Ladies and gentlemen, good day and welcome to Laurus Labs Limited Q1 FY 2022 earnings conference call hosted by Ambit Capital Private Limited. 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. Nikhil Mathur from Ambit Capital. Thank you, and over to you, sir. Yeah, hi. Good morning, everyone. On behalf of Ambit Capital, I thank the Laurus management for giving us the opportunity to host their 1Q FY 2022 earnings call. Today on the call we have Dr. Satyanarayana Chava, Founder and CEO, Mr. V.V. Ravi Kumar, ED and CFO, and Mr. Vivek Kumar, Senior GM, Investor Relations. I now hand over the call to Dr. Satya for his opening remarks. Over to you, sir. Thank you. Thank you for joining us on our Q1 FY 2022 results conference call. We are pleased to have this opportunity to update on our progress and answer your queries. I hope everyone and their family members, colleagues, and friends are safe during this second wave of COVID-19 pandemic. The second wave of COVID pandemic was more severe, impactful when compared to the first wave in terms of infections and fatality across regions. The regional lockdowns during the Q1 had some temporary impact, but with the agility and resilience that our teams have shown in the face of this challenge helped us to maintain normal operations across all locations. We are very thankful to our colleagues for rising to this challenge and ensuring business continuity. At Laurus, we are committed to protecting the health and well-being of our employees and their families. We continue to implement rigorous safety and hygiene practices across all locations without any complacency. We continue to conduct regular testing for all the employees and provide flexibility to work from home for employees wherever possible. Coming to the results of Q1 FY 2022, these results reflect a very healthy start to the financial year. We increase our focus on having a better product mix and focusing on margin sustainability. We achieved these results despite the pandemic-induced operation challenges. We stand reaffirmed on our aspirational revenue target of INR 1 billion by FY 2023. This was supported by healthy demand outlook and capacity expansion plans lined up across all our business segments. We achieved INR 1,279 crore revenue in Q1 FY 2022, with a 31% growth year-on-year. Our antiviral segment shown a growth of 23% and oncology 16%. Whereas non-ARV, non-oncology product sales, decreased by over 40%. Whereas overall generic APIs have shown more than 27%, around 5% growth. The Synthesis division has shown robust growth with over 95% growth from INR 100 crores- INR 195 crores. This is the first time we are also reporting numbers for our Bio division with INR 14 crores coming from quarter one FY 2022. To begin, I would like to share key updates on our formulation business. The formulation division reported highest ever revenue of INR 521 crores, a strong growth of 48% year-on-year. The contribution from formulation segment has improved during the quarter to 41% to our revenues compared to 35% for the financial year FY 2021. We have seen good growth in regions supported by ramp-up in global funds and stockpile supplies in the LMIC markets. We are also in the process of obtaining in-country approvals for our tenofovir alafenamide-based fixed-dose combination, and we are on track to launch this product in the current quarter. Apart from LMIC ARV business, we have also seen growth in developed markets in North America and EU. To leverage our front end in the U.S., we commenced marketing of in-license products. We have done six products in-license, and out of those three were launched, and we are in the process of launching remaining three during the current financial year. We filed two ANDAs during the Q1 FY 2022. With those, we have a total of 28 ANDAs with U.S. FDA, nine final approvals and nine tentative approvals. In Canada, we have 10 product approvals. We have launched five of those already, and we intend to launch two more in the Q2 and Q3. In EU, we have validated two additional products as part of our contract manufacturing partnership, and we expect a significant upside in FY 2023 from these products. Out of five approved products, we have launched two products, and we are in the process of launching one more product across many countries in Europe. With the robust outlook and order book, we continue to invest in our FDF infrastructure. We have commercialized the debottlenecking project during the Q 1. This is expected to add 1 billion units capacity to the current. With that, we have 6 billion units capacity operational right now. Further, our brownfield expansion to the same site, which is expected to add another 4 billion units capacity. With that, we will have by end of this financial year, 10 billion units of solid oral capacity. On the R&D front, we continue to allocate critical resources to our research initiatives and investing in portfolio based on complexity and scale. Our overall R&D spends to the sales for the quarter was at 4%. We have a total of 66 products in the R&D pipeline, either under development or under priority review, with an overall addressable market size of over INR 37 billion. As we also mentioned in our invest presentation, the current basket what we are looking at, only 20% is ARV and 80% is non-ARV. This is in line with our expectation to de-risk our revenue base by FY25. We are investing into non-ARV product development, both in APIs as well as in the formulation. Of the 28 ANDAs filed in U.S., we believe that two para IVs and seven first-to-file opportunities having a big addressable market size. As you have seen, our approach always remain product-specific, not market-specific. That is clearly visible in our dossier filing. We have 11 dossiers in Europe, 15 in Canada, eight with WHO, two in South Africa, and four in India, and 15 products filed in various rest of the world markets. When it comes to the generic API, our ARV API recorded a healthy growth when compared to the quarter-on-quarter. This was led by higher volumes of first-line APIs. On sequential basis, sales were moderately impacted, partly due to demand normalization, which is in line with our expectations. Second-line ARV APIs continued to see healthy sales during the Q1. We continue to maintain leadership in our key products while we expect increase our supplies to developed markets in Europe and U.S. The revenues from onco APIs were INR 59 crores for the Q1. This segment recorded a growth of over 16% quarter-on-quarter. Laurus Labs, as you're aware, we are one of the largest high-potent API capacities in the world, and we are adding more capacity to augment our offerings and also meet the customer demand. We have high-potent capabilities now in unit one, unit three, unit four, unit five, and we are adding more capacities in unit four. When it comes to non-oncology, non-ARV APIs, we have seen a decline of sales. This will be back on track from Q2. During the Q1, we have filed five DMFs in non-ARV category, taking the total number of DMFs filed to 66. We also initiated validations for few other APIs and expect to see significant growth from Q4 FY 2022 onwards. We have very good order book visibility in non-onco, non-ARV APIs, and we are investing into capacity enhancement to meet our demand in these APIs. When it comes to synthesis business, this division delivered robust growth for the quarter and grew over 95% to INR 195 crores. This strong growth was led by sustained new client addition and increased business from existing customers and commercial supplies of existing products. We are pursuing several interesting active projects in the late-stage clinical programs. We are also doing capacity expansion to support this division's growth plans. We commercialized the LSPL, Laurus Synthesis Private Limited unit one during the quarter one FY 2022. Also, our proposed greenfield investment to set up a dedicated R&D center for synthesis division at Genome Valley, Hyderabad, and two manufacturing units in Vizag under LSPL is progressing as per our plan. All these units are expected to be operational by FY 2023. The site will have the capabilities to handle steroidal hormones, highly potent molecules, apart from other large volume products. Laurus Bio recorded a sales of INR 14 crores for the quarter. As you're aware that Richcore was renamed as Laurus Bio, transaction was closed during the month of February 2021. Sequential numbers reported for this quarter are not comparable. On normalized basis, quarter-on-quarter run rate was very stable. During the quarter we commissioned two of the four fermentation vessels all the four fermenters will be operational from Q2 onwards. We expect full benefit of ramp up of the new capacity from Q3 onwards. We're also in the process of acquiring additional land to further expand our manufacturing capabilities in the fermentation. With that, I would like to hand it over to Mr. Ravi Kumar to share financial highlights. Yes, thank you, Dr. Satyanarayana Chava, and very warm welcome to everyone on our Q1 earnings call. Total income from operations for the quarter is at INR 1,279 crores against INR 974 crores, with a growth of 31% year-on-year. With a better product mix, gross margin, we could able to improve almost by 2%. Our EBITDA for the quarter came at around INR 400 crores. EBITDA margin is 30% on a full year basis. Diluted EPS is at INR 4.5 on a not annualized basis, which grew over 41% growth over the corresponding quarter. Our ROCE improved to 32.6% on annualized basis on the back of sustained operating leverage at across units. As you're aware that we have embarked on our CapEx plan of INR 1,500 crore-INR 1,700 crore for the two years FY 2022 and FY 2023. All the projects are on track except maybe some of the projects may be in four-eight weeks delay. We have invested around INR 213 crore in the Q1 for the CapEx. With this, I would request moderator to open the lines for the 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 then one on the touch tone telephone. If you wish to remove yourself from the question queue, you may press star then two. Participants are requested to use handsets to ask another question press star then one. Ladies and gentlemen, we wait for a moment while the question queue assembles. The first question is from the line of Kanishk Mehta from Edelweiss. Please go ahead. Hi, thank you for taking my question. I had two questions. The first is on Richcore. We have incremental capacity addition of 1 million tons as we spoke about. Could you tell us what the revenue contribution would be from this incremental capacity? In the Q1, we commissioned two fermenters, 45,000 each, and in the Q2, we will complete the rest of the two fermenters of 45,000 L again. With those four fermenters coming online by end of September, the R2 where the four new fermenters are located, we're able to deliver about INR 20 crores revenue per quarter. Okay, thank you. The other question I had was on the breakup of non-ARV revenue as a whole for Q1. Non-ARVs we have done. ARVs, we will give an answer. About 33% of revenue in Q1 came from ARV APIs. Sorry, I was asking for ARV as a whole, including FDF, APIs, everything. Oh, the two-thirds of revenue came from ARVs, both APIs and formulations. Okay, if I could ask a last question. I just wanted to know on the CDMO business, as we've seen tremendous growth this quarter, are there any one-off impacts in terms of orders that you've got in this quarter, or is this a sustainable run rate going forward? We don't have any one-offs in the Q1 for our CDMO division. We expect that this division will positively surprise us as well as all of you. Yeah. Okay, thank you. I'll get back in queue. Thank you. The next question is from the line of Dhaval Shah from Girik Capital. Please go ahead. Yeah. Hi, sir. Couple of questions from my side. Sir, first, the doubling of FDF revenue post our expansion. The sales would double from the FY 2021 base? The sales for the unit of tablets varies, so you can't do the arithmetic. We are increasing capacity so the revenue will increase. All depends on what products we make. Currently, we have 6 billion tablet capacity, which is operational, and additional 4 billion will be operational in a phased manner from November to March, current financial year. The significant revenue upside from the expanded capacity will come in FY 2023. The expanded capacity will be primarily used for non-ARV. Non-ARV. Correct. Okay. Sir, our finance cost is higher quarter-on-quarter. What is the increase in the debt and what is our current gross debt as on today? Yeah, also with this, last con call, we had given a range for the CapEx for 20-23, because you were finalizing certain projects. Have we finalized the exact CapEx number? CapEx, as we mentioned just now, we believe we will invest anywhere between INR 1,500 crore to INR 1,700 crore during FY 2022 and 2023. In the Q1 FY 2022, we already have done INR 213 crore CapEx. Okay. That's in CapEx is a range only at this juncture because it varies. Finance cost is concerned, actually there is an exchange rate adjustment that is one contributor for the additional finance cost. Second is, we also borrowed additional loans in the Q1. Okay. What is the gross debt? Sorry? What is the gross debt as on today? It's INR 200 crores higher debt in the Q1. Okay. On page 25 in the presentation, you mentioned about renewed market share gains in the ARV portfolio and LMIC. Can you elaborate on this line? What does it mean? We've gained market share or what is it? Gain market share in the first line. We have a significant presence in the TLD-based first line, and we are expanding our registration footprint in various countries for TLD 400 and other triple combination products. Thereby, we will strengthen our position in the first line. As you're aware, we don't have any product in the second line right now. We will start getting registrations for second-line products also. With those, we will increase our share of market in the both first line and second line. Okay. Fine, sir. That is for right now. I will come back in the queue. Thank you. The next question is from the line of Amish Kanani from JM Financial. Please go ahead. Yeah. Hi. Am I audible? Yes. Yeah. Sir, if you can elaborate on the mention that you have made about CDMO business where you said multiple partnership proposal is in collaborative phase. If you can elaborate on that, what are the plans or what are the discussions and is it the part of the CapEx that you're planning and stuff like that? We are investing into two new locations as part of our growth plan and business negotiations, what we're having with our current partners. The new greenfield units, which will come up in Vizag, will be to service our offerings, service what partner is needing. That is the reason we are investing heavily into CDMO. We can't give you more details of what products and what customers right now. Mm-hmm. Okay. Sir, also if you can give us some color and sense on the first to file and those seven products that we have done within that, I think two were more exclusive opportunities. If you can give us some flavor there in terms of market size or the timing of those potential launches, if any. What is the status of FDA approval for those set of products? Is it getting delayed because of FDA not being able to approach and come for the site? Thanks. Out of seven first- to- file and P4 opportunities, we got tentative approvals for three of those already. We expect to get tentative approval for two more ANDAs during the current financial year. Okay. For the tentative approvals, what we got, three. We are well-positioned in two of those because there the number of FTF companies are limited. Those products' current brand value is about $5 billion. Yeah. Okay. Sir, any tentative timeline for, if not quarters, say H1, H2 of which fiscal year is? No, this is. These launches will happen after 2025. These are all 2025? These launches will happen after 2025. Okay, sir. In that context, the $11 billion, of which 85% ARV opportunity is of the 33 approved, is this the market addressable opportunity for us for, say, next two-three years? Is that the way we can think? Can you repeat your question? We didn't get exactly what you're looking for. Sir, you said approved. We have about 33 products approved with an $11 billion market opportunity, right? In U.S. and EU. Addressable market opportunity that we have shown. My question is this the short to medium term, next two-to-three-year addressable market opportunity for us in EU and U.S.? These products which are in development, where you mentioned INR 37 billion opportunity, these will be long- term. I don't see these will have benefit in FY 2022 or 2023. For my product, which we have to get revenue in FY 2023, we might have filed already and we might have got approval or about to get approval. Yes, sir. That's the clarification I was asking, sir. That is $37 billion is for the long- term, which is 66 projects under development and pending. I was asking, there was a $11 billion opportunity that we are showing in a presentation where 33 products are being approved. At least those are the ones where we can get the benefits of market share and approval and this thing in medium term, which is two-three years. Is that the way to look at it? Only one product where we expect to launch in FY 2023 out of the opportunity what we have mentioned. Okay. One product will be launched in 2023. Sure. Okay. Thanks a lot, sir, and all the best. I'll come back in case. Thanks, sir. Thank you. The next question is from the line of Nimish Mehta from Research Delta Advisors. Please go ahead. Yeah, thanks for the opportunity and congrats on great set of numbers. Sir, picking up on the previous participant, we've seen the generic FDF growth sequentially much better than, generic FDF on ARV growing much better than API ARV on a sequential basis. Sequentially, API ARV is down. You mentioned that even dolutegravir pick up probably is one of the reason of generic FDF. Why is it not also translating into API growth? What is the disconnect? I'm trying to understand that. It's a very interesting question. Our API sale depends on how much of our partners are getting market share, and their inventory level, their order book. We can't sell more than what our customer needs. Whereas in the case of formulations, we know what orders we won and when to supply to which region we need to supply. We do expect this API supplies to our third-party ARV customers will resume to normal level soon. Yeah. I'm assuming that the products are overlapping, when it comes to API ARV and the generic FDF ARV. In that case, because we have cost leadership in most of the ARV products, is it not fair to assume that we will always have higher growth in ARV formulation than ARV API? Because we will get bulk of the market share versus other competitor. That's what I'm essentially trying to understand. In most of the ARV formulation business, the tender split is very even. Tenders are not awarded to the lowest bidder 100%. Winner doesn't take all. There will be a distribution between L1, L2, L3, L4, and there are certain capacities allocated for the new entrants. Even somebody wants to crash price, doesn't mean you will get 100% of the tender. At the best, you will get 40%. It is not easy to assume we'll able to garner all the market. There will be opportunity for us to get a good share while we continue to supply APIs to our partners. Understood. The next question actually probably partially you would have answered, but let me just reiterate in case you didn't. The other thing I wanted to know is that, while we are expanding into other products, say, second-line treatment in terms of capacities. Because there is enough competition already there in those products, how do we see ourselves gaining more market share? Because, what is that uniqueness? Again, it's the cost leadership or what is it which will help us gain market share? Our focus in other therapy areas, especially is on anti-diabetes segment and cardiovascular. In the anti-diabetes segment, the new class of drugs, especially the DPP-4 inhibitors, vildagliptin, sitagliptin, and other gliptins will go off patent from next year onwards. We have a full basket of products in the diabetic segment. There we have created capacity for both APIs and formulations. When it comes to the cardiovascular segment, these nitrosamine impurities disrupted the market share in the cardiovascular for the sartans. We invested during this crisis to enhance capacity and the best quality product. We do see the opportunities for a fully integrated player in both cardiovascular as well as the diabetic segment, because these are large volume products and the capacity demands are also high. Quality demands are also equally high. There, we believe we can play a role. We have capacity, we have the right quality material to get to the market. Understood. Actually, I was asking more about the ARV products where we are expanding into second-line treatment, especially for- I'll answer that question as well. The second line of the product basket is limited and the competition is also limited. Not all the ARV players are having integrated second-line therapy offering. We are creating or we're developing ANDAs to capture market not only in the LMIC region, but also in Europe and U.S. I see. That is on the base of, again, we being the least cost because we are integrated. Is that the right way to understand? Yeah. Yes. Okay. Thank you very much. This is very helpful. Thank you. Thank you. A request to all the participants, please restrict to two questions per participant. If time permit, please come back in the question queue for a follow-up question. The next question is from the line of Nitin Agarwal from DAM Capital Advisors. Please go ahead. Hi, thank you. To my question. Sir, you mentioned that FY 2025- Nitin, sorry to interrupt you. May I request you to speak a little louder? Hello, can you hear me now? Yes. Thank you. Okay. Sir, you mentioned in FY 2025, you're looking to diversify away from the ARV business. Right now, as you mentioned, we are about 65% ARV business in the overall revenue mix. How do you see this proportion changing by FY 2025? We can only guide you, but we cannot give you the exact number. We do believe by FY 2025, the ARVs, both the APIs and formulation business should come down from two-thirds to one-third. Okay. That's fair enough. Sir, we are right now at doing about INR 500 million of revenues on the ARV business on an annualized basis, give or take. In your assessment, how big can this business really get over a period of time? Given the size of the market and the way that competition is essentially is there are some challenges in terms of some, maybe competitors are not very aggressive in this business. How big can this piece get for us from INR 500 million, where it is today? Maybe one could grow single-digit, I would say. It's not easy to grow teens or higher growth because market, the number of patients coming on treatment is not increasing like in the previous years. There will be a shift from the weaker players to stronger players. Otherwise, if you look at the entire ARV formulation business is between INR 1.5 billion-INR 1.8 billion and INR 500 million is almost 33% of revenues coming to us. We do believe we have the ability to gain market share, but it'll not be significant. That is the reason we are investing our resources both in R&D as well as in CapEx to non-ARV, non-oncology. Got it, sir. Lastly, on that point, on the non-ARV business, since you've talked about obviously a very large significant growth in this business, because this business, as you said, has almost become two-thirds from one-third where it is today over the next, say, four years. Apart from diabetes and CV that you mentioned, where the integrated play for us will come in handy, these will be the primary drivers or are there any other drivers of business which will drive this non-ARV piece of business for us? We have a reasonably developed portfolio apart from anti-diabetic and cardiovascular segment. We have few other APIs being developed and ANDAs being developed. Those are complex and scale projects. Maybe we'll let you know at an appropriate time. Yeah. Okay, sir. Thank you, and best regards. 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. Just on this bio business, when at the time of acquisition, H1 FY 2020 had sales of about INR 30 crore. Which was without commercialization of two fermenters. Now for the Q1 with commercialization, we are at INR 14 crore. Just to understand this disconnect. I think the two fermenters, which came into operation only in the June. There is no significant revenue generated in the Q1 from the new fermenters. You will see the full-fledged revenue out of second unit probably from Q3. Understood. Secondly, on the formulation side, if you could share how much this in-licensed product would have contributed for the quarter. Would it be at a similar profitability as we make in the products which we manufacture? Revenue from in-licensed products in U.S. is not that significant in Q1. Understood. Yeah, that's it from me. Thanks. Just lastly, this debottlenecking also, benefit is there in 1 Q or that would come from 2 Q onwards from the formulation side? Formulation side, the debottlenecking was done by end of June and put into operation only in July. Yeah. That revenue would also get reflected in 2Q only. In the current quarter, in Q2. Yeah. Thank you, sir. That's it from me. Thank you. Thank you. Thank you. The next question is from the line of Harit Ahmed from Spark Capital Advisors. Please go ahead. Hi. Good morning. Thanks for taking my question. My first question is on the CDMO business. How much of this business will be coming from supplies to Aspen? What exactly the nature of these supplies? Similarly, what is the contribution from what we previously used to call ingredients supplies in the overall CDMO pie? The custom ingredients and supplies to Aspen, steroid intermediates, about 40% of our CDMO revenues in Q1. Okay. The nutraceuticals part of CDMO, how much will that be? Put together. The both Aspen CDMO and the custom ingredients, put together is 40%. Okay. On the formulation side, what is our TLD market share in LMIC currently? For the quarter, what will be the breakup of FDF sales between LMIC, ARV, and U.S., Europe? Is it the split the same as what we've seen in recent quarters, around 75/25? Yes, around that, 70/30 ratios. Yeah. Our market share for TLD in LMIC? TLD LMIC is in higher teens. Okay. Thank you. That's all from my side. Thank you. Yeah. Thank you. The next question is from the line of Naresh Kumar from HDFC ERGO Insurance. Please go ahead. Yeah, thank you for taking my question. My question you have answered partly already. I just wanted to get clear. From here on, majority of your non-ARV CapEx and benefits of that is coming more towards the end of this year and more in FY 2023. Next nine months, can I say that our EBITDA revenue will be broadly in a range until the non-ARV picks up significantly from next year? Is it right understanding? We have added API capacity became operational in Q4. We are expecting one more API block will be operational by end of December. We are putting capacity into commercialization on a regular basis. When we are saying our formulation capacity will be ready by March, that means the revenues from that expanded capacity will come in FY 2023, you're right. As we mentioned, our debottlenecking activity also gave a 20% more capacity, which became operational by end of Q1. Right. For that, you said the LMIC, I mean the ARV formulation market now will be growing at maybe some single- digit. I don't know. There will not be significant growth, but there will be some growth. That's what I should understand. There will be growth. See, we can ramp up production depending on opportunity. Our INR 6 billion current capacity is not utilized 100% even in this month. There is a scope for us to take more orders and service. Okay. Sir, one more question. On CDMO side, can you help us for the amount which we are investing in terms of CapEx in particularly for that segment? In the formulation, we're investing around INR 400 crores CapEx for this new capacity expansion. In CDMO formulation? In CDMO, we will be investing in FY 2022 and FY 2023 put together, maybe around INR 500 crores. Okay. Thank you. Thank you. The next question is from the line of Porom Parekh from Choice Broking. Please go ahead. Porom Parekh, may I request you to unmute your line from your side and go ahead with the question? Due to no response. Hello. Go ahead. Hello. Am I audible? Yes, ma'am, now you are. My question is on Laurus Bio. I understand that the contribution to the EBITDA would be niche in this quarter. Going forward, just wanted to understand how much would Laurus Bio contribute to the EBITDA. Second question is on the CDMO side. I see that we have commercialized four projects as on Q1. Going forward, how many projects do we intend to commercialize out of these 50 clients? We will continue to supply these four commercialized products in FY 2023 and thereafter as well. New commercial launches will happen in FY 2023. We don't expect anything in FY 2022. Okay. Laurus Bio contribution to the EBITDA? We are not giving division-wise EBITDA contributions. When we are in a position to give, we'll provide. Okay. sir, just last question, if I may? FDF capacity utilization, if you can just give us an idea? We're at about 80% capacity utilization in FDF right now. Okay. Do we have any scope for improvement, I mean, expansion in that? We can take more orders and service with the current capacity itself. Okay. Thank you. That's all, sir. Thank you. Thank you. The next question is from the line of Tushar Manudhane from Motilal Oswal. Please go ahead. Yeah, thanks for the call. Sir, just on the CDMO piece, on the investment of INR 500 crores, what kind of asset turn can be expected? These are greenfield projects. These are not brownfield. Right. The groundbreaking will happen next quarter. These investments will give revenues probably last quarter of FY 2023 onwards, not before. Yeah. What is the kind of an asset turn which we can expect from this investment? Difficult to predict right now. This will be in line with industry or better than industry. As you see, maybe our current asset turn ratio is closer to 1.4. We will be in that range. CDMO also it would be in the range of INR 1.4? yes. I think the other guys are at about INR 2.5. Yeah. Okay, sir. Thanks. Thank you. Thank you. The next question is from the line of Omkar from Sri Consultancy. Please go ahead. Yeah. One of my question has been answered. The second question is regarding, do you have any plans for debt reduction given the cash you are generating from the profits? No immediate plans. We see the business opportunities in front of us, and we're investing. Our cost of debt is not that huge where we will stop CapEx and retain debt. What's your debt to equity currently? Our debt to EBITDA is less than one. Debt to EBITDA is less than. Debt to equity is 0.58. Okay. All right. Thank you. Thank you. Thank you. The next question is from the line of Samir Palod from AUM Fund Advisors. Please go ahead. Hello. One clarification, you had mentioned that you are looking to split this contribution of ARV. Just want to recheck, sir, by which year do you expect to do that? FY 2025, we're saying. 2025. Sir, within that, how do you see the ARV business growing for the next four years? It will grow by single- digit. We don't expect it will grow significantly. As you have seen, ARV contribution, both APIs and formulations, was very significant in FY 2020, FY 2021, and FY 2022. This growth will moderate FY 2023 onwards. The new investments, what we are making in non-ARV, will start giving revenues from FY 2023 itself. Understood. Sir, the other question was, in the CDMO business, do you expect to have any ARV contribution? In CDMO, no. Biologics, sir? No. See, contract manufacturing, I wanted to clarify. We do contract manufacturing in generic APIs. We do contract manufacturing generic formulations. We do contract manufacturing in NCEs. See, when we are talking about CDMO business, it is primarily in the NCEs. Our generic APIs, generic formulation contract manufacturing is not added yet. That way, our today revenue contribution from contract manufacturing as a whole is 23%, or little more than 23%, when we add APIs, formulations and NCEs. When we are talking about this CDMO business, this is primarily meant for NCEs, custom ingredients, one product to one customer in the NCE space. They are both in the non-ARV space, right? Yes. The NCEs and the formulations are both in the non-ARV space. Yeah. Okay, great. Thank you, sir. Thank you. The next question is from the line of Naveen from Kotak. Please go ahead. Yeah. Hello, am I audible? Yes, sir, you are now. Go ahead. Yeah. Sir, my first question is around the capacity that you have for formulations with the 6 billion tablets. Can you give a split of how much of this is going for your ARV formulations and how much is going for your generic contract manufacturing of formulations? I'll give a broad number. About 20% of capacity is utilized for contract manufacturing. Okay. 40% is utilized for ARVs and 40% for other products. Out of that INR 6 billion, 40% is for ARVs, 20% is for. CMO. formulations contract manufacturing, CMO, and the rest is for? Other 40% goes to? The non-ARV formulations. Okay. Whereas from a value perspective, the ARV formulation- It is significant. Value significant. Significant. Okay. For the additional INR 4 billion. I wanted to clarify here, when we're talking of ARV, the ARVs, we do three APIs into one pill. Our 40% units may consume more equipment than our 40% where we use one API only. When we are talking just, I gave the 20/40/40 in number of units, but the number of equipments used to get this are much larger for these ARVs. In other APIs and other formulations, we use either one API or two APIs put together. Whereas in the ARVs, we have to use three APIs, so the number of equipments used is much more than the other tablets or capsules. Okay. I get your point there. For the additional 4 billion tablet capacity, could you just give us a ballpark split? You said by and large, this is for generic CMO, if I understood it correctly. Maybe you could give some idea, a numerical sort of cue to us as to how much of this 4 billion goes for generic CMO. In the new expanded capacity, about INR 1 billion will be used for CMO, and then remaining INR 3 billion will be used for non-ARVs. Okay. I'll request you to come back in the question queue for a follow-up question. Thank you. A request to all the participants, please restrict to two questions per participant. If time permits, please come back in the question queue for a follow-up question. The next question is from Devvrat Mohta from Capital Group. Please go ahead. Hi, Doctor. Hope all well. Just two questions for me. Firstly, on the CDMO, was there any one-off in the quarter, or this is just kind of business as usual, clients ramping up new projects commercializing? As we clarified, there is no one-off in CDMO revenues in Q1. This is business as usual. Got it. Secondly, can you just talk to what happened on the other APIs? Is this just timing mismatch or is there something else to The other API segment kind of declined quite a bit. Just curious to know what happened there. There is no mismatch. There is only shifting supply schedules. Okay, got it. Other last question, if I can squeeze in one more. On the margin. If I look at the margin sequentially, gross margins have gone up, but the EBITDA margin has gone down. Can you just talk through what's caused the gross margin to go up and what's caused the EBITDA margin to go down sequentially? Because of our pre-operative expenditure, our increased R&D expenditure, we were down by about 1% on the EBITDA. At the same time, we were almost INR 100 crore less revenue from Q4- Q1. That's for EBITDA. The gross margin, it is in mix there. Correct. For like more synthesis revenue we have. That contributed in a better gross margin. Correct. Perfect. If I understood correctly, so gross margin is because of mix. The EBITDA margin is primarily negative operating leverage and pre-operative expenses. Basically FY 2023 onwards, a lot of these pre-operative expenses will go away because, I mean, as your plants commission this year, there will be some cost this year, but next year you won't have that same pre-operative expense dragged on. Yeah. the EBITDA. That's correct. Thank you. Thank you. Thank you. Those are my questions. Thank you. Good luck. Thank you. The next question is from the line of Tarang from Old Bridge Capital. Please go ahead. Hello, sir. Just wanted to check, what would be your conversion costs per million tablets in case of formulations, and maybe per kilo or liter in case of APIs? Those details, I'm afraid we can't give you. Yeah. Sure. Thank you, sir. Yeah. Thank you. The next question is from the line of Nitin Agarwal from DAM Capital. Please go ahead. Sir, thanks for taking the question again. Sir, on the CDMO business, obviously, we've come a long way from where we started largely with aspirin to where the plans that we have for this business. If you can probably give us a little qualitative sense on how have you seen the business evolving, what kind of opportunities are you beginning to see now, and what is the USP that we're bringing to the table, which is getting clients attracted to us for this business? If some company looking to outsource their activity, if they write five names in India, with technical capabilities and scale, I am sure Laurus Labs is figured out there. That is one way we are attracting customers. We have 4.6 million liters reactor volume right now, and we are adding almost 1 million liters more in the next 18 months. We are one of the top five companies with reactor volume. We have demonstrated our expertise in certain type of chemistries, especially the chiral chemistry, large scale manufacturing, large scale chromatography capabilities, highly potent capabilities. There we have earned a lot of reputation with our customers. That is helping us to bring more new projects into CDMO. Right. Sir, most of these projects that you're talking about, like also the two greenfield projects that we talked about, these are what? These are products which are already commercialized or they are in late phase of development and will get commercialized. What is the typical nature of the business that you're looking to get incrementally? We have commercialized four products, three APIs, and one advanced intermediate. Those supplies are going on as planned. We have several projects in phase II and Actually, we have two projects in phase II, which are oncology, and we have one in phase III right now. We have a mix of highly potent molecules in various clinical phases, and we have a few where we have to use our large-scale manufacturing expertise. You're talking about the greenfield projects, sir? These are in clinical phase. Sir, you mentioned about you putting up two new greenfield projects, where you're in consultation with the clients. What would be the typical nature of these? These would be again, large scale volume manufacturing contracts that you are getting for which you need to? We will give more details at an appropriate time on those. It is premature for us to give more details. We will share those details when appropriate. Yeah. Okay, sir. Thank you. Thank you. The next question is from the line of Naresh Mehta from NM Holdings. Please go ahead. Yeah. I wanted to ask on the net debt as of June 30, 2021. Our net debt is actually around INR 170 crores increase. 170 crore increase? Yeah. The CapEx for this quarter, as you said, was INR 213 crores. What's the guidance for the remaining 9 months going forward for FY 2022 as well as FY 2023, if you could share that for CapEx? For CapEx, actually for two years, we gave a guidance of INR 1,500 crore-INR 1,700 crore. Right. Can we use this INR 213 as a runway for the rest of the year? In an average, maybe around that actually. We can't say exactly 200, but when I say INR 1,500 crore- INR 1,700 crore, it is similar. Okay. Thank you. Thank you. Thank you. The next question is from the line of Bharat Kumar, Kotak Value. Please go ahead. My question is for Dr. Chava. I guess the approvals for global tenders in FDA formulation is valid for three years. I think the approval you got in 2018 for these global tenders would be expiring this year. Can you please let us know if this approval is getting renewed now? The Global Fund tender was for three years, you are right. Due to this pandemic, they extended the tender period from three-four years. Okay. It's still for next year, 2022 then. Yeah. You see, these tenders are valid until end of next year. Okay. My second question is regarding this ARV API revenue. May I know whether you anticipate any growth in FY 2022 compared to FY 2021? I am asking because in last con call, you were guided for single digit growth for FY 2022 for ARV API. Is this guidance still valid? We do expect so. Yeah. Okay. My last question, if I may. In the recent interview with one of the international media channel, when you were asked one question on what excites you in future in Laurus, you said that you expect there would be an oral drug for COVID, and if it comes, it will be a big opportunity for Laurus. May I know if there is any COVID oral drugs in pipeline like molnupiravir for Laurus? As you're aware, we in-licensed 2-deoxy-D-glucose from DRDO, for which we are gearing up for launch in the next few weeks. We're in the regulatory approval process. Other than that, we are working on other drugs, but we don't know when the approvals come. It's too early to predict. Okay. Yeah. Thank you. Thank you very much. Yeah, that is it from my side. Thank you. Next question is from the line of Jeevan Patwa from Sahasrar Capital. Please go ahead. Good afternoon, sir. Just one question. In your presentation, you basically said we are going for 1 million fermentation capacity in phase I. Are you thinking of any phase II as well? Sure. Currently, the R2 will give 180,000 liter new fermentation capacity, and we are looking for a land, because we can't go to a new site for every 1 million liter. The new land, what we are looking at is fairly big, about 20-30 acre land bank. Okay. There we can go to 3 million-4 million L fermentation capacity, but we'll start with 1 million L. Perfect. Thanks a lot, sir. Thanks a lot, and all the best, sir. Thanks, sir. Thank you very much. Ladies and gentlemen, I now hand the conference over to the management for closing comments. Thank you everyone for participating in this conference call and also for your very insightful questions, and please do keep safe. Thanks. Thank you. Thank you very much. On behalf of Ambit Capital Private Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.