Dishman Carbogen Amcis Limited (DCAL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Dishman Carbogen Amcis Limited Q4 FY '20 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Arpit Vyas. Thank you, and over to you, sir.

Thank you. Thank you, moderator. Dear all, welcome to the yearly con call of Dishman Carbogen Amcis Limited. It has been a while since all the global pandemics have been going on since COVID, and we sincerely hope that no family members or yourselves have been affected negatively by this tremendous pandemic. And we wish you all the health and support and strength in case you do have faced such failures. And with that, I would like to bring to notice important facts of the company, and then post that, the numbers and the business strategies could be guided to you by Mark, our global CEO, and Harshil, our global CFO. In the recent events, you might have heard that we have faced a failure of EDQM. This failure is of the company -- of the people of the company who the management entrusted in, and that has allowed us to kind of create a massive reorganization in the company for the betterment to create a kind of a singularity of all our global assets and wealth in terms of people to come together and face this issue head on, for which reason, we have been able to create a global task force where we have taken competent quality officers from each and every location that we are present in and come together as a team to help fight this cause and to make sure that we come out to be better and stronger, not just, but to even raise the bar of quality for the entire country as it is looked at in terms of the pharmaceutical segment. This is what we believe in, and we will make sure that it happens. The change in the organization has allowed us to pick the right people who are actually caring for the company and to escalate them to the level where they are going to help us in the next phase of our journey to become the best possible pharmaceutical company of the country, which is our vision. And this is we are confident of achieving. And for that reason, we would request your trust and support in us, as you have always have in difficult times as well as in good times. These are difficult times. We -- and we hope that you would extend your support once again. And rest assured, your trust in us will not be going in vein. The numbers of the last year have been very good. This year, we would not be able to say the same. We don't know exactly what the exact guidance is going to be. But we, of course, because of the recent EDQM failures, we expect a little bit of downfall happening. But at the same time, what we have been able to do is to focus on the customers who are affected and did all the risk assessment, and we are glad to inform that our major customer, the risk assessment that we have done are not impacted and have qualified us to be okay even with the EDQM failures. So the major part of the business, which is the CRAMS segment, be affected in the matter that it might have been perceived. What will be affected is the Marketable Molecules segment, which is our own IP of the CEPs, which is constituting to not more than about $15 million worth of business, which we are hoping to grow had we not had the failure. But as of now, that will have to wait. But it has, as I said earlier, allowed us to come together as a team globally, which we always expected to do. We are very confident of the business going forward. We are very confident of the pipeline going forward. Our focus and strength is into innovation, which is, of course, going to take time. And we expect your true support in that matter. If you have any questions, we'll be more than happy to answer without a doubt. With that, we would like to move -- I would like Mark to add a few comments.

Thanks, Arpit. First of all, I echo Arpit's sentiments. We sincerely hope that you and your families have not been affected by this COVID pandemic, and we wish you all the best health. So as Arpit explained, we have Phase II challenges in this period of time since we last spoke to you in January. The first one, of course, is the COVID-19 pandemic, which has affected pretty much every company in every country in the world in some way, shape or form. We were fortunate during the late part of February to take a call in Europe where we could see that potentially there were some issues coming out of China with COVID, and we put some plans in place, which enabled us to keep operations running across our European assets, even during the worst time. So we've been able to maintain output at a pretty high level by being able to send people home who are able to work from home, setting them up in home offices. So our IT teams have been able to do that very efficiently. And that has provided space in our building, so that we can maintain some level of social distancing. As a result of that, in Europe, we have only had one case of COVID-19. And that person was actually a project manager who lived and worked from home in Italy, and he actually lives right in the epicenter of the Italian breakout. So he didn't catch that as part of the business. He caught that from his leisure time. So from a European perspective, we have managed. It's not been easy, but we have been able to maintain a reasonable level of output, and we anticipate as Switzerland, France and Holland start to emerge from the COVID crisis and start to relax restrictions that we should be able to get back to our normal levels of service. At the Indian level, we've had the same principles of isolation. The Indian lockdown, especially in Gujarat, has been very tough and has restricted the -- heavily restricted the movement of people from their homes to their places of work and have meant that we require special permits and documentation. We have been able to do that, but that has impacted our output. Coupled with that is we have had the events of the EDQM audit, which, as Arpit said, impacted both our Marketed Molecules sector, which also included our -- number of our small volume generics that we market. We have, over the last 6 weeks, got our global task force working across the board. We have completed all risk assessments for all customers. And to date, we have no product recalls. Our key customers, we have obviously prioritized heavily to ensure that supply of material to the market continues, and we've been successful in doing that. The long-term impact will be difficult to assess from a market perspective, but, internally, coupled with the reorganization of the business in India, which Arpit mentioned, will enable us to get back on a steady footing and be able to grow again, but that will take a little bit of time. With that, I'm obviously quite happy to give you updates on various things, including ADC's technology and all the -- all those other things that we talk about. Our operations in China were not affected at all, thankfully. This happened over Chinese New Year, the COVID outbreak in China. Fortunately, we were doing some refurbishments and modifications in the facility. And most people did not go home for Chinese New Year. Therefore, they stayed in the Shanghai area isolated in our facilities. And we have had not 1 case of COVID-19 in our organization in Shanghai as a result of people not going back home over Chinese New Year. With that, I'd like to hand over to Harshil Dalal, our CFO, who can talk you through the summary of the numbers. Over to you, Harshil. Thank you very much.

Thank you very much, Mark. Very good afternoon, evening to everybody. Like Arpit and Mark, I hope -- I'd like to say that I hope that all of your families, everybody is doing well in the COVID-19 situation, and nobody is impacted. With that, getting straight to the numbers, I'm sure you would have had a chance to go through it. But for the benefit of everybody, I'll just run through the numbers really quickly and mention the key highlights. Our total revenue, including the operating income for the quarter, was INR 512 crores as compared to INR 650 crores in the comparable quarter last year. As all of you would remember, last year, in Q4, it was an exceptional quarter for us, where bulk of the sales for the full financial year happened in the last quarter. Most of the commercial supplies went out in the last quarter. And hence, the quarterly sales was extremely high. This year, what we witnessed was that the sales was more or less evenly spread across all the 4 quarters. Though we were expecting certain additional commercial sales to go out in the last quarter, there is kind of step forward into the first quarter and Q2 because of the customer requirements as well as because of the COVID-19. So that was on the revenue. As far as our EBITDA for the quarter is concerned, it was at 26%. So we did an EBITDA of about INR 132 crores as compared to INR 169 crores in the comparable quarter, which again equates to about 26%. The profit before tax was about INR 60 crores as compared to INR 105 crores in the comparable quarter last year. One other important thing that I wanted to mention was the other operating income for the quarter. So last year, if you recall, we had a total foreign exchange realized gain sitting in the other operating income for the year at INR 112 crores, of which INR 38 crores was booked in the last quarter of the financial year 2019. As compared to that, this year, the total realized foreign exchange gain for the full financial year was INR 43 crores as part of the other operating income, and for the quarter it was about INR 8 crores. So there's a definite impact of the foreign exchange realized gains on the EBITDA as well as on the profit before tax. The tax for the quarter was -- and again, it's exceptional. The tax for the quarter is a negative INR 12 crores. The reason for that is that we had a write-back of certain amount of provision of taxes that was done in the earlier years, number one. Number two, we were writing off the deferred tax asset in the Shanghai operations until December 2019. The good thing is that all of the deferred tax asset has been written off. And hence, starting Q1 of the current calendar year or Q4 of financial year 2020, there will be no additional deferred tax assets that would be written off in Shanghai. We also -- under the new tax regime, which is applicable from the 1st of January 2020 in Switzerland, the effective tax rate goes down from 20% to now about 18%. And in a staggared way that is expected to go down to about 13.5% as per the new CTR III guidelines, which have been enacted from 1st of January 2020. So we should see our effective tax rates remaining around 25% as compared to about 31%, 32% that we have seen till now. In India, we are yet to take a call on whether to go for the new tax regime or remain under the earlier one. Obviously, if you go under the new tax regime, the effective tax rate in India as well would be about 25%. So our reported profit after tax for the full financial year or for the quarter ended March 31, 2020, was INR 72 crores as compared to INR 75.7 crores in the comparable quarter last year. As far as the full year figures are concerned, our revenue probably from sales was about INR 1,973 crores as compared to INR 1,919 crores in the comparable year last year. The total revenue, including the operating income, this year for FY '20 was INR 2,044 crores as compared to INR 2,058 crores. The EBITDA this year was INR 522 crores as compared to INR 552 crores. So if you take out the impact of the realized foreign exchange gain, that is to the tune of about INR 70 crores, the net differential, then the EBITDA actually grew this year as compared to the last financial year. The depreciation for the year was much higher. So the depreciation was INR 282 crores as compared to INR 240 crores in the last financial year. This is -- along with the finance cost is on account of the implementation of IFRS 16 from 1st of April 2019, wherein under the new standards for leases, we need to recognize the lease asset and a lease liability and the rental expenditure gets classified as depreciation and finance costs based upon the net present value. The finance cost of INR 62 crores for the year includes of a foreign exchange loss of about INR 9.18 crores. This loss in the last financial year was about INR 7.79 crores. So this is -- this largely represents the mark-to-market impact on account of the foreign exchange rate movement to the extent of the rupee cost of borrowing on our overall borrowings. The profit before tax for the year was INR 222 crores as compared to INR 308 crores for the financial year 2019. The tax expense for the year -- the effective tax rate was 19% as compared to 32% in the last financial year. This was largely on account of the reasons that I mentioned, because of which our profit after tax for the full financial year was INR 180 crores as compared to INR 210 crores in financial year '19. So overall, this was the financial highlights for the year and the quarter. Certain other things that I wanted to mention was -- were in regards to the debt figures. So on net debt as of 31st March 2019 was about $120 million. Because all of our borrowings is in foreign currency, it would be better to look at it in foreign currency terms. So in U.S. dollar terms, it was USD 120 million as of March 31, 2019. As compared to that as of March 31, 2020, the net debt figure is $100 million. So there is a reduction in the net debt figure by about $20 million in the full financial year. As far as our buyback is concerned, which was announced in January, we have completed about 50% of the total buyback size. So [Technical Difficulty] buyback has already been completed as of now. As far as our balance sheet is concerned, certain key highlights. If you look at it, the trade receivables have increased as compared to the last financial year. The major reason for the increase in the receivables is because of the unbilled debtors. So as you know, we have a huge amount of service revenue that we book at Carbogen Amcis AG. Because of which there is an unbilled debtor, which sits in the balance sheet because the revenue is booked upon the percentage of completion method. Our overall investments, cash and cash equivalents, they keep on growing every year. So we have been generating good amount of free cash flow every year. The capital expenditure that was actually incurred in the last financial year was close to about $42 million. So this capital expenditure was largely on account of the maintenance CapEx across all of our plants, certain additional capital expenditure on account of the growth CapEx that we did in Switzerland for the new building as well as in India for the soft gel capsules plant. So this was more or less the financial highlights for the year and the quarter ended March 31, 2020. With that, I'll hand over the call to Mr. Sanjay Majmudar, our Independent Director.

Good afternoon, everyone. And again, of course, first of all, wishing you all of you a good health, and prayers that everything is going to be good. Most of the points are covered, but 2, 3 very quick mention. Arpit, Mark, they all mentioned about EDQM. But as Mark clarified that for most of our long-term customers, the risk audits are over, and there is no big impact that is likely to be felt. Secondly, at Bavla plant, I think Dishman has aggressively started manufacturing a special range of hand sanitizers and disinfectants, which has been a forte of Dishman. And that plant is now operating 24/7 with a very high-quality disinfectant going in the market, which is also helping to some extent containment of this spread everywhere in the world, including in India. Thirdly, an obvious question that if first quarter has been a little bit impacted at Bavla, I think, globally, most of our plants have continued to operate uninterrupted, except, of course, subject to the adjustments and modifications as explained by Mark that social distancing, work-from-home, et cetera. And so overall, we believe -- while it's a bit early for us to give you any guidance, we believe that for this year, at least, if you discount a little bit of underperformance in Bavla, I think still we should not see an overall degrowth, which could be maybe more than -- or around about 10% in FY '21 as compared to FY '20. But as I said, this is just an indication. It's a bit early for us to make any assessment. But overall, I will say that in terms of the number of late Phase III drugs that are in pipeline, the huge opportunity that we see now as an integrated enterprise, multiple plants, single strategy, single marketing focus and a very unique business model, which we have, I think, from a medium to long-term perspective, internally, we continue to remain extremely bullish about the core strengths and opportunities that Dishman is having and is likely to sustain its growth going forward. I think with this, moderator, you can throw the house open for Q&A.

[Operator Instructions] The first question is from the line of Ashwini Agarwal from Ashmore India.

A couple of quick questions. Just Sanjay bhai's last comment regarding a 10% degrowth as a guidance. I mean, I was just thinking about this number because initial comments from Arpit indicated that the EDQM observations would affect the marketing molecules part of the business from Bavla, which is quite small in the overall context. So minus 10% for the aggregate company on a consolidated basis would also indicate some other slow growth in revenues or decline in revenues in some other parts of the business. Is there something else that we need to think about outside of marketing molecules at Bavla?

Sorry, if you think about -- Ashwini, it's Arpit here. If you -- 10% is -- prima facie the Marketable Molecules business is about $15-odd million. And the other degrowth is just on the terms -- if there is at all on the terms of the COVID situation, which did not allow us to ship any material to any of the customers because there was a global lockdown. So that would just go in terms of calculating it within the fiscal year. That would be seen as a degrowth because of the limited time frame. Otherwise, business-wise, there would be no degrowth per se. But if you look at a 2-year scenario, there would not be a degrowth. But if you look -- because of this COVID, when the 3 months, there was a total and complete lockdown, these 3 months, we can never get back.

So -- but that's April, May, June. You're referring to March, April and May, correct? Because June and even most of the manufacturing plants, especially in the pharma space, at least in India started operating pretty much from the middle of April. So which 3 months are you referring to and which geographies are you referring to?

This is mainly to the -- because most of our customers, the non-Marketable Molecules and marketable also, we are 99% export per se. So even when you look at Carbogen Amcis or Netherlands or France, in these complete lockdown, there was nothing that was shipped in the earlier quarters. We tried to mitigate that as much as possible. But there was -- once we see that quarter that has happened, per se, there will be a kind of degrowth because of this COVID situation because of the supply of material was just limited. So there's additional $5 odd million just to be conservative. It might happen. It might not happen.

And Ashwini, I was very clear. This is not a guidance, but this is what we initially internally feel. And I made a qualification statement that going forward, as June and July progresses, we might be able to see what best we can do to make it up. But this is what we internally feel as of now.

This is maximum number that we would like to give you in terms of being preparedness because it is just too early, Ashwini.

Right. Right. Second question is for -- on the 2 new approvals that -- or 2 new products that have gone commercial during the quarter or have received regulatory approval. What are these products? Is it possible for you to think -- to talk about the potential in the current financial year or on a medium-term basis? How should we think about them?

I think, as ever, one of them actually is quite interesting because it's for pneumonia. And one of the collateral impacts of COVID-19 is a rather virulent form of pneumonia, which, in certain subsets of patients, is almost impossible to treat successfully. This drug is actually showing some efficacy in that subset of patients. So that customer is rather keen to get additional commercial supplies this year. The challenge we have, as you know, is that we are very busy in Switzerland at the moment. So we're in discussions with the customer about how we're going to meet his short-term requirements. This wasn't on plan when we had our commercial planning meetings with them. So they need to bring some supplies forward. That could have a positive impact. The other product is an oncology drug and will follow the normal path. So they have stock of material for launch, which we manufactured, and we see what happens in the market. But they're both very, very fresh approvals in the last couple of months.

Okay. And my last question is to Harshil. Harshil, on the balance sheet, I see almost a INR 200 crore increase in your intangibles. What is this on account of? Goodwill specifically.

Yes. So this is just on account of the restatement of the goodwill at the closing exchange rate. So as you know, the U.S. dollar-INR moved significantly to about INR 75.60-odd as of 31st March 2020. So all of the goodwill gets restated at the closing exchange rate. There is no additional goodwill. It is just the restatement.

And the increase of -- it's a very small number, about INR 10-odd crores in other intangible assets. What's that on account of?

So that is again the same thing because the INR 89 crores increased to about INR 97 crores. So that INR 7 crores, INR 8 crores is just on account of the restatement again.

The next question is from the line of Anil Shah from Birla Mutual Fund.

2 questions actually. One, Mark, this is for you and Harshil both. When I look at EBITDA and reduced EBITDA for the foreign exchange gains, which have realized. FY '18 is about INR 426 crores. FY '19 is about INR 438 crores, FY '20 INR 479 crores, but if I adjust for the fact that we had a change in the lease accounting and, hence, the lease cost, which normally come above EBITDA, this time have been pushed into depreciation and, hence, depreciation was higher, I'm assuming that EBITDA was flat, more or less there. Last 3 years our EBITDA is between INR 425 crores to INR 450 crores. Could you please explain what happened? In 3 years, every call, we keep saying that we are in really good shape. And it's great opportunity, great potential. But last 3 years' numbers are in front of you. Would be happy to hear you out.

So Anil, it would not be right to just remove the ForEx component from the other operating income because there will also be a negative ForEx impact on the overall cost structure as well. So as you know, most of our costs are in foreign currency, the largest one being in Switzerland as well as in Netherlands. So...

Harshil, sorry to interrupt, but you yourself just excluded it just to make us clear that last year fourth quarter was too high, $120 million, yes?

Yes. Right.

So I was doing the same thing. Saying you remove the FX out and just see, it's been flattish.

So what I'm trying to explain...

For every other company in terms of...

So what -- Anil bhai, welcome back again after many years. What we are trying to say is that if you remove the ForEx component from the last quarter gain then you have to remove the subsequent impact on the cost as well and then calculate the EBITDA. Because otherwise, you are keeping the EBITDA at a higher cost and removing the ForEx gain, which is showing the flattishness.

I agree to your point that the INR 70 crores, which is the differential in the other operating income, which is probably on account of the ForEx gain, that definitely had an impact on the EBITDA this year. What -- the other impact, which is there on the EBITDA is also on the cost front. So all of the costs, they are also getting restated at the new foreign exchange rate. So I'm not saying that entire INR 70 crore impact is that -- the INR 70 crore impact is there in the EBITDA, but the differential does not represent only the INR 70 crores. It is minus the cost impact as well, which is built into the COGS and the employee expenses as well.

Just for comparison, Anil bhai, if you look at just the Swiss balance sheet or the Swiss cost, the cost of people is about CHF 62 million. Now the problem is that if you reinitiate that in rupees, in 1 year, you would be reinstating that at CHF 68 million, and in the subsequent year, you have to reinitiate that at CHF 78 million, just the Swiss franc.

Right. The other thing is, could you please specify where our gross debt and net debt and where exactly in what currency and which particular entity lie each of these things? Because when I'm looking at the consolidated cash flow that you sent across today, I just don't see -- and pardon me for my ignorance, but I just can't see $20 million of repayment that you're talking about. That $120 million will reduce to $100 million. So could you please give numbers specifically of gross debt at each entity level and in what currency and the cash levels in each entity, so that we come to a number, which is what you're saying? Because as I said, consolidated cash flow, I just can't see the $20 million paid back.

Yes. Sure. So Anil,, right now, I don't have it on hand. We can definitely take it off-line. But just to give you an idea, our total gross debt as of 31st March 2020 was -- in rupee terms was INR 1,056 crores, while the cash and cash equivalents, including the liquid investments that we have, were close to about INR 300 crores, the same figure as of 31st March 2019 the gross debt was about INR 990-odd crores, while the cash and cash equivalents were about INR 200 crores. So these are kind of the broad figures, but I can get you the foreign currency borrowings in each of the territories. Most of our borrowing is in U.S. dollars as well as in Swiss franc, and then we have certain amount of borrowings in euros as well. So largely speaking...

Sure. I would like to have specific numbers for each year.

Sure. No problem. Absolutely fine.

Yes. The third, again, is on the cash flows. It's been 2 consecutive years now. We're seeing an increase in inventory, so that's close to about INR 120 crores if I add both the years back -- if I'm adding both the years, increase in inventory is almost INR 64 crores and INR 58 crores, so it's about INR 120 crores. You already mentioned an increase in trade receivables this year to the tune of about INR 125 crores. The question really is what happened to our working capital? Where are we in terms of working capital, in terms of number of days, et cetera? And going forward, could you just tell us how this will play out?

So most of the increase in the inventory this year is on account of -- as I mentioned, there were certain shipments which could not go out by the end of March. So that is definitely having an impact on the increase in the inventory that you are seeing. And this would be to the tune of close to about $5 million, and that should go out in Q1 or in Q2. So that's on the inventory. On the trade receivables, I mentioned, it's largely on account of the service revenue or the percentage of completion matter that gets deployed. If you see on the liability side as well, the creditors have increased. So the trade payables have increased from INR 195 crores to INR 284 crores. So overall, on an overall working capital cycle, if you see our total current assets, those are about INR 1,800 crores, while our current liabilities are about INR 1,568 crores. One of the important things to understand in our working capital are the advances that we get from our customers. Because for many offices -- or I would say, for all of the development projects, we get a lot of these advances from the customers, and that is what is sitting in our current liabilities as well. So that is already cash that I have received from the customers. So if you see our current liabilities, other current liabilities, those have increased from INR 167 crores to INR 216 crores. So overall, for the full financial year, on a gross basis, the working capital has remained more or less the same as what it was in the last financial year. So there has been not, I would say, an incremental investment in the working capital in the current financial year.

Yes, but we've not seen a massive growth in the top line as well. So working capital from that perspective should not have gone up, right?

Yes, yes, exactly. So there is no increase in the top line. And hence, there is no increase in the overall working capital as well.

Mark, a question to you, Mark, since he's the global CEO. So we've -- in a sense, we've seen our gross block, if I'm correct, again, in the region of about INR 3,500 crores, plus or minus, I don't know how to -- how exactly we want to look at from a growth perspective. But our top line in the last 5 years went from about INR 1,700 crores to INR 2,000 crores. And we continue to do CapEx on a yearly basis. Part of it's maintenance. Part of it's in terms of some growth CapEx, as you mentioned, new building in Switzerland [ kind of around ] and some CapEx in India. Just turnover to sales ratio just doesn't seem -- I mean when do we really start seeing this commercialization of the large bouquet of products that we've been having for, Mark, many years really playing out in terms of manufacturing and the top line growth really starting to come?

Products generally, these commercial products...

Mark, just to clear the first question on the gross block. Actually, the gross block calculation is totally and purely on the account of reinstatement according to the foreign currency, which has moved most of our investments, especially pertaining to India and, of course, abroad which were happening at an exchange rate of the rupee at possibly at INR 50-odd per dollar, which has taken place, and in the new accounting standards have reinstated themselves at the current level. The gross block is increasing because of the accounting standards per se. It is not increasing on the actual investments that were made. I think that needs to be clarified, for sure. Am I right, Harshil bhai?

Yes, yes. That's absolutely right. So last year, we had already done that calculation. So that impact is almost close to about INR 550-odd crores, which was there in the gross block. This year, again, there has been an exchange rate movement by almost close to 8% as compared to the last financial year. So that would be an additional impact, which is sitting in the gross block.

Okay. So in terms of...

Now Mark, you can go ahead.

Yes please, Mark. Could you -- in terms of when do you really see an accelerated revenue...

I'm finding it very difficult to understand. It's very easy.

Yes, it is because we have to convert everything in rupees, and that is the problem where it is an accounting entry rather than the actuality.

Okay. Right. And the other question was about how long it takes for these validated processes to start to grow, yes? Yes. Okay. Yes. So in a general process, we're talking about validation, then you have about 12 months before things start to pick up and we start to see penetration in the market, the customers. Bear in mind, as we've said consistently, these are not our products. We're not in control of the regulatory filings. We're not in control of the marketing of the final products. So what we do is we manufacture the API, we qualify and validate the process. We provide documentation to the customer, and they do their filings. So generally, we see about a 12 to 18-month lag before commercial volumes start to come through. Most customers utilize validated compounds as stock to do their launch volumes, okay? And normally, the FDA is happy with that as long as the validations are straightforward and they don't have too many deviations. So this is what customers tend to do. And they build stock so that they can test the market without committing to large volume supplies. However, in that period of time, we're negotiating supply agreements with customers. Now bear in mind that a lot of the products that we're doing in Switzerland, we are not chasing 50, 60, 100, 300 tonne products because we don't have the capability to manufacture that. What we're chasing is high value, low volume products. So on average, the price per kilo is, by degrees, 10x what you would expect of a very large volume product, a very simple large volume product. So we're not chasing what we call blockbusters. And to be perfectly honest with you, I don't think there will be any more blockbusters. This is all about niche medicine these days. So -- and that's where we play. We play in the high tech, low volume, high-value basis. And if you look at the Carbogen Amcis Swiss boundary, you'll see yet again that there's been another record year. We've never done this much revenue and this much profit before. So what's happening is that our mix of development -- and this is the other factor that we have to keep maintaining. So while we're adding capacity, we've added capacity in development over the last 2 or 3 years, as you know, mostly in high potency development. That development capacity is now being filled. So what we're now looking at is manufacturing small-scale niche manufacturing capacity across the board. So that every time we add capacity in 1 area has a positive effect in the requirement for capacity in another area. So we're looking at an ideal mix. This -- our commercial revenues are around about $60 million a year, and that ratio of around about 35% to 40% commercial to development revenue and then the rest is validation is about the right sort of mix. We know that if that mix works, then we get a fair proportion of things that are validated because a lot of them die. So we're playing this nice edge of mix. If we go to commercial products and we just go to commercial products at about 2 years, they are wonderful numbers. But then we won't have been doing any development work, which means our pipeline is empty. Our pipeline today, as we speak today, is $98 million. We are sitting on $98 million of pipeline. So we're pretty busy. And what's happening is because we've added that additional capacity in development, we filled it. Now we need to provide capacity to take what has been filled and take it to the next scale. So that's the fine line we walk, and we have walked for 25 years in the history of Carbogen Amcis.

Sure. Mark, I think, as far as the development part is concerned at Switzerland, completely understandable. We know this business when we've been investors in this company for a long period of time now. I think the question was more to do with the fact that we were looking at some of those products finally going commercial. And the manufacturing of that moving to the Indian facility or the Indian manufacturing or the China manufacturing? If you're already ready -- the plants are ready and operational.

Yes. And it's still happening. So we're working on products either intermediate, starting materials or even final products, which are being transferred over to India. We've done, I don't know what it is, 15 tech transfers from Switzerland?

Yes. Yes, minimum.

So it is something like 15 tech transfers in the last 10 years since I've been back at Carbogen Amcis and Dishman. So we've done about 15.

We've done a couple in -- for China as well now. But as Mark said under the [ splitting game ].

Yes. And we've got 2 in China because we want to prioritize China as well as an asset when we need to get better utilization. So where we need the volume, which we don't have in Switzerland, then India and China come into play.

But it's just a waiting game as of now and COVID certainly doesn't help. As Mark said, as well, that it is not our IP. It is not our product. So we are not in control of the market. It is dependent on our customers of when they want stock. The validations have happened. And as a thumb rule after validation, that -- which is a stock building, as Mark said, we have to wait for a year. For instance, if you talk about the Janssen product, Bedaquiline, which we completed the validation and they have done the stock building, which is reflecting in the last year of the revenue, they do not want any material for 1 year.

Yes. And we shouldn't forget that the second most profitable product at Bavla is actually a GMP intermediate for Switzerland, which we transferred a few years ago. And that product is still growing. And we're still seeing a huge amount of revenue and margin coming through on that 1 for stand-alone India. And there are a number of those going forward. So that philosophy is still embedded in our strategy going forward. We will always be looking for the opportunity to move things to our Asian assets to take advantage of the scale of the operations.

The next question is from the line of Pranav Tendolkar from Rare Enterprises.

So I think everybody understands that the revenue run rate in April, May and June would have been lower, and that would impact your annual [ interest ]. But if we see Q4 in next year when we are supposed to have no disturbance from COVID, so I'm talking about March '21, then in that case, what could be your quarterly revenue run rate? That is one. That is my first question. And second question is what is your own analysis of where our actual bottlenecks is in terms of growth? And how we're assessing them? Because if you clearly assess the bottlenecks and you invest resources in them, I see no reason why this company can't grow at a much faster rate, seeing whatever strengths that I'm observing in other pharma and CRAMS businesses. So just these 2 questions to start.

So to answer the second question first, we have established a tremendous bottleneck in Switzerland, where we have done almost close to 18 validations. But now we have zero capacity to make more than 9 of them commercial, right, Mark?

Yes.

So when we have -- even if we expect out of the run rate that we have, which is 30% of success, we are looking at another 6-odd validations -- validated molecules going to launch for which reason we don't have a single manufacturing vessel available, for which reason, we have planned a strategic API building manufacturing investment to be done here in Switzerland. So that is already in the books and already in the plan. So that is 1 major bottleneck. The other bottleneck that we have helped is by giving the large asset of China under the Swiss arm of Carbogen Amcis is allowed many of the non-GMP work that Swiss was doing to be transferred into China to make the Chinese assets profitable. So one thing that we are missing to see is that a loss is also a cost, which a less loss is basically a gain in revenue. Where in China, we would have seen the loss being reduced year-on-year, which is also on -- largely on the account of gaining of the revenue. But because it's a loss, it's not seen. But that has helped Carbogen Amcis to achieve the $150 million just in Switzerland, which, as Mark said, is a historical year, because it never happened since its existence. And it was never even imagined to happen that it is possible. But because of all of these bottlenecks that have been identified, this has taken place, and it has happened. At the same time, the bleedings have reduced in terms of China and other assets which were bleeding. So this identifying of the bottlenecks and everything is a constant practice that our business takes -- which our business requires to perform. And it is happening. It is just that we are conservative. We don't want to make the same mistake as we did in the past. That we make investments just on the basis of anticipation, but we make investment on a 50-50 mix of anticipation and certainty. Before it was 100% anticipation, which made us burned our fingers. Now we have found an ideal mix of 50% anticipation and 50% certainty. For which reason, we are confident to make a large investment to help Switzerland debottleneck its current scenario because otherwise, it is not just that we lose the 6 products, it's that we lose -- we start to lose the brand name where people will start to think that Carbogen Amcis is full. It has a time line of 1 year, and it will not be able to manufacture any commercial products. So there is no point of even giving them the development work.

Well, you see, Arpit is absolutely right. The issue is very simple. If we need in Switzerland to do more commercial products, then without expanding, then we have to stop doing development work to provide capacity from commercial manufacturing. If we stop development work in 18 months to 2 years, the pipeline will be empty. So it's this game of kissing frogs. We need enough frogs in the funnel so that when we start kissing frogs, we find 1 or 2 princes, which are the commercials. And it's a cycle, and it's a known cycle. This is not a surprise. We know that the market has appetite for what we do, and development is where we create the technology and the capability, the innovation, and commercial manufacturing is where we reap the reward. And you can see that the system is working very nicely. I mean, for the last 5 years, we've had record sales and EBITDA is getting better. We're getting more efficient as we get busier. But we've reached a point now where we just can't squeeze anything else in. And if we want to continue to grow, we have to expand in certain areas. And we understand where those bottlenecks are, and we know when they're coming, generally speaking. So none of this is a surprise to us.

Right. So the new manufacturing capacity that you just alluded, when it is coming on stream?

We are anticipating about 24 months -- 24 to 34 months.

Okay. Okay. So second thing...

In the meantime, and just to preempt your next question, how we're going to deal with the shortfall in the next 24 to 30 months. We have a number of enabling projects which are underway already to enable us to bridge the gap between the investments. So these are smaller dollar ticket investments that are not outside the range of normal CapEx, and I'm sure Harshil can talk to that. But those enable us to bridge the gap between now and the next 24 to 30 months.

Right. And about my first question, that is quarterly...

Yes. So Pranav, regarding your first question, what we have been saying on the cost is that it's very difficult to give like a quarterly estimate of what we would be achieving in a particular quarter. It would be more prudent to see our business on a 2-year basis or at least a 1-year basis. So what we believe is that -- or what we can say right now is that the second half of the year looks to be much stronger than the first half of the year, largely because of the reasons that we had cited for the Bavla facility and because of the COVID-19. So that's kind of the broad guidance on the overall year.

Right, right, right. So just last question. So you don't see any CGMP approved facility, which can be acquired meanwhile? That's not that possibility?

No, we've looked. We've looked. And the problem is that at the moment, most assets that are available are large scale, ex large pharma assets, and they're not really tailored to what we do. So in acquiring that asset, the asset is one thing, but you have to acquire the people as well. And when you acquire the people, you acquire all the pension liabilities of a large pharma company. So we've looked at those, and we are still actively looking. Until we buy the first piece of major capital equipment, we will not stop looking for a potential asset to buy. But be aware that when you buy an asset, it's not going to be we acquire it on Friday and on Monday we're in production. There's still a lag time, of course. But what it does do is it does save you time. It's undeniable, it saves you time, if it's the right asset.

It may save you a 1/3 of the time...

We've been looking for 18 months.

Yes. It may save you a 1/3 of the time, but it gives you a 100% of the asset.

Right. But we are looking, and we continue to look. We've actually audited a couple of plants and 1 of them we looked at actually look very interesting. And Arpit and I sat down with the company that was facilitating the sale. And we had an estimate and we -- of what it would cost, and we put a premium on that estimate. And when they shared what their expectations were, it was actually cheaper for us to build it and build it our way to exactly what we want.

The next question is from the line of Deepan Shankar from Trustline.

With the FDA approval, ZEJULA or niraparib is now is the only oral monotherapy for first-line maintenance treatment. So what is the kind of opportunity size, which has improved for ZEJULA? And have we also got any updates on possibility of increased orders from Glaxo?

No, we have not gotten any update from Glaxo. What we believe is that they have built on enough stock that could help them continue for the longest period. We have done our analysis from looking at the revenues -- the past revenues of the company, which was in existing relation with TESARO and to the revenue uptick of GSK in terms of the oncology product line, where the kind of -- the amount of material that we have shipped calculating that with the dosage I don't -- we don't believe that they have even used even the tenth of the stock that has been purchased. So to be honest with you, we do not see anything coming in for at least for next 2 years in terms of niraparib, just based on the stock building that they've done. But since it is [Technical Difficulty] market, which we may be surprised, but that is something we have resolved from our potential [Technical Difficulty].

Okay. So there has been no change in terms of sourcing contract relationship with Glaxo, right? So are they sourcing from any other parties, sir?

As of now [ when this document ] has been built, we believe they don't. Am I right, Mark?

Yes, you're right. We had a meeting set up for -- with them at DCAT in February -- end of February, early March. But of course, that show was canceled. So we're still due to have a face-to-face discussion with them, and that may happen at CPhI, which is in September, if that shows on. But at the moment, our view is that the material that we've shipped plus the knowledge of what the other vendor has shipped plus their dose range, we think they are sitting on quite a bit of material.

Okay. Okay. And...

If you'll ask regulatory questions for them, by the way, we're still supporting them when -- supporting them with regulatory answers that they're getting asked by various agencies. So it's obviously still quite a bit of activity in the global market where they are looking at filing in different countries. That's obvious from the questions they're asking and information they're requesting from us.

Okay. Okay. Okay. And lastly, any update from tax authorities over here? So if we have not got any, so can we assume that the issue has been resolved out?

Harshil bhai, you want to take that? Or should I take?

Yes, yes, sure. I'll just explain. So obviously, we haven't received any kind of official communication from the IT department. So that's the same level of knowledge that you have, that we have. And we have cooperated with them. We have answered all their queries. All the necessary documents, information has already been supplied to them. So what we understand is that there is nothing material, which could have any kind of a major impact on the company that should come out of this. But yes, we obviously haven't heard anything official from them.

The next question is from the line of Elesh Gopani from Gopani Securities.

I am just asking a question regarding the buyback.

Sorry to interrupt you, Mr. Gopani, but we can barely hear you. Could you speak a bit louder?

I have the question regarding the buyback of the shares. We had originally planned the buyback of INR 72,000 -- INR 72 crores, and we have just done half the buyback. So why we have stopped the buyback? We have the time up to 24th July. And the price is in the range that we have thought of buying.

The COVID circumstances, we have to prepare for the future. We have to safeguard the company for the future.

But that was originally planned, no? And we are not going to buy or we are going to buy only INR 20 crores, INR 30 crores now, again. I don't think that INR 20 crores, INR 30 crores will affect much.

So obviously, we announced a buyback in January when, obviously, we didn't have the knowledge of the COVID. The buyback announced was for INR 72 crores. And as you would have seen every month, every other week, we had been buying up till the time that the COVID-19 actually started showing signs of kind of a slowdown in India and elsewhere. So that was the reason we just thought that it would be better to be more cautious right now because we don't know till what time and to what extent the impact could have been. As it seems as of now that the impact should keep on dying down, but we were just being extra cautious. That was the reason why the entire buyback was not completed earlier, if that was the question. But we have already completed about 50% of buyback.

That is according to the requirements. But our book value is reasonable it seems and these are the times we have the last opportunities. We'll not get another opportunity for buyback at this price. This is our lowest price in many years. So to increase the shareholder value, we can always have another INR 20 crores, INR 30 crores loan and buyback this. This price is the lowest price since last 3 years. And we'll not have another opportunity for doing that buyback.

No, no. So let me -- obviously, the regulation does not permit to take a loan for the buyback. So we would definitely -- if -- I mean, for the remaining part of the buyback to happen...

No, we are taking the loan for the business, not for buyback. You are just informing that we have stopped the buyback because we want to preserve ourselves for COVID. I don't think this INR 20 crores, INR 30 crores is a big amount for the company.

No, no. We have to preserve ourselves in terms of being -- not knowing the global impact of COVID where the Western world is yet to see the recession. So for a company who is in 100% export, who is dependent on the Western world, they have to take norms to make sure that they do not become inexistent just to complete the buyback, which is a luxury. It's not a necessity.

Harshil bhai, INR 20 crores, INR 30 crores will not be affecting the company in any way. It will affect the equity capital only. Anyway, that's my reason and it's for the shareholders' value, and it is for the benefit of the company, that's why I'm asking this question.

No, no. So let me -- I mean, that was the intent with which we announced the buyback of the INR 72 crores, and that is what we intended to do. But obviously, nobody expected the COVID-19. So we're not talking about the COVID-19 impact just on us. But as Arpit mentioned, this is talking about the global economy, where we are already seeing a lot of these companies having layoffs and slowdown, and there could be a scenario of a recession as well. So that was the reason we just said that let us be extra cautious maybe for 30, 40 days. Let's see how the situation pans out. And then we can, again, restart the buyback.

So we have time up to 24 July.

Yes, things could get better. You never know. But what needs to be also understood is that since all our currencies are in foreign currency, you can also imagine that our buyback cost has been -- has also been made a loss to us by almost 10%, which is the currency appreciation from the time that we have gathered the money for buyback because we are not allowed to keep the receivables in dollars.

Anyway, you can see for [ 30, 40 days ] and then have a call and we have time another 24 days.

Our stability levels is now coming at 76 [Technical Difficulty] equity appreciation which should be on the account of foreign currency.

The next question is from the line of Dipan Mehta from Elixir.

Sir, my question is more of a macro nature that because of this particular pandemic, in your interaction with client, do you think that overall R&D spend globally will increase in health care and indirectly that will benefit you in terms of higher projects in the medium term? I know these are all long-term trends, but is that a possibility at all?

I think there's a couple of things that are playing here, and we won't know until we start to emerge out of this. But I think there are 2 competing things. You're right that health care right now, pharmaceutical specifically, has a high level of interest in the general public. And if it has a high level of interest in the general public and venture capital money, obviously, we'll see further opportunities. So as you know, if you've been talking to us over a period of time, you know that one of the key metrics we look at is the amount of venture capital money going into pharmaceuticals. That is a key metric for us to see whether or not the market is slowing. Today, we don't see that the market is slowing. However, on the other side of this, what we also see is, politically, we are starting to see a move towards more nationalism. And by that, I mean, countries, looking at taking calls on stimulating their own internal markets again, so that they are, to a degree, self-sufficient on pharmaceuticals. That is a longer play. And of course, every 4 years, politicians change and move seats and things. But we're seeing that as a competing strategy potentially emerging as well. So rising nationalism, especially in the United States and in countries like Holland and to a degree in France and Italy, we're seeing that politics. Whether or not that's achievable, I don't know because a lot of those businesses have been gone from the West for many, many years and reestablishing those in a short-term is going to take an awful lot of investment and an awful lot of time. So those are the 2 things that we see emerging out of COVID, frankly. One of them is good news. The other one is not necessarily bad news either because we -- Europe is -- you can treat as one continent essentially, and Switzerland is ideally placed from a tax perspective. So we don't see that. There is a potential risk for our U.S. business. However, it would take an awful long time to rebuild the infrastructure to do the sort of work that we do beyond the companies that already exist there. So if that were to happen, it would be at least 5 to 8 years before there would be any significant impact on our business. And by then, we would have had a strategy in place to deal with that.

And then people would realize that rise to nationalism is actually death to capitalism, which again it is not going to be very much appreciated.

No but in the entire interaction with your clients do you get a sense that they want to invest more into new molecules and tip up that R&D to the next...

Yes. Yes. Well, this is the point about venture capital money. This is the point about VC money, especially in the U.S. So VC money is -- and we call it vulture capitalism. That's what we call it. And what happens is these guys are in for 3 to 5 years maximum. And we see that there is no slowing of VC money going into small to medium biopharma. There is no slowing down. So that implication is very clear. There is money going in. There is -- if money is going in, then new molecules are being developed. So we don't see a slowdown. We don't see a slowdown in inquiries. So we're still getting the same number of average inquiries that we have for the last 2 or 3 years. Our biggest challenge today is our ability to address those inquiries because of capacity. But that's always going to be a moving piece for this company. As soon as we create capacity in 1 area, we move the bottleneck somewhere else. And in 18 months or 2 years, that bottleneck is a real bottleneck, and then we have to request. And that's the way it's always been in this company. I've known the company 20 years, and that's the way it works. And it's all driven by VC money, and we don't see a slowdown today. I was having a discussion with my Head of Sales and Marketing only 2 days ago, and we don't see a slowing down. What will happen next month? I just don't know. But right now, we don't see a slowdown.

So essentially, what may happen is -- and this is a pure assumption is that if the COVID fear is going to help in increase the premiums for the insurance companies, then we might even say -- we might even see an increase in inquiries.

But so far as we see we don't have any capacity. So what I'm understanding from your con call so far is that we have reached a particular stagnation level when it comes to turnover. Unless we have a massive increase in capacity, there's no way we can grow the turnover.

No, no. We -- if you remember, we've got a plan already underway for another facility in Switzerland. We've already bought the land and the planning is all underway. We have a number of bridging projects, which enable us to bridge the time between now and the new plant to create headroom for more capacity.

We would have started the foundation on the 1st of April, per se, but the COVID scenario has just delayed the activities a little bit because of the social distancing. Here in Swiss, we have the law of not having more the 10 people together in a group. And I don't think 10 people can build a lot in a short period of time.

Yes. It's 10 people with a 2 meter distance.

So my question, as management you do plan on 3 years, 5 years type of a scenario. But as investors, I mean, we don't see any best practice coming up for at least...

No, no. I think that is a little -- I'm sorry, I'm interrupting. There's a bit of a disconnect here. We are also forgetting that there is a massive amount of technology transfer between Switzerland and India and China. And India and China are always there to support in terms of high-volume and relatively lower value products, which are always going to fill up the capacities. And I think in India, we have a decent capacity available. Same is the case in China, which will ensure that the normal growth continues. Am I right, Mark?

Correct.

Okay. And one quick question, sir...

Just to do these tech transfer also it is required that there is a customer approval, which, in some case, when Mark spoke about the largest product of Switzerland, which is the second largest intermediate of India, is it actually took us 4 years to do the tech transfer, just not because of that internal talent, just because of the regulatory filing that the customer has done. Just to give a time scenario of tech transfers.

Second question is relating to the product, which gets impacted because of the regulatory action. So what are the volume of turnover from that particular product, I can't pronounce the name, from Bavla, where the permission has been withdrawn by the European regulators? What is the precise turnover?

In totality, the entire -- with all the CEPs which have been revoked, the total quantum of business would be around $15 million to $18 million, Harshil bhai? What was the exact number?

So just for these CEPs, that would be not more than about, I would say, $5 million put together -- everything put together.

So to clarify the whole thing, the effect of this particular event is just $5 million. Am I right?

As a direct event, but what has happened is that EDQM since we -- until we resolve the issue of the EDQM, there will not be any filings allowed on the CRAMS side of things as well. You see, it's all connected. There is not a direct impact on the revenue, but on the CRAMS side as well, there will be a shortage in filings, which we would -- we will get out of the EDQM business in -- the EDQM issue in about the next 8 -- 7, 8 months with the CAPA and everything. But with our existing customers, since they are on the CRAMS side and have already done the filing, they have gotten the approval from the authorities of EDQM that yes, their product is unaffected by the findings of EDQM and which is going to allow the normal course of business to be ongoing. It is just that it might have an impact on the future business, which before -- what our internal trial is that before it has that impact, we would like to rectify the solution and COVID in that perspective has given us an opportunity to do that quicker.

The next question is from the line of Ashwini Agarwal from Ashmore India.

So this is a follow-up question to the discussion that has happened till now. One of the odd things about the revenues, if you zoom out and you look at it is that the -- there is, of course, the balance sheet, you say has bloated or has increased significantly because of FX movement. But then you would also see a similar impact of the FX on revenues, which is not happening. I mean if you -- again, Mark earlier said that Switzerland has had a record year. But if I look at the revenues, as you break it out, division wise, CRAMS from Switzerland and France, I mean, that revenue line in rupee terms is flat and for the fourth quarter was down. So somewhere something is not falling into place. What were the Swiss franc revenues for the Swiss subsidiary for the last 3 years? Could you provide that number, Harshil, if you have that handy?

So there is a revenue. Ashwini, on the pure revenue basis, if you take out the operational -- other operating income, there is a revenue uptick of almost 10% Y-o-Y.

For the fourth quarter or for the full year?

For the full year.

But then if you look at your slide, which gives the revenue breakdown, and we know that the Swiss franc has depreciated in rupee terms, why is the revenue flat? If you look at your Slide #9, CRAMS Switzerland and France, it gives you INR 1,081 crores versus INR 1,096 crores, which is a growth of 4%, fourth quarter was a decline of 11% despite depreciating rupee versus the Swiss franc. That doesn't make sense.

Because the depreciation of the rupee happened majorly in the last quarter, not the initial quarters.

Correct. But even then it should be at least a 10% growth no? If you had 10% growth in Swiss franc terms and the rupee Swiss franc didn't move, then you should see a 10% growth in revenue from CRAMS in Switzerland and France.

So Ashwini, in the last -- if you're just talking about the last quarter and compare it with the last quarter of the last year, then definitely, there is a degrowth. That is for sure. And that is largely because as I explained, Q4 last year was more like an exception where most of the sales happened in that particular quarter. So that is for sure. If you take the full year financials, there is a growth of about 4%. So just talking about the Swiss entity and the French entity, there is a growth of about 4% in rupee terms. So last year -- and obviously, not all of this revenue is restated at the closing exchange rate. I mean, it would be at an average exchange rate. And same would be the case for the last financial year as well. So I don't have it handy, but we can do a comparison taking into account what was the average exchange rate at which the revenue was booked in rupee terms in Switzerland and for financial year '20 and then financial year '19. So that will give you a complete perspective on this. But having said that, the FX impact is not just on this revenue line number, but also in the operating income. So right now, we're just excluding the operating income. We're just talking about the pure revenue number here. Because what also happens is that since we have many of these hedges in different currencies, certain revenues are realized against this hedges. So if I'm realizing the revenue at an exchange rate, which is more than what the prevailing exchange rate is, then that profit would fit into my other operating income.

No, Harshil, I understand, which is why it makes sense to keep the FX as a part of revenue, right? So then we have to make it EBITDA including the impact of FX because you've hedged the revenue and therefore, the revenue gets booked at a certain rate and then there's a difference between the hedge rate and your revenue booking rate shows up as an FX gain or an FX loss. So I get that, right? My limited point and this goes back to some of the questions that were asked earlier. I think it was Anil, who was asking this question. That you're saying that my balance sheet has grown by, whatever, 10%, 11% over the last -- 12% is your growth in the aggregate size of the balance sheet. And your argument is that bulk of it is due to FX movement, right? Bulk of your revenues are also outside India. Even what you manufacture from Bavla goes out of India largely.

As well as the bulk of the costs, Ashwini.

And a bunch of the costs. I agree. But the point is, if you just -- forget the cost right now, just look at revenues and look at the balance sheet, right? If your balance sheet goes up in size because of FX movement, you should see a corresponding movement on the revenue side as well. Now there could be a timing difference in that, where you say that the FX depreciation happened in the fourth quarter, revenues are for the full year, therefore, there's a mismatch. But the mismatch seems to be quite large. And something is not sitting well. I don't know what it is. This is what is creating a concern.

What we do, Ashwini, is that let us sit together and then analyze again of everything because what this is -- what we have presented is at actual. Maybe there is an accounting error, but that is highly unlikely. It is just that the kind of movement that has happened, which is inflating the gross block of things which has happened since past -- not even the past year, it has been happening since past 6, 7 years, the actual gross block of investment in India would not exceed more than INR 700-odd crores, which is standing at around INR 2,000 crores just on a stand-alone basis. Just on the basis of FX movement because actually versus the accounting error that has happened -- accounting entry, which is the new accounting standard making us incorporated.

Arpit, 1 sec. Ashwini, there is 1 small technical issue that you may keep in mind. See, the revenue gets booked at average rates, if you translate into rupee. The closing entries go at the closing rate. Now what has happened this year, that if you look at the average rate of CHF or a euro or a dollar, it is about 70, 71, but the closing rate is 75. So that bloating effect on the balance sheet as of closing appears to be a little more sharp. However, having said that, the correct way to look at would be perhaps also to compare the respective local currencies year-to-year and then see how things are moving. That's point number one. And even within the local currencies, the business mix. So for example, if I talk of Carbogen Amcis, there is a difference in the profitability and the EBITDA just by a mix, which is developmental revenue versus commercial. So there are certain nuances. That's why Arpit says, if you can take it off-line and maybe spend an hour not necessarily overall face-to-face meeting, but maybe over a...

Ashwini, If you want to normalize it, maybe the major contributors, as you mentioned in the -- which is in Slide 9, you look at it in the local currency, which should also be in Slide #12. And then make it -- convert it into the closing rate of today's rupee for all the currencies in the respective currencies against the rupee, which should give you the growth. But this, for us, it comes out from the system as and when it is booked because we run on SAP. It is booked at an average, which is the metrics of the system that has been incorporated, which might give you a disparity because of the abrupt movement in the currency. But if you want a normalized figure, I think you look at Slide #12. And in that, put the actual closing rate of the respective currencies, and then you would be able to see a much larger revenue uptick in terms of rupees.

Fine. Let me take this offline.

So, Ashwini, what we can do off-line is that -- what we can do is just take the foreign currency block, which is sitting in each of these entities. So we just keep the block in the foreign currency and then compare the foreign currency revenue against that particular block, so that will give you the correct fixed asset turnover ratio.

Yes. That's what I would like to do, and I'll take that...

Exactly. Because the pound -- the average rate of the pound, which has been taken for calculation is INR 90, where right now, it is going INR 95, for instance. U.S. average rate has been taken at INR 70.81. CHF, which is INR 79 almost is INR 71.9 or INR 72.

That's what Arpit said. Closing rate versus average rate is a very big disturbing factor actually.

It's huge, almost 10%.

Yes.

And this is very odd because this is probably true for the current -- for fiscal '20. Usually, the difference between average and closing rate probably is not so wide.

Exactly.

Exactly. It is just normal accounting which is...

That's what I thought. Very improvement very sudden in just March actually if you see.

Yes, yes, yes. Okay. Sir, 1 last question on the -- you mentioned to the previous caller that your CAPA will take about -- and remediation will take it 9 months. I had another question to that. Typically, when European authorities make observations, the U.S. FDA follows up and U.S. FDA will also issue strictures. That's at least what we've seen happening of late with various other companies that one investigate -- I mean, European authorities and the U.S. FDA tend to work together very closely. So are you kind of bracing for that as well?

This is what we were -- go ahead, Mark.

What we were saying is we've already completed all the risk assessments. We've passed those risk assessments to the customers. The customers have spoken to all of the regulatory agencies. So where we sit right now with all of the key products and the key customers we have no long-term concerns that there are going to be any effects on the FDA.

That was the last question. I would now like to hand the conference back to the management team for closing comments.

Arpit?

Yes. Thank you all for your questions. They were very well appreciated. We have taken all into consideration, and we'll make sure that next time we will -- in the next call online or off-line we'll be able to resolve all the issues that you have mentioned. At the same time, from the management side, we -- and the company's perspective, we are extremely bullish of this business. We are extremely trustworthy in the company and of what it does, and we will make sure that it is going to be committed accordance to the standard that we all have in our heads. It will take time. And for that reason, for believing in us and allowing us the time to do and achieve that, we are glad and thank you for such investors and your support that you have always been providing. And from our side, we will ensure that we will do nothing to not to break the trust that you have developed in us, rest assured from that perspective. With that, I would like Mark and Harshil to say a few words and close the meeting.

Okay. So thanks, Arpit. I really have nothing further to add beyond the fact that we appreciate the support. We are committed to move this business forward. And we have a track record of being able to do that. So these unfortunate incidents will be resolved. They're underway of being resolved right now. And we have an absolute laser focus on getting these things fixed and taking the business forward. So thank you again for your support, and please try and stay as safe as you can. Thank you.

Thank you. Thank you.

Thank you very much, everybody.

Thank you, everyone.

Thanks.

Thank you very much. On behalf of Dishman Carbogen Amcis Limited, that concludes this conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.