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

Ladies and gentlemen, good day, and welcome to Caplin Point Laboratories Limited Q4 and FY '25 Earnings Conference Call, hosted by Batlivala & Karani Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Julie Mehta from Batlivala & Karani Securities Please go ahead, ma'am.

Thank you. Good afternoon, everyone. On behalf B&K Securities, we would like to welcome you all to the 4Q FY '24-'25 conference call of Caplin Point Laboratories Limited. I take this opportunity to welcome the management of Caplin Point Labs represented by Mr. C.C. Paarthipan, who is Chairman of the company; and Mr. Vivek Partheeban, who is the COO of the company. And we also have today with us Dr. Sridhar Ganesan, Managing Director; Mr. D. Muralidharan, CFO; and Mr. Sathya Narayanan, Deputy CFO. I would now like to hand the conference over to Caplin Point's management for the opening remarks, post which, we will open the session for Q&A. Over to you, sir.

Thank you to everyone that has joined. Thank you also to B&K for hosting the call, and welcome you all to discuss the results of Q4 and FY '25. Please note that a copy of all our disclosures are available on the Investors section of our website, as well as on 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. The conference call is being recorded, and the transcript, along with the audio, will be made available on the company's website, as well as the exchanges. Please do note that this audio conference call is a copyright material of Caplin Point and cannot be copied, rebroadcasted or attributed in press or media without specific written consent of the company. With that, I would like to now hand over the floor to our Chairman for his opening remarks.

Thank you. Good afternoon. Welcome to -- all to our investors call. Let me start with a footnote actually of a French philosopher who once said, one's life has value so long as one contributes value to the lives of others. However, the evolutionary biology tells that this is easier said than done. Humans are hardwired, try to survive. And in the race to the fittest, compassion becomes a casualty. But we at Caplin strongly believe that empathy is a leadership essential in the world of technology. We practiced it, and we always followed the concept of catering to the bottom of the pyramid with quality generics at affordable prices to our customers. That's how that made all the differences actually to our business. And now, the asset quality is as follows: fixed assets, INR 700 crores invested in the last 5 years; liquid assets, [ INR 2,150 crores ], of which cash and cash equivalents is INR 1,180 crores. The roadless traveler continued to strive for value monopolies in the world of techno-feudalism that creates digital monopolies and digital landlords. Our value proposition in CSL, the U.S. FDA facility. Our deviations on job orders in the shop floor has reduced drastically in addition to the OOS and OOT from the QCs. This is possible only because of the women empowerment in the shop floor and also in the grassroots of quality control. When most of the big companies fully automate and digitalize the whole system and the shop floor and other areas, we have achieved this productivity with compliance only with partial automation and digitization. This will be replicated in all our new and old facilities. Now, coming to Pondi factory, that is Pondicherry factory, where we export our products to ROW market, we are planning to reduce the cost by utilizing our own QC/QA professional in our Pondicherry factory to do the outsourcing of quality products at a better price compared to our present cost in the facility. The products which we outsource is going to be in the Pondicherry state. We are sure that now we can create a cost reduction of 25% to 30% from -- compared to our earlier overheads. Number 3, we have developed 2 popular peptide injections for the ROW market where the patent expires by the early next year. Further, we also plan to launch in the regulated markets too. Number 4, Caplin received first insulin product approval in Central America. We have plans to file more dossiers in other Latin American countries, which is in progress. Number 5, we have established a warehouse in Chile. In addition to the government business, we already started actually supplying products to the private market too. So far, we have registered 95 products, and this will result in an increase of sales, cash flow and profit. Number 6, we are also in discussion with some Chinese medium-sized companies to import Biosimilar Key Starting Materials for fill/finish in India. Number 7, the current update of Mexico. We have filed 30 products and received approval for 13 products. Products in the pipeline is in the region of 60 plus to be filed in the next 12 months through internal and outsourced manufacturers. Number 8, we have completed API R&D for 51 general injectables and 34 Onco injectables and Onco OSD, which in total is 85. We now plan to manufacture these APIs in a Chinese facility, where it is easier to chase the economies of scale. These products will also be manufactured at a later date in India for captive consumption. Once the facilities are ready, the general injection facility which, of course, is nearing completion, after that, we will use it actually for our captive consumption in India. We'll also manufacture some of the APIs using this Chinese facility for the supply of our ROW markets, which again will be an asset-light model. Nine, our CP1, the Pondicherry facility is all set to launch a unique dual-chamber pre-filled syringe in all existing markets of Latin America. We are sure actually that this product also will make a difference to our actually bottom line as there are only 2 multinationals that are in this business today. Number 10, after completing the market tracker for our own sales and marketing, we now plan to create a cost control tracker through a dashboard with the help of our finance and IT teams. The benefits are as follows: A; the tracker will enforce fiscal discipline at every department level in the company; B, the MIS from the tracker will come through the finance team, which will arrest any cash leakage; Number C, it will also help us to go from projected versus actuals and cost versus benefit to monitor and review the financial activities. Number 11, we're also working on a MC-1, which is in the nascent stage. The rest of the business highlights will be actually shared with you, especially on the U.S. front end, by COO, and the numbers will be detailed by our CFO. Finally, a narrative. When signs arise at the border, philosophy must come forward to its horizons, setting bigger goal to be pursued. This is the only way to avoid saturation and escape the fallacy of limited understanding. Thank you. Thank you very much. I now invite the COO to give his presentation.

Thank you, Chairman. I'll give you a little bit more background on the U.S. entity, Caplin Steriles, and also some of the newer entities that we have taken on. Obviously, we are very happy to close out another strong year for Caplin Steriles with growth across all the segments. Of course, the numbers of it, which will be detailed by our CFO. We've grown 5x in revenues in the last 5 years. In fact, our EBITDA also has grown significantly this year. It won't be out of place to mention that the bottom line growth is due to completion of certain milestone projects and payments that we've received for that. But not only that, we've also seen that some of these newer approvals that we've had, especially in ophthalmics, have started to begin contributing quite significantly to the bottom line in terms of profit share that we received from our partners. When it comes to approvals, I think we've had a good year. We've had 8 approvals this year. We've launched most of them. We also acquired a couple of products from another Indian MNC, and we look forward to bringing this to market within the next 12 months. We're also hopeful of receiving another 10 to 12 product approvals this year. In fact, 13 products are under active review with FDA, and those should come through hopefully in the coming few quarters. In addition to this, we also have meaningful number of products that have been approved in Canada, Australia and hopefully in South Africa also in the coming year. We are slowly progressing along in Brazil. Hopefully, I think next year, we can start to see a little bit more traction in Brazil. I think I want to also touch upon our front end over here. In fact, when we began our ideas of pivoting our business model from B2B into -- I wouldn't say, we've entirely pivoted into a B2C, but we are sort of heading in that direction a little bit, but many people had some questions over why we are doing this, considering how well we are growing in Caplin Steriles. See, we took this conscious decision based on multiple factors, the primary one of it being that there is always going to be other companies, maybe mostly smaller companies like CMOs, that are able to offer lower prices than us. They might not be able to match us in terms of the compliance record or the productivity that we have. But when it comes to cost, there are companies that will be able to offer a more aggressive and potentially a less sustainable pricing than us. Number 2, with the amount of competition, our B2B partners being the size that they are, they're always going to ensure that their margins are not affected. So they're going to be squeezing the manufacturers into providing lesser and lesser prices. And 3, the most important one of all is that our pattern of success has always been in control of being in the front end. So, that continues on with us launching a label of our own. We are happy to say that within the first couple of months of us launching our own label, we have done over $2.5 million in sales. And we have set up contracts with 7 large distribution and wholesale companies in the U.S. The 3 largest ones are on a weekly ordering cycle with us, and we receive intermittent orders from the others as well. We've also set up direct contracting with about 24 health systems in the U.S. as we actively try and convert many of the other ones that we are in discussions with. Today, the breakup in sales is anywhere between 70% to 75% wholesale sales and the other 25%, 30% is direct. Eventually, our idea will be to pivot that into a 70-30 favoring the direct sales. In addition to that, our Oncology injectable division also has been completed. We are going for trials in the next few weeks on that. Our API for general category has also been completed, and we will be going for trials in June on that as well. And from a market perspective, we're making very good progress in countries like Mexico, Chile and slowly in Brazil as well. And definitely, I think, as Chairman mentioned, our improvement in productivity in Caplin Steriles has been due to a very, very close monitoring, in fact, from the highest level. As you all might have heard in previous con calls, our Chairman has already moved his base to very close to Caplin Steriles over the last 3 years, and also due in part to this women's empowerment movement that we've been taking on in the last couple of quarters. We hope for that to really gather strength in the coming few quarters and really make a marked difference to both productivity, compliance, integrity and safety that we maintain at our facilities all over. I'd like to just hand over the floor to our CFO for some color on the numbers before we can open up for questions, please. Thank you.

Thank you, Mr. Vivek. Good evening to all the participants who have taken time off to attend our investors call to brief about the results of FY '25 and the ending March '25. During the call discussing our first quarter ended June '24, I started saying what is well begun is half done. Now we are very pleased to inform that we have not only began well, but also sustained the momentum and ended the financial year with lot of milestones. Results are gratifying with growth in all key parameters. Total revenue crosses INR 2,000 crores at INR 2,034 crores, registering a growth of 15% over the previous year; PAT crossing INR 500 crores at INR 541 crores, registering a growth of 17% over previous year, 2017-'18 revenue becoming PAT of 2025; FY '25 PBT of INR 677 crores, exceeding revenue of 2018-'19, which was INR 658 crores; all-time high gross margin of 60.2%; PBT of 33.3%, that is every rupee sold, 1/3 is flowing into PBT; and all-time high PAT of 26.6%. Coming to our Chairman's vision of having products closer to customers was realized through bringing the channel partners and major markets served by us under Caplin Group. This has paid rich dividends. The following achievements are testimony. Growth from 2019-'20, March '20 is when we acquired the Guatemalan channel partner, to 2024-'25, revenue grew from INR 905 crores to INR 2,034 crores, which is 2.25x; PBT from INR 269 crores to INR 677 crores, which is 2.51x; and PAT from INR 215 crores to INR 541 crores, which is 2.52x. Cash and cash equivalents were INR 470 crores at the time, now it is INR 1,180 crores, increase of INR 710 crores after investing INR 700 crores in fixed assets as Chairman mentioned out of our own accrual. Liquid assets were INR 751 crores. It has almost gone up 2.86x to INR 2,150 crores. Net worth was INR 948 crores. Now it is whopping INR 2,850 crores, which is 3x. The most important point to note is that the inventory of INR 335 crores reported in balance sheet [indiscernible], which would yield a revenue of close to INR 900 crores when sold. It's even more important that around INR 500 crores out of the INR 900 crores sale value is closer to the customer, that is in our own warehouses at various places; 2/3 of them are in various places and 1/3 is in transit, which will reach anytime now. This has been our most lethal commercial weapon during the disturbed times like COVID, Red Sea issues and so on and so forth. CS, as Mr. Vivek mentioned, primarily addressing U.S. market, grew from INR 72 crores in 2019-'20 to INR 366 crores, which is a 5x growth. Core business operating revenue grew by 15% during last year and U.S. operating revenue grew by 13%. So this is from my side. And if there are any questions on the numbers, we'll be more than happy to take it. Thank you. Over to Vivek.

Thank you, sir.

Thank you.

We can proceed with the questions now, please.

[Operator Instructions] The first question is from the line of Rohit Singh from Nvest Analytical Advisors LLP.

Congrats for a decent quarter. Sir, I was checking your earlier conference call, and I found in Q2 FY '23, management stated that it will take around 2 years to complete some facilities, ex-CapEx and registrations. And once done, you will be moving from the road less travelled to road well travelled, right? And similarly, in a similar way, your network has increased by 60% in FY '24. And in FY '25 also, till first half. We completed some CapEx, which is -- which was a cumulative addition of around INR 200 crores to our net block. Yet our FY '25 top line growth is just around 15% and our U.S. business has grown nearly by 13% to 14%, whereas we were looking for a growth of around 30% in that business in this year. And we used to target to convert our top line into our bottom line in every 6 years. That means essentially a CAGR of 30%. But if I look at your PPT, you have mentioned your 5-year PAT CAGR is around 20%. And earlier, USD 100 million top line in Caplin Steriles is also not looking like we are going to achieve that. So, our concern is primarily towards the growth side. One, we are doing the significant CapEx, why this CapEx is not getting converted into revenue. Secondly, when we will start seeing the benefits from these investments? And can we still aspire for a growth of around 30% earnings CAGR going forward? So that is my first question, sir.

Okay. To be very honest with you, growing at 30% after reaching a sale of INR 1,700 crores and INR 2,000 crores is actually definitely, at this juncture, is not possible. At the same time, I would only request you to compare our company with our peers and see the fundamentals. And if you see the fundamentals of any other company of our size, if it is better than ours, then of course, I'll also tell you how exactly we will try and actually do the same. That's one. Second, CapEx is one area. It's actually -- sometimes we also go slow, the reason being it is true that we should not be afraid to start early. But equally, you should also -- we should not be afraid to be slow to finish also. The reason is, the whole world today is a VUCA world, where you can't simply complete without even understanding actually what's happening in the world. That's one of the reasons sometimes it gets delayed, okay? This is what I would like to convey to start with. If there is anything, you can again ask me also.

One more point I also want to include, anything to do with pharmaceuticals, especially CapEx and all of that, there is a period of gestation, which involves getting the right regulatory approvals, getting the right product approvals and everything that comes into play. So, it's not that we finish a facility and then on the very next day, revenue start to flow in. So, especially the kind of facilities that we're putting in such as the Onco facility, which requires a dedicated unit, where product revenues will come out only after product registrations have come out. And also, if you're looking at our API plant, that is going to be for backward integration and stuff. So, some of these have a little bit more of a gestation period, and pharmaceuticals in general has a longer gestation period compared to other industries, which I'm sure you are aware of also.

That thing I understand, but particularly on the U.S. side, Caplin Steriles is going to be the growth engine for us. But the kind of growth that we have delivered this year and the kind of growth that we have targeted for this year, there is a huge gap, right? So what is the reason like we are not able to achieve our own target of like we were -- in the beginning of the year, I was speaking with you, you were targeting around 25% to 30% growth in Caplin Steriles. But why we are not able to achieve that?

Yes. Let me -- see, there are 2, 3 things here. Number one is, what we are looking forward is a high-quality growth. If we need to go for growth, just for the sake of it, we can go up to even 40%, 50% just by stopping all of the R&D, stopping all of the product filings, et cetera, and going only for commercial revenues. I know another certain listed company as well that have dropped prices by almost 30%, 40% on a product that is selling for less than $1. So, we do not want to go after this kind of growth. What we want to go after is highly profitable and growth that we can sustain for a longer period of time. We are not in this race for the next 3 years and then running away. We are building up our company for the next 25 to 30 years. right? So, if there are periods during our progression where we see that the growth is a little bit moderated but comes at a high-quality growth, we are happy with that rather than chasing just top line numbers. And this has nothing to do with Caplin Steriles alone. This has to do with Caplin Point, Oncology, everything. So, our longer-term horizon of hitting $100 million for Caplin Steriles remains very much viable. And if we hit it 12 months or 18 months later than originally targeted, I think that is not going to put us in any sort of misery at all. See, the U.S. also, as you might have seen in the last couple of years, that's a very, very volatile space as well. So, we need to make sure our compliance record is taking precedence over everything else. We can't go from x productivity to 3x productivity within a 12-month period. We need measured and slow and sustainable growth. That I think is more important compared to just top line chasing, please.

Understood. So, that means overall, we will be essentially maintaining the kind of growth that we have done in the last 5 years is what I am understanding from your response, right?

See, I think we are growing very well, honestly speaking. I don't want to give numbers out and say that this is what we are going to be growing at, et cetera. I think we are growing very well. If you look at our parameters across industries and you benchmark us with people around the same size as us, you will see that we are better than most other companies on almost across all parameters, right? So despite the kind of volatility that you see in the markets, our growth has been extremely consistent. It's been measurable. It's been manageable. You would have seen that there is a high level of predictability in our growth. So, I think because of the fact that we cater so much to the bottom of the pyramid and also the fact that we are in the private market helps us sustain this kind of consistency. So, I think this is what we will be aiming towards, not so much on one specific number that we need to hit.

Another thing I would like to add. See, the business that -- most of the companies of our size, most of them, they are simply CMOs. But in our case, as you are aware that we started our front end. So, starting with front end takes little time, does not involve actually instant gratification. But what happens is when you keep your goods next to the customer, like any other big company which is there in the U.S., maybe 2 to 3 years from now, we'll also produce what exactly you are expecting. But again, as you know well, it all needs the timelines actually because overnight, you can't do anything. If you try and actually sell products for the sake of selling in credit, that also will lead to a lot of complications. Today, we are not a debt-driven company. We don't do anything in the form of leveraging the debt too. We don't want to do that also. We want to actually grow very healthy, more liquid cash and liquid assets. Maybe at one point of time, maybe after 3, 4 years when we have INR 2,000 crores, INR 3,000 crores in the form of cash, we can start to acquire a company, then everything will be doubled also. There is a possibility, but it should be a meaningful acquisition, then only we'll be in a position to do that also. So, anything that happens today is not that actually it's going to go in the form of actually slow or big, but what is important is consistency. If you do a mistake that will lead to foolish consistency, you also [indiscernible]. That's one of the reason, you want to go step by step and make it bigger when the opportunity comes. Thank you. Thank you very much.

And sir, like Vivek sir has mentioned in his remarks about the volatility that there is in the U.S. market. And recently, Trump administration has made an announcement on the price erosion of the prescription drugs in the U.S. So, while we are a kind of generic players and supply our medicines to U.S. companies who may be selling at way higher prices in the U.S. So, is it correct to understand that these companies will have to sacrifice their margins and not the Indian companies like Caplin because we are already providing them at a lower cost only? Or do you think we are at -- we are also under threat due to this announcement? So, please help me to understand sir.

See, what we understand is actually, I don't think that they will go to an extent of actually taxing the generic companies. In fact, if you read these actually statements in the recent past, he is talking of actually companies which are selling products, say, the price in U.K. and the price at which they sell in EU is not the same price they sell in U.S. These are all branded products. So if at all, they want to actually take it on the companies, it will not be the generic companies. They also know already the prices have eroded. Generic -- the competition of generic is the one which is the deciding factor for the price, whereas in the branded products, the innovator and the brand owners are the private label owners. They dictate TAMs. It is not actually the supply-demand mechanism which creates actually the price. Is it okay? Is it convincing to you? Do you feel it's a considered response?

Yes. And sir, lastly, on the U.S. tariff...

Sorry to interrupt, sir, but I may request you to rejoin the question queue for follow-up questions.

Just last question, sir. So, on the U.S. tariff, like last quarter, you said the things are not clear. So if you can put any color now, if it is possible, like based on your discussions and -- with industry people and the customers, like if pharma comes under the tariff, what kind of impact do you see on our U.S. revenues or global demand, which is going to be the key pillar for our growth?

Vivek, can you take this question?

So I think it's a wait and watch for everybody. Honestly speaking, the more clarity that we see over a period of time, it looks adequately clear, I would say, at this point without saying that this is the final one. It looks like the brand pharma, basically, the innovator companies are the ones that are under target right now. Whoever that we speak to, especially our B2B partners and some of these larger buyers of stuff, they also feel that generics will not be under any sort of tariff. But again, we have no idea, right? It's all a wait and watch for us, just like it is for everybody else at this point.

The next question is from the line of CA Garvit from Nvest Analytical Advisors.

So, my question is, India announced it has signed the term of reference with Chile for a comprehensive economic partnership. How do you see this as an opportunity for...

Sorry, your voice is not -- excuse me, sorry, your voice is not clear, please.

Is it good now?

No, it's still not clear. It's breaking up.

Hello?

Now it's better. Can you make it a little louder, please?

India announced it has signed the term reference with Chile for a comprehensive...

Mr. Garvit, your voice is breaking. Sorry to interrupt, but your voice is breaking. If I may request you to redial the number and rejoin the queue? The next question is from the line of Deekshant B from DB Wealth.

Congratulations for decent results. Firstly, sir, we have been investing a lot on our capabilities to get more U.S. FDA approvals and -- as well as we know that Caplin Steriles has been helping us grow, and we are expanding our foothold in the U.S. market. But can you help us understand that what sort of time period can we look at where the significant growth is back in the business? We are going through a transformation. Even on -- our cost and the margins are looking better from a longer perspective. But what is it that is required from us to make the growth feel much more vibrant?

Vivek?

Yes. So I think we've spoken about this in the past as well, where we feel that the next 18 to 24 months is going to be a bit of a transitionary period for us, specifically because of the fact that 2 or 3 of our initiatives are all in slightly nascent stages. I would say, number one is our entry into the larger markets of Latin America such as Mexico and Brazil, our Oncology division where we need multiple products start getting approved and come through, and our U.S. front end starting to gather steam. So I would say that while we are happy with the growth and the quality of growth that we have, for us to expect something even better might probably take another 18 to 24 months, within which period, you will probably start seeing similar kind of numbers like the ones that we have reported right now.

Got it, sir. So can you help us understand that? So, from our understanding, whenever we are getting new U.S. FDA approvals, we are also seeing that a better product composition is being launched by companies. What I really mean to ask you here is that the old products that we have, are they losing some sort of market share and they are being replaced by new ones? Or are we just -- the existing products, are they able to give us the similar kind of revenues that they were?

See, in the generic market, it's very much driven by demand and supply, right? So I would say, it was a broad mix last year and the year before that as well. Some of the products that we did back in 2018, 2019, '20 and all that, they don't contribute too much right now, whereas some of the products that we've recently launched have taken up their place. And I guess, once again, in a very dynamic space like the U.S., in due course of time, when some companies start to exit, those capacities start to be up for grabs for us. So it is a very diversified portfolio. It is a mixed bag when it comes to market share. We're not specifically targeting any specific product to occupy a larger market share compared to others. We need to make sure that we have very good cost control, we have very good consistency in supply, and above all, our compliance record takes precedence over everything else. So over a longer period of time, there is no product that we have, how do I say, not supplied for more than a year or anything like that. So I hope that answers your question in terms of our product mix.

100% sir. Sir, my last question is...

Sorry to interrupt, sir, but I may request you to rejoin the question queue for follow-up questions. [Operator Instructions] The next question is from the line of Aditya Pal from MSA Capital Partners.

Sir, just wanted to quickly understand, harping on the point that other participants were asking, so growth has fallen at least in the ex U.S. market. We have fallen from what we were doing, 16%, 17% to sub 13%. When do you think -- because we've also launched the Caplin One platform where we are supplying oncology products and there are new capacities that are coming to cater to these markets. When do you see these -- revenues from these geographies picking up?

Yes. I would like to actually answer this way. When we get into the bigger geographies, especially the regulated market, where there are 2, 3 important things that takes time actually like, A, the R&D. When you do the R&D, then of course, the facility -- when you have R&D, in addition to that -- in addition to the formulations that we manufacture, we also have to have an API. Now, one of our API facility will be completed, say, in another 2, 3 months. The other one, of course, it is work in progress. If you don't have API or if you don't have a facility, if there is any mismatch like -- ours also is vertically integrated company, but connecting the dot, it takes a little time in the form of having actually your intermediates, API and then formulation, and then your front-end process. Here, all these things contributes to actually a good growth. And then, the time that takes actually to complete your R&D, and then you have to go for, what you call, actually scale up and exhibit batches in the factory. Then you develop a dossier, dossier has to be filed. Sometimes they'll say -- they'll give this thing, what you call, either it's in the name of ANDA or some approvals in other countries. It takes minimum of 1 to 1.5 years, 1.5 year minimum in some areas. So these are factors that contribute to actually what is happening today. But again, if you -- in spite of it, if you find, the fundamentals, as I told before, is in the form of actually your liquidity and the quality of the assets that we have created. The 1% or 2%, which you say, see, whatever you miss, it can be offset at a later date. This is what I would like to convey. Is there anything you would like to ask, please?

No, sir. This is pretty clear. And the other question is for Vivek. So when we have seen a couple of quarters back that our aim is to achieve $100 million run rate in our Caplin Steriles platform, do we still think that is achievable? Or is it now, say, postponed by 15 to 18 months because of different strategies that are deploying there or different market forces that you're -- market pressures that you're facing on the ground?

Yes. We are 100% confident that we will achieve it. When we will achieve it is the golden question. Once again, I would like to say that if we achieve it in X year or if we achieve it in 18 months after X year, we're still going to be doing it with a high-quality growth. That is more important. We can achieve $100 million top line with 6% EBITDA or we can do it with 25% to 30% EBITDA. And I know which one I want to choose, right? So we're not in a race against anybody on that, and we will continue to go down the path that we've selected a very long time ago.

Understood. Just last...

Sorry to interrupt, sir, but I may request you to rejoin the question queue for follow-up questions. The next question is from the line of Shrinjana Mittal from RatnaTraya Capital.

Congrats on the continued execution. I just had a couple of bookkeeping questions. So if you can help me with the Caplin Steriles sales number and EBITDA and gross profit number, that would be helpful.

Yes. Can Sathya or CFO go ahead, please?

Yes, sir. Thanks for the question. So the sales for the year-ended 31st March 2025 of Caplin Steriles is a total revenue of INR 366 crores with an EBITDA of INR 102 crores.

Okay. EBITDA of, sorry, INR 102 crores? Okay.

Yes.

The next question is from the line of [ Suman Maji ], an individual investor.

We have receivables of INR 632 crores. That is more than our PAT and way more than our inventory, I guess. Do you see or expect any kind of significant credit loss on that?

We don't see any credit loss in this one. The receivables slightly increases based on the market, especially in markets where we supply the products to the government. And the payments -- for example, there is a country called Ecuador, the currency is dollar. But the same way, El Salvador is another country where we supply to the government, it's also dollar. And there are countries where there is no issue of stability of the currency also. But the government, sometimes they delay the payment. There's nothing in the form of [indiscernible]. It's only a delay. But we also know that we are supplying at a higher cost -- higher price, which means our profitability -- if you look at our actually profits, it keeps increasing in spite of the fact that you mentioned in the form of actually increase in the receivable period.

I have just one question, just another question, another one. There are threats to put tariff on pharmaceuticals whose APIs are imported from China -- from U.S. What kind of expected effect on CSL?

Yes. So we have very little exposure to this. In fact, out of the 33 approvals that we have, top of my head, less than 2 or 3 of those are from China. So I don't see that this is a threat to us at all.

The next question is from the line of Julie Mehta from B&K Securities.

So, my question pertains to, we have added recently 3 lines, and we have another one underway in our injectable facility. So how is the pre versus post capacity looking like, capacity utilization?

Yes. I think over the last 12 months, we have increased capacity utilization by almost 24%, 25% at Caplin Steriles. Of course, I don't have the exact breakup of how much went into commercial and how much went into exhibit batches, which is basically the batches that we take for submission of these ANDAs. Please note that only one of those lines have become entirely commercial, like fully commercial, which we call as Line 5. Line 4, which is our premixed bag line is commercial on 2 products, which are not very highly voluminous. The value is good, but not very highly voluminous products. And the third line, which is a prefilled syringe line, we will be submitting products this year. So, that 20% increase in capacity utilization, I would say, primarily comes from our -- by Line 5, which is the high-speed line that we got from Bosch.

Okay, sir. And sir, my next question is that since we are planning to file GLP-1 molecule in the emerging markets, so since it is a highly competitive space and with Mounjaro coming in and semaglutide will come in March '26 post patent expiry, there will be a huge inflow of players at that point. So what is our thought behind entering such a competitive space and that to a new one? And what will be our ideal strategy for success?

Yes. So obviously, in Latin America, if you see, we have had a presence there for more than 20, 21 years, right? So the platform is very well set. Caplin as a brand is one of the most trusted brands when it comes to pharmaceuticals. And whatever new products that we have launched, we have launched in the name of branded generics basically, where there is a high level of brand recall, there's a high level of trust in -- that's imposed on our name. So we feel that a GLP-1 product that we launched in the smaller markets where we are present now, which are very largely underserved by the products because I think, obviously, the innovators themselves have capacity constraints, and whenever that happens, they're going to be supplying and serving the markets, which are bringing the maximum revenue for them. So I would say, amongst equals, Caplin has a very, very good name and trust and brand recall in the markets where we're present, and we feel quietly confident that we can make it a successful launch.

Add to it, actually, I'm sure that it's not a questionable opportunity. If it is a questionable opportunity, we will avoid pursuing anything. But these are products which are definitely better than actually a vanilla generic. And we have been selling products, generics for a long time, and it has created a skin in the game. That's why we are sure that anything that we launch, as long as actually the quality and the price matches to actually our customers', and they will definitely buy our product because Caplin has become a private label in Central American markets. Thank you.

One final point also on that is remember that we also have a fairly wide portfolio of antidiabetic products that we have been supplying to these markets for a long time. So this sort of falls within that basket anyway.

Okay. Understood. I'll just drop in my last question. So can you just throw some light on any key products that we are looking at launching in the next 2 years? And any guidance as to how it can meaningfully contribute to us?

Did you mean for U.S. or you're talking about global, please?

So like I mean in general, like for U.S. as well. If you can specify for both areas separately?

Yes. So we obviously have a wide portfolio of products. We have a strong pipeline that we are working on, and that's into multiple areas, right? In terms of the U.S., it's in injectables and ophthalmics. If you're looking at Latin America, that's in oncology, that's in pharmaceutical softgels, et cetera. We don't have 1 or 2 specific products that we consider are going to be blockbusters or anything like that. Our model is to cater to the bottom of the pyramid with a wide array of offerings with a wide portfolio. So we will continue going in this direction, I would say.

The next question is from the line of Garvit Goyal from Nvest Analytical Advisors LLP.

Sir, India signed the terms of preference with Chile for a comprehensive economic partnership recently. So how do you see this as an opportunity for us in the terms of tariff benefits in that market? Because we are targeting our next leg of growth in Chile, right?

Yes. Chile, of course, is one of the lucrative markets in Latin America. And this is not a market where the prices are very low compared to some other markets. But to us, that the advantage actually comes in the form of increasing the number of product registration. And when you have more registration, there are people who will think -- go for this one, government tender business. There are people who will think of actually a private market. We, in fact -- we have been focusing more on the private market. Here, the private market is only 30%. So we still focus on private market. In fact, we started the warehouse with the private market products. We're slowly inching forward in terms of actually business growth. And tender business also is a good business, and I don't foresee any issues because of tariff and other things.

Actually, this economic partnership that can further enhance our marketability or market position in Chile. That's what I'm trying to understand how it can further add on to our market share in that market.

Which partnership you said? I could not hear your voice properly, please.

Recently, Indian government has signed the terms of preference with Chile [indiscernible].

Yes, bilateral trade. Yes. See the bilateral trade is happening between India and Chile, China and Chile and all. That has to no -- in fact, that doesn't have any very great impact. The duty structure there is small and the VAT is high. VAT is reimbursable. And the VAT, of course, earlier, it was 5% difference between India and China products to Chile. So that doesn't -- it's not going to either dent or actually help the companies which are into Chile. That's why I told you what is important in the generic business is the number of registrations. It's not actually the bilateral trades. It helps to a certain extent, not to a very great extent.

Got it, sir. And I want to understand more on this price erosion thing that U.S. government is announcing and requiring Medicare and Medicaid programs not to pay more than what the prices are being in other developed countries like Canada, Germany. So I want to understand how Caplin is doing the thing there? Like they are selling it to these programs? And if they are selling it, are they going to be impacted in terms of product pricing?

Yes. When it comes to generics, I think there is no bearing once again because the Medicaid and Medicare programs, when we sell to them, it's actually sold at an even lower price than our generic pricing. So I think the aim that President Trump has spoken about is, again, much more focused towards the branded products. I think specifically, he spoke about the fat loss drug that is sold for $1,300 in the U.S., which is available at, I think, about GBP 100 or GBP 120 in the U.K., where he said that it was very unfair that America pays almost 10x the price for the exact same drug. So I think, once again, we are talking only on innovative molecules where there is a significant price disparity between U.S. and other developed countries. So I think it has no bearing on generics, especially from India.

The next question is from the line of CA Vikash from [indiscernible].

In FY '22, our total revenue was somewhere at INR 1,300 crores [indiscernible].

Again, it's not audible, please. Your voice is not audible.

Yes. Now it's audible?

Yes, it's better, please.

In the annual report of '22, we have mentioned this one is there, having presence in most of the regulated market by FY '28, and as a result of which, Caplin [indiscernible] to convert the top line of FY '22 to bottom line of FY '28. At the time, FY '22, our revenue was INR 1,300-odd crores. We are still in the same line, is FY '28 -- is our bottom line at INR 1,300 crores?

So you mean to say there is a slight shift in the goalpost?

Yes, that is it because whatever the current situation...

You mean to say, the top line has not become the bottom line? Are you telling actually the same thing? We used to tell the top line of so and so can -- so and so here has become the bottom line, and that's how we have been talking. It cannot happen continuously. This is actually -- sometimes you win. Sometimes, of course, it's not that you lose, but you delay. It's not actually something which is lost. It happens until a point of time. After that, of course, there will be a dip. But again, what will happen, again, we'll come back actually when we complete the registration in all the countries where we are filing the dossier and all these new facilities one day, which will start up and running, and then we'll be manufacturing products actually in various geographies, and the things will change again. So what has happened actually is a one-off. It's not that it's going to go down actually.

The next question is from the line of Deekshant B from DB Wealth.

Yes. Sir, firstly, we continue to have great confidence in the execution of our team because you have clearly had that in the past. And this question is coming from that thought process because we -- 2 years of gestation is very normal for any business to go to a new all-time high. And we have been able to go new all-time high on profits again and again with sustainable growth. So the question really is, the numbers actually come in after the success the team has witnessed on your products and everything else. Before that next level of our transformation starts showing in the numbers, what is it that you would want us to look out for in the business?

Okay. I'll put it this way. I have not been traveling for the last 5 years. And I fixed my travel on Sunday. After 5 years, I'm traveling actually outside the country. So I'm basically the person who actually used to be in the market, whatever little creation I was able to do it, I did. Afterwards, my sons have taken over, along with the professionals. Now, I sincerely feel South America and China are -- in addition to U.S., are going to be the destination for our prosperity. See, initially, we did more of outsourcing from China and directly exporting the formulation. Now, we will go there and find out some start-up companies or medium-sized companies, especially into the most important areas of biosimilar and then peptide areas and then products which are always in scarcity in the area of actually blood products, see how exactly to go for a joint venture, I'll look at it there. So this is the time which I feel is going to open the floodgate for us to open up a second revenue stream. It may take 1, 2 years. But again, we are 100% sure we will make it. So this is how one has to take it rather than looking at it actually on a quarter-on-quarter basis or 1 year or 2 years. This one, we can guarantee you that we will do extremely well in 3 years from now.

And one of the core philosophies and principles with which Caplin has been able to grow is -- and please correct me here -- is sort of like finding that niche in a market where other people are not really looking at it and then able to sort of like go again and again and like really expand that niche for ourselves so that the competition in itself is not there as much. And with the recent antidiabetic product that you have talked about, it seems like -- in the particular market, it seems like you're following that thought process again. So like where do you see the opportunity right now where other people are not looking?

Okay. I do agree with you. We used to notice the thing which has not been noticed by others. And our journey always used to be in the unknown, unknown. Now what you're asking what is that actually, you will find now. That's what I said. Five years, I have not been traveling outside the country. When I go outside the country, I know actually, I'll be in a position to identify because in 2019, I made 8 to 9 trips actually to a country where we were almost complete -- we came to a final stage of doing something together with one of the biggest companies in that country, $20 billion company. And now, in 5 years, we have not done anything. Of course, 6 months ago, when the COO went to that country and he met the person and he is very keen to meet with us and then do something together. Like that, there are so many companies. Today, if you look at actually the biosimilar companies in China, at least 10x or 12x of actually Indian companies. If we have, let's say, 15, 20 companies, they will have at least 300 companies -- 300, 400 companies. So here, we have to actually change our strategy. We will have to actually look at -- earlier for generics, we went for the big companies like CSPC and others considered as #1 or #2 in the country. Now, for a specialized product, what is important actually is not the size, but the quality. And also, he has to grow, and we would also help him in terms of actually front-end marketing, but also if there is something in the form of other areas if he is interested, we would also [indiscernible]. So we will see the things which is not noticed by the big players. We'll see with the start-ups and the medium-sized company. That's how I will actually fit.

Okay. Do I have permission to ask one more question?

Yes, please.

Sir, Mexico is a key market for us, which is developing, and like diabetes is such a well-known factor of Mexico. So I'm assuming that we won't be doing too much business of that, but that is an assumption. Please help me understand that what is the unknown in Mexico that is making us excited right now?

You see, of course, if you look at companies, especially from India, most of the companies, they don't go to the smaller geographies. That was the time we went there. And we replaced the importer. It was more of a physical risk which, of course, not many companies do it. And then now, we are getting into the bigger geographies where we see big companies already present. But if you look at their business, there are 2 things one will notice. A, mostly they will go to the institution business; B, they will only replace the importer, the way we replaced the importers in smaller geographies. Now, once we go there, we will replace the distributors or wholesalers, which means one level below we have to go and find out who is our target audience and then cater to them. Maybe if you work 2, 3 years, then, of course, as I told you before, it creates the skin in the game. That's the only way we've made it actually in smaller geographies. We will make it the same in the bigger geographies. Mexico is just 1 hour actually by flight from Guatemala. The population of Guatemala is 17 million. That's where we do the maximum business of $48 million to $50 million per year. Then imagine what kind of opportunity will be there actually in Mexico. It takes time, I do agree. But definitely, there is a huge opportunity because culture is same, purchasing power is better, and the population is huge. And then, this is one place where maybe 7 to 8 Indian companies are present. They are all focusing on the tender business where they will get everything in volume. If you look at our business, we don't actually bother about the top line. We've always focused on the bottom line and cash flow. The same thing will happen when we approach actually in this -- when approach to the customer in this market also.

Ladies and gentlemen, we will take that as the last question. I would now like to hand the conference over to the management for closing comments.

Thank you.

Thank you very much once again to everybody. Thank you also to B&K for hosting the call. And we look forward to staying in touch with everyone. Thank you for your time. Thank you.

Thank you. Thanks to all of you. Thank you. Thank you very much.

Thank you. On behalf of Caplin Point Laboratories Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.