Marksans Pharma Limited (MARKSANS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Marksans Pharma Q4 FY '23 Earnings Conference Call, hosted by Ambit Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Prashant Nair from Ambit Capital. Thank you, and over to you, sir.

Thank you, Ryan. Good afternoon, everyone, and thank you for dialing in. I am Prashant Nair, Healthcare Analyst at Ambit Capital. I would like to thank the Marksans Pharma management for giving us the opportunity to host this call. From the company today, we have with us Mr. Mark Saldanha, Founder, Chairman and Managing Director; and Mr. Jitendra Sharma, Chief Financial Officer. I will now hand over the call to Mark for opening remarks and to take it forward. Over to you, Mark.

Thank you, Prashant. Welcome, everyone, and thank you for joining us in our Q4 FY '23 and FY '23 Earnings Conference Call. We appreciate your continuous interest and support for the company. We are delighted to report a great year of performance, which exceeded our FY '23 guidance of INR 1,800 crores in revenue. Our performance was led by intense focus on execution, driving market share in various products and SKUs. We saw strong growth across all our markets. Our EBITDA margin improved for the quarter based on normalization in freight cost and cost optimization initiatives that we had undertaken. We observed improved market conditions in the quarter with stability in price erosion for our Rx products. This year has been a relatively busy year for us, which accounted for key -- several key developments for the company, enabling shareholder value creation. This included the completion of the Teva Pharma acquisition, the OrbiMed warrant conversion, the share buyback and now additionally, we have announced a dividend of INR 0.5, which is 50% of the equity of INR 1 each face value for the financial year of '22-'23. We have appointed Mrs. Shailaja Vardhan as a new woman Independent Director in the company for the strengthening and broadening our board. One of our key focus areas for the next financial year is going to be the integration of our newly acquired manufacturing plant from Teva, where we plan to obviously increase the capacity and launch new delivery segment, Dosage Forms. We expect our meaningful revenue contribution from this plant to start from Q3 of FY '24. We continue our focus on revenue growth by growing SKUs and existing retailers, products and key markets. We also aim to launch new high-margin products in the year to come, enter new geographies, add new customers and capture growth opportunities in the OTC segment. We continue to take steps for backward integration and operational efficiencies. Marksans has consistently maintained a net cash balance sheet for the last 5 years. We aim to maintain a strong balance sheet with a disciplined growth approach over the coming years. We remain confident of the performance in the coming quarters, while adhere to the best of the duty and governance status. With this, I'd like to turn it over to Jitendra, who will update you on the financial and then we can start our Q&A.

Thank you, sir. Starting with Q4 of FY '23 performance, our operating revenue was INR 486 crores, an increase of 16.3% compared with INR 418 crores last year. The U.S. and North America was at INR 193.5 crores, representing a 12.8% increase year-on-year basis. U.K. and EU Formulation market grew by 33.1% year-on-year to INR 206.3 crores. Australia and New Zealand formulation market recorded revenue of INR 63.4 crores. The rest of the world saw an 11.8 % increase in sales to INR 22.8 crores in Q4 of FY '23. Gross profit was at INR 242.1 crores, up 17.3% year-on-year. Gross margin increased by 40 basis points from 49.4% to 49.8% in Q4 of FY '23. The raw material prices have started to normalize. However, the company is yet to see the full benefit of it. EBITDA for the quarter was at INR 109.5 crores, an increase of 72.1% year-on-year. EBITDA margin increased by 730 basis points from 15.2% in Q4 of FY '22 to 22.5% in Q4 of FY '23 on account of the normalization of freight expenses and cost optimization initiatives. Profit after tax was at INR 82.7 crores compared to INR 29.7 crores in Q4 of FY '22, a growth of 178.9%. EPS for the quarter was at INR 2 with almost 185% growth on a year-on-year basis. Now taking you through the full year FY '23 performance. Operating revenue was at INR 1,852 crores in FY '23, up 24.2% year-on-year. The gross profit for the year increased by 20.3% to INR 930.8 crores. The gross margin was at 50.3%. EBITDA for FY '23 increased by 31% year-on-year to INR 339 crores. However, the EBITDA margin increased by 100 basis points from 17.4% to 18.3% in FY '23. The cash generation from operation was at INR 237 crores. For FY '23, PAT grew by 42% year-on-year basis to INR 265 crores. The earnings per share grew by 42% to INR 6.4 per share. In FY '23, the free cash flow was INR 183.8 crores. The CapEx incurred during the year was INR 53.6 crores and we spent INR 29.5 crores in R&D, which amounts to 1.6% of the sales. We continue to remain debt-free. We had a total of INR 715 crores of cash as of 31st March 2023, which we plan to utilize for CapEx and funding our inorganic growth strategies. With this, I would like to open the floor to questions and answers. Thank you very much.

[Operator Instructions] Our first question comes from the line of Agastya Dave with CAO Capital. Please go ahead.

And Mark, I must congratulate you, amazing execution. Congratulations on great work this quarter. Sir, my questions to you are basically follow up on something that we discussed last quarter. You had mentioned 3 major levers for margins going forward. One was the high cost raw material prices coming down? Then the channel -- the freight costs and the internal improvements. Now my understanding was that the freight reduction would have contributed to 100 basis points of margin improvement this quarter? But you guys, quarter-on-quarter, have reported a much, much bigger jump. So can you help me reconcile because in the opening statement, you have also mentioned that the RM prices while coming down have not benefited you at all. So can you please help us reconcile the margins between Q3 and Q4?

Yes. I mean, see, the RM prices have been dropping down, but it's not that we have been able to capitalize it for the full year.

Right.

So, definitely, we did see a better improvement in Q4 compared to Q3. And again, this basically revolves around the inventory being held at different levels, at different plants, at different processes. While the freight has seen a steep decline on a month-to-month basis, so it's just a matter of timing, again, we definitely saw a better quarter compared to the previous quarters where these were concerned. Even the RM, actually, in April, we have seen better pricing than what we had seen in the last quarter. So there has -- because, obviously, when your inventory depletes, your new pricing comes into play, where your raw material and your purchase comes into play. So that is where the dynamics basically changes some time. But definitely for the financial year, we could not capitalize it for the whole 12 months. Obviously, we didn't see the prices prevailing at this level of full 12 months. We saw an improvement happening in the third quarter. It was much better in the fourth quarter. Our inventory, which was there reduced because, obviously, due to all the supply challenges, we have to hold our inventory. So once the inventory started depleting and we started gaining on the new cost of goods or new cost of raw material that came into play.

Sir, you mentioned in Q3 that you guys were sitting on 6 months of total inventory, different for different locations and different products. What is this number down to now? The 6 months of high cost inventory?

Yes, it's almost over. And some of the places and some of the items we have already started with new cost. But I must tell you that the cost of Q4, what material we got in Q4 and what we are getting in Q1 of this financial year, which is starting from April, has further improved. So there's been -- it's a continuous process of improvement. I do believe that it is coming to a rock bottom in terms of pricing. But I do believe this year will be much better where pricing is concerned or raw material pricings are concerned.

Nice, nice. One other question, which is on the inorganic side. Sir, any progress you were -- last quarter, you were saying you were evaluating 2 deals. Any progress there? Any likelihood that we'll see some announcement this quarter?

Not this quarter, definitely not this quarter, but we -- it's a continuous process. We do evaluate. We do -- we go under due diligence. We find out that when we do find out that maybe it's not the right deal for us, sometimes the valuations don't pick in. But nothing concrete where we are far away from pen to paper. But we do -- we are in dialogue with a couple of potential targets, but nothing concrete as of now.

Great. Sir, I may have a couple of more questions. I'll go back in the queue and come back.

Our next question comes from Viraj Mahadevia, individual investor.

Mark, Jitendra, fantastic numbers. Congratulations for you to staying on course through the difficult last year. My question was regarding your opening remark about the launch of new products. Can you give us a flavor of the nature of new products you're looking to launch from your R&D stable, which are going to push up margins overall. And in a normalized rate, raw material environment, do you think 25% margins are achievable in '24 or FY '25?

So let me address your first question. Obviously, our product launches are something which, obviously, it's not something that we start today and launch tomorrow. So these are items where we have been working on and they'll be filed for quite a long -- I mean maybe 12 months earlier. So we do see some approvals coming in the digestive range of items. We do see some approvals coming in the pain segment. We are expecting quite a few approvals in our U.K. plant and our U.K. manufacturing facilities. So we are seeing potential approvals coming all across...

What is different about these products, Mark? What is different, is that extended release? Is it...

Products in the UK are -- you are looking at antidepressants, cardiovascular items, some Rx and a mix of OTC. Out here in India also -- I mean, for the US market, you are looking at a bunch of pain and digestive in OTC and some in Rx items, and cough and cold also.

Right. And what is..

It is a basket of items, Mahadev.

Right. What will lead to the higher margin, sorry?

So the higher margins we are looking at basically, obviously, better cost of goods, raw materials, better product mix that is going to come into play with new approvals coming in. So these are factors that we are playing on. In terms of, obviously, leveraging new cost of material is always great news. But this will also come with some challenges of pricing pressure, in terms of new price challenges that will happen in the market because raw material prices have really declined dramatically out there. But we do see us capitalizing on this raw material, the trade, the packaging material cost that has come down, petroleum product, petroleum items, which are impacted with oil pricing, everything has improved. So we are very hopeful for better financial year, this year compared to last year.

Right. My second question, Mark, is regarding your cash balances and something I've repeatedly asked and congratulations on completing the buyback last year. I'm sure you're very pleased both from a shareholder and owner perspective, at the price at which it was done. You have about INR 715 crores of cash on your books. You're generating about INR 200-plus crores of free cash flow annually. Even if you set aside INR 200 crores for the Teva acquisition plus debottlenecking and another INR 400-odd crores potentially for 1 or 2 acquisitions, you will still have another INR 50 crores to INR 100 crores incremental left. Would you consider another buyback down the line because your share is still not fairly valued? Obviously, we have improved and come a long way since your last buyback, but that would add further to investor confidence.

I think this is going to be an every-year process. And we have now defined the process of free cash flow and how we have to deploy the free cash flow in terms of dividend and buyback. And we will basically -- I mean, this year itself, we have -- like I said, we have done a buyback as well as improved on our dividend ratio. But if you look at it, one-third of the free cash flow we have deployed onto -- either into both categories or any one of the categories we have to explore on that.

Right. So you’resaying, potentially it’s INR 50 crores to INR 70 crores could come back to shareholders in terms of a combination of dividend and/or buyback?

Yes.It's one-third of free cash flow. That's what we try to adopt.

Great. Excellent. Thank you. All the very best. Look forward to 2024 and 2025.

Our next question comes from Hiral Nandu with Kalpvruksh Capital.

Congratulations Mark, for the great set of numbers. Just to understand on the EBITDA margin, as you have promised earlier or you have guided further that we will keep growing, and it is seen on that path. We are now 22.5% EBITDA. So in going forward, how much this sustainable and growth, as I think the earlier question was also same line, that 25% or at least 22.5% margin sustainable in the future. And are we on the same target, top line of INR 2,000-plus crores in the years to come?

Yes. I mean, we are very confident. In all my earlier conference calls, we had set out a benchmark of INR 2,000 crores and we are pretty much around there. And so now we no longer talk of INR 2,000 crores. We talk beyond INR 2,000 crores. So we are confident of surplus in that benchmark. Now we are setting up a new benchmark, a new milestone for us and that we are planning to achieve in the coming years. So definitely we are confident...

We are excited to hear the new benchmark, actually.

Yes. I mean, because there is visibility. Obviously, we do believe INR 2,000 crores will be crossed and now we are aiming for higher grounds, higher -- new heights, let's put it this way. So we have visibility and we do see us growing in the next 3 years or so. And that's where I do believe, at least from a revenue point of view, we have surplus expectation, like I mentioned, in this year itself and we do plan in the coming years. So from a bottom line point of view, obviously, we are working hard in terms of EBITDA. It's very fluid, but it's always -- I believe it's going to be always better than the previous because of all these improvements of raw material, freight, everything coming into play.

So you see that this raw material and the freight price now being settled and more or less can remain constant in the future, right, for the next couple of quarters. So that this margin is sustainable that way. And if some guidance or some thought process on the Teva facility, that what kind of revenue we see in this coming year, financial year ‘24?

Well, like I said I mean, we do see there will be a gestation time. We have just acquired. We have just moved into Teva somewhere in April. There will be some gestation time for integration, for expansion of capacity, everything. So we do see revenue generation coming from the Q3 of this year. And then, obviously, we do see a full-fledged revenue generation happening maybe in the Q4 or Q1 of the next year, Q1 is more realistically, where we do believe with the amount of investment that we are doing, it will be probably equivalent to or at par or bigger than our present facility in Goa.

Superb. Superb. All the very best and congratulations once again.

Our next question comes from the line of Darshil Jhaveri with Crown Capital.

Firstly, sir, congratulations on great set of results. So, sir, I just wanted to ask about -- so we were talking about going beyond INR 2,000 crores revenue. So that would be for FY '24, correct, sir? And so what would be the potential of combined our new product launch and Teva maybe for FY '25 or something we could have like, some sort of what we could see is our combined that. And will the Teva facility impact our EBITDA margins because we are setting up integration of new facilities?

So from a short-term point of view, if you’re talking of a quarter or 2, definitely an integration takes time, takes money. So there’s a cost implication out there. But from a medium to longterm point of view, the return on investment and there’s a lot of gain from the pain that we take in the short-term. So I do believe that Teva facility is going to add tremendous value and basically it's going to fuel our growth and service our front-ends globally. So I think there is no other shorter cut or a shorter way to actually overcome that. But we are doing -- we are basically burning the candle at both the ends. We are working extremely hard to ensure the gestation time is as short as possible where that is concerned.

Okay, sir. So, if I may, just for FY '24, can we think about INR 2,000-crores-plus revenue with around 22% margin, would that be a fair assumption?

Well, I can say we are quite confident of breaching the INR 2,000 crores. So that's not a problem. The margin part of it, I would not want to speculate right now. But we are optimistic that a margin, our EBITDA will be better than what it was for the year end.

Oh, okay, sir, that helps a lot. And sorry, sir, but can I just if -- about the Teva facility. So what kind of peak revenue or how that we could may be expect, maybe FY '25, because I understand there is a gestation period or something? Any something ballpark figure or something [indiscernible]?

I think from a revenue point of view, again, we don't want to give a short-term outlook on a revenue basis. We normally talk about our objectives of hitting new goals and new heights. We have plans in place to achieve our new milestone. We no longer talk of INR 2,000 crores, but it's great that you still remember INR 2,000 crores. So -- but we have set a new height for the company, a new objective, new goal. But I do believe in terms of volumes, we are looking at 5 billion-plus tablets or pills to come out of Teva for '25.

Okay, sir. That helps a lot. And congratulation once again on a great set of results.

Our next question comes from the line of Manoj Mathew Jacob, an individual investor.

Congratulations, Mark and Jitendra. My question is what about the DMF, have you filed the DMFs? You said you will be filing DMF for the molecules?

So, Mathew, we are working on it. We are working on 5 items, 5 products, 5 molecules. We are hoping that our DMF would be filed somewhere in the month of September 2023. Obviously, we are just going through the entire process of stability, profiling and impurities. There's a lot of chemistry that is involved in all that, but we are optimistic that we should see the light in terms of the filing part of it.

And you’ll still stick to contract manufacturers, not to own the backward integration?

Yes. We will stick to contract manufacturers.

And one question, sir. Teva alone, Teva alone, in the next financial year, how much will it do? INR 1,000 crores or INR 2,000 crores?

I didn't get what you were asking. Could you repeat?

I'm talking Teva facility alone. Teva facility alone.

Teva facility, okay. Like I said, I can't give a number to it because we don't give a forward look on this, but I can give you what we are aiming in terms of the number of pills that we are -- the capacity that we are looking at 5 billion to 6 billion tablets coming out of that facility.

Not 8 billion.

Well, it will go to 8 billion, but it's a stepping stone. So we won’t -- it's not like -- I wish it was like a Ferrari where you start from a 0 to 100 in 4 seconds, but it does not happen that way. We are investing a lot. So in the first year, after the -- I mean, after the first year, we do believe we will touch between 5 billion to 6 billion and then we will be aiming for 8 billion.

Okay. And you will be looking into inorganic growth because we sit on a good amount of cash.

Well, that's a part of our business module that we always pursue and -- but if history has to say something about us, we are very choosy in how we go about doing our inorganic strategies and how we acquire companies. We have to see the synergy and obviously, it has to be value-driven for our shareholders. So it's easier said than done, but we are exploring. We are in dialogue. We've gone through due diligence of over 2 companies in the last 8 months. So we do explore that possibility, but nothing concrete today to report on that.

Okay. Okay. That's good news and the last question.There was some news that in Madhya Pradesh you allotted some piece of land. Is that true? Is it -- are you building something over there?

Yes, Indore, that was Indore, we were awarded land, but now our focus has gone to this new facility, Teva, that we acquired because that came a bit later on. So presently, we are pursuing the Teva plant. We've got our hands full. And like I mentioned in my opening statement, that's our priority number one because that will ensure our objectives being hit and our growth plan being abused.

If you look at your financials, it seems that you bought the Teva plant for INR 56 crores and you will be putting in another INR 200 crores to expand capacity. Am I right?

Yes. INR 200 crores includes the acquisition cost.

Okay. So now INR 200 crores minus INR 56 crores.That's how we should read it.

Our next question comes from Vignesh Iyer with Sequent Investments.

Congratulations, sir, on a strong set of numbers and thank you for the opportunity. This is more related to your other expenses for this quarter and for the quarter ended December. Just to get an understanding, as in your other expenses in quarter 3 was around INR 101 crores and which is INR 72 crores in this quarter. So just wanted to understand if this is onetime savings in quarter 4 or was it more to do with one-time expenses in the earlier quarter? Or what is the exact nature that we have managed to save a good chunk despite having growth in revenue?

So mainly, of course, this reduction has come from freight because in terms of -- if you see the product mix, most of our products are volume-driven products and our freight costs like has gone as high as 15%, like, of the revenue number when the freight rates were at peak. So just for your better understanding, for US refer containers, like, earlier at pre-COVID level, the freight rates were in the range of $3,000 per container, which have gone up to $12,500 per container and now it has come down again back to $3,000 per container. Similarly, for UK also, the freight rates have gone up to almost $9,000 per container, which has now come down to almost $2,000 per container. So we have witnessed a good amount of saving there. And so there is no one-off as such because freight, like, in coming quarters, we believe these are the normal levels. We have gone to almost pre-COVID levels of freight rates. So, hopefully, like, we see better numbers. We have taken lot of measures in terms of the cost optimization also. And there are some reclassification, which we have done in our other expenses and that also resulted into bit of lower other expenses in totality.

So, sir, if my understanding is correct, subject to the freight doesn't go up from here, we’ll be saving that amount of cost, right, for this amount of savings that we’re doing.

A good part of that, yes.

Fair enough. And secondly, coming to this new acquisition that you have done in Teva facility, just to understand if I have to put a blended margin profile for the products that are going to come from the Teva facility, would it be more or less on lines with what the company is making now?

Yes, that would be fair enough to say. Obviously, we will always try to improve on the margins, but it's too early to mention on the improvement part of it. But I think it’d be fair to say that it will be a blended mix of what we are getting today.

Okay.Because just to get the understanding, because you've got a huge chunk of cash with you. So just to understand what is the process by the management to actually identify any company. Is there a metrics in place, like a good IRR or ROC that you expect the company to make out of such acquisition? I mean, if I could just -- if we could, as an investor, get an idea behind, apart from the product profile, obviously, which is more on the technical side of it, but on the financial side, if we could get some understanding of what is the management thought process behind because we have got a good chunk of money even after this acquisition.

So, obviously, when you -- acquisitions are different types of acquisitions. When you look at an asset, I think the gestation time is going to be how fast we can optimize that -- those -- the desired output that we are looking for. And if we hit those objectives, then return on investment relatively is very fast. And obviously, we do calculate all this into an acquisition that we go into. When it’s related to more into company and to different geographies and all, it becomes a bit more complex, then integration takes a bit longer and return on investment takes a bit longer because then you are looking for different objectives and different milestones to be hit and different growth trajectories to be hit. So there, obviously, the dynamics and even the valuation becomes different when you look at company versus you look at a facility. So a facility is always looked as either asset or a liability. Company is always looked with more sentiments and emotions attached to it and valuations and multiples [indiscernible].

Yes, it is right. I don't deny on that part of it, but, financially, at least, I mean, as the management would be deciding on acquiring a company, which probably has like 3.5, 4 times of fixed asset turnover or a 15%, 20% of ROC at least, right? So if you have got any specific metric that you could share with us that, okay, we don't pick up a company if it is below this because at this ROC level, it doesn't make sense to actually put money in the company.

No, I think we evaluate it from case to case basis. We don't have a metrics defined in paper that way, but we do have -- obviously, we have a board of directors. We brainstorm. We evaluate it. We do consider -- we do try to see how fast we can -- how fast the ROC will take place. And if it is too long, then we have to let go of it.

Okay. Sir, just last question from my side. I just wanted to understand, we closed this year with a -- on a consolidated basis with a tax rate of 21%. Would it be at this level only or will it be moving to probably something like 25% again in next year?

Yes. It will increase a bit because from this year onwards, the UK corporate tax rates have increased from 20% to 25%. So we believe the effective tax rates from this year onwards should go to around 23%.

Okay. Okay, sir. That's all from my side. All the best.

Our next question comes from the line of Anupam Agarwal with Lucky Investment Managers.

Congratulations team on great numbers. My first question is on the Teva plant. So I understand Q3 of this year is when you're looking to commercialize. Can you help us understand the annual OpEx cost that will start flowing through from the next year with respect to Teva plant?

Well, see, the OpEx cost will depend on the level of activity and the capacity utilization we will have from the plant. So right now, we are in the investing mode. We don't have much of OpEx out there, but definitely, we are investing a lot in CapEx. The current costs, like, are not that high and -- but definitely it will increase in coming quarters. But our objective here is to ensure that we start generating revenue as early as possible. And we believe that we will achieve, like a breakeven kind of scenario by Q3 of this financial year so far as Teva facility is concerned.

You mean EBITDA breakeven by Q3 FY '24?

At profit level, I mean to say at profit level. Not EBITDA.

Understood. Understood.

Yes, at net profit level.

But you just mentioned to the earlier participant that blended company level both are at a similar margin as what Marksans reports currently. I’m not able to reconcile the math.

Yes. That was with regard to the product mix what we were talking about. The EBITDA, which our -- the existing plant product mix generates, like, we will have similar level of EBITDA with the products, which we are going to get manufactured at Teva plant.

All right. All right. Have we already started front-ending some costs with respect to the Teva plant already in the Q3, Q4 numbers?

It will start from Q1.

All right. And at 5 billion capacity, which sir said in year one, what will be the OpEx cost for the plant on an annual basis?

Well, I can give you just offhand numbers. It will be anything between INR 50 crores to INR 60 crores per annum.

Understood. That helps. Second question with respect to the new products. So you mentioned they're coming in digestive and pain segments and antidepressants and a mix of Rx and OTC. Just to get a color on how the product mix will shape up from the Teva plant. Is it similar to what we do currently or is it going to be meaningfully changing from there?

More or less in the first year, it is going to be very similar. And then as and when we start filing some products from the Teva plant, the product mix will change out.

And the revenue mix from that plant is also going to look similar, US and UK largely, or…

It will be more European-driven, but I do believe eventually it will balance it out to U.S. and Europe.

Understood. Just lastly from my end, just wanted to understand directionally, I know OrbiMed has come in and has converted the warrants. Any support you have received from them in terms of customer engagements, in terms of penetrating deeper into MSE Markets, or getting into new markets? Some sense if you can give as to what -- financially, we understand you've got the support, but otherwise, if you can help us understand what is the role OrbiMed is playing in terms of getting more business to us?

Yes. I mean they are actively involved in dialogue. They are also helping us in identifying M&As. They are on the board. They basically -- all the M&As we get also, we have -- they have insight, they have market intelligence on various continents and countries where they give us good inputs on potential targets that we identify and the background checks. So I think their value addition is tremendous, number one on the board, on the corporate governance point of view. And obviously, in M&A, they are very actively helping us on that. Day to day running of operation, obviously, we do most of the day to day operation.They do actively participate in our meetings that we have every fortnight or once a month. Whenever we do have board meetings, they are quite active out there.

So I believe it's been a year OrbiMed showed interest in investing in Marksans. Last one year, have you seen anything in numbers financially helping us show better numbers?

I think their role is a little different. [indiscernible] they are not here to run the company. So we run the company. But their role is more on to adding value on to the board and on to the direction that we would -- that we plan to take, the support structure that they actually offer, and obviously, the wealth of knowledge that is there in this industry as well as in M&As. So we do -- actually we do lean towards them where we -- whenever we do come across an M&A or with -- sometimes they have honestly recommended quite a few M&As, and they actually approach company or M&As for us even if we have potential target because they have better connectivity and better bandwidth of approaching clients. So they have been very instrumental. And M&As is a very important part of our business module that has evolved our company over the period of years. So I do believe they will add tremendous value where that is concerned.

Right. Lastly if I may, sir, out of INR 200 crores, we have invested INR 57 crores, so balance INR 143 crores. Will that entire INR 143 crores flow through in FY '24 as CapEx?And over and above our current business, what is the CapEx there?

So in the Teva plant, we have already -- starting from April, we’ve started really spending money because, like I said, we are trying to compress the gestation time as fast as possible. And we are trying to put machines, we are trying to increase capacities, we are trying to integrate. So a substantial part of that money will go in this financial year and in the new -- and whatever, our new -- in the current financial year, which is going on. And with the other facilities, the normal CapEx, which goes year-on-year, in terms of upgradation of machines or breakdowns or engineering novels that we keep working on. So that’s a normal process, which pretty much every plant witnesses on a yearly basis.

Right. So INR 150 crores, INR 200 crores each year for next 2 years. Is that understanding right?

More or less.

Okay. Got it.

Our next question comes from Yogesh Tiwari with Arihant Capital Markets.

Congratulation for the result. My first question is on the employee cost. So on a quarter-on-quarter basis, the employee cost has declined. So what would be the reason for it?

See, basically, I think it is just that, like, some bonus payments normally, which happens in the initial quarters and towards the end, like, it normalizes. So I think it is that, which has basically resulted in a bit lower employee cost. So it will get covered, like, in the first 2 quarters of the current year.

So basically, it was related to some bonus component.