Neuland Laboratories Limited (524558) Earnings Call Transcript & Summary

Good evening, friends. Good morning, depending on the geography you're from. We welcome you to the Q1 FY '22 Earnings Call of Neuland Laboratories Limited. To take us through the results and to answer your questions, we have with us the top management of Neuland, represented by Sucheth Davuluri, Vice Chairman and CEO; Saharsh Davuluri, Vice Chairman and Managing Director; Deepak Gupta, CFO; and Sajeev Medikonda, Head of Corporate Planning and Strategy. We have sent out the press release as well as the detailed presentation, and the same has been uploaded on the website as well as exchanges. You could take a look at that, or in case anyone wants, we could e-mail the same to you. Before we start, I would like to remind you that everything that is being said on this call, which reflects any outlook for the future or which can be construed as a forward-looking statement must be viewed in conjunction with the risk and uncertainties that we face. These uncertainties and risks are included but not limited to what we mentioned in the prospectus and the subsequent reports, which you will find on the website. With that said, I'll now hand over the floor to Deepak Gupta, the CFO, who will give the financial highlights of the quarter. And after that, Saharsh will talk a little bit about the business drivers and the outlook. And then we'll open to the Q&A. Deepak, over to you.

Got it. Good evening, and very warm welcome to FY '22 earnings call. I hope all of you are staying safe. I'm sure that you have seen the presentation we have uploaded. It was up on [indiscernible] and has also been filed at both exchanges. As always, comment on the [indiscernible] would be greatly appreciated, and we will [indiscernible] to include any additional data point in the future. I will briefly update you on the financials. The total income for this quarter was INR 202.9 crores as against INR 206.1 crores in Q1 FY '21. We had an unusual business complexity...

Deepak, message is saying that your voice is not clear. So take a few seconds to address that, and then get into [indiscernible] speak louder.

Try to speak as loudly as you can.

All right. So we had an unusual business complexity, combined with client customer inventory restocking, which led to [indiscernible] turnover. Our EBITDA for the quarter was INR 27.7 crores with EBITDA margins of 13.6%, which is a decrease of 310 basis points on a yearly basis, and 180 basis points on a sequential quarter basis. I would like to give some context on the EBITDA margins. There was an impact on rising raw material prices. We also incurred certain upfront costs on account of certain projects, which we have been working on. The execution has been slightly delayed on account of the complex nature of these projects, and delivery is also expected to happen in the subsequent quarters. Profit after tax was INR 8.6 crores as compared to INR 15.1 crores last year and INR 17.2 crores in the immediate preceding quarter due to the reason stated as above. This quarter's EPS is at INR 6.7, and cash and cash equivalent as on the date of the balance stood at INR 24.5 crores. Our gearing ratio continues to be stable, and it is low at 0.22 on a year-to-year basis. We have also undertaken CapEx investments of around INR 29.8 crores for Q1 FY '22. We have a strong business plan in place for which we do expect to make significant CapEx investments based on the commercialization and build up of CMS initiatives going forward. With that, I would now like to hand over the call to Saharsh for his remarks.

Thanks, Deepak. Good evening, friends. Apologies about the voice quality. I will speak as loudly and as slowly as possible. But other than that, at this point, I don't know what else we can do to fix it. First of all, thank you for joining this call. On top of what Deepak had just said, I'll add a few thoughts on the current performance, and then we'll open up the floor for Q&A. Just take a few minutes to just help you understand that the numbers itself in the first quarter are disappointing, but I would like to reiterate that our confidence in the business, both from a medium and a long-term perspective, is still very strong. Deepak has touched upon the factors that contributed to the drop in the top line. One of those key factors was the delayed execution of certain CMS projects. You may recall that we have quite a few exciting CMS projects in our pipeline. We've talked about it over the previous quarters. Many of these projects are 1 or 2 steps away from commercialization, which is where we really start seeing a continuous commercial revenue. These projects typically be involve complex chemistry and again scale up for the first time in our plants. They -- one of the things that we had to endure is that to ensure that first-time right happens, our ability to make sure that these processes work right in the plant, we are being extra careful. And in that process, we are seeing some extension of time lines, which is modest, causing some of these projects to get spilled over into the subsequent quarters. During this process, we've been very closely collaborating with our customers and anticipate scaling up these projects in the coming quarters. Therefore, we expect overall performance for the current financial year to be still on track. More importantly, we are also excited about the prospects of these molecules once they become commercial. On the financial front, we recorded sales of INR 203 crores. As Deepak had stated in his comments, the sales were almost constant on a yearly basis. Also on the basis of a few customers doing inventory destocking amidst the pandemic. However, we expect this to be a temporary phenomenon as we received continued interest across the board from other customers. The Prime segment witnessed growth, largely led by Labetalol and levofloxacin. The Specialty saw volatility on a high base. However, both Ezetimibe and Entacapone have done significantly well. On the Unit III front, I'm sure you'd like to know, I'm happy to say that we have started commercial supply of APIs from this unit. All incremental revenues for Neuland will accrue from this unit going forward, as both Unit I and Unit II are already running at optimum capacity. And we are looking at significant ramp-up in terms of capacity utilization of Unit III in the medium-term as well, and this should drive our future growth. Before I close my remarks, I would just like to reiterate that the nature of the CMS projects means that our revenues does get lumpy and -- which is consequently affecting our EBITDA margins. However, this quarter, we've seen that, although there was a strong raw material price increase, the business mix, especially in terms of our CMS project expense, meant that we saw better gross margins. So this is maybe one kind of silver lining to the cloud. The overall outlook for this year as well as the medium-term of 2 to 3 years plus [indiscernible] and we are focusing our efforts on delivering value to the shareholders. Having said that, I request Diwakar now to open the call for Q&A.

[Operator Instructions] So the first question, may I request Mr. Sunil Kothari to go ahead.

Boss -- I'm sorry, sir, basically, my question is you've been a listed company. We normally, as an investor, what we do, we compare yourself with other listed companies in similar type of groups and business. And our understanding is always limited to outcome of your effort, which is always numbers. So it is becoming a little difficult to understand and digest that we are not able to do some -- in terms of revenue growth, in terms of margin, in terms of ramping up, in terms of Unit III not yet able to be ramp up. All these things are giving little question mark on our understanding and your explanation. So if you would like to talk a little bit more in detail why things are not happening. Fine, it takes time, sometimes. But unfortunately, if we compare this quarter to last year's same quarter, we are almost spending INR 9 crore on higher employee cost, INR 10 crore on manufacturing costs higher. So I understand that because of Unit III or higher manpower and all these things, the margin is under pressure. But we have some listed other entity in your field, which is growing, investing more, spending more, generating more revenue and increasing margin. So a little bit explanation on our understanding and your business profile will be really, really helpful.

So thanks for the questions, Sunil. We'll try to answer it to the best as we can. I'll try to give it the first stab and then maybe request to Deepak also to respond. As you would know, we are a purely API company, we have a focus in the CMS space, which is broadly known as the CRAM space. And we also are in the generic API space. What makes our business both exciting, as well as difficult to predict is the fact that we have a lot of products in the pipeline, which are yet to be seen. And as we are going through that journey of scaling up these products, we also have the added complexity of using new infrastructure, which is the Unit III on manufacturing side and integrating it and using it for scaling up these new products. As we are going through this journey, we have seen in the past that as the products get scaled up and they start contributing, we will see better operating leverage contributing to increase in EBITDA margins and profitability. However, given the fact that some of these products have not fully been commercialized, and there is still some uncertainty involved in their scale ups, et cetera, as we have seen in this quarter, the absence of revenue coming from some of these molecules can also create a negative ratio on the EBITDA margins and [indiscernible]. And therefore, my -- what gives us a lot of optimism is that these molecules are really exciting, both on the GDS side and on the CMS side. We see good prospects going forward in these molecules. But there is also a certain level of lumpiness that comes with these molecules because their progression towards commercialization is not going to be a very straight line. Having said that, we find it very difficult, and we have not. We extensively benchmarked our compared assets to other API players because we believe that our model is unique that way. We have mentioned in the past that on ongoing basis, we expect our EBITDA margins, we have said this in the past, to be at 20%. But that's something that we've not shared as guidance. We've given it more as in terms of what it will be as our business gets commercial. This is something that we feel is an intrinsic part of our business. But as we go forward, as I did mention in the opening remarks, we see very strong prospects for all our molecules, both on the CMS side and the GDS side. This was a quarter where we just had challenges in execution. And therefore, the performance of this partner should be seen more as outlier rather than expectation going forward. So that's kind of what I would say. Did You want to add something to that?

No. I think it's fine [indiscernible].

Sir, so basically, what I would like to understand is there any specific reason for this Unit III is taking too much longer time, or it is as per your plan and expectations? And second last point is, if we look at other than CMS, that segment is also this Prime and recent Specialty segment, that is also not growing. So any thoughts on this 2 other segments, which is contributing almost 75%, 78% over revenue. So on these 2 points, if you can clarify more.

So Sunil, I think as far as Unit III is concerned, currently, there's 2 things that are happening in Unit III. One is that we are moving our existing commercial products to Unit III, where they're growing and the volumes are increasing, or we're actually creating a backup plan for existing commercial products so that once we move that product, it creates more volume and more capacity for products going in the [indiscernible]. That's one particular strategy for Unit III. Apart from that, all our new projects are also going into Unit III. So Unit III, as Harsh mentioned earlier, and now on these calls, is where a lot of the growth is going to come from. Coming back to something that I said, if you get the trend of a number over the last 3 years, all the segments have been growing, whether it is Prime, whether it's Specialty as well as the contract manufacturing. Even in the previous calls, and we've mentioned that given the nature of our business, given the size of our projects, we do expect that there will be a quarter-to-quarter lumpiness. And that doesn't necessarily reflect the overall business or overall expected performance. We continue to maintain this thing that given the kind of business we are in and that [indiscernible] manufacturing is a huge opportunity, and we're still in the process of consolidating that business. We will see this quarter-to-quarter lumpiness. But as Saharsh said in his previous comments, this quarter was a little bit of a stretch. Unfortunately, the time lines of our customers and the projects don't always coincide with the time lines of our financial quarter. So there could be variation and that does not determined or take away with you our overall expectation of performance.

And just if you can clarify this Unit III, by when you expect giving us some reasonable contribution, sizable contribution? This is my last point.

This current financial year, we will see reasonable contribution because we're already shipping commercially from Unit III. We expect our volumes to go up in the current quarter as well as the next 2 quarters.

The next question comes from the line of [ Srinivas Rao ].

Sir, just now, you said in the interaction that year as a whole, you are still on track. Could you please explain in more detail what is on track, whether top line and the bottom line? What could be the -- whether it is 20% year-on-year or 30% year-on-year. Hello?

Yes. I think the question was clear. Well, basically, what we meant is that whatever shortfalls we faced in the first quarter, that shortfall happened because of certain projects getting delayed. And those projects have actually shifted or spilled over into the second quarter and maybe a little bit into the third quarter. So our overall plans for the financial year remain intact, which is what we implied in the overall remark.

Yes, that's what -- sir, I understand your point. Overall, for the full year, it remains intact. Can you please explain what is impact, right, whether it is 20% growth or 30% growth, what could be the target revenues for this year? Because if you see last year also, there were some aberrations -- sorry, last -- this quarter also, there are some aberrations, and we are not getting a clearer picture from the management as to what is a near and foreseeable future as far as financial performance of the company would be?

Thanks for the question, and I'll try to clarify it to the best that I can. We obviously won't be able to give you a very specific answer on margin to the growth rate for the year. What we've said in the past and is that as an organization, we are targeting anywhere around 15% year-on-year growth over a long-term perspective. We also said that our EBITDA margin should be at about 20% on an ongoing basis. I think those are 2 comments that we've made in the past. And I think that's the extent to which we would provide any kind of visibility. However, we've also mentioned and qualified saying that given the nature of our business, we expect to see volatility, not just at a quarter-to-quarter level, but even sometimes on a year-to-year level, where you may not see a uniform growth on a year-to-year basis. Having said these 2 things, what we've also mentioned is that a lot of our business growth is coming from the scaling up of new products. And those new products are actually going through scale ups right now, and Unit III plays a very important role over there. What we expect in FY '22 and -- is that whatever challenges we have seen within the quarter are things that we expect to surmount over the next several months or the next few quarters, and therefore, we expect our FY '22 performance to be intact. That performance is kind of in line with our earlier comments, which is, on an annualized basis, we should see a 15% growth. But at the same time, I would like to caution you that what we are saying is not a year-on-year guidance. So we are not indicating to you that we may grow 15% every year. But you should expect that on a 5-year horizon, you should see the company growing at a 15% to 20% on an average basis. So I think that's the kind of clarity we would be able to provide, not because we do not wish to share more details, but it's just the uncertainty that -- of the business that we are in. We would be finding it very difficult to provide more granularity beyond this point.

Sir, I appreciate you being cautious on your guidance. But sir, how your pharma company is different from other pharma companies? Because you feel there are so more uncertainties than other pharma companies, at least in the foreseeable future. And my next question will be [indiscernible] timeframe -- which timeframe you could -- we could expect 20% EBITDA?

So let me give quick answer to that in the interest of time. Obviously, we understand our business really well, and we are happy to talk about the drivers for our business, but we cannot talk or compare ourselves extensively with other pharmaceutical companies and what they are doing. Then, right, the growth factors for our business is really what's happening on the CMS business. I think for a GDS, our growth in Prime, which is something that we have been seeing, we talked about the growth in levofloxacin as well as Labetalol. We've also talked about Entacapone as well as another product on the speciality sector, and these are what are driving our growth. With regards to the EBITDA margins, we have seen our EBITDA margins consistently improve. I think even in the last financial year, we've seen an EBITDA margin at about 18%. This has been a substantial improvement over the past. We expect our EBITDA margins going forward also to grow. And that's largely going to happen because of the improvement in the operating leverage of the business. The -- this particular quarter was an aberration because we could not see the operating leverage because there was a dip in revenues. And therefore, consequently, there was a dip in EBITDA. I think over the subsequent quarters, as we see our business resuming to normal levels, we should see an EBITDA margin getting back to a higher level, although we would not comment on when specifically we would get to 20% EBITDA. So I think that's as much clarity we can provide at this point of time.

[Operator Instructions] The next question comes from the line of [ Rahul Bhardwaj ].

So I have 2 quick questions. One, I'd like to know, what is the opportunity that Neuland as a company is most excited about in the next 5 years that they can share with us? And secondly, since due to the client requirements, the [indiscernible] revenue could not come in this quarter as they've been delayed. Can you provide us some guidance into -- if we can expect a 20-plus percent growth for Q2 in terms of the deferred revenue. So those are the 2 questions from my side.

Maybe from a long-term perspective, 5-year perspective, Rahul, there are several molecules in our CMS pipeline. I think every quarter, we've been sharing a table that shows how many molecules we have across Phase I, Phase II, Phase III and commercialization. And there is a column that we will call development, and there is a column called commercialization. If you actually see the molecules that are transitioning from development to commercialization, I think that is where there is the maximum excitement because many of these drugs -- many of these APIs are going into novel drugs that have been recently launched or are going to be launched in markets like Europe and U.S., and depending on how successful these launches could be, they could be a very big revenue drivers for Neuland. So that's clearly something that excites us a lot. Because of the confidential nature of these molecules, we cannot disclose the identity or the nature of these particular APIs, but we have at least about 4 to 5 molecules which are in this category. And we hope that at least maybe a few of them will be really successful. So that's something that really excites us. In terms of other product drivers, I think on the GDS side, we have very exciting basket of products. We have products which we had in our portfolio quite some time, but are continuing to grow now products like levetiracetam. We have products which are also niche in nature from our specialty category, products in Paliperidone, which are all going for scale out and commercialization in the years to come, and those are things that we -- could be exciting revenue drivers for us. With regards to the guidance of the spillover, I think that's something that we had -- we would not be able to share. Like I had mentioned in the comment earlier, I think we are on an ongoing basis target of 15% kind of revenue growth. It's not necessarily that it's going to happen every year. It's also because there is going to be certain unknowns in what's going to happen in the next 3 financial quarters. So we would expect to have a good financial year. We don't expect Q1 to have an impact on the rest of the financial year. But in terms of what we do and how much we would grow, that's something that we won't be able to comment on. So did you want to add anything in terms of what's exciting in the next 5 years?

Not much. I think the risk -- Rahul, going back to your question, it is exactly what I said. See, at the end of the day, how successful a molecule is going to be on the contract [indiscernible] especially is something we cannot control. The NDA can get approved and it may still not mean anything. So we're not in the business of making molecules successful, that's entirely to the merit of existing molecule. However, what's in our control is the number of projects that we acquire from our customers and the number of projects that we are able to execute. And if you look at the trend of the molecules over the quarters, that has been constantly increasing. That means that the number of projects we execute, the number of molecules that we need to develop, which are in Phase I, Phase II or Phase III clinical trials, have been constantly increasing, which means that a probability of success with these molecules is increasingly going up every quarter. And for us, that's what's exciting because that is something we can control. And the more projects we get, the higher probability of success for a higher number of molecules. And single-mindedly, that's what we are excited about from a contract manufacturing point. From a generic point of view, our strategy, as we've mentioned on this call earlier, is very clear. We don't like to do or develop every molecule under the sun. We're very clear about the kind of molecules we want to go after. This includes novel oral anticoagulants, such as [indiscernible]. These are exciting opportunities. Our goal is once we launch them, we stay in the whole molecule, we invest in life cycle management, we invest in capacity. And eventually, over a period of time, we do end up becoming the market leader in our generic molecules, and we're able to protect the margins. And the name of the game on the generic side is obviously persistence, stay in the molecule and investing in that molecule to protect the margin. So that's kind of Neuland's business model as well as our excitement [indiscernible] and action as much [indiscernible] as well.

The next question is from the line of [ Sahil Sharma ].

So the first question I wanted to ask is, if you look at the past few presentations. Consistently, we see that you have filed 898-plus DMFs. You have 300 process patents. What I'm wondering is that these numbers have not really moved in the presentation. So basically, what's happening on the R&D side for generic molecules? And like why don't we see more DMF filings or process patents? That's my first question.

Thanks, Sahil. I think it's a good question. I think with regards to DMF filings, your observation is absolutely right. I think there hasn't been a movement in the last quarter or 2. But that's also because of the timing of how the projects have been going through. And I think given what we've seen recently, we expect to have a significant number of filings in the next 2 to 3 quarters. Our target internally is, I think, about 6 to 8 DMF filings in the next 3 quarters, whether we need them happen or not is something we have to see. But there was a period of lull. I think the results with process patents, we have to get back to you on that. I think process patents is something that we continuously file, but those are also something that happens based on our ability to generate novel IP. As an organization, we don't have targets. We don't say targets for scientists to file patents. I think whenever they come up or something novel, that's when they file it. But I think DMFs is something that we actively back. But again, going back to the comments I was making to the earlier question, the focus is becoming more in terms of the quality of the products and the number of DMFs filed. But having said that, we still expect to buy 6 to 8 DMFs in this financial year.

Just a small clarifying question. When you say 6 to 8 DMFs, you mean U.S. DMFs or all across the world?

Yes, U.S. DMFs and they could possibly also translate, and you see these other DMFs on [indiscernible] as well.

The next question is from the line of [ Karan Surana ].

So I have a couple of questions. So as you mentioned that there was a steep increase in raw material prices. So would just like some color from the management? What led to this? Or from what geography did the price increase come from? Because in the previous conf calls, we've kind of speculated that you're going to derisk supply chain from China. That's number one. And number 2, sir, I would like to ask you as well that the CMS revenue from the last 3 quarters have been dropping sequentially. It did around INR 90 crores and INR 60 crores and now INR 44 crores. And even though you talk about like the projects, that's what we are kind of focusing on. We did not lose any projects in the development or the commercial side. So are we essentially getting lower value per project? Or what's exactly in that particular shares the company kind of overlooks per project and for the business. Any color on that?

Thanks, Karan, for asking that question. So in terms of raw material prices, we have seen that in this quarter, due to falling solvent prices have -- like -- so raw material prices this quarter has tried -- not only for Neuland, but for all the industry. So that has some marginal impact on our bottom line as such. And we do see that slowly, solvent prices are coming back to the normal prices. So we have seen a couple of solvents, which have really EBITDA margins in this quarter. And we are seeing that the trend is declining and going forward, that [indiscernible] solvent prices that we have seen. So that's where we stand as of now.

Maybe I think for the other question, which is about the sequential data and revenues and on the CMS revenue as well, I think your observation is absolutely right, Karan. From our perspective, the CMS order book as well as the potential value of the business as well as the overall value of the business, I think everything is looking fairly strong there. It's more about our execution and deliveries, which has really kind of created that optics, and there is a sequential decline. If we had not had those execution delays in Q1, and you would have seen a significant growth in both Q1 revenues as well as CMS revenues, although we are not really able to quantify them. So I think the observation boils down to the same underlying issue, which as you know, the delay in executing some of these CMS projects is what's really kind of creating better optics of situation, different revenue. But we're also fairly confident that, that will be overcome in the subsequent quarters because we have a clear hand on handling these challenges. So that's kind of what I would add.

The next question comes from the line of Jyotivardhan Jaipuria from Valentis Advisors.

So just going back to this dip in EBITDA margin, which we saw. I guess there's like a 350 basis point dip from the last quarter, sequential quarter. So we've said it's because of 2 factors. One is higher raw material prices and the other is upfront expenses on some projects. Now like the way I calculate it, our gross margin has not really changed. So it's all below gross margin. So that way, the raw materials have not had a main impact. The impact is something else. So what are these other expenses incurred for some projects, and where are they reflected?

So in terms of EBITDA margins, so as we said, raw material prices have marginal impact on the EBITDA margins. Apart from that, you would think, earlier, it was not operational in the year last quarter. So now since we have commercialized Unit III, so ramping up of Unit III is also happening in this quarter. So we have seen that we have added enough people for Unit III this quarter as compared in the last year's quarter. So that's also kind of having a short-term impact on our EBITDA margin. But once we see revenues coming out of the industry, that will be very positive for our EBITDA margins going forward.

And I think, Jyoti, the reason why the gross margins have improved is because of a better product mix. While it could have been higher if it wasn't for the raw material prices, I think the fact that we had CMS products with a healthy margins in Q1, the overall gross margins still look very good, but the fact is that they were still challenged because of these solid prices that Deepak [ has addressed ].

So I guess we knew even earlier that we are going to start, [ you can see ], right? So to that extent, like 2 months ago or 3 months ago when we did the earlier call, we knew this. So what really has changed? Because, I guess, 3 months ago, we didn't expect anything like this, like in this quarter.

So I think if you look at the dip in EBITDA first quarter, I think it's a culmination of multiple issues, right? I think the capitalization of Unit III, which was foreseeable, is something that [ is true ]. But what was not foreseeable is the dip in revenue that came because of the delayed execution of projects. Hypothetically speaking, if we were able to execute our plans for few months, which is even if we were able to deliver the projects we were supposed to deliver in Q1, then despite the increase of operating expenses due to the capitalization of inventory, despite the increase in raw materials, we should have still been posting good quarter optically from a year-on-year basis to a quarter-on-quarter basis. So I think it's a problem that has manifested because of the 2, 3 factors rather than 1 factor. So it's something that, hindsight, whether it could have been predicted or not is something that we are not very sure about.

Okay. So probably, I guess, a lot of the earlier participants have asked this. So when we are saying now for the full year we think all of this will even out and we'll end up with a good FY '22, can you spell out what is a good FY '22? [ Though over FY '21, would there FY '22 or we our over ]FY '22 and over FY '21 in EBITDA and sales, and even that could qualify as a good FY '22. Yes, can we get some -- like I don't want to know whether we go at 15% or 18%. But if we, let's say, have a flat FY '22, or say, '21, would that be good? Or would that be not so good?

I think our FY '22 should be better than what we did in FY '21. But yes, I think we'll not quantify it, but it should be a better year in terms of revenue as well as EBITDA. And I think the only limited point I did want to emphasize is that whatever hit we've had in Q1 would be delivered in the subsequent quarter. So on a net-net, we don't see any impact for FY.

[Operator Instructions] I'll now allow [ Keval Ashar ] to go ahead and ask his question.

Yes, so I have only 1 question. So we've seen in our product pipeline, Semaglutide is there. So wanted to know what is the size or proportion that we see in Semaglutide, seeing that glucagon-like peptides have shown a good growth over the past few years.

So yes, so GLP-1s are actually very exciting. The Semaglutide and Liraglutide both [indiscernible] are working on. Semaglutide is the more advanced project for us only because there is opportunity to be the first source for the generic markets. Currently, we are still in the early stages of the development. We expect validation to complete mainly in end of FY '22 -- sorry, FY '23. Having said that, we are looking at markets worldwide. There is a solid oral as well as an injectable formulation. And currently, they're exploring both exclusive as well as nonexclusive partnerships. But it is a complex project, but we do have very capable teams working on it right now.

Next question comes from the line of [ Manish Jain ].

My first question is, what is the current capacity utilization in Unit III?

Deepak?

So we have about, [ Manish ], we have about 6 production blocks in Unit III. About 4 of those production blocks, currently, we have products running, where validation batches are complete. We're making small commercial supplies where even with these whole production blocks, these products are made on a campaign basis. So the capacity utilization is still fairly low. So we don't expect to get to a reasonable, very close to 40% capacity utilization, 50% until the end of the current financial.

Okay. And a second question is, sir, so has there been any market share gain or loss for any of our top 10 products under GDS segment?

We haven't seen any signs of long-term market share gain or loss, [ Manish ]. What we've seen is that there's some products, because of either additional inventory, lower offtake because of the impact of the pandemic, we've seen those indications, but the overall products continue to grow. And any temporary lost market share will pick up through the rest of the year. But we haven't seen any significant loss in market share.

The next question comes from the line of [ Abhishek Kapadia ].