Indoco Remedies Limited (INDOCO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Indoco Remedies Q2 FY '25 Earnings Conference Call hosted by Dolat Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rashmi Shetty from Dolat Capital. Thank you, and over to you, ma'am.

Thank you, Sisa. Good afternoon, everyone. I, Rashmi Shetty, on behalf of Dolat Capital, welcome you all on the Q2 FY '25 earnings con call of Indoco Remedies. I would like to thank the management of Indoco Remedies for giving me this opportunity to host the call. Today, from the management team, we have a guest Miss Aditi Panandikar, Managing Director; Mr. Sundeep Bambolkar, joint MD; and Mr. Pramod Ghorpade, CFO. I'll now hand over the call to the management for the opening remarks. Over to you sir.

Thank you, Rashmi. Good afternoon, everyone. Thank you all for joining this call today. Let me draw your attention to the fact that on this call, our discussion will include certain forward-looking statements which are projections or estimates about our future events. These estimates reflect the management's current expectations of the future performance of the company. Please note that these estimates involve certain risks and uncertainties that could cause our actual results to differ materially from what is expressed or implied. Indoco does not undertake any obligation to publicly update any forward-looking statements, whether as a result of new transformation, future events or otherwise. Thank you. I'll request Aditi madam for her opening comments.

Yes. Good afternoon, everybody, and once again, thank you for joining us. It gives me immense, great pleasure to let you all know that this August, the organization celebrated 77 years of excellence in providing quality medicines and building healthier community. This has been a tough quarter for us, but let me share some of the general business highlights with you. As regards to India business, we have seen good growth in most of our key brands and majority of our therapy this quarter. Cyclopam, the #1 product of the company, the antispasmodic analgesic, has recently crossed a subscriber base of 1 lakh prescribers in this quarter, and incidentally, the brand is also growing at close to 20%. During the quarter, in the India business, we also launched new products, namely Perio Rexidin Mouthwash, Sensodent Acipro, both in the dental segment, dental ethical segment, and Clatm 250 and 500 mg, which is a clarithromycin antibiotic, in the ethical segment, in our acute division. Steve Jobs once said about his life, right, there were good times and there were hard times, but there were never bad times. For whatever it's worth, the international business at Indoco currently is going through difficult times, but very interesting changes happening inside the organization to prepare the company for the future wherein, especially in the solid oral space, efficiency in manufacturing and agility of product basket are going to be the need of the hour, and the company will prepare you for that. As you might be aware, we have close to 15 ANDAs in the solid oral space, of which at least two are great opportunities, with tentative approvals for the future. Also, in the current basket, which is being supplied to the U.S., we have some excellent products such as Allopurinol, which are vertically integrated. The company has made tremendous strategic plans on a master manufacturing operation to harmonize products at various locations to increase batch sizes, to bring down cost of testing as well as bring down other costs related to manufacturing. As part of this exercise, some of our plants are currently not in a position to supply all the orders that they have in hand. Added to this, we also have some challenges still in Plant 2, which is our sterile unit, where there is remediation going on across various lines for manufacture of ophthalmic and injectables. This remediation is in line with U.S. FDA expectations. These 2 factors have largely resulted in our inability to supply a product to the best of our abilities, and we therefore see the international business, particularly back to U.S. and Europe, having been impacted. Having said that, I would also like to share that in this period, Indoco received the final ANDA approval from U.S. FDA for lofexidine tablets 0.18 mg, with competitive generic therapy designation with 180 days exclusivity. Indoco also received approvals from WHO, Geneva for albendazole 400 mg chewable tablets. Our contract research organization, AnaCipher CRO at Hyderabad, has expanded its offerings with the new pharmacovigilance services department. Sensodent K won the prestigious Rising Brands of India 2024 Award in the sensitivity oral health care market, and we had a very successful launch recently of the new Validated Learning Management System at Goa. This is all for me. I will now hand over to Mr, Sundeep to share the financial highlights.

Yes. Thank you, Aditi. Good afternoon, everyone. Hope you all are doing fine. Let me first begin with the business highlights. Net revenue of the company for the second quarter '24-'25 showed muted growth at INR 3,946 million compared to INR 3,942 million when compared to the immediate preceding quarter. EBITDA to net sales for the quarter is 13.4% at INR 529 million compared to 15.6% at INR 724 million for the same quarter last year. Tax to net sales for the quarter is at INR 128 million compared to INR 331 million. Earnings per share for the quarter is INR 1.39 compared to INR 3.59. The above numbers are on a stand-alone basis. We have declared results with consolidation, which includes results of positive domestic formulation business. Revenues from domestic business for the quarter grew by 2.9% at INR 2,346 million as compared to INR 2,281 million for the same quarter last year. Major therapeutic segments, namely anti-infectives, respiratory and cardiac, performed well during the quarter as compared to the same quarter last year. On the international business plant, revenues from international business are at INR 1,262 million compared to INR 1,949 million for the same quarter last year. Revenues from regulated markets are at 866 million as against INR 1,495 million. Revenues from U.S. business are at INR 247 million against INR 814 million. Revenues from Europe for the quarter are at INR 599 million against INR 634 million. Revenues from South Africa, Australia, New Zealand are at INR 20 million against INR 47 million. And those from emerging markets for the quarter are at INR 396 million as against INR 454 million. Revenues from the API business for the quarter are to be INR 301 million against INR 358 million, and revenues from AnaCipher CRO and Indoco Analytical Solutions for the quarter are at INR 36 million against INR 64 million. That's all about the business highlights for the second quarter. I now request the participants to put through their questions.

[Operator Instructions] We have the first question from the line of Mr. [ Rajesh from Tata ].

Yes. Yes. Definitely, there is a CapEx of around [ INR 320 crores ], which you have incurred in the first half. Can you just elaborate whether this CapEx are gone?

Yes, Rajesh. Pramod here. So CapEx primarily is for 3 reasons. One is specifically for the upgradation of the plants, which ma'am mentioned just now as a master manufacturing plant. We have been increasing batch sizes, putting new machines, replacing old machines. That is at all oral solid doses plants. That is one. Secondly, we are upgrading certain lines at our sterile plant at Goa 2. That is another CapEx. And a certain portion of CapEx, the amount which you mentioned includes certain advances paid for 2 lines, which we already ordered, one injectable and one ophthal. So these are the 3 major CapEx which happened during last 6 months.

Incrementally, [indiscernible] from here, how does the CapEx guidance looks like?

So this year, as previously also we guided, close to about INR 200-plus crores. Out of that, close about INR 180-odd crores is already incurred. So we don't see much incremental CapEx in the remaining 6 months or so.

Sure. Sir, last question from my side. If I look at your Q-on-Q performance, I think there is a very sharp increase in other expenses. We are up to roughly around INR 27 crores. Your sales is up only by INR 6 crores. Can you just tell us then why your other expenses have moved to -- increased at such a sharp...

So Rajesh, as you see, as compared to quarter 1, the [ expenses ] increased by about INR 20-odd crores, particularly in our various sales promotional activities, advertisement, sales promotion activities. And in travel -- we have increased certain field force and travel-related to that field force is also part of this other expenses.

There is also some increase in commissions and incentives since our acute divisions are doing very well.

We have next question from the line of [ Sudarshan ] from JM Financial.

I would like to understand -- I mean, I understand that U.S. is -- because of [ problematic performance products ] right now, given the remediation of [indiscernible], can you elaborate why we are seeing a decline in Europe as well as emerging markets?

Yes. So I think Europe and emerging markets are 2 different themes, but there is one common theme for both these geographies is that both the plants supplying to emerging as well as Europe are also under the master manufacturing plan upgradation. So while we have tried our best to stagger it, somehow in Q2, it was not possible anymore to keep [ the spending ] as they would have hurt us in future. Just to give you -- and our Europe and U.S. clients, also geographically, we say Goa makes for U.S. and Baddi will make for Europe and Waluj will make for emerging. As part of our attempt to have a very agile operations management system, we are trying to align the portfolios at various locations. And therefore, whenever a location comes under renovation to meet with the blueprint plan as per the master manufacturing organization, a particular product to both geographies suffers. So somehow, in this quarter, that has happened. And one of our larger manufacturing units like to Europe, particularly, is under remediation. Not because regulators want it, but for us, because we've decided that, that is how, going forward, we'll get far more output from the sales unit as much lesser cost [indiscernible].

And apart from U.S., I mean, how far are you in terms of fixing up and ramping up for the other locations, I mean Europe and U.S.? I mean I understand it's always good to harmonize the quality and the others that you said.

Yes, yes. You are asking for solid oral?

Yes. On the solid oral. I mean I'm just trying to understand now that [indiscernible] the practices and the cost that has been implemented in [indiscernible].

Yes, what was the question exactly?

No. Earlier, I mean we are seeing impact in Europe and other regions that are the [ semi ] regions, and we are basically trying to harmonize it to understand [ how you ] put things in practice. So I'm just trying to understand why must you work with the U.S. FDA [indiscernible]. The others, you are working because it is more voluntary. [indiscernible] voluntary work being done for Europe and the emerging markets [indiscernible].

Yes, yes. Because it depends, I think the perspective is very important to decide what is mandatory and what is necessary and what is unnecessary. I think we are all aware of what is happening globally with increasing space and [indiscernible] in cost of goods, and particularly in U.S., with the dropping prices. I think our corporate operations planning have packed together with the business teams of Europe, U.S. as well as emerging markets, and we have made a plan, which will allow us to ride through these kind of rough phases, and therefore, you may say it is voluntary, but we feel it is a mandatory if we are to, going forward, show better efficiency and better EBITDA margins both in [ Europe and U.S. ]

The next question from my side is on the gross margin. If we are looking at, I mean, the API prices, my understanding is the chemicals and the API prices in India are kind of benign. [ Would be ] drop in the gross margin largely is because of the mix, the regional mix, that you are seeing? Or are you seeing any kind of a price escalation on the [indiscernible].

Which period you are looking for dropping [indiscernible]?

So I'm primarily looking at the second quarter and probably in comparison with the last year.

Okay. Gross margins and [indiscernible] operating. Because actually 2 plants, 2 large plants are under this kind of tagging shutdown, planned or compulsory, the operating cost at those pipes other than the material costs are of a fixed nature, right? So they remain. So finally, that's is how the margins get impacted. Is that your question?

Yes, yes. That explains the gross margin, we have also seen the raw material prices increase. Is that primarily because of the mix? Or is it primarily because the raw material prices have gone up? I just wanted to understand that.

So Mr. Sudarshan, if you see the raw metal sizes, the oral trend is on a difference in size. Of course, not significantly, but certainly, we are looking at certain key raw materials at the lower level. Of course, the impact of the same will reflect going forward in next couple of quarters.

But yes, product mix does matter because as of now, when -- with steriles being really down and whatever business for U.S. has come from solid oral, so naturally, that impact would be seen in the [ GC ], A. B, also, like we have explained in earlier calls, the company is in a transformational phase. In the past, quite a substantial portion of our revenues for [indiscernible] market used to come from milestones as well as royalties or profit share, et cetera, et cetera, but less of profit share and more of milestone. Now that Indoco has a front end in the U.S. of our own, and we are therefore keeping IP for ourselves, there is a miniscule amount that is coming from that. So rather than the GCs have gone down, the entire sort of portfolio mix or product mix of the business has changed. So in order to keep margins for us in the future, we are kind of following milestone currently. Does that answer your question?

And going forward, what should be the trajectory that we should expect in the near term as well as, let's say, FY '26 asset?

See, I think you can appreciate the last 2 quarters. Actually, Q1 was all right. We saw some impact of the supply constraints. Q2 has taken a maximum impact. Q3, while we remain optimistic, I have to say there would be certain constraints. So at this stage, I would want to wait for another quarter before I give guidance for the future.

One final question before I join the queue. If I look at the data on the brands that we had given in the present, also in an earlier [indiscernible], and the growth that we are seeing, it looks like our brands are doing fairly well in the secondary market, like the primary sales is little better. I mean one is what would be the resonance would lead to a capture plan going forward? I mean should the secondary [indiscernible] reflecting as a primary data in terms of that [indiscernible]?

Yes, I think when you say secondaries are good, you are looking at IQVIA or [ pharma IRI ] data, and primarily you are looking internally. Is that it?

Yes, yes.

So I think when you look at the internal data of IRl stand-alone, you have to factor in the aspect that 2 large toothpastes are now with the 100% subsidies [ warrant ] remedies. So the base sale of these 2 toothpaste continues to be there in [indiscernible], which is why if you look at growth on primary, it would appear that we are not growing.

We have next question from the line of [ Ankit Mehrotra ] from [ A Daisy Ventures ].

[indiscernible]

Your voice is not very clear. I'm getting a lot of echo, maybe. If you can...

Is it better now?

Yes, much better.

[indiscernible]

Yes. So in 2023, we were audited by U.S. FDA. And after that audit, the plant was classified as [ OAI ]. While there were not any issues directly related to the [indiscernible], any such procedures for a sterile unit really had [indiscernible], because they said that the plant was old and certain areas need any remodeling, so that more space is created. Also, some of our lines were very old and FDA expected us to move from [indiscernible] to the future [ isolator ] base line, et cetera. So [indiscernible]. After that, we have submitted an outlined plan to U.S. FDA of how and when we propose to meet these changes and complete the job. And accordingly, routine updates have been going to U.S. FDA. As for this plan, much of the work was to be completed by the end of 2024. And now, to our surprise, the U.S. FDA once again came in July 2024 while the lines were actually opened up and are not ready for any kind of audit, et cetera. And from this audit, there were 7 observations, and we have responded to those observations. And again, we have got the same cases. So basically, the way we look at it is once all the remediations on lines is over, U.S. FDA is likely to come back for an audit before it can change the classification of the site. Does that explain your question?

So just carrying on through the impact [indiscernible] you are expecting to read this remediation to get done by Q3. So [indiscernible].

We still expect the remediation to get over by quarter 3. Whether FDA is coming down in Goa or not coming down is going to hamper commercial from this site is something that we have to wait simply because we have continued the OAI status. But our technical teams are in continuous dialogue with U.S FDA to try and understand their concerns and understand how we have to move forward. Because I don't know, there were some -- there may be a [ walked in ] item they missed, misunderstood [indiscernible] that we would be ready in November '23 and not November '24, which was really odd because all our a communication said November '24 or later.

Okay. All right. My second question is any comment on -- I mean if I look at operating margin on a consolidated level, and the [indiscernible] the margin is revolving around a much higher level, and currently the quarter is consolidated [indiscernible]. So I just wanted to understand from your operating results, where do you see this number kind of [indiscernible]?

Right, right. So like I said to one of the earlier questions, at this stage, we are not very -- we don't feel it is a right time to give guidances. But I can help you understand why the consolidated picture is available. So for consolidation, we have 2 subsidiaries for which sales are consolidated to their country, which matter more. One is [ one integrity ], which is taking us 2 of our [ phased ] OTC and also manufactured a few vitamin drink APIs for us, for Indoco. The second is a subsidiary, FPP, which is Florida Pharma, which is our vehicle for launching products in U.S. So Florida Pharma is actually, quarter-on-quarter, has made great progress since its acquisition only more than just announced a year -- more than a year ago, 1.5 years ago. And we feel very confident in the next 6 months, especially after the supply to U.S. [indiscernible] smoothly, we expect the drain happening through FPP on the corporate to come down. Coming to Warren, wherein the [indiscernible] in the market, this is a phase where as part of the whole OTC product launch, awareness, digital marketing, individual marketing certain expenses, especially on the promotion side, are a little bit higher, but that is something which cannot be delayed. As a consequence of that, Warren revenues is also on the negative, and the consolidated picture appears like this more because of [indiscernible] Indoco revenues are very sharp in comparison with the remit cost of the organization, and as explained earlier, because our international business has not been able to -- we have not been able to supply and collect revenues against international business.

We have the next question from the line of Abhishek from Padmaja Investment.

Yes. So my question, has been partially answered. On the European part, you are done with this master manufacturing plan process? And can we expect the ramp-up from Q4? That's my question one.

Yes, we can.

Okay. So the European part is done, the emerging market part is done. U.S. is current -- and were there any repeat observation, so currently we received like 7 observations...

No. No, none were repeat.

Okay. Okay. And like will this take another one year to get again this classification changed?

No, no, no. I don't think it should take 1 year. Had they not come in July, I feel in the -- by the Q1 of '25, it would have been the latest and they would have come down. Now that they've just come in July, we will stay optimistic to bring them down. And also, we are in talks with them to understand, and I don't think current supply is out of that site. So once the site comes up and gets remediated totally and fully ready, I don't see why we have to wait for FDA audits to start supply.

But we won't be getting new approvals?

Yes, we have enough approvals. And actually, our order book, both for U.S. and Europe is very healthy. So that is not very disturbing. And neither are we missing out on any big deadlines for any Para IV. So that is not a big concern right now. Right now, for me, the urgency with which we can finish the projects. And you know there are 4 lines, so one line is up actually just now as we speak. And every 15 days, a line will come up. So the question is whether FDA will want for all 4 lines to be going before they agree to come down. Can we -- we are asking for a call with them since they have recently come and seen that site. You'd have to understand if they have any other concerns, all that is going on. And I'm hoping in the next call, when I speak with you, I can give you a much better guidance.

So, Q3 also there will be improvement, sequentially compared to Q2?

Look, U.S. business is not all about sterile for us. We do have solid oral plant, which is Plant 1. And there is a small amount of business we have currently of solid that also work is going on to ramp it up. So there will be improvement surely. But as you rightly said, Q4 would be probably a better time for us to see upside coming from smooth functioning of plant 2.

On the Europe part, is it completely done now and in Q3 also will ramp up?

Europe is almost done. Yes.

Okay. But revenues haven't started like optimally.

Yes, it will impact it rather, yes.

We have next question from the line of Ankit Mitra from Finnomics.

My name is Anik Mitra. I have a couple of questions. The first one is related to the OTC, like what is the -- what are the promotional expenses have been added to the other expenses? As OTC products, these are all for the OTC products, right? So going forward, like this OTC product, we will keep on adding and so will this expense -- this promotional expenses be there going forward?

So typically, if you are aware there are various categories of products, you have Frank, Ethical, then you have BTC as it's called behind-the-counter when you have OTX, and then you have Frank OTC. So depending on where your product is positioned, the amount of expenditure that is required is different. Not all the products we intend to take beyond ethical will always go Frank OTC. These 2 toothpastes had to go Frank OTC because the largest competitor which we have is sensodyne, has almost close to 70% of its revenues coming from channel outside ethical. That is chemist, meaning they sell at grocers, they sell with modern trade and the even with the pan waala. So we had to go there and since this kind of a supply chain expansion, shift in the structure of how goods are distributed, in order to keep your new SDs and new purchase partners and the GTs that is grocers, sort of positive on the product because they don't know this product, right? The chemist know the products because it's been prescribed for years. So for the channel partners also to get confidence, the company has planned strategically, the kind of input that we would require specifically advertising on television and digital spend on Youtube, Facebook, et cetera, and we have been doing that. Coming to your question, future products as they come, as they go, OTC, will be spend remain? No, it doesn't mean that with every product, this kind of a spend is there. Also, sometimes for the first time when a company goes OTC, such a spend is required, and that's what we are doing.

Okay. So maybe a small component maybe there?

If I were you, I would concentrate on growth in sales because we have won OTC. Because the whole thing about going OTC is getting a much larger market from which to get share. And while this expenditure initially is like an investment and we should be prepared for that. Yes?

Okay. Okay. My question is what kind of revenue addition can you expect from these OTC project in FY '26?

Right now, only 2 toothpastes are there with some various SKUs as in pack sizes, but largely, there are just 2. And these 2 for the current year, we expect them to do in excess of INR 120 crores which would still be a recent growth over there, I think, if I'm not mistaken, when they were in ethical, it was around INR 85 crores, INR 90 crores. So this is the first year. But as the awareness with consumers, the reach to consumer, we incidentally now subscribe to Nielsen data also where we measure what we weighted -- or numerical distribution. Where we are consistently seeing a 15 -- month-on-month 15% increase in the counter at which the product is being carried. These are all kind of foundation activities to prepare for a much larger sale as we go ahead. So I'm very confident and I feel surely and certainly that in the second year, we can definitely expect 25% to 30% growth from these 2 products itself.

Okay, great. Do you position your products, mean this toothpaste, with the normal toothpaste or do you place like -- consider it as only the peer of sensodyne?

Not necessarily only sensodyne, but sensitivity market. And as per Nielsen in the sensitivity market, we are #2 to sensodyne.

Thank you so much, best of luck.

We have next question from the line of Mr. Sudarshan from JM Financial.

I'd like to understand that a bit more on the debt side, if I look at the long-term debt, you have seen some kind of an increase and also in the short term debt, we have seen kind of an increase. I mean historically, we never had an issue in terms of interest cost but given by negative operating leverage, I mean if we look at the interest today and the first half, it is slightly higher than what one would have expected as compared to what we have ever seen in the past. In the context of...

Yes, I think his line got cut.

Sorry to interrupt. The line from his side got disconnected.

Shall we wait for him to join that?

We can proceed with the next question. So the next question is from the line of Ankit Minocha from Adezi Ventures. Hello. Please go ahead, sir.

Is there a problem in the line by any chance since the second caller also is not able to speak.

Give me a moment ma'am. Next question from the line of Dhwanil Desai from Turtle Capital.

Am I audible?

Yes, please go ahead.

Sir, I have one question on the U.S business [Technical Difficulty] and move the business model from kind of licensing out our brand to front-end -- developing our own front-end. So can you talk a bit about how long this transition is going to take and whether all the existing brands and the registered products will also get transferred here. And if so, what is the timeline, if you can talk a bit about that.

Yes. Thank you for the question. So no, in answer to your question, not all products which were licensed out are being brought in. But further products are not getting licensed out. So the milestones, therefore, are not coming in. We have some excellent relationships with front-end, other front-end partners in U.S., with whom we are quite happy, especially in the solid oral space, and those continue. Much of the ophthalmic and sterile opportunities, though we would prefer to do through FPP going forward. Many of the products which we had licensed out to Teva, for example, are now back with us as part of the arrangement. And those are also being relaunched through FPP. Does that answer your question?

Yes. So, approximately what percentage of your portfolio now is back to you and its now going to front-end? Existing one?

See, volume and value are two different things because you will get volume in solid orals and value in ophthalmics. So roughly, I would say, around 60-40, with 60% going with FPP and 40% still through others.

Okay, and that 40% is now currently everything is now through FPP, right?

No, no, no, 60% would be through FPP, 40% is currently with other partners.

So 60% is already done by our own front-end currently?

Planned to be done. Once the supply chain is there.

We have next question from Ankur Agarwal from R.C Business House Private Limited.

[Foreign Language].

[Foreign Language] Thank you for the question. The kind of things that I said earlier, literally, we are looking at incrementally getting 50% more from each of our sites, each of the factory. [Foreign Language] Testing costs associated to it -- with it process times required to manufacture each batch is being reduced. And I would not like to unnecessarily commit, but I'm actually hoping that as the numbers come out, you will see the beauty of what this kind of restructuring does. [Foreign Language] . And we are waiting for these beautiful things to come out and show by way of profitability.

[Foreign Language].

[Foreign Language] Yes. We are expecting from an EBITDA perspective, at least great increment to happen. But because of what we are going to right now, [Foreign Language], I would prefer to wait for one more quarter before I give you these numbers.

[Foreign Language].

[Foreign Language].

[Foreign Language].

We have next question from Sudarshan from JM Financial.

I would like to understand on the debt side, if I look from March to September, both on the long term as well as the short term, there has been an INR 80 crore addition each, more or less INR 140 crores to INR 150 crores addition. I understand that there is some CapEx that we are undergoing additionally to the working capital. I mean, if I look at it on the context of the operations, you never had an issue on debt, but given the fact that our margins are contracting because of various reasons, it tends to impact the profit. Can you give some color on how do we see the debt evening out, say, in the next couple of years or so? And second is on the PAT, given that the first half faced loss, it's more of a bookkeeping question, should we take lower tax rate taking the benefit of the loss that we made in the first half?

So let me answer first on the business, and then I will let Pramod take on some of your sticky issues on the borrowings. So you said -- I think there is something you said, which I feel needs correction. You said margins are contracting, which is actually not true. Margins are not contracting. The efficiency we are bringing in is to increase the margin. And also to prepare for the kind of business we are expecting both from Europe and U.S. going forward. The enhancement in capacity is being done. So it is correct from your side to wonder why so much CapEx is being companies incurring CapEx, whereas on one side, historically, also you must have seen that utilization was less. There is a very funny aspect of capacity, how you calculate capacity is also very important. What has happened in the generic space, especially in U.S. And of course, U.K for [indiscernible] year is that in order to ride over the kind of price drops, et cetera, each manufacturing unit has been trying to do a multiple or various kind of product mix. This kind of a mix when it comes to operations poses all kinds of challenges, whether it comes to line change, especially in sterile with media fills, et cetera, et cetera. And eventually, the unit becomes less agile. So on paper would look like 60% capacity is utilized but finally when you ask them to make one more batch, they have lost so much of downtime that they are not able to cope. What we are doing right now as part of the master manufacturing correction plan is to bring down all such things. So it might appear to you right now that the company is investing when it may not have required these investments, but trust me that the investments that are being done now are to prepare for a time when the huge volumes will start. I'll let Pramod now explain to you about the borrowing.

Mr. Sudarshan, if you see as compared to March, our long-term borrowing for Indoco has gone up by about INR 54 crores, primarily towards the CapEx, what we discussed in detail in our call the Master manufacturing initiatives and the site to certain upgradation and the new lines. So that is the primary reason for increasing long-term borrowings. Short-term also, it has increased by close to about INR 60 crores. So that is all investment into various new initiatives what we have carried on. Then there is a slight increase in borrowing in Warren, one of our subsidiary. Again, that is towards the CapEx related to Warren new business. API finished goods lines are -- we are just order, and we expect that to get finished within the next 6 months of time. So primarily increase in borrowings -- towards creating new capacities investment for the future. In one more area, that is particularly on the stability lab. So we have now centralized stability newly created at Waluj. So plan is to basically move most of the stability labs spread across various plants to this one central place to bring in efficiency to reduce cost. So all this is for investment for the future, Mr. Sudarshan.

Yes. So and what would be that debt-to-EBITDA that we're comfortable? Do we have any number in the mind, over the long term?

Not really. So as we discussed, we don't expect much of the CapEx going forward. It will be like running maintenance CapEx also, but that most probably we'll be able to absorb our internal accruals. But maybe incrementally, it maybe close to about INR 40 crores to INR 50 crores, may require intermittently, but not beyond this amount. And I missed one question that is on taxation. So we are already on the lower tax rate, Mr. Sudarshan, Indoco, at this point of time.

The next question is from the line of Abhishek from Padmaja Investments.

My question is on, currently we have close to 25 pending ANDA approvals, right? When it comes to U.S. Close to?

Yes.

20. Yes.

Of these 25, how many will be like sterile and ophthalmic products versus solid oral?

If I'm not mistaken, close to 6 are solid oral, and the rest are sterile.

And are there in Para IVs and first-to-files also in these?

I think you will appreciate that we have stopped giving this kind of disclosure now.

Thank you. The next question is from Maulik Varia from B&K Securities.

I just wanted a little clarity on your facility supplying to emerging markets and EU were under the renovation under the master manufacturing plan. So I might have missed the point, but when is it expected to be completed? Or has it been completed by September end?

So we have 2 sites supplying to Europe right now and one for emerging. The emerging site is almost done. One of the European sites is done. The second one is almost complete.

Okay. And during the Q2, were the sites completely shut for some number of days?

Not all. One of the Europes' site was almost not available. And the other two were partially available.

Okay. Okay. For the entire quarter?

Yes.

We will be taking that as our last question. As there are no -- I would now like to hand the conference over to management for closing comments.

Thank you all for the very interesting questions, which has allowed us to express our position. Thank you very much, and have a good day. Thank you.

Thank you.

On behalf of Dolat Capital, that concludes this conference. Thank you for joining us. You may now disconnect your lines.