Dr. Reddy's Laboratories Limited (500124) Earnings Call Transcript & Summary

So greetings to all of you. And thank you for being here with us today for the Dr. Reddy's Investor Day 2022. I hope all the participants who have joined us are able to -- can view and hear us. Today, first, the senior leadership team of Dr. Reddy's, Mr. G.V. Prasad, Co-Chairman and Managing Director; Erez Israeli, CEO; Parag Agarwal, CFO; M.V. Ramana, CEO of Branded Markets; Sanjay Sharma, Global Head of Manufacturing; Archana Bhaskar, CHRO; and Jayanth Sridhar, Global Head of Biologics. The management team would take you through the growth levers of our business and our sustainability goals. There will be a Q&A session after the presentation and request the participants to ask their questions during that time. We have also arranged for dinner for in-person participants. Please note that any reference made on the future outlook should not be construed as a guidance made by the company. These forward-looking statements must be read in conjunction with the risks and uncertainties associated with the company's business activities. For detailed information on these, please refer to the company's filings made with the SEC, which can be found on sec.gov. Now I request Prasad to address you.

Thank you, Amit. I hope I can take the safe harbor statement as read by all of you. Thank you. Firstly, a warm welcome to all of you. Thank you for being here today. And also thank you for your continued trust in Dr. Reddy's. Today, we're going to talk a little bit about today what we're going to do in the first -- in the next -- which is the next and the new. The next is about our existing businesses, how we're going to drive growth in them. This constitutes the majority of our revenue today. Then we're going to talk a little bit about the future. And that's the new, what we're calling as Horizon 2 today. These are businesses, which are today small in size or in the form of experiments that we are conducting in the marketplace. But we hope that they'll become seriously big in the future. That is the Horizon 2 part of our business. Along with this, we also want to share with you our long-term plans for sustainability. Sustainability is at the heart of everything we do, and it has always been an integral part of Dr. Reddy's. But today, we are going to unveil our goals for sustainability. And we'll also explain how we'll integrate sustainability into our strategy and also how we will create value for all of our stakeholders. And this is really the heart of the presentation, and it is -- and the team will take you through the strategy and explain to you how we will drive the current businesses and how we will create the future of the company. We also want to explain to you that sustainability means actually, it will also -- sustainability will also drive performance of the company, and we'll share some of the goals and explain to you how growth and sustainability can come together to create a truly high-value creation organization for all of our stakeholders. We have a short video, and after that, I'll come back and share the sustainability goals with you. [Presentation]

So you saw -- you all saw a glimpse of what we are about to talk about today as well as the evolution of the company in the last few decades. I want to start with talking about our purpose. Our purpose, as you saw, is to accelerate access to affordable and innovative medicines because we believe that good health can't wait. And the three elements of this are access, affordability and innovation, what we call as patient-centric innovation. With these three elements we hope to bring our purpose to life and take -- bring to life our credo of good health can't wait. And as we look at access, affordability and innovation, we have built a set of strengths, which will help us deliver this -- deliver on this purpose. We are vertically integrated. We have a very strong and agile supply chain, and this was very evident during the COVID times. We hardly missed a beat. We were able to supply products continuously and also bring in COVID therapeutics to the market at a record pace. We have a strong manufacturing system. And today, we will have some -- a glimpse of that through Sanjay's presentation. And our execution has improved over the years and productivity has also improved. In terms of access, we have presence in 66 countries. We have pipelines, which can be leveraged across many geographies. And our expertise in R&D is well known. And to this, we are adding patient-centric innovation to address unmet needs and also to position ourselves as a partner for bringing many innovations to the marketplace. In all this, we have, in the last few decades, we have focused heavily on people practices to help people become the best version of themselves, strong corporate governance to ensure a high level of transparency with all our stakeholders and of course, deep science and technology capabilities. And to this, we are going to add digital, as you saw in the video before. We are investing very heavily in digitalizing the entire pharmaceutical value chain to bring the benefits of digitalization to our patients. The topic for today that I really want to draw your attention is about sustainability. Sustainability has always been at the core of what we do at Dr. Reddy's. We were among the pioneers in embracing sustainability. We were among the first to publish our performance on sustainability. Along with that, we drove a lot of improvements. We were among the early adopters of zero discharge -- zero liquid discharge plants. We also ensure that we don't send anything to landfill from any of our plants in India and many such achievements are there. We've reduced our dependence on fossil fuels. We have renewable power starting to take a significant portion of our energy and utilities. And overall, we have done well on this front. But, however, it was not an integral part of our strategy. And today, we are putting in front of you the goals that we commit ourselves to you and making sustainability an integral part of the organization, its strategy and its performance metrics, which we will share with you on an ongoing basis. So these are our goals, and I want to take some time here to explain each area. The first one is about environment. All of you know about climate change, the generational challenge that we all have in addressing climate action. And for this, we are taking some very bold goals. We're saying by 2030, 100% of our power will be renewable power. We are also going to turn carbon neutral by 2030. Of course, there are many things we have to do to get there. Some of them within our boundaries and some of them outside to offset the activity that we are doing. And we are also saying that in our value chain, we will start focusing on our strategic suppliers and bring their footprint down. And by 2030, we'll bring the footprint down by 12.5%. We're already close to being water neutral, but we're going to become water positive by 2025. These are our environmental goals. Then, we have social goals. And this, we have two parts to it. One is the direct impact we have with our products and services. And the other one is to contribute to make the world more equitable and a fairer place in the world. So in terms of our products, we want to serve 1.5 billion people by 2030. And that means we need to add about -- roughly about 1 billion patients between now and then. We also want to add to affordability. And the biggest impact on affordability happens when you are the first alternative to high-cost brands. So we want to ensure that, at least 25% of our product launches will be first to market by the year 2027. And the third thing is about innovating to finding solutions to unmet needs and improving the standard of care. So we are saying that by 2030, we will have at least three innovations every year, which will improve the standard of care, either through incremental innovation, a service added on to a product or new chemical entities, new biological entities. The third part of this is contributing to make the world a fairer place and more inclusive. Here, we are saying that we are committing ourselves to having, at least 35% women in leadership positions. Today, we are about 1/3 of that. And we define leadership position as a top 200 positions in the company. We're also taking a very ambitious goal of achieving gender parity by 2035. This is one of the most difficult goals that I see here, but we are committing ourselves. It's better to aim high then fail than aim low and succeed. That is the philosophy we're taking when we put these goals in front of you. We also commit to making 3% of our workforce for people with disabilities. And also ensure that 100% of our workforce, extended workforce, contractors, daily wages, all of them who work in their premises to have living wages, wages by which they can live a decent life. These are environmental and social goals. And finally, on governance, we already are in a good place in terms of corporate governance. We will ensure that we continue to be there and adhere to the highest standards of ethics and compliance. We also want to enhance our disclosures. We already disclosed a lot in terms of our environmental performance and ESG performance. But we're going to add to that. And at least by 2025, we want to be in the top 25% in the world in terms of our disclosure standards. And finally, we want to have all our strategic suppliers to be part of our own ESG framework so that Scope 3 emissions are also measured, controlled and improved. So these are our sustainability goals. And while they are bold, ambitious and challenging, they will also help us improve our performance. If you're serving more patients and improving the performance in terms of first-to-launch products and bringing innovative products, all this will add to the financial performance. So we'll do all this without sacrificing our performance and in fact, enhancing our performance through these goals. With that, I'd like to -- a couple of more slides. I just wanted to point out to the Board of Directors we have who will help us and who are completely aligned with what we do in guiding the company forward. We are proud to have 1/3 of our Independent Directors as women. And we have a very diverse talented Board who guide us in everything we do and will add significant value in terms of strategy, governance and overseeing the management actions. And finally, we have a very strong leadership team led by Erez, who is a veteran in the generic industry, and his last 3, 4 years, he's made significant contributions. And we have a very diverse and strong management team coming from different sectors of industries and adding to our talent pool. With that, I'd like to hand over to Erez to take you through the strategy of the company and how we are performing in the various areas.

Thank you, Prasad. First, I want to thank you for coming. Great to see you. Some of you, great to see you again. Some of them may be new faces. We are looking forward to interact with you today, the next coming days, follow-up meetings, whatever. The dialogues with you is very, very important for us. In this section, we want to update on our strategy. And strategy is always evolving. And indeed, the company over the years, evolved its strategy multiple times. Some of you reminded me the last time that we made a day like that was in 2015. Last time that we updated, let's say, our strategy in a way that we have communicate to you somewhere in the beginning of 2019. And we felt that it's about time that we will do it again. And at that time, the philosophy was, can we find a way to increase the opportunity and to reduce the risk of the company? If you recall at that time, we were very concentrated on [indiscernible] generics and all the relevant trends that were at the time. Some of you know it very, very well. And we did that. I think we delivered on our promise, basically using three pillars of activities. One we redistribute the capital allocation to serve additional markets. And indeed, the markets outside of the U.S. grew faster than the market -- than the U.S. market, while the U.S. market grew, I'm going to discuss it. The second, we saw that we do have a great science, great capability in science, great portfolio. And the main thing -- the obvious things to do at the time was to leverage it. Can we sell the same product that we are developing for the U.S. outside of the U.S.? Can we sell it in India? Can we sell it in Europe? Can we sell it in China, et cetera? And productivity. Productivity is not just to have less cost. It's about using your resources better. Can you get out of INR 1 of investment more? Can we get out of $1 more? Can you do it faster? Can you do it cheaper? Can you get more out of the same investment? And the combination of that actually, I think, was so far, so good. We grew in those 4 years. We have a very, very clean balance sheet. And I will say, in the EBITDA is in the neighborhood of what we aspire to do and actually achieved it faster than what we originally thought. And the reason I am mentioning the past is because it will help us understand better the context of the future. I believe that it's not just those results. There is also the intangibles. For example, the maturity of the leadership team. We, as a team, now working together about -- some of us 2 to 3 years, some of us 4 to 5 years, but we learn to work together. Our processes are more mature. Governance is more mature. I mentioned to some of you, a foundation of a tower is different than foundations of a building. If we want to make our building a tower, we had to work also on those foundations. So as we grew and as we leveraged ourselves, at the same time, we built something that is ready. And the main message that I would like to convey to you, we are ready. We are ready to accept a new set of opportunities. Also, as you know very well, if we are now living ourselves, we are living in a world that is volatile. Change, actually, the level of change is -- or the pace of change is faster than ever, more volatile than ever. Everything that is on the trends and naturally, these are selected set of trends, you know very, very well. All of them are relevant to us. And we also in the company, and I personally very believe there is nothing like a good change for -- to get the opportunity. I am a great believer that there is nothing actually like a good crisis to make an opportunity. Just for example, take COVID. We saw COVID as an opportunity. We saw it an opportunity to bring a very healthy portfolio into India. It helped the patient. It helped the purpose, and it helps all of our stakeholders. Some of those changes have far reaching effect on us, on the world. Take for example, the biologics. If you look not a year from now, not 2 years from now. If you look a decade from now, 2 decades from now, if you look how the R&D is going to look like, biologics, cell gene therapy, T cells and any other evolving stuff. For example, who knew to say mRNA only 3 years ago is going to be very important. If we seek to serve patients, not just now but also a decade from now, if we seek to be many, many years, we have to focus and evolve ourselves also in this area. So it's not just how do we address current disruption or geopolitical issues, which is, by the way, also an opportunity for us. We are here in India, India as a country. At the time that countries are not always lacking each other or working well with each other, country like India is actually having a lot of opportunity. And we see ourselves as an Indian company actually, leveraging the -- some of the current situations. So those trends are -- people many see them as risk. I actually believe that it's a great opportunity. So the combination of our readiness and the opportunities that exist out there is the basis of what we would like to discuss with you today. And if you want, Prasad presented, we want to triple the number of patients that are enjoying the services that we want to do. We want to be impactful to patients around the world. And the foundation is our sustainability that was presented by Prasad. The focus that we are going to discuss on our strategy is basically what do we do with what we do now. And for the sake of the discussion, let's call it Horizon 1. And what do we do with the future which is in Horizon 2. And we, as an organization, wants to discuss and to dialogue with you on what we do with both. And there is -- or there are many opportunities on both Horizon 1 and Horizon 2. And I will elaborate about it. The execution of how we are going to evolve both on Horizon 1 and Horizon 2 will speak. You saw it also in the movie, how do we increase our leadership, how we are becoming more productive and how we are becoming more innovative. I will present the leadership. Sanjay will present the -- our productivity, especially in the operations side, and Ramana will discuss the innovation piece. That's how we are going to evolve it. And let's just zoom in a little bit of what do we mean by Horizon 1 and Horizon 2. Horizon 1 is the core that you are very familiar that we are doing. Our generics, our API, et cetera. We believe that there is still a very, very nice opportunities with Horizon 1, and we will discuss it. There are opportunities that are coming if we play globally, and it will continue to be productive. The main lever on Horizon 1 will be productivity and leadership. At the same time, as we work and evolve Horizon 1, we are -- feel that we have the capacity, we have the flexibility, we have the maturity of the management that I mentioned before to take upon ourselves more. And this is a selected list. It's not necessarily inclusive. It's not necessarily everything that will be robust, but we will discuss it, in which one of them we are going to ID it, pilot, scale up and create a business for all of those activities and maybe more. How do you select them? These are synergetic actually to what we do in Horizon 1. They're leveraging our market reach because either we do it or partners around the world want to work with us because we are friendly, we are compliant and we have something that many don't have. You don't have that many companies that can say that in their space, we are top 10 in the U.S., top 10 in Russia, top 10 in India and top 10 in China in what we do in our relevant spaces. And on top of it, we have the reach of the other countries. When you are a company that have great idea and you are looking for somebody that can actually operate and help you and have the ability to do that, especially when you take into account the current geopolitical tension and stuff like that, we are found by many as a partner of choice. And our R&D is allowing us to work in this area and evolve it. So when you look at nutraceuticals, it's a different market, but the principle of development is very much like pharmaceutical. When you look in CDMO, we are actually CDMO for more than 20 years. We have all the capability to do that. And we found the place which we believe that we can play and win, et cetera. So if you wish, what I would like the take-home message, remember, we have Horizon 1, and we have Horizon 2, and we are going to dialogue about these definitions also in the years to come. Now some high-level aspirations that in order to say what does it actually mean to us. Naturally, this is an Investor Day. First of all, we believe that we will grow. So it's all about growth. The best way for us, which is the most important, is the 3x more patients. 3x more patients eventually means that we are going to be more important in many, many sense. And we also believe that in terms of the normal language that we use to discuss with you about money and about value, whether it's revenue, whether it's EBITDA, whether it's profit, this will continue to grow in the same pace, give or take, as we grew also in the past and will be accelerated once the Horizon 2 will be more and more mature. We also feel comfortable with the aspiration that we shared in the past. But what we are saying here, it's a bit of a tweak. We believe that there is an opportunity to continue to speak on those [ 25 25 ] and invest in Horizon 2. So to take upon ourselves additional stuff and still to give the return on the short term as well as building a very, very, I believe, intriguing profound future organization. And on sustainability, which is intricate part of everything that we are going to continue to be a leader, we believe that we, as somebody that wants to lead our markets, have also social responsibility to lead something that we believe is very, very important, especially here in India, but also around the world. And we hope that many companies actually will follow our footsteps and will adapt the goals. The reason that we share those goals is because we want them to be visible. So hopefully, others -- as well as other will be committed to it and the world will become a better place for all of us. Now I want to zoom in a little bit on the three pillars. What actually leadership means for us. Leadership is, of course, leadership in the space that we decided to play. And we shared in 2019 as timed spaces, we are going to evolve them a little bit. And what we are saying now, we will continue to work in those spaces that we discussed in the past with a sharper focus. We will be focusing on what matters, especially what matters to patients and what create better returns, better productivity, better value to our stakeholders. We divided our products to four types. Products that we can win because we have economy of scale. Those products, we have, let's say, better market share than others, better market reach, better service, and we would like to sustain that. This naturally products of what you call the high-volume type of products or products that have certain particular feature that allow this economy scale to happen. The second pillar of products that we normally have is what we call the complex product. Normally, in meetings when we meet one-on-one, these are the products that are normally coming into the discussion. Do you have this product that can make a lot of money in a short period of time, especially in the U.S.? We will continue to have that. I'm going to elaborate on that. This is absolutely an area of focus, will continue to be an area of focus, and I'm going to share with you some new names that we did not do for a while. The next, which is very, very important, we call it product with a story. Product, it means that we have some differentiation that comes and the world is evolving. Product is not anymore just a pack of pills. For some of you, I mentioned examples. Take for example, a patient that have epilepsy. If we can come, and we have now technology to do that, and we can offer the drug products, but we can offer also a bracelet that can give 4, 5 minutes before potential seizure an alert to the patient that he is going to get it, we are going to change the journey of the patient. Imagine that if somebody has epilepsy, you will be afraid to drive. You will be afraid maybe to walk. Maybe will be afraid to be in a place that is -- with many people. He doesn't want to embarrass himself or his family, et cetera. You have now the ability to combine products and technology to create a differentiated game, very much on what we want to do in a country like India in the branded countries is going to be about that. We call it brands or products with a story. And the last, but not least, we are going to play in the clinically differentiated product. We already are doing it for quite some times, but we are going to do more of that. Our origin discovery has a pipeline of about 20 product, most of them in immuno-oncology. And we are going to play [indiscernible] game also in the future. Ramana will elaborate about it when we'll discuss. So all of that we'll be able to discuss. Productivity and innovation, it's primarily about the ability to use the tools of tomorrow. The ability to use digital. The ability of using automation. The ability of looking how there is a better way to do what you do. And there is always a better way to do. The world in which -- for example, we are selling a medical rep that needs to see 10 doctors a day. Each doctors will give him 2 to 5 minutes on average, which means that it's productive time, assuming that it's productive. It's 20 to 50 minutes a day are over because the digital allow you to do additional activities that we did not do in the past. And when you go to the sites, when you go to how you develop a product with the tools like artificial intelligence, with tools like ability to connect between data and machines, you can scrutinize and streamline and make the parameters much sharper. You can develop things that some of it were imaginary in the past. I want just to share with you an example. We -- when we develop a product in R&D lab, we need to move it to the plant. In the past, the people had to come to take a plane to fly to Vizag to spend time on that in order to produce that batch. That's how you do a scale up. Now when you put -- now all kinds of Google glasses and stuff like that, you can do the transfer without moving. For example, there are many, many ways to be more productive, and I'm just giving a glimpse. For us, productivity is primarily to work, one, more discipline, but second, to add innovation to it, especially digital. The innovation, it's about to bring either breakthrough, meaning a new paradigm, like I mentioned, to a journey of a patient or incremental innovation. The [ effort ] that Ramana is going to present and we are going to be focused is to do about, if possible, 50-50. We want to have breakthrough as well as innovation in it. Now we'll zoom in a little bit on that. First, on market leadership, and this will be also an opportunity for me to update you on some of your anticipated questions on the markets. Normally, people are asking us about the United States. And the United States is always in a negative connotation, giving price erosions, giving consolidation. And by the way, to anticipate that question, yes, it is not an easy market. Yes, there is a price erosion, but you can actually grow there. And the United States was and will continue to be an important market for us. And by the way, we grew in the United States. We are actually growing in the last 4 years in the CAGR of 5%. Not just that, we are able to change the portfolio and to actually focus and get some market share in a very, very important set of molecules. In the last 12 quarters, we grew 10 out of 12 quarters. And this is in the generic business model. In the United States, there is also an opportunity to grow outside of this business model. And this is what Horizon 2 is going to be all about. And it's also shared the importance of North America as a territory for us. We see an opportunity in biosimilars. We see an opportunity in digital-led. In America, there is a great, if you wish, awareness as well as a lot of evolving opportunities in the way people directly speak to patients and to customers. And these are all digital-led. We see an opportunity for our immuno-oncology as innovative play. And we also see that the business model of the retailers is getting challenged by Amazon, by [indiscernible]by others. We believe that if you remember in the past, we shared that we want to reach about 300, give or take, molecules in the United States. So we did. At the time, we had 120, if you remember. Now we see about 160 commercial product and about 175 products in the pipeline. Most of the products that are commercial has a kind of, let's say, reasonable market share and even leading market share within the relevant channels. And when we are zooming in into those 175 products, in which 90 of them we filed and the rest we are going to file in the short period of time. I want to give some highlights into that because we -- I know it's of interest. First of all, we are sharing with you names of product that we did not share in the past, not that it will shock you. But I believe that in each one of them, we are in interesting positions on both the biosimilars as well as that. This is a partial list. I just want to make. This is not the future of the company. It's a partial selected list of these opportunities. Actually, we have about 25 plus. And when I'm saying plus, it's something that we want to be very certain that will fit the definition of what we call complex product. If you remember, I said there are four pillars of products, this is one of them. And we -- as we know, most of our investment, most of the CapEx in the last couple of years went to sterile as well as to biologics. And this will continue to be the focus of the company as well. The leverage will continue. We are not developing for North America. We are developing globally, and North America is going to be an important market. So what we say we like to be in America. We like to sell in America -. We are not dependent on America in that respect. Europe. Europe, I think we -- it became an important pillar. In the last actually couple of years, we double ourselves in Europe. And we do see, and it's primarily by leverage. So you see that the leverage works. We take basically the U.S. portfolio, launch it into it and we are building that momentum. As we speak, we also see here Horizon 1 as well as Horizon 2. And some of them are unique to Europe. For example, take pharmaceutical cannabis to differentiate from medical cannabis. Medical cannabis is primarily for pain. Pharmaceutical cannabis is going for dementia, is going for autism, it is going for other attributes that are primarily CNS. We believe that a place like Europe, there is an opportunity like that is actually evolving on both medical as well as pharmaceuticals. We see a great place for biosimilars. On both the U.S. as well as in Europe, we are going to sell our own biosimilars. It's something that is different from the past. In both locations, if everything was about Germany, Germany is going to grow and will continue to be an important country in Europe. At the same time, we are going to grow in the other big EU-5 as well as 7 more countries that we will add and we'll play a pan-European game. We believe that by 2027, Europe will be an important space for us and not just, let's say, and Europe. But Europe will be a respected space in that area. India is the heart and the soul of Dr. Reddy's. Naturally being coming from here, most of our employees, our brand, our main investors, our main stakeholders are here in India. We will continue to stay in that way. I am -- I know I'm from Israel. I know I have an Israeli accent. But now, after more than 4 years in India, I feel very much Indian. So I have also -- I'm paying taxes in India. And I love the culture, and I believe that, that culture, that heritage of India is the heart of the soul that takes every one of them. So I can tell you that as a non-Indian, you should be very proud being an Indian. It's a wonderful country with wonderful talent and people, and we want to leverage it. And we did. If you remember, when we had the discussion in 2019, we were #16, #17. We told them that in few years we'll be top 10. And then top 5, we discussed top 5. We are still there. We are in that journey. We are going to be there. And we are even internally discussing now to be more aspirational than top 5. I don't see any reason why Dr. Reddy's will not be the leader in India in the years to come in health care, we have the motivation to do that. We have the means to do that. We have the people to do that. We have the brand to do that. And that's what we want to achieve. We saw CAGR of 17%. We grew faster than the market. But we believe that we can bring to India Horizon 2. The Horizon 2 innovation will be very much centered in India. India as well as the United States will be the countries in which we will speak in terms of revenues in billions in that respect. And the journey is going to continue. Our emerging markets worked really well for us, 2x in the last 4 years. The strategy that we have discussed in China worked also very well for us. Indeed, we see that we are starting to get the approvals in China. We are in Russia. We'll continue to work in Russia. Wherever patients are there, we are going to serve them. And we do see that the [indiscernible] countries, Russia, China, Brazil will continue to be -- and among the markets that I discussed before, these will be the markets in which we will develop products for, and the other countries will be leveraging those, if you wish. So we do see an ability to play in all business model, either a brand game or a B2B game. And we see actually a lot of opportunities for Horizon 2 activity. So if you wish, what I wanted to say with all of that, in each one of our geographies, there is a place for Horizon 1 and horizon 2. In each one of the places, the management is ready to accept Horizon 1 and Horizon 2. Our API. Going into -- when we have discussed productivity, when we are discussing potential disruption, even as a risk management, the API is essential for a competitive advantage, both on the risk as well as the opportunity. But when we are discussing API, it's important for us to agree and we are, by the way, discussing it in our report as part of PSAI. It's actually not one business. It's actually four different businesses. What is the API? And the importance of the API is primarily to allow your competitiveness and access to your market. This will continue to be. We are going to grow that business, but we are also going to accelerate the backward integration to allow the competitiveness of the future. And with that, we are working on both our drug master file as well as the pipeline in many, many countries because it's a competitiveness. For example, our ability to be as the APIs is the main advantage that we have in China. Again, please let us remember, the U.S. context used to be the game. It's still important. But the portion that we will have of the activities in the U.S. will be different when we'll have Horizon 1 and Horizon 2 plus the growth in the organization. There is a business that is actually selling in the same way you're selling API to customers, you're selling pharmaceuticals. And actually, over the years, the selling of products, finished product to customers can be as big as selling that. And we are planning to do that in many, many countries as complementary to the markets that we are working directly. That's the goal of -- we call it API plus. But in reality, these are dosage from -- sales into the marketplace. We are going to double down on our CDMO on both -- by discovery as well as services on both synthetic as well as biologics. This is an area in which we are going to invest. We believe that a lot of development in the future will be in biologics. This also will enable us to enhance our capabilities in those areas. So if you want to enhance your capability, biologics CDMO is a great way to do that. And last, but not least, COVID, like to everybody else, was also high moments for us to understand that we have values that we can bring to the world. Now that we did not know, but something that we've -- something that, if you wish, we understand the importance of it better. And this is where we started to go after the COVID products. And now, we are working very hard to have all the portfolio, for example, of COVID, but we started to work with those organization on other opportunities in other areas of need, whether it's women health, whether it's diseases that are relevant for this kind of the world, diseases like [ dengue ] and stuff like that. And this is going to be an important pillar for us as part of our B2B. So when we are going to discuss PCI in the future, please remember, it's not just about API. It's about each one of these 4 pillars that we are going to have in the future. And last, but not least, on the spaces, it's about our biologics. And normally, biologics, when we say biologic, we meant biosimilars. And indeed, this is the main focus that we have. So first of all, if you remember, and I discussed it with you in 2019, at the time, our main play was in the emerging market. We decided at the time to skip and not to develop the products that will be with patent expiration between -- up to 2027, saying there is no point to come with this product to the market because we are going to be #4 or #5, #6 in the market. We decided to go to the next set of products. The only products that we kept because it was already robust was rituximab, which is indeed going to be the first product that we are going to market ourselves in the, let's say, Western markets. We are already marketing this product in many countries by now. Our pipeline is now 12 products, some of the names I shared. And we believe that we are going to add, at least 2 to 3 more assets every 3 to 4 years, so to add to this asset. And we have the means to do that. In addition to that, we are going to undertake upon ourselves two things: One, the CDMO biologics; and second, the Horizon 2, which will be about CGT, cell gene therapy. So biologics is going to be an area that will be very important for us scientifically, operationally, market and mindset of what patients will need.

Thank you, Erez. Good evening, everyone. This is my first time in front of this group unlike Erez who has met both of you -- most of you many times. I'm going to talk about productivity in terms of what we are doing in productivity in Horizon 1. I'll start off with sharing our aspiration. Our aspiration is to be amongst the most productive pharma operations in the world. And productivity for us is not about operational expense productivity. It's not about people productivity. It's about being first to the market. It's about making sure that your products are competitive, with making sure in terms of your service, you are ahead of the curve and top decile. And also making sure on compliance, you are not just on compliance, you are beyond compliance. And I'm going to share with you a couple of things that we are doing, and we've been working on a lot of things I'll share a few of them in terms of what we are doing to make ourselves productive, not just in the OpEx and the people area. Also in the end-to-end area that I'm talking about. The first part is integrated product strategy. What we are doing is every product that we deal with would have an integrated product strategy across the organization. That means product strategy is not just about the aspiration of the market where we want to be. Product strategy is about what the market aspiration is and what we have to do in the complete back end, be it in terms of development, be it in terms of time, be it in terms of capacity that you will need to build in, all of that has to be sewn in together to create an integrated product strategy. And we're going to create integrated product strategy for every product that we deal with. So that's one part of it. Second part is in terms of making sure that we are first to market. As we build the product strategy, what we are doing is we are building platform technologies, which would ensure that everything that we do -- when you develop a product and you take it from selection to commercialization, it passes through multiple stages. And a lot of it gets lost in the translation because it's a complex chain to manage. And we have created platform technologies to make sure that one -- from one end to the other end, everything is linked in seamlessly to make sure that our result delivery against our aspirations are top class, and we are able to be in line with whatever is spoke about in terms of being first to the market. Third part is in terms of competitive cost. Product cost competitiveness is not about a onetime exercise. It's not that you take some products and you work on projects and get to the best cost. It's something about a culture of making sure that you're evergreening your products at every point of time. So what we are working on in every product that we have, we're making sure that there's an aspirational point B that you are working on. That would include development changes, alternate route of synthesis, alternate vendor development, changing your processes and wastages in the system, building scale to make sure that you get the scale benefit. So all of this put together helps you get to what your aspiration and the cost competitiveness is, and does not stop over there. Once you get to that point B, you're working on that product again for the next cycle of evergreening of the product. The next piece is in terms of long-term infrastructure plan, and that has a very important part to play in terms of our productivity. We have created a long-term 5- to 7-year infrastructure plan to take care of two things. A, build an infrastructure, which is nimble, where it is required to be nimble, and build infrastructure, which is designed for scale, so that you are competitive and are able to leverage the growth opportunities that you have. So just to give you an idea, everything that we do today is to make sure it's in line with what our aspirations are 5 to 7 years down the line. So we did not create an infrastructure with 3 years from now would be not competitive. So that's a criticality of long-term infrastructure planning in the whole plan. And finally, as we have seen some improvements, and as you get closer and closer to being on the higher decile, you realize that incremental improvements become difficult to come by. So we are using Industry 4.0 technologies in terms of making sure that we go beyond with what we have reached and get to our aspiration of being amongst the most productive. I'll talk about something about it in the subsequent slides. So this is just to give you a glimpse in terms of how we have progressed in the last 4 years. And in every vertical of the business in terms of our operational productivity, we have come a long way. And we have seen improvements in the range of 30% to 80% in most of our areas, be it API, be it formulations or be it the injectable part of the business. And we'll be continuing this journey. If you see the extreme right side, there's something called aspiration. There's still some business to go. And that is the point, which we say the point when I can say that we are amongst the most productive in the world. So as you try to make the transition, like I said, from where we are right now to getting to our top decile, the journey is becoming a little difficult. And what we started doing is we've taken one of our largest plant. And we are applying close to about 40-plus Industry 4.0 technologies to make sure that we break that barrier that we are hitting because beyond a point, the traditional levers in terms of lean operational excellence tend to have a limitation. So we're using Industry 4.0 technologies, 6 of the 8 technologies at scale. It's not just 1 or 2 products at scale. And we've seen significant improvement in most of the areas. Just to give you a couple of examples and some simple ones. Whenever you have -- and we run complex processes, the product manufacturing process is very, very complex. And when you have an attrition, some new person comes in, traditionally, it takes about 6 months' time to actually get certified to be able to do the same thing. We have created augmented reality modules. We could just put on a HoloLens in a couple of weeks, he is there to make sure he's doing all of those activities. So it's a journey. We have just about started off doing that. We've created on some of the equipment. We plan to take it out on scale. The other piece in terms of very extensive use of advanced analytics, and we're using advanced analytics to make sure that all our operations, they operate in the sweet spot. When you look at your operations, be it from the point of quality, be it from the point of view of productivity, there's always a sweet spot, identifying that sweet spot and making sure that you have control mechanism so every time batch after batch cycle after cycle, you are hitting the sweet spot. So these are some of the use cases. There are many more of these, and maybe when we have a separate session dedicated for this, I would love to take you through that. So there have been some significant improvements that we have seen on this, be it from the point of view of cost, or productivity or quality. But the most important is effort, simplification, touches, there's been a huge improvement. In fact, the kind of -- what we say Moody's and effort that people used to make in terms of data mining, data digging has become very, very effective and very, very seamless. This is something that we are now going to be rolling off to almost every operations. And this is what we see as a key lever in terms of our aspiration going from -- going to -- from going from top quartile to getting to the top decile and get amongst the most productive operations in the world. As a next step on this, we are taking this to all our operations. And over the next couple of years, you would see this Industry 4.0 practice as becoming the way of working at all the operations and Dr. Reddy's. And I'll be more than happy to answer queries towards the end of the day today. Thank you so much.

Good evening. I will carry forward where Sanjay left on productivity. I'll talk about productivity on sales and marketing. So if you see, there are two kinds of journeys that we're taking as far as productivity is concerned. The first part of the journey is about how do I get more with the same amount of spend. And that's about what is traditional, right? So how much of geography I'm able to cover? How many of those doctors are giving me their share of wallet? And how could I continue to improve on that and ensure availability of my products in the nearby pharmacies? But the second important element, which also is important from a point of productivity, is my SG&A going to maintain the business? Or is it going for me to build the sustainability? And the sustainability is coming, by the way, in building bigger brands, by the way, in which we are building the connect to the doctors so that it is not just the push from the company to the doctors, but the doctors are pulling Dr. Reddy's products and services, and we are also making investments to ensure the connect with the patients. And how are we going to do that is in the form of the go-to-market innovation that we have done. We today, have good coverage in the way in which we have done design thinking and started to get to rural, whether it is the Tier 3, the Tier 4, the Tier 5 coverage, whether it is the way in which we have been able to get more time with the doctor's clinic, or the way in which today we have been able to get more number of brands detailed out. And the way in which we have been able to go about doing it is not only get the customers connected to our representatives, but it is also about how are we connecting with the customers, both in terms of understanding the patient journey, at what point do we connect with the doctors digitally and then bring them on to a portal that we have developed, which you can say is an equivalent to a Netflix, but more importantly, understanding the needs of the doctors and able to deliver those educational needs. As we think through in terms of our future and our ability to build the big brands, which have been demonstrated and which you have seen in areas of slides, there is still a lot of room for us to grow in terms of the brands and the way in which we work on various pillars of these brands, whether it is growing the core, growing the adjacencies or taking the product into newer markets or consumerizing the brand itself. As we think through of connecting to the patients, it is about going beyond the pill and I'll talk about it in the Horizon 2. In terms of the Horizon 2, as an organization, almost 4 decades back, our Founder, Chairman, Dr. Anji Reddy created it with a vision to say that we will ensure affordability of high-quality medication. Over the last 4 decades, as an organization, we have been able to move from offering APIs to medicine. And today, we're talking about good health. And when you talk about good health, it's about how do we look at our next journey. When I think about the next journey and some of what is happening externally, it is becoming imperative that we would have to have a holistic thinking on the disease management and end-to-end thinking. And how do we bring in this end-to-end thinking is about how do we look at getting the newer chemical entities and NBEs for the unmet needs? How do we bring in the gold standards as far as the generics is concerned? How do we work on the nutrition piece because that helps in the illness to wellness journey? And how do we look at disease management, which is about having the conversations with the patients to nutch the patients to take the treatment and then help the patient in terms of the journey? So we would want to have this framework. And within this framework, whatever innovation that we bring in, first has to connect to the purpose of why we exist as an organization. So any innovation has to connect with the fact that we are here to deliver good health. That innovation has to be meaningful in terms of the size of the opportunity for us to pursue and the number of patients we are able to connect and touch. And more importantly, Dr. Reddy's has to have a reason to play in that opportunity and a right to win. So if I take all of that, the way in which we're looking at the innovation is through a typical innovation process. We have a lot of ideas. The ideas go through a funnel. We then look at the relevance of those ideas. Why would it -- what would it take for us to win? What capabilities we might have that we could leverage? What we need to bring in to make this innovation successful? And in doing so, we would pass these experiments, either by ourselves or through the partners. And only when the minimum viable product is successful in the market, would some of them actually start scaling up. And I would divide them into two. Some of these experiments have now become meaningful businesses and are going to scale, whether it is in the form of immuno-oncology, whether it is in the form of CDMO or nutrition. There are others which are in the space of differentiated assets, in the space of disease management, in the space of cell and gene therapy that are new, and I'll talk about it in my next slide. So on immuno-oncology, it is referred to this. So we have a fully integrated discovery company in Bangalore called Aurigene. We have more than 20 assets. Half of these assets, we are working with the partners. And for these assets, either we have the rights for India and Russia. And in some cases, we have for many of the emerging markets. And the rest of the assets is something that we are developing ourselves in various stages of clinical development. And we do expect as we progress that we would be able to bring them and make an impact to the patients. Two areas of our focus when it comes to Aurigene. One is oncology -- immuno-oncology. The other is inflammation. But we also see ourselves as we go along because of the presence that we have, we could continue to not only work with Aurigene, but work with partners. And our aspiration is to be a global immunobiotech company. As far as CDMO is concerned, a lot of these capabilities, our strength in medicinal chemistry, our strength in the biologics, our strength in manufacturing, process development has all got together, and they're starting to demonstrate as we work with large companies and biotech companies in CDMO on the small molecules, but we seem to also see a very meaningful opportunity on the biologics and developing similar capabilities so that we play not only on the small molecules on CDMO but the intent is to play on the large molecules as well. On the nutraceuticals, we started off with India. Instead of just believing in a single strain that goes into a nutrition and to claim an efficacy on the product, we said there are two important fundamental changes we need to bring in. One is to develop the product, bring that product to the market that is palatable to the Indian patients. And more importantly, we need to do a clinical trial to prove the scientific reason why we're bringing this product in. Got in a set of products in the area of diabetes, in the area of oncology, hepatology renal disease. And we see that as we move along and we understand the biome very well. We would move into an area where we will be able to personalize nutrition. Coming to Svaas. This is an opportunity that we saw, again, connected back to why we exist as an organization. So if you see the number of outpatient visits that an Indian patient or an Indian consumer is making, it is significantly lesser than what he or she is making in OECD country. And one of the reason why this is happening is because OPD insurance is not very well developed in India because of the cost that is associated with an OPD insurance. And we've tried to bring down the cost by bringing in the doctors, the pharmacists and the diagnostics onto a single platform and then offer this to insurance companies. And today, we've been able to take it to all the metros. We're seeing good traction over there. And we see the opportunity to utilize this and offer services that go beyond the traditional product into the condition and disease management. Coming to differentiated formulations. While there are a lot of -- today, the new products that are coming through, but still a lot of research is happening in very expensive areas in terms of oncology. There's still traditionally many areas or sometimes niche areas where the exact medication in terms of what we would want to have as the target is still not there. And we see this as an opportunity to look at repurposing or bringing clinically differentiated assets in identified segments. And also this is true to the fact that we have a good go-to-market in many of the markets. Coming to disease management. It is becoming increasingly clear that the pill alone would not help in managing the disease. So we have started now to think through and start running experiments in several diseases in order to see how we would be able to support the patient to go beyond the pill, whether it is through the help of a psychologist, whether it is through the help of a nutritionist, the required doctor. And the idea is, can we slow down the progression of the disease and if it is possible to ensure that the patient is not on multiple products. This is something which we feel is a comprehensive solution that we would need to bring in. And we see that there is a traction around the disease management, not just in India, but in Europe and in other markets as well. And some of these innovations will travel into the other markets. Into cell gene therapy, you would know that in India, the cell gene therapy products, especially in the area of CAR T, are not approved. There are several of these products approved in the European and U.S. as well as in China. The cost of getting a cell gene therapy is anywhere between INR 2 crores to INR 5 crores and not many patients are able to afford it. We feel that this is an important therapy. It will make a difference to the patient. We started the construction of the facility in Bangalore, and we would bring in products within this therapy. And we're going to go after those assets, those targets for which there is a good amount of evidence that a CAR T cell therapy would make a difference. As we will understand this therapy better as there more and more newer opportunities will come by, we expect to bring them into India and other markets that would require an effective -- a cost-effective therapy. So overall, if you see our journey into Horizon 2, it's about consolidating our core, whether it is biosimilars, whether it is CDMO, whether it is nutraceuticals. It is looking at adjacencies like a nutrition business, like a business which is OTC in nature or cell gene therapy but it is also about a newer opportunity in terms of connecting better with the patients in the form of disease management, in the form of Svaas and condition management. So that's the journey that we have as far as Horizon 2 is concerned. We feel that many of them are relevant for India and many of them would also move into the other markets, and we will see how this would play out. But the idea is how, as an organization, we are moving to good health and moving beyond the pill to make an impact. So I will now talk about our financial aspiration and how our strategy will create value on a sustainable basis. My first message to you is that we have a strong balance sheet to enable growth. We don't have any debt. In fact, they are cash surplus. And every year, consistently, year-on-year, we are generating a healthy cash balance. And this in the current environment of high inflation, high interest rates, geopolitical uncertainty is a clear strength. And this is going to give us the flexibility to make the right choices to invest behind Horizon 2 spaces and also in a number of inorganic moves. You heard the aspiration from Erez, we will aspire to drive double-digit growth. And you heard about the multiple growth levers that we have. The quality of our portfolio, multiple opportunities in Horizon 1 and Horizon 2 in various geographies and various businesses. We will also aspire to deliver 25% EBITDA margin and 25% return on capital employed after investing in Horizon 2 businesses. And to give you some color, in the short term, over the next few years, we expect Horizon 2 businesses investment to range between 50 basis points to 100 basis points of sales, which will translate to about INR 100 crores to INR 250 crores or INR 300 crores of investment every year. On the right-hand side of this chart, you will see the [ virtual ] cycle of value creation that we'll put in place and drive. And let me explain to you how it will work. As I said, we will drive double-digit growth largely through our core Horizon 1 businesses. And as we drive this level of growth, it's going to give us operating leverage. And taken together with some of the productivity levers that you heard from Sanjay about cost improvement programs and digitalization, it is going to give us the space to invest in Horizon 2. Now in Horizon 2, we will scale up some of the businesses, we will experiment with new business models. Some will fail, some will succeed. The ones that succeed, we will invest behind them to scale up and progressively these businesses will start contributing to the revenue growth, thereby maintaining the growth momentum, double-digit growth momentum. So this is how we are going to put the [ virtual ] cycle of value creation in place. There is one important message that I want to also give you here. We all know that there are multiple levers to create value. Margin expansion, driving top line, more efficient use of capital, tax and so on. Over use of one lever cannot generate value in the long run. So if we -- if a company drives margins very hard at the cost of investing in the future of the company, you cannot generate value on a sustainable basis. And we believe that our model here is well balanced on multiple levers to create value for our investors and shareholders over the long time. As we drive this strategy we need to acknowledge some of the near-term challenges that our industry is facing. And at Dr. Reddy's, we are not immune to these industry-level challenges. If you look at, for example, demand volatility. When the Russia-Ukraine conflict started and Russia is a significant market for us, we saw stocking up, which is going to unwind in quarter 1, which we have publicly stated. Over the last 2 years because of COVID, we saw significant volatility in demand, stacking up normalization, for example, in the API business. We know that costs today are at an elevated level because of inflation, commodity inflation which we believe will pass. But right now, it's a near-term challenge. So I have two messages for you on this chart. One, there will be near-term volatility. And second, despite that, we will drive our business to stay on course with our strategy. We do not manage our business from one quarter to another. So if in one particular quarter, there is a temporary dip in demand or a spike in costs or some launch has to be retimed, we don't start cutting investments. We will stay on course with our strategy. And finally, a word about our capital allocation approach. Capital allocation is about, again, balancing multiple priorities. We have to balance value creation, maximize growth but also manage the risk profile of the business. And my message here is, again, simple. Our return on capital employed today is 23% to 24%, which is a very healthy return and therefore, we believe there are enough opportunities and levers to deploy cash in our business. And therefore, returning cash to shareholders is lower down the priority list, subject, of course, to some opportunistic buybacks as an exception. So we do believe there are opportunities for us to productively deploy cash. The first call on capital would be our Horizon 1 core businesses. Then it would be Horizon 2 businesses, the scaling up that we will do. And the new business models and of course, the acquisitions. The point that I want to make before I hand over to Erez is that we are going to be very disciplined about our capital allocation. We are going to be disciplined about the way we are going to invest in Horizon 2 businesses. Like you heard, it's like an innovation funnel. So there is ideation, there is experimentation, investment and scaling up. So if there are business models that are not succeeding, we will kill them. If there are business models where we are succeeding, the proof of concept is there, we will invest behind it to rapidly scale up. But we have a disciplined process in place for this. Similarly, when it comes to inorganic opportunities, acquisitions, these acquisitions can be in Horizon 1, it can be in Horizon 2 as well. These can be small acquisitions. They can be relatively larger. They can be in branded markets. They can also be in unbranded markets. But the test that we apply is that any acquisition must fit into our strategy. And it must be at a price at which we can create value. So my key message to you is that we are going to be as a company, very disciplined about capital allocation. And with this, I will ask Erez to summarize this session before we open up for Q&A.

So this is to summarize this part of the meeting. First, we are coming to this meeting, I hope you see, with a deep commitment to growth, a deep commitment for shareholder value, deep commitment to our environment, deep commitment to our employees, deep commitment to our customers, deep commitment to any stakeholders, but the most important part, deep commitment to increase the pool of patients that are going to hopefully be more healthy using our services, not necessarily just our products. The second is this is the language, if you wish, that we are going to speak, we believe that by being even more diversified, but very also disciplined in its focus. For whatever we do, we are focusing on what matters. So what you see is the kind of relatively bigger, if you wish, pool of opportunities in relative certain levels from ideation, all the way to well scale-up activities. And we believe that we have the desire and the capability to drive those growth. And we are going to use our financial strength also for inorganic in a place that we will find it right, as Parag said. I want to thank you, guys. And if the management team can get organized while I do, and I want to thank all of you that are investing in us for the trust. And those that are not, I hope you like our story. We are more than happy now, and the team is getting ready for that to answer your questions, and we allocate time and we'll try to answer and address any questions that you may have. Amit, you are going to -- who is going to give the mic? Maybe we can get the same -- the first question as the team can come and -- Amit, please? Guys, please organize. And let's see, who wants to -- remove my mic. I'm speaking. It's okay. So who wants to maybe ask the first questions. Amit, can you transfer the mic to somebody? Yes, please. Yes, please. The question can be to any one of us. The team is getting ready for this. Yes.

This is Surya from PhillipCapital. The first question is that do you believe the Horizon 2 is likely to be the key earning driver? If that assumption is correct, then when do you think this Horizon 2 is likely to start contributing?

Yes. So Horizon 2, in certain area already started, for example, the biologic stuff. But let's say, in a meaningful way, that, let's say, 25% of what we do about innovation, we believe, will be by 2030. So let's say, if you wish in a meaningful way, let's say -- and meaningful, let's say, for the sake of the discussion, more than 15% of the pool of debt will be probably around 2027.

Okay. So until that time, is it fair to believe that the earning profile, which is likely to be challenged, because anyway, the Horizon 1, whatever the initiative that we are doing, it has been on since some time, and it is the extension of the work that we have been doing since long. And since the investment phase of the Horizon 2 is continuing, so there would be a kind of earnings challenge that we could see for Dr. Reddy's?

Like I mentioned, Horizon 1 has its opportunity. Even without taking the addition of Horizon 2, we believe that we will grow. We see an opportunity to grow more outside of the U.S. than in the U.S., but we do see opportunity to grow. What we are saying is that we are going to grow the numbers that we manage, the double digit, that will be primarily based on Horizon 1. What we are saying that on top of it, we have now capacity, energy, robustness of management to take more. And even if it will hit us by the 50 to 100 basis points, we can still do that.

Just one more question on the CDMO opportunity, how significant that you expect that to be for you? Because we have been there in that business, and potentially, it could be a kind of a -- since you are into the formulation generic as well, so whether that would be a kind of a concern for partners to have you as a CDMO partner?

We are working under a different platform, which is [ Origin Services ]. On the products that we are developing for our partners, we will not compete with them. So there is no need to be concerned. By the way, we are working with top big pharmas on those products as well, so they know that. I think for us, the main change is first that we want to double down on it. And second is that we see that as a great opportunity for us to scale up in technologies that are going to be important for us. So there is no better way to do that but to develop it to somebody else and get the skills, get this capability, get the physical capability, whether it's a plant, whether it's a technology by actually having somebody that is willing to pay for it and pay for that activities. And it's also very synergetic to us. So if you wish, the main message, first of all, I don't see a risk. But I do see much greater opportunities because of focus.

Just last question. What are the costs associated with the ESG initiatives? You talked about, let's say, 100% living wages, you talked about various social aspects and all that. So what is the cost associated with it?

First of all, the ESG, I believe, will be much more opportunity than that if you look at the commitments that we gave. Most of it is about reaching more patients because eventually, the #1 attribute that we have with ESG is the fact that more patients will use our products, and most of it will be first-to-market, et cetera. But as for the cost that is related to the operations, it will be within the same framework. So we are actually not planning to add more cost into debt or more investment because this is going to replace certain areas. Naturally, we are going to invest, for example, renewal energy. By the way, we are doing it for several times. It's part of our CapEx. But the level of CapEx or the level of debt is insignificant. And actually, it's even better. Once you are doing it, it's actually cheaper than the other resources. So the beauty about ESG, in general, that it's actually a good way to conduct yourself. It's not just good for the world, it's not altruism, it's actually a good business as well. Just to make sure that my message is clear, we are not planning to increase our level of CapEx or OpEx because of ESG. We are going to contain it within the normal activities that we are doing and within the budget that we are allocating.

So I also wanted to announce that participants who have joined on webcast can ask their questions by using the Interactive Question tab.

This is Kunal Randeria from Edelweiss. Firstly, thank you for sharing your vision for the company. Sir, going through your presentation, you mentioned biologics, biosimilars, nutraceuticals, NCEs, I mean, just about everything that a pharma company can do. So do you run the risk of spreading yourself too thin, because end of the day, you have only limited resources? So as, let's say, an NCE, it progresses, right, and then you may require a lot more funds, you may not be able to partner. So then what is the way out? Do you maybe take a hit on the margins for a couple of years? Just if you could share your thoughts.

Sure. It's a very, very good question. We believe we don't, but we took our time to discuss it with you. And we took our time in order to feel that we are ready for that, means that we had to get out of the way certain processes that were not robust enough, certain infrastructure that we have to build. The reason that we are, for example, can speak today about some of the digital activities that we do is because we invested heavily in digital as part of our 100% digitalization that we had in the past. So our, if you wish, technical and digital capability contain it by now. The second is in operation, in biologics, et cetera. This is one. Second, all of those new spaces are synergetic to the old. For example, take our NCE activities. We are in that game for 17 years now. Those 25 assets were not born yesterday. It's something that we are working. The business model was that you are licensing it to a partner that is willing to finance it and allow you to scale. We are now ready to say that some of the assets can be scaled up and we can actually market it. When we market it, we build marketing capabilities that now we are willing to take. So to make the story -- although it sounds like completely new spaces, it's actually very synergetic to what we are actually already doing. It is create more opportunities for those platforms than before. And about the governance of it, it actually doesn't require to increase governance. So in terms of running sim it is -- actually, you can do it without increasing your governance, you don't need to add people or stuff like that. On the contrary, we believe that we have even more opportunity to be even more lean than what we are today. What it will require is to enhance certain capabilities in which we will do in a moderate way. What I would like to convey with that, indeed, we are taking upon ourselves more assignments. But at the same time, we are removing assignments also from the past on product that don't met their activity, that do not met their -- and we are adding activities that we believe are going to bring a better shareholder return, et cetera, and overall to grow the organization.

Sir, one of the -- I think, your vision, which you had shared, I think, a few years back when you joined was China market. You had said that you would be launching a lot of products through your own setup and not through the JV. I believe, perhaps not -- it's not just Dr. Reddy's, but a lot of Indian companies that are struggling to make a mark in China. So what is it that you think is the reason for Indian companies not being able to scale up there? Is it the regulatory landscape? Or is it just how the market is?

Ramana?

Sure. So over the years, China has made it even more clear in terms of what it will take to register a product in China. And in a way, it is ICH Plus. So they have made it clear in terms of what it takes to register an API, what it takes to register a formulation and also the excipients that are used in the formulation. So if you are interested to register a product in China, it is imperative for you to understand, first, what it takes. And second, it is important that you have dedicated team within your R&D that understands this requirement and to be able to take the product into China. We have started to do that. Initially, we used to file about 3 or 4 products a year. Now we have gone into 13 to 15 filings per year, and we would want to scale that further. Second advantage today from a point of China, initially, you would take about 6 to 8 years to get a product approved in China, then you need to wait to get a product into the provincial listing, then after that, the hospital listing. But the Chinese government has now come out with a very good methodology called the GPO, in which if you are able to get the product in, into the first GPO, depending on whether you are the first 3, first 4, pretty much you are assured of 25% to 30% of the market. So if you're able to come out with a high-quality product that will pass through the regulatory approval of China and you are within the first 3 to 4, you're going to make a good amount of market share. And what they've also done as an incentive for people who are committing to make this happen, in the second GPO, the people who have participated in the first GPO actually have a higher market share. So they are going to reward you for the R&D and the regulatory work that you have done. So we see this as an opportunity. We are filing a good number of products, both from our rep office as well as our JV, and we will continue to do that. And today, there is a good amount of pull as well from the various partners that we have in China. And increasingly, I think this is becoming more and more clear. And not only will we take our own products to China, we will also probably take other partner products, which we have recently demonstrated by getting one of our partner products into China. And very recently, we've also won an important oncology product GPO. So it demonstrates that as long as we are following the rules that are laid down by the Chinese FDA, you will get the market access in China.

Can I request the person who is asking the question to stand up, please. Thank you.

So as we take the question from in-room participants, there is a question on chat from Neha Manpuria from BofA. What should we look at threshold investment in Horizon 2 businesses before the future of these are decided, to discontinue or take it forward for scaling up?

Amit, you'll have to repeat the question. The voice quality is not very good.

Sorry. So what should we be -- what should we look at threshold investment in Horizon 2 businesses before the future of these are decided? What should be the threshold for?

The threshold. So see, the way if you look at Horizon 2, there are broadly 2 sets of businesses. One is the businesses that are in scale-up mode. And second would be the new business models that we are going to put in place. In the second category, there are going to be multiple experiments that we are going to do. And we expect that in Phase I, once we have done the ideation and we are in experimentation, on an average, an experiment could cost us about anywhere between INR 10 crores to INR 20 crores, INR 25 crores. And it is after making this investment that we'll make a call, whether the proof of concept is in place or not, and whether we should invest further for scale up or not. And as I said earlier, in aggregate, across multiple business models in Horizon 2, we expect the investment to be in the range of 50 basis points to 100 basis points of sales, which means between INR 100 crores to INR 250 crores and INR 300 crores per annum of investment through the P&L. So I hope that answers the question.

This is Prakash from Axis. I have a question. So it has 3 parts. So one is on the R&D side, what is our current expense on the biosimilar and NCE as we have 2, 3 assets? And going forward, we are talking about 12 such assets, which are entering clinics and expected to be filed a couple of them. So you mentioned 50 to 100 basis points. I would like to know what is our current expense as a share to total R&D? And in 3 to 4 years out, how do you expect this to move up? And as per you, how much is the development cost of a biosimilar product today? Are we expecting biowaivers on many products? Or what is making us believe that we move that fast with 12 products?

So I will start with the initial part, and then Jayanth, maybe you want to share on the specific on the biologics. Jayanth, just to present to you, is our Head of Biologics. He will help me with the rest. First of all, as an overall spend, we are -- normally spend around, let's say, around the 10% of our expenses on R&D. And growing portion of it is going to biologics and sterile products, like I discussed in my presentation. I anticipate that this neighborhood of give or take, of course, it depends on timing of trials and stuff, will continue in general. Of course, we will grow. So as we grow, these numbers will grow, but we will stay in the neighborhood of, let's say, 9% to 11%, around the 10%. Second, some of the activities will be managed by -- be financed by others, for example, all the activities, which are also R&D that are related to CDMO, or be financed by partners, which is the model of the immuno-oncology of today, will continue. So I'm not counting of it because this is paid by others. For example, the level of money that we are getting from royalties and stuff like that on development is tens of millions dollars a year. This will likely to continue and help us to finance it. And last but not least, we will add over that period of time some scale-up activities, which are not necessarily R&D, but eventually related to R&D because some of those activities, especially biologics, will require, for example, pilot plant or stuff like that. We believe that the neighborhood of the CapEx, which is give or take around INR 1,500 crores per year, will go to any number between INR 1,500 crores to INR 2,000 crores per year. On CapEx, some of it is related to the infrastructure that is serving it. Jayanth, you may want to address the second part of the question.

Thank you. My understanding is on the financial part you've got your answer. The second part of your question was on -- is that accurate? Was there something else you are looking for there?

I was looking for a share what we are currently expensing for biosimilar stroke NCE developments? And what is the share that -- not as a -- as a part of total R&D, I mean, what I heard was 10% moving to 11% of the total sales. But what is the current spend we are doing.

I will take it. So the share of debt, it's about 3% out of the 10%, okay? And over time, it will grow. Now what is the cost of clinical trial? Let's say, Phase I is around $10 million, about $10 million. And Phase III is any number from $40 million to $150, depends on the number of patients, the number of death, likely, that most of them will be between $40 million to $70 million of Phase III.

And how we relate to the comment by Parag saying that it would be 50 to 100 basis point impact, because these are -- what we are talking about is 12 products, say, $100 million. So just trying to understand, you're saying you're going to partner most of these products? Or how do you like to fund it?

No. We believe -- first of all, we are today funding that. And we are adding products as we speak. Those experiments will not happen in 1 day. That will happen in every given time. We are today conducting in our current setup 1 Phase III and multiple Phase Is. Over the years, every year, we will finance not more than 2 Phase IIIs. So we believe that we have the budget to afford it. It will not increase significantly. We will not have a peak in which we need to finance 7 Phase IIIs at the same time. That's then I agree with you, then we'll be over budget. I agree with that.

Let me just build on what Erez said. When I talked about 50 to 100 basis points, I was speaking about the Horizon 2 businesses. Biosimilars is -- we are counting in Horizon 1. Today, as you know, our R&D percentage to sales is around 9%. And as Erez said, approximately 20%, 25% is towards biosimilars, right? This will grow. The proportion will grow. We expect R&D from 9% to go to 10%. And within this, the proportion of biosimilars will grow. And some of this, we are going to also monetize. So I think it's important to point out that the 50 to 100 basis points, which I highlighted, is about Horizon 2 businesses. Biosimilars is in Horizon 1 and is baked into our current financials. I hope that's clear.

Yes. That's very helpful.

So I'll take the second part, the biowaver question. So what happens in biosimilars is you have 2 trials, the Phase I, which is PK/PD and Phase III. At this point, I don't see Phase I ever being waived, because showing PK/PD similarity as well as safety is going to be a core requirement. Also, when you look at the U.S. and EU guidelines, right now, there's no mechanism to waive Phase III either at this point. Maybe in the future years later, because there's never been an instance of a biosimilar passing Phase I and not meeting Phase III requirements, maybe that will get revisited at some point. But at this point, we are not looking at a biowaiver scenario that's similar to what you see in the generics world.

Since you are here, I take the liberty to ask 1 more question on biosimilars. So since 3, 5 years back, we talked about 3, 4 products with Rituxan, PEG, and we tied up with Fresenius Kabi, and the experience has been mixed and the product is already getting competitive. Now you talked about 12 products, especially focusing on oncology and immunology. So what different we are doing here? What are the building blocks? If you could give more color, really helpful.

That's an excellent question. So yes, you are right, we have been gaining a lot of experience over the last period of time. Rituximab, our global Phase III, is ongoing as we speak. By the end of '22, we'll be completing that, and we'll be doing our global filings next year. PEG-GCSF was our first partnership with Fresenius where we did a tech transfer to them. We learned the process of dealing with IP, and we're now looking at launches in different parts of the world. EU has already been launched. U.S. will be coming up soon. So what we have done is the learnings we received from working on rituximab and PEG-GCSF, we're implementing them with other programs. We spoke about 2 today, Tocilizumab and Abatacept. We have learned a lot about how to do the development of biosimilars. We also learned how to manage manufacturing costs. So we want to be cost competitive. We want to come up with a high-quality product. We want to run clinical trials in a more efficient manner. And that's what we've gained with our first 2 programs, and we're seeing those results, the positive results in the coming -- in the 2 projects we're working on now. And we look forward to those in the 8 assets that are going to follow.

My name is Ranvir Singh. I'm from Sunidhi Securities. Sir, my question relates to India business. So we have very ambitious plan to come in top 5. Meanwhile, we see we have also have a deal to sell a few brands to one of competitors. So just wanted to understand what's the strategy, what actually our focus is. So we want to grow horizontally or vertically? Or focus is on particular therapy? So if you could just give some outline about the growth prospect.

Sure. So on India business, if you see in the last 24 months, we have moved from 16 to 10. Aspiration is to get to 5 and to look beyond that. So in order to get from 16 to 10, we have used certain levers. The first one is we already had good brands. The question was, can we have the capability to build bigger brands, which is what we have done, and we have demonstrated that in the number of brands which are more than INR 100 crores. Because what it does is the bigger the brand, the lesser the SG&A, and then you have the opportunity to flow it back into getting more products into the market. The second growth lever that we have used is new products. And new products, not only our own products, but we have been able to get partner products, which are differentiated NCEs or the nutritional products, and we've been able to take that as a second lever of growth. The third lever that we have been able to do, because of the fact that we have systematically built the capabilities in sales and marketing, and many of the times, we have onboarded the team members from FMCG companies which have a better sales and marketing capability compared to pharma, we have been able to also take on the products that we have been able to get through the business development, whether it is Wockhardt's product, whether now through the Novartis leads that we have done. We have been able to drive productivity for their business beyond what the companies have been able to do, and that has become a third source of growth. What we started to do now is to look at how do we comprehensively build the ability to win in the disease areas. So for example, in the area of pain and in the area of derma, we're in the top 10. In other therapeutic areas, we are between 10 and 15. So in each of the specific disease areas, what portfolio is required in order for us to win and with what sort of service that we would be able to get over there. While we do this, we have started to also put in some of the adjacencies like nutrition. So we have launched about 10 nutritional products, getting good response for those products. At the same time, we have gone into OTC, one of the ORS liquids, Rebalanz, which has done about INR 50 crores last year, we are scaling that up. So there's still a lot of growth within our brands. There's opportunity to bring in acquisitions in order for us to grow the channel or the therapeutic area that we are representing in to look at comprehensive solution to go beyond the pill. While we do this, there are certain brands which today, we are not investing in, and we are not driving their growth. So we feel it is legitimate that we let go of the non-focus brands, but this also gives us the cash that is required for us to look for opportunities to grow the business. So we are pretty confident on the growth that we have done so far. We'll continue to work on each of those levers, big brands, new products, business development, differentiated portfolio and going beyond the pill. And we feel confident that this growth trajectory should continue.

So can you indicate any growth -- any guidance on India business? How we are going to grow in either next year or next -- in midterm?

So we don't -- as you know, we don't give the guidance. I think in terms of our aspiration for FY '27 and what kind of growth, I think Erez has already pointed out, that we -- our intent is to continue to grow the way in which we have done in the last 4 years.

Fine. And second question was related to our Horizon 2 that consists of SVAAS scheme. So that SVAAS scheme, can you elaborate a little better because in 7 cities we are doing some pilot projects. So what exactly is this? And how this is going to help us in terms of in financial terms?

Sure. So what we try to understand, today, why people -- what might help people to manage their help more proactively. And one of the ways to do that is to have regular visits to the doctors. As compared to the OECD countries, in India, if the OECD countries have 4 outpatient visits, in India, it is less than 1. And one of the reasons why it is less is also because OPD as an insurance not very well developed as well as a network because we don't have many integrated services in which you have the doctors, the pharmacists and the diagnostics all coming together. We have a few, but not as many as what it is outside of India. And one of the issues that we have in the OPD segment is also because OPD is reimbursed, and it is physical. Many of the times just padding up of the expenses because of which the OPD insurance becomes expensive. So as an organization, we have been among the first few companies which came out with a digital platform in which we have been able to onboard curated set of doctors, curated pharmacies and diagnostics and offer this service as cashless to the insurance company. So we're working with top 2 insurance companies. And what we have been able to do is exactly in the same way that we would do a new opportunity and innovation. We only experimented in Hyderabad, and by that we'll learn whether this is scalable, whether we're able to get the right CSAT scores. And as we started to see traction, both with the insurance companies as well as with our complementers who came on to our platform, we started then to scale into the other 5 cities of Bangalore, Pune, Chennai, Mumbai, Delhi. And now what we intend to do is to start working more comprehensively to see how we would be able to take these products to more number of patients and start identifying to offer these products to people with specific diseases. With our intent that as we think about disease management, we would be able to bring in the same concept to the insurance patients as well. I personally think that this will have a lot more traction as and when we have the NDHM come in, because what NDHM will do is to bring in interoperability, it will bring in discovery, and it will also have opportunities for more and more OPD and innovative products to come through. So this is our intent, to first connect and to deliver health with ensuring that we have people proactively managing it, but we see this as a great opportunity because a lot more can be added, and our current intent is to reach out to as many people as possible.

Just a last one, though this is -- and we discussed 2 business models, H1 and H2. And I believe that there is some overlap currently also, some parts is contributed by H2. So if you're to consider in the next 3 years or next 5 years, how do you think that H2 would be contributing to the overall business? So what would be the proportion, that we wanted to understand?

So I mentioned it before. First of all, I agree with you on your first statement. There is already part of Horizon 2 that we are doing. We're also saying, for example, those that were scaling up, to Ramana's presentation, actually, we started to do it before. But they were not a significant contributor to the business, and we plan to double down, and some of them will be relatively new initiatives. Overall, we believe and what we aim that our innovation will be about 25% of the overall business. I mentioned around 2030 starting contributing in a significant way, let's say, more than 50% from 2027.

This is Damayanti from HSBC. I have 2 questions. Although you don't provide forward-looking statement, but how should we visualize your business mix 5, 7 years from now compared to current level in terms of contribution from key markets like India, U.S.? So that's my first question.

So we believe that the markets outside of the U.S. will grow faster than the U.S. market, but the U.S. will grow.

Okay. So right now, U.S. is proportionately higher around 40%. Should we assume that to come down more to, say, 20%, 30%, and India and emerging markets go up to similar levels?

So in a natural way, and it's hard now to tell you, but I'll try to give a ballpark, I think we started the journey in 2018, which the U.S. generic was 50% of the business? Where is it, Amit?

Yes. Around 50%, yes.

50%. And now it is?

Now it is 38%, 39%.

Yes. So first of all, this trend will continue. As we will grow Horizon 2, the portion of the generic piece, because we are going to grow in United States also outside of the generic, but we'll continue to go down because the company is going to grow and that piece of segment will grow, but probably in a single digit way. While the rest will grow faster. And of course, whatever will be added naturally will be more than that. So to tell you if it's 20% or 25%, it's hard for me to tell. But we do see this portion, first, profitable. We do see the opportunity. It will grow, but as a proportion from the overall organization, it's going to go down.

And my second question is, one point, which you often referred is leveraging portfolio across markets. So this has been, I think, one topic which you have discussed for the last few years. So can you share like any [indiscernible]? And going ahead, like you do have more plans for this kind of leveraging portfolio and R&D for markets growth. A bit more details will be helpful.

So first of all, about -- from the starting point, all the activities that we are doing in China on the generic part, all the activities that we are doing in Europe, and most of the activities that we are doing in emerging markets beside Russia are leveraged. If you are looking at the R&D, about -- if I need to give a space, and please help me out, I believe that 80%-plus of what we do on the R&D side is going to go global, meaning to much more than 1 market. Less than 20% -- probably less than 15% is going to go to only 1 market. Where should we go to 1 market? I just want to make sure that it's clear. If there is a specific opportunity in a very complex or very important product in the U.S., if it is a specific brand in India, if it's a specific brand with specific opportunities like we discussed in the cannabis in Germany. But other than that, the development global. All the biologics will be global. And most of the generic, especially those that are sterile, will be global.

Okay. And my last question is on biosimilars. Did you mention you will be setting up your own commercial infrastructure for marketing in a country like U.S.?

Yes. So the rituximab will not be marketed by us, but all the rest of the product will be marketed by us.

I'm Nithya from Bernstein. I have 2 questions. The first one is on some of your Horizon 2 opportunities that you have identified. Some of those are fundamentally not 25% EBITDA, 25% ROCE businesses. CDMO biologics, for example, you look at WuXi Biologics, Lonza, Samsung, none of these guys do anywhere close to the ROCE numbers that you aspired for. Similarly, CGT Therapies. Again, if you look at the margin profile, for Lonza, it's about 17%, 18%. So how do you marry this to your ambition to create these new growth opportunities versus the 25-25 ambition?

So the aspiration that we shared, which we are trying to be in the neighborhood of it is Horizon 1. On Horizon 2, some of those businesses can be with much different, to your point, scale of numbers, either on the profitability or on the ROCE. And some of them may not. So what we just did and what we are trying to convey that we believe that we have the ability to finance Horizon 2. As at the beginning, like we said, it will not contribute next year or next quarter in a significant way, while not hurting the type of performance that you got used to see from us in the last couple of years. So we believe that we have that ability. So if you wish, we are taking up on our self-commitment to build a future, which is different than what we have communicated to you in the past, and still deliver the type of numbers that you saw from us very, I believe, consistently in the last 4 years. We think that we have this capability. The numbers I want to share -- I'm just using the opportunity, may fluctuate from quarter-to-quarter because of trial, because of a launch. It's very hard to manage in this kind of industry quarters. But overall, we are very confident about this direction.

To follow up on Horizon 2, I think you addressed the question about how much investments in the infrastructure that you need to make. But even in terms of the people capabilities, it's quite a wide range, right? CGT is new to India altogether. Do we know or do we believe that there is enough of an ecosystem that's built out? If you're talking about disease management, bill plus, I'm assuming you need point-of-care devices, Internet of Things, which is, again, an entirely new set of capabilities that Dr. Reddy's now needs to start building out. How are you thinking about the people capability angle when you're building out your Horizon 2 opportunities?

So I will start, and Archana, you may want to help me. We believe that we can. Archana will describe also how we are going to do that. And I must tell you something that I must share kind of as a personal note. It is unbelievable how much talent exists in this country. I can tell you that coming from a small country, but also consider talented, Israel, there is nothing to compare. And actually, there is talent available for all of this exist in India, or relatively easy to acquire it globally. We have that capability as well. How we do it? Maybe Archana, you want to share.

Yes. I think Erez said that I think the model of building capability in organizations has changed. It's not about hiring people necessarily full time into the organization. So a few things I will say, one, access to global talent pool. We are a strong brand in many countries, including North America, Europe and so on, and we are able to hire talent. Second is, as an organization, we have a very strong legacy of investing and developing in people. We do find that there are a very good local talent available, and Ramana is actually in the process of hiring many of them in the new experiments we are doing and grooming them to do what we want to achieve. And the third one is partnerships. In fact, Prasad, maybe you want to say we are -- Prasad was recently in MIT trying to revive our partnership with these kind of institutions. And these partnerships are also going to give us capability. So it's a very different model of building capability, isn't necessarily just hiring people full time in the local country. We believe, as we grow the businesses, we have the ability to scale them with the right talent.

And my last one is actually on SVAAS. So can you talk to us about what sort of monetization model do you envisage? And can you talk a little bit about the fact that you're trying to build a health tech ecosystem as a pharma company, and therefore, fundamentally, you're not a neutral platform. So how do you manage that conflict of interest?

So in terms of the monetization, there are 2 ways that you could look at monetization. One is the monetization in terms of people using the platform. So transaction fees that you can get, and then the margin that you get from the complementers. As we get into the next level, I think the opportunity would be in terms of how would we price the products directly into the market, whether it is with our partners or whether it is with the corporates. So what we're getting now is 2 important elements. One, I think, is how to understand the market and build up partnerships, but it is also helping us to understand what products would be useful for what particular cohort and how do we start pricing the products. And that's what we plan to do.

So virtual participants can raise their questions by using the Interactive Question tab. One question we have from -- on the chat is from the line of Aishwarya Agarwal, Nippon India. Can you talk key launches in U.S. this year and next year? Also when to expect FDA inspection for key plants?

So the question about the U.S. in the next 2 years and...

And FDA inspections.

FDA inspections. So on the FDA inspections, it's relatively easy. I think you are all following up. There are inspections. Our next inspection will come to -- already announced, so I can share it. It will come to FTO 11. FTO 11 is our new sterile plant, and we will have this inspection in the first 2 weeks of July. And if we will qualify, then I believe we will, and we hope we will, then we are going -- it's going to help us to bring much more capacity into not just United States, but also other areas of the world that are dependent on the U.S. FDA inspection. So we see that as a very, very positive development of that. We don't have any announced inspection. Naturally, they can come whenever they think they should come, and it's not just the U.S. FDA, we are actually inspected by every country that we are serving. And we will continue to meet the requirements naturally of those. As for the U.S. market for the next coming years, we believe that we have a very healthy pipeline to launch. Naturally, in the next near future, we will launch REVLIMID, and we are also going to launch the products that I mentioned. We believe that with the pipeline that we have, depending on the year, we can launch any number from 15 to 30 products per year. It's not the quantity that it's important. It's about product that matters. And this is the number I think for next year. Amit, we have how many products to launch next year?

20 to 25 products.

Yes, between 20 to 25 products next year, and some of them are very, very important.

Do you want to ask any question? Okay. Any more questions from the participants?

If not -- any other questions?

Yes. On the chat, there are a few other questions. Would we look to replicate the U.S. injectable portfolio in China or focus on oral solids only? And how long does it take for a product to generate commercial revenue once it is approved by the China regulator?

So we are going to sell in China, both injectable as well as our solid as patents, and regulation required, and Ramana explained very, very well the level of the mix we are gearing up now with a pace of around 15 products per year.

On China, there are more. How many filings are pending approval? And are you leveraging your existing manufacturing infrastructure? Or would we be manufacturing in China for products filed in China?

So 2 things. Today, we have about 17 pending filings waiting for approval. And this year, we're planning to file at least 15 filings. In terms of manufacturing, we're leveraging the manufacturing facilities out of India. In China, we do have manufacturing facilities. And out of the profits that we have generated in China, we are expanding the capacity in China as well. So we would be leveraging our existing facilities, and we have newer capacities to offer in China.

So if there are any more questions from the participants, please raise your hand or else maybe we can close the session.

So first, thank you. Those that are seeking dinner, it is available. Thank you so much for listening to us. Thank you for coming. Thank you for taking the traffic in the rain, and we wish you all the best, and looking forward to communicate in the future.

Yes. So in case of any further queries, you can get in touch with the Investor Relations team. And participants who have joined us virtually may disconnect their lines. In-person participants are requested to join us for dinner.