Indoco Remedies Limited (INDOCO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY'22 Earnings Conference Call of Indoco Remedies, hosted by Centrum Broking Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Cyndrella Carvalho from Centrum Broking Limited. Thank you, and over to you, ma'am.

Thanks, Margaret. Good afternoon, everyone. I, Cyndrella Carvalho, welcome you all on behalf of Centrum Broking. On the Q3 earnings con call of Indoco Remedies Limited. At the outset, I thank the management of Indoco Remedies for giving us this opportunity to host the earnings call. From the management team today, we have with us Ms. Aditi Panandikar, Managing Director; Mr. Sundeep Bambolkar, Joint Managing Director; Mr. Pramod Ghorpade, CFO; Mr. Vilas Nagare, Corporate Affairs and M&A. I now hand over the call to the management team for their opening remarks. Over to your management team.

Thank you. Good afternoon, all the participants. Hope you and your family members are all safe and healthy. Let me first begin with the business highlights. Net revenues of the company grew by 4.6% at INR 348.6 crores compared to INR 333.3 crores for the same quarter last year. For the 9-month period ended December '21, revenues grew by 19.5% at INR 1,102.4 crores as against INR 922.6 crores. EBITDA to net sales for the quarter is 21.1% at INR 73.4 crores compared to 18% at INR 60 crores. EBITDA for the 9-month period is 22.4% at INR 246.5 crores compared to 18.3% at INR 169 crores for the same period last year. PAT to net sales for the quarter is 9.5% at INR 33 crores compared to 7.5% at INR 25.1 crores. And for the 9-month period, it is...

[Technical Difficulty] Ladies and gentlemen, thank you for patiently waiting. We have Mr. Sundeep Bambolkar connected in the call with us. Over to you, sir. I would request you to please repeat your call.

Yes. We were at domestic formulation business. Revenues from domestic formulation business for the quarter grew by 15.2% at INR 181.5 crores compared to INR 157.6 crores for the same quarter last year. Major therapeutic segments, namely anti-infectives, gastrointestinal, neurological and respiratory performed well during this quarter as compared to the previous corresponding quarter for the last financial year. For the 9-month period, revenues grew by 27.2% at INR 610 crores as against INR 479.7 crores for the same period last year. During the quarter, DROPIZIN syrup 100 ml, the molecule name is Levodropropizine and Chlorpheniramine Maleate syrup, was launched under the respiratory segment. Now on the international formulation business front. Revenues from international formulation business witnessed a growth of 5.5% Q-o-Q. For the 9-month period ended December '21, revenues grew by 19.5% at INR 431 crores as against INR 360.5 crores for the same period last year. Y-o-Y revenues were flat. Revenues from regulated markets for the 9-month period December '21, grew by 18.2% at INR 348.4 crores as against INR 294.7 crores for the same period last year. Q-o-Q revenues degrew by 2.3%. Revenues from U.S. business for the quarter grew by 9.6% at INR 49.1 crores as against INR 44.8 crores for the same quarter last year. For the 9-month period, revenues grew by 24.3% at INR 143.1 crores as against INR 115.1 crores for the same period last year. Revenues from Europe registered a growth of 13.7% for the 9-month period for the current fiscal year at INR 193.1 crores over the same period last year at INR 169.9 crores. Quarter-on-quarter sales have degrown by 9.1% at INR 54.3 crores over previous quarter of the current year, which stood at INR 59.7 crores. Revenues from South Africa, Australia and New Zealand have recorded 25% growth for a 9-month period of the current fiscal year at INR 12.1 crores over the same period last year at INR 9.7 crores. Q-o-Q sales grew by 41.5% at INR 5.4 crores in the previous quarter of the current year, which stood at INR 3.8 crores. Revenues from emerging markets for the quarter grew by 27.9% at INR 34.3 crores as against INR 26.8 crores for the same quarter last year. For the 9-month period, revenues grew by 25.5% at INR 82.6 crores as against INR 65.8 crores. Revenues from API business -- the growth for the revenues from API business remained flat at INR 19.69 crores over INR 19.73 crores. During the 9-month period for the current fiscal year, the API business recorded sales of INR 50.3 crores. Revenues from AnaCipher CRO and Indoco Analytical Solutions, for the quarter, grew by 43.4% at INR 4.4 crores as against INR 3 crores. The 9-month period, revenues grew by 32.7% at INR 10.9 crores as against INR 8.2 crores. That is all about the business highlights for the third quarter. And I now request the participants to put up their questions. Thank you.

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

First question, sir, on the India business. So while 50% growth Y-o-Y looks good, but if I compare your 3Q FY'22 revenue, your 3Q FY'20 revenue in India, they are both similar at around INR 180 crores. So it basically implies no growth whatsoever from FY'20 third quarter to FY'22 third quarter. So could you take us through what has been the reason for such a performance?

Aditya, you're talking of growth in quarter 3 FY'22 over quarter 3 FY'20. Is that right?

That's right. Yes.

Okay. Okay. Okay. We were -- the aspect if you look at the health of the pharma business in the India space for us. Frankly, we have been exceedingly well with in all our 4 core therapy areas, respiratory, stomatological anti-infective and GI. If it's all there is -- and Q3 FY'20, that might have been a one-off event, I think, because otherwise, third quarter for us is not a big quarter. In '20, I just look at it, and maybe I'll answer your question in a little later more meaningfully. But let me just talk about third quarter this year in any case for performance. As you know, in Q1 this year, we had the upside of pre-COVID. In Q2, we got the season to support us. And in Q3, again, we may not have measured in absolute terms, which is valid to the Q2, but the business has done really well. And both COVID as well as non-COVID vaccines have done well this year for us. So but if you look at the corporate, we are right now 26 as per -- in the IPM as per [indiscernible] and 23 as per SMSRC in prescription banking, and all of our growth and all parameters indicating health of business remains strong. I'll come back to you on what has happened in 2020 and answer your question again, okay?

Ma'am, basically, when I look at your FY'20 quarters, it doesn't seem like a one-off because we did like INR 160 crores in 1Q in '20, then we did INR 180 crores in 2Q and then we did INR 178 crores in 3Q, which tends to be the normal sort of trajectory of the business 1Q -- 2Q better than 1Q and 3Q slightly less better than 2Q. So one of my major concern here is that if I look at your 1Q '22 versus 1Q '20, then 2Q '22 versus 2Q '20 and then 3Q '22 versus 3Q '20, while 1Q and 2Q, we have shown 45%, 22% growth over '20 respective quarters because '21 quarters were, obviously, disrupted. We see material growth in 1Q '22, 2Q '22. And I understand some of it could have come from COVID, but 3Q is like absolutely flat. So COVID or no COVID, this business has just not grown from 3Q '20 to 3Q '22.

Okay. Let me come back to you because I would have to understand what was in the days of the 2020 performance.

Sure. And second question along the same business. So in our previous call, we said that we were optimistic about crossing about INR 850 crores in the India business in FY'22. Now that in the 9 months, we have done only about INR 610 crores. Full year number will definitely fall short of INR 850 crores. So where do you see the full year number now? And what changed for us to not meet that number? Some color on that.

Yes. So Aditya, INR 850 crores, if you remember in my previous call, the explanation was is very clear. We had taken growth on the previous year of growth. We also looked at various parameters, such as West, which was more heavily impacted and where we are strong and therefore, our ability to rebound. Having said that, for 9 months period, we are at 95% of the target taken. So I stress the fourth quarter target is on the higher side. And I feel pretty confident of being able to do well for the year. Okay, we do not do INR 850 crores as a sale target, but we will come close to it. Not to worry.

Okay. But even if you were to come close to it, ma'am your 4Q sales will have to be better than 3Q sales. Is that a possibility given that 4Q is actually seasonally the worst quarter?

There is a possibility, Aditya.

Sorry, ma'am, I couldn't catch that.

Yes, it's a definite possibility.

That 4Q can be better than 3Q in terms of absolute sales.

Yes, yes. As you know, for the half year this year, the company was on target and 60% of our field sales offices were in excess of 100% of the target. What has happened in Q3 probably is a kind of a nulling effect, people getting into comfort zones, but it's not impacting us [ secondly ] in anyway. And I'm very confident Q4 will come back.

Okay. Okay. Now coming to the export side of business, question for you Sundeep sir, on the European business. So are EU sales, again, seem to be tracking short of what we had indicated in the previous calls. Any particular reason you would like to call out why European region sales have been lower than what you were expecting?

Yes. I had indicated in the last call that Q3, we were not on track as far as Europe is concerned. The main reason was that the API price of Paracetamol had shot up. And as a result, we were not getting the desired feedback from our front-end partners. So that was one of the reasons we had to slow down on that molecule and that is the main reason. However, the brighter side of the story is things have come back now, at least 70% to 75% on track compared to what it was in the last quarter. So in Q4, we should be doing far, far better than Q3 as far as Europe is concerned.

Understood. So for the full year, when earlier you had said about INR 300 crores for Europe. Now do you feel like to INR 270 crores, INR 280 crores is doable? Or do you feel...

INR 285 crores to INR 290 crores is certainly doable.

Okay. And same question for the U.S. business. Since we launched brinzolamide, we haven't really seen a material uptick in numbers. So just to -- so Q3 FY'21, we were INR 45 crores in U.S. I understand there were some milestones included. And in these 3 quarters, since we have launched brinzolamide, we are doing INR 45 crores to INR 48 crores in the U.S. So is the product not really getting market share? Are we not really making money on brinzolamide or is it that the base business is sliding too fast?

No, no, we are making money, of course. And we have to give it a little time to settle down. If you see in this quarter, U.S. has done INR 49 crores. It is the highest among all the past 3 quarters. So in Q4, definitely, things will look up. The order book is extremely healthy as far as U.S. is concerned. And directly on our own, having out-licensed the NDAs or through partners. We now have about more than 18 products in the U.S.. So definitely, things are on track for Q4.

All right. One last question, I think, for the CFO. This is on the other expenses line item. So our other expenses were about INR 98 crores, INR 98 crores, both in 1Q, 2Q. This quarter, the other expenses seems to have come off significantly, it's only INR 88 crores, so INR 10 crores lesser then the last 2 quarters. And I can see R&D expense hasn't really changed that much. It's about INR 17 crores. So what has driven the change in other expenses, what is driving the lower other expenses? Or is this cost saving? Or is it just seasonality of expenditures? Is what I'm more concerned about.

Yes, Aditya, Pramod here. So overall, you're right, one is about cost saving measures or cost control, cost efficiency measures. That is one. Second, we have operational excellence programs are working very well in all plants. And third is about less sales and marketing expenses in line with the sales. So these are the primary reasons for reduction in overall other cost.

Got it. So basically because the sales did not come up to the level that it was in the past 2 quarters. That is why other results is mostly variable expenses, which are lesser then the previous 2 quarters.

Exactly.

Understood. Just one last question, and then I'll get back in the queue. What's our current net cash or net debt position?

I think that short term is around INR 120 crores, and our long term is also equivalent.

So INR 120 crores of debt. This is net or is this gross of cash?

This is gross of cash.

Gross of cash.

Yes. So how much cash do we have right now on the books?

So roughly, it is in the range of INR 6 crores to INR 8 crores.

INR 6 crores to INR 8 crores. So about INR 240 crores of net debt?

Yes. No, INR 126 crores to INR 226 crores in the gross, so if we have to net [ cash ]. So net balance is about INR 120 crores, INR 119 crores to INR 120 crores.

INR 220 crores, you meant?

Yes correct, INR 220 crores.

[Operator Instructions] The next question is from the line of Vipul Shah from Sumangal Investment.

Hello. Am I audible?

Yes, you are.

So my question relates to our CRO business. So when we are likely to see the scale in this business? And is this business profitable at the EBITDA level right now?

Yes, sir, it is definitely profitable at EBITDA level. Indoco got into the CRO business through an acquisition some years ago, we acquired Nicholas Piramal site at Hyderabad. And it is comparatively a much smaller scale CRO. It meet with our need. Indoco had filed, several first to file, Para IV products that year and continues to have. We continue to use about 50% to 60% capacity for our own needs. And the rest is being -- we have external clients and customer services. Looking at the performance of the division, we have plans to expand it and will be doubling the capacity in the coming years.

So how many scientists we are employing there?

This is a CRO. So we have around 80 employees, of whom about 4 to 5 are medical practitioners. And the rest are bioanalytical scientists and clinical technician, statistician, et cetera.

And lastly, ma'am, our material cost as a percentage of sales has shoot up very sharply, both year-over-year and quarter-over-quarter also. So what is the main reason and why we are not able to pass it on?

Yes. Why we are not able to pass it on largely is at least for the India side of the business, we are into brands and you're not able to increase prices just like that way. Let me come to why we have got impacted, as you might have been aware the whole China situation was -- it was anticipated that the cost of goods will get impacted. However, at Indoco in the first 2 quarters because of better planning, availability of products and materials in hand, we were able to for the first 2 quarters not had this kind of impact. But in this quarter, in particular, [indiscernible]. So cost of goods have largely gone up because of the increases in pricing prices, both of packing material for API as well as some of the APIs we purchased, particularly from China.

[Operator Instructions] The next question is from the line of Kunal Mehta from Vallum India.

I wanted to understand, could you please tell me what the market share of Teva in brinzolamide as at the end of this December quarter?

Teva's market share is close to 22%.

Okay. And for this quarter, ma'am, I wanted to understand, I mean have you accounted for any significant profit share from the product? Or it will depend on remittance from the partner and will be later accounted in the coming quarters?

We have not yet accounted for any profit share.

Got it, sir. And, sir, any indication as to -- I mean, any -- I'm not asking for in this quarter, but in terms of how -- what would be your duration, I mean, would you recognize it in 6 months or would you recognize it on a yearly basis of how it would go?

Actually, it all depends as and when the profit share comes, accrues to us, that's the time we account for it. So mostly now, it will be directly in end of March.

Got it, sir. Sir, wanted to understand, regarding the order book in Europe, can you please let us know the situation of your order book for Europe for the next 6 months? I mean...

The order book in Europe is at around INR 120 crores right now. So the order book position is very sound. It's a question of executing those orders in a very efficient and successful way which we are planning. And as Pramod spoke about the operational excellence program, which we instituted during the year between finance and operations and the plants, that is taking very active shape. And that's the reason we have the confidence that Europe will deliver definitely close to the figure which we had committed.

Understood. And sir, this INR 120 crores, I mean, order book to billing will happen over the next -- I mean, will have a continuation in the next few quarters?

No, over a few months.

Okay. Got it, sir. And sir, just final thing, I wanted to understand regarding the initiative of passing on the increase in raw material prices on the domestic side. So wanted to understand, I mean, do we have -- regarding the price increase for the -- especially for the brands in the [indiscernible] do you have any visibility as to when we would be allowed to take -- and at what point in time would it be regarding the price increases? Sir, speaking on the actual side.

Yes. Generally, what happens is the nonscheduled products, we are allowed to take a price increase up to 9% to 10% per annum. And the scheduled drugs, of course, goes with the government directive. But it's a matter of the number of brands competing in the market and so many other factors, whether a company wants to take a price rise or not?

In the coming few months, based on the fact that everybody in the industry is facing strong pressure. I mean if you have to put a number on what is the expected price rise across the board, which can happen at an average level, I mean would it be [indiscernible].

Although we have currently at around 4.8% or 4.9% price rise that has been taken on the entire India. And certainly in the coming quarters based on wherever there is scope to increase we shall look at it. Aditya, can I come back and answer one of the earlier questions, I will wait for you to come back in queue.

[Operator Instructions] The next question is from the line of Aditya Khemka from InCred AMC.

Ma'am, you wanted to answer the question about 3Q '20.

So, Aditya, I just got out my numbers for '20 to be sure. So first and foremost, if you look at our product-wise performance or therapy-wise performance, we are at par except for respiratory as a segment, where this year because of performance of Karvol Plus, we have done well, but one product, Febrex Plus, is not yet back to the pre-pandemic levels. So -- and that is a major brand for the company. So that is on 1 product we've seen this case. And if I look at the particular performance of Q3 that year, Q3 FY '20, Febrex Plus had grown by 30%. So I would have to look at some other probably there was a team operating in the market, something like that, to unnaturally push numbers for that category. If you look at our performance, otherwise, Aditya, Febrex Plus also compared to the last 2 years each quarter-on-quarter is doing well, month-on-month doing well, but it is yet not back to the earlier levels of '20. So that is the reason. I just wanted to clarify.

Sure, ma'am. But what sort of seems to be a bit of a problem here is that, a product like Febrex, which has Paracetamol, chlorpheniramine, et cetera. In COVID times, we have seen a slight bit of a wave this quarter as well in the December quarter as well. So what worries me is that in those times, products like Febrex don't do well, then what sort of -- are we losing market share in the representative segment? Or is it that the segment itself is not doing well?

As such, Aditya, although these products, sounds like it should do well in COVID, it is -- I think in Q4, you will see that. Like I mentioned, there has been one challenge we have faced in -- at the corporate level in Q3. Our 2 top acute therapy divisions, both are on very high achievement of target in excess of that target. And when that happens, as I said, it is a little difficult to push people to do their primaries. The division which carries product Febrex Plus also carry in ATM, our azithromycin brand, which has actually got a better kind of tailwind this year because of the COVID situation. So we all agree internally also that the performance of ATM, which probably has not got our people to go all out for Febrex Plus and this is recognized and corrective measures have been taken in the last quarter.

The only reason that [indiscernible] because if you see Dolo the performance of Dolo in our market...

Dolo is plain paracetamol, Aditya.

Yes, I know. I am just saying that the paracetamol related brands with the Dolo, Crocin, they've all been exceptionally well. So that's sort of a reason whether Febrex is -- it has to be something internal rather then external?

Yes I get. As I explained, this kind of a dual thing has happened with Febrex Plus but definite strategies are in place now to correct it.

Right. And, ma'am, what part of our portfolio is under NLEM?

11%.

And so for this 11%, given that WPI is still north of 10%, I think last I checked it was 10.4%. So one should safely assume that we'll be able to take a 10% price increase in the entire NLEM portfolio, am I right?

Yes, yes.

But for the non-NLEM portfolio is where you guys are saying you are slightly more tentative because there is competitive positioning will make a difference.

Correct. Correct.

But in the non-NLEM portfolio, in how many categories would we be, let's say, the top 3 leaders in the respective molecule or in the respective therapy area?

We are in top 3. If you look at our -- it depends on how we categorize, Aditya. So we have considered it like that way. Cyclopam is number one, if you look at the paracetamol market, if you look at it in the anti-psychotic market, we are #3. So the same appears for most others, for Febrex Plus, we are #2 and 3, depending on where we are in the country. For ATM, which is azithromycin, we are #3 now this year. In the azithromycin brand. Karvol Plus, we are #1. For the dental products, we are #1. So in many categories we are #1, I understand where you are heading with this, whether you feel we will be able to take price rise or not because of our competitive position. So these are decisions we make strategically based on where we feel we have strength or otherwise.

Yes. So wherever you are top 3, maybe 1, 2 or 3. Would you say that the strong enough position to take a price increase? Or would you still have to work out for the leader to take a price increase?

Absolutely. Because these are not very expensive products, per say. So that 8%, 10% is not going to damage the profits for the buyers also.

Exactly, yes. So -- ma'am, I'm sorry to dwell on this a little long. But -- so what percentage of your non-NLEM portfolio you can say with certainty, given the positioning of the brand or the absolute price of the product or the leadership of the brand, whichever variables you pay more weightage to. So what percentage of your non-NLEM portfolio would you say you will be comfortably be able to take a high single digit or a 10% sort of a price increase because your cost pressure is very pre-visible, but you're 60%...

I'll just comment on the cost pressure side also. Partly, the cost pressures are coming not only for India business and brands. They've also come out in international business because of the stacking prices of API. And like Mr. Sundeep explained in the earlier response, it is also one of the reasons we closed down manufacturing, some of our contract manufacturing kind of product line because we could see that there is definite pressure on margins. There is now a good understanding of ours with partners with which we are expecting to be able to give a better margin even for the contract manufacturing business. So you will see the cost of goods come under control.

Right, right. And in the fourth quarter so far, I mean, it's been only a month in the fourth quarter. But in healthy pricing of the solvent and key starting material come down relatively compared to the third quarter from China? Or is it kind of stable but not coming down?

Stable, but not coming down.

Stable, but not coming down.

Stable, but not coming down. So you need price increases to improve margins, right?

Yes. Let's see how the next 15 days of February pan out, then we can take decisions.

But on Q4, we expect similar comps.

Compared to 3Q, right? Because of the...

Yes.

Sundeep sir, same question for you. Obviously, outside India, we have a couple of branded businesses as in our -- some of our exposed to semi-regulated markets. So in those semi-reg markets would you be comfortable with price increases to pass on the cost pressures. Regulated markets, I understand because it's so competitive and there is no branding, it would be difficult. Please let me know if you concur.

Correct, correct. See, part of the branded business in Africa, we are our own front-end. That's French-West Africa which is -- this year going to do about INR 40 crores, INR 42 crores of business throughout the year. That business, we have just stepped into that business. So we won't be keen to disrupt by taking price rises unless it is very much evident. In other countries, of course, we already started asking for price rise and we are getting a favorable response from these front end.

Right, right. I understand. I understand. And just one more question. On the API side, sir, now where are we on capacity utilization? I understand our internal consumption would be first priority, but our external sales has been around INR 20 crores now. So anything -- any visibility there or improvement in [indiscernible] or most of the capacity will be used for internal?

Yes. Aditya, we are our internal consumption has gone up significantly. And -- but we expect by next year to be able to sort this out, so we can satisfy both internal and extend customers. There is not much concerns with the extent of someone's order position. But certainly, this year because we have not been able to satisfy them, there will be a little bit of an issue. But the next year, I expect external sales in API to also catch up.

Right. And Sundeep, sir, on the total EBITDA now, so we are at around INR 247 crores for our 9-month EBITDA in FY'22. Is it safe to say you will easily be able to achieve that INR 300 crore EBITDA target for FY'22?

Yes, true.

Okay. And just on this quarter U.S. sales, can you quantify how much was the milestone? And what was the milestone amount in 2Q, if you could remind me?

In Q3?

How much was it in Q3? And how much was it in Q2, if you could remind me?

Similar lines.. I mean, for the company I can tell you, not specifically on a product. Around INR 8 crores has come in through profit share this quarter.

INR 8 crores have come through profit share in this quarter. And this profit share is different from what we used to call milestones, the regulatory milestones we received from partners?

Yes, yes, that is separate.

That is separate lines.

Yes. So how much would be the regulatory milestones this quarter?

Regulatory milestone this quarter are close to INR 20 crores. Total, including the profit share.

Including the profit share. Got you. Okay. So this INR 8 crore profit share would largely be brinzolamide, am I right?

Yes. Yes.

[Operator Instructions] The next question is from the line of Cyndrella Carvalho from Centrum Broking.

Ma'am if you can look at our India domestic market, given the wave 3 is also contributing in Q4. But on the new launches that you had done in the domestic market and the coming year, how should we look at it? And what's the outlook here that you have? And what are the new launches trend that you can help us understand? How are they progressing?

Yes. So thank you for the question, Cyndrella. As you know, one of the areas of weakness for Indoco as a corporate in the domestic space has been our ability to scale new products and make them a success. Earlier this year, we restructured parts of our strategy group for the India business, created a Chief Marketing Officer, function. And the main sort of focus for this team has been to select and launch good products. So I'm happy to share that the products we have launched up to now, 2 products, one is [indiscernible] which despite being the fixed launch in its segment. In the very second month of launch, has taken up leadership position and is the #1 brand in its therapy now. The second product which we have launched in Q3 is, as we discussed, DROPIZIN syrup. It's a [ periphery acting ] cough syrup and very happy to share that the first 3 months trends are extremely good for this cough syrup as well. So I see lots of value add coming from new launches to the company's performance going ahead. Not only will it help us grow going forward, it will help us change the manner in which our portfolio is structured today. As you know, we are very heavy on legacy products and expecting new products to contributes substantially going ahead to the company.

Understood. And, ma'am, on the cost side, I mean, if we take the price increases in coming, say, from next year Q1 onwards,then should it be sufficient for us to maintain and grow our margins? Or you still think that the pricing scenario from the input side, will still remain slightly elevated. How should we look at it?

Look, Cyndrella, the rise in input prices or cost of goods, we expect this to be now not a short-lived thing, honestly, possibly by the next quarter. In the fourth quarter, we should stabilize on cost of goods front. 40% of our business now is exports and like Mr. Sundeep explained, especially that part of the exports where we are into contract manufacturing, et cetera. Our partners also understand the pressures on the business, and we've been able to correct that. So going forward, that would get corrected. India business as we discussed we will take price rises wherein wherever we see strategically also it makes sense. So I do feel that for Q4, the cost of goods will possibly stay similar to what it is now. But thereafter then, it should be okay.

The next question is from the line of Vibha Batra from FairConnect.

If we are to see our sales for FY'22, year-to-date, 9 months, what percentage will be because of COVID? I know it's very hard, but if you were to compare it with previous year and kind of segregate that if there is no way forward, what would be the hit on sales? That's my first question. And if you can quantify the sales growth coming here, considering everything. And also your tax rate rise, why is it high and how is it likely to move next year?

Okay. So I'll take your first question on the COVID market, et cetera. So as you've seen in the 9 months, we have grown at close to 19.5% for the company. And domestic business has grown at more than 27%. If you look at our COVID market, there is one product which perhaps appears in both COVID and non-COVID. The nature of the product, which is ATM, which is azithromycin, macrolide and anti-infective. It is always a very strong brand for us. It got a bit of an upside in the first few quarters. So it now plays in both places. But even otherwise, if you see then this market has also grown at 27%. We are one of the few companies which has a very good balance of COVID and non-COVID markets. With products on both sides have done well. So yes, in absolute terms next year when we hope for sake of everybody else, there should be no furthers waves. We do realize that certain upside, possibly a product like Karvol Plus, a decongestant, would slow down a bit, some part of ATM sales may decent. But otherwise, I don't see much impact. Yes. Coming back to your question on taxation. I think -- I'll just check, Pramod handle that?

So with regards to tax rate. Currently, we are at 35% per surcharge, next -- in the last 2 years. Next year onwards, we have been -- a better tax rate. That is a 25% [indiscernible].

Hope that answers your question?

If you were to quantify in value terms the COVID basket, your estimate on how will it -- by how much will it shrink by next year? Would our sales growth -- what will you achieve coming year?

Yes. Total COVID basket contributes to around 17% of our top line, of which major product is really ATM, which I don't expect it to really shrink too much. So just one product will likely to get impacted on and that is Karvol. But even Karvol Plus already on YTD basis, it's on growth. It has degrown only in this quarter. So I don't feel we should have too much impact next year because of COVID because new launches and growth of all other products, we should be able to manage the portfolio.

So overall sales growth will be what, 10% to 15%? Or 15% to 20%?

10% to 15% is a good one to look at, in post-COVID year.

Yes. And margins will improve from here? Or...

Yes, they will improve from here. Because of various things, including better per man return, our PHY, or per man, PPM, I used to call it, which used to be around 2 has gone up to 2.5, and this year has already gone up to 2.8. And I have said in one of our earlier calls within 2 years, we should get -- we should cross 3, and we will do that very effectively next year.

So our margins will be in excess of 20% coming year?

EBITDA margin you are talking about?

Yes, yes.

Currently, we are at 21% EBITDA.

Yes, okay. So they will improve from here?

I think that's what we all work for.

Okay. The next question is from the line of Vishal Manchanda from Nirmal Bang Institutional Equities.

Sir, do we also stand by our U.S. guidance of INR 250 crores for the year?

Yes, because of certain disruptions in material availability and transportation and logistics, INR 225 crores to INR 230 crores is what would be a very realistic number at the end of the year.

So basically, we would need to do around INR 80 crores, INR 85 crores in the fourth quarter?

Correct.

Do we have visibility on that? Almost...

Yes, yes. That's a very healthy order book for U.S. to, in fact, better than Europe, and we have clear visibility.

Sir, in the U.S., any color on which products are driving your business there? [indiscernible]

There are 7 to 8 injectables, which we have launched. About 5 to 6 ophthalmics and 4 solid dosages. So most of the products are doing well.

Any specific product that's been better than...

It would not be fair enough to discuss it. I hope you understand.

Okay. Okay, ma'am. And do we have enough capacities on the suspension side or we are adding capacity, yes?

We are adding capacity. One line is about to be commissioned in the month of March. A new line in Goa Plant II.

Okay. So how will that expand your capacity?

The capacity will go up by about 33%.

33%. Okay. That's not a large expansion. So can you just add 33% to your existing capacity?

Yes.

33% is pretty substantial.

Pretty substantial.

Yes. Are you fully utilized here or you have spare capacity within?

We are utilized to the extent of 75% to 80%. So this new line will be over and above that.

Okay. And there is a minor disruption in Teva's market share last quarter. So are we -- have you kind of taken care of that now?

Disruption in the sense?

On brinzolamide, Teva's market share...

Yes, I presume, so, yes, yes.

Okay. So that has been taken care and 4Q should be normal for that product.

Yes, yes.

As there are no further questions from the participants, I now hand the conference over to the management for closing comments.

Thank you, everybody, for being with us today. We wish all of you a safe and early period ahead and look forward to interacting with you in the future. Thank you very much.

Thank you.

Thank you.

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