Ladies and gentlemen, good day and welcome to the NATCO Pharma Q3 FY 2024 Post-Result Earnings Conference Call hosted by Batlivala & Karani Securities India 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 * then 0 on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rishikesh Pothala from BNK Securities Private Limited. Thank you, and over to you, sir. Hi, good morning everyone. On behalf of BNK Securities, I welcome all to the Q3 FY 2024 Earnings Conference Call of NATCO Pharma. Rishikesh, can I start? Hello? Good morning everyone. Thank you, Rishikesh. Again, welcome everyone to NATCO's conference call discussing our results for the third quarter of FY 2024, which ended December 31, 2023. Our discussion during this call will include certain forward-looking statements, which are predictions, projections, or other estimates about future events. While these forward-looking statements exemplify our judgment and future expectations, 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. NATCO Pharma undertakes no obligations to publicly revise any forward-looking statements to reflect in future events or circumstances. I'd like to state that except for the participant questions, property of NATCO cannot be recorded or rebroadcast without NATCO's express written permission. We'll begin with the results highlight, and then we'll follow with an interactive Q&A session. So we hope all of you received the financials and the press release that we had done earlier, including a presentation. These are also available on our website. So first of all, we are very excited to state that NATCO has achieved a big milestone in its evolution by surpassing INR 3,000 crores of revenue and INR 1,000 crores of PAT year to date, and we have one more quarter to go. So I think we are quite pleased with the results. For the third quarter of FY 2024, NATCO recorded consolidated total revenue of INR 795.6 crores as against INR 513.3 crores same period last year, reflecting a growth of 55%. Net profit for the period on a consolidated basis was INR 212.7 crores as against INR 62.3 crores during the same period last year, showing roughly about 3.5 times growth. The company has shown strong growth across businesses compared to last year and is confident of its strategy going forward. Very briefly on the segmental split for the quarter for Q3, API clocked INR 46.3 crores, formulation domestics INR 99.4 crores, formulation exports, which includes profit share and foreign subs, was INR 605.6 crores, crop health clocked INR 14.1 crores. The rest were in non-operating income. Thank you all. We'll open up for questions. Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press * and 1 on their touch-tone phone. If you wish to remove yourself from the question queue, you may press * and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question is from the line of Abdul Kader from ICICI Securities. Please go ahead. Yeah, hi sir. Thank you for the opportunity, and congrats on a good set of numbers. So my first question is with regards to your guidance for FY 2024, where earlier you had stated we were expecting profits of close to INR 1,000 crores-INR 1,200 crores. So sir, I mean, since you already achieved that in nine months, are we revising it or holding to the guidance? Sure. As of now, I mean, we're looking good. So my expectation now is that I mean, again, we have to see how things work out, but it looks like we're going to be on the higher end of the expectation. We're hoping to go past INR 1,200 crores PAT. I think that's our expectation. And our sales as well, I think, will probably be a little less than INR 4,000 crores. I think that's our expectation where things are. Okay. Okay. And so just to have a better understanding of your Q3 numbers, so on the face of it, it more looks like the export business has driven the quarter. But within that, how have your subs at Brazil and Canada performed, as well as in the US, if you could throw some light there? Thank you. Certainly. I mean, the subs have done well, Abdul. Specifically, I think all the subs together out of the sale, I think INR 163 crore has come from all the subs and primarily driven by Canada and Brazil. This quarter, we had a one-time tender order that we executed in one of the markets. So I think that was one of the reasons why the sub has done well. And so that also has improved the emerging market profits. Overall, it's a very balanced quarter. I think we got profit from all the major markets. And also, all the pharma also did well this quarter. And overall, I think even though lenalidomide contribution was on the lower side, still we had a pretty good quarter. I think we're very pleased how things went. Understood. Understood. And yeah, just one minute. Abdul Kader, I'm really sorry. Oh, go ahead. Sure, sure. I'll go on back. Thank you. Thank you. Next question, please. Yeah. Thank you. And the next question is from the line of Purvi from Kotak Securities. Please go ahead. Yeah, good morning, sir. Can you hear me? Yeah, please go ahead. Yeah. So firstly, congratulations on a strong set of numbers. So I have two questions. First is on the Kothur facilities, if you could just give us an update as to where do we stand with the STA. And secondly yeah, secondly, on the tax rate, for the past three quarters, we've seen that to be in the range of 16%-17%. How should we expect this for the full year of 2024, 2025, and 2026? Sure, sir. Okay. Let's start with the tax rate. The tax rate, I think, will be around that same range. I think our expectations that we'll have our taxation will be around 16%-17%. I think that's my expectation. We'll continue even going forward. Regarding Kothur, we have not. Now, we replied to the FDA about the corrective action that we've taken post-inspection. And we've not received a classification as of now. So as of now, we're still waiting for a classification. And we believe that we have done all the remedial measures based on the observations. And we're still awaiting the classification. And yeah, that's about it. And I think, as I said in the past and I'll reiterate it again, we have always implemented our risk mitigation strategy on our top products. And I think we are there. Yeah. Thank you. Next. Okay. Thank you. The next question is from the line of Ashish from JM Mutual Funds. Please go ahead. Yeah, am I audible? Yeah, go ahead. Go ahead, Ashish. Yeah, sir. Yeah, sir. Two questions. So first, on agchem business and our long-term vision to also set up the business in the international markets. And secondly, on the M&A. So earlier, we were wanting to add M&As to our portfolio with revenues of somewhere between INR 1,000-INR 1,200 crores. So update on that. Thanks. So I'll start with the agchem. Agchem, I think, usually December is the slower season. So I think the sales have been on the lower side. Overall, I think so far for the year, Rajesh, can you give us an update on how much you've done so far for the last nine months? Yeah. So just to add to that, Ashish, so year to date, we have done roughly around INR 110 crore, right? So as Rajeev was just mentioning, the sector itself has been facing quite a bit of headwinds during this year, starting from broadly, the weather pattern and the El Niño effect has caused quite a bit of disruption in some of the key crops, right? I mean, if you look at our key products of CTPR and related to CTPR, there's been failure in the soybean crop. Cotton crop has failed. Poor rain. So the rabi has also been impacted. And so we've seen multiple issues. And Q3 is generally expected to be on the lower turn anyhow, seasonality-wise. But I think broadly, that's where we are. And I think on the guidance, I think we thought we're on the range of INR 150 crore-INR 200 crore. It looks like we're going to be on the lower side, not on the higher side because of the slightly lower uptake in the agro division this year. Overall, I think we're fairly excited about how things are. Our foray to international markets, we have started registration of our key products in the major markets in U.S., Australia, and Middle East. I think things are moving well, and Brazil as well. I think the going I mean, the impact of that we'll probably see in a couple of years. Regarding the acquisitions, I mean, we're looking at a big one. I mean, that's what I think instead of doing a smaller one, I think we're looking for a big, large one. I think we're scouting and we're looking around. I think, as I stated, I think we're looking in the emerging markets. So we're looking hard, I think. I mean, I don't have an answer whether we have a deal on hand right now, but we're working hard. But the company has become stronger now, I think. On December 31st, our cash position and investments are at INR 1,929 crores. And our borrowing is about INR 129 crores, including foreign bill discounting. So I mean, net cash, we're at INR 1,800 crores. So we've gone up a little more from last quarter. And so I think we're in good shape, I mean, that way, I mean, to execute a transaction. To answer your question, do we have a transaction we're going to close? I think we're looking hard. I think that's all I can say at this time. But hopefully, we'll be able to consume something in the next 12 months. I think that's our expectation. Yeah. Thank you. Thank you. Thank you. Next caller, please. Yeah. Thank you. The next question is from the line of Anuj Momaya from Ideal Investments. Please go ahead. Congratulations. I'm going to set a number, Rajeev. So my first question is on the U.S. market, sales of Revlimid, how are we doing in those products, or can you shed some light? We're doing well. I mean, sales of Revlimid, I mean, Copaxone is one of our biggest products. So we have very good market share on it. We are the number one generic on that. And the other products, everolimus does well, lanthanum does well, Lamictal does well. So I mean, all the portfolio is doing reasonably well. I think overall, we're happy with our business. And all our key products, we supply from both the sides, both from our Vizag and our Hyderabad side. So it's fairly stable, and things are well. In terms of U.S. business, I mean, going forward as well, I think our strategy continues to be to get those key, critical, complex products. We have delivered good complex filings. I mean, you're familiar with semaglutide filing. And some of them, we have sold FTF on some strengths and some of the product. The idea is that we'll deliver and delivered olaparib. We've spoken over that. These are some of the big filings we have in the near future. Going forward, we have a stated goal. I think this next 12 months, we'll deliver at least 2 or 3 products which are as interesting as the ones I just mentioned. So I think we're working on them. Hopefully, in the next 12 months, we're able to announce something positive by achieving a filing. I think the strategy still again, I've said this for many times. I'll reiterate it again. I think the way U.S. is going to work is you got to do the complex generics. I think that's where the real money is or the FTFs. Otherwise, the regular products, it's harder to make money. Yeah. Yeah. My second question is on this domestic formulation. We have been flatish around INR 100 crore quarterly INR 100 crore. Is the oncology piece of business flat or the non-oncology? Can you throw some light? How are we doing on the domestic front? Because that has been lagging for quite some time now. Good question. I mean, yes, we are lagging. I think there's no running away from that. I think we have a reasonable pipeline. I think we have some couple of very interesting products that we're working on. We believe that that will drive the growth. But the launches are not in the near- term, I think. And that's a challenge. Overall, the business has been stable. I think oncology, volume-wise, is growing. I think we're doing all right. Again, as I said, I think one big challenge we have in this business is what do we acquire to increase our portfolio? Because we're only strong in the mid-segments. We're not strong in the more volume, large coverage, general GP segments. I think we looked at different acquisitions, and I think I always found them to be very expensive and not the return on capital expectation that I have is not on a sit-on-meeting. Whatever deals that I've seen are slightly better than the lending rates of a bank. So that's why I'm unable to close a transaction. I'll be very honest with you. That's where we are stuck. I think we have a reasonable pipeline. I think my expectation is that that business will grow. I think our expectations are it'll grow around 8%-10%. The strength that you're seeing in our export business, we're not seeing it in the domestic business, I think, clearly. Yes. But the growth will be coming from oncology or the non-oncology piece of business? Oncology is driving the growth. I think most of the portfolio is still I think 60%-65% of the portfolio is still oncology. Yeah. Okay? Yeah. Thanks. Yeah. Thank you. Next question, please. Yeah. Thank you. The next question is from the line of Somil Shah from Paras Investments. Please go ahead. Congratulations on a good set of numbers. In the previous call, you mentioned that most of our Revlimid quota was done for this year. Next quarter, there won't be much quantity left. Still, the performance for this quarter in terms of sales was very good. Does that mean that our other products did really well in this quarter? I think the other products did better. I think we got some tail on the lenalidomide. But actually, a significant part of the profit came from non- lenalidomide for this quarter. I think that's where I think that's the position. That's where it is. Okay. As mentioned earlier, the emerging markets have done fairly well. Yeah. Yeah. And also, we had some big few hits in one-time tender and all. They're all non-U.S. development-driven business. Okay. That performance can continue further for the next quarters, non-Revlimid? These are one-time, no? I think they're done. I think, again, next year is a new year. Again, you bid for new business, and you see how things go. But overall, I mean, the emerging market piece and the other products have done fairly stable. And we obviously have lenalidomide will come, I think, starting from March. We'll get a new allocation. I think we're expecting that things will be better starting from March. Okay. And so if my understanding is correct, correct, that from March 2024- February 2025, that would be your third year for Revlimid, correct? And the contribution to overall sales from this product will increase compared to the previous year. So can you please guide on the EBITDA margin? Will it be similar to the previous year, or if the sales increases, will the margin also increase? Good question. I don't have an answer. So we'll just see how the market forms. I think once, I think we'll have more color, I think, once some quantity goes into the market. We're optimistic that it will do well. Again, the extent of the erosion and all is very hard to judge. And I think we have to speak to our partner, Teva, and get more clarity. But I think once we get more clarity, hopefully, in May, when we have our March quarter numbers and the annual for the financial year, March 2024, I think I might be better placed to answer that question. And this time, it's too premature. Okay. Any guidance for the next financial year or revenue or profit? Not today. I guide for March 2024, 2025, I think maybe in the next call, I'll have more clarity. Yeah. Okay? Okay. Okay. Thank you. Thanks. Thank you. Next caller, please. Thank you. The next question is from the line of Nitin Agarwal from DAM Capital. Hi. Thanks. Rajeev, on the U.S. market, which I mean, are there any over 25, 26? Do you see any of those P4 launches coming through for you? I can't speak about dates, Nitin, because they're all bound by confidentiality. I think I'll give you a general picture of what P4 you can expect in the next few years. I mean, bosutinib 32, carfilzomib 10 milligram, we have sold FTFs. So those are probably coming in the next few years. And then we have olaparib, and then we have semaglutide. So I think those are the big P4s. And then we have trabectedin as well and pomalidomide. So these are all there in our investor presentation. But these are the ones that will play out in the next few years. Okay. And in terms of the new filing that you talked about, potentially, that can come through in the next 12 months, I mean, these would be what? A potential impact from a monetization perspective, these would be FTF post-FTF 30 events? depends on the patent litigation also. It's very hard to judge now, Nitin. I think what we're trying to tell our investors and in a lot of our interactions is that we continue to pursue the complex pipeline. Our idea is that you need to focus on these complex products. And you got to do peptide products, oligonucleotides, difficult delivery systems, harder to do generics. And that's where the real value is. I think we have a stated goal, I think, internally in the R&D that we have to deliver. We're targeting, let's say, about three or four. And if we succeed even at one or two, then it adds a really disruptive launch in the next few years. So I think the idea is that we have, let's say, three or four good complex generics coming up in the next five, six years. And then maybe we make it 6 or 7. Then there'll be more consistency in our delivery rather than the lumpiness that you're seeing in our R&D. So I think we should be able to generate I mean, we don't need many of these very good products. I mean, if you deliver 6, I think you're set for the whole decade. So I think that's the idea. I think we're trying to bring more pipeline with the R&D spend that we have so that we can bring more consistency in our complex pipeline. Secondly, on the ROW subsidiaries which are there, what kind of outlook do you have on this sort of piece over the next couple of years? I think Brazil and Canada are the best subs in the ROW. I think both are doing extremely well. We're very happy how things are progressing. Each of these subs are filing 7-8 products. I think that's a stated goal that we have. They'll continue to be strong. We are looking at more markets. We're starting a subsidiary in Colombia and Indonesia. Also, we're looking for a good acquisition in the ROW business. I think our sense is that we have to grow this business. Whatever pipeline that we're building for, let's say, Canada and Brazil, extend it to as many countries as possible. I think that's where the value of the business is. I think that's how it's going to be. I think you got to have a reasonable pipeline. The only way you're going to make money in this business, one, you have complex generics, difficult-to-do products. Two, you have global reach, and you have a steady, branded generic business. I think these are the three ways you can make money. And I think out of these three, you need to get at least one, at least two things right. And I think that's what will get you home. Okay? Okay. Thank you. Okay, Nitin. Thanks. Next caller, please. Thank you. The next question is from the line of Viraj from MoneyGrow India. Please go ahead. Hi, Rajeev. Rajesh, thank you. Seems like you've had a great quarter, and the work is behind for Natco. Been tracking this business for a long time. Just a question on Imbruvica and Pomalyst. Can you speak a little bit about those two, please? Because I think those are some of the bigger market opportunities out there for you. Certainly. I mean, Pomalyst, we have launched in a couple of markets. I think we launched it so far in, obviously, we have a reasonably nice generic in India. I think we're the number one generic of pomalidomide in India. We've launched it in Canada and Australia so far. So those are two markets that have opened up. So that is doing well. Now, US, we already have a launch date. But it's a shared FTF. So I don't know how big this product is going to be in the U.S. for pomalidomide. When you say shared, is it with one part player or multiple players? I think there are multiple players. I don't remember the exact number, but I think it's a shared FTF. It seems like four or five, but I don't want to say something where I'm not but it just gives the feeling it's many. But how many, I don't recollect exactly. And what was the other question you said other than Imbruvica? Imbruvica, I mean, we have lost the appeal. So we're just looking at what we can do. And so we're making our evaluations on how we can deal with the legal situation. So at this time, I can't comment, but we'll come back with what we probably need to do. Yeah. Excellent. Thank you. All the best. Okay, then. Thank you. Yeah. Thank you, Raj. Thank you. And the next question is from the line of Bharat from Equirus. Please go ahead. Yeah. Hi. Thanks for the opportunity. So sir, are we quantifying the one-time tender opportunity which we have got for this quarter? No. Generally, I don't do a split for competitive reasons. But we just generally give a general view. But I'm going to discuss the quantification of speaking a bit of a split. I don't do it. For sure. And sir, any outlook on the U.S. market, how it is happening? Because from the previous commentary, we are understanding that there has been some volume growth. Pricing has started getting better. So how are you looking at this market at the moment? I mean, business has been stable. I'll be honest with you. I think business has been fairly stable. I think all the products that we've had, we had stable revenue and stable pricing. There's no doubt in that. But having said that, again, I'll reiterate what I said a few minutes ago, is that the real money in the U.S. is not coming from selling large volume or mass volume. I think you get real value when you do complex generics. I think that's where the real money in the business is. And I think that's my sense. Yeah. Sure. I will get back in with you. Thank you. Okay, then. Thanks. Next caller, please. Thank you. The next question is from the line of Rohit from iThought PMS. Please go ahead. Hello. Am I audible? Yes. Please go ahead. Yeah. Hi. Congrats on good numbers. My question was on the NCE that we had NRC-2694. If you could just talk a bit about that, I think we would face Phase II trials. So if you can share anything. And also, the overall strategy around NCE for us as a company, we can share over the next 4-5 years if there is anything that can happen there. I think NRC 2694, I think we got permission to do phase II in the U.S. So we have supplier sites in the U.S., and then we're doing some work in India also. We got DCGI clearance to do phase II. And it is per our niche indication. I think it's premature at this time. I think we I think it's premature to talk about it. But I think once we make good progress, then we can speak about it. But at this time, I would like to say that it's in an early stage. But we're doing phase II. And in addition to this, I think we have another two products that we are looking to do R&D. But at this time, it's premature. I think maybe in the next quarter, I'll give you more updates. The line for the current participant has been disconnected. The next question is from Hussain from Ambit Asset Management. Please go ahead. Hello. Hi. Thank you for taking my question. So I had two questions. The first one was with regards to our $2 million investment in Cellogen around CAR-T therapy program. And if I recall, in the last on-call also, you alluded to some investments in this area which would make sense for Natco. So would it be fair to say that these types of investments would be the way ahead for us in Indian market compared to, say, typical outright brand purchase? And could you talk more about this? Sure. Okay. Fine. Outright brand purchase is not a big fan, Hussain. I mean, I know I'm contrary to everyone, what the street believes in or you guys love. But I think the return on capital is very low. And I think the growth of these brands are not so large that justify the valuation. So having said that, what we're doing with Cellogen is essentially, they have a very promising molecule in CAR-T therapy. And you probably know I mean, this is the new technology that has come in treatment of cancer. And this is a very exciting technology. And I think we realize that we don't have the - what do you call? - the know-how in our system to do these projects. But I also believe that this is going to revolutionize cancer therapy. So we felt that it's good to be at least part of a startup which is working on this. And we have started with a $2 million commitment. But I know if things go well, I think we can always bump up our investment in these sort of assets. But certainly, I think this is going to be gene therapy and CAR-T are going to be big things in pharma. And I think a lot of the - what do you call it? - innovation is happening in this space. And I think you need to be in this space clearly. And if you don't have the know-how internally, then you probably need to capture it through an investment. And then maybe you get a feel of how things are going. Then maybe if you're comfortable with how things are, then maybe you can do a larger investment and take it forward. Yeah. Okay. Understood. And sir, my last question is with regards to semaglutide and pardon my lack of understanding here, but just wanted to get a sense of what could be the timeline with regards to the development and then the filing and then will it be it's just an assumption if you could just help us understand. Is it a five-year or a five-year timeframe that we are looking at? The litigation is ongoing. I mean, I think the compound phase ended in early after 2030, I think. I don't remember exactly. Again, I don't want to say something that I'm just working with top of my head. I don't have any actual patent-expired numbers with me. But I think my limit handling the litigation, we have challenged different patents. It depends on the outcome of the patent litigation. And also, it's a complex generic. So I think the review time and all will be longer than your normal product. And we're answering all the queries. So at this time, I can't answer any timelines and any guidance on launch date or on the litigation. But I think we're just sharing what's in our pipeline. And we have an exciting product. And in some sense, we have FTF. I think it's a great opportunity if we're able to pull it off as and when it happens. Okay. Thank you. Thank you so much. Okay. Sure. Thank you. And the next question is from the line of Omkar Kamtekar from Bonanza Portfolio. Please go ahead. Hello, Omkar sir? Hello, Omkar sir? The line for the current participant? Hello. Hello. Hello. Yes. Please go ahead. Yeah. So my first question is with respect to CapEx. Approximately, what is the amount of CapEx that we have incurred in the current year? And what will be the steady state CapEx if we are going to incur in the next couple of years? Because we've added approximately 50% CapEx in the last four years, from INR 2,100 crores in FY 2019 to now, as of FY 2023, 57% CapEx has been the gross block has increased. Is most of the CapEx done, or will there be another round of CapEx? We always have maintenance CapEx. I mean, just you have to replace things, and you're always buying some new instruments and just upgrading your plants. So far, this year, we have spent for nine months INR 282 crores in CapEx. So I think that's fair. It's not been large like in the earlier years because earlier years, we did a lot of CapEx. I mean, we built a lot of new facilities. We built a fresh facility in Vizag. We built the agrochemical facility. And we did significant expansion in our existing facilities. Right now, I think we're okay. I think we are comfortable. I don't see any large CapExes. I mean, that's why you see the cash is increasing in the books because we're not spending so much on cash. Right. Right. So my question was with respect to so the point was, because of this increased CapEx, our fixed asset turnover gross block to turnover had gone down. And we'll be close to 1 by the end of this year, FY 2024, close to INR 4,000 crores of turnover. So we'll be slightly above 1. Historically, before the round of CapEx, we were above 1.3, 1.4. So would those be the levels that we'll be reaching? So what will be the maturity time for these capacities to reach optimal levels? So we might see 1.4, 1.5 times the gross block turnovers. I mean, I think we are running optimally because a lot of our investments are doing with things that we're trying to launch seven, eight years ahead of time. I mean, if you look at our business, I mean, we're working on stuff which is going to happen. I mean, for example, we're working on oligo peptides. I'm giving an example. We did a significant CapEx for the oligo peptide block. Hopefully, we'll get a filing through in the next 12 months. So what will be the payoff on an oligo peptide? Maybe five or seven, eight years away. So it's a treadmill. I mean, you can't think of it like that. I've done something, and I have to see return tomorrow. Pharmaceuticals is like everything that you do, you have to wait seven, eight years, nine years for things to happen. It's a cycle. What you make, you make today, and then you invest, and then you go for the next cycle. I think that's how. I don't know if I've answered to your satisfaction? But I think that's how you want to think about it. Yeah. Yes. Yes. Understood. I got the gist of it. And finally, with respect to the free cash flow, what was the free cash flow generation for the nine months or six months, whatever, if you could say, free cash flow? Free cash flow, I mean, I think we already said. No, a pack is about 1,000. So if you want to say you want an inhibitor or you want an how do you want the number, if I'm asking? Free cash flow. So that would be operating cash flows minus the CapEx for the year. So if it is available or. I don't have anything on hand. What I have is, I mean, INR 200 and I already told you about the CapEx first. From an EBITDA perspective, YTD is about INR 1,340. CapEx is INR 282. And what is the. Maybe I'll backcalculate, or I could take it out. Yeah. Yeah. I mean, the numbers are in the top line, though, and you can work it out. INR 282 is the CapEx. And then what was the EBITDA, Rajesh? 1,340. 1,340. Then you do the taxation. Then dividend, I think we paid this year, I think, almost INR 9.5. So is it 9.5? I think about INR 9.5 so far, I think. Yeah. Yeah. INR 9-INR 9.5. I don't recollect what. Yeah. Around there, so. Okay. Broadly, those are the numbers. About 15% dividend we have paid. Yeah. Yeah. Okay. Okay. Okay? Thank you. Next caller, please. Thank you. Ladies and gentlemen, please press star and one to ask questions. The next question is from the line of Shyam from Ladderu p Finance Limited. Please go ahead. Oh, hello, sir. Thank you for the opportunity. My first question is with respect to the revenue from the U.S. So the revenue has been in line with what we are doing in previous quarters and year-on-year, or it has grown or declined? And the revenue from Revlimid, the tailwinds that we have received from it. Could you rephrase that question? I didn't understand what your question is. Can you rephrase that and say it again because I didn't understand what you said? Sure, sir. So I just want to know that how was our revenue in terms of U.S. in terms of the U.S.? So it was in line with previous quarters, or it has declined or grown? I think if your question is on a year-over-year basis, we have done better than what we did last year in the U.S. And it is driven by, obviously, Revlimid and other products that we have. If the question is, are we better than last year? Yes, absolutely correct. If you compare our nine months for last year and nine months this year, I think we've definitely done much better than what we did. I think our last year profitability for the whole year was INR 715 crores. This year, we have done INR 1,000 crores profit for nine months. So we're definitely doing much better. Is that answer your question? It was actually something that happened because of how the sale is done for different products. So it's very difficult to, if you say, compare it to last quarter to this quarter, then it becomes very difficult to compare. You got to take a more multiple-quarter view on a year-on-year basis. Then you can see a better trend. I think the trend on a Q1/Q basis is difficult for that type of company. Okay. Okay. And sir, any development in our FTFs coming forward? Any specific molecules? I think the goal is we have about three or four smart FTFs. We want to take it to six or seven in the next two years. I'm hoping, again, it's all subject to how our execution and how everything works, that we'll be able to pull off another three or four very smart FTFs which can give you more consistency in our analytics. Okay, sir. Thank you so much. Thank you so much. Next caller, please. Thank you. The next question is from the line of Saion Mukherjee from Nomura. Please go ahead. Yeah. Hi. Just a small clarification here. I mean, for semaglutide, is it a partnered product, or you have your own filing, and you will sort of have the 100% of the economics here? No, we won't have the 100% of the economics. It is partnered, and it is with Mylan. Okay. Thank you. Thank you. The next question is from the line of Purvi from Kotak Securities. Please go ahead. Yeah. Thank you. Sir, my question is in regards to the Red Sea prices. So we've been hearing that the freight costs have escalated a lot. So are we experiencing any issues, or can this be a worry over the next 1 or 2 quarters? That's one. And the other one is on the raw material front that if you could just give us a number as to how much is our dependence on China for the raw material. And as we know that there's a deflation situation that's going on there, so how do we see this also having an impact on the raw material prices over the next 2 or 3 quarters? Thank you. Overall, I think the freight rates have gone up, Purvi. I think from what I understood in our conversation with my supply chain, I think there's been a 50%-60% increase in the freight rates. And even the airline freight rate has also gone up dramatically. So there's a lot of disruption that's happening in the supply chain. Having said that, I think we don't see any supply challenges. Things have been fairly stable. At least our key products, I think we're able to manage reasonably well. But to answer your question, yes, there's been a significant disruption in the supply chain because of the Red Sea issue. And regarding China and all, we see a lot of stability in the raw material pricing as of now from China. From what I understand, I think things have been fairly stable. Now, we have to see what will happen because of what's happening. But as of now, I think things have been fairly stable. Just to answer a little bit as to how much is the inventory for the raw material that we usually carry? Right now, my closing inventory for control is 600 and just give me a second, though. Let me read that paper and come back to you. No worries. Sir, so is it that can I? Yeah. INR 675 crore is the total inventory of the company as of today, 30th of March, 2023. Yeah. Sir, so I just wanted to allude to Red Sea price situation. What is the kind of impact that you can see on the margins that can come in? What do you see in the margins? There is some increase in raw material prices, and there's some delays in delivery, and there's overall general freight cost increase. So your logistics cost, other expenses have gone up dramatically. But our portfolio relatively is less affected because our portfolio is a very high-value portfolio, and a lot of stuff we send by air, and it's all small volume. So the impact that you'll probably see on our balance sheet will be not as significant, maybe, compared to a company whose portfolio is more high volume and low value. I think the impact will be much more. But having said that, I mean, there is an impact, of course. You can't run away from it. But relatively, the impact is less on a firm like ours. Yeah. Okay? Okay. Yes, sir. Thank you and all. Thank you. Thank you. Next caller, please. Thank you. We would like to remind participants that you may press star and one to ask questions. The next question is from the line of Nitin Agarwal from DAM Capital. Please go ahead. Thanks, Rajesh. On AgroChem now, how are you thinking about contribution of this piece over the next 2-3 years to the overall business? I have some very exciting launches, a lot of first-time generics lined up in the next 12 months, subject to how litigation is going to be. I think it's a very good business. I believe that right now, this year, we may end up on INR 150 crores-INR 160 crores, depending on how things go. It's a little lower than we thought, but I think we still did very well for someone who's completely new in that business. This business has the potential to go to INR 300 crores-INR 400 crores brand. There's a lot of brand loyalty from farmers once you deliver a very high-quality product. We're doing a lot of ad campaigns. I don't know if you've seen some of our regional challenges. I mean, we run ads regularly, especially in Telugu and Marathi, I think, which are big agrarian states. Maharashtra and the Telugu states of Andhra Pradesh and Telangana, we have done strong agrarian campaigns in the regional channels to bring the consumer to buy our products. I think we're doing well. I think it's a very exciting business. Right now, I think it looks, I mean, we're not making so much money in that business at this time. I think once we have a lot of high-cost inventory that we're selling off, but I think once the raw material prices stabilize and we're able to establish our brand, I think it's going to be as interesting as a branded generic piece in India. I think that's my vision and my view of the business. Yeah. How important a role do you think exports will start playing in this business as we go forward? Exports also will be exciting, but exports won't kick in for the next 2-3 years. I think some markets are opening up in the next 12 months, but I think the major markets will open in the next 2-3 years. Overall, it will be a contribution. I think our expectation is that. But our core strategy will be driven by the India branded business. Exports may contribute about 30%, but the India brand business is where I think we see a value. We see this business can scale up to INR 400-500 crores if we include export too. But it'll probably play out in the next 3-4 years, subject to our ability to launch these products and able to be there in the first phase of market formation. I think these are the two most important things in this business, or any business for that matter, right? Just like generics and pharma, you need to be in the first wave. Otherwise, you don't make money. Okay? Secondly, on your, you've taken a partial stake in this Singapore-based entity. When you are doing these partial stake sort of buyouts in some of these companies, what is the thought process behind these? I mean, it's like a strategic investment. I think a few minutes ago, I think one of the gentlemen asked me about the CAR-T therapy. CAR-T is something that it's a skill set I don't have internally, right? So I think so they're the what do you call? Invest so that we can get a see-through on how that business goes and then invest with the promoter and see to hopefully bring a successful product in the market. So generally, these are all strategic so that we learn more about that particular business where we are not present. That one, we invested a little while ago. It's actually a very small investment because we had a clause which protected the dilution, anti-dilution clause on the valuation as a reason why the stake has gone up. But otherwise, it's actually a 2%-3% investment. It actually went up to seven because of the dilution protection. But usually, the value that comes from these assets are typically if they give you a manufacturing advantage or they give you a technology platform that you're not present in. I think that's or they give you a portfolio that you don't have internally, I think. That's how you want to think about these assets. Last one, what's been your overall assessment, if you can, on how the competitive dynamics or the pricing dynamics or, in general, the market dynamics in lenalidomide has really played out over the last two years since you've been around? I mean, I think we've done well. I think there's been significant erosion, but also, we have done well. I think we're happy where we are. I think we have to see how the future holds. I think that's how I want to look at it. If you can put a squeeze in that, is there any other geography where this could be an opportunity? lenalidomide is an opportunity for us, barring the U.S. that we're doing right now. I mean, we do well in Canada. We launched this in Australia too. I think we're looking at one or two other ROW markets. But I think these are the key markets that we are present at this time. Thank you so much. Okay. Thank you, Jamie. Next caller, please. Thank you. And the next question is from the line of Somil Shah from Paras Investments. Please go ahead. Hi. Sir, even after giving such a good performance for the last two years, but still, the Street is not giving us the desired valuation to our company. And sir, it seems it's mainly because of dependency on one particular product, Revlimid. So I mean, can you please give your thoughts that post-'26, once this product is open for all, how shall we look at Revlimid numbers? So I mean, just your thoughts since you are in the business since long. Okay. You asked me a very difficult question. So I'm going to be as diplomatic as I can. Yeah. I think, see, my sense of the business I can answer like this, okay? So every company goes through a cycle where you make money on one product, and it falls away. And I think the way you need to judge a company is what pipeline do you have and what's going to be the next big product. See, for example, if you look at our history, right? I mean, we made money on Tamiflu. I mean, it held up earnings for many years. Almost 3-4 years, it held up. Now, obviously, now it's fallen away. The way the generic business works is there's always that one or two products which always will contribute a good amount of profit, and it'll fall away. And because you're in the first wave, you'll make money and then it falls away. Then you have to keep replacing it with a newer product which gives you that same amount of margin. And I will challenge you, I mean, that if you look at any of the leading pharma companies today, there'll always be that one or two products which will always give you that extra earnings compared to the core portfolio. It's true for us. It's true for everyone. And that's how we want to look at it. And to answer your question directly, I mean, you just have to judge it on the pipeline. I mean, honestly, I mean, all I can do is tell you like, "This is what we are filing, and we believe that these will come. And whenever they come, there'll be a reasonable upside." That's how we have to look at it. And you just have to judge the company by saying, "You know what? What else are you starting to file? And this year, will you deliver another 1 or 2 interesting filings?" so that you bring about more consistency. But that's the nature of the generic business. I mean, you have to assume that when you enter something where you're the only generic, you'll make slightly higher profit. But eventually, it all falls away. So I think that's true of every molecule. There's no difference. Got it. And any big launch, I mean, similar to this particular product, I mean, are you expecting in one or two years similar to Revlimid? One or two? One or two will be difficult to judge. But I think our investor position is very clear. I think we have a lot of interesting pipelines. I mean, we have semaglutide, and we have olaparib. Yeah. I just want to add on that. Somil, it is very important to look at the investor presentation where we highlight the sole first-to-file, right? These are the lists where the value that can come back to us would be much significantly higher. I mean, we've spoken of mid-size opportunities like carfilzomib and then trabectedin. So I think you just have to build this pipeline, and then you have to do a geographical spread so that you bring in more extension to your product portfolio in multiple markets. And that's how you make money in this business. And hopefully, you're there in the first wave so that you make more money. That's how I have to look at it. Okay. That's it from my side. Thank you. And sir, once again, congratulations on the very good numbers. Yeah. Exactly. Okay. Thank you. Thank you. The next question is from the line of Viraj from MoneyGrow India. Please go ahead. Hi, Rajesh. Given the cash flows on your books and the high cash flow generation in your business, despite the targeted acquisition, do you think you could see some corporate action such as a buyback down the line? Because I think the street, having followed your company and business model for a long time, I think the street is massively undervaluing you, probably as the cheapest mid-cap stock for the metrics that you deliver on your business model. I mean, as of now, we're looking at it. I mean, I've not made up my mind. I think I'm preserving all the money. Hopefully, we're able to deploy it for an acquisition. I think we're giving a reasonable amount of dividend. We have done a buyback in the past. We have done it. And I think recently, only we have done a buyback. So I think as of now, we're not looking at all options. I think we have to see how things go. We'll see how the year goes, Viraj. Let's see how 2024 goes. And I think we have more cash, and we don't have any smart ideas on how to deploy it. Then certainly, I think we can consider it. I think all options are open. But I'll consider we are considering every option at this time. Fantastic. Just second question is, there was a spike in earnings in the September quarter. Was there an anomaly then? Sorry, I'm just catching up. No, I think the earlier quarters were led by I think we had reasonable contribution from Revlimid. Yeah, I think that's the reason why. Okay. And Revlimid has seen pricing pressure since then? Two years since 2023? We have seen lesser contribution from this quarter. I think we're hoping that it'll be higher contribution in the coming quarters. Understood. All right. Thank you. All the best. Thank you. Thank you. Next caller. Thank you. The next question is from the line of Omkar Kamtekar from Bonanza Portfolio. Please go ahead. Hello. Thanks for the caller. Two clarifications. What is the percentage of R&D that Ambit said we can do on an average basis? What is for this current year, and what are we plotting it for the years ahead? I mean, it depends on the portfolio. I think we've strived to spend about minimum about 6%-8%. Sometimes, some years, it goes to 8%-10%. It depends on the year. The exact number for this year, I don't have it on hand, so I can't answer that question. I'll give you clarity, I think, in the next quarter anyway. With respect to what is the contribution of Revlimid in the total revenue, is that available? What is the percentage that we're not capping? We're not doing that question. We're not answering that. Okay. No issues. And I have two questions. Firstly, whenever you so whatever acquisition that you are targeting, what is the metric, and what is your thought process behind this acquisition? What are the key points that you are looking at? And secondly, what are the major risks that you foresee with respect to any markets that be domestic or international that could have a material impact on the operations or the outlook of the business? That's the two questions. I mean, in terms of metric, in terms of return on capital, I have very high expectations. I think we usually look for higher teens, or 20% is my expectation. I don't like doing 10, 12% transactions. I'm not a big fan of those. But because my hurdle has been so high, it's been difficult to do transactions. But I think we're sharp, and you're patient. In risk and all, I mean, the risk is I mean, you can always have currency risk, obviously. And there's always in our business, I mean, inspection risk is a big risk. And so I think these are the major factors that play a role. And pricing risk is always there. I think if you want to look at it, I mean, these are probably the two, three factors that play a big role. Understood. Understood. With respect to the acquisition, what you said was with return on capital or overall return on investment that you are speaking about? Return on capital, I think. That's what we target. But again, you can target a lot of things, but what you'll end up with is something else. But I think that's what we would want to target. Yeah. The targeted company should have at least 20% or more return on capital employed, and that should translate into our business. My hurdle should be such that will allow us to make that sort of return. I think that's how we like to think about it. But I mean, you have to weigh it based on the situation. Yeah. Understood. Understood. Thank you. Okay. Thank you. My last question now. So whoever the follower is, yeah. Yes. The next question is from the line of Shyam from Ladderu p Finance Limited. Please go ahead. Sir, just a couple of follow-up questions. In terms of agrochemicals, what we are producing is similar to what PI Industries and Syngenta fertilizers are offering in the market? Or what we are doing is something different from the domestic producers? My model is not the same like PI, and I can tell you that upfront. Our portfolio is generally a patent-challenged portfolio, meaning we try to be the first generic of that particular molecule in India. So a lot of the portfolio that we have launched is, in fact, usually the first generic or the first wave of generic. And our model is not to work with innovators. We always challenge patents and very aggressive challenges of patents. So it's slightly a different model. So it's not like theirs. Okay. Okay. So in fact, my second question with respect to Revlimid, since we have increased quota in this year, so will we be spreading the quota over the quarters, or will we see a similar allocation of quota that we've seen last year, last year and the year? I think it'll be spread out. But again, I'll give you more color to it on May, I think, when the March numbers are there. So we'll have more clarity on how they're thinking about it. Because we are not selling this product. They are selling our product. So I think we'll have some conversations, and I think, hopefully, we'll get some guidance on where we're going with our product. Okay? How this quota is going on for this product? I think March is, I think, we're launching our quota. So I think we are expecting that we should do well. Okay. Okay. Thank you so much. Again, thank you so much, everyone. I appreciate the time that you spend interacting with us. And I think thank you, and good day. Yeah. Thank you all. On behalf of. The questions and the details will be uploaded once they are available. Thank you. On behalf of Batlivala & Karani Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.