Indoco Remedies Limited (INDOCO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to the Indoco Remedies Limited Q1 FY '21 Results Conference Call hosted by Nirmal Bang Equities Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vishal Manchanda from Nirmal Bang Equities. Thank you, and over to you, sir.

Thanks, Aisha, and good afternoon, everybody. We welcome you to the Indoco Remedies Q1 FY '21 earnings call. We thank the Indoco Remedies' management for giving us an opportunity to host the call. Today, we have with us the senior management of Indoco represented by Mr. Aditi Panandikar, Managing Director; Mr. Sundeep Bambolkar, Joint Managing Director; Mr. Mandar Borkar, Chief Financial Officer; Mr. Vilas Nagare, President, Corporate Affairs and M&A. I now hand over the call to the company management for their opening comments.

Good afternoon, all participants. Hope you and your family members are all safe and healthy. Let me start with some preamble. The concerns and uncertainties due to COVID-19 affected day-to-day life and business operations. Despite challenges, the company took all efforts in maintaining continuity in operations to ensure uninterrupted supplies of medicines in India and across the world. Efforts by Indocoites reporting to work and also those working from home helped the company to restrict the degrowth in the domestic market to a single-digit and post an impressive growth in the International business, resulting in a modest growth of 8% in total revenues for the first quarter. Let me now begin with the business highlights. Net revenue for the quarter grew by 7.9% at INR 267 crore, as against INR 247 crore. Sequentially, revenues for the quarter were marginally higher by 1.4% at INR 267 crores, as against INR 263 crores. EBITDA to net sales for the quarter is 18.3% at INR 48.9 crore compared to 9.2% at INR 22.7 crore. Profit after tax for the quarter is 6.5% at INR 17.2 crores compared to 0.9% at INR 2.2 crore. Now on to the Domestic formulations business. Revenue from Domestic formulations business degrew by 8.7% for the quarter at INR 147 crore, as against INR 162 crore. In the midst of the COVID-19 pandemic, Indoco used various methods to create multiple touch points with stakeholders, like doctors, stockists as well as retail chemists through digital platforms. The objective was to build engaging virtual interaction models, example, care delivery adaptation, patient support enhancement and supply inventory management. These measures will pave the way for a better communication in future as well. During the quarter, Telmichek–CT tablets were launched in the cardiac category. There is no change in the status of the Apixaban patent litigation as the normal functioning of the courts in India, including Delhi High Court, is suspended since March 2020 due to COVID-19 crisis. As of now, the case is scheduled for hearing before the Delhi High Court on September 8, 2020. As per AWACS June '20 report, the Indian pharma industry has degrown by 5.9% in quarter 1 of FY '21. Indoco ranks 29th in the IPM with market share of 0.65% as on June '20 MAT. As per SMSRC MAT June '20 report, IPM shows a degrowth of 20% in prescriptions generated. Indoco ranks 23rd with market share of 0.83%. Now on to the International formulations business front. During the quarter, revenues from International formulations business grew by 60.9% at INR 95 crore, as against INR 59 crore. U.S. revenues were at INR 27 crores, as against INR 3 crore. The company received approval for its ANDA for Olanzapine tablets 2.5mg, 5 mg, 7.5 mg, 10 mg, 15 mg and 20 mg. Olanzapine is indicated for the treatment of schizophrenia and bipolar disorder. The U.S. market size of Olanzapine tablets is USD 65 million as per available IMS data. The company is planning to launch this product in the U.S. in the second half through the marketing partner. One of the company's U.S. partner received approval for Palonosetron injection ANDA, which was filed from Goa Plant II. Launch of this product has been planned in the current quarter of FY '21. In addition to Rasagiline tablet and Glycopyrrolate injections, launch quantities of Tranexamic Acid injections in June '20 and Zolendronic injections in July '20 have been shipped to USA from Goa Plant II. Europe revenues grew by 26.8% at INR 48 crores, as against INR 38 crores. U.K. was the major contributor to the business. Revenues from South Africa, Australia and New Zealand were at INR 1.8 crore, as against INR 2.8 crores. Revenues for emerging markets grew by 17.7% at INR 19 crores, as against INR 16 crores for the same quarter last year. Ivory Coast and other French West African countries and Kenya have been the major contributors. Regulatory update on Goa Plant I. Periodic compliance updates are being timely submitted to the USFDA and inspection of the site by the U.S. health regulators, virtually or on-site, is anticipated to be scheduled. API and CRO business, revenues were at INR 22 crore, as against INR 24 crore for this business. Revenues from CRO and Analytical Services business were at INR 1.6 crore, as against INR 2.5 crore. That is all about the business highlights for the quarter. And I now request the participants to put up their questions. Thank you very much.

[Operator Instructions] The first question is from the line of Deepan Shankar from Trustline PMS.

Congrats for a good set of numbers. So -- initially, so we have seen this Antidiabetic segment for the domestic market has grown well for us. So how many antidiabetic brands other than Glychek we have? And what kind of new launches we are expecting in domestic diabetic segment? And what kind of contribution we are expecting from this segment over the next 3 years?

Yes. So Glychek, no doubt, is the largest product in our antidiabetic basket. But other than that, we have got the Prichek range also, which is the Glimepiride and its combinations. In addition to that, we have the gliptins and Teneligliptin, we have 2 brands. One is J-Ring and the other is Zilenta. More importantly for us, it's our first time in India launch of Alogliptin brand, Aloja. Happy to share that we now have a center approval on a combination of Alogliptin with Metformin also, which is slated for launch later this year. So Aloja, [ Aloja-M ] is a great opportunity for the organization. Alogliptin is a molecule, which is approved by USFDA. We, as a company, have chosen to go with the first time in India launch of Alogliptin over a mad rush for Vildagliptin, which is there in the market otherwise. We believe Alogliptin is a much better molecule. And having the first time in India launch advantage is definitely something, which helps a small division, Antidiabetic division, like us, make entry into the physician chamber. As regards growth, the base is extremely small for us to worry about growth right now. We should definitely be clocking a higher double-digit growth in the Antidiabetic segment.

Okay. Okay. And also in the domestic market, this Vitamin, Mineral and Nutrition segment has degrew sharply. So is this OTC or prescription base? And do we expect good growth in the coming quarter?

Yes. So this -- ours is entirely prescription based. And although it is classified as Vitamin, Mineral and Nutrition, actually these are products written by gynecologists and mass specialty products. So basically, our vitamins, minerals and nutraceuticals are largely written by the mass specialty and since prescription generation in this quarter was an issue, we have taken a bit of a backseat, but going ahead, I believe, this will do well.

Okay. Okay. And also in the case of U.S. market, so when can we expect more ophthalmic approvals? And also what is the status on discussion with our marketing partner relating to ophthalmic? And how many of the products do we need to find a new partner?

Maybe we should take your last question first. We actually don't need a basket of products to find a new partner. Other than the initial deal we did with Teva, now Indoco doesn't do any deals for baskets with anybody. So each product is on a product-to-product basis, okay. Coming to your question on how many are to be transferred, how many are being transferred, we expect, at least, 6 products to come to us eventually; 2 are absolutely in the final stages of being handed over, yes. Your first question was about how many and when can we expect approvals? I think given the track history of what we are seeing with Plant II in the last 3 months, where we've had 2 to 3 injectable -- 4 approvals come in actually, I feel as soon as USFDA is happy with whatever data is being submitted, like CR responses, et cetera, ahead of time, we should be getting approvals.

Okay. Okay. Okay. So we are not seeing any market size reduction because of these kind of delays? So more or less, for our 18 products, we are not expecting any market size reduction?

No, no because many of these products were for the future.

[Operator Instructions] The next question is from the line of [ Sajal Kapoor from Unseen Risk Advisors ].

Aditi ma'am, could you just share your thoughts on the Para IV pipeline, in terms of the updates like the filings, the approvals and the launch time line?

Well, frankly, we do not disclose too much on Para IV filings in calls because partly it is a strategic advantage. But we already have 3 filings with FDA, which are Para IV in nature. What was your question exactly?

Yes. So in terms of the approvals, so we believe -- so when -- I think reading your previous transcripts, we were expecting at least one launch either back end of FY '21 or '22. Has that changed? So I'm not interested in the...

No, no, it has not changed. One is definitely on the card.

Definitely on the card, this fiscal or early next year? And any sort of...

Yes. FY '21, H2.

Okay. Right. Great. Great. And on this Succinylcholine ANDA that we got the fastest approval in our history, I mean, given the nature of the usage, i.e., the ICU/stroke emergency usage, how has been the market response in Q1 this fiscal?

You want to know the market size, is it?

No, no. Just how has been the response? So have we...

Okay, we've not yet launched it.

We've not yet launched.

Succinylcholine injection, the one you're talking about, was the fastest ANDA approval. We filed it, and in 4 months, we got approval, way ahead of any expectations. So from a launch perspective, prep is going on.

Excellent. Excellent. And just maybe a couple of more, if I could squeeze in. There is recently this news of stockpiling across the world, but one coming from the U.K., where you are the largest supplier from a Paracetamol perspective. So how do you see that opportunity unfolding? And do we have the capacities to fulfill the demand?

We actually missed the first part of your sentence. What is it about?

Yes. So the stockpiling, which is going on the...

Stockpiling, okay.

On the U.K., from a paracetamol perspective and other therapeutics, if you may.

We have not felt any of it, if it is there with our front-end customer. Because our order books pretty much are okay. And at any given time, they give us a rolling 6-month plan. So as of now, they have not made any reductions.

And how do you generally see this trend unfolding, both on the APIs and the -- more on the APIs? I mean have you seen much traction because we do have the spare capacity. We are ramping up our API.

Yes. See, what has happened is, as you must have noted, we have shown a 60% growth in International formulations business this quarter. The sudden surge in volumes being manufactured for international market, most of which have backward integration, has meant that the API capacity has been used more for internal consumption. However, thanks to the new block of APIs, where a lot of validations are underway, we are confident in the next 3 to 6 months with stability, et cetera, in place, we will be able to utilize that capacity and then deliver on API numbers.

Right. And will that be part of our contract manufacturing side of the business? And how do you generally see our trends? Because there is a lot of tailwind that we keep hearing from different companies, that contract manufacturing is definitely seeing some traction. And given that some of the capacity is overseas, I'm talking about Europe and U.S., are not functioning at 100% sort of capacity. And that's likely to further fuel the demand for contract manufacturing. Are you seeing any of that trend or indication?

We have not felt it, as you might have noted in the narration made by Sundeep. Our U.K. business, which is largely contract manufacturing, and overall, the European business has also shown a growth of over 25%. I'm not sure how much you follow our organization. But our company has come out of extreme regulatory issues of over 2 years. And we had a lot of catching up to do by way of volumes. So in addition to that, we have 2 sites other -- we have totally 5 manufacturing sites with UK-MHRA and European approvals. And in fact, we have got a good order book position. So as of now, we have not seen any of this. And I don't know because probably what you're saying is of capacities remaining idle in Europe. That is probably because they are outsourcing more from here.

Yes, exactly. So that's what -- and I'm aware of that Goa II issue that happened [indiscernible]

Yes, yes, yes. Actually, Goa II never impacted our top line as much as Goa I MHRA, which is totally resolved. So as a result, you see the total correction in volumes coming from Plant I for Europe.

Right. And on this Goa II, ma'am, if just very quickly, we, kind of, projected INR 100 crore sales in this fiscal. And I don't think that's kind of baked into this Q1 number, at least, because the numbers don't suggest that we are up and running as far as our injectables going into the U.S. are concerned.

No, we are very much on track. A lot of these numbers have got to do with the timing of approvals, timing of target dates given by FDA, execution of validation batches. So we are well on track for that number.

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

So a few questions. I would say three questions. Firstly, Aditi ma'am, in the first quarter of FY '21, 9% revenue decline in India. How is the sales force incentive being paid out? How are you looking to pay out in future? And in that context, how would you look at the attrition in your field force in India?

Okay. I'll answer your last question first. I think given that for the first time, for the Indian business, at least, the industry saw a kind of a simulation exercise of what happens to your brands when people cannot meet the doctor. There is a huge concern, I think, amongst the field staff for a continued opportunity or kind of demand for the function going forward. It is very clear now that everybody will look at efficiency and effectiveness, of course, in India market. So there has been no attrition. Question #2 was on commissions and incentives. So what we did, Aditya, is that when we were hit with this lockdown and crisis situation in the month of March, it became very clear that one cannot make any kind of long-term targets or goals because that would put sales in a tizzy. So what we have done actually is gone month-on-month. So every month, first few days, we have been announcing targets, and the field is then going after it. That has allowed us to keep the field morale high. It gives them confidence that we are reviewing the reality on the ground and then making allowance for target, and also for what tactical approach we need to take. For example, we have used this time very effectively in building a relationship with a new customer directly for us that is a retailer. We never used to reach the retailer directly earlier, and we have used this time very effectively. So domestic business has been about doing month-on-month kind of target setting, month-on-month going after and getting orders. And we get data from various sources above our internal sales from industry, and that is also keeping us aware of what is happening to various categories we cater to. So you might have seen that our dental has done exceedingly well. Some of our legacy products have done very well. A few of our legacy products, which are directly tied up with acute, acute kind of season coming in, they are not able to grow as much as last year. And that is the collective impact you got of this minus INR 8 crore to INR 10 crore -- 10%, sorry.

Understood, Aditi ma'am, very clear. So fair -- just to summarize your answer. So basically, the field force is being judged on a monthly basis. Is the incentive payout also on a monthly basis? Or is it paid at the end of the quarter?

Yes. so -- we used to always have a year incentive, we used to have a quarter incentive and we used to have month incentive. We have reversed some of the ratios to see that because people worry when too much is kept for the annual in a year where the situation is not easy. So we are tweaking the percentages here and there to keep them motivated.

Perfect. Secondly, in the sales of U.S. this quarter, if I'm not mistaken about INR 27 crores, could you break that up into product sales and milestones received?

Majority is product sales because we got approval of Rasagiline, then Glycopyrrolate Injection and all these products. So majority of it is in actual commercial dispatches.

Okay. But your milestones would be in the region of INR 7 crores, INR 10 crores...

Around INR 10 crores.

Yes. It's okay, if we don't have the exact numbers. We can always check back with you.

Around INR 10 crores, around INR 10 crores, Aditya.

Around INR 10 crores. Okay. Okay. Perfect. And the third question I had was on the other expenses. So I just looked at the earnings of some of your peers. Most of them had reported, sort of, a dramatic decline in their other expenses year-over-year, and I mean to say about a 15% to 30% decline from company to company in other expenses. And when we asked them questions about that, they said it was primarily driven by promotion expense, traveling costs in the domestic business, which has basically not been incurred in the June quarter. We had a slightly -- we had a slightly low decline in other expenses. If I am not wrong, about 2% decline. Just trying to understand which -- if your traveling and commission and promotion expenses also went down, what is it that went up to compensate for it?

See, Aditya, Mandar Borkar this side, other expense comprises of multiple items. One is essentially definitely the travel, promotion and incentive. So that is one. And there are expenses at the plant level also, in terms of repair, maintenance, power, fuel. So ours is that way, a unique combination because definitely domestic constitutes a major part, but at the same time, all the large 9 manufacturing plants. So we had a decline in both, traveling costs has been a substantial declining; then in terms of promotion also, there is a decline. And coming back to your question, which cost element showed increase, if I have the value of, there is no such major increase in any of the cost head. Probably, each company has got their own different cost structures. So you can't generalize like why our decline is not comparable. Plant expenses -- yes, plant expenses to some extent...

Yes, Aditya, considering that the international business has grown by 60%, you have to factor in that in absolute terms last year, there were hardly any other expenses related to manufacturing for International business. So in that manner, we are different from others. So...

Yes, but Aditi ma'am, last year, we would have also had some remediation expenses with USFDA.

Specifically to answer your question, on commission and incentives, on provision for doubtful debt, we have spent more, if that satisfies your question.

Got it. Got it. And how much has that provision for doubtful debts, if you could quantify that Vilas, sir?

INR 2,25,00,000 is the extra spend.

Extra spending. Okay. Okay. I get that. Yes. That makes sense. Just one last question to the management. So when it comes to the European business, again, very good growth of 27-odd percent. And I think the previous participant asked a question on Paracetamol. So would you say your supplies in the June quarter of Paracetamol to U.K. was like a normalized quantity that you keep selling every year and every quarter? Or would you say that because it came after a break, there was some sort of lumpiness in the quantity that you supplied in the June quarter, and therefore, that should normalize going forward. How would you look at it?

Yes. It was near to normal considering that now all the plants are working well. Touchwood, Baddi I, Baddi III, and Goa I and Goa III are catering to Europe right now. So I think there is scope for doing better still because Baddi III is yet to show its full potential, and that will happen as 1 or 2 quarters go by.

Yes, sir, this was the -- my question was on Baddi III only, actually. So Baddi III, what is the utilization today?

Baddi III utilization is about 33%.

33%. And what would be the annual operating expense of a plant like Baddi III?

[ Above INR 3crore ]

I could not get that number, sorry.

Yes. But now as a strategy, all the new products transferred from Europe, any new product is directly going to Baddi III.

With depreciation, INR 4 crores.

INR 4 crores is the annual expenditure.

INR 4 crores is the operating expense, including depreciation...

Quarter, quarter, sorry, not annual, INR 4 crores.

INR 4 crores for the quarter, including depreciation.

That's right.

Okay. I had one more on the API side. So anything we are targeting on the PLI scheme that the government has announced, I know it is only for domestic sales. And I know you have expanded our capacity in API through Patalganga. Now given that we didn't have commercial supplies from Patalganga till few months back, would we qualify for a PLI scheme if you were to develop one of those products where the incentives are available?

No. We've actually looked at the list. And there is just one-off product appearing, which is there in our list, and it's not very exciting, to be honest.

The next question is from the line of Anshul Saigal from Kotak PMS.

Congrats on great numbers, Mr. Panandikar and Mr. Bambolkar. I had -- you mentioned during the conversation that there will be one Para IV launch in this year. Is this as of we are talking of?

Actually, as I said, on Para IVs, we are not able to make too many disclosures, especially because we work with a lot of partners. I hope you understand.

No problem. The second question is that on gross margin, we had a very healthy number, which we showed for the quarter. Do we -- of course, it might be because of product mix, et cetera, and given that our overseas revenues have grown very handsomely. Now going forward, do we see this as a sustainable number?

Yes, yes. Around 30% cost of goods is what we are targeting on an annual basis also.

Okay. And which means that the -- I mean, the read-through from that is that the current quarter's EBITDA number also looks like a sustainable number because the only other major costs are other expenses and, of course, manpower, and to some extent, R&D. And those don't change materially on a quarter-on-quarter basis?

Yes. Let me just say this that this quarter, there has been, despite what Aditya talked -- spoke earlier than you said, that many other companies showed a much better drop. In our case, the India business, whatever we have saved on account of travel or promotional articles, et cetera, et cetera, that has helped us this quarter. And on an annualized corrected year in post -- in the new normal, it may not be this much. But yet since the COVID situation is dragging, we expect some of these benefits to continue for another quarter, at least. And then structurally, on an annualized basis, we are really working on increasing the efficiency of the India business. If that happens, this kind of predictable bottom line should be able to be done. But because it happened this quarter on account of people not traveling, that is not something that makes us happy because it does not augur good growth in prescription business in the future. I hope you understand.

Yes. Also on a quarter-on-quarter basis, our employee expenditure went up by, I'd say, about 5%. What is that on account of?

We have actually provided for increments, sir. Although we -- and -- because till the last year, it used to hit us in one-off quarter when we paid it out, so this year we are providing.

So does that mean that going forward, this number should be lower given that we provided for it in this quarter?

It could be standard. It could be stable.

Okay. I mean at the current quarter's level, it will be somewhat stable and at this level for the ensuing 2, 3 quarters?

Yes, yes.

Okay. And the India business, of course, kind of came off its growth trajectory for the quarter and for understandable reasons. But what is the outlook that we have for that business going forward?

Yes. See, we are entering into a very, very challenging quarter because under normal circumstances, it used to be the biggest quarter for the company, given it has almost 40% coming from so-called seasonal product mix. But this year, on account of COVID lockdown, footfalls lower in doctor chambers, doctors not fully practicing, there is bound to be some amount of impact on sale of seasonal products. So I would not like to make any kind of projections. As of now, all I can say is that the trends you see on the pure acute portfolio are likely to continue on growth perspective. That is month-on-month, we are seeing our products do better than before. But from a perspective of is it as high as last year in the season, that is not likely to happen. So I expect domestic business to continue to have small impact even in Q2.

Right. And if we were to just look at the month of July versus last year, where are we at 70%, 80%? What kind of number are we at versus?

More than 90%.

More than 90%. Okay.

My concern was on growing, not on...

Okay. Got it. And this number, say, in the period of May, would have been what, 50%, 60%?

April was 50%, May was 60%, 65%. June was close to 80%. Yes? So it is a steady growth. We just have to wait. I'm hoping the season will help us.

Okay. And can -- Mr. Bambolkar, just please give us some color on working capital for the quarter? How has that played out? And what are the trends on that?

Yes, yes. Working capital has gone up to some extent because important products of the India business, we ensured that inventories built up and not -- there are no shortages on the India business. Second thing, we are now having a slew of U.S. launches. In the next 3 to 4 months, we'll have, at least, 3 products being launched in the U.S. These -- and of course, Europe order book has been built up very well for the next 4 months. As a result of all this, our short-term borrowings, which were around INR 110 crore have now hiked up to INR 125 crore. So there is likely to be a demand for short-term loan, but nothing to worry. Hello? So as a result, short-term borrowings from INR 110 crore to INR 125 crore is the main point, the main parameter on which the working capital will go up to some extent.

Okay. Okay. And given the speed with which we are getting clearances from USFDA, is there a case to increase our outlook for launches and sales from the U.S.?

No, from U.S., you mean?

Yes, please.

No, I think that is captured in the numbers we have committed.

Already captured. Yes.

The next question is from the line of Charulata Gaidhani from Dalal & Broacha.

Congrats for the good set of numbers. My question was on the India business in -- with the normal monsoon, anti-infectives should be doing well. So -- but yet, the Q1 has shown a degrowth. So do you expect a similar kind of degrowth in Q2 or because the stocks are already there and not being sold?

No, Charulata. If you would see the kind of updates we get from AWACS, stock corrections are already happening in the field. High stocks were being held in April and May. But after that, stock level corrections have happened. Coming to your question on growth, as I specifically said, July, August, September, we sometimes do 2 or 2.5x volumes of a regular month. And my concern is only for those levels, yes. So season will come, no doubt, already product movement is there. Also aided by the situation, a product like ATM, for example, which is an Azithromycin brand, that's doing very well. Karvol Plus is doing exceedingly well. So there is a product-to-product kind of an impact. But some antibiotics like Oxipod or FEBREX PLUS, which are -- which is anti-COVID and very much driven with the season coming in, where there is a high footfall in the general practitioner's chamber, it is those products which bother me a bit. Therefore, I've already said earlier, I would not be surprised if similar trends continue in Q2 from the growth perspective. But efforts from our side are to see that sales grow, okay? But the situation is so fluid, it is not correct to give any kind, give or, say, anything rather. It could even turn for the positive. We are hoping for that.

Okay. Right. And U.S., the new launches happened in the month of June, is it?

Yes, one of them happened in June and more are happening in July.

Okay. And because sequentially, it is almost flat?

Yes, yes, yes. That's true.

So Q2, we should see a significant increase?

True, true. Certainly.

The next question is from the line of Aditya Khemka from DSP Mutual Funds.

Just, ma'am, given the limited number of products we are currently selling from Plant II to U.S. and even Plant III, what is the capacity utilization? Because III also caters to U.K. and Europe, I understand, so what is the capacity utilization of Plant II and Plant III, if you could provide?

Currently, Plant III utilization of about 50%, 50%, 60%. And yes, we are actually -- I might have said this earlier, but in a couple of years' time, Goa will be entirely freed of Europe manufacturing. It will all go to the 2 Baddi plants. So capacity is not a problem for us, Aditya.

And Plant II capacity utilization, madam?

Plant II capacity also, there are several lines. So actually, if you go by a line, there is probably a little bit of traffic on one line more than the other kind of. But otherwise, we are okay. Around, I think, 20%, 25% capacity is there. Also because of the continuous amount of validation batches or CR responses, there is some amount of capacity which gets utilized for that, which is likely to go down going forward. So we should be okay.

Do we have a open CRL on brinzolamide today, madam?

No.

Okay. And lastly, on the CapEx plan for the next 2 to 3 years. So given capacity of API has been expanded formulation, we have enough capacity. What would be the recurring CapEx for the next 2 to 3 years?

Not more than INR 50 crores per year.

INR 50 crores a year. And where do we stand today in terms of net debt? I heard Sundeep sir say something about the short-term loan on working capital. So where do we stand today in terms of net debt as a company?

Long-term loan is INR 155 crores. Now it has come down -- sorry, INR 143 crores and short-term has gone up slightly to INR 125 crores.

Right. So both put together, about INR 270 crores of gross debt?

Yes, yes.

So how much is -- cash and cash equivalent is how much?

So cash, cash equivalent is not more than INR 10 crores to INR 12 crores.

INR 10 crore to INR 12 crore.

Loan is INR 268 crores.

Yes, that is there.

Okay. So net debt of about INR 250 crores, INR 260 crores?

Yes, yes, INR 250 crores net-net yes.

[Operator Instructions] The next question is from the line of Rahul Sharma from KARVY Stock Broking.

You'll had mentioned in the previous quarter that there were... [Technical Difficulty]

Mr. Sharma we are not able to hear you clearly.

Yes. There was a decent order, which you'll had said it is there in -- of paracetamol in Q4 FY '20. So has that been exhausted? Or is it spanning over a couple of quarters?

See, Rahul, for para, in particular, we have a 6-month order position with us any given time with the customer. So there's no question of exhausting, yes.

There's no -- was there any one-off in this quarter in Europe or...

No, no, not at all. There was a small period in March when we could not ship, that's it, because of the restriction, okay? But not -- that was not significant enough to impact anything.

Another thing I just wanted to ask was of this couple of approvals, which have come in. Any of them are meaningful for the U.S. market for us?

See, for us, everything is meaningful, however, small the opportunity may be, given our size in U.S. and what it is. What is important is that we find decent front-end partners and get good margins. And as you know very well over the last 3 years, we've carried plant expenses without making product. So in that scenario, any product, if manufactured, will be useful for us at this time. So I think for us, there is not a concern. They are not very big opportunities, no doubt. But still, for example, Olanzapine, which just came in, is only $65 million. And there are quite a few competitors, but we are still positive on it.

Rahul, 4 injectables and 1 solid dosage has been commercialized in the last 3 months, last 3 to 4 months. And as Aditi said, anything is meaningful for us, given our size in the U.S. is very small right now.

What I have got -- Palonosetron injection is a good opportunity, was a good opportunity. Is it yet a meaningful opportunity, $400 million plus?

Yes, it is Rahul. Rahul, that is one. Glycopyrrolate is yet another, where the market size is around $224 million, so there's -- these 2 products definitely has a good kind of opportunity. And the rest of the injectable are in the range of $40 million, $60 million market size wise.

How big is Palonosetron now?

I think around $400 million. I'll get back to you.

Next question is from the line of Vishal Manchanda from Nirmal Bang Equities.

Sir, I want to check whether all the approvals that you received last year, including Febuxostat, have these been launched in the U.S.?

Not yet. We are in the process of manufacturing. It will be shipped very shortly, maybe in the current month or early next month.

So how many would be pending? And is Febuxostat also pending?

Yes, yes, it is.

Okay. And how many others are pending apart from Febuxostat?

Apart from Febuxostat, Succinylcholine, but that, I think, will take a little time.

Okay. So is the shortage there for succinyl chloride (sic) [ Succinylcholine ]? Or is it now out of shortage?

It is shown in the shortage list still.

Okay. Okay. And all other injections have been launched? All the injectables?

Yes. Despite from here, couple of them launched, others are in the preserved launch.

Right. Okay. And sir, on Europe, basically, if the run rate move up from here, so you are at INR 47 crores this quarter. So would this exceed INR 50 crores in coming quarters?

It has to exceed INR 50 crores because we have given a guidance of INR 225 crores. So it will be a little over INR 250 crores.

Okay. So we should expect better run rates from here?

Yes, yes, yes.

Sir, overall, is there a change in the Europe environment because what we are seeing is some companies are doing better in Europe than they were doing earlier. While it is not a very consistent trend, but I could see a lot of companies doing better than they were doing before. So as the pricing environment change, demand-supply situation become more favorable?

Yes. Our front-end partners are quite bullish on the business. And for, at least, 7 to 8 molecules in U.K. and 3 to 4 molecules in Germany and 2 molecules in Spain, we have a proper order book, a predictable, sort of, 3 to 4 months order book.

Okay, sir. And sir, on India, you -- on Alogliptin, could you talk about how is it differentiated from other gliptins in terms of either an efficacy or safety? Is there a difference that you can play it for us?

I'm sorry, can you -- I said it earlier, but I'll just repeat. Alogliptin is a USFDA-approved molecule, contrary to [ Vinda ], which is not yet approved by USFDA. And compared to many of the others, whether it is DAPA or especially, Teneligliptin, there are major advantages medically as well as from safety profile and all others. So it is a fantastic molecule.

Okay. Okay. And any color on the Apixaban litigation? So is this getting delayed on the [indiscernible]?

See, we have appealed for an early show in the court for lifting the stay, especially given that anticoagulants are very much required in COVID times also. I think in the MDA, we have put a date on which the hearing is about to happen, somewhere in September.

But Vishal, we have find a separate case to allow us to sell the products in the market in view of this COVID situation. And that case is coming up for hearing much earlier than what we have stated in MDA. So in August, later...

We will keep you informed based on whatever happens. Yes?

Yes.

The next question is from the line of Ashish Kacholia from Lucky Investment.

Congratulations on the good set of number ma'am. I just wanted to check whether we are going to be putting some further attention on our domestic dental portfolio in the Sensodent-K and toothpaste category? Because our packaging looks pretty old. I picked up a toothpaste tube from the chemist and like it really didn't stand out against the competition.

Oh, is it? Okay. I have to look at it. I know they have gone for glossy finish. Maybe you picked up the wrong variant.

I picked up the green boxes, it really didn't look very -- it didn't look kind of...

Okay. Okay. We will look at it surely. But I can tell you one thing is that product is doing exceedingly well. Most of us know what has happened in the lockdown period, that it's solely the legacy products, which were established in the consumers mind and where -- which have a good repeat purchase element to it. And with Karvol Plus, Sensodent-K is another such product doing very well for us. Thank you. We will look at the packing surely.

Any thoughts on putting some more money into the marketing and branding of these products, ma'am?

Definite thoughts are there. We will keep you updated when there are any concrete. There is definitely a scope for looking at OTX.

Yes. Brand recall is very strong. So I think there is an opportunity sitting, I mean, for us to definitely look at.

Sure, sure.

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

Yes. Just one last question, ma'am. So you mentioned in your remarks something about reaching direct to a chemist and getting a retail partnership done in India. Can you talk a little bit about that model because this is fairly novel and innovative?

Sure. Yes. It's not a partnership. See, Aditya, what happens is that all pharma track secondary sales, which is the sale from stockist to retailer. But none of us really track the tertiary sale, which is from retail -- at the retail counter. And when the COVID lockdown happened, when doctors could not advise patients, we realized that a large amount of influence is there with the retailer for the buyer when he comes to the chemist counter. Given that there is a large amount of products at Indoco, which have a repeat purchase element attached to them, it made sense for us to now understand this customer also better. With that in mind, we started some kind of retail campaign, so that there is a good database created of retailers with us. The person who spoke before you also spoke of the OTX element of our toothpaste. So for that also, it would be helpful. I'm very positive. With this new customer, we have, sort of, adopted over and above the stockists and the doctor, the stockist who actually makes purchase and doctor who actually makes the decision, I'm very confident this kind of a retail -- understanding of the retailers will help Indoco in the long run. Yes.

Would it be fair to characterize this as a trade generic model in the OTC segment?

No, no, no. For us, we are not going in the trade generic way, getting close to the retailer. For us, it is definitely for the push kind of products, which have a repeat purchase element to it. And to understand because there are more retailers than doctors. And we go after 300,000 doctors, and there are 500,000 retailers, and we will not reach them at all. So it made sense at this time to understand. There are -- there are kinds of retailers, who keep these kind of products and those kind of products, retailers who keep speciality products, retailers who largely keep dental products. So huge learning for the organization. We have used this period effectively, especially since our boys could not meet the doctor.

And it is your reps who connect to these retailers as well, ma'am? Or is there a different arm?

No. There are reps, and we have created online platforms. So the retailer can directly connect to the organization also.

[Operator Instructions] The next question is from the line of Anshul Saigal from Kotak PMS.

Ma'am, what is the total capital employed in the API business?

API...

INR 120 crores is a gross block.

API research, you mean?

No. Even the manufacturing, that much of it we use in-house and some we sell outside. How much is the...

Yes. INR 120 crores is the gross block.

INR 120 crores. And who's the competitor here? Are we competing with the Chinese on this API?

No. See, we actually -- I hope you're aware, Indoco got into the API business only as part of a strategic initiative when we wanted to be backward integrated for our own formulation. So currently, what Indoco International formulations does not buy is being sold by API sales team and that too largely in Europe and U.S.

Right. And given that we are going to add to our capacities in the next, say, 2 or 3 quarters, and our capacity is going to go up, we'll have more capacity to sell to the outside market. How much is that capital that is going into this business? And how much...

Yes. CapEx is already incurred. Utilization is going to happen. In fact, the CapEx was incurred, so that we are ready for a time when U.S. formulation sales kick off, which is now. So quarter-on-quarter, if you've seen the kind of guidance we have given for U.S. business for our formulations, much of it is backward integrated with our APIs. So the API team has to keep up with the manufacturing product for the same supply chain. In addition to that, we are doing external sales, and that will be about INR 100 crore, yes.

Okay. And why I'm asking this question is that given the current environment where the world is looking for China Plus One strategy, is that, kind of, going to catalyze our investments in this part of the business? Is it likely that we may add to us...

Yes, yes. Certainly, there will be some upside. There will be some upside. More importantly, we are also concentrating on the -- key starting materials, which are coming from China, some of which we were also getting. And we are adding Plus One to the KSMs, if you know what I mean. So there seems to be a good-enough opportunity even in key starting material supply from India, and we are exploring that.

The next question is from the line of Charulata Gaidhani from Dalal & Broacha.

I just wanted to know what is the percentage of legacy products to India sales?

Legacy products as percentage to total sale will be around 60%. It depends on what you term legacy, Charulata. Typically, AWACS only classifies last 3-year launches as -- 2-year launches as new. I would say any product, which is in the market for more than 10 years, technically can be called legacy. But even then, around 50% to 60% is legacy for us.

Okay. That means 60% of your India business is not impacted?

No. Not all legacy products did well. There also has got to be a demand created, even if the product is legacy. For example, Cyclopam, when I -- if Cyclopam has dipped in this quarter, that doesn't mean Cyclopam's sales are very less. It's just that if we had aspired to grow much, we are not able to get that, right? So the growth market has got impacted for generally where the business was getting added from new prescriptions, which were being generated.

Okay. And yes, how many MRs do you have right now?

2,300.

2,300. And my last question pertains to the traction in profitability that has come sequentially. Has it come from Europe or U.S.?

U.S. business growth is one area, and India business lower expenses is the second area.

Okay. Okay. What about Europe or paracetamol?

Europe has grown by 25%. So it's doing its bit. Yes, but because you asked for huge traction, from priority angle, it would be, first, India business expense is lower; number two, U.S. business growth and number three, Europe doing well.

As there are no further questions, I would now like to hand the conference over to Mr. Vishal Manchanda for closing comments.

Thanks, everyone, for participating in the call. Look forward to see you in the next Q2 FY '21 earnings call. Thank you very much.

Thank you, everybody. Stay home, stay safe. Thank you. Thank you for your active participation.

Thank you.

Thank you. Bye. Bye.

Thank you. On behalf of Nirmal Bang Equities, that concludes today's conference call. Thank you for joining us, and you may now disconnect your lines.