Aarti Pharmalabs Limited (AARTIPHARM) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Aarti Pharmalabs Limited Q3 and 9 Months FY '24 Earnings Conference Call hosted by Valorem Advisors. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sumeet Singhania from Valorem Advisors. Thank you, and over to you, sir.

Thank you, Sagar. Good evening, everyone, and a very warm welcome to you, all. I'm Sumeet from Valorem Advisors. On behalf of the company, I would like to thank you all for participating in the company's earnings call for the third quarter and 9 months of financial year 2024. Before we begin, let me mention a short cautionary statement. Some of the statements made in today's earnings call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's beliefs as well as assumptions made by and information currently available to the management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's earnings call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review. Let me now introduce you to the management participating with us in today's earnings call and hand it over to them for opening remarks. We have with us today Mr. Rashesh Gogri, Chairman; Mr. Hetal Gogri Gala, Vice Chairman and Managing Director; Mr. Piyush Lakhani, Chief Financial Officer. Without further delay, I request Mr. Rashesh Gogri to start his opening remarks. Thank you, and over to you, sir.

Thank you. Good evening. We welcome all the analyst and investor to this call on the FY '24 quarter 3 performance of Aarti Pharmalabs. I will start the discussion with key business highlights -- businesses. As the company operates in 3 distinct areas within the pharmaceutical industry, API Intermediates, CDMO CMO and Xanthine & Intermediates. The company is actively engaged in production and sales of API-related intermediates and adhering to regulatory standards as a primary focus -- as the primary focus is on selling in the regulated markets. For Q3, the share of regulated market was 53% of the sales in this segment. In CDMO CMO business, strong scale-up and commercial manufacturing expertise of over 2 decades helping us enhance our customer confidence within us. And for Q3, the revenue share of CDMO CMO business stood at 14.2%. We have added 1 new customer, 3 new commercial products and 6 new R&D products in this segment. Let me now cover the key financial highlights for Q3 FY '24. I am pleased to announce that in Q3 financial year '24, we have recorded the highest ever EBITDA and the net profit till date. In absolute terms, the EBITDA stood at INR 97 crores. On the quarter-on-quarter basis, the consolidated revenue increased by about 2% to INR 448 crores, whereas EBIT increased by 10% to INR 78 crores, against the earlier previous EBIT of INR 71 crores. Consolidated PAT stood at INR 53 crores, marginally higher over the previous quarter. The consolidated EPS for the quarter gone by was INR 5.82 per share. The Board has approved an interim dividend of INR 2 per share in the just concluded meeting yesterday. Let me now share update on ongoing expansion projects. The greenfield expansion project at Atali continues to remain on track and with the expected completion targeted in H2 of FY '25. The project to manufacture primary raw material of Xanthine is expected to begin in this quarter, thereby limiting our import dependency. The semi-commercial production block at our U.S. FDA intermediate manufacturing site in Vapi to cater to smaller bed size requirements, is aiming for completion in Q2 of FY '25. In addition to about the company's planning to further expand Xanthine capacity over the next 15 to 18 months. All these efforts signify our commitment to growth, self-reliance and catering to diverse client needs. With the current stable demand outlook, we expect to have EBITDA growth of approximately 8% to 10% in FY '24 and remain well positioned to achieve our long-term goal of 12% to 17% annual growth in next 2 to 3 years. We believe that the Indian and global pharmaceutical industry is poised for sustained growth, and we aim to continuously improve our performance by decreasing our strong research and development capacities. We envision ourselves fortifying our leading position in Xanthine segment of the business. In API/CDMO segment, we plan to strengthen our position by introducing more value-added products and acquiring new customers. This will help us solidify our position in the market, creating long-term value for all our stakeholders. I will now request moderator to open the forum for Q&A session. Thank you.

[Operator Instructions] The first question is from the line of Pratik Banthia from Girik Capital.

Am I audible?

Yes.

So just a couple of questions. First, we can see a big jump in the gross margins in this quarter. So can you please elaborate -- can you break down the gross margin expansion reasons?

Yes. As you will see that we had higher percentage export and our CDMO CMO business has also expanded and both of these have resulted into overall margin expansion in our business.

Okay. So -- and the Xanthine RM project was supposed to be commissioned in this quarter, sir, in Q3, so that has been pushed to Q4, right?

Yes, yes. That has got pushed to Q4. But however, we are able to buy at a similar price range from alternate suppliers. So that doesn't have any cost impact on our renting production costs.

Okay. So even when the project comes on stream, we will -- we can see a similar kind of gross margin, not a big expansion from these levels, right?

Yes, yes. That project is mostly from a standpoint of supply security and Indianization of the raw materials then the import dependence goes away.

Okay. Got it. And last question on my part was is there any change in the theophylline realization because as seen from the import -- for the export debt realization seems to have gone up quite a bit for theophylline, aminophylline and other bronchodilators category. So are you seeing anything on that front?

No, it is at a more or less a similar level and mainly aminophylline or theophylline margins or utilization has been pressurized at similar level to the CapEx pricing.

The next question is from the line of Ankit Gupta from Bamboo Capital.

Good to see the ramp-up on the PMI and CDMO side. But we have seen a significant jump in CDMO segment in this quarter, and our product basket, both on commercialized molecules as well as underdeveloping molecules has increased considerably. And you also added 1 new customer. So the ramp-up in the CDMO that you've seen in the last quarter, is it sustainable? Do you think the traction that we have seen in CDMO segment is expected to continue going forward as well?

Yes, we expect the ramp-up of these projects continuing. As you see now, we have a basket of more than 39 products that we are dealing with, with our 16 customers and they are at various phases of development and some are commercial also. So depending on their plans and the approvals that they get, these products will become commercialized, and provided they pass their clinical research and launch this product. So on that basis, we will have a visibility of these products in the future.

But do you have good visibility on the products, which are already commercialized, which have already launched?

Yes, yes. That's why we are saying that we have good conviction that we will be able to grow the current business of CDMO CMO in the future.

Sure. And sir, given this -- in the segment is in last quarter contributed 14% of our overall revenue. Do you think over the next -- or given visibility that we have that this segment can become 25% of our overall revenue in the next 2 to 3 years?

Next 2 to 3 years, yes, it has a chance to become 20% to 25% of the total revenue or even bigger because it depends on how the products are commercializing at the customer end, depending on that, we will have more visibility. But I think going forward, we see this number to at least reach this 20% mark and go above it.

Got it, sir. And sir, on the API and Intermediates side, [indiscernible] Intermediates side, how is that segment doing there have been pressures on the pricing front. So how is that segment doing? [indiscernible] pricing trend so how is that ...

Sorry to interrupt. You're sounding a bit muffled. Is it possible to use the handset mode in case, if you are using the speaker?

Is it better now? Yes. Yes, on the API and Intermediates side, how is the demand scenario currently? We had been -- the industry has been facing some challenges on the pricing side, as well as demand. So how is the segment doing for us? And how -- what is the outlook for the segment for FY '25 and FY '26?

Yes, basically, in API & Intermediate segment, in API, I particularly mentioned the company operates in the steroids and anti-cancer segment, along with the lifestyle drug. And in this product segment, we are feeling stable to good demand. And though there is a little bit of compression on pricing overall due to overall competition, but I think since we operate largely on the regulated market and export market, we are quite okay with this business and growth potential of this.

Okay. So can we expect 15%, 20% kind of revenue growth in the segment in the next 2 years?

Yes. It depends on the new launches and how our partners are becoming successful in future. So we expect definitely this business to grow. The absolute number can be 10% also yes, in that range.

Okay. Okay. And sir, last question was on the Xanthine side. How is the pricing scenario now? I think last quarter also, it seems that we have seen that we have seen some pressure on pricing. So where do you see the pricing pressure ending and how -- what is the outlook for the sector -- for this segment?

Yes. Overall, we have seen Xanthine segment pricing pressure. But we have been aided by lower raw material costs also. So ultimately, pricing pressure is there, but margin pressure is not as much as the pricing pressure overall. We feel that I think these -- all the China-based dumping of these kind of products also that we are seeing in other APIs will eventually end in next couple of quarters. This can't continue because everything is becoming quite challenging to others, yes.

The next question is from the line of Hrishali Shah from Unifi Investment Management.

Congratulations on the set of numbers. I have 2 questions. First is on Xanthine segment. So it was earlier mentioned that we hold 15% to 20% share in the segment. And then there is one Germany player almost equal to us and Chinese players, which are larger. So it appears as of Xanthine is a very consolidated market. So how do we expect growth there? Is it an incremental opportunity coming in the industry, which will lead to growth? Or am I missing on something in case of industry growth?

Yes. As you see that the overall market of the Xanthine derivatives is growing and particularly, it is growing significantly in Indian subcontinent, and that is resulting in overall growth of the business. The customers that we are focusing on are convinced about our ability to partner with them for their growth. And that's how we are seeing larger allocations to us for future demand from them.

Any particular factor leading to this kind of growth? Or is it just the trend evolving?

Yes. So Xanthine is essentially caffeine and other products, and there is a lot of demand of these kind of drinks and other food application, which is increasing overall usage in particularly Asia and Indian subcontinent.

Okay. That answers it. Another question was on CDMO CMO front. So as we saw the sharp rise from -- of around 700 basis points, that is from 7.2% to 14.2%. So what led to this kind of growth?

Yes. So we had a customer -- see, in the CDMO CMO place, we have customer orders and we had significant orders,, which got expect in this current quarter that we are reviewing, so which resulted in growth of sales.

Also, if you can bifurcate the margins into these 3 segments. We already had -- you already had mentioned that CDMO CMO is the margin accretive business. So if you can just bifurcate margins as of how much contribution of Xanthine segment, how much is at CDMO or how much is API?

Yes. Currently, we are not giving this bifurcation of margins and probably later on from next year onwards, we will give you the bifurcated margins because the assets are common that we are utilizing for API Intermediate and CDMO CMO. So it's a little bit trickier to give this breakup.

The next question is from the line of Ankit Gupta from Bamboo Capital.

Am I audible?

Yes.

As we have indicated in this call as well as in the past, that the margins in the CMO and CDMO segment are higher than our overall company margins compared to Xanthine as well as API Intermediates. So with the proportion of the segment increasing, do you think our overall margins can be like 20%, 21% over the next 2 to 3 years?

Yes. See, margin percentage depends on the pricing also. There are 2 factors, which have led to higher margins in this quarter. Of course, you know we focus more on absolute growth. But lower price of Xanthine derivatives is also factored in overall because the margin compression has not -- absolute margin compression has not happened, but the overall pricing has come down. So that has resulted in terms of percentage increase.

Okay. Got it. Yes, yes. And sir, on the volume side on Xanthine, in the 9 months, have you seen growth in the overall volumes? And if you can broadly give an indication how much has been the growth in volumes in Xanthine?

The growth over last year has been around 3.5% YTD, if you compare YTD last year and this year. So we have done a growth of close to 20%.

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

First question is on the Xanthine side. So in the Xanthine, we are indicating that in a couple of quarters, the China dumping like all other APIs may stop and prices may again kind of move up. So given that, and I understand you do annual contracts for Xanthine for most of your large customers. So how does it work? You revise it somewhere middle of the year or you go through with the same pricing? And then next year only the prices gets revised? So how does it work?

Yes. So all our 100% quantity is not on an annual pricing. We have a mixture of quarterly pricing, annual pricing and spot pricing. So it's a mixture. However, significant portion is on the annual pricing and that gets reset every year.

Okay. Okay. So that is at the start of the financial year or calendar year?

That is too much of detail to share.

Okay. Okay. Sir, second question is, I think we have given that 12% to 17% EBITDA growth guidance. So I think at that point in time, when we were discussing on the call, one of the things was that the Xanthine realizations are likely to come under pressure. Now from here on, if the Xanthine realization again, comes back and we remain backward integrated, do we see any upside potential to what we have said?

No, we have a wide range, 12% to 17%. So I think we'll still fit in that range, even though there is an uptick in -- and there's a lot of dependency on the -- our partner success for the projects for which you know the launch will happen. So we have a series of launch, which will happen in '24, '25. So with that, Intermediates as well as API, how they fare and how partner fares that will determine the overall margin profile and absolute number on our project. But in terms of Xanthine, we will have another a 7% to 8% increase in quantities that further some debottlenecking will happen starting next fiscal. And so that will complete our current debottlenecking program that we started last year. And we further plan to do one more round of debottlenecking by further investment, and we are still working on that. So once we have some details, we will get back to you in the next call.

Okay. Okay. And what is the total CapEx that we are likely to have in FY '25, both Atali and Xanthine expansion put together?

So overall, there are several projects which are undertaken. So I think in Atali, we have announced total CapEx of INR 375 crores. And then there is a solar project where we are doing INR 90 crore CapEx. And then the Xanthine CapEx number is still being worked out. So all in all, everything largely will get spent in '24, '25. So over next 12 to 18 months, we are looking at somewhere in the region of between INR 400 crores to INR 500 crores of CapEx.

Okay. And out of that INR 90 crores is for the solar, rest is for the processes and increasing the capacity, right?

Yes, yes, yes.

And we can assume around 2x asset turn on whatever CapEx that will be?

Solar is going to be not adding anything...

Not solar. I'm not -- I'm excluding the solar part. So I'm saying for the process part and the API and CDMO part?

Yes.

[Operator Instructions] The next question is from the line of Nitesh Dutt from Burman Capital.

First question is on gross margin. For this quarter, the number of 46% is a lot higher than your usual 41%, 42%. Now you explained the reasons, but is this a sustainable number? And also can you bifurcate the impact of product mix and lower RM prices, export, et cetera?

This 46% number is definitely due to the lower sales price and higher -- lower raw material cost percentage plus improved margin due to exports and CDMO CMO segments. So all 3 have contributed to this. And I think we will have to really work on that number. But however, we are looking at absolute number increase and how we are able to get this absolute number to grow as a percentage. So that is where the company is focusing more rather than this percentage.

Understood, sir. Second question is on API and Intermediates. So you have given a pie chart, right? Basis that it seems like the revenue from API intermediates has gone down a little bit in Q3. So have you diverted some of your capacity -- API capacities towards the CMO and CDMO?

Yes, yes. Yes. We have diverted some of our capacity of intermediates for CDMO CMO or utilization, yes.

And sir, you have committed a CapEx of nearly INR 270 crores in FY '23 and H1 of FY '24, right, including the new Tarapur API block and the hydrogenation reactors, et cetera. Now impact is still not visible in our top line. So when will it start getting reflected in the top line? And also related to that, if you can share some details on Atali ramp-up, right? What is the peak revenue potential expected utilization, et cetera?

Yes. So regarding this earlier expansion of hydrogenation as well as the new API block. I think now, we have onboarded most of the customers on this newer block. And we ultimately have to look at consolidated API capacity availability. And what has happened is that we have moved our larger products to this newer block and we have emptied out our capacity of multipurpose block. So overall, as this ramp-up is going to happen over the next 2 to 3 years and then we will get this API capacities getting fully occupied. Whereas in case of Atali, it's a very large land parcel that we have, where we have almost 80 acre of land, and we have only started first phase of Atali, where we are doing this INR 375 crores, out of which the infrastructure cost itself is going to be INR 100 crores, INR 125 crores and balance is going to be spent on the blocks as well as the utility, et cetera, for that particular block that we are going to utilize. So overall, that ramp-up -- so will happen slowly initially, but ultimately, we will put up more and more blocks at that site because we have space to almost put 12 to 15 blocks in that particular site that we are developing. So every year, we can put one block depending on our customers' growth and we don't have to change the sites.

Got it. Any targets on capacity utilization or revenue potential, et cetera, for FY '25, '26 or FY '27?

See, our endeavor is to do more than 1x, 1.2 kind of x of over asset, net asset, net fixed asset. But we have to completely do the more product mix and manufacture more value-added products to achieve this number.

Got it, sir. A couple of more questions. R&D spend, what will it be for FY '24? And also FY '24, what's going to be the total CapEx?

Piyush?

R&D normally, the run rate is about INR 10 crores to INR 11 crores per quarter. So we'll spend almost about same amount that we spent in '22, '23, which is about INR 40 crores of gross R&D spend. And CapEx, we have spent about INR 40 crores so far in H1, and we will be capitalizing. So we have INR 102 crores of WIP. So basically, the CapEx number for this year would be about INR 150 crores or so, excluding R&D.

And the number of INR 400 crores to INR 500 crores, you mentioned is in addition to this INR 100 crores of WIP, right? This is fresh INR 100 crores or INR 400 crores?

Yes. So -- but some of this would be spent in '24, this financial year '25, and '24 like last quarter also. So in 15 months, we will spend this INR 500 crores.

Understood. Sir, last question from my side on the Xanthine segment. I just want to understand the market dynamics better. So can you help me explain the entry barriers in Xanthine, right? Do you expect any sort of large capacities coming up in India or globally in the medium term? And also if -- third, the market is attractive in the Asian subcontinent, what stops other players setting up capacities in India or in, let's say, other China or elsewhere?

No, sir, as you know that overall, the Xanthine market has seen pressure on pricing and margins currently. So for any new player to enter and create this kind of market has become difficult to get to the scale at which we are operating. And also, there are regulatory approvals and qualification requirement with the large customers where it takes a lot of time for any new entrant to get qualified and all that. So that is the entry barrier that we have in this segment. And that is what will deter other competitors from entering into this segment. So now from last year, this year, it has become more difficult because overall, other spot customers and those markets have also -- pricing has become more challenging.

And also, we can offer 100% India, China like [indiscernible] ...

Sorry to interrupt, ma'am. We are not able to hear you properly. You're sounding...

Yes, yes. So what she is trying to say is that we are giving our customers India-only product advantage so that there is no Chinese element in our product. So that is the advantage that people in -- if there is any competitor from China, it will not get entertained as much as we get entertained from India as a supplier.

The next question is from the line of Mr. Vikas Sharda from NTAsset Management.

I just wanted to confirm one factor, which you mentioned earlier that the volume growth for the 9 months was around 20%. There was some background noise, so I couldn't get the numbers clearly.

Yes, on Xanthine segment.

Yes. Okay. And secondly, on the CDMO side. So the labels at which you are, say, this quarter, would you expect that to remain more or less stable going forward for the next few quarters? Or would you see a very high volatility?

Yes. CDMO CMO, quarter-to-quarter, we can't give the guidance. But however, on an annualized basis, we are pretty confident of growing the current segment. Last year, we did almost close to INR 95 crores to INR 100 crores. This year, we are -- already, we have crossed that number. And across -- we are near last year's number and this 1 quarter, we'll be doing another round of sales to our customers. And going forward, we expect growth to continue at, say, 40% or 50% annualized.

Understood. And what would be the nature of these products like? It's more like commercial launches of the products or like still in the R&D stage?

Yes. So we have 19 products, which are in commercial, 20 products at R&D stage. Of course, R&D stage share in revenue is not as -- is very hardly anything. But currently, the products which are -- which we have been working with our 16 clients are more the numbers are showing up from few products, which have been either the validation quantities or commercial launch.

The next question is from the line of Bismith Nayak from RW Advisors.

Sir, what do you see on ground that you believe China dumping would be over in the next 2 quarters?

We feel that overall, in the chemical segment and other segments also, the overall, I think pricing and sustainability of China at this lower pricing has ended in certain product segment in chemicals. And I think the same will continue in pharma also because once the chemical prices start moving up which we have seen in China, the API prices also will slowly start mirroring that.

Understood. Sir, and on annualized guidance, I could not hear it properly. CDMO is expected to grow at 20%, 25% as a segment every year?

CDMO next year, will grow faster. So we are anticipating 40% to 50% growth over this year in CDMO/CMO segment.

Okay. Sir, on gross margin, at least, can you give us a sense of how better CDMO CMO or better compared to company gross margin on an annualized level, at least?

Yes. So basically, gross margin currently, we were at 41%. Now we are at 46%. But on the CDMO side, I think our gross margin is in excess of 50% in most of our products that we do. Whatever, as the product will become more and more commercial and commodities ramp up. I think those margins also will rationalize going forward. But however, it will get compensated by absolute quantity increase, and absolute [indiscernible] number increase. So it's a balancing number. It depends on where -- in which place the products are and how we are doing. So if I do have a campaign of innovator every year, so then the margins can't be 50% or north of 50%. But initial launch batches or those can be higher.

Understood. And sir, this CapEx of INR 400-odd crore of solar, which we want to do in the next 15 to 18 months. So the commissioning of it should be expected around Q1 FY '26?

Yes. See, we have guided H2 FY '25 maybe -- yes, that would be the -- so basically, we will have in the next 15 months, the projects will start operating.

The next question is from the line of Dhwanil Desai from Turtle Capital.

Sir, one clarification. So in the business vertical split that you have given, is that for the standalone number for this quarter or 9 months? Or is it for consol numbers?

Standalone. Standalone numbers quarterly.

Standalone for the quarter, right?

For the quarter.

So sir, my question is that if I look at the API and intermediate segment, we had -- if I look at the overall numbers, we are close to INR 500 crores, INR 550 crores in that segment. And given that we have such a good customer base, and very good products and we have 3 new -- 13 new APIs under development, all regulatory approvals across various countries. So can we grow this business at 18%, 20%? And if not, what are the restricting factors for us to grow this business at that rate?

Yes. So globally, API business for newer generic launches has seen a lot of pricing pressure on day 1 launch and also subsequently. So there's a lot of pricing pressure, which is there on this launched new APIs. However, the advantage that our company has is that we are backward-integrated and we have our own multi-stage synthesis that we carry out for these APIs, which make us -- position our product differently than other players of API. So basically, absolute number increase is one thing, but what we are trying to do is how we can grow the margins, absolute margins because the assets which we are using for API, we are not using for any other uses. So how we can do more absolute contribution in this manufacturing asset is what is our goal.

Okay. But is it safe to assume that your volume growth could be in that 15%, 20% rate, just the realization pressure because of which the growth may be that lower?

I think those numbers, we can guide for absolute EBITDA increase that we plan. But however, these top line numbers are ultimately a bit -- because if you see, we have not increased our top line over last year, but however, the EBITDA and other numbers have shown increase.

And one more question, sir. I think we have kind of -- we had given earlier that 10% to 15% EBITDA guidance in terms of improvement over FY '23. Now we are saying 8% to 10%. So is that largely because of the Xanthine market changes or anything else which kind of is slightly different than what we had anticipated?

Yes, I think you are right that we have [ tagged ] lowered our absolute growth. As we pass quarter-on-quarter, we have more surety on what number we are going to achieve. And we are at this number. We are seeing some postponement of orders of certain projects also, which have resulted in moving this sales to next financial year. So both these results would result in that lowering of the EBIT growth.

Okay. Okay. Just one small correction. The earlier target was 10% to 12% and not 10% to 15%.

[Operator Instructions] [Operator Instructions] The next question is from the line of Nitesh Dutt from Burman Capital.

Sir, my question is on Atali. We are committing significant CapEx, right, INR 375 crores in the next year. So is this more from a longer-term growth point of view? Or are you also seeing some near-term visibility driven by customer orders, et cetera?

Yes, it is more from an overall growth perspective. I think it's a large manufacturing site that we are trying to put because we would like to see, consolidate our place where we do further expansion because the regulated customers and innovators don't like us to ship the sites from one site to other site. And so from that perspective, we have taken a bet on putting up this very large manufacturing site and it will have, I think, multiple phases of newer CapExes that we will do at this site. So current Phase 1 includes the infra spend as well as 2 large blocks that we are constructing there as part of this current phase of expansion. And we will have all the permissions and land and everything to do further expansion also there, which can come up every year as additional blocks. So that is the strategy. So there, we can -- longer term, we would have one site, which will give us consolidated control over our expansion.

Got it. And sir, are we also adding some new capabilities, let's say, chemistry capabilities or newer kind of products in Atali side?

Yes. Overall, in the new R&D center that we have started, we are looking at doing more peptides and flow chemistry as well as the newer reactions and newer chemistry we would like to add in. And once we -- from our R&D capabilities, I think in the future projects, you will -- we will see more such production capabilities coming into Atali.

Got it. Finally, on the INR 90 crores CapEx on solar side, will it help us -- help reduce our energy costs in any way?

Yes, Yes, yes. So the cost increase that we are looking at is about INR 6 to INR 7 per unit. So currently in Tarapur, the per unit cost of electricity almost INR 10. So there is definitely going to be a savings and we are consuming about 20 lakh [ units ] on an average per month.

Yes, yes. So roughly INR 10 crores of annual savings.

It will be more than that.

The next question is from the line of Krishna from Capital Mine.

Yes. Sir, my question is regarding Xanthine pricing pressure. Sir, are we at the fag end of the pricing per year? Or do you think how long do we -- can we expect for the pricing to come back to its previous year level? That's one question. Second question is on the -- you mentioned that EBITDA, we are expecting 8% to 10% growth, right? So is that for next year, next quarter or next financial year? So these 2 questions, sir, from my side.

Yes. So overall, I think Xanthine pricing pressure will end in -- we anticipate that it will continue until the middle of next year. And in terms of the growth that we will end, FY '24 is 8% to 10% EBITDA growth. And for future next 2 to 3 years, you can anticipate 12% to 17% annual growth of EBITDA.

Okay. So this 8% to 10% is for next year?

This year. This year. Next quarter.

Next quarter only. Okay. Got it.

All Combined. So '23, '24 overall compared to '22, '23.

Okay. Okay. And then from '25 onwards, we can expect 12% to 17% for next 2 years till '27?

Yes. Yes.

The next question is from the line of Bharat from Neomile Capital.

Yes, I just wanted to ask how do you plan to fund your CapEx within the next 2 years, like [indiscernible]. So how do you plan to fund it?

It will be a mix of both, internal accruals as well as borrowings. And if you can see our debt equities, we are quite well placed. And if you see the business opportunity also, we are in a much -- quite good place to basically expand on the capabilities as well as the [ feature ] that we have. So we think that kind of CapEx is really put in a much better place, and we'll fund it through internal [ accruals ] as well as some sort of borrowing. We will keep a tap of where we want to be in terms of debt equity. So our target is between and we want to be between 0.3 and 0.35 next year.

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

We thank you, everyone, for taking their time to join us for our Q3 FY '24 earning call. I hope we have addressed all your queries. If you have any further questions, please feel free to contact our Investor Relations team, and they will revert back on the same. We look forward to connecting you together again next quarter. Wish you good evening, and bye for now. Thank you.

Thank you. On behalf of Aarti Pharmalabs Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.