The first question is from the line of Ashish Soni, an individual investor. Please go ahead.

This is regarding the new capacity of build. So, when do you think optimally it can be used within this year or maybe next financial year?

Yes. I think you are referring to the formulation capacity. Assuming it's that, I think in July the ramp up will happen. By August we should be touching about something like 100 million per month and over the next eight months from then, maybe into April, May of next fiscal, we should be able to touch at least 4 to 5 billion annualized capacity.

And regarding this new product approval, so how much it can contribute to our revenues going forward this year, next year?

Priyanka, you want to answer that?

Sure. good evening, everybody. Going forward, we are looking for new products to contribute about 7% to 10% if everything goes well up next year's revenues.

Okay. And how is our progress on the DDCA, the green chemistry, what you are planning to do? So how is the progress right now looking like?

We started pilot plant production in March. We commercialized production from the pilot plant and a lot of trials and variations are happening. We are also streamlining and tweaking the process. This process is first time in the world anybody has done it. It's our own proprietary patented technology. It needs a lot of refinement. So it's going on in the right direction. Everything is planned. And once it's finalized, we should be, we are already making arrangements for commercial production in Kakinada. So things are going well on that front.

The next question is from the line of Darshil Jhaveri from Crown Capital.

Just wanted to ask right now sir, seeing improvement in our gross margins right now then. So what kind of margin trajectory would you see in FY '25? Will we be able to keep bettering margins as quarters go by?

Yes. Thanks for the question, Darshil. We have achieved 48% gross margin in F Y '23, and FY '24 we have achieved 55%. Last two quarters, we are in the range 57% to 60% . That is also because of higher FD sales, and we continue to see that the higher FD sales will be there in the next year as well. And the raw material cost also has helped us in the current year. So depending on the raw material costs and our product mix we see the sustainability in the range of 55% to 58%.

Okay. So sir, how much would that translate to as an EBITDA? So can we see around like a broad range maybe 24% to 26% EBITDA. Is that possible, sir, if you could help in that, sir?

Okay. Perfect. And sir, with regards to our higher interest cost, so what would be the trajectory that you would see, maybe will that this run rate would continue for a year or two? Or how would we look at our higher interest costs, sir?

That would all depend on the U.S. Fed, but I would let Mukesh answer that in detail.

Yes, Thank you, CMD, for putting that rightly. So yes, it is largely dependent on our SOFR rate. If you see, our net debt has not gone up despite investments in capex, so it is largely dependent on Fed rate. And based on the current conditions, we see the Fed rate is not going to come down in the next six months also. So in the upcoming 2 quarters, we see the similar interest cost of Q4.

Okay. So that helps a lot. And just like, sir, one last question. In terms of revenue, would we like to guide something that how much better could we do it in FY '25, sir? Any quantitative, qualitative guidance that can we grow at a certain rate? That would be very helpful, sir.

We'll definitely do better, Jhaveri. And how much better, I don't want to mention anything. Like I said before, we have taken a decision not to give any guidance.

Okay. Perfect, sir. And just one last question, sir. In terms of our demand environment, do we see any, how is the demand environment currently going? Is it buoyant right now? Or, what do you see around, sir?

The demand for all our products is quite good. As we add new ge ography, the sales are also increasing. And there is a fairly good demand, a very healthy demand for all our products. Except, of course, with the exception of paracetamol, where we have had some challenges in the last quarter.

The next question is from the line of Nirali Shah from Ashika Stock Broking. Please go ahead.

So my first question is that paracetamol API sales have been declining and is witnessing price erosion. So where do you see this stabilizing now?

Actually, this demand is also partly because of overstocking by some of the large brand leaders in the world. And that I think should start stabilizing from Q3. And also, there's also an issue of excess capacity that was built up after COVID. So, there's a lot of competition and that is causing to price erosion. I think this year most of this thing may continue. Next year onwards, FY '26, things should stabilize. But even during this year, quarter-on-quarter, I think there will be some improvement.

Understood. Thank you. And my second question is on our debt profile, where do we see a comfortable net debt number, say, over the next 2 to 3 years?

So internally, we want to manage net debt to EBITDA at 1 to 1.1 level, 1.1, we are comfortable. Hope that answers your question.

Sir, this new formulation capacity that we have installed, how much revenue do we foresee from this plant itself in this fiscal and in the coming year?

The new capacity is in granules life sciences Pvt Ltd . So, CMD has already answered that. 100 million per month, we are expecting July 24 onwards. And next fiscal year, we are looking at 4 to 5 billion.

Revenues depend on the product also we are trying to finalize, which products to commercialize there. It will depend on that.

The next question is from the line of Nirali Shah from Ashika Stock Broking.

So I just have one more question that we see that the product mix over the next 2 years, it has changed from 25% new products to 25% legacy products. So, when can we expect the shift in the margins due to this product mix?

Yes. So, as I already pointed out that we have a product mix change from API to finished product. And as CFO has already explained, we already moved up our margins because of the shift in the business model. All the new products which we are launching now and we are going to get approval in the next 1 to 2 years also will add to this shift in the business model more towards the FD. And also in other regions also, we have the contributions coming from the finished dose. So, overall, I think the moment will be quite positive on the finished dose side and that should help us to have much better and sustainable margin of bottom line.

The next question is from the line of Madhav from Fidelity.

Good evening, sir. Thank you so much for your time. My question was that if you look at our employee cost and other expenses this year, they have gone up by almost 20%-25%. And I think some of it seems to be that we are kind of investing ahead of the curve in new plants and I think we have had the new packaging facility in Virginia as well. So, is it the right understanding that in the coming couple of years, as revenue scale s up, some of these cost line items should kind of grow lesser than revenues? Basically, is there a scope for operating revenues to kick in given how the business is kind of positioned right now?

Yes, Madhav, you have been perfectly right saying that the new facilities and expansions that have led to increase in manpower cost. It's R&D too. R&D, GPAC, the packaging facility in the U.S. And also, most importantly, we are investing in building a future-ready organization. In the U.S., not only the packaging side, there's been a lot of investment on the marketing team and also building up capacity in the U.S. manufacturing. So both these things also have taken up a lot of manpower. And also, we have invested a lot on the global marketing team. We have built up a new organization to serve customers in a better way. And we have people of very high caliber and a lot of people have been added to various services. They have customer-specific representatives. There's a big change happening in the organization. This cost increase has happened. But going forward, it will not be at this rate, definitely. This is a big shift that has happened this year. So, it will be in control.

Okay. And then the second question which I had was, like we were, I think in the presentation you have highlighted in the -- I think this is the second part of that slide, which is the portfolio expansion slide, Slide 7, you have spoken about the CNS, ADHD products and the MUPS products. And I think you have also mentioned about getting approval for Metoprolol and I think one other product which has come through. So I just wanted to understand that some of these products, will they start contributin g in a healthy way from Q1 FY '25? Is that how we should think about it?

They will not contribute heavily from Q1. But as we go by, these are very big products for us. We are banking heavily on these products. And the margins and the revenues from these products are going to really propel the growth of revenue.

Okay. So could you share a bit more on the timeline, like when do we expect more material ramp up from these newer products?

This year itself, FY'25 will see a good contribution from these products and a good growth due to these products. But '26 should be the year where we will see a very marked difference.

Okay. And I think , I think Priyanka was referring to, I don't know if I have picked it up. No, I was just saying that I think in the earlier comment, you have mentioned that 7 % to 10% of contribution should come from new products in FY25. So, did I get that right? 7 -10% of FY24 revenue basically should be like new products in FY25. Is that right?

I think so. What we are looking at right now when the question was asked was on the 7% to 10% of the contribution coming from new products. But as we see the number of approvals and the launches that we are doing in the US, this percentage of the new products will definitely go up. And it continues to grow as we go from FY25 to 2026 and 2027, this is expected to grow much faster.

Madhav, I just want to add a clarification , in the presentation that we have circulated. It is a history of 10 years. So,in the history of 10 years, if you see the 5 products were the l egacy and everything else were new products. What JMD has just clarified is, in addition to that another 5%-7% contribution from more new products.

Not the growth of new products introduced already, but the products that will be introduced.

And has Metoprolol being launched in the US or that is going to happen going ahead and Ibuprofen OTC as well?

Mostly US, but it is happening in other countries also. So, nowadays whatever the new filings that we do, it is for across the world, global filings. So, most probably we launch in US and Europe at the same time. Other countries will be in the next phase.

FY25 capex, we are estimating about 6,000 million, INR600 crores. So, half of that will be granules lifesciences expansion, other half will be for other projects as well as maintenance capital.

Okay, got it.

Just to elaborate a little bit on that, Madhav, we have decided to go a little slow on CZRO, take a very cautious approach. And only after each state gate is passed, we are investing money on it.

Thank you. The next question is from the line of Foram Parekh from Share Khan. Please go ahead.

Yes, thank you for the opportunity. Sir, my first question is, you mentioned that value added products now contribute 65% of the sales. So, may I ask, what is the percentage contribution do we envisage? I mean, till what percentage do we want to go?

I will just clarify your question a little bit. So, value added, we call it as gross margin as value added, which is 55% for the year and if you are asking about formulation, in the quarter 4 we were at 73%, overall year we were at 65%.

So, this 65% is expected to reach to what number? I mean, how much do we envisage?

We are looking at around 70% moving forward. It could be a little more too, but we will see as we go. We expect some API sales also to keep increasing. We don't want to cannibalize that totally.

Okay. So, this 75% is expected like in one year's time or it will be spreaded over a period of two years?

It will be next year. One year's time is best.

Okay. So, then my second question is, you mentioned that EBITDA margin is expected to reach to 22%, 23%. So, again, this would be like over a period of two years or we see this coming and being executed next year?

If you see in the past few years, also, we were around 21%, 22% EBITDA margin. So we expect that to be reached as early as possible. But going forward, we say that this is what we will maintain, but the possibility of doing better is always there.

Okay. And sir, in the presentation, I see on the Slide 22, geographically, all the geographies are not -- have not performed in FY '24. So could you just elaborate? I mean, why are we not able to grow in all the regions like Europe, Latam, India, ROW?

In these markets, LatAm and ROW, especially these two markets and in Europe, our sales were mostly profiled by Paracetamol, API and PFI. So, we had an issue on Paracetamol, API, PFI due to market demand coming down and also the price erosion. Now, just to give you an example, the prices have come down from something like INR600, INR650 to INR250 or INR300, it was lower than that. So, that is what has contributed to the decline in sales in this region.

Okay, so sir...

FDs have gone up in Europe, they have compensated to some extent.

Okay. But sir, in ibuprofen, we see that prices have come down and probably we do not see it going back to the COVID days. So how do you see the demand? I mean, is there demand? And with this kind of prices, how do you see ibuprofen sales ramping up in the next years?

Ibuprofen sales will have to ramp up only by volume increase. It is not going to be driven by value. I think the value is the lowest, and it will continue for a while. The market for these products like Paracetamol and ibuprofen don't grow too much. They grow by single digit or possibly 2 digits. And the only thing we have been growing is to get increase our market share and then very crudely put it cannibalized on other people's market share. We have done it successfully in the past. And even for ibuprofen going forward, we expect to improve our market share mainly in the U.S. But the good news is we have some European approval, and we already have tied up some sales contracts with some customers there. So, Ibuprofen will only grow by cannibalizing on others.

Okay. And sir, can you just give us the number what would be the market share for ibuprofen in the European market?

There are different forms, OTC, Rx window, it is a little difficult to estimate. But we do not have a presence today but we will be getting a detailed market share as we go forward in Europe.

The next question is from the line of KVKS Choudary, an individual investor.

My first question is with regard to MUPS Block. Can you give us an idea about the current capacity utilization in the product from that line?

MUPS Block, we're contributing quite well to the revenue and profitability, but actually, MUPS Block will also do a little bit of granulation and other type of compression too. And we have packaging lines. But actually going to just the M UPS products, we are doing around 40 % to 50% capacity utilization. And by the end of this year, we expect it will go up to 70%.

My second question is with regard to Granules Incorporated, GI Incorporated. We have had some controlled substances approvals and as well as ADHD. But the ramp up doesn't seem to be commensurate with the number of approvals. What is the current investment and asset turnover EBITDA in Granules?

Can you come back on that question?

GPI asset turnover, we have invested there in the intangible assets as well as fixed assets. Fixed assets turnover significantly better. So it is in excess of five. And now GPI manufactured products is also going up. Some of the launches that you rightly said, which will get launched in the next couple of years. So we will get a good return on the intangible assets also.

The controlled substances are not under patent. Isn't it possible for you to launch them immediately?

We have a lot of controlled substances being sold from GPI from our US facility already. And that facility has been set up only to concentrate on these products. And we have more products coming up and we will be selling more of these products.

Okay. What is your ADHD line?

Sorry?

What are the products lined up for ADHD??

We have many products lined up but I don't think we should talk about them.

Hello?

Yes, we can message out there. I don't think we can give you the names of products.

The next question is from the line of Nilesh Prasad from Motilal Oswal.

Hi, sir. Tushar here.

Hi, Tushar.

Sir, on Metoprolol and subsequent to that, how do we see good any potential product for '25, '26, if you would throw some, light?

It's got -- yes, go ahead. Anything else?

Yes. Maybe if you could answer this and then...

Tushar, Metoprolol has a very good potential and things are looking very, very positive. And we are ramping up production for the U.S. market. So we are very happy with the progress there. And the good news is Europe also, we got approval. We are going for national phase. And this year, we will start sales of Metoprolol in Europe also. So two regions we will be selling and we are also planning to take this product into L aTAm and other countries. The outlook looks quite good.

Sir, anything on the price erosion on Metoprolol per se with, in terms of the competition?

Okay. And sir, any other like this interesting product in the portfolio which can come up for approval in '25?

Yes, they're quite interesting products Tushar and as we get the approvals, you will know about them. And maybe later on, possibly, we could look at how they're doing. But we have many exciting products there in the pipeline.

And just to add to that, we have a total of about 16 to 18 launches coming up this fiscal year, out of which 14 products will be new and remaining will be essential extensions of the launches -- ramp-up of the launches that we've already made in Q4.

14 new launches, right?

Yes. Yes.

Interesting. So that should further build up at least as far as the U.S. market is concerned?

It's not just the U.S. market. It's both, sorry, U.S. and Rest of the World markets.

And mainly Europe, Tushar.

Okay. So the 16 to 18 launches is combining of U.S. and Europe market largely?

Yes.

Correct.

That's right. It's a big challenge for us and the excitement expecting to say this is the first time in Granules, we'll be launching so many products in 1 year.

Yes, that could help grow the sales at a healthy level in '25, '26, right?

Yes, that definitely Tushar you are, right. We are working towards that.

And so if I connect this comment with the EBITDA margin also moving up to 22%, 23% for FY25, so effectively and subsequently, the cash flow generation and considering the capex, the net debt level to what it would come down to maybe by end of FY25?

Net debt will not -- possibly may not come down, Tushar. We are looking at maintaining our net debt-to-EBITDA at less than 1, and if at all, we can get great opportunities too, we may not want to grow if the net debt-to EBITDA has grown more than 1, but we are not trying to make it zero debt, bring it down totally. We want to have a healthy net debt to EBITDA.

Understood. So no, I didn't mean zero net debt, but will there be any reduction in net debt, INR INR50 crores to INR100 crores?

No. I mean INR50 crores to INR100 crores reduction is what can be expected?

Not really so, because of the growth there is the investment in working capital and also Granules Life Sciences capacity expansions are planned. So we would positively manage the net debt to EBITDA. Ratios is not worsening, it is improving.

Just to clarify this were INR842 crores is the net debt as of today, as of year-end. And I don't think we are planning to bring it down drastically. Maybe there could be a small change, plus or minus here and there.

Got it. And lastly, because I joined late, so I would have missed it. Just if you could elaborate on the paracetamol situation, what has happened exactly because of which there has been significant price reduction? Is there any new competition that has com e out or existing players have lowered the prices significantly?

So Tushar, there are three components to this issue. The first one is many players who are end customers of paracetamol have actually got a lot of inventory store d. And as explained by Chairman earlier, it will take a couple of quarters to actually get to the position of liquidating their inventories, and therefore, the paracetamol situation is expected to not to go back to the original levels, but definitely go back to some higher levels by quarter 3 or quarter 4 of this year. That is the first reason. The second reason, because the offtake is low and the capacities which have come up thanks to COVID are high, so there is an excess supply to the demand and some of the organizations are looking at lowering the prices to actually survive the capacity utilization. So therefore, the price has been significantly down at the numbers shown by Chairman just a few minutes ago. So I think that's the second. And the third one, we actually did -- and as I told in my communication that we are moving towards the finished dose on paracetamol and therefore, we will be in a position to look at overall balancing at paracetamol in the next couple of quarters. But suffice it to say that this situation will continue for the next 2, 3 quarters.

Just want to clarify, Tushar, except us at Granules India, every other paracetamol manufacturer is a single product company and they will fight tooth and nail, and if they don't sell enough, they will be dead. So, they are desperate and at this point in time, I don't think they should go and fight for that market with no margin. We would stick to our regular customers, and once their inventories are rationalized, we would get back into business..

Got it, sir. And this is more specific to paracetamol, right? We are not seeing such situation in either Metformin or Ibu or Methocarbamol, right?

No, no. It's only paracetamol.

Sir, can you disclose the sales from our GPI subsidiary for FY'24 Granules Pharmaceuticals Inc., for U.S. subsidiary?

Did you say revenue, Harith?

Yes, yes, yes. .

So GPI full year turnover INR1,619 crores, Harith and for the quarter is INR477 crores.

Okay. Okay. So, when I look at FY24, we've had a very strong growth in our FD segment, more than 25%. So, when I think of FY25, should we extrapolate a similar growth? Should we be able to maintain a similar momentum for the segment? And if you can also share the number of launches that you're targeting particularly in the U.S.?

Harith, all the growth going forward is only going to come mainly coming from FD. So if you look at the overall growth, obviously, the FD growth has to be very decent and very healthy. Definitely there will be a very healthy growth and possibly a little better than last year's growth.

Okay. So, when I look at the filings, the data that you've given in one of the slides, we have, from both GPI and GIL, together we have around 13 ANDAs pending approval. For the size of our FD business in the U.S., it's supposed to be slightly on the lower side. So, should we expect a further step up in R&D spends going forward? And if you can share the spends that you're anticipating in FY25, R&D spends that you're anticipating?

So, we have already communicated that our R&D spend has gone up, and it continues to remain around that and likely to go up in the coming years, because we have a very good pipeline and the delivery of the pipeline in the various categories, as I mentioned before. So, we expect the R&D spend to be, you know first-to-file. Go ahead.

So, I'll... Go ahead. I think Dr.Ram Rao said in the speech that we are working on a lot of first- tofile 181 days and all these 3-4 launches. So, there's a lot of work going on, especially in the Onco and other areas. There could be a slight increase, but overall I don't anticipate there'll be a great increase in R&D spend. Already, we have provided for the growth, and we are already there.

Got it, sir. And then last one, when I look at other expenses for the quarter, there's been a sharp increase of around INR50 crores quarter-on-quarter. I understand all that is probably because of the quarter-on-quarter increase in the R&D spend, but it still seems to be on the higher side, any one-off that's there in the number, the other expenses number?

Yes, Dr.Harith, as we have explained, one is the R&D expenditure, which has gone up. Second is the freight cost, which also has gone up because of red sea issues. In addition to that, there are a few one-off costs, such as consultancy costs and quality audit costs, which also have gone up, which were specific to a quarter.

Yes. So going forward, you know, R&D, there will be a similar expenditure quarter-on-quarter. Other expenditure should come down.

Ladies and gentlemen, in the interest of time, this was our last question. I would now like to hand the conference over to Mr. Krishna Chigurupati, for closing remarks.

Ladies and gentlemen, once again, thank you very much for attending our call. In spite of your very busy schedules today between the earnings season. So once again, thank you very much, and we look forward to meeting you all in the next investor call with better news.

On behalf of Granules India Limited, that concludes this conference. Thanks for joining us, and you may now disconnect your lines. Thank you.