Poly Medicure Limited (531768) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Poly Medicure Q3 FY '25 Earnings Conference Call hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Abdulkader Puranwala from ICICI Securities. Thank you, and over to you, sir.

Thank you, [ Nico ]. Good afternoon, everyone. On behalf of ICICI Securities, I welcome you all to Q3 FY '25 earnings conference of Poly Medicure Limited. Today on this call, we have with us the senior management team of the company, represented by Mr. Himanshu Baid, Managing Director; Mr. Naresh Vijayvergiya, CFO; and Mr. Rahul Gautam, President, Strategy and Corporate Development. I would like to thank the management team of Poly Medicure for giving us this opportunity to host their call. And with this, I will hand over the call to the management. Over to you, sir.

Yes. Thank you very much, Abdul, for hosting this call. And again, good afternoon to everyone who is on the call, and I'll take you through the quarterly highlights of the quarter 3 of Poly Medicure. Just to begin with, I'm sure you also read the presentation, which has been uploaded on the company's website, but people who have not seen it, I'll just maybe highlight the numbers once again. So the consolidated revenue in quarter 3 FY '25 compared to FY '24, we've seen a growth of around 24.9%. Revenue has grown from INR 339 crores to INR 424 crores. The EBITDA has also increased from INR 91 crores to INR 116 crores. And consolidated EBITDA -- and we [ are talking ] about the operating EBITDA. Consolidated EBITDA, we have seen our net improvement of around 65 bps roughly in that consolidated EBITDA compared to quarter 3 to quarter 3. PAT has increased from INR 65 crores to INR 85 crores. Return on capital employed is around close to 23.9%. This excludes the amount raised to QIP in August because that has not been deployed so far. So that's the reason we excluded this amount. But whatever is deployed so far has given a return of 23.9% ROCE. The net cash available in the company is close to around INR 1,074 crores. This is net of all working capital and everything and which includes INR 900 crores raised through QIP as -- out of the QIP proceeds of INR 1,000 crores, INR 100 crores are deployed in the working capital and expenses and rest is being gradually being used as new plants are being built as announced earlier in the QIP. The number of devices we have sold has also increased from 26 crores to 32 crores in quarter. And number of patent additions has been around close to 9 additions. So total patents are now 334. In the quarter, we have also added 23 new people in the sales team. So this was a quarter highlight, and I'll also take you to the 9 months summary for the preceding 2 years. So in FY '25, consolidated revenue has touched now INR 1,229 crores versus INR 998 crores, again, an increase of 23.2%. So as you remember, I recall in the earlier part of the year, we've given a guidance of close to 22% to 24%. So we are very close on that guidance, and we are very much within the range. Also, EBITDA, if you look at percentage EBITDA has increased from 26.5% to 27.4%. There's almost a 95 bps improvement. And we have guided in the initial part of the year for EBITDA improvement of around 100 to 150 bps. The consolidated EBITDA has also increased from INR 264 crores to INR 336 crores, and PAT has increased from INR 190 crores to roughly INR 247 crores. Again, number of devices sold has increased from 81 crores to 96 crores. And if you see the number of sales associates added within this 9 months is 64 people. So total strength is now close to 475 people. And initially -- in the initial part of the year, we had also commented that we'll be adding 100 more sales people. So in these first 9 months, we have a net addition of 64 people. When we added more people, maybe some [ have less, ] so the net addition is 64. And this is especially across 2 new divisions, Cardiology and Critical Care, where we added most of the people during the year. I'll also talk about some few updates during the quarter. First, we received our regulatory approval, the CDSCO license for DES, drug eluting stent. And very soon, we are going to commercialize the product. The first stent will be implanted in this coming week, first few stents. And as we go further, then we will see this commercialization along with the balloons to be launched together. Also, we had set up a JV with AMPIN in Haryana to give us a 9.9 megawatts of solar power. Polymed has made a commitment of INR 3.6 crores in this JV, and this is in line with our goal of running our plant completely on green power. And hopefully, this will be operational by end of September, October. And after that, most of the Polymed's manufacturing facility will be running on green power. And this is in line with our goal to reduce our carbon footprint by 30% by 2030. And also, we have seen a big change in the requirements in Europe where more and more focus is given to green energy products being produced using green energy. Also, we have recently done a groundbreaking ceremony of our new plant, which was also part of our -- to be established on our QIP proceeds. This plant is coming in Palwal, Haryana. And this will be one of the largest plants of Polymed. And hopefully, we should be able to commission it between July, August, maybe in that period of 2026. That is the current plan. You have seen that on the revenue side, there is a steady growth. And also company has sufficient net cash balance, also both on new CapEx. So current year, CapEx is close to around INR 222 crores in 9 months. And the plan was to invest close to INR 300 crores. Now all this money has been invested through internal accruals. We haven't used any money raised through QIP because this CapEx was done for existing plants. And more or less, by end of May or June, the CapEx in the current plants will be complete. And then all the QIP proceeds will be used for the 3 new plants, which are under construction right now and will go live in 18 to 20 months. Also, the company received CII Industrial Innovation Awards 2024 and also received CII International -- Intellectual Property Awards 2024. On the margin side, I think there is a constant endeavour to improve the margin. And as we have launched 2 new category of businesses, Oncology and Critical Care, so we have almost added 60 people in this category. Currently, these businesses are just brand new. It will take at least 2 to 3 years to ramp up and scale up. But meantime, the current team is helping us to enter some new hospitals and also build up the business for these new categories. Coming to the current scenario on the ForEx side, I think currently, the company does not have any hedging, almost close to only 0.7% of hedging on the ForEx. So we have open exposure to all the ForEx. And I think with the current scenario, hopefully, this should be a helpful scenario because market being very volatile, it was prudent to stay open, say, keep our exposure open and not stay hedged. And as we have a net -- we are a net exporter and we have a net earner of foreign exchange, so any fluctuation in foreign exchange does not impact P&L in any way. So that is more or less neutral for us today. On the segment-wise analysis, of course, if you look at 9 months, Infusion Therapy is the largest segment of the company, contributing close to around 70% of the revenue, followed by Renal, which is now close to around 8% to 9% of the revenue. But if you see the growth rates, Infusion core business is around 25% in the first 9 months. And Renal, where we have initially a growth rate about 50%, if you see the first 9-month performance, the growth is close to 56%. So that has now really taken off well and we have also expanded capacity, some new capacities coming up in April also, which is currently under installation. And hopefully, we'll be able to scale business further up in coming years. Currently, the company holds around 10% to 12% market share. By end of FY '25, we'll have around 10% to 12% market share in the Renal category. And we continue to push more machines and push more products in this segment. On the domestic business side, if you see we are back to growth in the domestic business. And domestic business is now growing more steadily. If you see the previous quarter, domestic business has grown by 23.8%. And we are -- as I have promised you in the last quarter that we are working hard to improve this growth rate, so we are now back to over 20% growth rate. As we had first quarter low growth rate, so overall growth rate is only 16.7%. But now within the quarter, we have started growing better. And hopefully, the current financial year, we should end up more than 20% overall growth rate in the domestic business. Exports in the first 9 months have shown a great growth. They have been growing at around 28% probably. And if you look at the quarter itself has grown by around 30%. So overall, we are on track to deliver the committed growth. In terms of geographical mix, Europe has overall grown by around 30% in 9 months. Last quarter, growth was around 20%. And I think overall, we should end up between 27%, 28% growth for Europe by the end of the year, which is a very healthy growth. And rest of the world has also grown by around 27%. So if you look at the mix of the business, today, we have almost 31%, 32% business in India, followed by around 31%, 32% business in Europe and around 37% business in the rest of the world -- 38%. This is a mix, which is very similar to mix, which we had told initially in the beginning of the year. And probably we will continue with the same trajectory until the end of the year as we see it right now. And -- so exports will be around close to 70% for the whole year and domestic business between 30% and 31% in that range. So these are a few of the updates on the business. And of course, we continue to be on the heavy CapEx cycle with plants coming up, additional capacity being built. And on the U.S. business side, we are building on the current product portfolio. Revenue started kicking in. Of course, it will take some time. We see the first stronger wave coming in FY '27 because we have some more products to be included in the list, and they are undergoing some clinical trials and regulatory approvals. And they will also start contributing to revenue maybe end of this year or early next year. So that is what we are targeting. But from the current product also, we are expecting some good growth in coming quarters. Of course, there are some changes happening in the U.S. right now with the new tariffs coming in. So it won't impact India as such. But I think as these tariffs are also in China and maybe even if it comes on India, it will be neutral for us because it will be equally applicable to all the countries. So we don't expect any impact of this tariffs right now. And plus U.S. business is currently a very small portion of our business. So we don't see any impact of this tariffs on the current business. So I will stop here and then, of course, I will let you ask if you have any questions, please feel to ask me questions. And I'm very confident that we'll be launching more products in the next few years. So in the current pipeline, we have close to 50 products, which we launched between 1 to 2 years. In the last 3 months, we have launched around 15-plus products across our 4 different categories. And there's a lot of plans to bring more products. And also, we are trying to look at new opportunities in equipment space, if we can expand that area also because our dialysis machine has been very successful. And now we have achieved a run rate of close to 40 to 50 machines a month. And as time progresses, we see further increase in that capacity in the next year. So overall, we have a strong current tailwind on the dialysis business and equipment business. So we'll continue to build some new capabilities around that. With this background, I'd like to hand over call back to the operator to answer any questions that might be from the participants on this call. Thank you again for listening. Thank you.

[Operator Instructions] The first question comes from the line of Vikram, who is an Investor.

Can you hear me?

Yes, I can hear you, please go ahead.

I just wanted to know with regards to the drug-eluting stent, if you could share some more details like what are the addressable market? How does our product compared with the competitors, any differentiating factor? If you could...

See, basically, we have just entered the market. So we have a U.S. entrant in the market. But again, what we are trying to do is also get drug-eluting balloon with the product. And most of the companies today import that product from outside. So yes, Polymed is going to manufacture everything in-house, and that will make us more competitive. And also, we are looking at the construction of the stent. So our stent probably has the best maneuverability and that is what we will do. But of course, we'll have to go through the clinical trial cycle and everything, which is going to take a while. But with the help of stent, we'll be also able to sell all our cardiac consumables we have launched recently, whether our diagnostic catheters or our guidewires or, let's say, balloons, other balloons. So that is what it will help us to sell these products in the market.

Any meaningful time line for this product to be meaningfully impacting our revenues in the future?

No. It's a new product and only we can -- time will tell, but I think we are very confident with the approach we have. I think the cardiology business itself, we have already guided that it will take some time. But I think we are building it up for the moment. But I can't guide you on a revenue number for this particular business because it's too early. We just received the license last week only. [ See, in subsidiaries, ] I might be able to give you more information.

Fair enough. Just one question on the dialysis machines. I just wanted to know how will this improve our margin profile in the future as this keeps growing, if you -- if there was any guidance on that?

So dialysis as a business, it's a new business, 4, 5 years old business in the company. So let's say, if you look at infusion vascular, it's around 25-year-old business. So this is a new business. And now we have seen a ramp up in the capacity -- capability. And as we sell more and more products and the cost of doing business will come down, the operational costs. So definitely, it will help us improve our margins. And for first 3 years, you're not able to get PLI. So our target is that next year also take PLI on the -- because we already are under PLI. But as we were not able to fulfill the aggressive targets set on PLI, so we were not able to get it. So hopefully, this next year, financial FY '26, we'll also get some contribution from PLI for this business. I can't quantify the number because [Technical Difficulty]

Can you hear me, sir?

Yes, we can hear you. Sorry to interrupt you...

Just one question, if I may, and then I am done, sir. So the last question I had was ust to get a clarity on the dialysis business, we are only selling the machines, sir. There is no lease model or rental model, nothing.

Ladies and gentlemen, please stay connected while we connect with the management.

My last question was, sir, just to get the clarity on the business of dialysis machines. We are only into providing the machines no, sir, selling the machines. We are not into rental or leasing model?

No, we also sell consumables, all the consumables.

[Operator Instructions] The next question comes from the line of Rashmi from Dolat Capital.

Just need some clarification, the 50 product launches, which you said that over a period of 1 to 2 years and across 4 different categories, these are what categories and these products will be launched in which all markets? Will it be exported also?

Yes. First -- so Rashmi, of course, we are not disclosing the product because it's confidential company's business. But this is what we're developing. It will come across, mainly across the core 2 categories, which we have just started Cardiology and Critical Care and then followed by some existing in Vascular and Renal, we'll add also a few new products. So there are almost 50 SKUs we are working on, which will be added across, and we start with India first and then go to global market because we'll have to wait for regulatory approvals to come from each country to sell in those markets.

Understood. Got it. And your dialysis machine, you said that the run rate now it is 50 machines per month. Yes. So for 9 months, how much we have done? And are we on track to achieve 500 installations this year?

No, we'll not be able to do 500 installations this year. This year, we'll be able to do between 300 and 350 installations. I don't have a real figure, but it should be around 350 plus. And then next year, maybe we'll double the installations.

Okay. And till now, how much we have done, I mean, right from the stage where we started?

I don't have the number right now, Rashmi. I can't give any number right now.

Okay. Okay. The next question is on stents. Stent is already under price control, and we are going for that particular product. So what is the strategy behind that? And is it that since it is a price control product, so it will be like -- it will be a little low margin business or...

No. So price control is at the upper end of the segment, not at the lower end of the segment. So there is a big delta between the ex factory price and the finished product price. So average stent price in India, Indian stent is around INR 10,000 to INR 12,000, whereas the price controls at INR 40,000 set.

INR 40,000 a set.

Yes, roughly around INR 40,000. So there is a big delta available, where you know...

Our price will anyways be lower than the ceiling price?

Nobody operates at ceiling price. Ceiling is the maximum which we can sell at. So nobody sells at the ceiling price.

Okay. And to that extent -- but we will be able to take the price hike only equivalent the WPI rate, right?

Yes, yes. So that's fine. That's absolutely fine because there's enough already margin on the table.

And generally, on the blended basis, your blended portfolio in the domestic market, generally, what is the price hike which we take every year?

See, typically, it depends. So sometimes the contracts are longer. You don't get a price hike. But typically, we can take between 3% to 4% price hike per year.

[Operator Instructions] The next question comes from the line of Tanmay Gandhi from Investec.

Congrats on a good set of numbers. Sir, my first question is on gross margin. So the gross margins have declined by good 300 bps sequentially, right? So this is largely due to the revenue mix? Or is there anything on raw material pricing to call out for?

No. I think gross margin, I don't see it declining so much. I think -- overall, I think gross margins still are around 65%, I think, if you look at the number.

Sequentially, I think the gross margins have declined.

Maybe it's because of the revenue mix then. Otherwise, if you look at overall EBITDA margins, they remain the same, and they are better actually.

Yes. Yes. And sir -- so still there is no raw material inflation that we are witnessing, right?

Not at the moment, but it may change depending on how things shape up in the next few months. We don't know right now, Tanmay. But so far, I think -- see, we typically track EBITDA margins. And of course, gross margin is around 65%. If that is within that range of 1% to 2%, I think we are pretty much fine with that.

Understood. And sir, secondly, if I look at your average realization per devices sold, right, so that comes around at INR 12 to INR 13. So just wanted to understand that what would be our low realization of products, which would be dragging the average realization because [indiscernible] are really low.

It's actually been the same. If you see, there is no change. Tanmay, if you look at earlier commentary also or maybe earlier quarters also, it's been the same. But the most important part here is, today, if you see, our growth is not -- let's say, the number of pieces sold is not directly. So we also have seen that if that is increased by 19-odd percent, let's say, devices sold in 9 months, but the revenue has increase by 23%. So that is what clearly showing that we are able to also take a better price from the customers. If you look at the 9-month performance, Tanmay, and if you have the presentation, if you look at the devices sold, growth is 19% in 9 months, whereas the revenue has increased by 23%. So that is what we are now tracking right now, and that's the reason we have shared these numbers that we want to track these 2 numbers also internally.

Yes. Sir, I get the price growth points, right? But what I'm trying to ask is that what are the low-value products, which are sitting in our base, which are...

Polymed, we don't sell too many of those machines. So we are mostly a consumable company. Consumables are always priced at low point. Yes, because we are making disposables. So disposables are not that very high. Now, we are entering the new space of Cardiology and, let's say, Critical Care and Oncology, so that there we will see more higher-priced products being sold.

Right. And sir, with this stent approval, we have entered the implants category as well, right? So now probably we are across all 3 major categories, right? So is there any plan to enter more such implants? And how do you see implant as a category because this is -- because I think this is...

So we are already in Oncology and we have also launched oncology implants. The ports -- chemo ports, we have recently launched in India. So that is also another product, which is Class III device and is implantable device. So we are getting more and now more into Critical Care, so longer-term use devices. Earlier, devices were short-term use. So now we are more focusing on the longer-term used devices. And we are getting more into Class III category devices, which have a longer dwelling time inside the body.

Understood. But sir, how do you see implant as a category that what is the competitive scenario like? And how difficult it is to penetrate into new customers...

The moment it is more higher category is more riskier. And the competition is more for multinational companies. There are a couple of good Indian companies also like Merrill and all which are doing such kind of good implants. So I think there is a good opportunity to replace multinationals from this segment.

The next question comes from the line of Harsh from Marcellus.

Congratulations on yet again a good set of numbers. My question was on similar lines that Tanmay raised with respect to gross margins and with respect to EBITDA margins. With gross margins, I understand that it's because of the revenue mix, correct me if I'm wrong, sir.

Yes, this is because of revenue mix. As we -- see, quarter-to-quarter, revenue mix can keep on changing across the 6 product segments we operate in, large product segments. So -- and that we don't control. But what we control is that we stay around that 65% number, and we control that EBITDA margin and what is the final EBITDA on selling the products. So that is where we are seeing and where we are seeing a constant increase in EBITDA, basically, the margin improvement.

Okay. Got it. And sir, just to understand the business a bit better, could you understand what are the businesses which have a lower gross margin and what businesses have a higher gross margin?

We don't disclose the business margin. Sorry, that's confidential. I cannot disclose that.

Okay. Got it. And sir, with respect to operating expenses, there's almost 9% drop on a Q-on-Q basis in that cost line item. So here again, maybe if you can help us understand what has led to this drop?

So Nareshji is on the call. Nareshji, can you explain that why operating references are down 9%?

Hello.

Yes. Nareshji, the question from Tanmay was that why operating expenses are down by 9% in the quarter?

So the major drop is because we have some efficiency of expenses. There is a slight drop in R&D expense and then there is some drop on legal expenses and travel also. So overall, it is 9%. There is a slight drop in R&D expenses as compared to quarter-to-quarter. But there is no major item to be disclosed or something like that. No abnormal item.

The next question comes from the line of Kayuri Bafna with Nag Analytix.

I wanted to know what are the exports and which is the highest exporting product that you have in the company right now?

So basically, exports revenue is almost close to 68%, 70%. And majorly, exports come in the Infusion Therapy category, we have a -- where we have a global leadership on this product category. And that's where it comes from. And in infusion, so we have IV catheters and accessories around that business, and that is where the major revenue is coming from.

[Operator Instructions] The next question comes from the line of Bharat Shah from ASK Investment Managers Limited.

Himanshu, if we take a 3- to 5-year view ahead, a, what kind of growth rate we think is possible? B, how much of that is reasonably predictable for us? And c, whether it is a durable growth, something which can prevail for a longer period of time? And what are the various strategies at play in terms of product innovation and newer categories and geographies, the manufacturing assets and resources, talent hiring, approval cycles, which can vary across geography and all of that? So how do we strategize for growth rate predictability and its durability? If you can kind of -- and thereafter, on margins, how do you see over the coming period of, say, 3 to 5 years?

Bharat bhai, it's a very, very long question, maybe a very long answer. But I'll try to answer in a short while, so that we'll give a chance for other people. So on the growth side, Bharat bhai, if you see, from 2010 to 2020, we had a growth of almost 14% to 15% on a 10-year cycle. And the company was capital starved. But now as a company has done some capital raise in the last 4 years, so you have seen that the trajectory has now started changing. So last 3 years, continuously, we are growing around 20% and over. And even this year, we have projected for around 20% over growth. So now we see that the new normal for this company should be 20% plus growth. And today, for us, maybe if you look at, let's say, our predictability, let's say, predictable growth for this company as we have seen already a 4-year growth cycle now from FY '22 to '25 numbers, which all will be almost we are 9 months over. So we are almost at the 20% cycle -- basic growth cycle, plus cycle. So the orbit has changed from 14% to 20%. So that is number one. Number two, I think to maintain this growth, I think India is a good driver for us, great growth driver. And as we increase more and more deeper presence in India, so our India presence is today still, we have not covered 2/3 of the hospitals in India, have only covered 1/3 of the hospital. And even in the current hospitals, our, let's say, wallet share is less than 20%. So we can increase our wallet share in the current hospitals and also cover more and more hospital as time progresses. And for that, we need to hire more and more people. And if you've seen the presentation, sir, we have already added this year 64 people. So we've added close to -- from 410-odd people, now we have 475 people in the company in sales and marketing, in domestic. So we are continuously adding -- and all these are company employees. So we are adding continuously, let's say, every year, we'll add 100-odd people for next 3, 4 years to maintain the domestic growth. And international markets also, we are actively working on U.S. strategy. We are working on Europe. And we think that within these 2 important geographies and some of the developed countries, we will be able to achieve export growth rate also in north of 20%. And if you see our last 4, 5 years history, we're already growing over 20% in export market. So I think growth rate is more or less now with additional capacities built in, additional plants built in and with more CapEx happening. So even if you see CapEx cycle, which was maybe INR 100 crores, INR 120 crores pre-COVID, has gone to around INR 200 crores, INR 250 crores post-COVID per year. So that helps us to put in more plants, put in more products, invest more in R&D, launch new products across different categories. So this is what we are seeing in terms of growth rate, durability, market is robust. Indian market is very robust. Government focus is on Make in India. So a lot of import substitution we are bringing in the business. So all that is simultaneously happening, sir. And on the margin side, I think we have already projected close to 27% EBITDA margin for this year. Last year, we were close to 26-odd percent. This year, 100 bps improvement, 100, 150 bps. So we are already in that range. So as we see operational efficiencies coming in, so every year, we could increase margin by 50 to 100 basis bps easily in, let's say, next 4, 5 years. That's what the plan is.

I see. So what I understand from this and I'm summarizing, correct me if I'm wrong. What we are seeing is growth orbit has changed and instead of early double digit, it is now in the double digit in 20s [ target ].

Correct, sir.

So the growth is no longer on the exports. It is both exports and domestic, where perhaps domestic market can burgeon and become even a larger growth rate engine possibly.

That is correct, sir. Absolutely, correct.

Our product innovation strategy, manufacturing asset putting strategy, people hiring strategy [indiscernible] ground all are aligned to ensure that these results we can obtain in a predictable, sustainable way rather than with ruptures. And finally...

The business is more predictable now because today, we have contracts with customers, India, global. We can project what we need to do, the production lines are getting aligned with that, so everything is more predictable, sir, than what was maybe, let's say, 10 years ago or 5 years ago.

Okay. And finally, margins will improve for, a, scale reason; b, the kind of more complex and higher-margin new verticals like renal, oncology and cardio that we are entering.

Correct sir.

And all of that put together along with the scenario of the opportunity, both in India and abroad. Next 3 to 5 years, this kind of healthy growth with improving margins is something which is fairly predictable.

Yes, it's fairly predictable. Of course, we don't know what is going to happen as every day, something is changing. But when we go in a predictable analysis -- analytics, I think this is pretty much possible.

Understood. One last thing, Himanshu. If anything were to go wrong in this scenario, in your opinion, what could that be?

I think -- see, I don't think, sir. We've been running the business for 28 years now, and I've not seen -- health care is one area which is not going to go wrong. The demand is not going to shrink. And with government more focus, you've seen in the budget day before yesterday, Ayushman Bharat has more allocation. So they are trying to bring in gig workers. So more and more focus is going to be health care, wellness and also medical tourism, there is some focus. So Indian hospitals will continue to do better only as more and more patients will flow in. So only, sir, things can go wrong when we make bad quality product.

And how do we barge against that risk, accidents, failure of products, liability?

We have 0. We've -- touchwood in 20 years, we don't have a single product liability claim. 28 years history, I'm talking.

We take liability insurance, right?

Yes, we have a liability insurance, yes sir.

To summarize, superior growth with improving margins across both India and other territories with [ evolving ] verticals and more products, so deepening and widening of the product portfolio with the talent pool is something which gives us predictable, sustainable belief about where our destiny is.

Absolutely. Absolutely, sir.

[Operator Instructions] The next question comes from the line of Nitin Gosar from Bank of India Mutual Funds.

Just one question. I wanted to understand, I think you called out that the -- from a hedging policy point of view, right now, 1% of our exports is hedged. And a, how should we see this hedging policy? Currently, currency is in our favor, but at times, it can cut both the sides. So should we believe that as a management, we would like to keep it open or we would like to hedge it?

No, we will not hedge. See, I'll tell you why. See, we have already burned our fingers many, many years ago in hedging. And some more informed person there who was in us and -- because you're banker I'm not going to call out, but we burned our fingers already. And I think what we have seen over the past 8, 10 years of -- without any hedging, it gives us more better visibility. And as we have a positive net flow of foreign exchange, and let's say, for example, we have almost $70 million, $80 million of positive flow of foreign exchange after covering our imports and CapEx. So there is no need right now. And I think with rupee 10-year history, you can always predict that every year it is going to depreciate 2%, 3%. So I think we can't go wrong because we have a 10-year history now. [ 2012 ], the last cycle where we hedged was 2012, and where we really took a bad hit, [ '11/'12 ].

Sorry, if I would just -- to just impose one more question on the same scenario. If, let's say, currency right now, which is closer towards INR 86 moves back to INR 84, which can slightly compress our gross margin?

No, it will not because then our other costs will go down, our raw material costs will go down. Other light cost will go down, let's say -- yes. And then, if the rupee is -- yes, if rupee is, let's say, appreciating, it will also impact the other side. Interest rates will come down.

Fair point. And one last question is on the employee cost. So right now, since you are on the additions [indiscernible] current quarter number of around INR 78 crores on employee side, does it capture the recent hiring into numbers or it will...

Yes, yes. These are all recent hirings. So that -- because that 64 people were added during the year. Only in sales and marketing, we're talking, right? So a lot of people have been in manufacturing and other activities, regulatory, quality, engineering, R&D. So that is not included here.

Okay. Okay.

Yes. The reason we're calling out sales people because that is the organization we want to bring more strongly right now.

No, I take your point because you've been calling it out, you want to improve the reach in India.

Exactly. Exactly. That's correct. Absolutely correct, sir.

[Operator Instructions] The next question comes from the line of Tanmay Gandhi from Investec.

Sir, my question is on the U.S. tariff, right? So basically, if the government were to put tariffs on Chinese and Mexico exports, right, so will that create any risk of dumping by these exporters in markets like Europe, ROW markets?

So I think, Tanmay, I think it's very clear, these are essential products, right? And it will be very difficult overnight to -- U.S. hospitals cannot run out of products. You still need them. So eventually, what we will do is add cost to the patients or cost to the hospitals in the network. But it's not good that they'll stop buying. But if they stop buying, they can't take care of U.S. patients and hospitals. It's a necessity, it is not -- it's an optional thing.

Understood. So basically, you don't really see any risk of dumping of these products in other markets?

Why dumping -- because India, there has to be consumption. Even if you dump extra product in the Indian market, who is going to use it?

Correct. But sir, if the -- but the same case is with the pharmaceuticals as well, right, where the supply is in upside, and that is something which drives a price erosion, right? So though the demand may not really go up, but again, if the supply is more than probably you may see pricing...

But India is very regulated on this area and...

Sir, I'm not talking about India, I'm talking about Europe and ROW markets.

No, no. Nothing is going to change. See, everywhere we have contracts, no. The business runs on, but it's not a daily business. See, today, they will buy from you, tomorrow, they will buy from somebody else. And also, we have a very strong Polymed branded business. It is contractual.

Understood. Understood.

Otherwise, it will impact every industry, not Polymed. It will impact every manufacturer who is selling products into U.S. or Mexico or Europe, everybody gets impacted. The whole Indian economy will get impacted. There's nothing on Polymed specific then.

[Operator Instructions] The next question comes from the line of Sandeep Abhange with LKP Securities.

Sir, can you give a breakup on your product categories like Infusion Therapy, Renal, blood transmission, anesthesia, respiratory, et cetera. If you can give a breakup of FY '24...

So Sandeep, we only call out 2 important businesses, which are material right now, Infusion Therapy and Renal and that we have already given the disclosed in the presentation. If you see the presentation, Renal is 800 -- sorry, infusion is INR 800 crores out of INR 1,181 crores and Renal is INR 104 crores out of INR 1,181 crores for 9 months. And then rest of the products is INR 276 crores, which is 5 to 6 different categories of product there right now. We don't call out them because they are not significant under 5%.

Okay. Okay. And sir, as far as Renal is concerned, we have seen a good growth in terms of last 3 years, like around 30%, 40%. And this year, we have seen till almost 56% kind of a growth rate. So what could be the trajectory ahead for the Renal business? And like currently, I believe it is somewhere around 7% to 8% of your overall revenue. So what could be the trajectory we can expect going ahead in 3 to 5 years?

Yes. So we are expecting this business to grow faster, let's say, in the next couple of years, at least, because as we are replacing imported products in the market, as we are the only producer of these kind of products in India. So that is what is changing the landscape. But what has happened is good news is that government has increased reimbursement rates for dialysis treatment. So from INR 1,200-odd has gone to INR 1,800 under National Dialysis Programme and Ayushman Bharat. And also, government has given permission to open standalone dialysis clinics. So we have been talking to the dialysis chains like Nephro Care and Apex and all other big ones, which are operating in a more organized way. And they are predicting a growth of around 25% to 30% in their businesses in dialysis chains. And plus, with more stand-alone dialysis -- earlier dialysis clinics were only allowed within the hospitals. Now there -- as government has recently announced daycare oncology centers, so now they are also opening daycare dialysis centers. So that will also maybe help in growing the demand for this product. So -- but our target is to maybe reach, let's say, by 2030, around 20% to 25% of the market share.

Okay. That's great. That's helpful. And one last thing I wanted to understand on the margin front, like there have been quite a few questions and so I just wanted to understand like 27% kind of a margin, so like you earlier mentioned that you are expecting at least a 50 to 60 basis point increase in margin every year. So do you think it is achievable for the next 3 years? How...

See, as we improve our operational efficiencies, let's say, next year also we grow, let's say, 20%, for example, revenue. Then the expenses will not go in the same proportion.

Absolutely, yes.

So then definitely, we will see some margin improvement there because this year, we have started 2 new business. So I've got 60 new people who are not giving me full productivity in sales and marketing because they have just joined and they are part of the new division. So as time progresses, these people get more productive and then probably we'll see -- so overall, this number should be achievable. In any manufacturing space, if you keep on improving revenues and definitely, you will get some advantage of operational efficiencies.

Okay. Okay. And sir, on the CapEx front, like how much CapEx has been done till now? And what is the expectation of CapEx?

So this year, we've done around close -- in 9 months, INR 222 crores of CapEx and -- where we have a budget of INR 300 crores. So -- and that -- and probably another few more months of CapEx in FY '26 will -- then probably, our CapEx cycle for the old plants, which were established between '23 and '24 will be over. And then we will focus on the new plants, which we are establishing -- 3 new plants, which we're establishing. We have just started building those plants, hopefully ready in 18 to 20 months, and that is where we'll be spending close to INR 400 crores to INR 500 crores.

And all of QIP proceeds will be used for that?

Correct. There is a segmentation in QIP proceeds. So INR 500 crores is for new CapEx and that is where we'll be using it.

And that would be for over 2 years, like by how -- by when you are expecting?

18 to 20 months basically to build a plant and get all the regulatory approvals.

Okay. Okay. And sir, on the acquisition part also, like you had earlier mentioned in previous con call that you are also eyeing an acquisition on majorly in the critical care or maybe oncology or cardiology space. So have we boiled down any acquisition targets in this space?

Sandeep, if we have something, we will definitely announce. So far, nothing. But if we have anything, we'll definitely announce.

Okay. But some of the QIP proceeds would be reserved for that.

Yes, part of the QIP proceeds designated for acquisitions.

[Operator Instructions] The next question comes from the line of Harssh Shah from Dalal & Broacha Stock Broking.

Just one question from my side. Sir, any sort of role we could be playing say, in the drug delivery devices. So when I say that, it is more to do with the injector space, the auto injectors, pen injectors, I mean, do we have that expertise or anything you would like to enter? Or...

We already made combination devices. So we make like blood bags, which is a combination device plus drug. In blood bag, there is a CPD solution, which goes with the bag. We also make prefilled syringes, which is a combination device. So we are in combination devices. And it again depends on the opportunity because most of these devices are sold by large multinational companies because they have the expertise to take the drug out and they rely on devices for other companies. So it depends on our partnerships and maybe future trajectory, but we'll continue to explore more opportunities in this area for sure because already, we do some kind of products in that category.

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

Thank you, again, everyone, for asking great questions and thank you for your support, as always. And as we continue to move in a good direction at a steady pace, I think in our annual earnings, we'll be able to give you more final projections on our next year's numbers and how we will fare depending on how our new plants and our new products shape up in the next few months. So thank you again, once again, and please stay in touch. Thank you.

Thank you.

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