Please note that this conference is being recorded. I now hand the conference over to Ms. Richa Periwal. Thank you, and over to you, ma'am. Thank you. A very good morning and good evening to all of you, and thank you for joining us today for the Dr. Reddy's earnings conference call for the quarter ended December 31, 2023. Earlier during the day, we've released our results, and the same is also posted on our website. This call is being recorded, and the playback and transcript shall be made available on our website soon. Further discussions and analysis of this call will be based on the IFRS consolidated financial statements. The discussion today contains certain non-GAAP financial measures. For a reconciliation of GAAP to non-GAAP measures, please refer to our press release. To discuss the business performance and outlook, we have our CEO, Mr. Erez Israeli, and our CFO, Mr. Parag Agarwal, and the entire investor relations team. Please note that today's call is a copyrighted material of Dr. Reddy's Laboratories and cannot be rebroadcast or attributed in print, internet, or media outlets without the company's express written consent. Before I proceed with the call, I would like to remind everyone that the safe harbor contained in today's press release also pertains to this conference call. Now, I hand over the call to Mr. Parag Agarwal. Over to you, Parag. Thank you, Richa, and greetings to everyone. A warm welcome to our Quarter 3 FY 2024 earnings call. Thanks for joining. I'm pleased to take you through our financial performance for the quarter. For this section, all amounts have been translated into U.S. dollar at a convenience translation rate of INR 83.19, which is the rate as of December 31, 2023. We continued our growth trajectory in the third quarter and delivered another quarter of financial results with highest ever sales and robust operating profit. Consolidated revenue for the quarter stood at INR 7,215 crores, which is $857 million, and grew by 7% on year-on-year basis and by 5% on a sequential basis. The growth is led by the generic business in U.S. and Europe, with contributions from both base business and new product launches. Consolidated gross profit margin stood at 58.5% for the quarter, a decrease of 73 basis points over previous year and 18 basis points sequentially. The decrease was on account of price erosion for certain of our existing products, partly offset by improvement in product mix and productivity. Gross margin for the global generics and PSAI businesses were at 61.9% and 29.4% respectively. The SG&A spend for the quarter is INR 2,023 crores, which is $243 million, an increase of 12% year-on-year and 8% quarter-on-quarter. The year-on-year increase is primarily on account of investment in sales and marketing activities, digitalization capabilities, and new business and innovation initiatives. The SG&A cost as a percentage of sales were 28.0% and is higher by 148 basis points year-on-year and 72 basis points quarter-on-quarter. The R&D spend for the quarter is INR 567 crores, which is $67 million, an increase of 15% year-on-year and 2% quarter-on-quarter. The R&D spend is at 7.7% of sales and is higher by 60 basis points year-on-year and lower by 20 basis points quarter-on-quarter. The investments are driven by ongoing clinical trials for differentiated assets as well as other developmental efforts to build a healthy pipeline of new products across our markets for both small molecules and biosimilars. The other operating income for the quarter is INR 97 crores, as compared to operating expense of INR 73 crores for the same quarter last year. The other income was higher on account of sale of non-current assets. The EBITDA for the quarter is INR 2,111 crores, which is $254 million, posting a growth of 7% year-on-year. The EBITDA margin stood at 29.3%. Our profit before tax for the quarter stood at INR 1,826 crores, which is $219 million, posting a growth of 12% year-on-year and a decline of 4.6% over the previous quarter. The net finance income for the quarter is INR 96 crores, as compared to net finance expense of INR 14 crores for the same quarter last year. Effective tax rate has been at 24.5% for the quarter. The effective tax rate was marginally higher in comparison to the same period last year, mainly due to an increase in the proportion of the company's profits coming from high tax jurisdictions, partly offset by adoption of corporate tax rate under Section 115BAA of the Income Tax Act of India. We expect our normalized EPS for the year to be in the range of 24%-25%. Profit after tax for the quarter stood at INR 1,379 crores, which is $166 million, posting a growth of 11% year-on-year and a decline of 7% over the previous quarter. Reported EPS for the quarter is INR 82.7. Operating working capital increased by INR 1,227 crores, which is $148 million, against that on September thirtieth, 2023, mainly due to increase in inventory and receivables. Our capital investment stood at INR 307 crores, which is $37 million in this quarter. The free cash flow generated before acquisition-related payouts during this quarter was at INR 22 crores, which is $2.6 million. Consequently, we now have a cash, net surplus cash of INR 5,907 crore, which is $710 million as of December 31, 2023. Foreign currency cash flow hedges in the form of derivatives for the US dollar are approximately $672 million, hedged around the range of INR 83.4-INR 84.6 to the dollar, and Australian dollar AUD 1.1 million at the rate of INR 58.3 to Australian dollar, maturing in the next 15 months. With this, I now request Erez to take us through the key business highlights. Thank you, Parag, and very warm welcome to everyone joining us today. I'm delighted to report yet another quarter with the highest ever revenues and robust operational performance. We made the progress during the quarter on strategic collaborations to bring novel therapies to India and to improve our position in new avenues across globally. We are also humbled by the recognitions received for the progress we have made on our sustainability agenda. Let me take you through some of the key highlights of the quarter. Sales and EBITDA grew by 7% each. The sales growth was primarily driven by improved market share for our existing products in the U.S., continued momentum in our Europe. We generated healthy EBITDA margin at 29% and annualized ROC at 37%. Net cash surplus was $710 million at the end of the quarter. We entered an exclusive development and commercialization deal with the US-based Clene Nanomedicine for their product, CNM-Au8. It is an investigational combination biologics for treatment of neurodegenerative disease, ALS. We received an approval from UK MHRA for proposed bevacizumab biosimilar. We acquired a leading women's health and dietary supplement portfolio of brands called MenoLabs in the US. We've given a recent entry into the UK consumer health space with the launch of an anti-hay fever medicine, Histallay OTC, and we have taken steps to strengthen our OTC business globally. The U.S. FDA completed a routine cGMP inspection of our formulation manufacturing facility, FTO-3, in October 2023, as well as GMP and pre-approval inspection PAI at our R&D facility in December 2023. We were issued Form 483 or OAI with 10 observations at FTO-3 and 3 observations at our R&D facilities. We have submitted our response within the specified time frames. Our efforts in sustainability and ESG continue to gain momentum and external recognition. We are becoming the first Indian pharma company to be featured in the Dow Jones Sustainability World Index for 2023, and retaining our place in the Emerging Markets Index for the eighth year in a row. We were awarded gold medal status by EcoVadis. We upgraded in the MSCI ESG rating from BB to BBB. We are awarded the Golden Peacock for Corporate Social Responsibility in 2023. Further, we are the first Indian company to pledge toward plantation initiative, covering 2,900 extra acres by 2028, as part of the World Economic Forum 1t.org. Now, let me take you through the key business highlights for the quarter. Please note that all the reference to the numbers in this case are in respective local currencies. Our North America generic business recorded sales of $401 million for the quarter, with a growth of 7% over the year, and a sequential increase of 4%. The benefit of market share expansion in certain existing key products, revenue from new launches and integration of acquired portfolio was partially offset by price erosion due to competitive environment. We launched four new products during the quarter. We recently acquired MenoLabs portfolio of women's health and dietary supplement brands in the U.S., which complements well with our U.S. self-care and wellness business portfolio. Our European generic business recorded sales of EUR 55 million this quarter, with a year-over-year growth of 8% and sequential decline of 6%. The contribution from new product launches improving in the business volumes helped offset price erosion. During the quarter, we launched a total of six products across markets. Earlier this month, we entered the U.K. OTC consumer health market with the launch of brand allergy medication, Histallay. Our emerging market business recorded sales of INR 1,283 crore, a marginal year-over-year decline of 2% and sequential increase of 6%. The benefits of new products and price increase in certain markets was more than offset by unfavorable Forex. We are on the path to deliver double-digit growth for the year. We launched 30 new products during the quarter across various countries of the emerging market. Within the emerging market segment, the Russia business grew by 3% year-over-year, but 7% on sequential basis in constant currency. Our India business recorded sales of INR 1,180 crores, and reported year-over-year growth of 5% and a marginal sequential decline. We anticipate the base business to deliver double-digit growth in the coming quarters. We are focusing on licensing and collaborations to bring innovation to India. A rollout of Nerivio, which made our entry into the digital therapeutics. We are seeing adoption by doctors and repeat purchases indicate high patient satisfaction scores. India remains our priority market, and we will continue to reinforce our presence in core therapeutic areas, while investing and building the innovation spaces in line with our strategy. Our PSAI business recorded sales of $94 million, with a strong sequential growth of 11% and a marginal year-on-year decline of 1%. Excluding sales of COVID products in the same period last year, sales growth was in high single digits. We expect sales to improve on the back of strategic collaborations with regional and global players. Last quarter, we invested 7.7% of our revenue to strengthen our R&D capabilities. Our efforts are focused on developing complex value-added licensed products, including several generic injectables and biosimilars, in line with our patient-centric strategy to enable access and affordability. We also continue to invest in innovative solutions through strategic partnerships, such as recent collaboration with Coya Therapeutics on investigational therapies. We have done 9 global generic filings, including two ANDAs in the U.S., in Q3 FY 2024. We have been recently ramping up inventory to reduce the risk of supply chain disruption and building inventory for our pipeline products. We are also strengthening our position by building best-in-class, high-quality commercial infrastructure to leverage our portfolio to expand further. We continue to develop our pipeline and scale up our biosimilar business, being our pivot to growth strategy. Our ability to source external innovation through strategic license development collaborations will enable us to address unmet needs and patient support, the overall growth ambitions of the company. With this, I would like to open the floor for questions and answers. 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 phone. If you wish to remove yourself from the question queue, you Mayne press star and two. Participants are requested to use handsets only 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 Balaji Prasad from Barclays. Please go ahead. Hi, this is Michaela on for Balaji. Thanks for taking our questions. Just two from us. First one is, what is your latest thinking on generic pricing trends, particularly in the U.S.? And could you provide a bit more color on how you see this trending going forward? And second one, what are your thoughts around the Chinese pharma market in 2024? Thanks so much. I did not get the second one. What is... Sorry? The second one was, what are your thoughts on the Chinese pharma market in 2024? So the first question, we give the continuation of, of the pricing environment that we saw in the last couple of quarters, so we are living with the same environment, meaning that relatively to other areas, it's less than it used to be, more focused on service, sustainability of supply, and... But obviously the business model did not change, and in every place that competitors is coming, we see price erosion that's in the same neighborhood, like we have discussed in previous quarters. As for China, we do see a very good tracking of our approvals. We got nine approvals since the beginning of this fiscal, and three in the last quarter, for so far, the momentum continue in China. Do you have any more questions from the line of Balaji Prasad? No, that was it. Thanks so much. Thank you. The next question is from the line of Kunal Dhamesha from Macquarie. Please go ahead. Hi, thank you for taking my question, and congratulations on good set of numbers. First one, on the US product launch and filing momentum, so if I look at the first nine-month data, we have launched 12 products in the US, and we have just done 8 new filings, and our total pending ANDAs also have come down from 90 in quarter four FY 2022, to now 79. So is it because we are focusing on few therapy areas, more complex? If you can provide some color, that would be helpful. So yes, we do have less filings, let's say overall, because we are really focused on products that we believe is critical, but it's still in healthy numbers of files. I believe that you'll see in the next coming months more filings which are coming, just timing of those files. On the launch piece, we will have more than 20 this year, and so it looks like a healthy number, but everything in the U.S. that is important is the type of product, launch, the number of launches, but so far it looks healthy for us. Sure. And then, just a follow-up on that, you know, we are, now we have acquired this MenoLabs. If you can provide some, a minute clarity as to how does this fit into our strategy, what was probably the last 12 months sales for these brands, and, what is the acquisition value that we have paid? And, does the increase in borrowing, quarter-on-quarter relate to this? So, as far as the timeline of what we call Horizon Two, we decided to focus in general as a company on three types of segments: NCE and NBE. I'm talking primarily collaborations or BD acquisitions, OTC and pharmaceuticals, and digital therapeutics. Specifically for the U.S., we decided to focus on OTC in several areas, including working on dietary, on our private label, as well as brands in women health. So we acquired the Premama in the past, and now we the complementary products or brands that were added to it. The idea is to create a franchise in women health supplement. So that's the kind of, if you wish, diversify the U.S. business to areas that have different pattern of of demand and supply and and the brand awareness. I don't recall exactly the sales of MenoLabs before, but we are talking about the range of $ millions here. So this is a very... So it's relatively small. We believe that we can take it from there. After this, what would be our U.S. revenue contribution from the wellness product or OTC product? I think earlier we used to provide it in 20 years or the quarterly filing. I'm not sure now we provide that. The OTC, if I may, on an annual basis, should be about 10% give or take, of the overall U.S. business. Sure. Thank you. I have more question. 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. Yeah, thanks for the opportunity. So firstly, on the receivables, which have increased on a quarter-on-quarter basis, is this on certain select products or is it across the portfolio? And for which markets? No, receivables increase is primarily in line with the top line increase, so it's nothing unusual. It's across the markets, but largely concentrated in the U.S. It's in line with the normal top line increase. Okay. Secondly, gross margin for PSAI segment has been higher for the quarter compared to the previous quarters. So anything in specific you'd like to comment? Yeah, we are growing, and because of the nature of the business, that it has normally a high, high level of fixed costs. So when you are increasing the sales, you normally will have better margins. So it's just a reflection of the growth, and I'm happy that we are back to growth. It took us quite some time to achieve that, and I think now we are, looks like in the right direction. Okay, because second quarter the PSAI revenue was INR 960 crores with 13% gross margin, and now it is INR 1,040 crores, and the gross margin has improved to almost 22%. Yes, so it's a combination, again, of the mix and the combination of the, you know, sales. And there is nothing unusual in that. It's just the type of the growth. Okay. Just lastly, considering the launches and the filings and the market share gains for the existing product, if you would like to share outlook for the U.S. business for the in 2025, you know, end of 2024. So if you could share some color on that. You know that we are not giving guidance, but we are supposed to continue to do well in all the levers. So far it looks healthy for both commercial products, service to the customers, price environment. Climate is going to continue to be meaningful. All All the levers should continue to work well also in the next coming quarters. Awesome. Thank you. Thank you. The next question is from the line of Neha Manpuria from Bank of America. Please go ahead. Thank you so much for taking my question. If I were to look at the SG&A spend increase that we have seen in the quarter, or even if I were to look at it over a three-year period- ... I know you've mentioned that you've been investing in Horizon products, you know, or projects that you talk about, but from a monetization point of, you know, view, when should we start seeing this contributing to revenue? I'm just trying to understand, you know, when should we start seeing operating leverage in the higher spend? And do you think this number continues to trend up from where we are? Yeah. So part of it, which is related to the investment we put now in certain brands in India, will give results already in FY 2025, because that's the nature of the game, so we are increasing demand. Some of it is related to investment that will take more time as we are putting the money into building products that will be launched in FY 2026... 2025, 2026 and then 2027. So likely that this level of that level in the at least on the value-wise will continue to be a bit higher, but I do see more growth in revenue. So overall, it should be in the same environment that it used to be in the past, meaning before that. Let's say to your questions, part of it will be already in FY 2025, and part of it will be in FY 2026 and 2027. You know, if I were to dig a little deeper on the, you know, points on the launches. I know in your analyst meet, you've mentioned certain areas that you're working on, but out of the 2025 launches that you talk about in the U.S., can we try to understand as to, you know, how many of these could be, you know, the bread and butter launches that we need to offset the base business? And how many of these could be meaningful products? You know, some color there would be helpful. Yes. So we have, overall, about 26 products that, that can be launched to get the full value. So we, you know, winning all the hurdles, the normal hurdles in the market, that can be launched, and I'm talking about products that can be, meaningful. What meaningful means, probably, $10 million and more than that. This is what let's say for the sake of discussion, meaningful. The question is what combination of that will actually get to the market, and what will be the sales? That, of course, I don't know, but we are building on that to offset the period after lenalidomide. In addition to that, we of course are planning to have a growth in the other levers, as well as potential. So the combination of those is supposed to even address to that. You know, just to follow up on that, the 26 products would be, you know, over the next 2 years, 3 years? How should I look at the timeline for that? So potentially, you know, with all the cautious about this kind of products, I refer to products that are supposed to be in the next two years, 2025 and 2026, if it's going to 2027, we have more products. Of course, subject to approval, subject to, and subject to all the normal challenges that we are bringing product to the market, but let's say it's a healthy list of, of, stuff to make, stuff to develop products. Understood. And my last question on the biosimilar pipeline. You know, could we talk about how many products you are developing, you know, for the U.S. and European market? And you know, when should we start expecting, you know, some sort of a timeline, or let's say, a progress update on the pipeline that we're looking at for biosimilars? Yes. So we are talking about six products by FY 2030. And again, subject to receiving approval in those timelines, but, and subject to winning the patent cases, but at least this is what we are aiming for. If you recall, at the time when we had the change that we made after the arrangement that we had at that time with the next, so, you know, we decided to skip couple of years and to move the products that we have a chance to be first to market. This is the strategy. The first product should come in the beginning of calendar 2027, and then the rest of the products by FY 2030. Then, of course, we have a bunch of products that will come later between 30, 30, FY 31 and FY 35, ongoing. So that's right now the case that we are planning for. Understood. Thank you so much, Amir. Thank you. The next question is from the line of Damayanti Kerai, from HSBC Securities and Capital Markets India Private Limited. Please go ahead. Hi. Thank you for the opportunity. My first question is for your India business. So you obviously mentioned you're working on some innovative product, digital therapeutics, et cetera, to improve market offering. But I just want to understand, like, how far these opportunities are right now for you, because it appears that these kind of product uptake might take some time, and meanwhile, your India business is, I'll say, growing slowly within the market. So how do you bridge your growth versus market growth till the time those innovative products start delivering results? Sure. First, just to calibrate, part of the reason that people see single digits is that business, the brand that we acquired, the price holding that we had, which we anticipate is out of the business plan that we took into account when we acquired this brand, contribute about 3% of that decline. Last, in the base of last quarter, last year, we had also products that we divested. So if we are taking those, we are already in the place of double digits. But I'm... But going forward, what's more important, we identify brands that should grow even faster than the market. So I'm talking about brands that will grow at the pace of 1.5 times the market. Those specific brands, we are building behind them. And in addition to your point, indeed, those pick up makes it time, but it's very significant pipeline that we are building now. All the products that we are building innovation are better than the current standard of care, so it will be meaningful growth, more in the medium term. In April 2025, I'm expecting to see double-digit growth in new business from the big brands. Okay, that's comforting to hear. My second question is on your US business. So obviously you delivered very good set of numbers. So few reasons you mentioned pick-up in market share for some key products, et cetera. So just want to understand, was Revlimid contribution for third quarter even much higher than what we saw in the first and second quarter? And have you seen... Like, what kind of pick-up you have seen on the main portfolio? So, you know that I cannot speak on forthcoming quantities on the, on neither in the market. I can also say that it's absolutely within our expectation, and I'm expecting to be meaningful also in the future. As for May, we see pick-up, we see that it is growing, so far it is within our expectation, and I'm happy for this acquisition. Okay, thank you. And my last question is, can you talk about your progress in some of GLP-1 products, specifically for anti-obesity indication, which you might be targeting for, say, U.S. or other export markets? So we decided, like many others, to build this segment. So it's a very important segment for us. It's in our interest from both. First, we are very much into anti-diabetics products in India, but also actually globally. And we built ourselves. And the second is the peptides. As a family, we believe that it's a core strength of ours, both on the API as well as on the sterile facility that we have. So the combination of what we want to play in this market very much, and also to address some of their needs. So we are planning to launch globally, we mean in all the countries that we have reached, these products, when the relevant patent situation will allow us to do that. Okay, yes. Thank you very much for your answers. Thank you. The next question is from the line of Surya Patra, from PhillipCapital- Mm-hmm. Private Limited. Please go ahead. Yeah, thanks for this opportunity. So my first question is on the U.S. business. In fact, the base U.S. business, excluding, let's say, Revlimid and the recently acquired Mayne portfolio, it looks like that YY we are kind of seeing a flattish performance, despite the improved pricing scenario in the U.S. So, could you qualify that, whether that is the kind of trend what we have also seen? And, what is the kind of growth that we are anticipating for the base business? So I can confirm that the base business is growing, and it's attributed to, our ability to, and the efforts that we put on both inventories and sales. Mm-hmm. And obviously relationship with customers. I anticipate that this trend will continue also in the future. And naturally, the geopolitical situation and in certain areas, the concern about sustainability of supply, important topic for customers, and we see ourself as a partner to help them to with that challenge, and whether we are successful, we have to see more sales. ... Okay. Regards to the, let's say, sir, the recent M&As what we have seen, let's say leveraging the cash flow generation from the Revlimid, I think we have done couple of acquisition and, and already announced three, four odd kind of line licensing arrangements. So, cumulatively, here, all these initiatives should have also contributed to the growth in the base business. So in fact, could you share that, okay, what is the kind of incremental growth that such M&A initiatives would have added to the base business? And, going ahead over a period of, let's say, next three, four years, I mean, beyond Revlimid opportunity, so what base business growth that you are anticipating out of the M&A activities? M&As, I'm not saying, I'm not calling it base business. It's by design, new stuff that we are adding to the company. The most of the M&As is actually, it's not just M&As, which we have all kinds of collaboration like licensing, JVs, also M&As. All of that is primarily to strengthen the future portfolio as per the strategy, whether it's in, like I mentioned, it can be on the base product like main, but mostly it is about actually what we call R&D, again, NCEs, or in PSAI and digital therapeutics. So actually, most of the efforts are coming from that. In addition to that, we are always looking for opportunity. By the way, it's not the money from Revlimid, it's the money that we make also from Revlimid, but also from the other activities of the company. How much it will contribute? As much as we'll be able to buy. We potentially have a significant financial capacity and we are very active in the market. At the same time, we are not buying for the sake of buying or for the sake of any other. We buy because we feel it's a good deal for us and it's meaningful for our strategy. So like we said, I said, in fact, we are not in a shopping spree. Buying that we believe is good for us and strategically. Sure, sir. Regarding the inspection outcomes for the Bachupally facility, so what risk that one should assign to it, or what is your practical assessment here? So do you find any risk to the existing business, given the kind of number of observations that has been issued to you, and the nature of the observation that has been highlighted? Yeah. So that's about the FTO-3, I'm assuming? Correct. Yes. So, first of all, what is the risk? The The risk is that you get an OAI. Is there a possibility for that? Yes, there is a possibility. There is always a possibility, but there is a possibility that it will happen. What I can update is that firstly, address all the observation in a specific time. After that, we gave twice to the FDA, with the blessing also of external consultants, data that shows that the data that we put in place is working. This is happening in installments, one in December and one in January. Mm-hmm. I believe that it's a robust answer, but of course, we will wait for the FDA response for that. Sure, sir. Just one last clarification from my side. Whether you have commented on the MenoLabs' size and the potential contribution to our U.S. business? No, I did not, because I don't remember the numbers. I apologize for that. We won't disclose the numbers, but as Richa mentioned, couple of millions is what is there, and as the business progresses, we'll keep updating you. Sure. Yeah. Thank you, ma'am. Thanks a lot for all your, your responses. Thank you. The next question is from the line of Bino Pathiparampil from Elara Capital. Please go ahead. Hi. Good morning, good evening. Just a couple of quick questions. One, you have this product, Lumify, which you have been licensed in the U.S. So is there any timeline we can get regarding the approval of the same? Which product, sorry, I didn't... Generic, generic Lumify. Sorry, which one again? Lumify. Lumify. I don't have any information, so that is it. Okay. So that is there actually in the pipeline, so that and we'll keep updating once, you know, when the same approval is in place. Okay. Second, on biosimilar Rituxan, could you give some color on what sort of timelines you have in mind for the launch? Also, you know, given the recent inspection of U.S. FDA and the outcome, et cetera. ... we submitted in April, we got the FDA inspection actually on time in October. We addressed the FDA observation. We did not receive any additional information, so if everything will be without any CRL or any query that will come from the FDA, the earliest that we can get approval is the end of April, but of course, it may be that it will get any, any query or CRL. Understood. Okay. Whereas you mentioned about this biosimilar pipeline, which kind of starts from CY 2023 or 2027, and going into the 2030s, do you have some products which could be among the first wave or the first biosimilar to some of the products within that? This is the intent. All the products that we are developing, we are developing with the intent to be in the first or in the first level. Understood. Okay, great. Thank you. Thank you. The next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead. Yeah, thank you. Good evening. Thank you for taking my question. It is just the first one, is on the overall CDMO kind of space. I know you have a subsidiary, but just want to understand, are you able to see more demand coming from global innovators towards India-based companies, including companies like yourself or your subsidiary? So that's the first question. And, you know, are you investing in capacities either on the small molecule side or the biologic side for manufacturing for CDMO? So it's less of both. The caveat is that still our business is not that big, so I cannot say that it's an overall global trend, but the trend that we see is growth. And indeed, we do invest in capacity, both in the lab as well as for production, for products that we have contracts and can we know that it will be that the capacity will be, of course, be paid by those contracts. I think I'm just trying to understand from a capital allocation standpoint, will this be significant for you, or you think, you know, we have enough other projects in the pipeline for us to be, you know, or do you think this will be small part and will not be ramping up? The CDMO is not. In the overall scheme of things, capital allocation will not be big. But it's a business that should go from tens of millions of dollars to hundreds of millions of dollars, that's the expectation. But in the overall scheme of things, of this, the overall size of the company is relatively small business. Got it. Helpful. Just a second, just a financial question to Parag. I'm just looking at your disclosure around net cash generated after removing taxes. I'm looking at FCF, right? So it's been, you know, the conversion has been low. So just want to understand, I know there has been an acquisition you paid out for in the quarter one, but just want to understand, either in terms of CapEx or in terms of intangible buildup, is there something that we need to keep in mind? So I think, the only thing I would point out is what it is mentioned, which is we are investing in strategic inventory buildup. So we are investing in new product pipeline buildup. Also, in because of the supply chain, the sea routes disruption, we don't want to, you know, lose any sales. So we are also increasing inventory in our front-end markets. So it's primarily the working capital impact, apart from receivables increase, which is in line with normal sales. So that's, that's the key reason. Otherwise, our cash flows on various fronts continue to be healthy. The conversion is healthy. Got it, Parag. Thank you, and all the best. Thank you. Just a reminder to all the participants that you may press star and one to join the question queue. The next follow-up question is from the line of Kunal Dhamesha from Macquarie. Please go ahead. Thank you for the opportunity again. Just continuing on the last question on the inventory buildup. So how much of our product would be probably be going through sea route now and anything, you know, going through Red Sea route as of now? So the majority of the products are going through the sea route. Actually, the escalation creation of opportunity actually to move something by air in a strange way, certain products even better to do by air now. But of course, this is a volatile situation and may change. But in general, we are trying to trace the majority, majority is moving, for us, it should be 80%+. The second one is that we are trying to have as much inventory in the U.S. very close to the customer as part of our service, to address the customer need. We see that as a, as an advantage for us, as we can give the customer a service that they may not get from others. So this strategy, of course, that goes with the fact that we have a healthy balance sheet, help us a lot to do it. ... Sure, sure. And just one related question in U.S., you know, over the, let's say, last 3-4 quarters, how has the one-time or short-term supply opportunities behaved for you? Are those supply opportunities increasing, maybe coming to you or decreasing in the last 3-4 quarters? Yeah, I would say that the one time situation is not big, and there is no, let's say, tangible trend on that. So it makes more of the fact that if we are gaining share, we are gaining it for the long term, and this is more something that we are focused on. And most of the growth that we have, you know, this product is more longer term nature rather than one time buy. So, is it fair to say that now the agreements that are being done are for a little longer period of time versus what it used to be, let's say, two years back? Every customer has its own pattern of procurement. I don't want to go into details, but in general, we do see appreciation of the approach we are taking. So we are trying to be positioned as a partner for customers and certain areas like that. Sure, sure. One on the India business. So we have said that we want to focus on our key brands we have identified in India, where we want to grow 1.5 times the market rate. Could you provide some ballpark number as to how much of these key brands will be contributing to our India business? So most of the contributions to the overall double digits that India is supposed to do will come from those brands. So when they will grow at the pace we, the overall India business will grow by double digits. Sure. And the last one, because we are focusing on the GLP-1 opportunities, can you provide some color on how much is our manufacturing capacity? And are we manufacturing anything currently for regulated or semi-regulated market? We are focusing not just on GLP-1. We are focusing beyond that, like other, et cetera. But to your point, yes, we are making, but most of the volume is yet to be launched because the products are still under patent or are still under approval process. But either ourselves or by external partners. Sure. But any capacity that you want to put out? Like, you know, some of the other global players have put out that they can manufacture, they have 32,000 liter capacity, you know, to manufacture GLP-1. Any numbers? Let's say we've invested a lot in our capacity, both in the API as well as on the finished products. Again, I am not prepared now the numbers. Sure. Thank you, and all the best. Thank you. The next follow-up question is from the line of Neha Manpuria from Bank of America. Please go ahead. Yeah, thanks again for taking my question. Just to confirm, out of the 26 products that you mentioned that is in the U.S. pipeline, you know, which are meaningful, that none of these would be from Bachupally, would that be a fair assumption? None of the, sorry? Are from Bachupally, FTO-3? In FTO-3, we do have, I think, two products that are part of that. And, so in the case that we will have an issue, we will have to move it to another site that we have, if it will come into that situation. Okay. From a pipeline dependence, how... You know, upcoming launches, how important would FTO-3 be, you know, just to understand the risk in case of an adverse outcome? Not significant. Most of the products are in early, but most of them commercial. So not significant. Obviously, we don't want it. It's not nice to- Sure. our reputation, et cetera. Sure. But it's not significant. Most of the growth will come from like, not so much. Got it. And Parag, on the moderation in the, you know, gross margin that we have seen in the generics business, how much of that would be... I mean, the quarter-on-quarter moderation, would all of that be because of pricing pressure, or is there any other big factor there? I think FX could be the other one, I'm assuming. It's more of a mix issue, Neha. The, I mean, pricing is obviously there, but it's very stable. So pricing doesn't stand out, but it's just that, you know, the offset from new product, launches, from the product mix, has been a bit lower. That's all. So it's not that the price erosion is higher. Price erosion still remains, at the same level. It's the upside from the other things that we see in terms of productivity, in terms of product mix, there is some timing issue, I would say, yeah. So overall, well within the normal range. I should, shouldn't assume that the incremental business that we've seen in U.S., et cetera, is a lower margin business, and hence that's reflective in my gross margin? No, no, that's not right. Yeah, you should not assume that. Okay. Got it. Thank you so much. Thank you. Ladies and gentlemen, that was our last question for today. As there are no further questions, I would now like to hand the conference over to Ms. Richa Periwal for closing comments. Thank you all for joining us for today's evening call. In case of any further queries, please get in touch with the investor relations team. Thank you once again on behalf of Dr. Reddy's Laboratories Limited.