Indoco Remedies Limited (INDOCO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Indoco Remedies Q4 FY '21 Earnings Conference Call, hosted by Centrum Broking Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Cyndrella Thomas from Centrum Broking. Thank you, and over to you, ma'am.

Thanks, Steve. Good afternoon, everyone. Thanks for joining this Indoco Remedies Q4 Earnings Call. I hope and wish that all of you are well and safe amid this pandemic times. At the outset, I thank the management of Indoco Remedies for giving us this opportunity to host the call. Today, from the management team, we have with us, Managing Director, Ms. Aditi Panandikar; joint Managing Director, Mr. Sundeep Bambolkar; Chief Financial Officer; Mr. Mandar Borkar; Corporate Affairs and M&A, Mr. Vilas Nagare. With this, I hand over the call to management for the opening remarks.

Thank you, Cyndrella. Good afternoon, all the participants. Hope you and your family members are all safe and healthy. Let me first begin with the business highlights. The net revenues for the company grew by 12% year-on-year. For the year ended March '21, revenues grew by 12.8% by INR 1,217 crore as against INR 1,079 crore last year. EBITDA to net sales for the quarter is 18.5% at INR 54.6 crore compared to 12.7% at INR 33.3 crore. And for the year ended March '21, the EBITDA is 18.4% at INR 223.6 crore compared to 11.4% at INR 123.3 crore. PAT to net sales for the quarter is 8.4% at INR 24.9 crore compared to 2.1% at INR 5.4 crore. And for the year ended March '21, the PAT is 7.6% at INR 92.4 crore compared to 2.2% at INR 24.2 crore. Now on the Indian pharma industry. As for the events [ realized ] the IMS showing signs of recovery and has registered a sale of INR 38,253 crore with a growth of 5.3% in the fourth quarter. During the quarter, Indoco has registered a sale of INR 231 crore, de-growing by 1.6%. The company is ranked 29 in the IPM with market share of 0.61% as of 31st March. SMSRC by monthly Rx prescription data for Jan to Feb '21 has shown recovery in terms of overall prescription generation for IPM, with prescription de-growth of 4% over last year, Jan-Feb '20. Indoco reflects prescription de-growth of 20% during January to February '21 with prescription share of 0.73%. The source here is the SMSRC prescription data. Domestic formulation business. Revenues from domestic formulation business de-grew by 13% year-on-year. For the year ended March '21, revenues de-grew by 9.8% at INR 619 crore as against INR 686 crore last year. During the quarter, dapagliflozin 5 and 10 mg tablets under the brand name, Depaja, were launched. The value of new products and SKUs launched for the year stands at 9. Now the international business front. Revenues from international business posted a robust growth of 65.7% year-on-year. For the year ended March '21, revenues grew by 66.2% at INR 492 crore as against INR 296 crore last year. Revenues from regulated markets grew by 75.3% year-on-year. For the year ended March '21, the revenues grew by 83.8% at INR 400 crore as against INR 217 crore last year. Revenues from U.S. business for the quarter grew by 23.5% at INR 33 crore as against INR 27 crores for the same quarter last year. Brinzolamide suspension was launched in the U.S. in March '21 in partnership with Teva as of 1st January. For the year ended March '21, the U.S. revenues grew by 162.3% at INR 148 crore as against INR 56 crore last year. Revenues from Europe for the quarter grew by 120% at INR 69 crore as against INR 31 crore for the same quarter last year. For the year ended March '21, the revenues grew by 55.5% at INR 239 crore as against INR 154 crore. Revenues from South Africa, Australia and New Zealand for the quarter are at INR 2.5 crore as against INR 1.6 crore INR. For the year, the revenues are at INR 12.2 crore as against INR 7 crores. Revenues from emerging markets for the quarter grew by 36.4% at INR 27 crore as against INR 20 crore for the same quarter last year. For the year ended March '21, the revenues grew by 17.5% at INR 92 crore as against INR 79 crore. Revenues from API business de-grew by 1.6% year-on-year. For the year ended March '21, our revenues grew by 9.3% at INR 94 crore against INR 86 crore. Revenues from CRO and analytical services for the quarter grew by 13% at INR 3.8 crore against INR 3.4 crore. For the year, the revenues grew by 10.9% at INR 12 crores against INR 10.9 crores last year. That is all about the business highlights for the fourth quarter. And I now request the participants to put on their questions. Be safe, be healthy. Thank you.

[Operator Instructions] The first question is from the line of Aditya Khemka from InCred Asset Management.

Aditi, can you split the growth in the India -- the de-growth in the India business into acute and chronic sales?

Yes. So Aditya, it is -- the entire growth is attributed only to 2 categories that do in acute. One is anti-infectives, and the second is respiratory. So if you had heard me in the earlier calls, for much of the year, most of the acute segments were de-growing. But by Q4, we made up in GI, which is Cyclopam leading the way, one of the main brands. However, FEBREX PLUS in respiratory and Oxipod in anti-infectives are largely responsible for pulling the growth down. Their categories have also heavily de-grown for the pharmaceutical industry.

Sure, sure. I appreciate that. So [ healthy ] chronic brand or the semi-chronic brands, have they actually resisted growth in the same time frame in the last 12 months or in the last...

Yes. Yes. Chronic, in particular, there is a marginal growth. Subchronic, mostly dental has done decently, all right. However, the base is too small. So when 2 of the largest brands de-grow very heavily, that's Q4, compared to the earlier quarters, I had to say overall growth in domestic have been a little muted. So India business suffered highly this year. And typically, field force is motivated to go after the targets when we can achieve incentives. So what you saw in Q4 was largely led by an unfavorable environment in business and possibly a demoralized field force. So that is a cumulative effect of that, nothing else.

Understood, understood. And on the export side, on brinzolamide. So we launched it in March. But could you give us some sense of whatever we shipped in March, was that like a 1-month inventory for our customer? Or was that like a 6-month inventory for our customer? I mean, what kind of volumes you would have shipped in March?

Yes, Aditya, they wanted a critical mass in their warehouse before they could launch the product. So I suppose this is about 3 to 4 months inventory, which we have shipped.

Right, and you wouldn't have got the profit share. So this is the revenue that you are reporting is basically your cost of goods plus manufacturing margin?

Correct, correct. Right now, that's where we are.

Right. So going forward, as brinzolamide sales pick up, as in Teva sales pick up, you will start receiving profit share from them as well. Is that the correct understanding?

Yes, yes, absolutely.

[Operator Instructions] The next question is from the line of Sudarshan Padmanabhan from Sundaram Mutual Fund.

My question is, I think the last few quarters has been very good for us in terms of business doing well across the board. But on the cash flow, while if you look at the cash flow prior to working capital, when we have generated about INR 240 crores, but a fair amount of leakage is seen across one of the other current assets, where almost about -- we have seen about INR 35 crores, INR 40 crores. Inventory, I mean, has not seen much impact, but receivables, other current assets are. I think we have basically been a little bit more -- I mean, the payables have been unfavorable in the sense that's basically moved up from the extent of over INR 50 crores. So can you explain a little bit more on what's happening on the working capital?

Yes. Sure. See, our payables had partly suffered in previous years because of the cash flow issues we had after the MHRA and FDA problems. Those got sorted out in the last 12 months, the cash flows has been very solid. And as a result, we had to make up for our payables, which were lagging behind. And today, I'm happy to report to you that all the payables are almost online. We had to do that because otherwise, we would not have got good rates going forward for the purchases. And the confidence in the marketplace had to be built up. So that's the reason. In spite of that, you will be more happy to note that short-term borrowings are still pegged around 120 crores, which shows very solid cash inflow, both from our domestic business as well as international. Those have been -- inventory days has been brought down from 79 to 71 days. Receivables has been brought down from 84 to 70 days. So there's a mass improvement in personal [ government and management ].

And there's this other working -- I mean, other current assets that have moved up. So any specific reason for that?

Yes. See about -- before that, I'll tell you about the creditors also, if you see all our major projects, capital projects have virtually been completed. So in the previous period, there have been creditors due on account of project capital expenditure. That has substantially come down. So that's the reduction also you are witnessing. Trade receivable, naturally, in line with the export business growth, the credit trade in the export, vis-a-vis the credit trade in domestic, there is always a difference. So that is 1 important aspect. And a specific question on the available current assets amounted more towards -- as we are building up the inventory for the others. And there are GFT related some news. So that has also led to this because overall the -- if you see the top line growth is happening because we are comparing with the last year base, so that's to make sure, at least.

Sir, I would assume that as we move forward, I mean, your working capital will rationalize and the cash generation will come back pretty strongly.

Perfect. Perfect.

Perfect. Perfect. So in the new year, that is the year which is going on. We are slated to raise -- generate about INR 300 crore cash.

This is free cash you are talking about or cash from operations?

Cash from operations.

Sure. And my second question is taking cues from your earlier commentary on the domestic side. When I understand the fourth quarter has been bad, but if I look at probably the last month, we have seen a major spike as far as growth is concerned. Can you give some color with respect to, are we also seeing a growth in line with what the AOCD is kind of showing? And second is what's really happening on the ground? I mean, given that we are seeing extended lockdowns across several states, do you think that the sales force continues to remain a bit demotivated? Or any specific plans that we have to kind of improve the productivity and improve retail?

Yes. So Sudarshan, as you say yourself, the max numbers for April are already out, and you must have seen that the industry has grown by over 50%. Indoco, too, if you saw in AWACS has shown a growth of -- in excess of 75%. And this is pretty close to the real picture. This growth is partly coming on the base of a low level April sale of last year. And unlike the first wave of COVID, when entire acute market did very badly, this time around because there was no complete lockdown across the country, and there were essential services and many other people are working also, because unlike the first wave, the doctors are practicing. So what you are seeing is that the other acute segments are not hammered this time around. So there is a double impact on growth, 1 on a low base; and second on an actual growth coming in. As you must be hearing now pre- and post COVID, there is a much better understanding of disease, its treatment. And one is seeing several upper respiratory infections, anti-histaminic -- use of anti-antihistamine, use of anticoagulants, steroids, which are required to be done pre- and post COVID also. So the entire market is moving and that is responsible for the growth that you've seen for April in AWACS. Happy to share the Indoco, too, is seeing similar growth. Your second part of question about lockdown, and is it impacting. When the first lockdown happened, there were very few companies in India, which had already established a digital means of reaching out to customers. Companies like Indoco were quite nascent for this. And I'm happy that we have got enough time to prepare in the interim. So today, even if the field is not able to move as freely as they would like to. They are still able to make a, doctor calls; and b, they are able to connect and stay engaged with the customers through digital means. So this time around, we are not seeing that big an impact.

Sure, and 1 final thing before I log off -- join back the queue is we also have the study group, I mean, the COVID portfolio. Is -- I mean, how would the growth be if we are basically removing the COVID. I mean, is the growth holistic? Or is it kind of colored by COVID? Are we seeing an excess growth because of the COVID portfolio?

Yes, so segments like ophthal, dental, where typically, the doctors are not practicing because of the risk to themselves. Those are seeing a bit of an impact even now, as in they are not growing as much as the other. But other than those therapies, and what I'm hearing from the industry, Indoco is not big on CNS but psychiatric treatment, CNS is moving very well. Like I said, antibiotics, respiratory is also doing well this time around. And per se, other than -- chronic, of course, is doing all right. And in fact, there seems to be a good consumption of medicines of all kinds. I'm wondering if people are sort of stocking up at home as well. So there is -- I'm not seeing too much impact on too many segments. Like I said, ophthal, dental maybe because they are directly related to 2 branches where a lot of surgical intervention happen. And that probably is getting postponed.

And finally, the [ revenue ] should also be adding to our portfolio, right?

Yes, it is -- well, not -- it's not very big for in local, but still doing exceedingly well.

The next question is from the line of Rashmi Sancheti from InCred Capital.

Just a follow-up from earlier participant. Ma'am, could you explain that -- which of your top brands are basically co-prescribed with -- for the COVID treatment now where we can see that some kind of ramp-up in the coming quarters?

Yes, so Rashmi, we have -- typically for COVID, we have a basket used in prevention. We have a basket used for treatment. And then we have a basket of products, which are used post COVID for any other infection. So it's quite broad. But roughly to talk of the key brands, we have ATM, which is an azithromycin brand, and it is the third highest growing brand right now in azithromycin segment for the industry. And today, it is the largest bank for us as a consequence of that. Other than that, we have Karvol Plus which is used as a nasal decongestion, and it is moving very well used if used in steam in relation to prevention. We have got Rexidin mouthwash with Warren, our dental division, which is a mouthwash for killing germs in the oral cavity. That is doing well. We also launched 2 other ancillary products in our COVID basket. One is a mouth gage called Poviclean, which is gradually taking up -- taking share. And zinc with vitamin C and D, zinc with C and D which is a higher-end zinc-vitamin C combination, which is which is at a nascent stage, I would say, in launched. Besides this, we have got favipiravir, of course, it is used for treatment. Also other antibiotics like Oxipod, which is a cefuroxime used in upper respiratory tract infection. Cost attritions like that by [ FEBREX PLUS ], and with vitamin D3 combinations, which we have, like [ OHC3 ] which is also very small. But we do have a good-sized bucket of products used along with pre- and post COVID, and they are always there.

Okay. And ma'am, we have done around 9 product launches in India. So what kind of run rate we should expect in FY '22 after seeing a good recovery in the India market?

So in this phase, we -- other than dapagliflozin and [ dapagliflozin ] combination and alogliptin, alogliptin combination, because they are key products for us. Most of the products have been in the COVID basket that have been launched. And after 2023, typically, we do a new product launch of around 3 to 4 products per individual. So we should be able to do that around 20 products in a year.

20 products, it something that annual run rate, we can expect for next 1 or 2 years?

Yes, yes. Okay. And lastly, on the raw material cost, are we seeing any sort of impact due to the high raw material prices or anything which would impact the gross margin? Or it would more or less remain at the same level?

I don't think it will be that substantial that it will impact the margins because on the international business front, we have covered our costs. And as far as the domestic is concerned, we expect things to get hand out within 2 to 3 months from today.

Okay. So any guidance on the gross margin front, which you are giving?

We should be able to work at these margins. Because our business mix is evolving, Rashmi. So if you observe this year itself in international business, it has moved from the pure contract manufacturing for Europe more towards supply to U.S. And even for domestic and the profit -- as the per person return increases, the product mix is also getting better. So I do not think that the increase in RM prices will directly impact our gross margins too much.

Okay. And 1 last question on debt. Our long-term borrowings are more or less at the same levels versus last year, are we going to see any kind of repayment in FY '22? Or it would remain at the same level? I mean, I understand that for our working capital needs, our short-term borrowing can inch up. But if you can give some guidance on long term borrowings.

Yes, long-term borrowings compared to March '19 and March '21, we have repaid INR 40 crores long term borrowing. And today, we stand at 141 crores. And by September, this figure should go down to 128 crores.

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

Firstly, I would like to understand from you, what will be our guidance for full year next year overall and for U.S. and European markets.

So domestic is -- because it's coming off a very difficult year. And of course, today one has to predict based on how the situation will be. But considering a different amount of normalization in the business environment, domestic is targeting to do an excess of INR 850 -- around INR 850 this year in top line. U.S. should do close to INR 250 crores, and Europe is expected to do around INR 300.

Okay. And lastly, any update on the court case, [indiscernible] Picked up and application?

Sorry, the court case in India? No, no, no. So an application has been made, we are eagerly await a hearing.

Okay, okay, so no settlement in -- for U.S. market also, right?

No, no.

The next question is from the line of Abdul Puranwala from Anand Rathi.

Just one question on the U.S. business, as mentioned by one of the participants earlier. When we expect the profit share from the U.S., [ personal ] net sales coming down in the next few quarters. I mean, had it been that we would have gotten this quarter, would there be a substantial increase on the gross margin?

If it had come in March quarter?

There will now be 2-door management, definitely.

What we launched, we shipped in March. So the question doesn't arise. So definitely, when we declare June quarter results, you will learn something about it.

All right. And my second question was on the other expenses. So when we you're talking about the India business, how stable is it in growth or how many -- in the next quarter. And from there, how do we see the promotional expenditure? So typically, I mean, for our set of products, I mean typically, when does the MR start pushing those products in the market? And when -- as compared to last year, would there be any substantial increase in the promotional expenditure that we see in FY '21?

So this year, actually, if you look at the numbers, there is a quarter-to-quarter or change in how much has been spent, so we had been showing a steady increase in sales and promotion expenses up to Q3. And then because of the lockdown, again, in Q4, it has come down a bit. But yes, compared to this year, next year, there will be a marginal increase once the lockdown phase is over. And it is very much required for India business to grow, right? So as you might have heard from one of the earlier questions, right now, there's a spot in the COVID basket. That is a kind of a demand created because of the environmental condition. But other than that, to maintain and grow the other segments of business, certainly, some amount of sales and promotion expense increase will happen. But the increase in top line will more than offset. So it is not going to impact margin clearly.

Sure ma'am. And would you like to provide some sort of guidance on an EBITDA level for the FY '22?

So it is kind of sensitive topic, right, for us because from close to 11.5% last year, every quarter, we were doing in excess of 18%. And I kept saying that depending on the next quarter will be less than that. And looks like we still did 18.5%. So we'll definitely better this. Okay?

The next question is from the line of Sachin Kasera from Svan Investments.

Congrats to the management for a good set of numbers this year. Ma'am, I had 2, 3 questions. One was just I wanted to clarify regarding this domestic, you mentioned a figure of INR 850 crores or INR 750 crores.

INR 850.

That looks quite aggressive. Even if you adjust for a base of FY '20.

How?

We are looking at more like a 15%, 17% CAGR; earlier is, 12%, 13%. If you could give us some sense what is giving this type of optimism.

Yes, because this year in lockdown has been a huge year of learning. And we are seeing that kind of upside for many of the product categories that we are in. Other than that, for the organization, basically, this year, if you looked at our performance, our 3 of our top 4 segments you have hammered. And we are already seeing in the first quarter, good signs of recovery and growth. So I feel pretty confident to be very close. This is a target taken, but I feel pretty confident to get close to that number.

Second question was on the margins. You mentioned you will be better this year, but considering the fact that you also mentioned that your industrial business now has become profitable. And now that disability is a benefit of profusion also from brinzolamide, can we look at a significant improvement in middle market environment?

Yes, I think because we are yet to fully understand how and when these margins will start flowing back to us, so we have not actually take them to come in at a particular quarter or not. So this is steady state operations, but we will do in excess of 19% EBITDA per share.

Okay, and on the U.S., ma'am, how many products you plan to file and launch this year?

This year, we are trying to file a 5 to 6 products.

And the number of launches, any idea?

Number of launches would be also equal number, around 5, too.

And just 1 last data question. The CapEx model this year and next year, have you financed the CapEx plan?

Yes, yes. We are -- we'll be close to INR 80 crores this year. And next Q also should be a similar number.

[Operator Instructions] The next question is from the line of Charulata Gaidhani from Dalal & Broacha.

My question pertaining to U.S.. There is a sequential de-growth. So if you could throw some light on the details? And secondly, in terms of repeat orders from U.S., how are they moving? And how you expect to grow going forward?

Yes, so, Charulata, as of now, the way products are taken on a campaign basis, and the way we book these sales is that unlike India business, there is no -- there is not a -- you don't have, like, a running product mix quarter-on-quarter. So if this quarter, 80% or 90% of the top line has come from brinzolamide, the earlier quarter, it would be from another product. Set of products. So that is one thing. Also, the business mix. Sometimes milestones come in at a particular time in a quarter, and then they don't come in the immediate next quarter. It is just that nothing else, yes?

Yes, okay. And about repeat orders?

Yes, yes. We have plenty of repeat orders. U.S. business is going to be very bullish for Indoco. I don't want to spell out the numbers at this stage, but the order book is very, very strong.

Okay. So, so far, I think there are 11 products in the market now.

10 to 11? Yes, yes, correct.

So how many products have you started getting repeat orders?

At least 6 to 7 products.

And in terms of the India business, how much is the percentage of COVID -- time and contribution of COVID to India sales?

It is not that substantial, Charulata, because we -- only 2 big brands that are contributing to the COVID bucket until now and until the Q4, our ATM and Karvol Plus are [indiscernible] and was launched after the first wave. So until Q4, it has not seen a significant number. However, in this quarter, that is a running quarter, it is doing well. So we'll just wait and see how things move, too early right now. Yes? But as such, we have a very de-risked India business. So the COVID basket, by way of contribution to the whole India business, is not too big.

Okay.

In fact, Canada, during this quarter, the COVID-native products have not done as well as last quarter the same year -- last year, the same quarter.

And I list out on -- you called out a number of prescription de-growth in the domestic.

Yes, I just checked that number after that was said. So the entire industry is de-growing still on prescriptions, and what SMSRC does is they give a relative de-growth, okay? So Indoco is relatively de-growing by 8%, looking at the entire industry. This is what it means. That minus 20% is an absolute number. What they mean is 80% of the prescriptions for the industry are coming back. That's what it means. Yes?

Okay. So in terms of doctor prescriptions, are you seeing the growth now compared to...

Yes, so like I said, compared to the first wave, this time around doctors are actually attending clinics. Patient footfall is a little limited on physical side, but there are a lot of e- and consults going on. But at least the early signs of April and May show that there is consumption of medicine happening. Lastly, on account of people wanting to buy COVID and COVID related therapies and otherwise, chronic and subchronic basket based on need.

Okay, and in terms of paracetamol, are you seeing the raw mat first increase?

Yes, yes, of course, like any other company, but we have passed on the cost increase to our front-end partners.

[Operator Instructions] Next question is from the line of Rashmi Sancheti from InCred Capital.

Just want to know what is the current capacity utilization at Baddi III plant?

Baddi III is around 70% utilization of capacity.

Okay. And what about the other plan for the Europe business?

So currently, still Europe, a lot of it comes from Goa, although gradually, plans are to move it to Baddi that has begun to happen. So plant 1 is running at quite a high-capacity of excess of 85% and plant 2, which is the sterile plant and running at almost 70%, 75% capacity. What we want, also does Europe, and that is running at a much higher capacity. Yes, ma'am, so you have guided at around INR 300 crores of European revenues for FY '22. That includes your German tender business also?

Yes, yes, yes. Everything.

Yes, yes. Includes all.

In okay. And what about your API business? This year, we have done exceptionally well, but going ahead, how should we look at it?

Yes. So like Sandeep said in the call, we -- the business has also -- had set good targets for growth. Expect to do around 20% growth in the API business in the coming year.

20%?

Yes, 20%. What happens is as the international business for us increases the current consumption goes up. So they are not able to sell enough. Right now, there's a struggle on satisfying customers, both internal and external paralleling.

Yes, and finally, any remediation cost we had incurred in this year in FY '21 or there was...

Around INR 3 crores.

How much?

Around INR 3 crores.

The next question is from the line of Kunal from Vallum India Discovery Fund.

Congrats for a very successful year. Sir, my first question was on the U.S. business. So...

Kunal, we can't hear you.

No, we are not able to hear you.

Yes. So the first question is on the event business. So in the opening to your [ review ] before you opened it up to participants, you mentioned that you had shipped 3, 4 months of inventory of brinzolamide to the U.S. So when I remove, considering the market size, which was reported, when I removed that much 3, 4 months' worth of revenue from the U.S. business, what I see is that the rest of the portfolio actually has been growing on a Y-o-Y basis. So could you please give us -- throw some light? Was there any competitive pressure? Or it is just, I would say, more of a seasonal change in terms of the U.S. business in terms of the mix?

Yes, as we said, it's all a product mix driven business. It's unlike the India branded business, so we cannot equate that because 3 months inventory was shipped, that's why the others are not doing well. It's not that. The order book currently is very, very strong. As I said earlier, I can't give you numbers, but it's absolutely on a very sound footing. So the 2 don't correlate the way what you are trying to put it.

Can you repeat what you tried to say because I have to completely understand what you're saying. Are you saying that if you took out the brinzolamide sales, we would have de-grown? Is that what you're saying?

Because this quarter, you did INR 33.1 crore. And the same quarter last year, you did INR 26.8. So from INR 33, if take out a reasonable quantity for brinzolamide...

So that -- let me repeat what I said earlier. U.S. should not be measured on a period-to-period basis. So you -- because there are continuous shift in the kind of products we sort of manufactured and sold because we take them on a campaign basis. So it's better if you look at it on a broader period basis, maybe 6 months, over 6 months or something like that or annually. That makes more sense. Because see, when we manufacture, we sell, we ship it to U.S. Then the partner carries inventory there and then sell. So to make any kind of sort of conjecture based on the number of unit mode or value of it is not correct. So we might have shipped something big last year at this time, which was held by our content partner, something like that.

And certainly, Kunal, another point is the entire 3 of 4 months inventory was not shipped in March. March was just the beginning of the shipment, and it also happened in April.

And second question I had was on the India business. So -- now I do, I appreciated that last year, I think you would have -- last -- you would have had a good amount of time to gain insights on how we can improve the momentum of the India business. But the INR 850 crore target, which you have mentioned, could you give us a broader understanding of how? Because as one of the earlier participants also mentioned, that even on the FY '20 this target of growth is much higher than what we have done in probably any of the last 5 years also. So...

Yes, well, I did explain earlier that we are pretty confident of getting close to it. If you looked at industry growth, which has come out for the month of April, which is 56%, normally on the old ways, even with COVID, the base effect industry should not have grown at more than 30%, right? So there are signs of an increased consumption. Sometimes pandemic also -- because, see, we were always aware that on account of reach and distribution itself, 1 should be able to sell more in India than you did before? Possibly, things are changing. We are seeing a very high consumption happening right now at the industry across almost all segments. So I feel the targets taken will stay positive, and we try to get there. Yes?

So ma'am, you're saying that the whole trajectory of the consumption across a much broader basket and just undertook that for all -- for a good portion of the entire industry, that was a rebase to some extent because of this pandemic?

Yes.

The next question is from the line of Chirag from HDFC Fund.

Two questions. Firstly, did I hear correctly, you mentioned INR 300 crores is OCS for FY '22?

Cash and -- yes, yes.

And if I look at it historically, in terms of your OCF to EBITDA generation, what you seem to be indicating is an EBITDA that should be north of 300 crores as well?

You're right. We said we will do better than 19%.

Okay. Fine. And secondly, on domestic, again, did I hear correctly, INR 850 crores for FY '22?

That's the target, yes, except for refunding for job.

Okay. Because that -- again, I know a few participants have stressed this, but this looks very, very aggressive.

Yes, I agree.

The next question is from the line of Aditya Khemka from InCred Asset Management.

Last time, what was the milestone income in this quarter for the U.S. business?

INR 8 crores.

INR 8 crores. So out of INR 33, INR 8 crores as milestone.

Yes.

Okay. And do we still have, say, for the next 12, 24 months? Do we still have visibility on the milestone side for the U.S. business, where we can say that the milestones received in FY '21 would not decline in FY '22 or '23? I mean, how should we look at the milestones for '22 and '23?

It will be maintained.

It will be definitely maintained.

Definitely maintained, okay. Is there a reason why it should not grow? I mean, we are launching more products and hopefully, more customers should ideally pay.

No, your first question was will it decline. So we said, no, it won't decline.

Okay, that's advantage. Okay. So let me rephrase the question. How much growth can we expect on the milestone sight?

The endeavor is to develop more and more complex products, but we definitely have visibility that it will grow. How much and all that is...

Aditya, what happens is a lot of these milestones are pegged to a certain regulatory total events.

Correct.

And to see our responses, ANDA approvals, API [indiscernible], as a lot of situational things are there. It all needs to fall in place. If everything works out, you can definitely do better or much better. Yes?

Yes. Yes. Okay. Understood. And when it comes to the FRM business, the [ Legislative Market Business ], how do you see the future? Because we have a very small base there. And we have a decent product basket in other markets, which I don't believe is replicated in the FRM side. So I'm slightly more interested because I believe that's a high potential business where we don't have enough debt on that side. So any thoughts to on the FRM side or Sandeep, 7 days line of sight?

Yes, yes, yes, We have done INR 91 crore and INR 92 crores this year. And next year, we will definitely do around INR 115 crores.

And how would you achieve this growth? As in how would you get there? Is it more product launches? Or is it better penetration of existing products? What kind of portfolio are you selling? Any color?

For both, better penetration in the existing markets and new products to be introduced in the existing as well as new markets. This year, just like the India business, I mean, for the year completed, we had run into some problems, logistics wise and getting material across to those countries. But now it seems to be dying down all these issues. And Americas also back on their feet in Africa to visit doctors. Doctors are meeting the reps. So things are far better now. So that is what -- and plus the introduction of new products. That's what gives us confidence. I mean, it's a question of adding about INR 25 crores to the base. That's where we are.

Right, did I hear you correctly, Aditi, ma'am? You said that the Micro Labs' Baddi III plant is now running at 70% capacity utilization?

Yes.

Is this like the average utilization for the past quarter? Or is it at this moment in time? I'll tell you why I'm confused because my understanding was that Baddi III, at its peak, could give us INR 300 to INR 400 crores of sales. So when you're saying it's doing 70% utilization, is it already generating like INR 200 crores, INR 250 crores of annualized sales?

No. Like I've explained several times before, how much sale you can do from a site and its utilization do not have a direct relationship as regards contract manufacturing-related product mix. Because we are continuously changing our mix to make it more earnings per unit manufactured, both on the top line as well as margin. So currently, when we say 70% utilization, that also includes the capacity utilized for a lot of validations and filings and things like that. So this is our entirely for commercial, and this is spread an average kind of.

This is quarter-on-quarter. Aditya, this is quarter-on-quarter. And for the year, it is not much. There's 50% or less than that. And besides, Aditya, you are right, we can easily generate 400 crores to 450 crores from that plant. It's just a question of replacing the product. Like Aditi said, higher-value products, the moment you make automatically, the value for dispatches from the plant will shoot up.

Yes, yes, no, I get that. And I respect that. I know each product doesn't give you the same utilization and the same revenue, that's not proportionate. I get that. What I was trying to gauge here is okay. So given by what we have said, we are basically selling lower value products than maybe higher value products at this juncture from that facility. And my question is, if you can throw some more light on what is the kind of high-value products that we may sell from that facility going forward. What is the pipe of that facility, in other words? And also, what are the current products that you are selling? Are we manufacturing paracetamol for the tenders on that facility, which is why the volume is higher and values growing?

No, no, no. It's not only paracetamol. There are a slew of products for both domestic as well as international markets being made over there.

So domestic are also manufacturing in that new fleet.

Of course. Of course.

Yes. Yes.

The next question is from the line of Gaurang from NBIE.

I just had a question on employee cost. It has de-grown Q-o-Q by 17% and also Y-o-Y %5. So I just wanted to ask whether this is structural or was it a one-off.

There were some provisions in prior quarters, of which we got the benefit. That was 1 part. And the second part was the actual revaluation. So both these put together has brought down the employee costs to some extent.

But it is not structural. It is more onetime for this quarter.

The next question is from the line of Vipul Shah from Sumangal Investments.

Congratulations, a good set of numbers. My question is regarding our CRO business. How are we going to scale up that business over the next 3 to 5 years?

So we have a total capacity of 98 beds at CRO. Divide it into 3 zones. So we can do studies from 16 beds to a total 98 bed if need be. And currently, almost 40% capacity is being utilized by Indoco internally, either for our own project or for customer projects for which we are doing contract research. But there are some external customers, and there is -- going forward, certainly, this business, I'm expecting for it to grow by around 25% every year.

And second question relates to domestic business. You have given a guidance of INR 850 crores. So when I see your major branch, all of them have de-grown by 15% to -- some have grown by 40% Y-o-Y. So I'm -- like, something's missing. So can you explain the...

Yes, so our top 4 categories for India business are stomatological, anti-infective, respiratory and GI, vitamins business, the typical. So if you look at this current year, 2 of those categories got really hammered. One is anti-infectives and the other is respiratory. And GI for the greater part of the year, was also not picking up at all, largely because of the COVID like environment. So this INR 850 has been taken, keeping in mind a more corrected environment, surely. So if the lockdown is imposed for much longer and our COVID-19 situation continues, then what happens to top line is a factor of how the COVID basket moves, of course. But looking at our top 4 categories, how badly they did. And the amount of sale, we expect that there will be spot this year in those categories. And I'm pretty confident. Other than that, many of the other divisions, whether they are ophthal, dental, gynec, cardio, [indiscernible] are really very small and have to ramp up in a big way. They have taken challenging targets. And of course, one has to wait and see, but we are pretty confident this year, domestic will be able to revive and go after it.

Remember, all our R&D expenditure, we charge the P&L or any portion is capitalized well also?

No, we have set our policy many years back as per that, the projects post completion. And once we get the approval, they are written off in 3 years.

Three years, okay.

And what is the P&L is about 5% of the sales.

The next question is from the line of [ Vipin Taneja ], an individual investor.

Actually, you were mentioning about -- actually, it seems you have mentioned that the cash from operations are going to be upwards of INR 300 crores. And I think Mr. Chirag of HDFC was also mentioning that we'll be having that 19%, 20% EBITDA margin. That means like sales around INR 1,500 to INR 1,600 crores, including the rest of the world as well. So INR 1,400 crores, you have mentioned from INR 850 is from domestic market. The U.S. is around INR 250 crores and Europe, INR 300 crores coming forward. And rest of the world, INR 100 crores, INR 200 crores. So around that number, we should be looking at, ma'am, INR 1,500 crores to INR 1,600 crores around...

No, you have not counted API yet.

Another INR 100 crore for API.

INR 100 crores. So around INR 1,500 crores, INR 1,600 crores of sales this year?

Yes, that's a good number.

Yes, around INR 1,650.

INR 1,650. And 19% to 20% EBITDA margins, which we have to look for INR 300 crore plus cash generations.

Ladies and gentlemen, as there are no further questions, I now hand the conference over to the management for closing comments.

Thank you very much, all the participants. Thank you for your actual participation. Have a nice evening. Thank you.

And all, stay home and stay safe, please.

Yes, thank you.

Thank you. Ladies and gentlemen, on behalf of Centrum Broking Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.