Caplin Point Laboratories Limited (524742) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Caplin Point Laboratories Q4 FY '21 Earnings Call hosted by Batlivala & Karani Securities India Pvt. Ltd. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. [ Alka Katyal ] from Batlivala & Karani Securities. Thank you, and over to you, ma'am.

Thank you, Malika. Good afternoon, everyone. On behalf of B&K Securities, I would like to welcome you all for 4Q FY '21 and full year FY 2021 results earnings conference call of Caplin Point Laboratories Limited. Today, we have with us the senior management team, including Mr. C.C. Paarthipan, Chairman of the company; Mr. Vivek Partheeban, Chief Operating Officer; Dr. Sridhar Ganesan, Managing Director; Mr. D. Muralidharan, Chief Financial Officer; Mr. M. Sathya Narayanan, Deputy Chief Financial Officer; and Mr. Avaneesh Singh, General Counsel and Compliance Head of the company. I would now like to hand over the call to the management team for their initial comments. Thank you, and over to you, sir.

Thanks, [ Alka ]. Thanks, everyone. Welcome to our earnings call, and I hope everyone is being safe wherever you are listening in today. We're pleased to welcome you all to our call. Please note that the copy of our disclosures are available on the Investors section of our website as well as the stock exchanges. And also do note that anything said on this call, which reflects our outlook for the future or which could be construed as a forward-looking statement, must be reviewed in conjunction with the risks that the company faces. With that, I would like to hand over the floor to our Chairman, Mr. Paarthipan, for the opening comments, please.

Good afternoon, ladies and gentlemen. I welcome you all to our investors call. At the onset, I wish you all stay safe, stay healthy and stay fervent in this unprecedented pandemic. Let us look at the cash resource, the cash flow, which is the most important business essential in this pandemic. Our cash and cash equivalent stands at INR 470 crores, and the incremental cash from the parent company is INR 288 crores in the current financial year. Further, we also have orders on hand from the parent company to the tune of $22 million to $23 million. Here, we confirm that we do have sufficient raw materials and capacity to complete the exports on time. Further, we have an advantage in exporting the formulation from China to Latin America whenever some of the raw material prices are high in India and low in China. Hence, exporting it from China to Latin America is a unique opportunity for Caplin Point. Due to this pandemic, many local companies in Latin America are not getting the raw materials on time as they have to import the same either from China or from India. This again is an opportunity to Caplin Point as we have our stocks closer to the customer. And you are aware that our stock and sale model in Latin America. Now let me highlight our expansion plans in Latin America. We are registering our products in various parts of Lat Am, such as Bolivia, Peru, Chile and Colombia. Shortly, we'll be starting our stock and sales business in this part of the world once the COVID curve flattens. We are also entering into the bigger geographies such as Mexico, I mean, in Lat Am. We have received the emergency orders from Mexico and also exported few consignments in the recent past. Further, we received our first order from Brazil, which again, is an emergency purchase. We also completed the agreement with a leading importer in Brazil, which will trigger the online approval shortly. We are further in the process of acquiring a few products' approval from a leading company in India for Mexico. We also initiated the new lines of marketing in the existing markets of Central America and Caribbean. The new lines of marketing are institutional sales and marketing of CNS drugs through doctors that we registered in the recent past with the help of our R&D. We give you a glimpse of the new projects. We are starting the oncology plant for OSD and injectables. The remodeling of the building is completed fully, in addition to the design and detail engineering. The tablets and capsules section will be completed faster, hopefully, in 12 to 15 months. Our general OSD facility for regulated markets will also be completed in the next 18 to 24 months. Further, the API plant for U.S. injectables and oncology are also in progress. In fact, we acquired the land in an industrial estate, which is closer to our Caplin Steriles. The tendering for the similar mechanical work are in progress. Our plans to manufacture this API from Key Starting Material will also make the company self-sufficient as we do not have to depend on an external company or countries. Caplin's CRO wing, Amaris Clinical, where U.S. FDA audit is expected shortly or received. This will also help the company to do BE/BA studies for many of our products in the regulated markets. Finally, we are also in the process of starting 2 more injectable lines in our Caplin Steriles, the details of which will be presented to you by the COO. You are aware that the CAGR in the last 10 years is 25 -- 28% and above in terms of revenue, EBITDA, PBT and PAT. We promised the shareholders in 2015 that our top line will become the bottom line in 2021, and we handed it. Today, our focus is on cash flow and investing the same judiciously for the growth of our company. I'm confident that in the next 6 years, we are sure of creating a [indiscernible] INR 1,500 crores to INR 2,000 crores, which will make the company a force to reckon with in the midst of the top Indian pharma companies. Thank you. Thank you very much. Now I reckon the COO to give his presentation.

Thank you, Chairman. I will give you a little background about what we have done in the U.S. market, specifically through our subsidiary Caplin Steriles. So last year, we have shown a growth of over 30% in the top line in our U.S. business despite all the challenges that we have faced during the pandemic, in 2 parts: one is many of the outpatient services in the U.S. was stopped because of COVID hospitalizations, and as you know, injectables are products that are typically sold in the hospitals only; and number two, the qualification of our second vial line was also delayed by about 6 or 7 months because of restriction with man and material movement within our states. But despite that, we have managed to show more than 30% increase in revenue. So we are quite satisfied with that. And we feel that the next year is going to be important for us because we are targeting cash flow breakeven revenue. We also had 4 ANDAs that were approved in the last -- between basically January to April, which brings the total tally to about 10 ANDAs approved under Caplin's own name and 5 more approved through our partner. Of these, we have already launched 8 products, and we have already completed the manufacturing of the launch batches for the other 4, and the last 3 products will be planned for launch before October 2021. We've also had partnerships finalized for Canada, Australia, Brazil and Mexico as well as Chairman had mentioned. We hope that we can have some revenue contribution from these places in the next 18 to 24 months. Basically, any product that we are developing and launching in the U.S., we want to make it into a global dossier so we can extend it to other countries as well and have some additional streams of revenue from these markets. With regards to backward integration. So we have -- we feel that this is going to be an important differentiator for our company because with prices bottoming out in the U.S. due to competition, what really differentiates between Caplin's offering and XYZ's offering is continuity of supply, which is very important for buyers in the U.S. So if we have our own API, then we can guarantee that there are no disruptions in our supply. And also when it comes to compliance, when it comes to confidentiality and all of the -- even cost for that matter, I think we'll be very much in control if we had our own API. We are working into the different ways for that: one is on an inorganic route, and the other one is building on our own. And we feel in the next few weeks, we might be able to come to a conclusion of that, and we'll be able to give you more information. Also, with regards to the front end, we are actively looking at the right timing for us to launch our front end in the U.S. As our Chairman always says, what has worked out in the past for us, we shall always concentrate on that and identify those patterns. And if you see, in RoW markets, we are probably the only company that has end-to-end presence, including the front end in Latin America. So that is what we are trying to achieve in the U.S. as well. But timing, of course, is important. And we feel sometime in 2023 would be the right moment for us to start because we feel that we will have more than 30 ANDA under our belt that we can launch in our own label. And we are also expanding our capacity significantly with the activation of Phase II of our injectable plant in Caplin Steriles. We are going to go for about INR 100 crore, INR 110 crore expansion, which will add 4 more lines: 2 vial lines; 1 lyophilizer line; and a PFS line, which is prefilled syringe line, and also provision for another premixed bags line. And the entire thing will be funded by the parent company. In addition to this, we are starting to get into more complex products such as emulsions and suspensions, both in injectables and ophthalmics because typically, this is a space which sees a lot less price erosion and stability in the market. It might take a little bit more time for approval and launch, but this will be much more longer lasting compared to very simple solution products. That's it from the regulated markets side. I will just hand over the floor to our CFO to give you a little brief on to the numbers from last year. And then we will open up the floor for questions after that, please. Thank you.

Thank you. Thank you, Vivek. Good afternoon, everyone who is on the call. This is Muralidharan, CFO of Caplin Point Laboratories. Welcome to the call once again. At the onset, at the testing time, what we have all been going through, the last year has been very gratifying year in terms of performance from all fronts for Caplin Point Laboratories. One, the revenue has grown. Operating revenue has grown by 23%. And for the first time, we have crossed INR 1,000 crores in revenue and INR 300 crores in PBT and INR 250 crores in PAT. The is a gratifying year for all of us, even though the year has been not all disturbed -- smooth. That is one thing. Secondly, the last year when we were in the call, there were [indiscernible] gross margin dropping, PAT dropping and OpEx going up. All the impact of the subsidiarization [indiscernible] and I'm glad to say that we have gone back to the original levels of gross margin. We are at 55.6% gross margin current year as against 52% for the last year. So the last quarter of last year was only 48%. As again said, we are at 55% this year. And the impact of the preacquisition stocks that we had in the last year, which impacted temporarily the gross margin level, has been earned out. We promise that the earning out will take place over the last year, which just happened, which is evidence of the results, what we are seeing. Secondly, on the expenses, OpEx, last year to this year, there has been increase in OpEx. We were just -- hopefully, it's coming into a fold and the -- [indiscernible] coming into a fold. With all that, even though the expenses have gone up, we have been able to deliver a higher profit margin, and we are at 25% [indiscernible] PAT level [indiscernible] earlier level. And also EBITDA margin, we are sure that we'll catch up with that, the increase of -- increase in expenses will definitely be absorbed by the increase in turnover in the current -- the coming year, and we'll go back to the original levels of EBITDA margins and PBT and PAT levels. Secondly, on the balance sheet, you see [ all-in net cost ] is over [ INR 1,200 crores ], which is 88% of the balance sheet side, right? That means it is all -- we earned profit. We earned profit. And on the asset side, 75% of the assets is liquid in nature in terms of inventory, receivables, cash in banks. Only 25% is in the noncurrent assets, which is the property, plant and equipment. That means we have a good leverage, I mean, taking the company forward would be [indiscernible] focus. So these are the points which I would like to highlight as financial success, and we are open for any questions. Over to you, Vivek.

Thank you, sir. So yes, we can now open up the floor for some questions, please.

[Operator Instructions] The first question is from the line of Aashiesh Agarwaal from Pareto Capital.

Congratulations on a very good financial year '21. So I had a couple of quick questions. One, I gather that in Colombia, stock and sale would be starting this quarter. And you'd be starting sales in Brazil and Mexico also shortly. So could you give some sense on the trajectory as to by when Brazil and Mexico will start? And when will -- what kind of revenue you're expecting from these geographies in this year and the next?

Okay. Where's Chairman to take this call, please?

Yes. I mentioned that we'll be starting actually warehouses in these 4 countries where we are currently registered the products. But this juncture is not easy for us. But to -- in the next 1 month, we will not be starting it. We'll have to wait for this actually COVID situation to flatten, COVID curve to flatten, which may take actually between 3 to 6 months also. However, we have already started doing some business in this part of the world. That's one thing. Second, as I mentioned in course of my speech, the business that we do now in Brazil and Mexico is based on the emergency orders, which will continue because the situation which you and me face today is also one of the same in Brazil and Mexico. At the same time, the [ restations ], as you are aware, it takes minimum of 2 to 2.5 years. But again, we will be in a position to launch our business at the earliest in Mexico, provided I feel that I should go there and understand the market scenario and then start the business. So eventually, it all depends upon the COVID curve. We don't know when exactly it's going to flatten. However, the business which we do in other parts of Latin America will continue to prosper. Thank you. Thank you very much. Thank you, Mr. Aashiesh.

I just have a quick follow-up. You mentioned a 30% Y-o-Y growth in revenues in the U.S.A. So if you could just quantify how much would we have done in U.S. in this quarter? And what is our expectation for FY '22 from U.S.A.?

Yes. With regards to the last quarter, the last quarter was the biggest one with regards to our overall sales contribution from the U.S. This year, our target is to achieve cash flow breakeven. And the visibility is already there for us because we've already launched 8 products, and as I was saying, the next 7 are going to be launched imminently. And with whatever forecasting that we've received from our partners in the U.S., we'll go very close to achieving our target of cash flow breakeven. We feel that, that number is anywhere between INR 125 crores to [ INR 135 crores ] in the U.S.

All right. And just one last question. The oncology injectables plant, you've put it in a separate subsidiary. Any specific reason you chose to do it that way? I mean are you looking at getting some investor onboard over there? Or what is the thought process? That is all from my side.

We don't expect any -- yes. We don't expect any investor to come into that space. But again, you are aware that there are some benefits in terms of income tax and other things. That's why we have spun it off as another subsidiary. Thank you.

The next question is from the line of Ashish Kacholia from Lucky Investments.

[indiscernible]

Sorry, Mr. Kacholia, but your voice is not audible, sir.

One second. Is it audible now?

Yes, sir.

Yes. Congratulations to the entire Caplin team on a very good set of numbers. My question is pertaining to the regulatory compliances and the preparations that we have done for the U.S. market and the Caplin side. Can you tell us what steps you have taken to ensure that we kind of remain on top of the compliance curve?

Yes. Thank you, Mr. Ashish. Now from day 1, when it comes to our U.S. business and the U.S. plant where we are operating in, for us, compliance has always been at the top of the priority. We've never really had a trade-off between deliverables and compliance or revenues and compliance or anything. We've always felt that the compliance has to be #1. And today, we feel that quality and deliverables are 2 sides of the same coin. So right from the beginning to today, we've always engaged right from top down to make sure that we are engaged with our people, specifically our quality people, and to make sure we also have external consultants. In fact, we work with 2 former FDA inspectors that have had more than 25, 30 years stints in the agency itself to come and not only do mock audits for us but also give us training, both in terms of quality and also data integrity and in other areas. We also try and make sure that we take people because obviously, when it comes to regulated markets, we need more talent from outside. So we also try and make sure that we take the necessary people from good quality compliance company because they will come with a good culture that will be evenly blended with the culture that we have at the plant. And we feel that going forward, we are going into much more higher levels of automation, whether it comes to laboratory [indiscernible] that we are intending to use and also going as close as possible to a paperless system over there, which gives adequate comfort level for any auditor to come and see. So we feel that our investment into this EBM and all of the software that we are getting into will also go some way to make sure that our compliance levels remains high.

Okay. And my second question basically is when you mentioned that we will do U.S. business about INR 125 crores to INR 150 crores in FY '22 and reach breakeven there, what is the total potential output from this plant? I mean what kind of capacity utilization you'll be doing to reach INR 125 crores to INR 150 crores?

Yes. So today, the capacity utilization is a little bit of a misnomer for us because number one, we are not doing only commercials from this plant. We also have a big number of products that we are doing exit batches for because these are the ones that we're going to file ANDAs in the U.S.A. So -- but if you want to put some rough numbers on to it, I feel that we are at about 40%, 45% utilization of capacities when it comes to purely commercial products. But we realize very quickly that because U.S. is approving products much faster than before, we need to make sure that our capacities are in line with the number of products that we are filing and getting approved. So this is the reason why we are going for another doubling of our capacity. It will actually be even more than double when it's completed within the next 15 months. From current status, we are looking at around 105 million, 106 million units just in vials alone. And when it comes to prefilled syringes, we are looking at another, I believe, 15 million units. We are looking at 12 million in terms of bags. And ophthalmics will be another 10 million, lyophilized will be [ routine ]. So all put together, I think we are looking at well over 160 million units from this plant.

Okay. This is the -- this is just the expansion that you mentioned?

No. All put together, will be around 160 million units after the...

Mr. Ashish, I would like to add a few words with regard to the regulatory confidence. I fully agree with you, this is a very important area as far as actually U.S. FDA facility is concerned. Compliance is part of the culture. And in fact, in the next 1, 1.5 years, I am moving closer to that factory. I'm building a house next to it. The purpose is like this. As you are aware, culture is part of the habits of the people actually who work in the company. Integrity, quality, deliverables, all is part of actually the habits of the people that creates the character. The character creates the culture. When I go there, because of my age, I'll be in a position to understand the cash flow characters of my company. One good thing to show them is this is closer to my will. The purpose of creating this facility is to help my roots. At the same time, I also understand, either the people who work in my company [indiscernible] the company [indiscernible]. If one of these are not there, the culture will not be established, and we'll not be able to actually create the compliance, which is needed for the factory. This I guarantee you, Mr. Ashish Kacholia, because you're a well-wisher, you are one of the leading investors of the company. Thank you very much.

And my other question is this expansion will cost us how much money. And will we have to invest the entire money? Or it will invested in proportions with Fidelity Investments?

No.

This will be...

Yes. Please go ahead.

Yes. So this is going to cost us around INR 100 crores to INR 110 crores investment. Basically, this is the entire Phase II of our injectable plant that is going to be completed. And because our parent company is sitting on a decent amount of reserves right now, we -- from Caplin Steriles, what we are planning to do is take a line of credit from the parent company at an arm's length, and we are going to complete the CapEx. And -- but we are not expecting or we are not looking for any sort of external investments for completing this CapEx.

Okay. So the equity structure will remain what it used to be? I think it's 70-30, if I'm not mistaken?

It is 75-25, and it will remain exactly the same.

It will remain 75-25, and the extra capital will be in the form of a debt from the parent to the subsidiary. Is that right?

Correct. Yes, absolutely.

Yes. Okay. And the total investment after this investment will be how much, including this INR 100 crores, INR 110 crores, what do you think, for the expansion?

You mean overall, what has been the...

Yes. Deployed plus this INR 100 crores, INR 110 crores [ whatever ].

Probably, the CFO will be in a position to give a correct answer to it. Can I request the CFO to come and give the exact figures, please?

Yes. The excess -- the total OpEx and CapEx that have gone into this facility are still about -- last year, it's about INR 400 crores. But of course, the net book value of the asset is about INR 300 crores to INR 330 crores, right? So that's the amount that is going into this facility. If we add to that INR 250 crores of [indiscernible] the property, plant and equipment will stay at about -- closer to INR 300 crores.

INR 300 crores have already gone in -- sorry, INR 400 crores have already gone in? And INR 100 crores...

Yes, yes. When we say INR 400 crores, that also includes the OpEx during the initial period.

OpEx capitalized basically is what you're saying.

Not capital. It is not Caplin. It is the OpEx of the parent company before [indiscernible] actually.

So INR 400 crores plus INR 100 crores, so INR 500 crores. And what is the potential output of sales from this unit at full capacity?

Yes. Vivek...

Yes. So it's -- yes, it's -- okay. So what happens is, obviously, the U.S. is a very dynamic space. And then like when we start the development of a project up until commercialization, it is not going to be the exact same numbers as well, right? So it's not very easy to look at what will be the output from this plant. But what we have targeted for ourselves, both internally and also given out in public, is that we are looking at achieving revenue of around $100 million from this plant in 2026 -- 2025, 2026. Correct. And last year, we have done INR 90-plus crores. And this year, we targeting around INR 130 crores. I think we -- our trajectory looks decent. And with the expansion of capacities as well, we will be starting to look for some level of high-quality contract manufacturing orders as well. So all put together, I think conservatively, you can estimate that the revenue potential of this plant that we target is around $100 million by 2025, '26.

Okay, sir. And my last question is, is there any opportunity for us to play in the contract vaccine manufacturing space given that, that is also an injectables kind of a manufacturing process?

Vivek?

Yes. So there is a -- of course, you are absolutely right when you said it's an injectable product. But the fundamental difference is vaccines are coming under this category of biological products, and we do pharmaceutical products. So technically, both of them cannot be manufactured in the same plant unless you go for a very high level of containment, but which takes time and quite a lot of investment as well. So as our Chairman always says, what is measurable is manageable. When it comes to vaccine business, there is a lot of variables from outside. We don't have any control over the technology. We also don't have any control over the marketing of the product. So that's not some space that we are very comfortable with. We had evaluated it initially because when it comes to the technology part of it, when it comes to fill and finish, I think we are very comfortable doing it. But everything else seems to be external variables over there. So we ended up not looking at investing into the space. And I also feel and I also hear that there is a significant amount of capacity coming in for vaccine manufacturing in the next 12, 15 months, specifically in the Hyderabad, Telangana area. So I think there is going to be a little bit of a glut in terms of capacity available.

Muralidharan again. I would like to just clarify, in terms of the CapEx, once the expansion is completed, it will be close to INR 300 crores in terms of gross growth. When you say INR 400 crores, that included OpEx, which we incurred in the past. This is already [indiscernible] Caplin Point Laboratories. So assets that will be productive will be about INR 300 crores in terms of gross growth.

The next question is from the line of [indiscernible] from [ SCR Consultants ].

I have a question regarding the new subsidiary, the Caplin Oncology. So you mentioned briefly that it's a new manufacturing plant, and there are income tax benefits. So am I correct to assume that you would be paying, say, 15% since it's a new manufacturing plant?

Request CFO to take this, please?

Yes. Yes. We want to -- aware of the benefit that is for the new entities, and that is the major thing. And apart from that also, this being a focus area, we want to help keep it as a separate entity as such.

Okay. Okay, clear. And another question regarding the subsidiary. So if I compare, let's say, 5 years back, there was just one subsidiary. And now suddenly, over the years, many new subsidiaries have been set up. So is there any, like, strategic reason for that? And should we expect more subsidiaries in the future?

I request Chairman to take this, please? I request Chairman to take this query.

Yes. If you look at the subsidiaries that you see now, these are all subsidiaries which have been taken over in the recent past, and these companies overall are marketing partners in Latin America. And so far, we have completed actually this one. The purpose of doing it actually is to have an effort to control over actually our what we call supply and then distribution. Immediately, we don't have any plan to go for any subsidiary other than the one which you have mentioned in our press release.

The next question is from the line of Jeetu Panjabi from EM Capital Advisors.

Great numbers as well. So sir, there are 2 questions I really have. One is your opening comments were that the focus of the year is going to be on cash flow. I'd love to -- if you could give us some more color on how you would define success in measuring cash flow. And also in terms of -- is it cash flow post CapEx? And what kind of goals are you achieving over there? And second is, if there are -- what other metrics will you use to measure success or -- from an organizational standpoint 12 months from now besides the cash flow point, which is so well articulated?

Request Chairman to take this, please.

Okay. As far as cash flow is concerned, you are aware that this is actually the most critical months which [indiscernible] at this juncture, which I told you before. And this is possible mainly because of the fact that our business model is very unique. We not only manufacture and export, we also import, we distribute. We go to the last mile also, we can -- which is an end-to-end business model. If you look at most of the companies of our size, none of the companies have an importing model actually where you will have this kind of end-to-end model. That's one of the reasons. We are in a position to control our business, and that increases the cash flow increases per se. To date, as I told you in the course of my actual speech, not many companies are in a position, especially the local companies in Latin America. They are not getting the API on time as they have to depend from India and China. That also opens up an opportunity for Caplin Point. And then what we have done now, the moment actually this pandemic started, we started increasing our stocks. If you look at the recent past, when we check with the last year and current year, we increased the stocks to the tune of actually 10 million to 15 million, mainly in Latin America. All these things, the more and more you export, that increases the possibility of more and more sales, which means more and more cash will be repatriated to India. This is as simple as that. There is nothing in the form of extraordinary marketing, I say. It's simple distribution as we have created actually a stickiness factor in the bottom of the permit and the lower actually ring of the permit in Latin America. The people understand this is a product where they'll find the quality. They also see a good price in our products. Then we also give them the volume. We also give them the variety and novelty. Automatically, they come to our warehouse and buy. And there is nothing in the form of an intermediary. The manufacturer going to the last mile, that clearly helps us to have consistency in top line, bottom line and cash flow. It's as simple as that. Have I addressed your question?

You have. But just a slight tweak or follow-on on that. So you -- in your opening comments, you're sitting on INR 470 crores of cash. Just -- if I were to take your cash flow discussion, that number will be higher 12 months from now?

Please come again, I could not...

I will just repeat his question. So what he's asked is we are sitting on around INR 470 crores of cash flow. What is the expectation for this year in terms of cash flow?

Yes. That, of course, I will ask my CFO actually to tell you.

No. Will the number be higher than INR 470 crores? Or just -- that's static cash number on the balance sheet?

That is -- that's why I request actually my CFO to give you the exact numbers.

Thanks, Chairman. The cash balance as on last year is around INR 470 crores. As you read in the press release, we also have plans to expand, one through investment into the oncology plant and the other through the API plant, which is all going to be funded through overall cash accrual, whatever we are carrying. And we expect a similar cash accrual during the year. We will not be able to put a number of what would be the closing balance at the end of 2022 because that depends on the project execution and how much of the cash accrual planned will be observed in the current year. So the Board Chairman was trying to -- focus will be on to increase the cash accrual so that we are always having free cash flow to take on further expansion, either organically or inorganically. That is the objective.

Okay. Fair point. And my second question...

I can also add one more thing to that one. The cash flow that you see today, more or less, it will continue the same way. Maybe we don't have anything in the form of actually the pandemic affecting our people. So what is happening today is affecting actually 1 or 2 is fine. [indiscernible] That may also will not totally affect the business, it may be 5% to 10%, [ I'd say, that way ]. So the cash flow will continue to remain the same. That's because of the fact, as I told you, we are increasing the export. We are increasing the sales. As and when you increase the sales, the places where the goods are going to actually stay, we will have opportunity to sell more. That means when you sell more, automatically, that has to become cash. Cash is repatriated to India. So every time when we go for actually this kind of a cash flow, it has to be [indiscernible] If we don't [indiscernible] also, the growth will not come in leaps and bounds.

Okay. Fair point, sir. Sir, my -- I have one more question. This Latin America growth, which has been a significant engine of your growth in the last 12 months at least and even before that, do you expect the growth rates to sustain? Or what is your thinking on that?

Okay. I'll give you a detailed report on this because I, in fact, [ talked to my people ]. Today, we are in the smaller geographies of Latin America. As I told you before, we are entering into the bigger geographies of Latin America. If you see the Latin American population, the Central America and one part of Caribbean, that it's Dominican Republic and then Mexico. So when we go to Mexico, that's a huge market. And we also know how to sell our products in the private market in addition to the tender business. That's where the big players are there. Okay. How are we going to compete the big players who have deep markets? We will not try and compete with the products that they are concentrating. Their concentration is on chasing the economies of big products like anti-HIV, [indiscernible] But our focus will be more on 20, 25 products. This will not be in the form of like INR 1,000 crores and INR 500 crores. These 20, 25 product, each one will be like INR 100 crores. I'm talking of the API. So if I can manufacture a Key Starting Material to API and formulation and then register the products in Mexico and Brazil and the other part of actually the bigger geographies like Colombia and Chile, I still have an opportunity to compete with the locals. And the big players are not actually competing in this particular area. Even if they come into this space, my price will definitely be equivalent to their price, and their overheads will be much ahead of my overheads, which means they cannot actually place the price, which will be cheaper than mine. That's one. And second, most of the Central Americans and Mexicans are the one you will see in U.S. The Latins in U.S., mostly they're all from this place. And many of them, in the next 5, 6 years, we'll understand -- already, we know there are people who used to carry -- which, of course, we don't entertain. But again, it happens. So people who go from Central America to U.S., they take not only that [indiscernible] which is like a [indiscernible] fried chicken, they also carry some generic products because they want to help their own families, which is there in U.S., the same way I found them carrying our products. Once we complete our business in Mexico in the next 4, 5 years, Mexico being the #1 actually country from where the migrants have come to U.S., that will open up another revenue among the Latins in U.S. in the form of our products. So that's why in the 5, 6 years, not only we will sell the product that we are manufacturing in Caplin Steriles. We'll also sell our oncology product. We'll also sell our tablet [indiscernible] and other things, which means the basket of products with different buckets will open a huge opportunity among the Latin population, which is in South America and North America. That's it. Is there anything you want me to add, please?

No. I think I heard you loud and clear, explaining how the whole strategy is going to work and how you're going to scale up and what are the strengths to scale up. But just from a -- so would I be fair to summarize that you expect the growth rates to sustain? Is that a fair summary in a one-line sentence?

If I have to say the one thing which I can't predict rate, which is an unknown to everybody is the pandemic. If the pandemic actually is not going to affect one company, it will not affect me. If this is going to affect every company, it will affect me also. Is...

The next question is from the line of Nitin Gosar from Invesco.

A couple of points for the -- on the debtor days and the inventory part, how should we understand -- like, since going forward, we'll be having meaningful play coming in from U.S., how different is the debtor days and inventory cycle in U.S. versus the existing business that we have?

Yes. I will just answer the first part of the question. With regards to U.S., our receivable days is anywhere between 45 to 60 days. Today, if you see, our receivable days is sort of stabilized somewhere between the 80 to 110 days, depending on which part of the year you're looking at. So we are somewhere around 90, 95 days right now. As the quantum of business increases in the U.S. and it's starting to become a meaningful part of the overall revenues, maybe you will start to see the consolidated debtor days -- receivable days basically coming down for the overall company. But we are very comfortable at the current stage itself. As you could see from the cash flow surplus that we have, that even at 90, 95 days, we're able to substantially increase our cash and cash surplus. So anything more specific on that, of course, our CFO can answer also.

Yes. Further, if you could touch upon on the inventory days as well.

I request Chairman to revert on this inventory basis. Because we always feel that the inventory is a significant advantage for us. Our Chairman will give you a little bit more color on that.

As I told you before, there are 2 sets of companies. When the -- when you say inventory, inventory in the factory definitely is not a good sign to the company. Inventory in the market, especially during COVID times, is [ a good ], it's not a [ bad ]. And so the reason is, I already told you, raw materials are not coming to that part of the world because it has to come from India or china. And we are the only company having this warehouse model, and there are not many companies. And the 2 -- the inventory doesn't contain 5 or 10 products. It consists of 300 to 500 products. That means you have variety, you have novelty, you are in a position give at a very good price because have removed the intermediary. On top of this, if your product is sold in the market for 10, 15 years, that's a guarantee for the quality. So when you can give good quality at affordable price, then you can remove the intermediaries, which is a very risky business model because you are removing the local. We faced all that. We faced all the physical risks. Today, we are a force to recon with in that part of the world. So the more and more we increase the gross inventory, it's better. But if you look at actually the press release, the inventory has come down on the contrary. It has come down to INR 179 crores from INR 238 crores. So this one, I would prefer the inventory to be on the higher side so that the cash flow will be higher. For example, first year, this first year, we have increased our cash flow to the tune of INR 288 crores, incremental cash flow, I mean, compared to the previous year. That has happened mainly because of actually the [indiscernible] to the customer.

And one more point, one important point over here is there are 3 types of inventories, right? Number one is the one in the factory; the one on the waters; and then the one near the customer. A significant chunk of it is on the waters and in the -- with the customers, like closer to the customer.

So very little part of it -- of course, the percentage-wise, I think CFO can describe. Very little percentage of it is actually work in progress at the factories.

Point taken. My reference was more to understand the perspective on U.S. Will it create more pressure on inventory that we carry? Like, roughly, today seems to be around 60 days...

No. U.S., I'll also -- I will also give you one more information on this. With regards to U.S., there are 2 things we need to take into consideration. Today, 100% of our sales in the U.S. comes from our partners, and our payment terms with our partners are anywhere between 30 to 60 days, number one. And number two, we don't really keep any inventory in the U.S. So our business model is very conventional today. That is what we are looking to enhance by 2023 when we have our own front end. But today, it is a conventional business where products are basically made to order, right? So we don't -- and these products are the ones that are going to a hospital. So we don't really have to stock up in the U.S. So you will not find any sort of pressure from the U.S. business when it comes to receivable days. It is quite the opposite, I would say.

Got it. Sir, second question was pertaining to the ability to hedge the multiple currently. As we scale, the complexity in the business also gears up. And today that we are on the front end more, [indiscernible] what are the methodologies we adopt in order to hedge ourselves so that the currency volatility for those countries, which are pretty hard to deal with, they'd get managed well?

Yes. So I would request Chairman to take this, please, on the currency. I request Chairman to take this question on the currency.

Yes. Sorry, I didn't unmute. I'm sorry. Now coming to the currency volatility, 2 countries where we are currently in Central America and Caribbean -- sorry, 3 countries, Panama, El Salvador and Ecuador, the currency is dollar. Then Guatemala is the country which gives us the maximum business. We do around [ 2 million ] and up to [ 3 million ] per month, and the currency is very stable. And the only currency in Ecuador -- sorry, in Nicaragua and other countries also, like Honduras, the currency has not been an issue in the form of volatility. The only currency which is not very bad, at the same time, smart, stable is in Dominican Republic. We fully know we are [indiscernible] and the measures that we take. If you supply the product in credit, if you give a lot of credit to your customer, yes, there is a risk. But if you keep your goods in the warehouse, whatever little risks you face in the form of devaluation can be offset by selling the products at a higher price to the same customer. So this is the answer I would like to actually convey to you.

Got it. Got it. And sir, last question is on the Brazilian market. The understanding there is that it's very difficult to crack, especially on the branded side. What I could gather right now, we are targeting the tender market. But as the time goes by, we would also find the branded market. That -- is that the right understanding, sir?

See, today, brand marketing -- of course, we will get into brand marketing for products which are difficult to manufacture since you all know that we are more into R&D and we are getting into more and more complex products. So when we market the complex products in South America, yes, we'll definitely get into brand marketing. But the portion of sales will be mainly from generic because, right, from U.S. to other brands with other regulated markets, their focus is more on generics because generic is a product where they won't continue to be benefited because of generic. When you go to your tender, it's generics. When you go to any institution, private or public, they expect to supply generics. So it will be a mix of generic and brands. Our major portion will be from generics. And slowly, we will build our brands also. Did I -- answers to you are good? One more question you asked, I could not hear it properly. Will you please ask...

No. This was the question, sir. And just a follow-up on this Brazilian market. Typically, what we see is that Brazilian market or ANDAs, it takes almost 4 or 5 years to approve a product. Is that the case with us also? Like if we are in tender market too, we also see the similar challenge because the products are -- the product approvals process maybe the same?

You're very right, the Brazilian approvals used to be long, grand process. But they [indiscernible] a little bit away during this COVID. There was no medicine, they had to suffer a lot, they had to go for all emergency purchase. So now they are slightly changing the policy. And we are also aware that Lula actually has come out of jail. So the elections are in the [indiscernible] And just people -- when the chain in the government, and of course, the present government also is in favor of completing the [ reinstitutions ] faster. I don't know how fast it's going to be, but definitely not as bad as before.

Yes. Just one point to add. For the first time, [indiscernible] has come out with guidance that says that they might also recognize other countries inspections on a mutual recognition basis, such as EU-GMP and U.S. FDA. And so both Brazil and Mexico, they are slowly starting to open up to accepting inspection reports from other countries, especially U.S. and Europe.

The next question is from the line of Sachin Kasera from Svan Investments.

Congrats for the good set of numbers. I had one question on Caplin Steriles. Hello?

Yes. Please.

Can you hear me, sir? Hello?

Yes.

Yes.

Yes.

Yes. So I had a question on Caplin Steriles. If you could just give us the breakup of the revenue between the licensing income and the income from sale of products. And secondly, if you could share the EBITDA and the PAT number for Caplin Steriles for financial year 2021.

I request our Deputy CFO, Sathya, because he looks at this closely. To the best of my knowledge, we are at about 60% product revenue and 40% in profit share in milestones. But I think Sathya can elaborate a little bit.

This is Sathya Narayanan. So as shared by Vivek, our export revenues in Caplin Steriles for the year was close to 58%, and the milestone and profit share contributed close to 42%. And the -- for the full year, the PAT was negative INR 22.8 crores.

What was the EBITDA number, sir?

EBITDA is close to negative INR 24 crores.

Okay. Second question regarding -- there was a mention regarding a number of [ additional ] CapEx within Caplin Steriles. And you mentioned -- there was a mention that the parent company [ may turn a loan ]. But if I see the FY '20 annual report, there was INR 150 crores of cash line in the balance sheet. And this year, the losses -- so you still have what I believe around INR 125 cores of cash in the annual report. So if you could just throw some light, why is there any further necessity of borrowing from the parent company?

So when it comes to pure operations, we are able to live within our means. We are self-sufficient with the investment that Fidelity has made to our company. But what happens is when it comes to additional CapEx, we are not able to afford it with the investment alone. So obviously, as you know, when it comes to R&D, we are one of the highest spenders of R&D in the country. In fact, I believe we are #1 as a percentage of revenue. So -- and we also have a [indiscernible] policy of charging off our R&D expenses as well. So we need to be prepared for the number of products that we are filing and the number of products that are going to get approved. We learned the lesson in the last 18 months that U.S. is also starting to approve dossiers quickly, and we need to be in a position for faster launches, as close as it gets to approval. So we know that the business is going to grow. The volumes are going to grow. So we want to be ahead of the curve rather than be left behind a little bit. So that's why I think when it comes to pure CapEx, we are going to go for a loan from the parent company. But if it was going to be non-CapEx, regular OpEx, I think everything is taken care of internally by Caplin Steriles.

Sure. My next question on CapEx, sir, is you mentioned in one of the previous queries that by '25, '26, we are hoping that we can achieve $100 million. Now if you see the track record of Caplin other than this U.S. business, we have been in the range of 35%, 40% EBITDA margin and between, I would say, 50% to 70% ROCE. So is that some sort of a number we're also looking to aspire to achieve in Caplin Steriles 4, 5 years from now, where we achieve $100 million?

Yes. So if you take away our spend on R&D and filing expenses and all of that, Caplin Steriles' business is even today very profitable. I think gross margins, we are very, very similar to parent company kind of gross margins. The fact that we continuously invest into R&D is the one that is pulling down the numbers a little bit. And also, I would say that once we have our front-end presence in the U.S. starting in 2023, we don't need to necessarily share the 50% or 30% of profit share that we give to our partners. The entire thing can be absorbed by Caplin Steriles itself. That will go some way to boost our bottom line as well. So we are...

I think I'd add one more thing here, Vivek. As we told you that we are in the midst of actually starting Key Starting Material to API for our injectable. So which means once you complete actually the API registration in the U.S., that is [indiscernible] then this also becomes an end to our orders. You will have your own API, you will have your own formulation, you'll have your own front end, which means there is no intermediaries. That's what actually will increase the profitability of the company, too.

Yes. It will be fully vertically integrated when that happens.

Sure. My next question is regarding the INR 300 crores CapEx, which was mentioned in the presentation. So if you could give us a sense as to how much will be -- what is the plan as of now to spending this year and next year? And what is the time line for commissioning of these 3 projects?

Yes. When it comes to the oncology plant, this will be faster than the others because we have acquired 4 buildings from a bank. So the Civil, which usually takes about 12 to 15 months, that has already been completed here because we acquired the buildings itself. So the oncology part of it, the oral solid dosages, we are hoping to have the first building out of this within the next 12 months, 12 to 15 months itself. And second one is the API. I think if you're looking at a greenfield project, it is probably going to take about 2 years to be completed. If it is going to be inorganic, it will probably happen obviously much faster. Of course, we don't have clarity on that today. So we are going ahead with the assumption that, that is going to be a greenfield project only. And number three, the addition -- basically, the expansion of capacity of the injectable plant will be completed in 15 months from now. So shorter answer to your question is this INR 350 crores will be spent over the next 24 months.

Sure. And what is the type of payback or incremental revenue this INR 300 crores [indiscernible] like INR 600 crores of incremental revenue once fully utilized?

It's very difficult to say at the juncture but that it will be manyfold. We don't want to give the numbers, to be very honest with you because we are in the process of studying the market. There are 3 kinds of markets, which we address today. One is actually the RoW market. The other one is nonregulated and then your U.S. kind of stuff. So I will not be in the position to give you the exact numbers on that please, to be very honest with you.

Sure. Sure. And just one last question on the overall EBITDA margins. I believe that because of the currently lower profitability in the Sterile business, there's some pressure on the EBITDA margins in the last 2, 3 years. But right this year, we are expecting much better improvement in profitability there. So can we see that in the next 2 to 3 years, the EBITDA margin should improve from where they are currently?

[ Hopefully ], I agree with you. Yes.

We feel so. Yes, we feel so.

The next question is from the line of Mitesh Shah from ICICI Securities.

Congratulations for the -- continuously giving a strong result. My question is regarding to U.S. sales. You have achieved around $12 million this year and then actually also expecting around $18 million, $20 million. And your expectations would be around $110 million. So could you -- when should you expect the flip in the sales on the -- is that for the sales? I believe one is [indiscernible] they are going into the front end without the partners. So what -- when we can expect the paying out these results for this particular geography?

Yes. So when it comes to the U.S. trajectory, obviously, in the beginning period, we've focused more on simple solution products where typically, the sales and the margins are a little bit lower than some of the products that we are getting into right now, which is more into the injectable, emulsion and ophthalmic emulsion, suspension category and stuff. And in addition to that, we're also getting into premixed bags and prefilled syringes, lyophilized products and all that. So once these start to come through, we feel that there is going to be a significant flip in the next 3 years. So our revenue projection is based on this. And also in addition to that, like I was saying, once we have amped up our capacity, we are also going to be going for some higher-value contract manufacturing as well with the larger players in the U.S. That is going to improve our run rate as well. So while it might not be a very simple curve, it would be, I would say, rather in terms of [ stilts ] rather than [ linear terms ].

To add one more thing, to tell you, frankly, when a promoter is a nontechnocrat and in the initial basis, it's not that easy to attract efficient projects heads and [indiscernible] And most of the time, people don't touch up their own. They somehow actually create something that -- that it leads to doing is easy, repairing is difficult. We have completed that process. [indiscernible] is one. Then there is something there happens, we learn from it. If something good happens, you grow. Now we have come to the stage of growth. Whatever happened in the past is because of actually the fact that every first generation, our consumer has to go through that [indiscernible] market technocrat. So whatever has happened in Caplin Steriles, if we are not in a position to generate enough cash, we would have been in trouble. Because this has not happened actually by leveraging the debt. It has come naturally because of the fact that we have a very good setup, marketing setup in Central America. We generated enough cash. Then of course, we attracted an investor. We are not very keen also in spite of [indiscernible] then we decided there is a concept called capital plus. In addition to capital, they also promised they will be in position to help us when we go for the front-end marketing in U.S. So all these things have happened. Now we are very confident that we'd be in a position to do well going forward. We have increased the capacity, we are further increasing the capacity. Today, the issue is not marketing in U.S. The issue was actually capacity constraint. That has been addressed. Then second, people constraint. Now we know we are in a position to attract good talents because we are offering the ESOP also to people. [indiscernible] plan that [indiscernible] offering to the best of the best at INR 2. So with all this put together, we are very confident that we will actually get into the fast track. Am I able to give you the correct answer, please?

Regarding the -- your backward integration, you said about the -- you are making the API plant. So is that a preplanning? Or has any competition has increased and you are looking that the -- that would be the advantage for us. Is there any change in the competition scenario right now?

No. This is something similar to the business model of all big buys. If you look at all the big companies, they are not only into formulation, they are into backward integration. When they go for backward integration, they don't simply manufacture the API. Today, what is happening, you're aware that 70% of the API comes from China, which means your dependence on China will always be there. But to avoid that the dependence, one has to go for Key Starting Material, intermediate API. Of course, formulation, we are the #1 in the world, especially in regulated markets. It's not China as China -- which is more into API, Key Starting Materials and intermediates. So it's not that we have done it just because the profits started eroding in the market. It is a plan based on what the big people have done it and we also have to -- we have to follow it, make that difference. Difference is since they have deep pockets, they entered into some space already. It's not easy for us to go and compete that. That's why, as I told you before, we have decided not to get into the areas where they're very strong. We have decided to go for molecules which are not big. The molecules which are small are bigger, and we increase the numbers. When we increase the number, then we will also have an edge. That edge will give us actually a space for us to compete with any other company, which is in the market. Have I addressed your questions, please?

Yes. Absolutely, sir. And one more about the Central America and Mexico and the Brazil where we got the emergency approval. So that would be a meaningful contribution? Or the -- and also this emergency approval can be -- give a boost to the presence to -- of us in the -- this market, Brazil and the Mexico in the going future?

Yes. There are 2 things which will happen. See, when some country is coming forward for an emergency purchase, if you can meet their requirement, that means you have done something which will convince the Ministry of Health, that this is a company which has the capacity to actually supply us also, for example, propofol. It's a product which creates huge problem in U.S. market also. If you look at most of the companies which have registered propofol in U.S., right, from a big company in Hyderabad, they manufacture it outside the country, somewhere in Italy. The only company, that is Pfizer -- Hospira -- Pfizer is the company which exports in a big way to U.S. propofol. This is a product which we have exported to Mexico. We have exported at least 5, 6 consumers. The quality of the product is established. Now people who have seen this product in Mexico, now they will actually come forward to place an order for Brazil. So that's an advantage that we see, but the quality will be established. Second, the people who use your products, whoever is the company, which will also actually -- the one which grew in the form of [indiscernible] Many people will come to know, this company is in a position to supply a difficult-to-manufacture product to the market. So these are the advantages that happens. When this happens, that will also open up other possibilities of getting into the market. You want me to talk anything in addition to that, please? Is it total? Or any other questions, please?

The next question is from the line of V.P. Rajesh from Banyan Capital.

My question is how much revenue are we getting from countries like Colombia, Argentina and Brazil?

No. We are not -- Colombia, Argentina and Brazil, we have not started the business. Colombia reinstitution is completed. Argentina and Indian companies -- none of the company's -- [ 90% ] of the company, except 1 or 2 which have registered their API. Colombians are not in favor of -- sorry, Argentinians are not in favor of the Indian formulations. Brazil, as we told you before, we have completed actually the agreement. That will trigger actually the online inspection rate. We have gotten out of our emergency tender. And we -- in fact, we are mobilizing the API and other things to manufacture the product and export. I think Colombia, Brazil and Argentina -- I think I've addressed your question, please.

Yes. My follow-up question is given the instability in some of these countries, how are we making sure that our receivables are not...

Sorry, sorry, I cannot hear you properly. Can you come again, please?

Yes. My question was, given the instability in these countries, in some of these countries, how are you making sure that our receivables don't get stuck and you don't experience any currency devaluations, potentially, currency devaluations?

I think I already answered this question once so I will repeat it. See, it is true there is an instability in one country, that is Dominican Republic. The rest of it, if you look at 7, 8 countries where we are present, 3 of them, like this one, like El Salvador, Panama and Ecuador, the currency is dollar. And Guatemala has been very stable. Even in times when Chilean currency and Brazilian currency took a serious beating, Guatemalan currency was stable. And there was little actually issue in Nicaragua, which is stabilized now. Honduras also is okay. But one more issue here is if you give credit in the form of like 6 months and 7 months, then what will happen, there is a possibility of your currency getting devalued. Even for 1, 2 months, [ if you give ], that can happen. Definitely, it will happen. It's not that it will not happen. And how will you offset it? The way to offset it, you have goods actually in the local market because we have a warehouse and we sell from the warehouse. Then the moment we find some products actually where the profits are a little eroded because of the devaluation, we always sell actually at a higher price, the next one, and make it up. Because not many companies have registration in the form of 300, 400 products, and there is no company of our size having awareness in the form of stock and sale model. There is no company from India of our size having registered 300, 400 products. The big boys will not come to this market, which is sort of smaller markets. Generic business, the big boys will always go for actually huge countries like U.S. or other countries where they will do tender business. So that play, we are very uniquely placed in this part of the world, especially in the smaller geographies. So the currency -- volatility of the currency has not affected in the past and is not going to affect us also in the future.

Thank you. The next question is from the line of Tushar Manudhane from Motilal Oswal.

Sir, just with respect to the audit which you have highlighted in the presentation at the CRO. So is this to do with some product under shortage? And which [ dossier ] these products are?

The products that we are planning actually to do from our CRO is a mix of everything. And this will also open us an opportunity for us to create another CRO in Mexico. There are only 2 countries in the world that they expect the BE/BA studies to be done in their own countries: one is this one, Mexico; and the other one is Russia. The advantage of actually this CRO is we will keep the bioanalytical here, and we'll only start the clinical side of it in Mexico. The number of products, we will not only do it for the regulated markets. We will also do it for markets such as Chile, Colombia, even 1 or 2 countries which are part of nonregulated markets. The advantage of creating a BE/BA study is to prove to the doctor that the product is in line with the R&D. R&D is the innovator product. The moment we do it in a U.S. FDA-approved facility, that enhances actually the image of the company. That adds as an image-building exercise. So it's a mix of everything, not only one actually in the form of going only for maybe emergency product asset. We will do that also, but priority will be given to an emergency product. But at the same time, in the long run, we will go for the mix, which will ensure actually sustainability to the company.

Right. [indiscernible] 2 ANDAs, which have been filed through a partner...

Your voice is not audible, sir.

I'm referring to 2 ANDAs, which have been filed through the partner where BE/BA studies have been done from the CRO side. So is this referring to some products under shortage that should prioritize U.S. FDA to inspect this?

This is for the product which is under shortage in U.S. This is a difficult-to-manufacture product, which has been given to us by a big company from Hyderabad. We used it. We have completed. They already filed it. That will open up the opportunity in the form of triggering the inspection. So any time we expect actually the inspection to be completed. So once you get the U.S. FDA completed, you don't have to actually get the approval from many countries. Using U.S. FDA, you can do the BE/BA studies for registration. That is the idea of the whole thing.

Secondly, on this capacity utilization for Sterile injectable side, because the pace of and the filings will definitely be higher, at least for over the next 3, 4 years, so subsequently, we'll keep doing the stability batches. From that perspective, how do we see capacity utilization increasing for the commercial purpose?

Yes. The commercial is going to increase more and more in the coming years, for sure. Once, I think, we have filed more than 80% of the current pipeline, we will certainly reduce the number of filings. And then we will focus specifically on the difficult-to-manufacture products, [ find on-site build to ] kind of products, while at the same time, strengthen our front end and back end also in terms of API supply. So I would say that, in a short note, the commercial revenues, by way of product supply, would be much, much larger going forward.

Got you. And just lastly, one clarity on the Brazil market, where in a sense, other than the tenders, are you going to file the product separately?

Yes. We are going to be filing. In fact, we've already started with the first 2 products, with the partnership that we have struck in the last couple of months. And we are not only focusing on emergency tenders. Obviously, our larger idea is to ensure that we have a presence in the year going forward. So we are also filing products as well in Brazil, yes.

Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to the management for closing comments.

Thank you, everyone, for taking part in our earnings call. And once again, we all hope that you and your loved ones, everyone is staying safe, and we hope to meet people in person when things allow us and when the pandemic situation is much more under control. Thank you very much for your interest in our [ company ].

Thank you. Thank you very much. Thanks to one and all. Stay safe and stay healthy, please. Thank you. Thank you very much.

Thank you. On behalf of Batlivala & Karani Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.