Q2 2025 Divi's Laboratories Ltd Earnings Call Transcript

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2024-11-11 03:04:25
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    Refinitiv StreetEvents Event Transcript
    E D I T E D V E R S I O N

    DIVI.NS - Divi's Laboratories Ltd
    Q2 2025 Divi's Laboratories Ltd Earnings Call
    Nov 09, 2024 / 09:30AM GMT

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    Presentation
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    Unidentified_1 [1]
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    Ladies and gentlemen, good day and welcome to the earnings conference call of the Laboratories Limited for Q2 FY 2025.

    As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes.

    Should you need assistance during the conference call? Please signal an operator by pressing star then zero on your touchtone phone.

    Please note that this conference is being recorded.

    I now hand the conference over to Mr M Satish Chaudhry. Thank you and over to you, sir.

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    Unidentified_2 [2]
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    Good afternoon to all of you. I am M Satish Shahry, company secretary and chief Investor Relations Officer of GVI Laboratories Limited.

    I welcome you all to the earnings call of the company for the quarter and half year ended 30th September 2024 from Divi's Labs. We have with us today, Dr Kiran S Divi whole time director and Chief Executive Officer, MS NMA Prasar Devi whole time director, Commercial Mr L Kurwa, Chief Financial Officer and Mr Wesa Permal General Manager, Finance and Accounts.

    During the day, our board has approved an audited financial results for the quarter and half year ended 30th September 2024 and we have released the same to the stock exchanges as well as updated the same in our website.

    Please note that this conference call is being recorded and a transcript of the same will be made available on the website of the company.

    Also, please note that the audio of the conference call is the copyright material of laboratories limited and cannot be copied rebroadcasted or attributed in press or media without the specific and written consent.

    Let me draw your attention to the fact that on this call, our discussion will include certain forward-looking statements which are predictions, projections or other estimates about future events.

    These estimates reflect management's current expectations of future performance of the company.

    Please note that these estimates involve several risks and uncertainties that could cause our actual results to differ materially from what is expressed or implied.

    DV lab or its officials does not undertake any obligation to publicly update any forward-looking statement whether as a result of future events or otherwise.

    Now I hand over the conference to Dr Kiran Divi for opening remark, sir.

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    Unidentified_3 [3]
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    Good afternoon, everyone and welcome to the laboratories earning call for the second quarter of the financial year 2025.

    It's a pleasure to speak with you today and to share an overview of our recent performance and progress we are making across various areas of businesses.

    We are pleased to report that we achieved significant revenue growth in the second quarter, reflecting the success of our efforts to harness expanding market opportunities.

    This growth comes amid a significant shift in custom emps landscape where we see an increasing demand from both existing and new customers. Our strategy to diversify across portfolios is yielding favorable results and the impact of our previous investments and expansions are becoming clear.

    We are not only expanding our market presence but also reinforcing our reputation as a trusted partner in complex and high value green industry in the generic markets. We are indeed facing some pricing pressure and industry wide challenge but we are optimistic that this will stabilize in the near future. Despite of this, our emerging generic products continue to perform well, creating positive momentum that supports our overall generic business. Importantly, our future pipeline is robust with a range of generic products advancing towards customer qualifications and regulatory approvals in the United States and Europe.

    We anticipate these products to start contributing to our revenues from 2026 onwards.

    Our contrast media segment is another area of noticeable progress where we are currently engaging with most of our key customers and our projects are moving through various stages from qualifications to commercial supplies. This strong engagement underlines our growing demand for our capabilities. In contrast media and providing us with significant growth potential within our custom synthesis division. We are seeing increased interest and engagement from our customers, the number of rsp's and on site visits from our existing customers and potential customers has been steadily rising with a focus on securing long term partnerships that emphasize supply chain resilience and backward integration. Our approach in custom synthesis continues to be collaborative and forward thinking ensuring we are well positioned to support the evolving needs of our customers in response to the wave of new peptide drugs, particularly those targeting GLP One, we are making investments to expand our technical capabilities. We have established infrastructures dedicated to solid space peptide synthesis and currently operating multiple 500 L reactors with the demand continuing to rise. We are now expanding our solid phase peptide synthesis facilities. Further on the technology front, the V has been successfully utilizing continuous flow chemistry technology. We have successfully applied this technology in our labs and at a scale is set to expand its use into commercial scale production in the next 1 to 2 years. This step not only this step, not only talks about our enhancing our efficiency but also reflects our commitment to innovation and advanced technology.

    We are also excited to report that our Greenfield expansion at unit three is progressing. Well, this 200 acre project represents a significant step forward in our growth trajectory.

    With phase V production activity expected to begin in December 2024. This facility will provide us with added capacity needed to support our growth and further extend our production capabilities.

    In Q2, we have successfully concluded a USFDA inspection at our unit two facility in Vishak, Patna.

    This positive outcome reaffirms our commitment to the highest quality and regulatory compliance standards underscoring our reliability as a global supplier.

    Beyond our operations, these libraries remain deeply committed to corporate social responsibility.

    We believe in contributing to the wellbeing and sustainable growth of the communities around us, particularly in Telangana and Andhra Pradesh where our manufacturing units are based this quarter. Our community initiatives were centered around expanding access to primary health care in rural areas. We deployed mobile health screening vehicles to bring essential services directly to the rural populations, ensuring daily health care needs are met. We also supported the establishment of community health care centers conducted in school health checkup camps and extended assistance to several government hospitals in Vishak, Patnam.

    These initiatives are aligned with our commitment to fostering healthier and more resilient communities around us. Now, MS NMA Prasad Divi will present you with the financial highlights of the second quarter of the financial year 2024 25. Thank you.

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    Unidentified_4 [4]
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    Good afternoon, ladies and gentlemen. Thank you for joining us today as we gather to discuss these laboratory operational and financial performance for the second quarter and the first half of fy 2,425.

    I'm pleased to share that the disease has achieved sustainable double digit growth in the first half of this fiscal year.

    This is a testament to the resilience and dedication of pines as This growth has been realized. Despite significant logistical challenges, continued disruptions in Red Sea have impacted global shipping lanes with increased attack on commercial vessels. Prompting the routing of shipments via South Africa.

    This change has extended our transit times from around 45 days to approximately 70 days and raised associated logistics costs.

    In anticipation of these issues. We have been in close communication with our customers to plan shipments well in advance ensuring that we meet their requirements with minimal disruption.

    Our commitment to efficient supply chain management has been paramount in maintaining a steady flow of products to our customers even MS disruptions on procurement front. We have observed stability in raw material prices over the past six months while the stability has been favorable, we are approaching it with caution as the market remains sensitive to developments in the Middle East and fluctuations in crude oil prices, a sudden shift in these factors could impact raw material costs and our dreams are closely monitoring the situation to mitigate the risks related to inventory management. We have adopted a proactive approach by advancing shipments by 3 to 4 weeks, maintaining extended safety stock levels and diversifying our supply base wherever feasible.

    These measures are designed to safeguard against potential supply chain disruptions and ensure that we can continue to meet our customer demand without compromising on quality or timelines.

    Our commitment to operational excellence and our strategic adaptability have been key in navigating the challenges of this first half of the year, I will now present an overview of the financial performance for the second quarter and first half of the financial year 2024 25 we have achieved a consolidated total income of INR2,444 crores for the current quarter as against the income of INR995 crores for the corresponding quarter of previous year and of INR2,197 crores of the immediate previous quarter of the current financial year profit before tax for the current quarter is INR722 crores as against INR469 crores for the corresponding quarter of previous year.

    Profit after tax for the current quarter is INR510 gross as against 348 gross for the first half year, we have earned a consolidated total income of INR4,640 crores as against the income of INR3,854 crores for the corresponding half year of previous year.

    Material consumption remains at about 41% of the sales revenue for the first half of the current financial year. Profit before tax for the current half year is INR1,326 gross as against INR961 gross for the corresponding half year of the previous year.

    Profit after tax for the current half year is INR940 gross as against 704 gross for the corresponding half year of previous year.

    Exports for the half year is about 87% of the total sales revenue exports to Europe and United States combined are about 71% of the total sales revenue product mix for generics to custom synthesis for the half year is 49% and 51% respectively.

    We have a forex gain of INR28 crows for the current half year as against a gain of INR14 crows in the corresponding half year of previous year, our constant currency growth for the half year has been at 21%.

    Our nutraceutical business amounted to INR406 grows for this half year.

    We have capitalized assets of 64 crows during the current quarter and INR124 cros during the half year, we have a capital work in progress of INR1,316 cros as of September 30th 2024 of which Kakinada project accounts for INR1,006 gross total amount spent on Kakinada project till 30th. September 2024 is INR181 crores as of 30th, September 2024 we have cash on book of INR3,602 crows receivables of INR2,181 cros and inventories of INR3,145 crores Thank you.

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    Unidentified_2 [5]
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    Thank you, madam. With this. We would request the moderator to open the line for three hours.

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    Unidentified_1 [6]
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    Thank you very much. We will now begin the question and answer session.

    Anyone who wishes to ask a question may press star and one on the telephone.

    If you wish to remove yourself from the question queue, you may press star and two participants are requested to use handset. So I'll ask you a question.

    Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants, we request to limit your questions to two per participants.

    We'll wait for a moment while the question to assembles.

    Our first question is from line of the K I from HS BC. Please go ahead.

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    Unidentified_5 [7]
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    Hi good afternoon and thank you for the opportunity. Doctor Ly, you mentioned there are multiple 500 react 500 L reactors right now in operations for your sub type project, etcetera. So can you elaborate a bit more like like are, are you like close to supplies or it's, it's still like some time before you will start supplying to your customers? And also if you can mention whether you're just working on the solid state of the site or you are also working on the liquid, liquid state, the type also.

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    Unidentified_3 [8]
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    So as I explained before in the previous call, we have been in the peptide business for the last 14 years where we have developed amino acids, protected, protected amino assets. And we have been supplying these to several innovators for, you know, for them to produce the G LP ones. Now, we have got into solid phase peptide synthesis and also liquid phase peptide synthesis, both both to produce fragments. These are for tetramer, optimus dec comers and the, you know, the call we are right now producing and they're undergoing qualifications, then they have to go into filing. So it is it will take some time before they totally commercialized in terms of peptides right now. We are we are we are supplying the individual potato and assets while the qualifications are going on.

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    Unidentified_5 [9]
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    Approximately say in another 12 to 15 months. Do you think supply can start for these products? Also.

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    Unidentified_3 [10]
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    We are hoping it it would be sooner because the sooner we can get approvals we can sell. But all this depends on the regulatory bodies both in us, Europe, Japan different countries. So it, it completely depends on when we would get regulatory approvals.

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    Unidentified_5 [11]
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    So, and my second question is the generic business. So you mentioned the future generic opportunities will start from 26 onwards. So can you provide some color, like how many new products you can launch under that that bucket? And in terms of performance of the existing business, are you seeing a pricing challenge across the board or it's a particular to certain products. Only.

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    Unidentified_3 [12]
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    To answer on the on the steady generic business. We have like naproxen gain car dopa, levadopa. We are seeing pricing pressure across the board. It's not related to one segment or you know, one therapy. We are seeing an overall pricing pressure. And though our volume wise, we have not, we have not lost any volume. We have seen a volume based growth on these products. But however, due to pricing pressure, you know, the, the, the sales, the sales, the generic side do not do not show what it has to be showing.

    Coming to your second question, the Futuregen generics. These are mostly products which are coming off patent from 2026 onwards and they're in various stages of qualifications with our customers, both in us and Europe. Right from some of them have filed their their A ND A and they're waiting for their approval from various regulatory agencies. Once they get their approval, we will start supplying them quantities.

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    Unidentified_5 [13]
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    Sure. Thank you. Thank you for this.

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    Unidentified_6 [14]
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    Call.

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    Unidentified_1 [15]
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    Thank you. Our next question is from line of Surin Naran Patra from Philip capital, India Private Limited. Please go ahead.

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    Unidentified_7 [16]
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    Yeah, thank you for this opportunity, sir. And congratulations for the great set of numbers.

    Sir, first question is about the, the G&P preparations and the our preparedness about it. So you have already indicated a couple of times about your manufacturing capability in that and the fragments, what you have been dealing with earlier in the now the technical grade thing what you're talking about. So with this, is it possible to share you that? Okay, with this, are you ready for the peptide block with the entering capability or it will still be kind of a fragments and hence focus would be around that.

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    Unidentified_3 [17]
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    See right now, we are going by what the customer you know, has requested us to do right now. Our customers have shown interest in procuring fragments for us. So if our customer wants end to end, we do have the capability to provide end to end, you know, the final AP I. But since this is a complete custom synthesis project, we will only abide by what the customer requires and wishes to procure from us.

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    Unidentified_7 [18]
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    Okay?

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    Unidentified_6 [19]
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    So.

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    Unidentified_7 [20]
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    Also there are see, this is this involves a kind of a complex and difficult chain of things in the IP A manufacturing or even the segment manufacturing.

    So could you share what could be the kind of value potential of AP I or let's say the services that you are providing from the total AP I opportunity?

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    Unidentified_4 [21]
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    Can you please elaborate your question a bit more?

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    Unidentified_7 [22]
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    Yeah, the it's the AP I opportunities X then our current capability, what we are offering that will be capturing what 60% 70% of the total AP I opportunity in the blog that I'm trying to understand.

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    Unidentified_3 [23]
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    In the peptide segment. You know, we, we we are very optimistic that, you know, we will be a major player in the long term right now. Right now, we we have just entered into the fragment manufacturing and you know, as time goes and as the custom business on the fragment side keeps increasing, we will get a lot of opportunities as of now, we have good opportunities and a decent pipeline in it.

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    Unidentified_7 [24]
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    Sure, sir. Just last one question about the the sense about the, the RQS that you have indicated because there is a spike that we are witnessing for everybody. That is those who are present in the CD MO space. But while this is giving a kind of a great visibility and opportunity, but what could be the since that is the trend for everybody? So what is the likelihood of those RQS getting converted into business? And what timeline it generally takes for converting the RQ into business? So some sense on that would be helpful, sir.

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    Unidentified_3 [25]
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    See generally, you know, we get RSQS from, from several customers, okay? They can either be in phase one, they can be in phase two, they can be in phase three or ready to launch. It depends on what stage they're getting any RSQ and also based on regulatory approvals, it can be a new chemical entity completely or a new therapeutic category or they're going for a particular particular, you know, type of dosage. Now, all these, we have to go through regulatory approvals across all all continents and, and then you know that once the approval process comes in, then the commercialization takes place. We have been in the business for the last 30 years on this and we have been dealing with RF for us, it's not, I mean, it's not a trend, we have been in it for a long time. So we know how, how the, how, how when the customer can see whether it is, it is looking promising or it's not looking promising or whether this molecule will go on fast track or is it something that you go on on a slow pace because they're seeing some issues and they have to go back on the bench. So there are a lot of factors to be involved before we can just put a number and say, okay, in three years, we'll see something. It is hard to see an R excuse. It depends completely on, on at what stage the molecule is at the innovatives end and how fast he's planning to take this molecule. And if he, if the success rate is good.

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    Unidentified_8 [26]
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    Sure.

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    Unidentified_7 [27]
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    Just 11 more about this 654 or 660 to 700 growth project. Could you update, sir? What is the status of that project? And just one clarification about the, whether the project is about a existing product, so that we would be supplying, let's say by this stage or something like that. And hence it is a dedicated project or if you can give some color on that.

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    Unidentified_4 [28]
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    Can you just repeat your question again, please?

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    Unidentified_7 [29]
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    The 650 to 700 pro project dedicated one what we are working on it and it should be a kind of I 27 facility. So the nature of the project, whether it is that we have been associated with the customer for some other component and now it is getting converted into a kind of dedicated project or what is the nature of this?

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    Unidentified_8 [30]
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    Yes.

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    Unidentified_4 [31]
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    The information we already shared is the is what we could actually share to even now because we are bound by confidentiality not to share more information regarding that particular venture.

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    Unidentified_7 [32]
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    Sure, ma'am. Yes. Okay. Thank you.

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    Unidentified_1 [33]
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    Thank you, ladies and gentlemen. In order to ensure that the management is able to address questions from all participants, we request you to limit your questions to two per participants for any follow up questions, you may rejoin the queue.

    Our next question is from the line of Neha Manpuria from Bank of America. Please go ahead.

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    Unidentified_9 [34]
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    Yeah, thanks for taking my question. Lima, just to confirm you mentioned that the generic business is 49% of the revenue, right?

    Yeah.

    Okay. In the generic business, other than the, you know, large AP is that we've been supplying one of the strategies that we've talked about is increasing market share in, you know, some of the smaller AP is given the pricing pressure, have you still been able to see success and sort of growing share in the smaller AP is to get it, you know, to make it larger in size or, or has that process been slower because of the pricing environment?

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    Unidentified_4 [35]
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    I would say not just the larger molecules, but also the smaller molecules all together. I would say that this time, this half year for the generic business, we have seen a good volume based growth and it is 49% for a similar reason that in spite of having pricing pressures, we were able to sustain the generic business to that particular percentage.

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    Unidentified_9 [36]
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    Okay. So we're still seeing market share gains in the smaller AP is as well. Yeah.

    Okay. And when you say pricing should normalize in the near near future, would this be in the next six months? One year? What according to you would be in a good time frame where we see pricing stabilizing for.

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    Unidentified_5 [37]
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    Generics.

    It is.

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    Unidentified_4 [38]
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    Very hard to answer that particular question. But that is the hope that, you know, in the next six months to a year, we should see at least some stability with respect to the pricing pressure.

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    Unidentified_9 [39]
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    And my second question is on the contrast media, I think you mentioned that, you mentioned that they're moving from qualification to commercial supplies. These are for the newer IO deal based on the good based products. You know, if you could give some color on, you know, for which products are these, not the names, but you know, because I remember you talked about some good deal based products also that we are working with innovators. And when can we see commercial supply for these?

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    Unidentified_3 [40]
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    So, so on the contrast media and the IO based products, a few of the molecules, we are in qualification stages and a few of them, we have already commercialized with our customers and we have even long term contracts with them. And as time goes, the volumes will increase even with them.

    So that answers the iodine based product coming to G gadolinium compounds. We are still in qualification stages with our customers and we hope in the next 1 to 2 years, we will be commercializing on them.

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    Unidentified_9 [41]
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    And these are for a lot of you know, gin compounds or a few of them, you know.

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    Unidentified_3 [42]
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    As of now, you know, because we have C DS with several customers. I can just say that we are working quite a bit with, with a lot of customers on several compounds. I would leave it there. Thank.

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    Unidentified_9 [43]
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    You.

    Thank you so.

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    Unidentified_8 [44]
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    Much.

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    Unidentified_1 [45]
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    Thank you. Our next question is from line of Abdulkader, Puranwala from IC IC I Securities. Please go ahead.

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    Unidentified_6 [46]
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    Yeah, hi. Thank you for the opportunity. So my first question is with regards to your GM P products. So just wanted to understand, you know, your, I mean, are you trying to target a basket full of products or these are quite specific, you know, specific products, what you're doing for your customers currently.

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    Unidentified_3 [47]
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    So as of now, GL P compounds, we are only, we are only manufacturing specific to what customers require. Every compound is, is every molecule is different. Okay? Some might be 40 chain min acid with min is in a particular you know, in a particular line. So what we're doing is we're, we are manufacturing fragments for them based on whichever fragments they decide to source from us. A fragment can be an October decoma or whichever one they, they prefer to buy from us.

    We are not looking at the, at the generic side. So we are not producing, you know, different October or different dec comers or AP is and keeping it ready. We are strictly looking at as a CS business at this point.

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    Unidentified_6 [48]
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    Understood. Understood. And so I mean, if you could help us, you know, the quantification, I mean, what would be the kind of investments you would have done so far? I mean, would that be possible for you to quantify.

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    Unidentified_3 [49]
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    At this point? It would be difficult to quantify because our investments are still ongoing with the increase in demand. We are investing. But yeah, we we have we are expanding our capacity in this product. So it would be difficult for me to quantify it.

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    Unidentified_6 [50]
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    Got it and on final on the general business. So understand the about the pricing pressure but in terms of the volumes, you know, could you please highlight in the sense that you know, which are the products where there is a volume growth? And then lastly, if you could quantify the volume growth for this particular product would be helpful. Thank you.

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    Unidentified_4 [51]
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    I would say most of our products, we did have a good growth and most of our key products, which we have been having quite a substantial market share where we are the leading market share. We did have a very good growth, which is a volume based growth, which is almost like a double digit growth that I would say volume based. But beyond that, I don't think I can be more specific about product wise.

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    Unidentified_6 [52]
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    Okay. And how about the volume group for the quarter?

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    Unidentified_4 [53]
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    That's what I just mentioned. It's the similar situation across the quarter as well.

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    Unidentified_8 [54]
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    All right. Thank you.

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    Unidentified_1 [55]
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    Thank you. Our next question is from Line of Erika Veral, from City group. Please go ahead.

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    Unidentified_10 [56]
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    Yeah, hi, thank you. So, so you have alluded that you are working on both. Solid taste, depression and liquid was pre pressure. That's it. So just want to understand that these are you working for only one innovator with these two technologies or you are working with the different innovators? Thank you.

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    Unidentified_3 [57]
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    With, with regards to peptides and you know, fragments we have, we are working with several customers and each one has their own requirements in terms of fragments, in terms of the chain, whether they want Optimus Decor or you know, purification, you know, whatever the customer requires we are producing. But in, in simple words, we have, we have, we are working with several customers.

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    Unidentified_10 [58]
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    And you're working with the projects which are already commercialized, right? If I understand correctly.

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    Unidentified_3 [59]
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    We are working with customers who have projects already commercialized. We're working with customers who are in phase three, phase two. So we have a pipeline which is working right now.

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    Unidentified_10 [60]
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    Okay. Thank you. And just the second question, You highlighted that you're operating multiple 500.

    So is it possible for you to quantify what is the current capacity that you have for solid business? And over the next couple of years, how much capacity you plan to add? Although you are not quantifying the investments, etcetera, but you can quantify in terms of capacity of solid based pricing business, that would be super helpful. Thank you.

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    Unidentified_3 [61]
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    Yeah, and in terms of capacity because we have confidentiality agreements where we have procured reactors based on product specific for a customer and not at liberty to talk about capacities.

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    Unidentified_11 [62]
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    Okay. Understood.

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    Unidentified_3 [63]
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    And I can talk about, I can just talk about my general plant. I have a few 500 L reactors which I'm using it for qualifications but product specific which, whichever I'm working for customers I cannot discuss. I'm sorry.

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    Unidentified_10 [64]
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    Yeah, no problem at all. And is it fair to assume that you are not working given that you are working with innovators in the GRP one, you will not work for the generics or you are still interested in the generic opportunity as well that we open into 20 six. As.

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    Unidentified_3 [65]
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    Long. We as of now, our, our focus is on custom synthesis in PEP business because all the G LP ones are right now still under patent and we are focusing more in that segment.

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    Unidentified_10 [66]
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    Thank you. Just one more question if I can speak in for this is this is related to contrast media in the previous call, you talked about that you see a strong demand and expanding the capacities for one or two of your products, right? So is it possible again in here that how much the volume can increase as far as the contract we are concerned over the next 2 to 3 years?

    Thank you.

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    Unidentified_3 [67]
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    So, so, so in contrast media, we have several customers like, you know, you know, who are the big players, there's nothing secret and we are, we are undergoing you know, some of them are undergoing qualification, some of them we are have commercialized and while commercializing it is it is a long term contract with year on year increase in volume.

    So it's hard to tell. It's hard to say that you know that I I would say about year on year, we would have a 20 to 30% increase in volume would be a fair statement.

    Thanks.

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    Unidentified_10 [68]
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    Thanks. I have more questions. So.

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    Unidentified_8 [69]
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    Thank you.

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    Unidentified_1 [70]
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    Thank you.

    Our next question is from line of pay from Malara capital. Please go ahead.

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    Unidentified_8 [71]
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    Hi. Good afternoon. Just two quick questions from my side. One If I look at the consolidation of other expenses, as I see it is flat or maybe slightly down. Yoy, what helped us here?

    Can you.

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    Unidentified_4 [72]
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    Please repeat the question again? It wasn't clear.

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    Unidentified_8 [73]
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    Yeah. I was looking at the other expenses in the consolidated P&L it is flat. Yy or slightly down. What has helped us there of.

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    Unidentified_4 [74]
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    The, the, what you have seen is mainly because of mainly like, you know, we implemented a lot of brain chemistry and we have improvised a lot on the efficiency front and also the backward integration that we went into. And so I think it's a combination of all the factors that have taken into consideration that you are seeing slightly lower. Other expenses.

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    Unidentified_8 [75]
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    Okay. So, so it's going to be like this for the next near future.

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    Unidentified_4 [76]
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    You Yes, I would say approximately the same similar lines.

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    Unidentified_8 [77]
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    Okay. And what would be the total CapEx all put together this year?

    I would say.

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    Unidentified_4 [78]
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    Including Karra and everything put together another 1,000 crows is what we are assuming.

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    Unidentified_8 [79]
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    Understood that takes it to around the 1,600 course.

    Yes.

    Okay. And yeah, and for next year, year after, I mean, I'm not asking for an exact guidance or something. You know, a rough you know, would, would CapEx be in similar lines or significantly lower than that?

    Sorry, I didn't hear if you said something.

    --------------------------------------------------------------------------------
    Unidentified_4 [80]
    --------------------------------------------------------------------------------
    Oh, the I would say that, you know, the CapEx is an ongoing thing and as, and when our CS projects are finalized and, you know, expansion plans going ahead, the CapEx would keep on adding to it and we would be bringing it to the notice as and when we feel that there is going to be substantial cap that's being invested in the organization.

    --------------------------------------------------------------------------------
    Unidentified_8 [81]
    --------------------------------------------------------------------------------
    Understood. But I mean, just my question is coming from the perspective that, you know, usually your CapEx still last year was around I think around 700 calls or so, every year this year is just shot up next year. Would it normalize based on your visibility as of now?

    --------------------------------------------------------------------------------
    Unidentified_4 [82]
    --------------------------------------------------------------------------------
    This year, it has shot up mainly because of the Greenfield project that we have installed at Karra. And as you know, there's a huge difference between a Greenfield expansion and a brownfield expansion. A brownfield would have other services and you know, services such as warehouses or your boiler facilities, everything united at one place, but as Greenfield, everything has to be set up from start. So definitely the expansion of the CapEx expansion would definitely be larger than it is a green field. But yes, the idea from the next year is to be because it's going to be Brownfield expansion. It's going to be slightly lower than what it has been this year.

    Unless there is a huge opportunity that we would be seeing, it would require again, a massive investment.

    --------------------------------------------------------------------------------
    Unidentified_8 [83]
    --------------------------------------------------------------------------------
    Understood. Thank you very much.

    --------------------------------------------------------------------------------
    Unidentified_1 [84]
    --------------------------------------------------------------------------------
    Thank you, ladies and gentlemen. In order to ensure that the management is able to address questions from all participants, please limit your questions to two participants for any follow up questions. You may resign the queue.

    Our next question is line of shams univar from Goldman Sachs. Please go ahead.

    --------------------------------------------------------------------------------
    Unidentified_12 [85]
    --------------------------------------------------------------------------------
    Yeah, good afternoon. And just the first question is on unit three. I think in the opening remarks you mentioned about the December 2024. You know, II I couldn't get it. So what happens in December 2024? Is it where the unit gets ready for inspection or it's ready for commercialization? If you could elaborate and what could be the subsequent steps that we can track from a milestone perspective on unit three.

    --------------------------------------------------------------------------------
    Unidentified_4 [86]
    --------------------------------------------------------------------------------
    So the unit three, we are planning to start a common production from December 2024. And it would be a phase wise manner where we would start initially, certain blocks and as and when they are picking up and other blocks are coming to completion, they would also start getting into the production line. But the the starting would happen in the December of 2024.

    --------------------------------------------------------------------------------
    Unidentified_12 [87]
    --------------------------------------------------------------------------------
    I just just maybe I'm wrong but I remember we were doing some intermediate, some backward integration in ministry already, right? Like maybe six or nine months back. I know which didn't require inspection so that will stop with it.

    --------------------------------------------------------------------------------
    Unidentified_13 [88]
    --------------------------------------------------------------------------------
    Or sorry. I.

    --------------------------------------------------------------------------------
    Unidentified_4 [89]
    --------------------------------------------------------------------------------
    We haven't started any production in unit three as of now. I mean, I don't remember mentioning that in any of the calls because it is a green field and it is, the construction was still going on. Kaka is going to be a combination of multiple things and certain regulatory requirement and non regulatory requirement, products would be maybe planned over there. But as of now, there is no production happening over there. If that's what your question is.

    --------------------------------------------------------------------------------
    Unidentified_12 [90]
    --------------------------------------------------------------------------------
    Understood. And phase one, then you expect like a reasonable amount of utilization for this particular unit three for phase one.

    --------------------------------------------------------------------------------
    Unidentified_3 [91]
    --------------------------------------------------------------------------------
    So unit three will start in December in a phase wise manner. We think about it in the next 6 to 7 months, we will use complete phase one initially since you know, we have to go through, we have to search for regulatory approvals which will take time. We will do some backward integration over there and free up capacity at our regulatory units where we can produce additional products.

    And then in the meantime, we will we will see as and when we can, we can, when the, when the products will get approved for, for regulatory inspection for unit three.

    --------------------------------------------------------------------------------
    Unidentified_12 [92]
    --------------------------------------------------------------------------------
    Understood. Thank you. Second question quickly on this number. Qoq, we have seen like a 10% revenue increase, quarter two versus quarter one, but our gross margins have kind of declined. Anything like material cost, I think minimal. You called out at 41% versus 40% last quarter, quarter one. So anything that has changed, is it the generic pricing pressure that is leading to the any, any qualitative color, please? Thank you.

    --------------------------------------------------------------------------------
    Unidentified_4 [93]
    --------------------------------------------------------------------------------
    I would say general pricing pressure would play a role in that, but that's not the complete scenario. We would normally as an organization say not to look at quarter on quarter, but to look at complete eo because there could be lumpiness happening in one particular quarter. Whereas the other quarter would have a downside and another quarter would have an upside based on the shipments that in the customer requirements. When the shipment should take place. So, ideally speaking, we would say look at the whole year rather than looking on quarter on quarter.

    --------------------------------------------------------------------------------
    Unidentified_12 [94]
    --------------------------------------------------------------------------------
    And versus fiscal '24 you think things have changed on the just the material cost angle, I'll be getting better or worse. Sorry.

    --------------------------------------------------------------------------------
    Unidentified_4 [95]
    --------------------------------------------------------------------------------
    The material cost is actually has stabilized. I mean, if you see my previous years, investor call, there would be information that the material cost has been rising. Right now, what we see is like downward trend and stabilizing trends. So we are hoping this year it would be a stable material cost.

    --------------------------------------------------------------------------------
    Unidentified_1 [96]
    --------------------------------------------------------------------------------
    Thank you. Our next question is from line of to Sharman Adani from Laus. So financial services, please go ahead.

    --------------------------------------------------------------------------------
    Unidentified_14 [97]
    --------------------------------------------------------------------------------
    Thanks for the opportunity, sir. Just on this peptide again, the so we commercialize the liquid p product.

    --------------------------------------------------------------------------------
    Unidentified_8 [98]
    --------------------------------------------------------------------------------
    Peptides.

    --------------------------------------------------------------------------------
    Unidentified_3 [99]
    --------------------------------------------------------------------------------
    We have been there for a long time on the liquid phase pepper synthesis. What we have introduced in the last one year and we have been working on is solid phase pep synthesis and we are working only on custom synthesis projects. So it's based on whatever the customer requires. If he prefers us to make in liquid phase, we will make it in liquid phase. If he wants us to go by the solid phase Pepper Synthesizerss we will produce in that model.

    --------------------------------------------------------------------------------
    Unidentified_14 [100]
    --------------------------------------------------------------------------------
    Understood sir. And sir with respect to this uniquely, this is for like customs and this is generated if you want to call out in terms of what kind of products.

    --------------------------------------------------------------------------------
    Unidentified_3 [101]
    --------------------------------------------------------------------------------
    We manufacture.

    I didn't understand your question. I'm sorry.

    --------------------------------------------------------------------------------
    Unidentified_7 [102]
    --------------------------------------------------------------------------------
    At unit.

    --------------------------------------------------------------------------------
    Unidentified_14 [103]
    --------------------------------------------------------------------------------
    Three, the one which is going to start the production. If you would call out like segment wise, this unit three will have more of the generics or the custom synthesis or this type products.

    --------------------------------------------------------------------------------
    Unidentified_3 [104]
    --------------------------------------------------------------------------------
    It will be a mix of everything. Like I explained in in, in previously, initially, we will be producing certain backward integrated products to free up capacity in our existing plants so that products can regulate products can jump in while we will be qualifying regulated products here too. So it is a product mix like we have unit one and unit two.

    --------------------------------------------------------------------------------
    Unidentified_14 [105]
    --------------------------------------------------------------------------------
    And lastly maybe one just clarification, this contrast media product segments. So this is under we put it under generics or custom services.

    --------------------------------------------------------------------------------
    Unidentified_3 [106]
    --------------------------------------------------------------------------------
    It depends on the molecule. We have certain molecules which are under custom synthesis and a certain molecules which will come under generic. It depends on whom we are selling to. It also depends on whose process is it the innovators process or is it our own process?

    --------------------------------------------------------------------------------
    Unidentified_14 [107]
    --------------------------------------------------------------------------------
    So if I have to understand in terms of the quote.

    --------------------------------------------------------------------------------
    Unidentified_1 [108]
    --------------------------------------------------------------------------------
    I requested to read on the question queue for any follow up questions.

    Our next question is from Line of Kunal Dame from a query. Please go ahead.

    --------------------------------------------------------------------------------
    Unidentified_13 [109]
    --------------------------------------------------------------------------------
    And thank you for the opportunity, sir. One of the GP one for the project that we are doing for the already commercialized product. Would you say the DD projects that we are getting are more of a supply chain be risking? Or would it be more like incremental supply that the inverters are seeking? Because some of these D LP one molecule which is to be on shorted list have been removed from FDA short list and given that we'd be qualifying maybe a year later. I know what's your take on this?

    --------------------------------------------------------------------------------
    Unidentified_3 [110]
    --------------------------------------------------------------------------------
    So like I explained, right, it it depends on what the customer strategy is, whether he's de risking the model, whether he wants to have whether he wants to have increased the capacity because of the demand in the market because we are working with several G LP ones and also with several products which are in phase two and phase three. So we, we, we do not know the customer strategy and clarity, of course, as a volume, we would like to take the maximum volume and the maximum benefit being a strong player in CS. So as of now, we are seeing good opportunities and good demand.

    --------------------------------------------------------------------------------
    Unidentified_15 [111]
    --------------------------------------------------------------------------------
    So sir, and, and.

    --------------------------------------------------------------------------------
    Unidentified_13 [112]
    --------------------------------------------------------------------------------
    And the related question of.

    --------------------------------------------------------------------------------
    Unidentified_12 [113]
    --------------------------------------------------------------------------------
    Don't know for the.

    --------------------------------------------------------------------------------
    Unidentified_13 [114]
    --------------------------------------------------------------------------------
    Unit three since it's starting in December, would it have a lot of fixed operational cost to start with? And as and when can we kind of ramp up gets basically leveraged. How should we think about that for the first full year? Would it be like a break even in first full year? A bit?

    Or.

    --------------------------------------------------------------------------------
    Unidentified_4 [115]
    --------------------------------------------------------------------------------
    Can you please repeat the question again?

    --------------------------------------------------------------------------------
    Unidentified_13 [116]
    --------------------------------------------------------------------------------
    So unit three will be operationalized in December, right? So it will start with some fixed operational costs, right? Which will be utilized over a period of time as the revenue ramps up. So what is your timeline to inhibit the break even for this unit? For the phase one commercialization.

    --------------------------------------------------------------------------------
    Unidentified_3 [117]
    --------------------------------------------------------------------------------
    It is slowly scale up like like I explained to you right now, we will be producing certain backward integrated products while we're undergoing qualifications for certain products. And we have to go through regulatory approvals for commercial supplies. So it it will take time time before before we can stabilize phase one of, of Katina.

    --------------------------------------------------------------------------------
    Unidentified_13 [118]
    --------------------------------------------------------------------------------
    Sure, sir. Thank you and all the best.

    --------------------------------------------------------------------------------
    Unidentified_1 [119]
    --------------------------------------------------------------------------------
    Thank you. Our next question is from line of Anua Hwal from U Bs. Please go ahead.

    --------------------------------------------------------------------------------
    Unidentified_11 [120]
    --------------------------------------------------------------------------------
    Yeah, hi. Thank you. One question, just want to understand the generic side. You made a comment that on the price division trying to understand what's causing this price division because my sense is that most of the molecules to supplying have been operating for a very long time. We have a very large market share. Is it high inventory at the customer level? All I basically, I'm doubting that there'll be new rule which is causing the price range. Can you, can you elaborate on the general segment here?

    --------------------------------------------------------------------------------
    Unidentified_3 [121]
    --------------------------------------------------------------------------------
    And if you hear from, you know, if you hear from my previous calls, okay. There is, there is a lot of inflation globally where there, where there's a huge pressure is to drop the prices to, to make the medicines more affordable. And and is is passed on to our customers from, from the government agencies which is coming to us. So it's not that there are new approvals. Of course, you know, customers, some customers may want to venture in, they will qualify us. So the volumes are growing. So on a volume base, we have increased our our sales volume, but on a pricing pressure, the pressure seems to still continue and we are just hoping it will normalize soon.

    --------------------------------------------------------------------------------
    Unidentified_11 [122]
    --------------------------------------------------------------------------------
    Okay. That's helpful. Second clarity. I think Nema mentioned about that advancing shipment by 3 to 4 weeks to take care of the logistic issue. Just trying to understand this more. Since when you would have done this business this quarter of the last two or three quarters, you've been doing it. That's one question here. Second is what does it mean? The customer is holding a month inventory higher here.

    --------------------------------------------------------------------------------
    Unidentified_8 [123]
    --------------------------------------------------------------------------------

    --------------------------------------------------------------------------------
    Unidentified_4 [124]
    --------------------------------------------------------------------------------
    It is, from, you can say this quarter we've been proactively planning and we are advancing the shipments of our customers as well as our suppliers, not just our customers but in the material we are holding it at our end. The supply, the customer shipments are taking much more longer because of the Red Sea crisis and because it needs to go around Africa and because of that, we're looking at something like a 70 day shipping period. So definitely we need to advance it by a few weeks.

    --------------------------------------------------------------------------------
    Unidentified_11 [125]
    --------------------------------------------------------------------------------
    Would it have led to you guys getting benefit of this in terms of extra sales in this quarter or would this still be transited? Not book as the, as the revenue this quarter?

    --------------------------------------------------------------------------------
    Unidentified_3 [126]
    --------------------------------------------------------------------------------
    No, this this is not that we have advanced the shipments. The shipments have been planned according to customer requirements and have been sent. It is not sending material in advance and talking to the customer. The customer is also using it just in time.

    --------------------------------------------------------------------------------
    Unidentified_11 [127]
    --------------------------------------------------------------------------------
    Okay, sure. Thank you.

    --------------------------------------------------------------------------------
    Unidentified_1 [128]
    --------------------------------------------------------------------------------
    Thank you. The next question is from Line of Lakshminarayanan from Toa Investments. Please go ahead.

    --------------------------------------------------------------------------------
    Unidentified_15 [129]
    --------------------------------------------------------------------------------
    Yeah. Thank you. Two questions among your top five products. What is the mix of custom synthesis and generic mix because you give around 40 45% is from your top five products as per the annual report. You know, what is the mix of customs and syn.

    --------------------------------------------------------------------------------
    Unidentified_4 [130]
    --------------------------------------------------------------------------------
    That I would say I wouldn't talk about my top five products generates and customers, there's a lot of confidentiality as well sitting there. The so, but I would say in general, my complete portfolio, we would have a 49 to 51.

    --------------------------------------------------------------------------------
    Unidentified_14 [131]
    --------------------------------------------------------------------------------
    Got it. And.

    --------------------------------------------------------------------------------
    Unidentified_15 [132]
    --------------------------------------------------------------------------------
    Second, in terms of the G LP one products do we tend to supply to generic firms as well? And if so, what is the opportunity you see in the next 3 to 5 years? Supplying not to the innovator but to the generic firms.

    --------------------------------------------------------------------------------
    Unidentified_3 [133]
    --------------------------------------------------------------------------------
    Right now, we are concentrating on customs projects on G LP ones. There are huge opportunities for us lined up and also a lot of molecules are in phase three and then we are looking at at, at various other new opportunities. We are not looking at generic customs projects. Sorry, generic peptide AP is at this point.

    --------------------------------------------------------------------------------
    Unidentified_15 [134]
    --------------------------------------------------------------------------------
    Just one last question in the generics. Can you just quantify the revenues coming from the products that we are supplying only in the last three years and removing the you know, determent assignment, things like that. What are the, what is the mix of seven years today?

    --------------------------------------------------------------------------------
    Unidentified_4 [135]
    --------------------------------------------------------------------------------
    It's not something that we have calculated and get ready for the on call, but like I would say it would, it is quite substantial if I have to say the top five.

    --------------------------------------------------------------------------------
    Unidentified_15 [136]
    --------------------------------------------------------------------------------
    No, I'm just in the, in the, in the generics. I'm saying in the products that have been launched in the generics in the last 3 to 5 years, you think it's, you're saying it's substantial portion of our generic.

    --------------------------------------------------------------------------------
    Unidentified_3 [137]
    --------------------------------------------------------------------------------
    Sorry to answer this question, generic, we always look at when we do, when we do our numbers, we look at generics as one portfolio. We've never broken it down to to, you know, few future generic generic recently launched. So it would be very difficult for me or us to substantiate it all. What Neil is trying to say is that we have gained decent to better market shares in those molecules which we have launched in the last 2 to 3 years and we are growing in them with the qualifications and going forward.

    Thank you so much and.

    --------------------------------------------------------------------------------
    Unidentified_15 [138]
    --------------------------------------------------------------------------------
    Come back.

    --------------------------------------------------------------------------------
    Unidentified_1 [139]
    --------------------------------------------------------------------------------
    And see.

    Thank you.

    Our next question is from Line of Diksha Mulchan Nani from TV Weld. Please go ahead.

    --------------------------------------------------------------------------------
    Unidentified_16 [140]
    --------------------------------------------------------------------------------
    Hi, congratulations on the great numbers. The first question is really on if we were to track you and find the right metrics to judge you by what are the things that we are looking in the future or that we should really be focusing on?

    This is regarding the regarding the book.

    --------------------------------------------------------------------------------
    Unidentified_4 [141]
    --------------------------------------------------------------------------------
    Can you please repeat the.

    --------------------------------------------------------------------------------
    Unidentified_8 [142]
    --------------------------------------------------------------------------------
    Question?

    --------------------------------------------------------------------------------
    Unidentified_16 [143]
    --------------------------------------------------------------------------------
    So to track you, what are the right metrics that you would like us to track you as, as you mentioned to track you from an H1 perspective to H2 perspective. As we are doing more launches, what are the key things that we should be looking forward?

    --------------------------------------------------------------------------------
    Unidentified_3 [144]
    --------------------------------------------------------------------------------
    So if, if, if I understand your question correctly we have, like I explained in my previous calls, we have the six growth engines in place right from our existing business, generic products, which we are you know, maintaining them quite stable and then increasing it in growth in terms of volume. We also have a certain business which is growing steadily. Our future generics, which are ready to be launched from 2026. And we are undergoing various stage of qualifications with our customers and we are getting up from launch from 2026. Some are going to be launched in 2,728. All the way to 29.

    Apart from that, we are working on, on the next set of molecules for them to come off pattern. Yes, please.

    --------------------------------------------------------------------------------
    Unidentified_16 [145]
    --------------------------------------------------------------------------------
    So, regarding these 26 launches that we are having in 2026 the what we have alluded in the previous phone calls to some products are going off patent and we'll be able to do on generic. Can you share some particular drugs that we can think on? Look at right now?

    --------------------------------------------------------------------------------
    Unidentified_4 [146]
    --------------------------------------------------------------------------------
    Just second, please.

    --------------------------------------------------------------------------------
    Unidentified_16 [147]
    --------------------------------------------------------------------------------

    --------------------------------------------------------------------------------
    Unidentified_4 [148]
    --------------------------------------------------------------------------------
    Can you just repeat your question once again?

    --------------------------------------------------------------------------------
    Unidentified_16 [149]
    --------------------------------------------------------------------------------
    In the previous phone calls you have mentioned and even in this one that in 2026 we will be launching more drugs and these drugs would also be drugs which were previously patented that are coming off of patents and we are going to go on generics as well.

    So could you just give us some key drugs that we are focusing on right now so that it would be easier for us to track it?

    --------------------------------------------------------------------------------
    Unidentified_4 [150]
    --------------------------------------------------------------------------------
    Yes.

    --------------------------------------------------------------------------------
    Unidentified_3 [151]
    --------------------------------------------------------------------------------
    You know, typically I would not like to disclose these drugs. You know, the only one I can talk about is what I spoke last time is Tika Gerard, which is coming off in 2026. But we have several other molecules that are coming out in 2,728 and 29. That's all I would answer right now.

    --------------------------------------------------------------------------------
    Unidentified_16 [152]
    --------------------------------------------------------------------------------
    Well, it's just one last follow up is on the Ozempic drug that we have been working on or can we really talk a little bit more on this? The G LP one.

    --------------------------------------------------------------------------------
    Unidentified_3 [153]
    --------------------------------------------------------------------------------
    I'm, I'm extremely sorry due to confidentiality, I did not talk about a drug or a product because you're mentioning a name and I'm not at the liberty to, to answer that question.

    --------------------------------------------------------------------------------
    Unidentified_16 [154]
    --------------------------------------------------------------------------------
    No problem, sir. Thank.

    --------------------------------------------------------------------------------
    Unidentified_8 [155]
    --------------------------------------------------------------------------------
    You so much.

    --------------------------------------------------------------------------------
    Unidentified_1 [156]
    --------------------------------------------------------------------------------
    Thank you, ladies and gentlemen, in the interest of time. That was the last question for today.

    I would now like to hand the conference over to Mr M Satish Chaudhry for closing comments.

    --------------------------------------------------------------------------------
    Unidentified_2 [157]
    --------------------------------------------------------------------------------
    Thank you all for joining us today for the earnings call of labor limited. In case you need any further clarification. Please reach out to our relations. Thank you.

    --------------------------------------------------------------------------------
    Unidentified_1 [158]
    --------------------------------------------------------------------------------
    Thank you on behalf of the labor is limited that concludes this conference. We thank you for joining us and you may now disconnect your lines.

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