Which will give us more capacity in the near to medium term. Yes. I think you in the growth engines I have described about that, some of the big PS projects, some of the products where they are expiring, some of the short-term, we have been. We planned with three, four quarters ago. That is what the work in process is, CWIP. Okay, sir. Thank you so much and all the best. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants, please limit your questions to two per participant. The next question is from the line of Damayanti Kerai from HSBC. Please go ahead. Hi, good afternoon. Thank you for the opportunity. Sir, can you update us on your progress in the iodine-based contrast media projects, which you are working for few last quarters? When we are expecting notable sales to come from these products? Yeah. As I mentioned in the last quarters that projects are under implementation. Now two of the products are our own generic products. The contrast media where we are doing custom synthesis, that project is already implemented. The qualification is done. Now we have just entered into commercial production, and you will see good numbers in the Q1 2024 onwards, by which time all the regulatory clearances would happen. The strength for it, again, I would stress that is the capability of iodine recovery to the maximum, where it used to be $25 a kilo, it is $75 a kilo. We are, we have excellent relationships with the customers as well as the big pharma where this contrast media are being used. Okay. Just to clarify, by first quarter of FY 2024, you should be starting commercial supply both for the custom synthesis project as well as for your own generics, right? That is correct. Okay. My second question is on demand scenario for overall generics portfolio. You mentioned that you are seeing good volume for some of the products where 50%-70% increase has come on demand side. On very broad basis, are you seeing recovery in demand from the customer for some of the base generics which are like large products for you? Yes, we are seeing a double-digit growth in some of the generics, that's the minimum. The products are expanding as well as the customers who probably were some of the customers who were buying from elsewhere probably having issues, and that is where we are also getting lot of demand from. In coming quarters, we should be expecting better volume growth on the generic part of your business. That's correct. Okay. Okay, sir, I'll get back in the queue. Thank you. Thank you. Thank you. you. The next question is from the line of Cyndrella Carvalho from JM Financial. Please go ahead. I'm sorry to interrupt you, ma'am, but we cannot hear you clearly. Your voice is breaking a lot. We are unable to hear you. Sorry. We will request you to please rejoin the queue. Thank you. The next question is from the line of Ashish Savkur from IIFL Asset Management. Please go ahead. Thanks for the opportunity. Sir, you mentioned about gadolinium compounds, I believe you are also on the iodinated contrast media. Given that this is a $7 billion market globally and market is growing at 10%, what kind of say will we be having in this entire market? How are we planning to move ahead with the commercialization of the molecules? There are not many customers who would consume the contrast media, both iodine compounds, gadolinium compounds. There are only a handful in the whole world. With majority of them, we are discussing for long-term agreement for supply of these APIs. Okay. It's not intermediates, but you'll be directly into APIs. That's a fair understanding, right? In most of the cases, they are direct APIs. In few of the cases they are like N-1, N-2. Okay. But would it be fair to assume that, you know, some of the bigger names, they would also be doing in-house. Are they willing to shift the entire like seven to eight step process, to us? Is that, a fair way to understand? I won't say that they will shift the entire, but we will get a decent portion of the business. See, the contrast media is growing in the world at the rate of a minimum of 10%. Each of these contrast media is there about 2,500 tons-3,000 tons. Every year we need about 300 tons extra quantity. In the last couple of years, if you count, they need about 600 tons-1,000 tons planning for the next four years. That is the kind of opportunity we are looking at, number one. Get some quantities from the existing market. Going forward, instead of these big pharmas expanding, we will be expanding in India, number one. Two, with reference to these new gadolinium compounds or other compounds, where they are used for MRI and also some of the newer ones, we are looking at supplying the N-1, N-2. Okay. This helps. Thank you so much. Sir, last question. On the new pipeline, the NCA-based molecules that we spoke about in the second quarter commentary, you said there are like couple of projects which are there and could see FY 2024 launch. Any update on those lines would be helpful. Thank you. That's right. This is the sixth growth engine where there's a $20 billion product expiring between 2023 and 2025. Yes, we have submitted for some of them Drug Master File. Some of them are getting ready to be submitted. As and when the customers have sampled, customers have purchased some quantities for their formulation purposes and stability studies to submit to the FDA. I think going forward, it looks good as and when the patents expire, I think we should have the opportunity. Okay. You're confident of FY 2024 launch? 2025 for sure. Even if it starts in 2024, I don't think on day one we'll get very big volume. In 2025 we should get good volume. Yeah. Thanks and all the best. I'll get back in the queue. Thank you. The next question is from the line of Neha Manpuria from Bank of America. Please go ahead. Thank you for taking my question. Sir, could you know. Sorry to interrupt you, Ms. Manpuria. May I request you to speak a bit louder? Is this better now? Yes, please go ahead. Okay. Thanks so much. Sir, could you give us some color on the extent of pricing pressure that we've seen in the quarter? Also just trying to understand the gross margin a little better. Is there some impact from, let's say, high cost inventory for raw materials that we used in the quarter? As raw material costs are coming down, we could probably see improvement in gross margins. Is that one of the factors that we should consider? Yes. One of the factors could be that if you recall in the last three, two years, I think some of the raw materials, I think the price has went up by 2x. Just Nilima was mentioning a while ago on the lithium. The same thing goes for several other materials where we have procured them at high prices, and some of them still we are procuring at high prices. We see now a drop in prices or at least price pressure is coming down. Across industry, I think people face the prior price pressure. Now it's loosening and we should expect better margins in the coming quarters. Sir, what about the API price, you know, realization decrease? How much would it have been on an average, let's say, you know, over the last year or quarter-on-quarter, if you could give us some color? It is surprising that several of the APIs, some of the APIs have price pressures, where the prices came down 5%, 10%, whereas some of the APIs where we just entered, we were able to maintain good prices and even prices gone up, depending on, I think, how many suppliers are there. I think what will happen finally is that if there is a supplier who would continuously supply without interruption and maintaining the quality, I think customers have no choice but to buy from them. That's where we see that we are positioned, and we should be able to get better prices. Sir, is the API realization pressure more on the older products that we are selling rather than the new launches? Is that a fair assessment? I think if I have to say that, I would say it is across portfolio. Naturally in some of the new products there could be little more pressure depending upon how long several people have been with stock waiting. When they reduce the fear of once the stock is disposed into the market, the prices will stabilize. Understood. Sir, on Kakinada, you know, now that we're starting work, by when should we start seeing the facility being ready for, let's say, validation, regulatory approvals and eventually, commercial, production? Would it be more, you know, two years, three years? What sort of timeline should we look at? I think we should be able to look in two- three years, anytime after two years. Commercial production or validation? No. These are two things. I think I said that we'll be doing some starting material with a different chemistry- Okay. -some advanced intermediates and some APIs. For APIs, definitely initially we will be selling to the other markets while we are qualifying for the regulatory market. The raw materials, starting materials and intermediates, we should be able to consume them for our existing products to increase our further capacities. Got it. Thank you so much, sir. Thank you. The next question is from the line of Surya Patra from PhillipCapital. Please go ahead. Yeah, thanks for this opportunity. I just wanted to understand the pricing situation in the APIs and intermediates better. Is it anything to do with the China opener or it is a cold correction or inventory rationalization now what we would be seeing post the strong demand situation during COVID, you know, few quarter that we have been witnessing. Anything to do with that, the current price situation that we are witnessing for the APIs and intermediaries? Can you just repeat the question again, please? Hello. Yeah. To understand this price erosion or price correction in the API, I'm just trying to understand whether this correction, what we are witnessing in suddenly in this quarter is because of the China open-up scenario, what we are witnessing. Is that or the recent crash or the sharp correction in the crude prices that we have witnessed, or that we are witnessing any kind of inventory rationalization situation at the customer's end after seeing a kind of inventory buildup situation during COVID over last many quarters? What is really impacting these prices? We have not seen this kind of broad-based price erosion case in case of API in many of the names. The pricing pressures I think is not only with us, it is across the industry and across products. Yes, you are right that the pre-COVID, during COVID, post-COVID, there is a difference in the consumption of the therapeutic segment and now slowly the therapeutic segments are coming back. We don't know the real cost that each of the either API manufacturers or dosage manufacturers. We felt the pricing pressures. I'm sure everybody is feeling across industry. We see the raw materials prices getting better in the right now what contracts we are entering. We expect that in the coming quarters, not only we will have the volume growth, I think we should be having a profitability growth as well. In fact, the margin for the quarter is the lowest ever. This is not only because of the gross margins decrease, it is also because of the spike in the other expenses. There also what is that has that? Whether it is the energy cost element or it is the freight cost one, what is really has. Can you tell, sir, what is the share of this freight cost element in your overall cost? I think, it is not just one. Mm-hmm. I think one is the plant maintenance cost went up because several of the buildings or several of the utilities we are building, built them in the 1995. We started implementing rebuilding some of those build plant material, plant structures. Also we have invested heavily in replacing some of the old safety systems with new safety systems. You must have heard recently popping up here and there few come, few accidents, and we are making sure that we are removing all those old pipelines, old electrical cables, which we installed in the early years. That's probably one of the reasons. Okay. You must have seen the taxation went up. Mm-hmm. When it comes to the profit after tax, the tax what it used to be, 12%, 15%, 18%. This is the highest, I think 29%, 30% almost. That's what we have paid tax. Okay. Just simply say, if you try to ask slightly differently, let's say the sequential 10% correction in the margin, what we are witnessing, what portion of this would be quarter specific for this quarter? Which may not be there in the following quarter either because of the improvement in the pricing scenario or few of the cost element which will not be there, like maintenance ones and all that. This is really low number and this is a big negative surprise to the streets. That's why I'm trying to understand a bit more, better. I think we are after we have seen the COVID drag where we have high margin, high productivity where we achieved. Coming back to the pre-COVID production schedule or modifications and getting into the new, utilizing those as some of those assets to be reorientation, reorienting them to make the current again generic products or these products, this is where some of the costs went into them. Fully geared up and we should be able to see not only double-digit growth in terms of business, but also profitability. Sure. Just last two questions. About the new capacities what we had added, both in the two sides. Around 15 odd units that we had added, incrementally over last one and one and a half year period. Out of that, how many of the units are underutilized or has not been utilized so far or commercialized so far? What is the kind of spare capacity that is there and, how long that spare capacity can ensure our growth momentum going ahead? Because this quarter there is no problem in the revenues. It is just the margin which you are saying that it could be improved subsequently. Just about the revenue growth feasibility, what is the spare capacity that we are having? Will that be sufficient enough to drive growth till the time the Kakinada facility is ready for its commercial venture? The currently we are occupying about 75%-77% of occupancy. That leaves 23% of free capacity, you know, yeah. Going forward as we in the growth engine where we said that the Sweetener Coast engine fix and the South Plant engine and capacity increases where we have done the qualifications being either completed or getting completed gradually. Agency clearance has been waited. I think all this, I think I mentioned in the last quarter and before quarter, earlier quarters also, it'll take about two years to get into the full benefit out of them. We have enough capacity for all that, and we need not worry about that. Sure, sir. Thank you. Wish you all the best. Thank you. Participants are requested to limit their questions to two participants. The next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead. Thank you. Good afternoon, and thank you for taking my question. Just looking at 3Q, and comparing 3Q 2023- 3Q 2021, December 2020, most of the numbers are absolutely the same. Like, look at generic API, custom synthesis, nutraceuticals. My question was, you know, historically, Dr. Divi, we had a, like a 10% growth coming through on, and I'm removing all the five, six quarters that you talked about which had got, say, COVID drug molnupiravir benefits. I'm just looking at like a two-year. That growth has not happened, right? There's been no 10% growth even on the base portfolio excluding all that. If you could disaggregate and say is that underlying that business has it seen volume growth, and all the volume growth has been taken away by price. Would that be one way of looking at it? The volume growth has happened and is happening, and we are foreseen that it will continue. I think double-digit volume growth we see foresee that it will continue. Yes, the price pressures were there. That has impacted on the profitability, which we are hoping with the raw material prices being either stabilized or going down, not going up. We should be able to get back to our profit margin on the gross level. On the taxation level, I cannot comment at this moment based on how the projects which we planned in the SEZ, how soon they will come into commercial production in terms of clearance at the regulatory authorities. As and when they happen, of course you will see the taxation coming down. Got it, sir. That's helpful. Just following up here. Generic API or nutraceutical, I understand some pricing pressure. Custom synthesis, why should that... That number is also same, INR 680 crore in 3Q 2021 and INR 675 crore this quarter. Just any thoughts there on what's happening on custom synthesis or custom, that particular line item specifically? On custom synthesis, it's different. It's not only profit margin. There's no profit margin issue with that. During the COVID and towards the end of the COVID just happened in the last two months, we all were able to remove the mask and were able to freely walk around, whether it is in this country or abroad. Everybody, all the companies had preference towards to see how good we can push the COVID drug, ever big pharma, instead of looking at other therapeutic segments. Everybody's kept down the pedal down for every other therapeutic segment product. We are seeing now number of projects coming to us from the various big pharmas, multiple opportunities in all therapeutic segments, and we don't have any pricing pressures from the big pharma business. Got it, sir. Just last question. I don't know, maybe you'll answer this, will we go back to this 10%-15% historical growth rate that you have talked about in the past in some time in the future? Why not more? Okay. Thank you. Thank you. The next question is from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead. Hi. Thank you so much, sir, and, a very good afternoon to you. Can you update us on the fast track CS projects that you had talked about? We have. There are two big fast track projects. We have completed the projects. We have validations completed for both. Both are in the commercial ramping up. You will see some values in the Q1 through four of our financial year. The Q1, they should be fully ramping up. Q1 of 2023, 2024. Okay, that's great. This is pandemic related, non-pandemic related? Both are not non-pandemic related. Okay. Okay, got it. Sir, just on contrast media, now that you are getting very close to commercialization, any number that you can share? Is it like INR 100 crore-INR 200 crore opportunity to begin with, or any color would be great, sir. I think it should be bigger. It should be larger. Because the business is much larger. We are aiming at bigger numbers. Okay, that's good to hear. Sir, just on margin bit, you know, your normalized margins, you know, used to be 40%, give or take, and that's where you used to aim at EBITDA margin. You are probably closer to 29% now. What's the roadmap for that? You have explained many things and it's going to improve and all of that. Do you think you can get to this number at all? And is it in the foreseeable future? That would be very helpful, sir. We are not talking about immediately in the next three, four quarters to reach that level, but definitely it is possible. We are making a lot of efforts with the new chemistry to how to minimize material consumption and how to increase the throughput. I think we will see In the next two years, probably we should be back with that. We have several opportunities we are getting in the, from the big pharma. We should be able to again see in the next few years, yes. Okay, great. Sir, can you split broadly, qualitatively in a custom synthesis business, you know, what percentages or what part is commercial molecules versus how much is contributed by development quantities? I mean, is it 50/50 or is it skewed more on one side? We have never disclosed or given any details on the developmental products for the big pharma because we have signed several confidentiality agreements. It's very good, I would say. We have never seen so many opportunities coming, and they'll be implemented in groups. I think in the next two years, these small volume products will go into the multiple tens of tons or higher. Okay, that's great. Sir, Kashi Nara- After Mr. Baisiwala, we will request you to please rejoin the queue. We are partnering with- Yes, sure. waiting for the call. Okay, no worries. Thank you. Participants are requested to please limit their questions to two per participant. The next question is from the line of Cyndrella Carvalho from JM Financial. Please go ahead. Am I audible? Yes, you are. Please go ahead. Thanks for the opportunity. Sir, you had mentioned on last call that regarding the pandemic supplies that we had, we had almost closed those orders for our partner. Our partner has given some more guidance also now. Just wanted to understand from the inventory that we are carrying with us today, do we have anything pertaining to this pandemic related goods with us today out of the INR 2,981 crores that we highlighted? We do not have any stock. The stock, whatever we made or already shipped, and we don't have any stock of any API for them. They are shipped as and when made. That is very helpful, sir. Sir, coming back to the API pricing that we spoke about, and the entire recovery that you are talking about. Can you help us understand, can we see the reversal of, say, the top line around 1800, 1900, in the coming one or two quarters time? Or you think it will take three, four more quarters to be at that run rate of the top line? As soon as the top line comes back, should we expect the margins also to revive to the same extent? I don't want to say quarters. Definitely we are on the way. We have double-digit growth and double-digit growth also requires, in both of these, sales and profitability. Going forward, I think we talked about how the cyclicality in, and they should be able to see us to not only get back to the pre-COVID, but I think further ahead. Sir, in terms of if we try and understand, you are saying improvement in the volumes on the generic side as well as on the price side should follow. You're saying that there will be a custom synthesis project also which could start shipping in Q4, and we'll see maybe 1 Q FY 2024, we'll see a full quarter. In the light of these two comments, how should we see? If you can help us understand qualitatively will also do, not on the number perspective entirely, but That's because the numbers have been fairly moving up and down because of pandemic supplies. Just want to understand some clarity there. Going forward with the two big custom synthesis projects where their contribution will be seen a big potential from the Q1 of 2020- 2024, I think with also our generics with the double-digit growth, I think we should see a good growth. We don't want to say anything about the custom synthesis from generics, separating them, I think, overall, the growth should be there and also increasing profitability. Thank you. The next question is from the line of Chirag Dagli from DSP BlackRock. Please go ahead. Yes, sir. Thank you for the opportunity. Quarter- on- quarter, the mix is not very different. Custom synthesis business is 40% this quarter versus 43% in the second quarter. Despite that, our gross margins are down almost 7 percentage points. Two questions there. Why is that? You know, you talked about product mix being different. If you can just give a little more color around, you know, why this large 7 percentage point QOQ dip in margins? Is this across both the pieces, generic as well as custom synthesis, or is this more to do with generic business? I think we have made it in the past very clear that there was the one-time opportunity. We bit us opportunity within, though we should not wish that the COVID should be there and the API should be consumed. The profit margin or profitability of the anti-COVID drug was definitely a better one. When it was there in those quarters, and normally in the last quarter, in the quarter just we went through, minus COVID drug, I think this is where we are with the pricing pressures on the APIs and also on the increased raw material costs. I have explained that going forward in the coming quarters or year, we should be able to get back to the normal mode and growth mode without the COVID drug. Okay, sir. Is generics more impacted than custom synthesis? Pardon? Sir, is generic, gross margin more impacted than custom synthesis gross margin? The custom synthesis, the impact is less because there is no pricing pressures from the customer. It's only the raw material prices probably some of them entered. Some got compensated, some did not, by the customer. Whereas in generic, nobody will compensate you for the increase in raw material prices when the generic API is more or available if there are. Thank you. The next question is from the line of Sayantan Maji from Credit Suisse. Please go ahead. Yeah, thank you for the opportunity. Just wanted to understand what was the proportion of sales from, you know, U.S. and Europe. Do we see the pricing pressure in both these markets, or is it mostly in the US market that you're witnessing this? Can you repeat the question again, please? Yeah. I just wanted to understand the proportion that you mentioned in the opening comments on the U.S., proportion of sales coming from, you know, U.S. and Europe and, exports. The generic pricing pressure that you're observing, is it, in the U.S. or the Europe market? The exports to Europe and U.S. is about 70% of our revenue for the quarter and 70% for the nine-month period. Between the Europe and U.S., we don't differentiate because the orders come from Europe and we ship to U.S., the orders come from U.S., we ship to Europe. We don't differentiate much. There is no price pressure differences between Europe, U.S. I think in the difference is not there. Overall, there can be little lowering price in the regulated market. Of course, in the non-regulated market, it's much less because it's had more. Okay. What would be the proportion of export sales for this quarter? Exports accounted to 87%. Okay, thank you. That's all from my side. Thank you. The next question is from the line of Naushad Chaudhary from Aditya Birla Sun Life. Please go ahead. Hi. Thanks for the opportunity. Two clarifications, sir. Firstly, on the CSM business side, can you explain us, what is your pricing policy here? Typically how often, you revise your prices annually, six-monthly? In which all months, it is loaded as? Second question. Pricing policy. Price revision policy and CSM business. Pardon? The pricing policy, it's not the revision of pricing policy. It is being discussed with the customers and see what is happening in the market on a quarter-on-quarter basis. Usually, the contracts are over a long period of time, and some of them are discussed when the pricing is done more from the customers. Usually, on a quarter basis, we'll discuss. There's nothing like pricing policy on quarterly basis. It's driven by demand and supply from the customers. Okay. Secondly, on the operating deleveraging side, sir, is there any challenges we are facing on the operating deleverage because of the intra we have created for the COVID-based product? Is that creating us giving a cost load to us on the balance sheet, on the P&L, or is it forcing us to do some low-margin product, and that's why we are facing the challenge currently? Well, at this point, what we see is as the sales increase and the growth is driven more by the profit and the normalcy comes back into place, we would say that, you know, the operating leverage would be more favorable. Okay. Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. Satish Choudhury for closing comments. Thank you all for joining us today for the earnings call of Divi's Laboratories Limited. In case you need any clarification, please reach out to our investor relations. Thank you. Thank you. On behalf of Divi's Laboratories Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.