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

Ladies and gentlemen, good day, and welcome to the conference call of Q1 FY '25 Earnings Conference of Dishman Carbogen Amcis Limited. [Operator Instructions] Please note that this conference has been recorded. I now hand the conference over to Mr. Pascal Villemagne, Chief Executive Officer. Thank you, and over to you, sir.

Thank you, moderator. And good afternoon, dear shareholders. Hope you're all well, fine before the big day tomorrow. A quick update regarding the business activities for the first quarter of this year '24-'25. Globally, we can say that the follow-up of the last quarter of the fiscal year, so we are facing a number of challenges at the very beginning of this quarter, which were the follow-up consequences on things that had happened the quarter before, which were impacted the trial results of the quarter. This is the reason why the global results of this particular quarter are not really as expected. However, during this quarter, the good news is obviously that we finally tackle all the issues we are facing and we have definitely turned the corner. And I'm thinking especially of our new facility of drug product located in France, where we are facing a number of [ key man ] challenges over the start-up activities and operational startups. Now, since the middle of the quarter, we have been operating normally and everything is growing as now planned. From a market perspective, if we look at globally, of course, we know that all the macroeconomics, KPIs are not really great to raise. However, the pharma industry is globally well resisting, and particularly our CDMO, CRAMS activities across the globe is still quite good out. We see some slowdown a bit across Europe, but we see funding on several customer place. But globally, U.S. and Japan, China are doing well. So we were having a large number of purchase order in our global portfolio, in drug substance or product or product activities, which give us a very high confidence that although the third quarter was a bit disappointed, we were able to match our targets by the end of the fiscal year, being able to work in a proper way to get those numbers right by the end of the year. As we mentioned 2 times, it's about nonpharma markets are getting also a bit better. I'm thinking about the cosmetic market that we are addressing with both of our facilities located in Europe. The cosmetic market is getting much better than it was after -- post COVID. We know that it was suffering a bit. So now that market is also getting better. So that's giving us some large opportunity to our U.K. and Netherlands activities to increase the volumes of production of certain items we do for our customers. All in all, as mentioned in the quarter, was not showing nice numbers from a financial perspective. From an operation perspective, we've done a lot of efforts to tackle and finalize all the issues we are facing. And now we can tell that now, especially with the new facility, we foresee nicer news coming in the next few months. And we have for that facility, as well as our 3 facilities, a large product portfolio of orders that we can process in the coming months. So all in all, we are positive and optimistic for the rest of the year results. From a pure organization perspective, we've done reorganizations of our business at Carbogen Amcis side, which is going to help us to have a more accurate and more finding strategies for recent type of business we are in. So now we look at our global activities into 3 different activities, Drug Substance, as mentioned, Drug Products, and Specialty, which is our product business. Thanks to the reorganizations we will leverage more, as I said, accurate strategy for each business segment and [ indeed ] to have better market penetrations and success. So this new organization is now implemented since April -- July 1, and it's going to give all the fruits through the new year. So we all think that, thanks to these organizations, we will be able to leverage our success and get the best of our capabilities in the Carbogen Amcis branch of the business. I thank you all. And then I now hand over to our Global CFO, Mr. Harshil Dalal.

Thank you very much, Pascal. Very good afternoon to everybody. Regarding the financial performance of the quarter, starting with the revenue, it was kind of a mixed quarter for the first quarter ending June 30, 2024. As far as the positive aspect was concerned, the India revenue, after the clearance from the EDQM, the certification that we received in February of this year, after that, we saw an uptick in the India CRAMS revenue, which increased substantially as compared to Q1 of last year. So from INR 38 crores, it has increased to INR 82 crores, which is almost 114% increase. And there is also some basic into a positive EBITDA for the India CRAMS business, with it close to about 14% of EBITDA. On the negative side, there was unfortunately about 9.8 million worth of orders, which according to the customers' requirements, has to be deferred to the next quarter as compared to Q1. And this was maybe at [indiscernible] and Switzerland because of which the development revenue as well as the commercial revenue to asset in Q1. However, all of that revenue should be made up in the remainder part of the year. So it was kind of a mixed kind of reason as far as the revenues were concerned, something positive, especially because everybody is looking forward to the India revenue to increase, especially after the EDQM clearance, and that was already reflected in Q1. And we expect that the India revenue should increase substantially over the last full financial year. And the remaining 3 quarters for the Swiss entity should be very good, as the revenue loss in Q1 for the commercial and development work should be made up in the beginning 3 quarters. As far as our Dutch entity was concerned, there was a dip in revenue by about 16% as compared to Q1 of last year. And that was largely on account of lower sales of the vitamin D analogues, which is obviously highly profitable for us as compared to the Cholesterol business. Unfortunately, in Q1 this year, most of the revenue makeup in Netherlands was because of the cholesterol sales and especially the Cholesterol SF, which is a low-margin product for us. And that is the reason the revenue in Netherlands is lower as compared to Q1 of last year, and that obviously had an impact on the margins as well. The good thing is that as far as the key raw material, which is the [ bulk grains ], is confirmed for our Dutch entity. We have been able to successfully renegotiate the supply agreement with the supplier, the largest supplier that we use for that particular product. And we should see a decrease in the cost for that particular business from Q3 of the current financial year. So there has been a significant savings that can be expected because of the renegotiated contract with the supplier. So that's the good deal as far as the Dutch entity is concerned. The employee expenses more or less stood at a similar level as it was in Q4. There was nothing exceptional in the other expenses. One of the changes that we have done with -- starting from this particular quarter is in relation to the goodwill, which is -- which was in this now for a period of 15 years. We have reassessed -- or the Board has reassessed the useful life of the goodwill as it stands today. There has already been a significant appreciation, which has picked the P&L over the last 9 years amounting to almost about INR 750 crores. So what has been decided is that the goodwill, as it stands today would accept on getting tested for impairment at the end of every year. And the useful life, since we have to define one, has been defined now at 99 years. So the amount of amortization of the goodwill in the P&L would reduce substantially to roughly about INR 6 crores per annum as compared to about INR 45 crores as was being charged to the P&L earlier. And hence, we would see the depreciation and amortization figure going down from this quarter onwards. The finance cost was more or less in line with what we had last year. It's about INR 32 crores of finance costs. And we had an exceptional item of about INR 5 crores. This was on account of write-off of Southern inventory, which was seen to be nonusable for certain projects that we were anticipating in the past. So overall, the current quarter in terms of -- I mean if you consider the factors that have been defined especially on the revenue side and the impact that it had on the margin, since most of that will be made up in the remaining 3 quarters of the financial year, and as we have been seeing -- saying that the right way to look at our business would be more on an annual basis rather than on a quarterly basis, we expect that the current year should be a much better year as compared to the last year. We should be on target to achieve close to about 10% of incremental revenue over the last year. And the operating profit should also be significantly higher than what we had reported last year. So with that, I would like to ask the moderator to open the floor for Q&A.

[Operator Instructions] The first question is from the line of Tarang Agrawal from Old Bridge Asset Managers.

A couple of questions. So Pascal, when you opened this floor, you said that Switzerland might impose some challenges because of the floods, right? And you have maintained that the CRAMS business of Carbogen Amcis will be able to make up for whatever was lost in Q1. So do you believe that CHF 200 million revenue number, which that business does, that's going to be achievable for FY '24 despite -- as for FY '25, despite the adverse developments in Switzerland.

Yes. So definitely, because although the numbers, if we look at the fleet number, the [indiscernible] number, we are not as high as we were expecting that they were not as low as to a point where it's critical, that -- so that's definitely something we can work on. And we have specifically one element which is using a dedicated facility, and there is just some technical issues that forced us to prolong a bit the project, but we fixed those things. And the fact that we are using a dedicated facility for this, that we are going to make those revenues later in the year without competing on the other revenue. So I'm extremely confident that Switzerland is going to grow even beyond CHF 200 million for the activity to take for sure.

Okay. Got it. Second, congrats, good to see the Bavla side coming back. How should we see the correction from this business now going forward? Historically, this business was able to deliver INR 100 crores, INR 120 crores top line. So any guidance commentary on this for the remaining part of FY '25?

Sure. So Tarang, what we're expecting is that in the current year, we should be closer to about INR 325 crores to INR 350 crores in terms of the revenue coming out of CRAMS. That is what our target is. And the Q1 number is more or less on target in [ the terms getting the ] clearance in February. So we do expect -- and Q4 is historically the strongest quarter for India, so that trend should continue. So overall, for the full year, INR 325 crores, INR 350 crores is something that we are targeting, and we should be able to achieve that. What that should also consider too, as we had also mentioned in our previous call, into an improved profitability for the group as a whole. We are working on several initiatives, including we are already seeing the traction in terms of the orders that we are receiving from the existing customers. New customer visits are happening, so we are anticipating additional orders coming from new customers. And thirdly, we are also collaborating closely internally between the Swiss site and the Bavla site, trying to see what all projects can be transferred in the short to medium term to the Bavla site. So we don't see any challenges in achieving that kind of number as of now. Obviously, the next year should be even better, it should be closer to the to the INR 100 crores of run rate that you mentioned, which would equate to close to about INR 400 crores of CRAMS revenue for the India business.

And the development in the Netherlands business has been particularly striking. While you've been guiding about compression margins for almost 8, 10 quarters, I was quite surprised with the numbers that have been reported in Q1. So is there anything specific that went off? I mean was there a kitchen sink of sorts where all the inventory was skewed out? And just to understand, you did [ a new ] to getting into a revised contract with your vendor. So if you can just elaborate a bit in terms of how that can play out purely from a margin standpoint.

Sure. So in Netherlands, as you already are aware of, there are 2 broad segments in which the Netherlands business is divided into. One is the Cholesterol business and second is the vitamin D analogues. Now if you break down the Cholesterol business even further, there is Cholesterol NF, there is Cholesterol SF and then there are other variations as well. So what we saw in Q1 was that there was a high amount of sales of the Cholesterol segment and specifically Cholesterol SF, which is quite low in margin as compared to the other product segments in Netherlands. And that had an impact on the margins. As we have been saying, and as you correctly said, over the last 8 quarters or so that we have -- we are already seeing an increase in the prices of the [ whole grains ], which is the key raw material for manufacturing the cholesterol as well as the vitamin D analogues. So we internally took up the challenge to renegotiate the contract with our existing supplier with the possibility of also funding new suppliers for this particular raw material because we can't be dependent on this one supplier. So what we have been able to successfully do in the user part was to renegotiate this contract with the existing suppliers wherein the prices have been renegotiated by almost 35% as compared to what the earlier contract was. So we would start seeing the impact of this improved prices from Q3 and onwards because we already have stock, which has already been purchased at the higher prices, which will first need to be cleared out, which we are expecting should get cleared out by Q2 of this year. So that's the strategy on Netherlands, where we are trying to improve the prices and the cost of our products. And that will help us in being more competitive as compared to other players because now in the vitamin D analogues segment, we are seeing a higher amount of competition. So it was quite critical for us to reduce the cost by deploying various measures. So renegotiating this contract was a first step, but we would still keep on looking out for additional suppliers for this particular [ bulk grain ]. Pascal, do you want to add something more to this?

No, I think you have summarized the situation. It's an obvious effect on the product mix production during this first quarter. The asset grade of our Cholesterol is a larger volume production, but it's also the lower margin. And when we produce a large amount of assets, it affects directly our profitability over the quarter. But if we look at that from an order perspective on the annual base, we should be back on track in the coming months, where we are going to manufacture more NF, HP grade of Cholesterol into the mix. So some of concern about that is really when we look at this first quarter, yet we see that, obviously, there is an impact on profitability, but we know that it's a product mix effect. The good news, as you mentioned, is that now we are much more in control of our supply chain, and we have a much better control on our COGS over there, which I think 2 effects. First, on the high-end cholesterol product, we have a better margin, and on the lower, like SF, we also can be more competitive and then also increase the revenues by improving slightly the margin. So all in all, it has a positive effect. We are going to see those positive effects along the year because although we've negotiated that over the third quarter, we still have -- we are still sitting on an amount of our product that has been [indiscernible] so we have to consume it, as they as soon as we finish to consume the existing stock of the more expensive [indiscernible] and we can go and reach the better margins later on. So all in all, we can only see the positive side of it in the coming weeks with Netherlands.

Sure. Just last two. What's the net debt as on 30th June 2024? And second, you had guided that the French operations would see EBITDA burn out anywhere between CHF 4 million to CHF 5 million in FY '25. Do you stick to that guidance? Or do you think it might increase for this year?

Sure. So the net debt was -- stood at about CHF 164 -- CHF 164 million as of 30th of June. As far as the French entity is concerned, yes, I think we should have, based upon the current forecast, the impact on the EBITDA should be about negative EUR 5 million for the current financial year. We had a negative impact of about EUR 2.5 million in Q1. What we are -- the operations have become from June of this year where the revenue was about EUR 1.2 million for Q1. So what we are expecting is that the revenues will progressively keep on increasing quarter-over-quarter. And while that would still be a loss in Q2, we will start seeing a turnaround from Q3 onward where we would see the losses coming down substantially. So for the full year, EUR 5 million of loss is what we are expecting.

[Operator Instructions] The next question is from the line of [ Venkata Padwalla ], an individual investor.

Yes. So one question to the management, I could see there are 3 times the changes in the -- how company trades the goodwill on their books. Okay. So my question to the management is, why not you, I mean, remove the entire goodwill from the book so that all the books will be clean and clear, right? Why we are keeping the goodwill on the books?

Sure. Thank you for your question. Unfortunately, there is also an option that we had exposed. The only way the goodwill can be written-off would by providing for an impairment of that particular goodwill. Now this goodwill, the way -- what this goodwill consists of are the intangible assets within the company, which includes our brands, patents, technical know-how as well as the technology that we have in-house. Now if you write off the whole goodwill, what that would mean is that the value of this intangible is now 0. And that, too, again have different implications from a tax perspective as well as a regulatory perspective. So that was the reason, and the way the approval was taken when the merger happened under the court order was that there has to be a defined useful life under which is goodwill can be written off over a period of time. What we have been doing is that every year, we have been testing this for impairment at the end of every financial year where the value of this goodwill is much higher than what the goodwill number stacks in the books. So it is very difficult to certify that now this goodwill is of no use and hence we have to write off this entire goodwill to the P&L. So one of the options that we also try to see, whether it can be written-off against the regrowth under the accounting standard, but that was also not a possibility. So what we are saying now is that after a write-off of almost INR 750 crores, now to INR 600 crores or INR 590 crores which is outstanding on the book, we can keep that for a longer period of time. And the write-off or the hit to the P&L would be a very small amount, which will lead us to what the India is saying that you just keep on testing the goodwill for impairment rather than writing off in the P&L.

Yes, I agree that it may increase the profit a little bit. But still, that book value and return on equity and written on [ assets ] still it will impact this parameter and many of your market pundits will determine the quality of the stock by using this parameter.

I am with you. But the right way to look at our return ratio would be after discounting the goodwill as well as the impact of the forex on the assets, because most of our assets are located overseas and these assets get restated at the closing exchange rate at the end of every year. So the right way to look at our return ratios would be after discounting these 2 parameters, and that would be the right way to determine our return ratios.

So one more question from the European entity. So what -- can you be able to quantify the percentage of the renewal revenue that we are getting on development and commercial from the Swiss entity?

Yes. So as a Swiss entity, roughly, if you take a ballpark, roughly about 55% to 60% comes from development work because in the historical trend and about 45-odd percent is what comes from commercial. In Q1 of this year, we had development revenue which was close to about 40%, and 60% was contributed by the commercial part.

Yes. But I see, sir, surprisingly, the material cost is very low, INR 60 crores only.

Yes. So the material cost was lower because some of the commercial projects that were sold in Q1, those were highly profitable, more from a gross margin perspective. But since the development revenue was low, and you can see the biggest fixed cost that we have on the P&L is the employee cost and most of that employee cost is for the development work that we do. So since the margins on the -- if we talk about the EBITDA, which is after the employee cost, from an EBITDA perspective, that got adversely hit because some of the development projects were deferred to the later quarters. So yes, on the commercial side, the margins were good, especially at the gross contribution level, but because of the high impairment cost for the development, for the overall, EBITDA margin was subdued.

The next question is from the line of [ Preet Nagase ] from [ Wealth ] Financial Advisors.

Sir, could you repeat a change in depreciation, meaning it will -- what is the amount that will be replaced by how much? I did not catch the full thing.

So essentially now as of 31st of March '24, the goodwill stood at about -- the goodwill on the stand-alone books, which effectively goes also into the consolidated books, which is eligible for depreciation, that stood at about INR 594 crores, which earlier we were writing off over a period of 15 years on a straight-line network basis. So now the useful life has been changed effectively to perpetuity because we believe that this value of goodwill will not be bad in the foreseeable future, especially now that the India business is getting back on track. So what we are now saying is that the goodwill will be written off over a period of 99 years, which would mean that into the P&L would be close to about INR 6 crores per annum instead of the earlier INR 45 crores per annum.

Okay, this is effective from quarter 1, or...

Yes, effective from 1st of April 2024.

So the quarter 1 numbers already considered this?

Yes, that's correct.

The second question I wanted to understand was regarding your guidance for both top line and our margins. So you mentioned 15-odd percent for top line? Is that what you said?

No, I said about 10% for the top line. The EBITDA growth would be much higher. So last year, obviously, we had a lot of one-off which we are expecting would not happen this year, except for the notional FX, which could be the -- that would be the not considering that. But apart from that, we do expect that the EBITDA margin should be closer to about 18% for the current financial year.

Right. And the other thing I wanted to understand is that the -- we are hearing a lot about pharmaceutical changes in the global markets and how India could stand a beneficiary. A lot of them are about CDMO and stuff. But on the CRAMS side, do you see any such large tailwind emerging out of those markets?

So -- and obviously, I'll ask Pascal also to elaborate on that. But what we are seeing is that because of the issues with China, and U.S. also thinking of passing an act, which might prohibit sourcing of the APIs from the Chinese companies, we are seeing offshoots of certain projects moving through our European entities as well as [ we both ] we could see potentially certain projects moving to India as well. So that could be something that we are already seeing a certain impact, but I think it is still not passed in the legislation. I mean if that happens and the -- I mean India as well as our European subsidiary could be high beneficiaries of that particular act. But Pascal, maybe if you can elaborate a bit more on this question.

Yes, it is definitely [indiscernible] so it's right by mentioning what happens in U.S. with that particular act, it's not yet fully in force. So we have a lot of customers that are swinging from one position to the other. What is true is we have more and more, not only because of this new law, but also the post COVID situations where people think that it may be a good idea to move things closer to the point of consumption. So there is a global movement to refocus European project in European facilities, so when we get and we see the benefit of that in our European operations. On the other hand, with China, we see also a clear movement. We'd like to emphasize what the entire group is able to provide with very high and knowledgeable R&D CRAMS in Europe and then lower potential cost across India so we can leverage the life cycle of all the products. So we see clearly an attraction from some customers. We are also in an election year in U.S. And as you can imagine, there is a number of decisions that are pending as know whether those kind of constraints are going to come. So [indiscernible], we feel that at the end of the day, there will be a positive impact on our business anyway, so that's for sure.

Right. So going back to the earlier comments you made regarding the overall EBITDA margin profile of 18% for the financial year. Now for this quarter, I think clearly, it was far below that. So which quarter do we anticipate as going back to that run rate?

From Q2.

So you see Q2 then should be back at that 18% run rate?

Yes, eventually, for the leading 3 quarters, we need to be above that in order to achieve the ending target.

Right. I mean the reason I'm asking is that given that only 1.5 months has already completed for this quarter, you would have a good indication whether quarter 2 onwards you are looking at that kind of run rate.

Yes. So based upon the first month of Q2, based upon the numbers of first month of Q2, we are pretty confident of achieving that in this quarter.

The next question is from the line of [ Pradeep Rawat ] from [ Bolkay Capital. ]

So I am pretty new to the company, so I have some basic questions. So over the years, our margins have declined from 25% to 26% range to currently less than 10%. So I just wanted to understand what factors lead to the situation? And going forward, could we achieve those kind of margins again?

Sure. Thank you for your question. So yes, so if you take financial year 2020, we were at roughly around 25%, 26%, as you correctly mentioned. Obviously, in March of 2020, we had certain observations from the European health authority for one of our manufacturing sites in India. And India at that point in FY 2020 was contributing, from a CRAMS perspective, roughly about INR 400 crores to the revenue with healthy EBITDA margin. So now because of these observations that have been received that impacted the revenues coming out of the Bavla site in India, and that obviously had a negative impact on the margins as well because the India site, because of the cost efficiencies that we are able to bring in, make the highest margins for us globally. We -- I'm not sure if you already heard that in the previous call, but we already had a reinspection from the EDQM in September of '23 and we received the final certification in February of this year. Post which now we are seeing traction as far as the India business is concerned by the way of increasing in the orders from existing customers, new customers looking at the India site and also collaborating globally with the Swiss entities. So with the combination of all of this, we do expect that the India business should be back on track. And the Q1 results were quite enlightening for us. And we do expect that the growth should be visible in the full financial year this year, and it should just keep on increasing going forward. As far as the other entities are concerned, the Swiss entity has been delivering growth year-over-year, both on the development and the commercial side. And that is something that we expect would continue in the future as well. We had -- we obviously had issues in terms of the global inflation because of the Russia-Ukraine war, where the price results in electricity has increased substantially across all of our European entities, and that had a negative impact on the cost structure, plus because of the inflation, the people costs have also increased. So over the last, I would say, 2, 3 years, we had this inflationary impact on the cost and also one of the key raw materials for our Netherlands site, the prices have increased substantially, which now we have been able to successfully, as I mentioned earlier, renegotiate the contract with our supplier. And we are looking at other sources of that raw material in order to reduce the cost at that side so that we can go back to the earlier margins that we were making. The third important factor is the French facility, which we moderated last year. We -- I would say we should have already started manufacturing from the site at a commercial stage as well as on the development side, right from January of this year. But unfortunately, there was certain technical issues with the manufacturing line which were discovered only after the [indiscernible] actions were undertaken and when the commercial batches were tried to be taken from the same line. That led to an increase in the cost that we had to incur in order to make sure that the manufacturing line is able to produce the product at a commercial scale. And that process after the validation, the OQ as well as the PQ, all of that got completed in May of this year, and it was renewed from June 2024 that we were able to start producing from the fourth manufacturing line in France. The second manufacturing line is also ready now, and we expect that it should start generating revenues for us from the next quarter. So that was the third issue that we were taking. Now all said and done, we have already cleared the EDQM inspection, and post that, even the U.S. FDA inspection. We have already taken the measures in order to reduce the COGS, right, for that site. With the efforts are still ongoing, it will reduce it even further. And thirdly and the most important point was the French facility, which now is on track in order to deliver the revenues that we are targeting for the current financial year. So this is a journey that we have to go through, the pain that we had to take. But now with the kind of improvement that has been done, especially at the India sites, both at Bavla and Naroda, and all of our overseas entities, we do expect that we would be able to reach the 25%, 26% margin in the next 2 to 3 years' time.

Yes. Understood. I hope turnaround at the earliest. My follow-up question with this regard that you said Dutch -- raw material prices have [ roughly ] increased. So can you specify how much raw material prices increased? And do we have any -- like can we pass on these prices for our final customers? Or is it like a fixed contract type of things?

Sure. So the -- so if you see historically, the Dutch entity was doing close to about 25% to 30% kind of EBITDA margin for us, which not taking into account Q1, but if you take the full financial year, we are now at about 16% to 17%. So that is an impact of, I would say, close to about 20% to 25% or maybe even higher, just on account of the increase in the [ bulk grain ] prices. What we expect is that these prices should come down in the next quarter. But what the impact is, our competitiveness as far as the vitamin D analogues business is concerned. As far as passing on the cost for the Dutch entity is concerned, it is not possible in all the products that we sell because then there are competitors which have other sources, other raw material sourcing that they use in order to manufacture the product, the cholesterol as well as the analogues. So it is only selectively that we are able to pass on the cost to our customers because if we try to pass on 100% of the cost, the business might no longer be there as far as that particular segment or that particular customer is concerned. So we have been able and we have been able to and we are continuing the process of trying to transfer the cost, but it won't be 100% or 1:1.

Yes. Understood. And with regard to the same facility, so you said that you manufacture cholesterol and vitamin from these facilities. So can you provide a brief breakup of those?

Yes, so roughly around -- so if we talk about this particular quarter, roughly around 60% was contributed by cholesterol and the rest was contributed by the vitamin D analogues. Historically, what we have seen is that the ratio is about 55% vitamin D analogues and about 45% cholesterol. So that is the reason there is an impact on the margin. But going forward and in the remaining part of the year, we would see a higher sales of vitamin D analogues as compared to cholesterol.

The next question is from the line of [ Ankur Agarwal ] from [ RC Well ] Solutions.

[indiscernible] the last 4 years, is there a possibility to come in profit net [indiscernible] criteria?

Yes. So that's the whole. So as I already explained in the answer to the previous question the reason why the performance was subdued over the last 4 years. So now that all of those issues have been cleared, we don't see a reason why we should not be back in profit in the current year and also in the years going forward. And as I also explained earlier, as far as the French entity is concerned, it would still be in loss in the current financial year, but the losses would be lesser than what we had reported in the last financial year. So that will also help us in improving the profitability as compared to the previous year. But yes, I mean if you see historically prior to these observations that we have received for the India site, we were generating substantial amount of profit, and that is something that should be possible in a year or 2.

Because every con call you feel you will be in profit, but any time there is one-off in every quarter, something -- sometimes something, sometimes something, but you are not so profit in the company.

No, I agree. So one of the reasons, as I also mentioned, was the write-off of goodwill that was happening every year, which is obviously a noncash item. But there was a write-off of almost INR 45 crores to the P&L, which now from this quarter onwards, that impact reduces substantially. So that should also help us in reporting positive profit after tax in the current financial year.

The next question is from the line of [ Sai Krishna ], individual investor.

I have a question regarding the Carbogen Amcis business. Year-over-year, we had, I think, INR 220 crores loss of revenue. And even if you account for the development project, which is only about INR 100 crores, what would the remaining INR 100 crores be the result of?

So thank you for your question, [ Sai Krishna ]. So are you comparing Q1 this year to Q1 last year?

Yes.

Yes. So basically, the Q1 of last year, it was more of an exceptional quarter where we had reported INR 723 crores of revenue. On an average, our revenue is somewhere around INR 600 crores, INR 650 crores if you look at the trend of the last quarter. But the biggest impact in Q1 of this year, one was roughly about INR 100 crores of development and commercial revenues that did not happen at Carbogen Amcis Swiss entity, which should happen in the remaining 3 quarters. So we will make up for that particular avenue. And secondly was the basis of revenue in Netherlands because of the lower sales of vitamin D analogues. So these were the 2 major reasons why the revenue was lower in Q1 of this year versus Q1 of last year. But we do expect that all of this revenue should be made up in the remaining 3 quarters. Because -- and that's the reason, as I mentioned earlier, we say that the right way to look at our business will be more from an annual basis rather than on a quarterly basis.

Okay. And a follow-up question. So last year, we have done about I think INR 2,600 crores of revenue. And this year, you have guided for a 10% growth. So that's about INR 260 crores. And I think of the INR 260 crores, about INR 130-odd so crores is coming from the Bavla site, the increase in revenue from the Bavla site. So the rest of the business is basically, I think, showing only a mid-single-digit growth. So do you expect any of your other business segments to register degrowth? Or it's going to be a mid-single-digit growth across the other segments?

So for the rest of the businesses, right now, we have assumed a single-digit growth, but it could be higher depending upon how the Q2 and Q3 goes. So there could be potentially upside over there. But on a conservative basis, we do expect that it would be a single-digit growth for the rest of the businesses.

Okay. And just last question. On the Cholesterol and Vitamin D analogues business, this quarter, we had, I think, mid-single-digit EBITDA. So on a full year basis, are you expecting to maintain the EBITDA margin ahead of last year?

Yes, it should be at least that much.

The next question is from the line of [ Subro ], individual investor.

So my question is relating to the dollar trend translation loss which gets reported almost every quarter. This quarter, there has been gain because there was not much volatility, but starting July, for the last few months, there has been substantial change. So do you expect some losses -- translation losses this quarter as well?

That's a good question. It depends upon how the action it closes at the end of 30th of September. We have already tried to -- I mean we have already hedged part of our cash position. So from a cash perspective, we don't expect there should be any kind of a loss in the current quarter. As far as the notional FX thing is concerned, they're all kind of on how the proving exchange rate comes out to be because it won't be just the dollar, Swiss franc conversion, but then also the Swiss franc to the INR because our reporting currency is going to be in INR. The whole thing is that, like if you remember, Q3 of last year, we had a huge amount of dollar balance sitting on our account, which was closed for about [ $120 million ]. And because of which there was a huge impact in terms of the notional FX. What we have tried to do with many of our customers used to renegotiate our contracts in Swiss francs. Which means that the balance sitting on the U.S. dollar account is not much. At max, it might be $20 million, $30 million. So even if there is an FX impact, it should not be as substantial what we have seen in the past.

Just a follow-up to that. Most of our operating assets are sitting outside of India and Europe. And [indiscernible] has been openly speaking about a weaker dollar policy. So going forward, if that happens, would you think that your Swiss operations will become even more uncompetitive because the weaker dollar will be that our expenses will be higher, but our revenues will grow less.

Yes. So [ Subro ], that goes back to what I mentioned. I mean many of the customers, what we have done is that we have renegotiated our contracts in Swiss franc itself, because most of our costs are in Swiss franc. So to the extent that we can have a matching against the cost in terms of the revenue, we are trying to do that to the extent possible. And then whatever exposure is open in terms of the revenue, that is something that we are hedging. So that's a good on hedging policy that we have, that we would keep on hedging on a rolling basis as far as our revenue is concerned. But if on the bank account, if there is dollar balance which we have the dollar payment, to that extent there could be a notional impact. But apart from that, we do not expect any substantial impact as far as the P&L is concerned.

[Operator Instructions] The next question is from the line of [ Pradeep Rawat ] from [ Yokay Capital ].

Yes. So I have a question with regards to our facilities. Currently, we have somewhere around 7 sites, manufacturing sites, so can you provide us the breakup of how much revenue from each site we can get?

Sure. So Pradeep, basically, the sites will be multiple. So like, for example, in India itself, we have 2 manufacturing sites, Bavla and Naroda, and in Switzerland, we have 4 manufacturing sites. Then we have 1 in France, 1 in U.K., 1 in Shanghai and 1 in Netherlands. So we can again provide that our subsidiary value breakout of the revenue, which we are -- so we are reporting the [ segmental ] revenue in our presentation, which includes the CRAMS revenue coming out of Carbogen Amcis, which includes the Swiss site, the Manchester site, the Shanghai site, as well as right now, even the France site is part of it. So the more substantial revenue, roughly about 90% of what we see as CRAMS under Carbogen Amcis is contributed by the Swiss entity. The Shanghai entity is an extended, so we say, a supply chain of the Swiss entity, where all of the manufacturing down at the Shanghai entity feeds into the Swiss entity. Manchester, roughly about 40% is sold directly to the customer and the rest I think goes to the Swiss entity, which then onwards gets involved to the customer. And the French entity just started operations where the revenue was about EUR $1.2 million. The cholesterol and vitamin D analogues, that specifically are our Netherlands entity, so that is the revenue done by the Netherlands entity. The DCAL India [ AP ingredient ] intermediates, that's essentially nothing but our Bavla site in India, and the Quats generates in DCAL India is basically the Naroda site. So this is the breakup of the revenue.

Okay. So you have provided the margins also so that -- so what is the revenue potential from our -- all the facilities? So can you provide an overall perspective of how much revenue can we generate from our current asset base?

Overall, right now, if you see across the group, underutilized capacity is in India because in India, we have done significant improvements over the last 4 years while we were under the cloud of EDQM. So now with the -- because of the changes that have been made between the Bavla and the Naroda sites, including the operational excellence that has been brought in both sites put together and do a revenue on the existing asset base of close to about INR 1,000 crores. So that is the potential as far as the India sites are concerned. As far as the Swiss entity is concerned, it can potentially -- currently, it is running at roughly about 85% in terms of the capacity. So it can go a bit higher to maybe around 90% to 95%. The Dutch entity operates at roughly about 65% to 70%. So we could potentially increase the revenue over there. Shanghai is operating at roughly about 70% and the Manchester entity is roughly about 80%. So there is more or less the capacity utilization at different entities.

Yes. What I can understand is we are operating at close to 80% or 70% of utilization. And with respect to our asset turnover, it is quite low, less than half right now. So what [indiscernible] kind of lower asset term?

So essentially, the lower asset term that you see is largely on account of the India site. So if you see the India price, like, for example, last year, with a total revenue of about INR 250 crores on the CRAMS side versus the asset being based upon the current asset base, which can be roughly about INR 800 crores. The total asset base is about INR 800 crores for the CRAMS business. So now as the things we have already received the clearance from the regulatory authorities, we do expect a significant ramp-up in the revenues coming out of the India site and that should help us in improving the asset on, especially out of India. As far as our overseas locations are concerned, I think the ideal or the maximum asset turn that we can achieve will be close to about 0.8 dividend with high, maybe 0.9 because of the higher cost base of the assets over there and most of the world that is being done, especially out of the Swiss entities on the development site, and the development infrastructure is also quite costly. So -- and if you compare with any of the larger European players who are into the CDMO space, we will find a similar kind of asset turn. Plus, the other factor to be considered is our French facility, where the asset has just been created worth about EUR 50 million, and the revenue has just started from June of this year. So that's a completely unutilized asset that we have right now where we can aim for an asset run of close to about 1:1. So there are a lot of capacities that we have across the group where there is a potential to increase the revenue. And hence, from a CapEx perspective, we don't expect any significant growth CapEx to be invested majorly. It could be on the maintenance side as well as on the compliance side that we have to make sure that we are -- we are always GMP compliant in terms of the assets that we have. So essentially or any spend on the CapEx on the maintenance side is roughly about [ $17 million ] to [ $18 million ], and that is something that we will have to keep on incurring go into the future.

Yes, sir, I understood. So you are saying that like our kind of business will generally generate 0.8 to 0.9 kinds of asset turn and our current asset base is close to INR 7,000 crores. So is it fair to assume that we can generate, at our current asset base, close to 5,000 kind of turnover?

No, I think the INR 7,000 crores that we are mentioning also improves the value of the goodwill, which is obviously not -- I mean not a tangible asset, so as far as our tangible assets are concerned, that would be close to about INR 2,000, INR 2,400 crores. So that -- I mean on a net basis, after depreciation. So on a gross basis, there will be close to about INR 3,500 crores.

You have close to INR 4,000 crores in intangibles. So what does it contain? For instance, you mentioned that we have around INR 750 crores of intangibles or INR 550 crores of intangibles, so I just want to understand that.

So basically, the intangibles are broken down into 2 parts. One is the intangibles that we have on the India balance sheet, which is the outstanding amount of which is roughly about INR 594 crores. The second is the goodwill or the intangible asset that's visible on a consolidated basis. So this goodwill that you see on a consolidated basis, this is on account of -- this is just on account of consolidation of all of our subsidiaries and the pattern for the reporting purposes at a group level. So since we have investments -- I mean I think from the current perspective there are investments in the subsidiary which got revalued in 2017, whatever is the incremental value of the investment in the subsidiary, that is what all as part of the goodwill on consolidation. So that is all intangible because it's all assets not to be used for manufacturing purposes. So the core assets for manufacturing part of this are to the tune of about INR 3,000, INR 3,400 crores.

As there are no further questions, I would now like to hand the conference over to Mr. Pascal Villemagne for closing comments. Mr. Pascal, we are unable to hear you.

Sorry, I was on mute. Thank you, moderator. Dear shareholders, thank you very much for your time taken to our call for today. I hope that you have got all the answer to your questions, and we are looking forward meeting with you over the next quarter. Thank you very much.

Thank you very much, everybody.

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