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Advanced Enzyme Technologies Ltd
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Ladies and gentlemen, good day, and welcome to the Advanced Enzyme Technologies Limited Q1 FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Ronak Saraf. Thank you, and over to you, sir.
Thank you, Jahnavi. Good evening, everyone. Welcome to the Advanced Enzyme's First Quarter 2023 Earnings Conference Call. I am Ronak Saraf, the Manager of Investor Relations here at Advance Enzymes. We hope you all have gone through our financials, press release and the presentation, which has been posted in the Investor Relations section of our website.
We have with us Mr. Vasant Rathi, Chairman; Mr. Mukund Kabra, Whole-Time Director; and Mr. Beni Prasad Rauka, Chief Financial Officer. Today, the management will discuss the performance and business highlights, update on strategies and respond to any questions that you may have. As is usual, for ease of discussion, we will look at the consolidated financials.
Before we proceed, I would request you all to please read the forward-looking statements contained in the presentation. During the call, we may make forward-looking statements regarding our expectations or predictions about the future. Because these statements are based on current assumptions and factors that involve risk and uncertainty, our actual performance and results may differ materially from our forward-looking statements.
So without any further ado, we shall commence this call. Over to you, Mr. Rathi.
Thank you, Ronak. Good evening, everyone. I really appreciate you all for taking out your valuable time, and welcome you all to the conference call for the quarter ended 30th June 2022. Please continue to follow necessary precautions and stay safe and healthy, although it appears that COVID-19 we have left far behind. I know this is not -- COVID-19 is not over, you know that also. But hopefully, there will be less or no interference of this deadly disease, which is affecting everybody globally. I will try to keep my remarks short so that you all will get some time to ask Q&A.
To begin with, you all know, going through the numbers, that it is a very rough start -- tough start for 2023 -- '22-'23 with ongoing disruptions in the business environment due to COVID-19 and geopolitical scenarios. The raw materials -- as you know it all, the inflation is hitting sky high all over the globe. Europe has never seen this kind of inflation in the last 40 years. Same is with the U.S. The raw material prices and logistic costs remain largely elevated, and supply chain issues, which were ongoing from last couple of quarters, still hit hard. We firmly believe that most of the hurdles are transitory in nature and rather than structural. And hopefully, the situation may start easing out from quarter 2 or mostly from quarter 3.
Moving on to the results update. Revenue declined. We have revenue declined by almost 12% on a year-on-year basis to INR 1,211 million in quarter 1 FY '23 as against INR 1,370 million in quarter 1 FY '22. Our EBITDA declined by 51% on a year-on-year basis to INR 309 million, while PAT declined by 56% on a year-on-year basis to INR 176 million during this quarter. During quarter 1, our EBITDA margin stood at 26%, while PAT margin stood at 15% during the quarter. As I previously mentioned, the impact in the margin is because of the inflated input cost, increased cost in salaries and other areas. We're trying to optimize and manage to insulate the margins to the extent possible.
Talking about the division-wise performances. The human nutrition segment contributed 67% of the revenue. It's registering a decline of 10% to INR 807 million in quarter 1 of FY '23. The animal nutrition segment contributed 13% to the revenue of quarter 1. It has shown an improvement and delivered a growth of about 11% to INR 156 million in quarter 1 FY '23.
The bio-processing segment contributed 15% to the revenue. It underperformed by almost 10% during this quarter, accounting INR 183 million in quarter 1. In this segment, food business degrew by 14% to INR 147 million on a year-on-year basis. And the nonfood business grew by 13% to stood at INR 37 million during this quarter. The specialized manufacturing segment contributed 5% in the revenue at INR 65 million during the quarter, a decline of 52% on a year-on-year basis.
With this, I will now hand over the call to Raukaji. He will talk -- he will walk you through the financials and key subsidiary numbers. Beni?
Thank you very much, sir. Good evening, everyone. I hope you all are in good health. Let me walk you through the company's financials for the first quarter of FY '23. Vic sir has already briefed you all about the year-on-year performance. I would further extend it and give a brief on Q-on-Q performance.
The revenue is decreased by INR 106 million from INR 1,317 million to INR 1,211 million. The EBITDA is decreased by INR 94 million from INR 403 million to INR 309 million. Profit before taxes decreased by INR 103 million from INR 340 million to INR 237 million. PAT is decreased by INR 77 million from INR 253 million to INR 176 million.
The EBITDA is decreased mainly on account of -- as Vic sir has already mentioned. The input cost has gone up and, therefore, there are some expenses, which continue to be like higher in terms of power and fuel cost has gone up, and that has resulted into lower gross contribution. And in addition to this, there was impact of sales mix of the products.
So that has like created a negative impact of about INR 62 million or so, and increase in the payroll cost as compared to the last quarter because of the annual increments, which are given in the month of April, and in addition to that, some other expenses, which has also gone up by some amount of about INR 11 million, that is because of some mark-to-market losses and also some incremental cost on account of consulting. All this put together has -- there's an increase of about INR 94 million in other expenses. Therefore, the EBITDA, this was 31% in quarter 4 of last year, it has come down to 26% in this quarter.
Now I would like to talk about the financial numbers of our subsidiary company, a couple of subsidiaries number, which we generally share with our investors and our analysts, is our performance of our subsidiary, evoxx. So evoxx number stood at INR 69 million in this quarter with an EBITDA of 16 -- INR 18 million and PAT of about INR 8 million as compared to INR 62 million of top line and negative EBITDA of INR 10 million and that of INR 21 million negative in last year Q1. So overall, Evoxx has given a very positive number this quarter as compared to Q4 also and as compared to Q1 of last year.
The JC Biotech revenue stood at INR 146 million with an EBITDA of INR 19 million and PAT of INR 7 million as compared to about INR 123 million of top line, EBITDA of INR 31 million and INR 14 million was the PAT during first quarter of last year. And again, here, we could see that the EBITDA is lower because of higher raw materials and higher power and fuel costs and also the higher tariff of electricity by the state government.
The SciTech sales stood INR 66 million as compared to INR 135 million of last year. And PAT is, I mean, negative this quarter by INR 14 million as compared to INR 18 million of positive PAT last year first quarter. So SciTech has reported a loss during this quarter because of the lower sales in this particular quarter.
The largest product, which is our anti-inflammatory enzyme. The sales stood at INR 279 million as compared to INR 245 million last year first quarter. So we could see that in this particular -- I mean -- and we have a higher sales as compared to Q1 of last year and as compared to last quarter also. From INR 245 million, it was INR 247 million to INR 279 million this quarter.
Our top 10 customers contributed about 28% in this quarter as compared to 29% in Q4 of last year and 28% in FY '22. Our B2C segment has contributed a sale of about USD 1 million as compared to USD 1.14 million during the same period last year.
Our R&D expenditure is up from INR 53 million to INR 70 million. So overall -- I'm sorry, the R&D expenditure is about INR 70 million in the quarter 1 as compared to INR 53 million. This was about 4.4% last year, and this year, it is about 5.10%.
So overall, this is from my side. And now we shall open the floor for question and answers.
[Operator Instructions] The first question is from the line of Vaibhav Badjatya from Honesty and Integrity Investment.
So if I look at the full year FY '21 numbers versus FY '22 numbers, in other expenses, apart from power and fuel and travel cost, which is obviously going up, there's a huge jump in sales promotion and legal charges. So if you can just explain what has happened in FY '22, which is seeing this increase and, I think, it has been continuing in this quarter as well. So if you can highlight why the sales promotion and legal charges are going up substantially.
So FY '21, it was kind of a year when we have seen unprecedented lockdowns throughout the globe. So sales promotion expenses were low. But then FY '22, we have exhibited in many shows and because of that -- sales promotion and exhibition expenses, everything has gone up.
About the second part which is happening in sales promotion is travel cost has gone up exponentially as probably you are aware of. So everything in the travel-related expenses [Technical Difficulty] and after 2 years, long years, this is the time to meet all the customers again -- 2, 3 years, which was lost -- contact loss. So there is going to be a sales and promotion expenses have gone up, and they will continue to go up for a time being.
Right. Yes. And what about legal and professional charges, which has gone up from INR 11.5 crores to INR 15.5 crores in FY '22?
So legal and professional, when we call it, comprises of even the consulting charges. And of course, that includes some kind of outsourcing of some of the technical services and some kind of studies, which we get from outside. So those expenses are part of legal and professional expenses. That has gone up because you spend more on, number one, on technical studies and research and development. And apart from that also, couple of legal advices and legal -- wherever -- legal charges where we need to really get the experts' opinion or we need to hire the expert. So those are like the reasons of increase in the legal and professional expenses.
Legal expenses will trim down as we move on to this year. They will be lower. This quarter, it was on the higher side.
Okay. And sir, secondly, if you can just comment on competition -- in which products we are facing competition from Advanced Vital Enzymes? If you can just broadly comment on that, that would be helpful.
There is no area where we are really directly competing with Advanced Vital Enzymes.
[Operator Instructions] We have a follow-up question from Vaibhav Badjatya from Honesty and Integrity Investment.
I just wanted to give time to others. That's why I kind of stopped earlier. So in terms of margins, we have seen even gross margins contracting as compared to FY '21, as it has contracted in FY '22 and it is continuing. So is it because of the absolute fall in the realization in some of our products? Or is it because the RM cost -- raw material cost has increased and we have not been able to pass it through?
Vaibhav, it's both. RM cost is up, and it is going to be a slow process to pass on. It's a tough competitive market.
But in terms of contraction in -- you said that it's both in terms of realization contraction and increase in RM cost. So in which areas the realizations are reducing? In which segments or in which product areas the realizations are reducing in absolute terms?
Overall, you see that nutritional market, people have plenty of inventories. And there is overall cost going up for them. So they are looking at -- constantly looking at reducing their cost in other areas, and that comes into the ingredients or supply side of the raw material. So there is a lot of pressure on keeping the cost or cutting the cost, while the expenses are going up.
Now there is going to be readjustment in the market for next couple of quarters, okay? There will be a pass-on cost will happen. But again, because the supplies were coming from -- in U.S. market, at least, I don't know much about Indian market, but a lot of material was coming from China and Chinese impact is tremendous. The supplies are short supply. The shipment cost is ridiculously high.
And overall, just to maintain the customers and customer relations and supply chain, we ended up supplying it at any given -- because these guys are paying too much money for the packaging, filling, all of the other areas. Everybody is looking to see how they can reduce their cost or reduce their inventories.
[Operator Instructions] We have a question from the line of Ketan Chheda, individual investor.
My question is in terms of the increasing revenue pressure for some time, our growth has reduced in the last couple of years. What are we doing to increase the growth? What are the areas that we are targeting? I know there's a lot of information in the investor presentation. But I'd like to hear when do we start seeing growth in our revenues from here on?
Ketan, good question. And some of the areas which were out of our control, couple of things which are happening in the global scene. I hope that they are now -- hopefully settle shortly, if not completely. But that being the factor and global scene, don't know what happens with another crisis or may not be a crisis in future. But considering they are out of our hand, I believe that we should be -- in a couple of quarters, we should be able to see a sustainable growth.
Okay. So are you seeing uptick in the demand going forward because on Q1 it didn't seem so, but are you seeing an uptick in the demand?
We are -- as you know, we are in 3 different segments, right? And we see some great opportunities also and growth prospects in other markets.
Okay. And one last question is, if you could throw some more light on the work that we are doing with some pharmaceutical companies in the area of APIs. I know there is some price probably or some loans that we are doing to get our products approved with them. If you could throw some light on that area, what's the status and what is our outlook, when do you expect that you'll get some revenues in these areas?
We are progressing well. The API market is like developing the completion of the R&D and pilots and then moving into the molecule. There is an enormous opportunity we see as we go forward. And we are very -- I will not say satisfied, but we are very pleased with the progress which is happening in that.
So is it possible that...
Sorry. Sorry to cut you. There is a great deal of opportunities, and we are the leading suppliers in this marketplace.
Okay. So I just want to ask 1 follow-up question on that. So can you expect to get increased orders in the remaining 9 months of this year on this specific segment?
It will start. Ketan, it will start gradually. But we expect some more products to be commercialized this year.
[Operator Instructions] The next question is from the line of Gagan Thareja from ASK Investment Managers.
I hope I'm audible.
Yes.
Yes. Sir, if I look at your segmental sales, specialized manufacturing has had a sharp drop this quarter. And if I look at it from a geographical composition, Europe and others have had a severe drop. So if you could help us understand both segmentally and geographically what happened.
Your question is in geographically, which segment you said?
Geographically, Europe and others are down very sharply. Europe is down 36.5%. And what you classify as others is down to virtually INR 0.7 crores from INR 6.9 crores.
Gagan, like this Europe business, these orders are not all the time like divided into the quarter-wise. Sometimes it's on a higher side, sometimes it's on a lower set. That doesn't mean that this is happening as far as the geographical is considered.
As far as the specialty -- special segment -- specialty business of SciTech, what is happening out there is again the inventory. There was like a lot of sales of effervescent tablets for the COVID-related products, which they were making, for example, vitamin C and paracetamol and other things. But right now, they are struggling with a lot of inventories at the customer end. So a lot of orders are on hold.
So I think this is, again, an inventory-related phenomenon and probably, this is a quarter where we really saw the real drop into the SciTech sense.
Okay. And if I again look at your sales from a longer term horizon, even past 3 years you have faced, CAGR would have been 8%. In a normalized world where these sort of transitory issues, which has had a deep impact in the shorter run, if one assumes that they come back to normal, in such a scenario, what is the sales growth potential for the company?
We understand that in the current scenario, you're getting impacted by extraneous factors. But in a normalized scenario, what is the baseline growth, which your business with its pipeline of new products and existing products and customers is capable of?
Well, thank you for clarifying that, like, as you said, in the last couple of years, very abnormal years. So if we can keep that aside, and as I said in the beginning, if we don't have any other further disruptions globally, which are not under our control, we can -- we are targeting to be growing 15% to 20% revenue.
Okay. And if you could -- I appreciate that you've given us that number at least, which helps us understand where you're headed. But if you could also elaborate a little more and give us some idea on the road map and how you expect to achieve that, what goes into being able to reach that aspiration.
Glad to hear that. See, there are 3 segments which we have clarified to you, right? One is bio-processing, and there were questions on that, and we already clarified that, that growth we see is very sustainable and continued because everybody is trying to find the alternative. API growth will be there in India. Everybody is trying to get away from China supply, and there is a great deal of prospect to grow substantially beyond 15%, 20%.
The second market segment, which we are in a full processing area and we see several products approvals. It takes time to get approval and yearly contracts. So we are doing extremely well on that particular front on Q, R&D, et cetera. And we see substantial growth in that segment also.
Third one is animal feed area, where we are seeing -- we have placed a lot of various different key things in the global marketplace. We have signed an agreement with the Sumitomo Chemical, Japan, Japanese subsidiary in USA as an exclusive marketing sales company. And similarly, several other areas are moving forward on that particular front and you will see a substantial growth.
Human nutrition, we are also looking at B2C market growing considerably than the current place. And as far as B2B market, we think it will continue to grow also after the initial inventory hurdles because U.S. is still strongly growing, and there is inflammatory -- inflatory -- inflammation -- inflation process is still on, but we feel that we have a good chance of -- excellent chance of growing. There will be pressure on margins. I can tell you that.
Okay. So again, as we sort of passed through on the sales aspects, likewise on margins, again, in a normalized world, with your prospects in fermentation APIs, improved processing and so on, would the margin trajectory be still lower than what it was in the past?
It's been dropping over the last 2, 3 years. But then again, there's a lot of contribution to that drop from issues which are not of a permanent nature. There might be others which are of a permanent nature. So hence, my attempt to understand, in a normalized world, what should be sustainable margin trajectory for this business?
Well, we are going to keep our margins -- at least try to keep our margins above 40%. That -- those are our areas. We are very mindful. At the same time, we are very aggressive in future investments. And increasing our R&D expenditures will grow up considerably. It is a research-driven company, and we are putting a lot of things into the future growth. So a lot of investment will be there on that particular area.
We're also developing and spending more into expanding the market segments. So there will be a pressure initially. When you're trying to develop the market, you'd like to spend a lot on the sales and promotions, which you will see quite a lot, and also human development. So these are some of the things, challenges, management always face when they are growing and before the growth. So they are also part of our company's story.
Right. So what should be a reasonable time line to expect over which you can -- these efforts that you're putting in, start bearing fruit? Is it going to be 1 year? Is it going to be 2 years before the consequences of these efforts start showing up? How should we think about that?
Some of the efforts you will say quite soon. So exactly all the efforts will come, everything will pay off, I hope I can get some crystal ball, but what we see is very, very positive trend.
So to answer that, I can say that some of the effect will start after 1 or 2 quarters.
Okay. In a couple of quarters, some of your efforts will show up in top line growth.
In the numbers. In the numbers, yes. But you will also, at the same time, you see how the costs, we are going to spend a lot of money into various different areas I just said.
Yes. So -- I mean when you say sales and promotion and R&D are going to remain elevated, as a percentage of sales, you pointed out that R&D cost is at 5.1% for the quarter. Is it going to remain in this trajectory all through the year? Is it going to rise still further from 5.1%?
I think it will rise. And we are -- our idea is somewhere around 8%.
Okay. So you're saying that over the quarters in this year, as you move from the first quarter down to the fourth quarter, and as you exit out of the year, we should be expecting 8% R&D to sales?
Not really. Not -- 7% to 8% is like a longer term goal. But this year, it will be in the similar range, maybe 5% to 7% -- in between 5% to 7%.
Okay. But that means...
It's a gradual thing. It doesn't happen like it's going to jump instantaneously because we have to be budgetary constrained and a lot of other things comes in R&D.
So I get your point, sir. I understand that over a period of time, you want to increase R&D to sales by almost 3 percentage points. While it is understandable that, that is required for the business to grow, should it then not mean that a baseline margin trajectory would probably be lower than 40%, unless, of course, that R&D starts to give you a return on investment in a short time frame?
Beni?
Yes. Well, there will be some kind of a pressure, of course, as you mentioned, because when you spend more on R&D from 5% to 3%, so 3% has to come through your incremental revenues. But the good part of our business is once we cross the threshold and after that, most of the time, we have seen our margins are really pretty decent.
So we should be in a position to maintain our -- the EBITDA margin, which we have been talking about of, say, 40% or so. But yes, on quarter to quarter, suppose my R&D in a particular quarter is 8%, probably the EBITDA margin could be 37%. So overall, if we really look at it, it will be in the same range.
Right. I get that, sir. But when we are talking of this margin, at what juncture or what time frame do we get to that margin? Because currently, we are...
So I'll explain you. What happens is -- you are right, absolutely. I mean everyone wants to have a good margin. Of course, we are also working for that. The sale mix of our -- sometime that also creates this kind of a situation. For a quarter, some of the product sale is higher, so you get a better EBITDA margin. So that's what I'm saying. Overall, when you look at the entire year, it gives you a fair idea here in what range we are going to be.
But then, are you saying that in spite of what we've seen in the first quarter this year, which could have had an adverse sales mix, if you think of the full year FY '23, we can get close to that number of 40% for the full year?
So I mean we have another 9 months to go. So we have like -- that's what is like -- of course, we will try to see that we got close to at least the margin which we have last year at least.
So are you saying that when you exit -- the exit margin will be 40%? Or are you saying that the aggregate for the full year could come close to 40%? I just want to ensure that I'm not interpreting you wrong.
So yes, I'm saying that the aggregate EBITDA margin could be close to the...
For the full year.
Close to the last year FY '22, so that will be somewhere at the end of the year, FY '23.
Okay. So you're saying you'll reach FY '22 margins in Q4. But for the full year margins FY '23 will be substantially lower than FY '22?
That is what is 1 quarter which we are discussing. So we have 3 more quarters. So let's see an average we should be able to reach to that margin.
You will see that there is -- there will be an improvement definitely.
Okay. That's heartening to know. Also, sir, there is a pretty substantial fuel ethanol blending program mandated by the Indian government. And I presume it's an enzymatic hydrolysis process which goes into fuel blending also. Do you supply enzymes for those processes? Or do you foresee that as a reasonable opportunity to pursue?
Well, we tried with a couple of big refineries. Some of the product has gone. But honestly, this is not our active area. We are an approved supplier. We are waiting for the next move as the feedback and other things will come up.
Okay. And from a working capital standpoint, not necessarily only Advanced Enzymes but everybody, because they are building up inventories due to the supply chain issues, receivables are lengthening. It's been a common feature across most companies. How should we think of working capital for you both in the shorter time frame for the year and in maybe a longer time frame of 3 to 5 years?
So maybe -- it will be in the range of 110 days to 120 days. That is kind of the working capital cycle for us.
Okay. This is sustainable both in the shorter and the longer time frame?
Yes, absolutely.
The next question is a follow-up from Vaibhav Badjatya from Honesty and Integrity Investment.
Yes. So I guess it's Saturday, that's why I'm fortunate to get too many follow-ups. So in terms of -- I understand that we are taking all this cost pressure. But in your last con call, we asked management as to why they are not able to pass on the cost in terms of higher prices. And it was mentioned that there is -- this is because of increased competitive intensity. I just wanted to understand which are these players who are -- who have entered into the market and creating competition for the current [indiscernible].
What is -- no, it's a high-margin area now. Everybody is trying to enter into it. So you will see that there are a lot of major players also is going to jump into it -- into international markets.
Yes, but -- yes, it's understandable. But I think given the nature of business and development process, it is quite long, so sudden increase in competition is unexpected. So that's why I just wanted to understand.
It's not a competition. What happens like if you try to increase the prices, all the people want to reduce their prices because they do have an impact on the other side. So they will go to the whoever 2, 3 suppliers are there. They will try to work on this. And then you may lose the business because it's a competitive world, right?
So -- and ingredient is the area where you can see that they can cut down the cost. They cannot cut down the cost on traveling. They cannot cut down the cost on the packaging. So this is the area where everyone wants to cut down the cost.
Understood. Got it. And lastly, on the cash that we have. So we continue to build on cash. And so -- and I understand that there will be some investments that we will do. But even accounting for that investment, we'll continue to have a very good amount of cash generation, given the profitability is reasonably good, even at this declined level. What are your thoughts on capital allocation in terms of distributing the dividend to the shareholders or, in any other way, moving that cash out of the company in any form?
Two answers for you. One is we are already increasing the dividend this year by 10%, 11% than compared to last year. So our company is constantly increasing the dividend year after year. The second is obviously deploying the cost. When the capital cost is going up globally, we see the chances of possible targets for us may increase quite a bit, okay? So we see that, that is an opportunity for the companies like us who are -- who have no issues of the capital.
We have a follow-up question from the line of Gagan Thareja from ASK Investment Managers.
Sir, 2 questions. One, the other operating expenses are up quite sharply for the quarter. I think in the beginning, you did give some sort of explanation there. But if you could sort of break that specific cost head down and give us some more or a little more elaborate understanding of how much has come from the legal and professional and how much has come from increased sales and promotion. And also, is this quarterly rate of INR 35 crores under that cost head a sustainable future for the year?
Beni?
Your question is about the increase in expenses?
Yes.
Right. And that is with regard to other expenses, right? So if I look at other expenses of Q1 of this year as compared to Q4 of last year, so Q-on-Q, I mean, the expenses is up by only INR 11 million, yes? So it's not substantive in the sense.
Sir, but then year-on-year -- see, there are 2 things. Q-on-Q, your sales is down 8%, but still your other expenses are up. And if you look at it year-on-year, your sales are down 12%, but your other expenses are up almost 40%.
So that's what I'm saying. The other expenses, generally, I mentioned earlier, kind of fixed expenses, where you can't do much on it. So that's the reason -- the sale has nothing to do with assets with all these other expenses.
There is another one area like, for example, power and fuel. So if you look into the AP where our JC Biotech plant is there, there like -- there was no power supply for the -- some of the month, like 50% power supply, and then you had to run on the generator, right? So if you really look at it -- I think somewhere around INR 18 million is increased due to -- because of that.
Now I'm giving you the perspective of Q-on-Q -- sorry, year-on-year. So last year, the other expenses was about INR 249 million. This year, it is INR 349 million. So here, you can see that there is an increase of INR 100 million.
So I'll give you some kind of a breakup here. Our professional -- legal and professional expenses are up by INR 22 million; power and fuel expenses are up by INR 20 million; and taxes are up by about INR 7 million; lab expenses is up by INR 5 million; and INR 10 million is roughly increase in our sales promotions and travel expenses as compared to the Q1 of last year. So that's how, overall, the increase in expenses.
And in addition to that, it also includes some mark-to-market valuation. So that has also happened. And because of that, we have some kind of INR 33 million of like losses in that sense when you do the mark-to-market valuation. So this is an exceptional item in that sense in this particular quarter, so which is not kind of fixed expenses.
INR 33 million is mark-to-market, which is not -- and then there's another INR 18 million, which is because of the power shortages, which, in AP, we has now been normalized, right?
INR 8 million, sorry, not INR 18 million.
So total is about INR 20 million, INR 8 million for one particular company, which is our subsidiary, JC Biotech. But in addition to that, INR 12 million is increased in case of Advanced Enzyme stand-alone numbers also. So all put together is INR 20 million increase in power and fuel. And legal and professional, I have already explained, INR 22 million. And there is an increase of INR 7 million in taxes -- freight and taxes. Then lab expenses, travel and sales promotion expenses. I think that's what I have given you the breakup of it.
Right. Right. So we could say that, that INR 33 million and INR 8 million, so around INR 41-odd million is not necessarily a sustainable sort of increase and one could adjust that out to arrive at what is a more normalized number?
Right.
Right. And again, if I look at the trend of other expenses across quarters, first quarter tends to be the lowest and then it sort of peaks into the fourth quarter, although the sales might not go in that same line. So for example, FY '20 sales first quarter...
That happens mainly because of CSR expenses. Generally, what happens, the entire CSR expenses that you spend in the last -- I mean that was because of that. You might have noticed last year that other expenses are up in last quarter.
It's been the case right through the last 3 years. So I am saying that is that also a trend that will continue? So for example, if I knock out INR 4 crores from INR 35 crores, so my normalized other expenses is INR 31 crores, but then it will keep on rising Q2, Q3 and Q4. Is that the correct inference?
That to some extent, yes.
Right. I guess that's it. And on tax rate, how should we think of tax rate? Because I think your tax rates are -- while they are stable, they are on the -- they are not in the 25% or 26% bracket.
It is 25% to 26%, effective tax rate.
That was the last question. I now hand the conference over to Mr. Ronak Saraf for closing comments.
Thank you, everyone, for taking your available time for attending our earnings call. We will keep you posted for any further updates. I request you all to kindly send in your questions that may remain unanswered. An audio recording and a transcript of this call will be uploaded on our website in due course. Looking forward to host you all in the next quarter. Until then, stay healthy, stay safe. Thank you.
Thank you. On behalf of Advanced Enzyme Technologies Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.