Jubilant Pharmova Limited (530019) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to the Jubilant Life Sciences Limited Q4 and FY '20 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vineet Mayer, Head of Investor Relations, Jubilant Life Sciences Limited. Thank you, and over to you, sir.

Thank you. Good evening, everybody. I'm Vineet Mayer from Investor Relations at Jubilant Life Sciences. Thank you for being with us today on our Q4 and 12-month FY '20 earnings conference call. I would like to remind you that some of the statements made on the call today could be forward-looking in nature, and a detailed disclaimer in this regard has been included in the press release that has been shared on our website. On the call today, we have Mr. Shyam Bhartia, Chairman; Mr. Hari Bhartia, Co-Chairman and Managing Director; Mr. Pramod Yadav, CEO of Jubilant Pharma; Mr. Rajesh Srivastava, CEO of Life Science Ingredients; and Mr. Alok Vaish, President and CFO, Jubilant Life Sciences Limited. I now invite Mr. Shyam Bhartia to share his comments.

Thank you, Vineet. Good evening to everyone. I'm sure you would have had a chance to go through our presentation and press release, which we have shared with you. We are glad to report record profits in FY '20 with improvements in margins, resulting from strong performance in the Pharmaceutical and Drug Discovery & Development Solutions segments. Pharmaceuticals segment delivered 27.2% EBITDA margin, and DDDS segment saw EBITDA margin increased to 28.1% from 8.3% margin in Q4 FY '19. The LSI segment, FY ['22] (sic) [ '20 ] revenue was at INR 3,179 crores as against INR 3,545 crores last year. Strong growth in Specialty Intermediates and Nutritional Products businesses led to margin improvement by 100 basis points in -- 100 basis points to 13.6%. I'm pleased also to highlight that during the year, the company reduced its net debt by INR 514 crores and is focused on further deleveraging by generating healthy levels of cash flows. Further details on debt and other key financials will be provided by Alok in his remarks. I would also like to discuss the impact of COVID-19 pandemic on our business. I'm pleased to report that despite the tough COVID-19 situation, we have made all efforts to operate all our facilities with safety of our people and plants. Demand conditions across most of our businesses continue to remain stable. We have been able to continue to operate almost all our facilities in North America and India. Our Nanjangud facility, which had temporary suspended operations, has also received regulatory approvals to restart. Pramod will provide you more details on this in his remarks. We have ensured adequate stocks of all the raw materials in our businesses, along with security of future supply, and have not witnessed any significant variations in the availability and the purchase price of key raw materials. We have also been able to overcome the logistics-related challenges, thanks by our manufacturing and supply chain teams. We are conducting a stringent review of our overall cost structure to reduce both fixed and variable costs. We are also rationalizing our CapEx plans without sacrificing growth until the business environment stabilizes. Across our operations, since the onset of COVID-19, our paramount focus has been the safety and well-being of our employees and their families, business partners and local community. At workplace, we are following necessary guidelines of sanitation, social distancing and emergency preparedness to deal with any eventuality related to COVID-19. In response to COVID-19 pandemic, we have also started production of hand sanitizers in our plants [indiscernible] quantities to various government and regulatory and health care facilities. We have also contributed INR 5 crores to PM Cares fund to support the government of India's initiative in mitigating COVID-19 crisis. This includes 1 day gross salary of about 5,300 employees. As announced recently, regarding our licensing agreement with U.S.-based Gilead Sciences to register, manufacture and sell Gilead investigational drug, remdesivir, a potential therapy for COVID-19. We are working towards initiating production of the drug by July 2020, subject to all regulatory approvals. I'm confident that notwithstanding the current challenges unleashed by COVID-19 pandemic, we'll be able to deliver sustained growth given our leadership position in all our businesses and presence in niche and highly potential Specialty Pharmaceuticals, CMO, Specialty Ingredients, Nutrition and Drug Discovery businesses. I also like to take this opportunity to thank all our employees who have worked tirelessly across all our plants and offices to ensure continuity in operations. With this, I would like to request Pramod to discuss the Pharma business.

Thank you, Mr. Bhartia. A very good evening to all of you. I would like to share overview of Pharmaceutical business performance during the quarter. During Q4 FY '20, Pharmaceutical segment revenue was up 6% year-on-year, driven by a 13% year-on-year increase in Specialty Pharmaceuticals and 17% growth in the generic businesses. The growth in Specialty Pharmaceuticals during the quarter was led by a strong performance in the Radiopharma business, the result of higher volume in key products, including [indiscernible]. We are also working on our unique pipeline of around 8 products currently under development with an addressable market of over USD 300 million. We are confident that the strategic alignment of our areas in Pharmaceutical business with the [ radiopharmacy ] (sic) [ radiopharmaceutical ] business position us strongly to capitalize on current market demand. We are taking several steps, including opening up of new pharmacies, acquiring new customers and increasing operational efficiencies to drive growth in top line and improvement in profitability in the distribution business. The Allergy Therapy Products business also reported revenue growth during the quarter, led by better prices. CDMO business Q4 FY '20 revenue was INR 388 crore versus INR 447 crore in Q4 FY '19 due to lower revenues in API, which was partially compensated by higher sales in CMO businesses. API business revenue decline during the quarter was due to lower dispatches from the plant on account of COVID-19 situation at site and additional quality checks on all input raw materials to meet enhanced regulatory requirements. The Generic revenue growth in Q4 FY '20 was driven by healthier performance in the U.S. market, which witnessed higher volumes and better prices. The EBITDA of Pharmaceutical business segment was up 50% year-on-year to INR 429 crore from INR 285 crore in Q4 FY '19. Apart from higher revenue and better margins, the quarter also benefited from better comparisons from Q4 FY '19 since the quarter has significant litigation costs and failure to supply penalties. With regard to COVID-19 situation, I would like to mention that it's business as usual on the operational front. All of our plants in North America are operating normally. We continue to witness stable demand across CDMO and the Generics segments. The only COVID impact we have witnessed is in the Specialty Pharma segment, which has been impacted by fewer hospital visitations. However, with the lifting of lockdown in North America, we have witnessed business recovery to about 70% of normal sales last week from a low of 40% to 50% of normal sales in early April, we expect normalization of sales in Specialty Pharmaceutical business in Q2 FY '21. I would now like to provide an update on API Nanjangud plant. In last week of March 2020, operations at our Nanjangud plant was temporarily suspended due to positive testing of 2 employees at the plant for COVID-19. The company has provided full support to district administration and health authorities, including ensuring quarantine of all employees and importantly, following government protocols. We are pleased to report that all the employees are also fully recovered and ready to get back to their work. We have assigned utmost importance to the well-being and safety of our employees and the nearby community and have distributed masks, soaps, sanitizers and rations to support fight against COVID-19. We have now received the permission to restart the plant and expect the production to start in the next few days after following all the protocols. We expect to partially mitigate the impact of temporary suspension of operations at the API plant through the existing finished goods inventory at sites and by increasing production of new high demand products where we have additional capacities available. With regard to regulatory matters, the site's remediation activities and routine consultation with third-party consultants to address USFDA observations are progressing well. And we are hopeful of the resolution of the same once COVID-19-related infections subsides. The Nanjangud plant during the quarter was assigned GMP compliance status by Health Canada. We are working diligently with the USFDA regarding regulation of OI status in the London group and are hopeful of a regulation of same as well. We continue to maximize our capabilities to remain competitive and meet the needs of our customers as we continue to invest in operational improvements. We are committed to doing our part of [indiscernible] available treatment for COVID and feel a profound responsibility to help improve the health of the people around the world. We are well positioned, through our combination of scientific expertise, operational scale and financial expense to bring together our resources in collaboration with others to accelerate our fight against this pandemic. With this, I would like to turn over today's discussion to Rajesh for providing insight into LSI and DDDS businesses.

Thank you, Pramod. Well, good evening to all of you. I would like to share details on Life Science Ingredients and Drug Discovery & Development Solutions segment performance during the quarter. LSI segment's Q4 FY '20 revenue was at INR 823 crore compared to INR 912 crore in Q4 FY '19. This was due to lower revenue in the Specialty Intermediates and Life Science Chemicals businesses. Our Nutrition business reported robust revenue growth of 50% year-on-year during the quarter, led by higher volume and better price in our Vitamin B3. We expect pricing scenario to improve further in Q1 FY '21. Specialty Intermediates revenue was impacted by subdued demand of Pyridine and its derivatives, resulting from weak demand in crop protection products due to COVID-19 impact in China. Life Science Chemicals business revenue was impacted due to subdued demand of ethyl acetate resulting from lower demand in segments like automotive, paint, consumer durables, packaging and electronic industries. Revenue in LSC business also impacted due to continued decline in pricing resulting to lower demand and significant price reduction in our key raw material that is acetic acids. EBITDA during the quarter was at INR 118 crore, up 17% year-on-year and 18% Q1 quarter-on-quarter, led by margin improvement in Specialty Intermediate and Nutritional Products businesses. EBITDA margin was at 14.4%, up from 11% in Q4 FY '19 and 12.6% in Q3 FY '20. I would like to mention that demand in our Nutritional business as well as Specialty Intermediate business continues to be strong, both domestically and internationally. All our customers globally are buying those products at pre-COVID levels. We are also realizing better pricing than that during the last quarter. In Life Science Chemicals business, we are witnessing stability in demand, and prices are [indiscernible] and expect demand to improve going forward. About 70% of our revenue in LSI segment is from pharmaceutical, agrochemical, nutritional products and other essential material industries. And hence, we expect our performance at pre-COVID levels. I'm happy to announce that our R&D team has developed formulation for hand sanitizers using own produced ethanol. The company has got necessary approvals from government authorities and has realigned its manufacturing facility to start producing hand sanitizers. We have supplied these sanitizers free of cost to [indiscernible] and state governments to support their efforts against COVID-19. To meet the strong demand in the market for good quality sanitizers, we have started producing sanitizers at commercial estate. Our Drug Discovery & Development Solutions business witnessed robust growth during fourth quarter due to strong demand witnessed from integrated services and for chemistry and scale of opportunities by the Drug Discovery Services business. Q4 FY '20 revenue of the segment increased by 25% year-on-year, and EBITDA increased to INR 35 crores from a loss of INR 1 crore in Q4 FY '19. In view of the strong demand in this segment, as we have discussed with our Q3 FY '20 earning call, we are making investments in this business to double the capacity in the next 2 to 3 years. In Drug Discovery, both chemistry and biology business have shown strong momentum and experienced only minimal impact from COVID-19 with no delays or cancellation to existing programs. All signed projects continue to be on track. COVID-19 is offering some new and important opportunities, which we are reviewing. In our innovative therapeutics business, we are working on more than 6 programs to deliver precision medicines focused on both first-in-class and validated but difficult to address global targets to address unmet medical needs in the area of oncology and autoimmune disorders with potential to fast track promising assets from discovery to clinical assets. On the operations front, we are implementing CapEx reduction actions while ensuring that we run operational safety and are compliant with various regulations. Our focus is to maximize utilization of our existing assets at optimum level through minor debottlenecking wherever required to meet growing customer demand. We have significantly reduced our planned CapEx in FY '21 without affecting the revenue plan as per expected demand of our products. In our Life Science Chemicals business, which is more susceptible to commodity prices, we have taken action to immediately revise our minimum inventory level of raw materials as well as finished products. We are closely working with the customers to keep control on our account receivables. A very high level of rigor is being followed to conserve cash and also ensuring that we meet all our customers' demand. Taking into account the present market demand scenario, we expect to generate even stronger cash in business with tighter control on working capital specifically in Life Science Chemical business and lower CapEx investment. With that, I will pass the discussion to Alok.

Thank you, Rajesh. A very good evening, and I thank everyone for taking out time in joining us on our quarterly earnings conference call. I would like to highlight the company's financial performance during 12 months and the quarter ended March 31, 2020. Revenue from operations during the quarter at INR 2,391 crores was in line with last year's corresponding quarter. The Pharma revenue was higher by 6% year-over-year to INR 1,483 crores. LSI revenues at INR 823 crores versus INR 912 crores during quarter 4 fiscal '19. And Drug Discovery's revenue higher by 25% to INR 85 crore. Reported EBITDA at INR 556 crore was up by 58% year-over-year and 8% quarter-on-quarter with margin at 23.3%, which was higher by 852 basis points year-over-year and 107 basis points quarter-on-quarter. Depreciation and amortization expense during the quarter was at INR 129 crores, higher by 36% year-over-year and higher by 14% quarter-on-quarter. Increase in depreciation cost was largely due to adoption of new lease accounting standards. Finance cost during the quarter was at INR 71 crores higher by 16% year-over-year and higher by 1% quarter-on-quarter. Average blended interest rate for 12-month fiscal '20 was at 6.1%. Rupee loans were at 8.2%, and foreign currency loans were at 5.3%. Profit after tax during the quarter was at INR 260 crores as compared with a loss of INR 99 crores in quarter 4 fiscal '19 with an EPS of [ INR 16.35 ] per share. Q4 fiscal '19 had a fund IFC stock settlement charge of INR 235 crores, classified as an exceptional item. Normalized profit after tax during the quarter was at INR 260 crores as against INR 135 crores in quarter 4 fiscal '19. Normalized EPS during the quarter was at INR 16.4 per share versus INR 8.50 in quarter 4 fiscal '19. For fiscal '20 financials, the key highlights are the revenue achievement of INR 9,154 crores, marginally up from fiscal '19; EBITDA of 1,995 crores, up 12% from fiscal '19; profit after tax of INR 898 crores, which is up 56% from fiscal '19; an EPS of [ INR 56.4 ], up 53% from fiscal '19 EPS of [ INR 36.9 ]. The rest of the details about fiscal '19, fiscal '20, please refer to our investor presentation and press release shared with you. The company's net debt on a constant currency basis was [ INR 2,926 crores ], a reduction of INR 514 crores as compared to March 31, 2019. At the end of fiscal '20, our net debt to fiscal '20 EBITDA has improved to 1.6x from 2.0x at end of fiscal '19. We have improved our cash position further during the current quarter and expect to generate healthy operating cash flows during the year to further reduce our debt levels. I would also like to mention that given our strong liquidity position and normal operations, we have not requested any deferment of loan and interest payments, and we will continue to service all our debt obligations on time. The CapEx was at INR 89 crores in Q4 fiscal '20 and INR 516 crores in fiscal '20. During the year, the company has generated operating cash of INR 1,290 crores before CapEx and product development of INR 624 crores. During the quarter, the company paid an interim dividend at INR 5 per share or INR 4 -- INR 1 paid up for fiscal '20, which is also the final dividend for the year as well. Despite the challenges posed by COVID-19, we have been able to deliver strong performance. We will continue to strengthen our leadership position in all our businesses and create value for our shareholders. Before I conclude, I would also like to provide an update on our reorganization proposal. After filing the composite scheme of arrangement with the BSE and NSE stock exchanges, we have received no objection letters from both these exchanges in January 2020. Post this, the company had filed application for approval of the composite scheme of arrangement with NCLT Allahabad Branch. Given the lockdown situation, we expect some delay in the process time lines and expect completion of this process by October or November 2020. With this, I would like to conclude our opening remarks. We will now be happy to address any questions that you may have.

[Operator Instructions] The first question is from the line of Rahul Veera from Abakkus.

Sir, I was just trying to understand the interest cost. So on an annualized basis of from like INR 219 crores last year, we paid INR 287 crores this year. And that too is when we are reducing the debt by close to INR 500 crores. Can you shed some light on this, sir?

So we also have the lease accounting standards, which requires us to capture that, the interest cost, because of the lease expenses that is also coming in there, adding to the difference.

Okay. Okay. And how much would the value be approximately?

I don't have that number offhand. I'll just come back to you on this.

Sure. Sure. No problem, sir. One more question to Pramod, sir. Sir, on the Drug Discovery side, last year, same quarter when we did INR 68 crores of revenue, our EBITDA margin was slightly negative. But at INR 85 crores, we have an EBITDA of INR 40 crores. So what changed in the Drug Discovery segment?

So one...

Sorry, is Rajesh here?

This is to be answered by Rajesh. I think, Rajesh, you are mute.

I'm okay. Can you hear?

Yes. Yes.

Okay. Yes, so this is Rajesh Srivastava. Basically, the production in terms [indiscernible] too much [indiscernible] on the back mainly because of, one, is because of pricing. We have improved our pricing of the FTEs of research. And secondly, our capacity utilization has gone up. We have improved our capacity utilization. And of course, there is some positive impact from exchange rate as well. So these are the 3 key reasons.

[Operator Instructions] The next question is from the line of [indiscernible] from [ Value Partners ].

So my question will be mainly on the Jubilant Pharma side. So like for the Pharma segment, how much CapEx we're expecting for fiscal 2021? And this is my first question.

So the CapEx for FY 2021, post this COVID scenario, we are kind of, as of now, controlling to conserve the cash. And we are continuing to work the situation and then take the decision based on that. But however, it will be somewhere plus/minus of the $50 million of -- of the $60 million, but we haven't taken -- but we are not changing the situation.

As for like kind of we have around $60 million CapEx we're expecting this year for Pharmaceutical segment.

As I said that we are watching the situation. And as of now, the aim is to conserve the cash. So anything which can be avoided without impacting safety or the compliance, we are bit -- a bit holding that.

Okay. Got you. So for the -- actually, like for the debt, could you please give the breakdown on the Jubilant Pharma side, like with the debt level and the cash level?

So we have bonds of about $400 million. And we have a small working capital facility, about $50-odd million as of March 31, 2019. On the cash side, we have about $7.5 million debt -- sorry, $75 million debt. So net is about INR 200 crores of cash that we have, which roughly about [ $3 million ] of net debt.

Okay. So I have another question about -- on our rating upgrade of -- by the S&P and Fitch. Any comment from -- any update on their side?

We didn't get your question clearly. Can you repeat?

Yes. I mean from the international rating agency, the rating upgrade. So any like process, kind of any progress on this from the rating agencies?

There is no change in rating, I think, on our...

Yes. So rating agencies obviously have put us on a positive watch for the Pharma business. Basically, they're waiting for the deal merger to happen, which when that will probably happen sometime in October or November. Again, the rating agencies will come up with the final rating.

Okay. Okay. Got you. So I have one more like for the Pharmaceutical side, like for the first quarter fiscal 2021. Did you -- would you highlight what is our estimated impact on the revenue?

Can you repeat your question, please?

I mean like the first quarter 2021, the impact on the Pharmaceutical side revenue?

So obviously, we have been growing on our top line. And in FY '20, we have delivered the strong performance. We had expected this performance to even improve more in FY '21. However, we do have the COVID-19 situation as of now, which is evolving almost on a daily basis. So at this point of time, it will be slightly difficult to project. But we -- the way we are seeing the demand in the market, we are very confident that we will be able to deliver the stable performance.

Any expectation that you -- for your this year's slight revenue growth?

So I don't give out the outlook. I said we don't give out growth guidance for the financials. But as we said earlier, obviously, Q1, we will have some COVID impact. But for the full year, we believe we should be able to come back from the COVID impact and not have a significant impact on the financials.

[Operator Instructions] The next question is from the line of Rakesh Jhunjhunwala from Rare Enterprises.

Congratulations on a fine performance. I have only one question -- two questions. [indiscernible] the [indiscernible] [ agency ] in which you have taken this conference call, they're making us hold for over 20, 30 minutes. Will you please [indiscernible] I was holding the line for 20 minutes in order to join the call.

Sorry. Sorry, Rakesh. I'm sorry.

Will you please tell them again, please? And second thing, Pramod, [indiscernible] regarding your payout ratio 8%?

Yes, please?

On what basis has the Board made the dividend policy? On what basis are you declaring your dividends?

See, we are trying to conserve cash because of the COVID situation. And we are going through a demerger also.

So that's fast. But has your Board -- do you have a defined dividend policy? I mean 10% clearly is ridiculous.

The actual detail of debt also. Considering that we have to repay the debt and we have a high debt of almost 2x of the EBITDA, so you will see that we have been able to reduce our debt. So overall, it will really help, say, investors in reducing debt.

And now revenue value holding such large amounts of cash. Over [indiscernible] of cash, no?

No, we have cash. [indiscernible] normally for repayment of the debt.

No, but you have [ INR 1,200 crores ] of cash. So I don't know.

The main cash is in U.S., which we will use it for repayment of our [indiscernible]

Okay, and congratulations on a fine performance.

Thank you, Rakesh.

The next question is from line of Hitakshi Chandrani from Motilal Oswal.

Congratulations. My first question is the margins that you have for the Drug Discovery business this time. You said it is because of the 3 reasons, but how far are these margins, say, going forward?

Yes. So in fact, going forward, our -- as I said in my speech, that our demand remains strong. And we are in a position to continue utilize capacity as not only as for last year. In fact, we are planning to debottleneck capacity, and we are trying to improve going forward. So I definitely see that the demand continues. We are utilizing higher capacity. Our pricing of our FTE are stronger. So I don't see any reason that this will not come true. In fact, it should improve any further if possible.

Okay. That helps. And my other question is, I think there has been an increase in gross debt by INR 600 crores, so is there any reason, specific reason for it that you would like to point out?

Yes. As I said today, we have cash and the cash in U.S., and we are holding the cash for our repayment of our debentures.

And also there has been a restatement of the debt due to the foreign currency translation. So in the previous year, that exchange rate was about INR 69, which has now gone up to INR 75. So that we can see the translation also increase the gross amount of debt.

[Operator Instructions] The next question is from the line of [indiscernible]

I have got two questions. The first one is on your Drug Discovery Services business where you're doubling investments to around INR 400 crores, which is good news, of course. I just wanted to better understand the nature of these investments. Is that going into new capabilities or additional lab space or purely human capital? I mean are we looking to add new growth, high-growth areas like cell and gene therapy? And as part of this CapEx, what exactly are we planning?

I'll explain you, but we are not investing INR 400 crores. Yes.

No. No, taking it to INR 400 crores, so we are doubling, right? So we are currently about INR 200 crores, we'll take it to INR 400 crores...

In 2 to 3 years' time. Not immediate.

It's correct.

So immediately, we are adding more lab space to take care of the additional requirement. As you see that from a lot of business is increasing towards India from other countries. So we see a lot of business coming in, and we see a lot of inquiries. In order to meet the requirement of our customers, we're increasing the lab space and also the people. That will bring in more.

Yes. Yes. In terms of capability, if you could just add some more color. I mean what exactly are our customers? I know we mainly deal with big pharma. We -- or are we including dealing with a small biopharma, the virtual ones as well? So are we looking at -- because cell and gene therapy is the new thing on the horizon. Is that one area we are looking at? Or definitely...

Including cell and gene therapy, but we are not entering as yet. We have not entered as yet. But we are dealing with big pharma also and medium-sized biotech pharma.

So more and more, it is on integrated Drug Discovery as well as medicinal chemistry right now. And it's not -- we're not adding on cell and gene therapy.

Okay. Understood. Second question I have is, in U.S., we have an on ground presence. We are on the U.S. soil. A significant part of our assets are there. But U.S. currently has a high dependency on India and China for its pharma supply chain. So how feasible you think it is to move the entire supply chain and back to the U.S. soil because that's what they're hinting at? That's one. And two, will the gestation period and the economic support such a threat? Or is it just purely an election rhetoric?

So I think, let me tell you one thing that, like we, we are also present in dosage form in U.S. also and in India also. So we continue to increase our presence in U.S. in our dosage form for U.S. business. And also for India, also, we continue to increase our business. So it is both the combination of U.S. business and India business. This business is also growing. At the same time, India -- from India also exports to U.S. and to Europe is growing.

No. Correct. My question, sir, was more on the industry perspective. So do you think it is feasible to move the entire supply chain because that's what the politicians are talking about? I mean is it economically viable?

[indiscernible] But of course, we are -- since we are present in both India and U.S. both in dosage forms, so for us, it is good that we can -- we are also growing in U.S. and India. But it cannot -- 100% cannot be transferred. There will always be a big focus there in the U.S. So when there is a focus in U.S., we are also concentrating in our increasing capacities in U.S. also.

Right. And are we still guiding for around about INR 500 crore of CapEx for foreseeable future? Or what's the sort of trajectory looking like?

No, the CapEx, we actually said that we are trying to reduce CapEx this year, so which has a long-term investment, which has only the debottlenecking and some small CapExes for safety and regulatory reasons. So CapEx this year, we hope to reduce substantially.

Okay. Which means that we should be at a much lower net debt end of the fiscal?

That's right. As we have said also that we hope to reduce net debt at the end of the year.

[Operator Instructions] The next question is from the line of [indiscernible] from [ Nomura Instinet ].

Hello?

Yes.

Sir, your voice is breaking up.

Yes, yes, yes. So I had a couple of questions. So first one was on the API. You told in the initial remarks that API segment was impacted during 4Q. So sir, can you please substantiate on that how much was the impact during 4Q in the API segment?

So quite a lot of dispatches were lined up towards the end of the March. And that's the time when this Drug Discovery situation got escalated and we had to suspend the operations. So we couldn't dispatch the inventories, which were there in the system. Now as we plan to open up the plant, very shortly in next few days, we will be starting to [ start deployment ].

Okay. So that impact would be partially fully reversed in this quarter if the inventory dispatch was the [indiscernible] right? Is my understanding correct?

Yes. But yes, so the inventory will be dispatched immediately. But then we also lost the production for 2 months. But we had the capacity available. We had the demand there in the market. So we will be making our all efforts to recover the gap that we have.

Okay. Okay. And one more thing on Drug Discovery business, so what I've got is that your EBITDA margins improved substantially because your EBITDA improved more than the sales improved. That was partially because of pricing as well. So what will be that trend going forward as well? Do you expect similar trends to continue when prices improve further and the growth to continue?

Yes. That is what I said earlier. Also, the pricing thing is continuing and the capacity utilization also is as high as it was earlier.

Got it. And sir, why was the Pharma segment, et cetera, went up this time?

Pharma side -- I missed your question. Well, the Generic has performed well. And our radiopharmaceutical and [ LSI ] business performed well. And contract manufacturing of sterile injectables performed well. I think the only which was affected was the API business.

I think Pharma segment [ actually ] went up for the sales.

So that, again, is largely on account of the foreign exchange translation given the sharp increase in there. And there was also some bit of increase in working capital on account of inventory, where in the previous year our inventory had come down and we actually had to build it back up to insure inventory backlogs for customer orders.

And at the end of the March, actually, there were some logistic disturbance also because there had an announcement of this thing. Some dispatches are also held up.

That's right. Especially in the API business and others, you had some inventory built up on account of that.

Taxes were held up for a few days, and that was almost...

Ladies and gentlemen, the line for the speaker has got disconnected. Please stay connected. We now have the speaker. Over to you, sir.

Hello?

Hello?

Yes, sir. Please proceed.

Yes. Sir, so staying on the Pharma assets that are the inventory and they have gone up because of the specials as well as that last year the inventory was below. So it was more because of the ForEx side of the inventory. That's correct, right?

That's right.

Okay. And sir, one last question, if I may ask. That -- so in LSI business, are people also looking at the outside China benefit?

Yes. Overall, I think in all our businesses, we are seeing some benefit of increment people want to move out of China. But there is not such big movement. But yes, there are sentiments which are in favor of India.

The next question is from the line of [ Deepak ] from [indiscernible] Capital.

I just wanted to understand in terms of the EBITDA margin, 33% EBITDA margin we reported this quarter. So what sort of sustainable and [ actuation ] EBITDA margin we are looking at going forward?

We cannot comment because of the uncertain situation. We can't comment on the future EBITDA margins, right?

But over the medium term, you may not be the sort [indiscernible] that we are facing right now. But over the medium term, what sort of aspirational margin you might be looking at because our Drug Discovery is doing quite well, right, higher returns?

Our businesses are strong. In the medium term, we are quite confident to maintain a reasonably good margin.

The next question is from the line of Rahul Veera from Abakkus.

Just wanted to understand, since we are launching the RUBY-FILL in Europe, what is the market size there? And how long will it take that to breakeven?

The RUBY-FILL in Europe, as of now the market, there's quite a lot of pent-up demand. It's an unmet need. But the market is to be developed because the product commercially is not available.

Okay. Sir, what are the expectations from us, like how much investments do they require? Like how long will you take to breakeven there? And what will be the key markets within Europe?

So investment is required only in terms of our overall capacity to produce. It's not much of the investment on that front. We plan to launch the product in the Europe market commercially this year. And once we launch the product, we will be aggressively doing sales and digital development activities, and we will be developing the market. We are already in touch with a lot of hospitals and the [indiscernible] center there, and we see quite a strong demand over there.

First, we hope to launch in Germany and Switzerland and then other countries.

Okay. Okay. And in terms of pricing, sir, what would be the gap because Europe is largely price control base health care infrastructure. So how are we going about that?

That is on -- for this product, in this [ procedure ], so I think there's no control on pricing as such. [indiscernible] had to be fixed in Europe for this procedure. This is not existing today.

Okay. Okay. Got it. Got it.

On your earlier question on the finance cost, the lease capitalization was about INR 9-odd crores in November. And also the full year this year, we had the 2019 bonds for the full year. There is the prior year, they were there only for the 1 month of the [indiscernible] difference in the number.

[Operator Instructions] The next question is from the line of [indiscernible], an investor.

So I have got a question on our CDMO business. So this 30% incremental capacity will be potentially generating a revenue of USD 30 million, so that's good. I'm just trying to understand, so we have just added more lines to the same. So we are still doing those sterile fill/finish and localization type of work, and we are not into any biologics as such, right?

No, no, we manufacture biologics and vaccines, and all that we do is there also.

No, in terms of the incremental CapEx.

No, the incremental CapEx which we implemented for the bond lyophilizer which we commissioned last year. So we have commissioned 1 lyophilizer, thus, we have increased the number of shifts of operations in U.S. from 2 shifts to 3 shifts operations in both our facilities. That has given incremental capacity in all 7 days.

Right. Right. And for the biologics, can you just help us, remind again, is that all dominion or microbial or both?

No, no, we manufacture -- we do still unfinished. We don't do manufacture of API either. It is still unfinished, we do all biologicals, vaccines, small molecules. We do everything.

But not the drug substance?

Not the drug substance. Correct.

Moving on to the next question. That's from the line of Mr. [indiscernible], an individual investor.

So my carry is the growth revenue looks flat in terms of INR, but on constant currency basis, it seems to be -- [ since we had grown 5%, 5% ] by 6% because the currency has also dropped whether we compare on quarter-to-quarter basis or whether we compare on a year-to-year basis. So what is the reason of the same? And the second question is what is our hedging policy?

So yes. So currency has, obviously, the dollar has appreciated over last year's quarter. So that is in the numbers. In terms of our hedging policy, we have decided as a policy, one, we are fairly hedged from a natural perspective. Our exports, imports, there's not much of a difference. Whatever [ little there is ] that we don't usually have because usually we end up turning out to be even out with or without the hedge. So as a policy, we did not present additional amount of net exposure we have.

So do we hedge our debt because of -- I mean the currency fluctuation, our debt has also -- I mean debt has increased by around INR 200, INR 300?

See, our major debt is in U.S. dollars. Major income, revenues and income, are also in U.S. dollars in Pharma business. Immediate debt of about $400 million in U.S. dollars. We are fairly hedged, naturally hedged there.

Naturally hedged. You need to cover that. Okay. And what was the reason for drop in the revenue because in constant currency, bring it up.

If you see the average foreign exchange is around INR 69, right, if I'm not wrong.

Yes. INR 69. Yes, INR 69, with investments INR 75.

For the whole year?

Yes, for the whole year. Yes. For the whole year -- for the whole year weighted average would be about INR 72 something. The year-end was INR 75. And the previous was about INR 69.

The year was how much, Alok?

About INR 72.

INR 72.

Are you done with the question?

Yes, yes, yes.

[Operator Instructions] We take the next question from the line of [indiscernible] from [indiscernible]

There's no question?

[indiscernible] Ladies and gentlemen, that is the last question. I now hand the conference over to Mr. Vineet Mayer for his closing comments.

Yes. I would like to thank all of you for joining on this conference call. I wish all of you and your families good health and please stay safe. If you have any further questions and anything on the clarifications, Alok Vaish is available. Please call him and discuss with him. Thank you.

Thank you. Ladies and gentlemen, on behalf of Jubilant Life Sciences, that concludes this conference call. Thank you for joining us and you may now disconnect your lines.