Suven Life Sciences Limited (SUVEN.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '20 Earnings Conference Call for Suven Life Sciences and Suven Pharmaceuticals. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Rishab Barar from CDR India. Thank you, and over to you, sir.

Good day, everyone, and thank you for joining us on this call to discuss the Q3 FY '20 earnings for Suven Life Sciences and Suven Pharmaceuticals. We have with us Mr. Venkat Jasti, the Chairman and Managing Director; Mr. Venkatraman Sunder, Vice President, Corporate Affairs; Mr. Subba Rao, the CFO, Suven Pharmaceuticals; and Mr. Mohan Kumar, CFO, Suven Life Sciences. Before we begin, I would like to mention that some statements made in today's discussion may be forward-looking in nature and may involve risks and uncertainties. Documents relating to the company's performance have been mailed to you earlier. I now request Mr. Jasti to share his perspectives on the performance and outlook. Over to you, sir.

Thank you, Rishab. And thank you, everyone, for tuning into this new order of Suven Life Sciences and Suven Pharma. As you know, we metamorphosed from the Suven Pharmaceuticals into Suven Life Sciences way back in 2003. Now we have become again -- come back to Suven Pharmaceuticals and Suven Life Sciences in 2 different divisions. And in this thing and -- Suven Life Sciences will have a very short presentation, in the sense, there's only the drug discovery and development. And as you know, it is only the revenue burning segment of the business, which we now have being separated out from the revenue-generating CRAMS business, so that a different client deal can outline with this based on their risk appetite. In the Suven Life Sciences, I will start with -- because the Suven Pharmaceuticals also will be given answers later. Since we do not have any forum since it's not a listed company, we'll be doing this together this time and -- but next time onwards, it is a separate call. Suven Life Sciences, as you know, we have a big disappointment with respect to the SUVN-502, which we thought based on the safety profile, which is very good for the 568 patients, no death based on the drug. But unfortunately, it did not meet the final endpoint for the desired protocol, which we have worked out. The product -- project is not dead, even though we could not monetize it because the results are not good. But the secondary endpoints, some of the endpoints which we are seeing and now we are dissecting the data, has some positive implications, some other indications. We'll be getting this sorted out within next 45 days to 60 days. And then based on that, would like to go to the agency, the FDA, to go for a separate clinical trial -- separate indication. So that is as far as SUVN-502 is concerned. With respect to the 3031, the narcolepsy, that's excessive daytime sleepiness, the trial is a Phase II. Proof-of-concept trial is undergoing, and we have about close to 20% of the patients are enrolled. Originally, we expected the trial will end before the end of the year, but it looks like now, it may be going to be before the end of this fiscal, that is the '21 March time frame of next year. With respect to the third compound, which is 4010, we are now in the stage -- final stages of finalizing the indications for which we need to go for the clinical trial, and that will be, I think, within another 2 months' time, we'll also finalize that and then only prepare for the Phase II clinical trial. So the other products -- projects that are going and progressing well. As I said, we have 14 molecules as of now in the pipeline. And the monetizing opportunity can happen -- for this, the revenue generation is very vigor in the sense, so it is only the technical services which we do per part of the erstwhile when we are reporting the contract in technical services, some of the -- is also part of that recovery equipment we use and support some of our customers, that would be the only thing that will be there. So hence, not much revenue. It's only revenue burning all these. So the possibility of amortizing can happen earlier. It will be in the second or third quarter of 2021, based on the outcome of these SUVN-G3031, based on the positive results, we're going to monetize it. People have many questions. How are you funding? Until now, Suven brands business is funding this. As you know, we have some cash which is with us. So that will take us for the next 18 months. But we have many things in, what you call, planning for the continuation of the funding for this activity. One part is, it is going to be -- now that it is pure play, this drug discovery program. And the people who has the appetite to align with us, mostly the strategic players, can come into the picture based on the pipeline we have. That's one way of looking at it other than the monetization. The second thing is even asset-based are bringing in a partner is also a possibility, which we have not started the activity yet because now it only just has happened, this bifurcation. And the third thing, you -- I mean if both are not happening, we need to set up a management team in place in U.S.A. and in 2.5 years from now, we'd like to go into the U.S. IPO pursuing neurosciences, which is the only one subsidiary of Suven Life Sciences. So this is the plan which we are progressing. Hopefully, something will happen to all those 3 or 4 activities, which we are thinking can happen to sustain this one. So to tell you, there will not be revenues to report is only the updates, mainly on the progress of the compounds until -- unless the monetization happens other than the activities that we are working on. So as and when there is a activity you will certainly know upfront. So I will leave that there with Suven Life Sciences. Now we will move into Suven Pharmaceuticals, which has been demerged from the Suven Life Sciences. This is many of our shareholders and funds who visited us said that why you are only restricting to yourself to certain part of the activity, why not expand your activity? We are slowly creating the infrastructure to make it to that level. And this is a new company largely not just declined even in the CRAMS itself, as you know, not just the intermediates who will be moving into the APIs also, now that globally the trend is expand the horizon, that means our offerings from certain players who are the long-term vendors for the global pharma. So we can go from not only from the -- in the CRAMS side of the business, not only from the intermediates to the APIs to the even formulation for the early-stage virtual companies and also formulation for the local market for the multinational companies and the regions, rather. So it's -- in addition to that, as you know, we also have specialty chemicals that also we are expanding as we were telling you. And the third thing, which you are knowing that we have a niche ANDA just started a portfolio and now that is going to be also our focus area. So ANDA will be also a focus area. So the volume of business that will be generated will be more or less 3 parts equally, it will have that within a period of 18 months from now. So with that, we are saying now the focus is to expand our horizons and making a development in pharmaceutical solutions provider. So from now onwards, there will not be any segmental reporting like our colleagues in the industry. It will be all pharmaceutical. That's the way we want to do it from now onwards. With respect to the fourth quarter, possibility, as I said last year -- I mean before the con call, 15% to 20% growth will happen during the year. So as you know, it is not the quarter-on-quarter basis. If you see that way, this quarter is less than the last quarter. But overall, we have waited to move close to the last year turnover that the fourth quarter will be similar to the third quarter with 5%, it's better that way. So overall, we'll be giving a 20% to 22% growth compared to last year. And the final -- another question is, what people are asking, what will be the effect of Chinese raw materials? Yes, it will have an effect because even some of these purchase orders which we have placed, the raw materials which are lying in the shipyards also not being shipped out. We will not be knowing until I hope for the 10 days before what is exactly the situation. It will have some disturbances, it'll happen. But if the coronavirus thing is going down, then it will not be much of a problem. Otherwise, you will see -- we are not able to gauge at what level these disruptions can happen. Right now, we're okay. But days from now, we don't know. But this quarter, we are okay. But for the first quarter onwards, we cannot exactly give you the indication. It's a 50-50 chance that we may not have any problems or may have problems, whichever way you look at it. So this is an indication that you need to look at it. And finally, is Suven Pharmaceuticals Limited listing. The listing, we have done our job. We have submitted the things to the stock exchanges, and we are awaiting for their feedback and the -- whatever the requirements which need to be done is only queries, which we will answer within 24 hours. So it's between the SEBI and the stock exchange when this can happen. So it's not in our hand, as you know. So we cannot resolve it. So many people are asking when it's going to be listed. If it's in our hands, I could have told you, but it's not in our hands. So with this, I will stop from here. I'll take questions from you. Thank you, again.

[Operator Instructions] We take the first question from the line of [ Anand Singh ] from Unifi Capital.

Congratulations for a wonderful set of numbers. I have 3 questions. And the first is, there are some media reports that you are planning to sell the CRAMS business. So if you can comment on it as to is there any truth to the rumors? And second question is about the CapEx in the CRAMS business. You indicated that the ambit of activities within the CRAMS business would be widened. So if you can give us a broad sense of -- and the quantum of CapEx over next 1.5, 2 years? And thirdly, with respect to the CRAMS business, as we are planning to increase the activity, what's the plan for the management bandwidth expansion? Have we -- are we planning to add more top C-level executives to kind of take the newer initiatives forward?

Yes. With respect to the media report, this is not the first time it has come. It has come 3 months ago, 2 months ago. These rounds keep going on. And whenever there is somebody because so many funds comes in, so many advisers comes to our offices and somebody just puts one-to-one, I think that we are going for that one. As I said, for the Suven Life Sciences, we have planned out what it is. So there is -- we're not going to talk anything about the rumors. The rumors are rumors. When it happens, we'll certainly let you know beforehand, also with the stock exchanges. With respect to the CapEx, as you know, we've been working on this CapEx, since we have the appointed date as October 1, 2018. Since that time onwards, in order for us to expand our horizons the CapEx is being spent and additional block is being built in the Suryapet, which will be operational by the end of the year. And we have done the special OEL facility in Pashamylaram, which has come into operations now. And also, we are expanding with our formulation manufacturing site and -- which will come into the picture before the end of the year, too. By the time it is finished we should have 1 or 2 ANDAs approved so that we can produce and sell those things too. So this is the way it is happening. With respect to the broadband and the management team, yes. So we are looking for a senior executive at the COO level, which will be, maybe, hopefully within the next 3 to 4 months, it can happen.

Sir, one accounting query. What would be the book value of Suven Life Sciences at the end of December 2019, book value in absolute crores?

Book value of this Suven Life Sciences, if you really look at it, actually, when the net effect was separated out in demerger for INR 457 crores, the same thing -- of which the money what we spent close to about another INR 100 crores happened since then actually. The balance will be the total net worth as of now, that's what it is, that's it.

Okay. So about INR 350 crore is net worth?

Yes.

Next question is from the line of Aditya Khemka from DSP Mutual Fund.

Sir, if I look at the gross margins of the Suven Pharma business, so the question is pertaining to Suven Pharma, so we have now almost 6 quarters of data. So the gross margin tend to change from 66% to 78%, 79% sort of a range. What is such a wide -- why is there such a wide variability in gross margins from quarter-to-quarter?

As you know, we do not have a stop and sale item, which we do not do day in, day out, the same item, right? We are in a mix and match kind of business, depending on the nature of the product and the values keep changing. High-value, low-volume product and low -- I mean the low value, high-volume products also will be a mix. So this keeps changing. So you cannot guide because it's not having the same products made day in, day out so that there will not be any change in the gross margins. So this keeps changing depending on the specialty of the product and the stage where it is and the complexity of the projects, so we price differently.

Right. And secondly, you used to give your breakup of revenues on base CRAMS, specialty chemicals, commercial products, CTS services. Could we have that breakup for the current quarter as well, please?

No. As I said in the initial remark, we are dispensing away in this new order because now we are going into various activities. And since that's not giving a meaningful -- the numbers are not giving meaningful results, we are dispensing away with that. We are going to give you total revenue-based activity.

Okay. Fair enough. And on your cost side, so you do not report any R&D expenses further. So in the CRAMS business to develop the intermediate or the API, whatever cost you incur which is more like R&D only, but that cost is included in other expenses now?

No. No. Actually, if you remember, all the time, except the human cost, when we have 35 to 80, whatever it is...

Weighted deduction.

Weighted deduction, all the raw material cost is already charged to the CRAMS projects. Only the human cost we did not charge, that we have taken into this 35, 80. That's why you are seeing the R&D. Since the R&D weighted average deduction will not happen in this one, it has stayed with the Suven Life Sciences, this human cost also, we added to the...

Employee cost.

Employee cost, regular employee costs rather than the R&D cost. That's the only difference. And all the R&D expenses so far, other than the development of our ANDAs where the R&D will be there, there will be some -- there -- they can be capitalized when they mature into things.

Understood. And sir, our income from associates is largely related to the Shore Pharma Holding of Rising Pharma Holdings, right?

Yes. Yes.

Yes.

And if I see the number from the income from associates, again, quarter-to-quarter, I think first quarter was INR 17 crores, second quarter is INR 4 crores and the third quarter is INR 6 crores. It's again a very variable number. Why is such a variability in that earning revenue stream as well?

In the first quarter, it is mainly because of the inventory...

The gain of the inventory...

Inventory...

Acquired from the bankruptcy court...

From the bankruptcy court. Afterwards it is -- then afterwards the expenses growth because we need to bring back the businesses. So I think you will see -- you need to give us another couple of quarters before you see a ramp-up of the margins.

Right. And our stake in Shore Pharma is 30%, right?

25%.

25%.

25%. Okay. One last question.

Rising...

Sorry, go ahead, sir.

Rising Holdings.

Rising Holdings, right? And one last question. What is your capital expenditure budget for the full year of FY '20 and '21 for Suven Pharma?

The capital expenditure total is about INR 320 crores, of which we already spent about INR 160 crores. And the balance INR 150 crores will be spent most likely by this year.

Another 12 months, before 12 months...

Another 12 months.

So INR 150 crores is already incurred in FY '20 and you will close FY '20, closer to INR 175 crores, INR 180 crores?

Yes.

And then the following year, you will be doing another INR 125 crores, INR 150 crores?

No, out of INR 120 crores, we already spent about INR 160 crores as of now. And before the end of this year, we'll be spending balance amount.

Okay. And then FY '21, that is the next year, how much will be your CapEx budget totally?

As of now, other than the replacement CapEx of INR 50 crores, nothing is planned.

Nothing new planned. So where is our capacity utilization today in terms of the business?

Capacity utilization is always 100% because the mix and match kind of a product. So not all the equipments are utilized as well at the same time, but not -- some of them are -- or whatever -- not -- I mean, available, cannot be used for full product, unless we could have a single product going day in, day out, then the capacity utilization can be much more easier to tap. But here, this being somewhere 6 to 7 products are changed for month-to-month, it's very difficult. At any given point of time, it is 100% occupied, in the sense, not physically, but otherwise, it's occupied.

And sir, in your opening remarks, you made a comment about the fourth quarter outlook for Suven Pharma. I just couldn't hear you very clearly. Could you repeat that one?

I said it will be in the same range as third quarter. It's 5% to 10% this way or that way as of now. Last minute, so we don't know when the last shipments will go out depending on the 1 or 2 raw materials that is supposed to come also which they roll.

[Operator Instructions] Next question is from the line of Ashish Kacholia from Lucky Investment.

My question is when we go into the manufacturing of generic products, would this not lead to a conflict with our CRAMS customers, the innovators, because they are pretty guarded about doing business with generic companies? So your thoughts on this?

No, that is a myth. There is nothing like you're not going and competing with their own product or anything like that. This is, as I said, a niche ANDA is what we are going to do that -- at the back end of the things or NDAs, we'll be doing it, and what we are working with innovators and what we are trying to do with the generics are not going to conflict. That is our understanding with the way things -- 5 years we have been working on this and nobody has any questions. That's why we are moving forward. Because everybody knows about that. Everybody knows about that. As a matter of fact, some of them are even auditing our formulations or future opportunities for them to outsource the manufacturing at whatever cost development.

Okay. And sir, what are you seeing as the growth over the next 2, 3 years for the Suven Pharma business?

I mean we are now heading into the new direction. Right now, we say 15% to 20% growth. But when the activities in the ANDAs and even our infrastructure comes into the picture, I think '21 onwards, it will be better growth. Right now, for the next year, it will be 15% to 20% growth.

Okay. And what do you see as the margin profile, given that we're now going to have a generics component in our business? Will the gross margins and the EBITDA margins come up sharply because we were one of the highest margin companies in the sector?

Yes, because we are not going to sell it to somebody else and it's only on the profit-sharing basis, so the margin profile will be similar to what we are enjoying now.

We take the next question from the line of Ankush Agrawal from Stallion Asset Management.

Just a couple of questions. Firstly, can you give a number on the debt and cash status on the Suven Pharma and Suven Life Sciences as well? Secondly, in a recent interview you mentioned that post the demerger, you will be looking for a strategic investor for the CRAMS side of the business as well. So can you give some comment on that side?

As far as the debt of CRAMS business is concerned, actually, it's only the working capital, what we have right now. That's about INR 30 crores to INR 35 crores.

INR 33 crores.

Yes. Other than that, we don't have any long-term debt in Suven Pharmaceutical. Suven Life Sciences, we don't have any debt other than a small debt of what we have taken from DST, Department of Science and Technology of assets. It's about INR 2.5 crores. That's a very minor one.

Okay. And the cash?

What was the other question you had, actually?

So on cash as well on the Suven Pharma and Suven Life Science?

Suven Life Sciences, yes, we have put our quota of cash, it's about INR 180 crores. And Suven Pharmaceuticals, we have close to about INR 230 crores -- INR 213 crores.

All right. And secondly, on the strategic investor for the CRAMS side of the business?

What I said is, I think when somebody asked me why this, because I said if some strategic investor wants to come in, they don't want to come in, in a mixed bag. And I said we don't want to come in where an expense is being done on the [indiscernible] R&D. That's what I said. So the possibility of attracting a strategic investor, this demerger will be helpful, but I did say that we are going to look for a strategic investor.

All right. So if I can squeeze just one...

I mean we certainly...

Evaluate.

Evaluate certainly.

All right. And sir, if I can just squeeze just one more question. Can you give some color on the status of Rising Pharma? How the business is doing over there?

Yes. Yes. We left that...

First 8 months, we made profit. So it must be doing good, right?

Yes.

So you had time for that. And I think things will go into the right direction.

We take the next question from the line of [ Ranveer Singh ] from Renaissance Investment.

I'm [ Ranveer ] from Sunidhi Securities.

Sir, this is the operator. I'm sorry to interrupt. Requesting you to please speak a bit louder. Sir, your questions are not audible.

Yes. It's audible now?

Yes.

So my question relates to this revenue we see in Suven Life Science. Can you help me reconcile it, which part of business is actually coming in this Suven Life Science?

The revenue in Suven Life Sciences comprised of 2 parts. One is the contract technical services. The other one is the interest income on the cash that has been kept for the Suven Life Sciences.

So erstwhile, what we used to report on the technical services is coming in this Suven Life Science?

Not all of it. Part of it. Part of it.

And drug discovery services, part of drug discovery services are also coming in this...

Yes, that's what it is...

That is obviously...

Both one and the same, technical services is part of the drug discovery only.

The number in 2018 has been around INR 49 crore in drug discovery services as reported.

No, no, no. That is in contract technical services, all put together.

In 2018, when you're talking about, it is a combined entity when it was having it, actually. And now post the separation, if you really look at it actually, it is different.

It will have both. Both companies will have the same services offering, depending on the nature of the product -- I mean nature of the equipment it use and who is the customer and it's -- either it's close to Suven Pharma or it's goes to the Suven Life Sciences.

Okay. So roughly, that 40 -- INR 50 crore roughly we reported under services segment last year in FY '19?

In the drug discovery, it's only less than INR 5 crores all the time.

So should I take this 50% of -- roughly 50% of it is in this CRAMS -- in the Suven Life Sciences.

No. More, more.

No, it is more, actually.

Suven Life Sciences, you'll have a very nominal. You don't have to -- it's not -- very nominal, less than INR 5 crores a year, INR 5 crores to INR 6 crores a year.

And that INR 5 crore is coming from services only, that technical services only?

Right, right, right.

Okay. Fine. And when we list this Suven Pharma, then in Suven Pharma, we will be reporting the CRAMS and the commercial suppliers separately, right?

No. We are reporting as a single segment.

Okay. Okay. Fine. And when we are expecting to get it listed?

Hey, it's anybody guess. We have submitted all our documents. It's only the NSE, BSE and the SEBI, which has to give us the clearance.

We take the next question from the line of Dipan Mehta from Elixir Equities.

Sir, congratulations on very good set of numbers and demerger. My question is relating to Rising Pharma. If you could just refresh our memory, what is Suven Pharma's holding in Rising Pharma?

25%.

Okay. And will there be any -- I mean, related-party transactions between Rising Pharma and Suven Pharma, when you eventually start getting into the generics space because they are -- they have very stronger generics space from what I understand?

Yes, there will be because we already had some developmental agreements with Rising Pharma even before we bought into this company. Now that this has come into the picture, anything the new that -- because when once ANDA is developed and the market through them, then it will be a related-party transaction. And when that comes in, it will be reported.

Okay. And last question, sir, is regarding related-party transaction between Suven Pharma and Suven Life Sciences if you could just highlight those related-party transactions? And has Suven Pharma given any guarantees or -- I mean in the event of Suven Life Sciences balance sheet deteriorating for the risk it takes, is there any fallback or any new liability coming on to Suven Pharmaceuticals because of that?

Okay. To be -- for everybody's clarity, it has nothing to do with -- anything to do between the 2 companies. They are 2 independent companies, even if it is -- there is no guarantees given by Suven Life Sciences. As a matter of fact, Suven Life Sciences is borne out of Suven Pharma, okay? What you call the related-party transactions will be there, 2 different types. One, the facilities we are to lease it out because all these facilities, except one piece of land and a small building, has gone to Suven Life Sciences. All other infrastructures like manufacturing sites and R&D sites, everything has gone to the Suven Pharma. So there was a lease agreement in place for the space that is leased out to Suven Life Sciences effective January 9. So that is a related-party transaction. In addition to that, there are certain activities conducted by the Suven Life Sciences for Suven Pharma for -- based on their equipment availability. We don't want to duplicate the equipments. So that will be on a arms-length basis. Similarly, Suven Life Sciences will be doing some activities like formulation manufacturing for them and all those kind of stuff for the Life Sciences on a pre-agreed terms and conditions. And this will be a related-party transaction. These are the services for one to each other will be recorded and also lease agreement will be recorded as well.

So there will be significant related-party transaction between the 2 companies because of manufacturing and sharing of premises, sharing of laboratory equipment...

Yes. Yes. I mean a significant advantage is there are 2 parts. As I said, the lease is one part. That's a regular ongoing thing. And the services is the second part. Services, you don't need all the time on the manufacturing because unless the services happen, there is -- a requirement will not come into the picture. Only in the specific equipment, which Life Sciences have if the pharma don't have, they will use their equipment and whatever the Life Sciences are charging to their customers, it will be given at a special pricing arrangement. Similarly, Suven Pharma will be doing, which is specific then it will be a related-party transaction. If you say, the number of activities, yes, it may be real time 15 per month.

Okay, sir. And any timeline for Suven Pharma listing? Is it weeks or months or quarters? I mean what is your merchant-venturer...

I think if somebody from the business can go and tell the SEBI and these stock exchanges that we're waiting since a long time for the answer, that would be great because I cannot influence them. I only did what I can do.

We take the next question from the line of Rohan Advant from Multi-Act.

Yes. Sir, my first question was on the interest expense that we've recorded in Suven Pharma of INR 7.6 crores. What does that pertain to, sir?

Working capital, and we have -- at Suven Pharma, we have a debt, right? We have working capital.

Sir, but the debt amount that you gave was quite low, around INR 32 crores, right? So INR 7.6 crores of interest, how is that -- that I couldn't add up?

When the demerger taken place, there is -- cash is allocated for Suven Life Sciences. And the cash is still with the Suven Pharma, which is obligated to Suven Life Sciences and which it has to be given a certain percentage of, which is agreed between both. That is the one which is the bulk of the interest cost.

Okay. Sir, what interest is being charged? And how much is that cash, sir?

It's 8%.

Okay. On INR 180 crores, INR 200 crores?

Yes.

It cannot be like INR 180 crores, INR 200 crores. It's just an average, diminishing balances.

Okay. Okay. Sir and second question was on the -- sir, now you said that you are not giving the commercial breakup separately. But in the past, what we've understood is that in a year where you have commercial supplies that have grown very fast, it is difficult to grow from that base in the year next. But you are also saying FY '21, you think you can do 15%, 20%. So I just wanted to understand, this has been a very good commercial year for you, at least based on the first 6 months and your guidance then, that we'll do INR 180 crores. So in spite of that headwind, do you think FY '21, we can grow at 15%, 20%, sir?

That's what our gut feeling is. And as and when the changes happen, we will certainly inform you. But as of today, there is a gut feeling. Because we're not having full visibility and have the retroactive, what you call, the results. This is what our guidance.

Sir, and lastly, on Shore Pharma. Sir, our profit from associates, which is INR 6.4 crores this quarter, which would mean INR 25 crores for the full company. So what revenues would be this profit generated on? And what is that percentage? And where you can take this to in the next 12 to 24 months?

See, I cannot take that company to somewhere else. I am not running that company. As I said, we are only investing in that one. And in the distribution company, I think it will be only 8% to 10% maximum product margins.

Sir, so this INR 25 crores would be on what revenue, sir?

So this is a private company. This is a -- a revenue share is given to us. We are not getting this into our balance sheet. It's only reporting requirement, only when they distribute as a dividend, then we get into our books.

Okay, sir. Sir, just one thing I wanted to understand, you gave cash of Suven Life of INR 213 crores and INR 180 crores for Suven Pharma. Can you -- because our cash was INR 300 crores beginning of the year, and we spent $35 million on Shore acquisition. And we still seem to have INR 400 crores of cash roughly. So I couldn't understand how the cash...

We don't have INR 400 crores. There is a liability for Suven Pharma to pay to Suven Life Sciences, that is still there, actually, right? So when you really net it off, actually it will be reduced.

I got that, sir. That was the confusion I had.

We take the next question from the line of Amar Mourya from AlfAccurate Advisors.

Yes. So firstly, on the CapEx. For this INR 230 crores CapEx which we are doing, this will be for the, I mean, specialty or for the intermediates or for the API? And how much the capacity will increase from the -- what level to what level?

As far as the capacity is concerned, it is not estimated because this is multiple products, so they cannot tell what is the capacity. What we are telling is capacity in terms of the reactor volumes and whatever that is. And these activities, not only for the intermediate and specialty chemicals but also for formulations and the API, all put together.

Okay. So basically, this INR 320 crores will expand your capacity by 50%? Or -- and how do we see the utilization in this trend?

[indiscernible] capacity and capacity. I am not looking into the capacity. We are only increasing the reactor capacities, not by the product capacity. Product capacity, I can tell. If I'm making a generic product, day in, day out, if I am increasing from 10 tons to 15 tons, I can tell. But we're navigating a product from the outside and which is only 500 kilos, I may need big reactors, 10 of them, which we will be using only for 3 months or 2 months or 1 quarter or whatever it is. It would impossible for us to give you a capacity-based activity. What we can tell you is, the reactors which we are putting is about 300-kiloliter capacity reactors.

Okay. Okay. So basically what I can understand here is that then in your case, yours would be a batch production. So then in that case, like how much of the -- this INR 320 crores can generate a sales versus turnover ratio? So peak sales versus turnover.

No, no, no. That is also -- if you see last 15 years, you never can be able to gauge what is the z, turnover ratio comes to the capacities what we have. It is only the value that comes out of this. I may be doing only $10 value product out of this, but I may be making $6 out of that for one product and $3 out of that product. I am not looking at the volume of the business, but it is the value of the business. That's the number of mix-and-match products that I can take up today at a given point of time so that my customer will be serviced. When the opportune happens, then actually, then you will expand further one more line and don't need to put it full block.

Okay. Okay. So basically, sir, your commercial, is it fair to understand then in that case, your commercial supply capacity is fully occupied at 100%?

No, because, as you know, commercial comes and goes after one product comes [indiscernible] and after that for 18 months there will not be anything. At that time we'll be doing the mix-and-match products. So there's nothing like a commercial product or a dedicated product. Other than the specialty chemicals, nothing is dedicated. Everything is a mix and match.

Okay. Okay. And then, sir, specialty chemical, do you have the room to grow for the next year in terms of the capacity?

Yes, if we get the business, certainly sir.

Okay, okay, okay. So basically, sir, what I was trying to understand, I think the other participant also has asked. This 20% growth revenue guidance which you are giving, I mean we -- since our business is like this, we never have a visibility in terms of that. So what gives you confidence of this 20% guidance or 15% guidance for the next year?

First of all, you're asking the same question every time, not you I mean, everybody is asking me some kind of a guidance. And I'm giving you guidance based on my past performance and the gut feeling what we have and the number of projects that are there, there is a possibility that can happen. Sometimes, it may not happen also. But this is in general comment that we give because of the expanded activities we are doing. I used to tell you 10% to 15%. But I have now gone on record as saying now 15% to 20%, or even 20%, because of the expanded activities, expanded capacities, that too after 1 year from now.

Okay. Okay. Perfect. And sir, one last one. What would be the tax rate for the next year?

Same thing, I guess. What is that?

25%.

For Suven Pharma.

New tax rate.

25%.

25%. Okay.

Next question is from the line of [ Ankit Gupta from Bamboo Capital ].

Sir, just wanted to know what is -- what drove the growth for our revenue this quarter? Because you gave a guidance of INR 180 crores of commercial grants for the full year. And in H1 itself, you have done close to INR 140 crores. So INR 40 crore incremental revenue from commercial CRAMS for Q3 and Q4. So just if you can give us a broad highlight of what led to higher growth in revenues this quarter, specialty chemicals, regular or commercial CRAMS?

Again, you are coming back with the same thing, like asking for a segmented information, which we said we are going to discuss with [indiscernible], right? We are going to [indiscernible].

In general, all the activities has contributed to the -- compared to last quarter, it's less now. So that's why this average is coming because when I say something, oh, then you're going to make this data this and that and which leads to the...

People are giving unnecessary estimates.

That's why we are going in a total revenue-based activity.

Sure. But will you give us the breakup of the number of molecules which were in Phase I, Phase II, Phase III and commercial?

Anyway that does not give you any value because we are not giving you -- if you see to the total -- out of the total, you take out all these commercial and specialty and all, it's not giving you that much value with the number of products that are on hand. Moreover as we go forward with the number of activities increasing, the number of that will be -- when the other number increases, this number...

May I just say [indiscernible]?

So that's why we are not also giving that part.

Okay. But sir, one question on commercial CRAMS. Like we had 4 molecules, which were in the commercial stage. So have we got any more molecule in commercial stage now? Or we had Phase III -- one molecule in Phase III. So any movement in that, which is driving the growth for the company?

Not at this time.

We take the next question from the line of Rahul Veera from Abakkus Asset Management.

Sir, just wanted to understand, what is the long-term strategy for Rising Pharma, like 3 years further down the line?

I think I want to give end to this question. I just said, this is an investment we have done. We are not running that business. That's a private company. I cannot give their -- this thing. I only can report whatever their share that comes to us. And I can only take the money whenever that -- a dividend is given to us. So I hope people will refrain from asking me about the way how do I do the business with Rising Pharma when I can't do anything with that because somebody else is doing it. I am not an active part of it rather than...

That's is an unlisted company.

So I think it is clear to everyone that we are not running that business.