Aarti Drugs Limited (524348) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Aarti Drugs Limited Q2 and H1 FY '24 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Adhish Patil, Promoter and CFO, Aarti Drugs Limited. Thank you, and over to you, sir.

Thank you. Good morning, everyone. Hope, everyone is doing well. On behalf of Aarti Drugs Limited, I extend a warm welcome to everyone joining us today to discuss our financial results for quarter and half year ended 30 September 2023. On this call, we are joined by Mr. Harshit Savla, Joint Managing Director; Mr. Harit Shah, Whole-Time Director of Aarti Drugs Limited and SGA, our Investor Relations Advisor. I hope everyone had an opportunity to go through the financial results, press release and investor presentation, which we have uploaded on the stock exchange and on our company's website. Let me begin by sharing an update on the ongoing CapEx projects. The capital expenditure incurred during H1 FY '24 amounted to INR 109 crores, and it is projected that the total CapEx for the entire fiscal year will be between INR 250 crores to INR 300 crores. Notably, all of the CapEx plans, including Gujarat, Sayakha CapEx and Tarapur CapEx on dermatology, both of which belong to high margin accretive categories, are estimated to be completed by mid of H2 FY '24. Such projects shall lead to improvement in margins once they are commissioned and capacity utilization is ramped up. Now turning to the financial performance. In Q2 FY '24, our revenue stood at INR 642 crores as against INR 688 crores, a decline of 6.6%, mainly on the account of negative rate variance. EBITDA stood at INR 77 crores as against INR 74 crores year-on-year basis. EBITDA margins stood at around 12%. PAT stood at around INR 40 crores and PAT margin at around 6.2%. For H1 FY '24, our revenue stood at INR 1,304 crores as against INR 1,310 crores, a decline of 0.5% due to lower selling prices as compared to last year. EBITDA stood at around INR 162 crores as against INR 142 crores last year. EBITDA margin stood at 12.4%. PAT stood at around INR 88 crores and PAT margins at around 6.7%. Now coming to segmental performance. In the quarter gone by, despite the geopolitical uncertainties and macroeconomic volatility, API segment volume grew by approximately 10% year-on-year basis, primarily led by domestic demand. However, revenues for the quarter declined by 6.2% due to downward rate variance. In the first half of FY '24, API revenue grew around 1%. Due to operational efficiency and input cost stabilization for majority of our products, gross margins have shown improvement and is expected to be better going forward. Moreover, export demand has been sluggish in some of the geographies for APIs in H1 FY '24 on account of USD shortages, increased interest rates, and cautious spending by customers amidst global geopolitical tensions. We have witnessed a marginal increase in our operating expenses due to onetime buyback costs, which we announced in the month of July 2023, due to labor rate revisions across all our facilities and other expenses. Within the API business, the antibiotic therapeutic category contributed around 47%, antidiabetic around 16%, antiprotozoal around 17%, anti-inflammatory around 10%, antifungal around 8%, and the rest contributed around 2% for the total API sales of Q2 FY '24. Formulation segment stood at INR 86.6 crores for the quarter, a growth of 5.0% year-on-year basis with exports contribution of approximately 49%, whereas in H1 FY '24, revenue stood at INR 176.5 crores with growth of 5.3% year-on-year basis. Specialty Chemicals industry, globally the demand usually seen has been dipped. And there is some spillover of order execution of campaign-based products, specialty products into next quarter, which has impacted this segment for the time being. Coming to stand-alone performance for the quarter. The revenue for Q2 FY '24 stood at INR 578 crores as against INR 625 crores, a decline of 7.6% year-on-year basis. The stand-alone business contributed around 87% to the consolidated revenue for the quarter. Around 67% of this revenue came from the domestic market and 33% from the export market for Q2 FY '24. Domestic revenue grew by approximately 1% on value basis, while exports decreased by around 20% year-on-year for Q2 FY '24. On consolidated basis, as on 30 September 2023, net debt stands at INR 589 crores as against INR 609 crores as on 31 March 2023, whereas equity and total assets stands at INR 1,120 crores and INR 2,352 crores respectively as of 30 September 2023. Net debt-to-equity stood at 0.49x, whereas net debt-to-assets stood at 0.25x. In spite of short-term challenges, we remain optimistic about the growth avenues for our API and non-API business. All our growth plans shall enable steady growth over the next 2 years basis the completion of ongoing projects, some improvements in the current manufacturing processes, and better utilization of current capacity. The pace of growth in exports is expected to continue in the formulation business. With this, we can now begin question-and-answer session. Thank you.

[Operator Instructions] We'll take the first question from the line of Tushar Manudhane from Motilal Oswal Financial Services.

Sir, primarily on the pricing of API segment, we have seen this is second consecutive quarter where the prices have been on the down trend. So if you could comment on this. And is it across the portfolio or certain select API which are driving the overall pricing of API segment?

Yes. So the overall pricing trend has been down. What we have seen, the raw material pricing had stabilized from the month of February. But last 2 months we observed that for few of the antibiotic products and some antidiabetic products, the prices of raw materials had gone down further. And subsequently, what we observed for our sales portfolio, that for the month of July and August, the prices were stable; for the September month, the prices had gone down further. Having said that, our price rate, negative rate variance quarter-on-quarter, means September '23 versus June '23 quarterly, approximately around minus 7.5%. Whereas if we compare September '23 versus September '22, the negative price variation, the price percentage rate degrowth is almost around 16%, minus 16%.

Understood. But at the same time, the volume pickup has been quite decent in terms of price impact. So is it to do more with the significant demand you're seeing? Or this is more like a market share gain?

Harit bhai, would you like to answer that question?

Yes, partly margin gain and partly domestic demand looks good these 2 quarters, first 2 quarters, yes.

And just lastly, the raw materials which we procure are largely imported from China or domestically obtained?

So usually, it is a sound mix, import is around 60% and domestic is around 40% to 45%, it changes from quarter-to-quarter. And out of total imports, around 80% is coming from China.

And even currently, as we -- let's say last month or so, still the prices are further going down. Is that the way to think about say for the upcoming quarters?

See, for few of the intermediates, for some products, we saw that the prices had gone down. But nevertheless, with the increase of crude, the prices of basic solvents, like toluene, methanol, they are going up slightly.

[Operator Instructions] We'll take the next question from the line of Rashmi Shetty from Dolat Capital.

So again, on volume growth in first quarter, we have seen 18% volume growth, whereas in this quarter, we have seen 10% volume growth only. So quarter-on-quarter, along with the price decline, have you seen a volume degrowth also? It has come up, right?

Quarter-on-quarter, we do have a positive volume growth actually of around 5% -- roughly around 5%.

So it's 5%?

Yes. But then the rate degrowth is there of almost 7.5%.

Okay. And in the coming quarters, like in the October month and the subsequent quarters, what is the trend likely to be you're going to see? I mean, this time we have seen quarter-on-quarter decline in prices of around 7.5%. So are these prices supposed to fall further? Or you feel that somewhere it is going to get stabilized?

The thing is, for the September quarter as well, what we have observed that the September month prices were slightly lower for the top few products, they were slightly lower by 4% as compared to August and July prices. So taking this into consideration, probably -- it's a very rough estimate that probably around 3-odd percent negative price rate growth can be seen in the December quarter with respect to September quarter.

Okay. Got it. And related to your CapEx plan, Tarapur CapEx on dermatology and specialty is a brownfield project and the Sayakha project, which you're referring in the press release, is it for greenfield expansion for Specialty Chemicals?

Yes, yes.

So out of this INR 250 crores to INR 300 crores, can you just give us a breakup of how much will be for the Sayakha project at greenfield and how much would be for the...

Coincidently, both the projects at Sayakha and the dermatology greenfield project in Tarapur, both of them are roughly around -- roughly of the same amount. So both of them would be somewhere between INR 350 crores to INR 400 crores combined, and it will be almost 50-50 split.

Got it. And this Sayakha project is expected to get completed by which year?

So we -- actually, we were planning -- we were hoping that we will be able to complete by December of this current quarter -- or December end quarter. But then there were slight delays in terms of equipment delivery and because of rains also some part of civil work we did. But nevertheless, we feel that by the end of January, we should be able to start the work at site, and then maybe 15 to 30 days later, the commercial production batch can also start in the month of February or February end or March beginning.

So just want to understand more on this. Like you have already mentioned that the demand for the Specialty Chemical is pretty muted. And there is a complete demand slowdown for most of the products. And we are putting up this brownfield plant will also get over by mid of H2, greenfield plant will also get over by December. So we will have a lot of capacities, but we will not be really supplying the project. And will it take time for the capacity utilization to run at full level?

Yes, so the products which we are putting up at Sayakha, those are actually different line of products. So those capacities will be for different products, not for the existing products. And moreover, whatever slowdown which we have seen in Specialty Chemicals, that is mainly due to the inventory pile up. So we don't expect that sluggishness to remain more than a quarter or 2. So definitely, by the time we come up with capacity, the Specialty Chemicals segment should be better. And moreover, if you see, quarter-on-quarter, we have volume growth for Specialty Chemicals, but year-on-year, it is slightly -- it's almost flattish, but it is not that negative as far as Specialty Chemicals is concerned for it.

But this chlorosulfonation products will be manufactured in which plant? Will it be in your Tarapur plant or in the Sayakha project?

So in Tarapur, we have 2 facilities. So in 2 of them, we manufacture the chlorosulfonation product, whereas the Sayakha will be totally different.

And the derivatives of chlorosulfonation will also be manufactured in Tarapur only?

Yes.

Got it. And the last question, if I may, related to your gross margin improvement and your EBITDA margin improvement. Since you are foreseeing that demand continues to be weak in the next 2 quarters also, and the rate variance also is likely to be negative, we have done around 12% EBITDA margin in first half. So what is the guidance which you give for the entire year, that is for FY '24?

So the thing is, for the next half, we feel that the gross contribution should increase slightly, at least 0.5% to 1%. We hope that the contribution will improve for the next half of FY '24. Where we are seeing the negative side is that quarter-on-quarter, June '23 versus September '23, the other cost, means the other manufacturing cost and administration costs, the percentage of that has slightly gone up. The reason being the selling prices have come down quite drastically. So that is one of the reasons, but a part of that we are trying to offset by better volume growth. But yes, there were few other things also at our factories, which we have been improving processes of few API products, and while doing so, we had some negative raw material cost, higher consumption for the last quarter. That also we plan to improve going forward. So all this put together, we feel that at least we should improve by 1% in the next half of FY '24.

You mean to say around 13% sort of?

Yes.

Okay. And this includes your cost, which will be coming from the new facilities also, that is Tarapur both the facilities, and the Sayakha project, because that cost will also be added, right?

Yes. A part of that has already been installed, some part of it. So yes.

[Operator Instructions] The next question is from the line of Bhagwan Chodhary from Sunidhi Securities.

Adhish, just one question. This is regarding, earlier we were expecting our margin to reach by 15% by the end of the quarter -- end of the fourth quarter. So the question is that, on the one side, we are looking there, there is a volume growth, while there is a pressure on the pricing side. So margins are not able to move from here onwards. So what is holding exactly us to take that pricing part given the fact that volume growth is there?

Yes. So one thing what we noticed from our internal analysis is that the raw material prices have gone down more in terms of percentage basis, but they just came -- if you take [indiscernible] which is based on that. So those rates have gone down further. But then we have an inventory of almost 94 to 95 days from that inventory to get accounted into P&L. So that is the reason why we see that there is slight squeeze in the gross contribution. So we do expect that the gross contribution will improve mostly. And the second biggest factor for us has been exports, the de-growth in exports because of global scenario. That has caused -- that is something relatively new that happened this quarter. From this quarter itself, we saw a significant impact of that on the numbers.

So what I'm understanding out of this is that inventory pricing, the higher pricing inventory was holding us so far, which is likely to normalize from the next quarter onwards, but the impact of that would not be more than 100 bps?

Correct. As of now, at least we expect 100 bps. But going forward, if anything changes, then hopefully, we'll try to achieve even better than that.

So let me put this other way, for example, in the next year, to reach the 15%, what are the circumstances, and what are the conditions we are looking for?

One is the crude level should not go up sharply from here. The current year is still okay. There should not be much volatility in the market. And these geopolitical tensions, what is happening right now globally, that should ease out, because that definitely impacts the business quite a lot in terms of transaction -- ease of transaction.

Got it. And secondly, what is the status on our Specialty project? Has that commenced, first?

Yes, so are you referring to that Tarapur one?

Yes, Tarapur.

Okay. So the thing is, we were hoping to start it by September end only, and we were quite in line, except for very few days of delay from the instrumentation from the vendor. But then even that is done. The thing is we had installed -- I'll tell you a little bit in detail, we had installed one titanium pipeline. So there were a few leakages and we had to take it out again and again gave it to vendor. So because of that it got delayed by a few days. Otherwise, by now, it should have been already started. So anyways, in October itself, we'll mostly start it. And once we start it, we will update you on that.

Great. And on the salicylic side project, we are on track?

Yes, salicylic site, by December end we are planning to start the commercial batches.

Any update on the USFDA part?

So there's a big update on that actually. So after the last response what we had filed back in March, we had done a few follow-ups on that. Then in the past month, we were able to speak with them on the phone, and so we asked them about their response part, so they said that the response is complete. So they don't need any more information as far as the response is concerned. However, by that time they had not intimated their Indian counterparts to initiate the audit. But they told us to follow up by the end of October or start of November to check with them again. So most probably, they will be intimating the Indian counterparts to initiate the audit, but it will be mostly an unannounced audit.

And that can happen any time from now onwards?

Yes. So we are like ready because it can be a surprise inspection, I believe.

[Operator Instructions] The next question is from the line of Dhwanil Desai from Turtle Capital. As the current participant is not answering, we'll move on to the next question, which is from the line of Chirag Dagli from DSP BlackRock.

On the facility where there can potentially be FDA inspection, has a mock audit been conducted already?

Yes. So the thing is, before giving the final response, just before that we had done almost a week-long -- 4 to 5 days or a week-long mock audit from 2 ex-USFDA inspectors. So that report also we have submitted as a part of response to FDA. But nevertheless, almost few months have passed since that time. So probably, we might think of having few more checks for the facility.

Understood. And Adhish, assuming that, let's say, sometime in the future, this facility does get approved by the FDA, what happens over the next 6 to 12 months post that, just if you can throw some light on what will be the next steps as far as we are concerned to tap that market?

Yes. So there are couple of DMFs, which are actively referred in ANDAs. So those product launches will start. So that will be definitely positive. Then how it scales up then that is to be seen. But we are very confident about products like ciprofloxacin from that facility, because there is a huge demand of that product in the European market. But because of the FDA import alert, they also are not able to purchase from us. So even that business will kick off. Because for the same plant, last year we had EDQM audit around October or something, and that has been cleared now. So we had been issued the new GMP certificate for the same plant.

So you're basically saying Europe will open up rather than the U.S. per se. U.S., you have 2 DMFs, which you're saying...

Yes. U.S. will definitely open up, but then the thing is, the other businesses then we will have to reinitiate, two of them are already active. But Europe will kick off much faster than U.S. is what we believe.

Understood. And can you give us a sense of -- for your chosen products, whichever you can come back in the market with, you're obviously selling them in the non-U.S., non-European markets. What is the kind of price differential, for example, in ciprofloxacin that you see in European markets or in the other 2 DMFs which you talked about in the U.S., what is the price differential versus your current realization in these markets?

Harit, would you like to answer that?

Sorry, can you repeat the question, please?

Harit bhai, I was asking that Adhish was indicating that 2 DMFs can be launched in the U.S. assuming that the facility gets approved today. So in those products, what is the price realization difference in the U.S. versus what we currently sell?

So in narcotic products, price realization is almost 25% more than what we are selling in Europe also vis-à-vis domestic it is around 35% to 40%.

Okay. So as some of these markets open up, it is obvious to assume that you will target some of these higher realization markets?

Definitely.

Understood. And cipro in European markets, how different is pricing over there?

It is -- for example, to give an example, in ROW market, we are selling at about $23, $24. And in Europe, we are selling at $35, $36. So almost 50% more, because of the low commodity, low value price. It’s low value product, right? So overheads are also high.

Understood. Okay. Fair point. And Adhish, in terms of CapEx, so both these projects almost get done by the end of this year. So how are you thinking about capital expenditure in FY '25 and beyond? And just some color around where that potentially will be?

Yes. So one is, if there is any spillover from these 2 greenfield projects, which can happen, that will be not too much, though. Then there is a metformin expansion, which we are planning, which might kick off next year. And plus in one of the greenfield projects which is coming up, we have land parcel to bring up one more production facility. So all the supplementary amenities will be there, ETP, everything will go already there. So a production block will come for 1 more product which is under R&D and piloting. That is, again -- I would say, that is a group of products which correlate to salicylic acid.

But it's a brownfield expansion?

The thing is that the production battery -- production plant would be greenfield, but then it won't require any plot development cost or ETP cost or other utility or department costs, warehouse costs. But the plant will be absolutely new.

So what will be absolute rupees crores CapEx in '25?

So it probably won't cross -- as of now, we don't see beyond INR 150 crores.

For both the projects put together?

Yes. For next year.

Understood. And just the last question on -- before this CapEx, these new facilities come through, as you look at the current facilities and the utilization, et cetera, what is the kind of -- what sort of utilization are we at on the existing block that we have -- on the existing facilities that we have?

So the existing one, we are slightly up by 1% or so as compared to June quarter. But it is still somewhere around -- between 74% and 75%.

And what can we peak at, Adhish?

90% is achievable, but then the thing is, in many of the cases, we have taken like 28 days. But on a safer side, you can say that 90% is easily achievable. And in some products you can go 95% as well.

Understood. And what is the hurdle for us to reach this 90% potential? We have been at 75% for a while, Adhish. So why...

Yes. So the thing is, the reason it is 75% for a while because we keep on expanding the -- we are constantly doing incremental expansions. So each time the new utilization is calculated based on the newer capacities. So that is the reason why it is going hand-in-hand, but once the greenfield project goes online, then suddenly you will see a little bit of dip, because suddenly lot of capacity will be introduced, so you will see a dip in the utilization, but it will be because of that.

Understood. No, so my question was on the existing ones -- on the existing capacity or the existing gross block. If you were to think about how do we reach at 90% utilization in this year, is it going to be usual linear growth that will bring us to that? Or is there something...

For 3 of the products, we have already reached 90%, for few of the products. And for few of them, it is below. So that composite is coming to 74%, 75%. So as the product is becoming more and more -- and we get more regulatory approval, we are getting more and more -- the more and more market is getting open for a few products. So in certain products, we have already reached that, but in certain products it is lower.

Understood. And just the last question, I'm sorry about this, on harping this point, but this European market, you said that there is a market which is not available because of the FDA issues for us. Just if you can quantify how much of our utilization can improve if and when this market opens up?

It is all about gestation period, but I would say within a couple of years, some of the -- one plant will definitely become full. We might have to do expansion in the adjacent -- we do have some space to put up additional production plant. So we might have to do that as well. Once it comes through, we will immediately start that expansion.

[Operator Instructions] The next question is from the line of Dhwanil Desai from Turtle Capital.

So my first question is, so what is the CapEx that we are likely to capitalize in FY '24? And in last call you had mentioned that in FY '25, we should be able to do 35%, 40% capacity utilization for the CapEx that we have capitalized. So are we on track?

Sorry, Dhwanil, can you repeat the question?

Yes. I'm saying that what is the total CapEx that is going to be capitalized in FY '24?

Capitalized, okay. So FY '24, probably around -- and this is a very, very rough estimate. So probably it can be plus/minus INR 200 crores or something like that.

Okay. And that will give us additional revenue potential of INR 500 crores, INR 600 crores, right? That's a right understanding?

Yes, correct.

And I think in last call you had mentioned that in FY '25, whatever CapEx gets completed in FY '24 second half, we should be able to get to 35%, 40% utilization.

Dhwanil, give me 1 second. I need to answer your last question, give me 1 second, I'll just recheck. Actually -- yes, it will be like, if both the projects, if everything is put in place, probably around -- we can go to the level of INR 250 crores also in terms of capitalization by the end of the year.

Okay. So my question was, can we utilize that capacity to 35%, 40% as we were expecting till last quarter? Or you think that because of the environment that has changed, we would expect lower utilization next year?

So that much we do expect to utilize by FY '25. 1/3 probably we should be able to use.

Okay. And second question is again on margins. I think we were expecting around 14%, 15% margin by the exit of FY '24, and you indicated that probably we'll end up 1.5% lower than what we are expecting because of the inventory changes. So are we -- I mean, I was under the impression that Q2 was the quarter where most of the high cost inventory will get accounted for, but it looks like that something will spillover again in Q2.

So what happened was, when we started the quarter, the first 2 months were really good. So in fact, our gross margins improved almost by 150 basis points. But then -- I'm talking about the API and Spec Chem business. But then it went down and closed to only around 0.3 or something like that. So the thing is, in the month of September, there was some price cut. And because there was a price cut -- that was a new price cut which was not there before. So if that price cut did not happen, then all the high-cost inventory would have been already consumed in this quarter itself. Nothing would have been left. But because there was another price cut in September month, that is the reason I'm saying it might push further.

So are we still holding on to 10% top line growth guidance that we had given?

It would be slightly challenging, because the way the rates have corrected, means as I said, in September month, almost minus 17% rate variation was there -- September quarter, September versus September, so -- but we will definitely try to achieve anywhere between 5% to 10% for the entire year.

And one of the things that has been slightly challenging from a market perspective is the international market, right? The export market for last 2, 3 quarters has been pretty subdued. So are you seeing any revival or you think this kind of trend continuing for a few more quarters?

Yes. So the export market is a new factor, which we did not account for when we gave the guidance of around 10%. So that has impacted our guidance. The September quarter was weak. Right now still all these -- because of geopolitical tensions, things look little dicey. So if it improves, then we feel it will definitely pick up, because it cannot go so low as compared to previous years, because we are adding new customers, we are adding new geographies, so it has to go up. I think it is more of a temporary thing, and if the geopolitical situation improves faster, then the recovery will be much faster in the export market.

And is this the reason why export market is subdued in a lot of other segment is because of the hangover of the inventory. But I think...

Mainly what happens you know, the interest costs have also gone up quite high in last one year -- last six months especially across the globe. And earlier, those people, carrying inventory was not an issue because the interest cost was much lower, but now they also feel the pinch of carrying more inventory. So probably even that is impacting demand in near terms. It won’t be for longer period, but it will normalize the inventory.

The overall channel inventory is coming down because of that, that's what you are saying?

That is just an estimate. I mean, I can't verify it, but that is how it looks, right?

[Operator Instructions] The next question is from the line of Harsh from Marcellus.

So sir, from what I understand, we're planning to manufacture methylamine with products at Sayakha.

Harsh, your voice has gone down.

Sir, from what I understand, sir, in terms of new revenue growth drivers, we are entering into methylamine-based products. So could you give us some indication as to what will be our right to win in this product segment?

Yes. So the thing is, there is a lot of captive consumption for this, because we are quite big in metformin. So more than 50% demand would be ours only from the entire project. And the thing is, we can sell to other players as well. And plus, there are 2 more products coming out from this chain, wherein few other group companies are also purchasing totally from outside. So we do have a demand visibility. And that is why we are pretty confident that selling the product won't be a challenge. The main thing would be to set up the quality of the product right and achieve the cost of production.

So what is the total capacity that you're coming up with? And what will be our internal consumption rate, sir?

So as of now, we might come up with 60 plus TPD of capacity.

And sir, to an earlier participant's question, you said that we'll be reaching 35% approximately utilization in FY '25. So that was for this capacity, right?

Yes.

So what is the constraint? I mean, why can't we reach, let's say, 60%, 70%, 80% utilization in the first year itself? What is the constraint here? Just trying to understand.

The thing is, the settling of process would be the major constraint. Once the process settles properly, probably we might revise that estimate.

Okay. Got it. And are you planning to enter into this market in a much bigger manner, because this itself is like a INR 2,000 crore, INR 3,000 crore market?

There is room for expansion for little bit, but we will evaluate that further, means whether it makes business sense or not, whether the margins are there, what is the competitive landscape at that point of time, and then we'll take a call.

We'll take the next question from the line of Bismith Nayak from RW Advisors.

One clarification, sir. Like this INR 650 crores run rate that we have on consolidated revenue, that is based on 75% utilization, correct?

Right.

And whatever new capacity will come through, which will be available for us to ramp up at the beginning of FY '25, potential of that would be INR 1,000 crores, right?

Approximately, longer term. Yes.

And 33% of that INR 1,000 crores can be done in FY '25. That is also a fair understanding?

1/3 of that -- 1/3 of capacity utilization. So probably initially we might have more captive consumption for the Sayakha plant. So we will update that guidance as and when the picture becomes more clear on that.

Understood. And backward integration with regards to Specialty Chem that we will do from the new CapEx, what could be the gross margin benefit over long term?

Gross margin benefit -- the EBITDA level margins definitely for Spec Chem products was upwards of 20%, so higher than company level margins.

[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to the management for closing comments. Over to you.

So with this, I would like to thank everyone for joining us today on this earnings call. We appreciate your interest in Aarti Drugs Limited. If you have any further queries, please contact SGA, our Investor Relations Advisers. Thank you.

Thank you, members of the management. Ladies and gentlemen, on behalf of Aarti Drugs Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.