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Ajanta Pharma Ltd
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Ladies and gentlemen, good day, and welcome to Ajanta Pharma Q4 FY '22 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Yogesh Agrawal, Managing Director of Ajanta Pharma Limited. Thank you, and over to you, sir.
Thank you. Good evening, and welcome to all of you. With me, I have Mr. Rajesh Agrawal, our Joint Managing Director; and Arvind Agrawal, our CFO.
I'm glad to inform you that the financial year 2022, we have returned INR 436 crores to the shareholders against INR 251 crores in the financial year 2021 in the form of dividend and buyback. So this reiterates our commitment to the shareholders to return the free cash flow in excess of the business requirements. Further, the Board of Directors have approved, in today's meeting, issue of bonus shares in the ratio of 1 share for every 2 shares held subject to the approval of the shareholders.
Coming to the results. They're already there with you, and I'm happy to share with you, the year has witnessed a strong growth momentum across all of our major markets. I will take you through the business-wise performance during the quarter and for the year, along with comparison of previous year for the same period.
Let's start with the emerging markets' Branded Generic business. First, I'll touch upon Asia. During the quarter, sales was INR 263 crores against INR 172 crores (sic) [ 174 crores ], posting a 50% healthy growth. And for the whole year, the sales was INR 813 crores against previous year's INR 712 crores, posting a growth of 14%. The smart recovery in the growth was in line with our expectation and is the result of our continued effort to strengthen our brands in these markets.
Coming to Africa. During the quarter, the sale was INR 136 crores against INR 99 crores, posting a healthy growth of 37%. And for the full year, the sale was INR 587 crores against INR 413 crores, posting a 42% growth.
Asia and Africa put together contributed to 43% of the total revenue for financial year 2022. Our exports to these markets were INR 398 crores against INR 273 crores, a growth of 46% during the quarter; and INR 1,400 crores against INR 1,124 crores, a growth of 25% during the year.
Moving to the U.S. Generic. U.S. contributed 21% to the total revenue for the financial year 2022. We registered the sales of INR 168 crores against INR 173 crores, posting 3% de-growth during the quarter. For the financial year 2022, the sales were INR 696 crores against INR 637 crores, posting 9% growth.
Lower growth in Q4 and financial year 2022 was due to increased competitive intensity leading to higher-than-anticipated price erosion on the base business. During financial year 2022, we launched 3 new products and filed 8 ANDAs. We received 2 final and 1 tentative approval, and 20 ANDAs are awaiting approval with U.S. FDA. We are poised to file 10 to 12 ANDAs in financial year 2023.
Coming to the African Institution business. This business contributed 6% in total revenue for financial year 2022. We registered sales of INR 50 crores against INR 80 crores, posting a de-growth of 38% during the quarter; and INR 206 crores against INR 271 crores, posting a de-growth of 24% for the financial year 2022. As we have mentioned earlier, the institution business remains unpredictable.
With this, now I hand over to Mr. Rajesh Agrawal, our Joint Managing Director, who will take you through the India business. Thank you, and over to you, Rajesh.
Thank you very much. Good evening to all of you. Let me now discuss some of the key highlights of the India business with you. India business contributed 30% in the total revenue for FY 2022. Sales stood at INR 245 crores against INR 218 crores, posting a growth of 13% during the quarter; and was at INR 982 crores against INR 813 crores, again posting a healthy growth of 21% for FY 2022. This includes sales from trade generics of INR 30 crores during the quarter and INR 117 crores for the whole year FY 2022.
We have launched 16 new cohorts in FY 2022 with 4 first-to-market products in the country. Our performance has been satisfactory, which was on the back of new product launches, market share gain and price increase.
As for IQVIA MAT March 2022, we have posted a healthy growth in all therapeutic segments and exceeded India -- and exceeded industry growth across that space. We have 3 of our brands appearing in the top 500 in IPM now.
With this, I would like to hand over to Arvind Agrawal, CFO, to take you through the financial performance. Thank you, and over to you, Arvind.
Thank you very much. Good evening to all of you, and a warm welcome to this earning call. For ease of discussion, we will look at the consolidated financials and provide year-on-year comparison. You will understand that the FY 2021 witnessed higher profitability due to COVID impact, hence the FY 2022 comparison with previous year will not be apple-to-apple comparison.
Let me take you through the key financial highlights for the quarter and full year. It was an excellent quarter and year with 15% growth in revenue for the Q4 and 16% for the FY 2022. Total revenue stood at INR 870 crores against INR 757 crores in Q4 and is at INR 3,341 crores against INR 2,890 crores in FY '22.
EBITDA for the quarter stood at INR 207 crores against INR 259 crores. For FY 2022, it was INR 929 crores against INR 999 crores. EBITDA was 24% for Q4 and 28% for FY '22 lower than previous year due to normalized expenses on both R&D and marketing after the COVID -- post-COVID and increase in input costs and trade expenses.
During the quarter, PAT was at INR 151 crores against INR 159 crores, down 5%. And for FY '22, it stood at INR 713 crores against INR 654 crores, up 9% due to reasons mentioned earlier. PAT for the year is at healthy 21%.
Material cost was higher in Q4 and FY '22 due to increase in API prices and U.S. price erosion. We are still witnessing upward trend in few API prices, which may impact gross margin going forward.
R&D expenses was at INR 59 crores against INR 39 crores last year -- for the quarter and INR 204 crores against INR 139 crores for the full year. R&D expenses [Audio Gap] of revenue, which will continue [ as it is ] going forward. Other expenses reached [ normal fee ] and all the activities are at pre-COVID level. With our continued focus on Branded Generic business, we will be allocating higher resources on product registrations, team and launch of new products.
Other income stood at INR 116 crores in FY '22, mainly contributed by ForEx gain of INR 73 crores. Income tax stood at 22% for FY '22 against 27% in FY '21 and expected to move slightly higher going forward with some of the facilities phasing out their tax exemptions.
We incurred CapEx of INR 154 crores in FY '22. Our net fixed asset turnover has improved to 2x in FY '22 compared to 1.8x in FY 2021. CapEx, including maintenance CapEx, for the FY 2023 is estimated to be about INR 200 crores.
We have reduced the inventory levels to 88 days against 98 days in previous year, with supply chain returning to normalcy. Receivable levels increased to 113 [ Corona ] days in March '22 from 95 days in previous years, but they are all in normal routine nature.
With these highlights, I open the floor for the question and answer. Thank you very much.
[Operator Instructions] The first question is from the line of Tushar Manudhane from Motilal Oswal Financial Services.
Sir, first question on domestic formulation segment, given that this year, you had a robust growth on account of the lower [indiscernible]...
I'm sorry, Mr. Manudhane, but the voice is breaking, sir.
Is this better?
Yes, please go ahead.
Yes. Just on domestic formulation, this is where the growth was quite robust for FY '22. And at the same time, given that you'd have the NLEM-linked price hike upcoming in '23, so what kind of growth can be anticipated in this segment?
Overall, for domestic, we are looking at mid-teens. And more importantly, we are looking -- our ambition is to grow faster than the market and the sub-therapeutic segments with mid-teens growth. I think we should be growing faster than that.
Sir, understood. And secondly, on -- sir, secondly on the gross margin front where we have seen a sharp dip both quarter-on-quarter as well as year-on-year basis, so how do you see this raw material pressure in the near term? Is it like over next 3 to 6 months?
Tushar, I think here I would like to explain, this quarter, if you see, the COGS is about 28% right?
Right.
Now out of this 28%, 1.5% is onetime charge. We had sent one product to U.S. with the expectation of good flu season last year.
2 years ago.
2 years ago. And now it is nearing expiry. So we are retuning this quarter. So that is onetime impact, which is about 1.5%. And there is another 1.5% impact because of the price erosion in the U.S. So total 3% of this higher cost of fuel is only because of this reason. 1.5% is onetime, so it is not going to be there.
Another 1.5% will remain because that is the price erosion impact. But the fact that we are expecting that from -- going forward, we should be able to increase our branded business component, higher being in future coming years, because of which we should be able to recover. So our guidance of that 25% overall, COGS is something which remains, so 75% gross margin.
The next question is from the line of Rashmi Sancheti from Dolat Capital.
Sir, again, on gross margins, you said 1.5% impact comes from the price erosion in the U.S. and 1.5% charge on the product charges, and the remaining everything comes from the high raw material prices?
Yes, you are absolutely right.
So that means the impact is quite higher, right?
You're right. You're right.
So what I want to understand, despite a very strong growth in the branded business segment in Asia as well as Africa and India, where normally the gross margins are pretty high, which is not able to offset it?
It will get offsetted, as I said again just now, that it will get offset. But the numbers have to get in for that circle. Because see, for the quarter, it will have a major impact. But once you are taking the whole year, you can see that our -- still the whole year margin is still 75% in spite of 28% in the quarter. So that is something which definitely has balanced out.
So if I just reduce 1.5% from quarter 4's raw material impact, the rest shall be the new base for quarter 1 FY '23 and quarter 2 FY '23? Or we should see raw material costs, which is reported for entire FY '22?
Yes. I think that would be the correct way to look at it, for the whole year, normalized at 25%, so which offsets the onetime impact of 1.5% of the 2 product write-off and also factors in the price erosion. So going forward, 25% in the current visibility of what we have on the raw material packing bundle prices is what we are looking for the next year.
Okay. And sir, most of the price erosions we have seen in FY '22 versus FY '21 in the U.S. market?
It's been quite high. Traditionally, we've seen around 10% price erosion, but it's almost been to the tune 18% plus-minus.
Okay. And any expectation whether it would [ stop now ] in FY '23? Or do you believe that it would still remain in double digits?
No. We believe that it should now, again, normalize to the 8% to 10% price erosion going forward.
8% to 10%, okay. And sir, normally, our run rate of product launches are around 5% to 6% every year. But this year, we have just launched 3 products only doing the year in the U.S. market. So what is the reason behind that? And what are we guiding for FY '23 and '24? And the next question is that with this kind of growth which we have seen in both Asia branded and Africa branded, we will be able to sustain it? Or this is something that we are seeing from one-off supply?
So 2 parts. Let me take the U.S. part first. So in the U.S., the filings, the approvals, the launches could not be done because there are a number of products under approval with the FDA. And as you are aware, the FDA has still not resumed the regular inspections. They are still doing the inspections either for [ calls ] or mission-critical. So we've been pursuing with the FDA, and the FDA stand still remains that they have not opened the regular overseas inspection.
And till the time that doesn't resume, our number of ANDAs which are awaiting approval doesn't get approval. And this scenario is not only to Ajanta. I think this is across all the companies like us who are waiting for the FDA to start inspecting. And as that starts to happen, we will, again, hopefully come back to the launches of 5 to 8 products per year. So that was the first part on the U.S.
And second on the branded generic, we've been guiding that because of the headwinds, which we see in the U.S. market, larger focus, attention, resources are being diverted towards the branded generic business in India and the emerging markets. And you've seen the growth which we have posted in the current year. Going forward also, we do not give the guidances region-wise, but we believe that on a blended basis, we should be able to deliver the mid-teens to high-teens growth in these markets.
The next question is from the line of Kunal Randeria from Edelweiss.
Sir, I mean, is it fair to assume that the kind of price raise that you mentioned is maybe specific to Ajanta perhaps 2 or 3 products? Because some of your peers who are operating in the U.S., that in segments of price erosion has been fairly stable now for the last 2 quarters.
Sorry to interrupt, sir, but we cannot hear you. Your voice is breaking. We are unable to hear you.
Hello? Can you hear me now?
Yes, sir.
Okay. So I'm saying, in general, I think most companies have found -- seen aggressive price erosions. And I think most companies, in their earnings calls or otherwise, they have mentioned that the price erosions have been twice of what we've witnessed in the normal years. I think -- and again, company to company, it may vary depending on the product portfolio. But in general, our take is that the price erosions have been fairly aggressive, but which are stabilizing now.
Sure, sir. And just to take this point forward, sir, these kinds of erosion obviously cannot be sustainable, right? So at some levels, the companies will have to start downsizing their portfolios. So how far do you think the industries -- because once they start downsizing, I guess, erosion should also then start coming down?
That's a good question. We are not at that inflection point. Case to case basis, product to product, they keep getting added and dropped. But I don't think on a materialistic basis where I can say that there'll be any drop-off for any product.
Sure, sir. And sir, when I look at the balance sheet, sir, receivables have gone up quite sharply. So is there any kind of pressure from emerging markets?
For what?
Your receivables.
No, receivables have gone back to the pre-COVID levels. If you see pre-COVID level also your receivables around the same time. I think during the COVID times, there was a lot of efficiency which was coming, including expenses. So I think this is a normal level. There's no exceptional elevated levels there.
It was 111 in 2020. Now it is 113. So we are at the same level.
Got it. Got it, sir. And just lastly, sir, your product [indiscernible] that you have discussed in the past, I mean, is the approval held back because of plant inspection or some other reason?
Unfortunately, there are different components to it. So I think we'll not be able to give you a product-specific insight. At the best, we can say that it is still under review with the FDA. We are hoping for the earlier approval than later.
Sure, sir. And just one more, if I can. So you have over INR 320 crores of cash on your books. Just wondering, are you open to acquisitions? And if so, what kind of company or brands do you think could fit into your company?
Yes. I think we are looking at the brand acquisition for quite some time now. And we are in the market -- every investment banker is aware that we are looking for the brands. Our preference definitely will be India because we understand it better way, and also we feel that here we can add value by acquiring the brands.
So we are open for it. We are looking at all the deals which are happening in the market. But we are still not getting the brand for valuation which we feel is right. So that is where I think we are waiting. But otherwise, we are definitely open.
The next question is from the line of Abdulkader Puranwala from Elara Capital.
Sir, my first question is with regards to your field force rationalization, what we had done earlier. So are we entirely done with the 2,800? Or is there any further scope for us to rationalize this further?
Rationalizing of the field force? Yes, we are completely done with that, and we don't see the scope for [indiscernible] to reduce the field force any further. As a matter of fact, going forward as and when we feel it is important and the productivity increases, then we will again come back in the mode of adding medical representatives wherever necessary.
Sure, sir. And sir, my next question is on the margin front. So wherein you said the gross margins would be close to 75% ahead. Sir, I just wanted to hear your brief commentary on how it would look on EBITDA and considering that some bit of an operating leverage would also be there in the business because of the Guwahati plant and the utilization level improving. So if you could guide us something on the EBITDA margin spend, it would be very helpful.
I think we should be able to retain the EBITDA margin of the current year. For the whole year, we have done about 28%. I think we should -- going forward also, we should be able to get this kind of EBITDA margin, maintaining this margin.
Sure, sir. And just a final question, if I may. In your earlier commentary, you have mentioned that nearly 50% to 60% of your Branded Generics portfolio is under some sort of a price restriction. So now that the prices of your raw materials are increasing, so sir, how soon can this be passed to the customers within the geographies of India, Asia and Africa?
For India, as and how we have the eligibility to increase the price, based on the NPPA guidelines that we have, so we are able to comfortably pass that on. And of course, as you have seen, all the NLEM products also, there has been an increase of 10.5% in the last year because of the WPI linkage. So that also we have taken for all the brands that were under NLEM.
And our NLEM brand portfolio is not more than 20% in the domestic. And so it is for the international markets also. As and how we have the opportunity, we are able to pass on the price increases. But at the same time, we take a very granular approach and look at each brand and the other competitors' pricing also, because we don't want to be completely out of range. So it's a very meticulous process that we follow and then take a decision based on that.
Sir, any color on which months or which quarters will exactly the price hikes has been taken earlier or you would like to take a call going ahead as well?
For NLEM brands in domestic, it happens every year in April as per the NLEM and NPPA guidelines. That's common to the whole industry. So we have taken it last month, which will start to impact us maybe May or June as the inventory exhausts of the old pricing.
And for each other -- for the other brands, it is based on a yearly cycle. And again, as I said, it's hard to tell you on the company-wide basis because every brand may have a different cycle and also different competitive pressures. And the competitor MRP is also equally important for us to make a decision.
The next question is from the line of Ankeet Pandya from InCred Asset Management.
Sir, I hear you when you said that for the non-NLEM portfolio, this is an annual exercise and you'll have to wait to see how the competitor behaves. But the cost, which is the API cost, et cetera, has gone up equally for you and your competitor. And as we understand, Ajanta is one of the leading brands in most of the therapies that you have presented.
So in majority of the cases, it is the leader who initiates the price increase and the followers follow. So you would already have a fair estimate as to what kind of price increase you'll be able to take in 80% of your India portfolio, which is not covered by NLEM. So would you like to guide us as to what percentage price increase you will be able to take?
So you're right in a way that wherever we have market leadership, we are in a position to command the pricing. But at the same time, we are also price leaders in most of the molecules that we have been first to launch or where we hold significant market share. So we are already at the price point where competitors are a little bit lower than us or maybe, at max, along with us. So what happens is we will have to evaluate based on the indirect competition also.
But the maximum -- to answer your second question, the maximum price increase that we can take is 10% for the whole year on any given brand as per the NLEM, NPPA. And it is, of course, linked to the WPI and NPPA guidelines to restrict us to take not more than 10%. So that's an exercise that we take -- undertake. And then we increase the prices as and how we find it appropriate.
I understand. Secondly, when it comes to, let's say, Asia or your Africa branded sales, would the dynamics be similar? I know the NLEM concept doesn't apply there, but [indiscernible] prices. But what kind of price increase would you be able to take in your branded markets?
So Asia, some of the countries actually follow a similar method like NLEM. Like Philippines has a list of essential medicines. And there also, they have -- but of course, we don't have any of the brands in that particular list. But we are able to pass on the pricing because as you know, the inflationary price pressures are being faced by all the competitors across the globe.
So this is a common practice now in the last 6 months, 9 months that we are seeing that companies are very comfortable taking the price increases across the globe in every segment, every country. So we are also doing the same. And as I explained earlier, we take a very, very meticulous and on-the-ground approach and then look at each brand and then take the price increases.
So at the bucket level, let's say, on the Asia business, would the price increase be high single digits or low single digit or low double digit? Because the cost inflation clearly reflects more than that.
So I think let's look at the company level only, that is the better way. We don't give out the margins on a region-wise basis. So as we said, for the current quarter, the 3% extra COGS which we have seen against our typical 24% or we've guided 25%, we've seen 28%. So what we said is 1.5% is because of the onetime inventory write-off and 1.5% is because of the price erosion. So if you remove that 3%, then we [ are at 1.25% ].
Next year, what we are saying is that going forward, this 1.5% price erosion is here to stay, but we are going to recover this by increase of the business from the branded generic business, which also includes the price increases, which will have a higher margin.
So this is how our plan is to recover with 1.5%, and we are giving an item about 25% gross margin -- cost rather, 75% gross margin for the whole company. I think it will be too difficult and not possible for us to give you a reason why the price increases and the time lines on when it's going to happen. It will not be relevant also to [indiscernible].
Fair enough. Fair enough. Just one last question. So out of your total COGS, let's say your total COGS is INR 100, how much is the API cost and how much is the cost of formulation? I understand you also buy finished goods for some businesses. So if you could give us some rough split how much is your finished good purchase, how much is formulation cost and how much is purchase of API and other key starting material?
Good question. I don't know if I have the figures with me. Do we have the figures? Yes, go ahead.
Yes. The purchase of stock in trade is about INR 136 crores out of the total material cost of about INR 832 crores. So we are talking about 20% -- 15% -- around 15% to 16% of the total material cost which is being purchased directly, and they're called traded goods. So that is the component. Balance everything is with the in-house material APIs and packing material and consumables, which are going to be consumed there.
Yes, sir. So again, sir, how much is the -- so how do we balance INR 700 crores? How much is our third-party purchase of API or raw material, if you could just zoom into that number a bit.
See, we purchase the entire API from third party.
Exactly. So the INR 700 crores will include...
As I said, out of INR 832 crores of total COGS for the year, INR 136 is for the purchase, that is purchased from the third parties, finished goods.
Formulation.
So out of the balance INR 700 crores, there will be some cost of conversion of API to raw material, right? And some costs of...
No, no, no. It is only raw material impacting material consumables. The manufacturing costs can be other expenses.
Other expenses, the power and fuel and all that, okay.
Yes, yes.
Yes, yes. So INR 700 crores entirely is basically third party materials?
Yes, yes, yes.
The next question is from the line of [ Bino Pathiparampil ] from InCred Capital.
Just a couple of questions from my side. First, just a follow-up on Chantix. I can see there are some tentative approvals on the U.S. FDA website, whereas I don't see you have tentative approval. So would you have to wait for those guys to launch the product before you launch? Or you think you can go along with them on day 1 if you get approval in [ time ]?
Unfortunately, I'm not able to give you a more detailed answer on this. There are different components associated with this product. We are -- these are many touch points, which -- one is price, exclusivity, the FDA approval. So I think I'll have a limitation in giving you more visibility on this product.
Okay. And just have you done any settlement yet or no?
Yes, yes. We have the raw materials, packing materials ready with us. So the day we get the product approval, within 60 days, we'll be able to reach the inventories to the U.S. market. The good part about this is the Pfizer and [indiscernible] Apotex, I think, ramped up this thing. So earlier -- I'm not sure Apotex, but some other company, I think [indiscernible].
So the good part is that market, which was at risk of melting or becoming nonexistent, is back up again. So that's the good news because unit-wise, the market is again back to the pre-nitrosamine challenges. So for any new generics, which are coming in, there will be a bigger pie from which they can take a share.
Okay. I guess, Endo is the one who has launched what you mentioned, right?
Right, yes.
Okay. And do you have any sort of settlement with Pfizer yet or none so far?
As I said, I'll have some limitations in giving you visibility on this, so matters of confidentiality agreements are sub-judice.
Okay, no problem. And just another question about the Africa Institutional business. What's the outlook for the coming year?
We continue to give the guidance for the flattish nature. What we have on current year, we should be able to do that kind of business next year also.
The next question is from the line of Alisha Mahawla from Envision Capital.
Sir, my question was with respect to the branded business in the emerging markets. We've obviously seen very strong growth this year, and we're talking about achieving a mid- to high teens growth on top of this. Is my understanding correct?
That's correct. Yes.
And can you break down into where do we -- what will be the growth drivers or why are we expecting this business to achieve such high growth on such a high base?
So the other thing is -- what they are. I think new brand launches, gain of market share and price increases. And we are confident that we can win. And also, we are taking -- undertaking expansion wherever we feel it is appropriate in terms of adding the numbers of the medical representatives in every country. So this is what will drive the growth, and we are reasonably confident that we should be able to achieve these objectives. Yes?
Okay. Sure. And with respect to our margins, we just called out earlier that we're expecting it to be at about 28% level. But post the -- with improved utilization at Guwahati, we were expecting this to be closer to 30%? So is there a reason why we're expecting that we won't be closer to the 30% mark in the near term?
Basically, I think the price erosion in the U.S. is impacting us to some extent. Plus also, we are now investing on the next phase of growth for next 4 to 5 years by investing more on the product registration and for the people, et cetera. So because of that, it is a conscious call that we are taking. We would like to really work on that. We are talking about higher resources allocation for the Branded Generics business. So because of that, we expect that it should be somewhere around 28%.
Okay.
So I think just to add on, on what your question was, the fact, as we said that we are adding more resource, attention, focus on the Branded Generic business, so that is what is increasing the expenses also because we are adding people, we are increasing the promotion.
So all this is adding some R&D expenditure also because we are putting a lot of trust on developing new products, filing for registration. So this is kind of slightly elevating the expenses, resulting in to still be able to maintain a 28% EBITDA, which is still a very healthy EBITDA to have. So this is primarily looking forward for next 3 to 5 years.
[Operator Instructions] The next question is from the line of Nitin Gosar from Invesco.
Two questions. On R&D, R&D now is around INR 200 crores for the year. Dollar-denominated number could be around $27 million. Could you help me understand where are we investing a predominant growth? If it's coming from branded generics, then why the investment is so high for R&D?
Yes, almost I think it is 50%, 55% is for the regulated markets, U.S. and around 45% orders for the India and the emerging markets.
What Nitin, I think you are trying to ask is that the R&D expenditure is high according to you in terms of the Branded Generics business. That's what you are trying to say, right?
What was it compared to the previous year?
Yes.
Previous year -- the last year is not a like-for-like comparison.
Yes. Because previous year, you can see that because of COVID, the R&D was almost not working for 6 months. So that is why the expenditure was lower. But if you see the year before, I think our expenditure was almost about INR 240 crores. So I think we are talking about consistently investing on the new product registrations, new product development, even for the emerging markets and India also.
Just to add to that, R&D is what has given us the edge to be able to launch all the new brands in India as well as in the international markets. And most of these formulations, we have been the first. So in that sense, we have been investing reasonable amounts in R&D, which has helped us to gain a competitive advantage in the market.
Okay. And what should be the ballpark understanding on U.S. market R&D investment, like $13 million, $14 million, and we're doing filing of around 10 to 12 a year. How should we gauge the investment ratio? Is it high, moderate according to you?
So we have [indiscernible], the ANDA filing, and we are looking to file 10 to 12. Current year, we ended up filing 8. But there are some products, which got skewed towards the end of the year, and we are expecting a larger filing in the Q1. So next year, it could be, in short, 10 to 12, it could be higher than that also. So I think in terms of percentage, as I said, you can estimate around 55% to be for the U.S. regulated market of R&D spend and 45% is for India and the emerging markets.
Okay. Okay. Second question is with regard to working capital. Arvind-ji, you mentioned we are going back to the pre-COVID days on debtor days. But if I were to take a combination of inventory debtors and payables, we have gone to almost a level where we have not seen this company for the last 7, 8 years. Our understanding of earlier 5 years was anywhere between 3 to 4 months and now we are surpassing 5 months on inventory day -- on working capital.
Yes.
What are we trying to do out here? Why is it going up? And what can result it to come down ultimately?
No, for the inventory, slightly you've seen last year, we had ramped it up because of the COVID uncertainties, and that was a conscious call taken not to get stock out of the market, which we are now pruning down slowly. And currently, you've seen, from 90 days, it has already come down to 88 days. And maybe there is some scope to taper it down further, number one.
Number two, there are some inventories which got built up because of the new product launches expected for the U.S. market. That also got added up, and we didn't get the ANDA approvals. So that also slightly elevated. I think other than that, there is no concern on the receivables. I think it is 110. Maybe at the end of the quarter, probably the billing, [indiscernible] is developing into slightly higher outstanding. But there's nothing to be concerned about. I think we are at very normal levels.
The point is, only if I were to see numbers in last 4 years, it's moved from 120 days to 128, then 145 and now 160.
Total working capital.
Total working capital, right.
I think, Nitin-ji, where -- there, I think -- and I mentioned last year also the same thing. I again repeat that the U.S. business has got definitely higher inventory and higher receivables. So that is something which we explained last time also that, that is the cycle which is there in that particular market.
And we strategically have placed higher inventory for that partial market. Plus also, the cycle there is a little longer because of the cashbacks, et cetera, which I explained last time. So if you are comparing 4 years back, then our U.S. business was very small. Now the U.S. business is higher. So naturally, to that extent, it has gone up.
Okay. So we should consider this number as a steady state number, 160 days? Or it should...
Yes, I think this is a steady state number. Now there maybe, as MD said, there may be some scope for improvement, but nothing major really.
The next question is from the line of Harsh Beria, an individual investor.
Am I audible?
Yes, you are audible. please go ahead.
Congrats for the good set of numbers. I was seeing on the FDA website that Ajanta got an ANDA approval for generic bystolic in March. And I also remember, like last time you guys said that we cannot get approvals unless FDA inspects our facilities. Does that mean there was some kind of inspection at our facility?
No, there was no inspection. So it is an FDA call, which they feel under the review that they can approve the product without having to go for the factory inspection. But purely during the review cycle, the call is taken by the FDA. So there could be approvals, which may be received without the inspection also. And there are a lot which get tied up with the inspection. So with the plant in question, no, we have not had the inspection for our facilities from the FDA.
Okay. My last question is about domestic trade generics. I've seen that this business has scaled very well. I think it's already up to INR 170 crore levels. What's the Ajanta -- what's Ajanta strategy in this business division?
The overall strategy in this is we are trying to focus more on specialty as against just general product range that is there. And we have gained a tremendous acceptance with the [ trade ] and also with the pharmacists, chemists and the patients. And that is what has given us the traction and the growth that you see, crossing INR 100 crores in this year.
And are the gross margins similar to the Branded Generics in the trade generics division?
No, gross margins are much lower, as you can expect. They are much lower. But yes, they are lucrative enough for us to be able to operate in it.
Okay. Can you give like a broad range of gross margins that this division might be making? Is it similar to the overseas gross margins of 55%, 60%?
No, we don't give the individual gross margins for the division-wise.
The next question is from the line of Surajit Pal from BOB Capital Markets.
As you have mentioned that you are also getting into non-pharma business in API segment. Could you throw some light to your plan and how aggressive you are into getting into that? And what would be the approximate revenue going forward?
No, I think there is some misunderstanding. We are not getting into non-pharma or in API business at all. We are very firmly interested into formulations, and that is what our core strength is. And we will like to build on that itself.
Okay, okay. And do you think that current level of marketing expenditure or other overhead costs will maintain at the same level? Or do you expect that there will be growth further?
No, I think it will be at the same level, barring the normal inflation. Definitely, that will [ refill ]. But otherwise, it will be almost at the same level.
[Operator Instructions] As there are no further questions, I would now like to hand the conference over to the Mr. Yogesh Agrawal for closing comments.
Well, I just want to thank all of you for joining this call. If there are any questions, which were left unanswered today, please feel free to reach out to our Investor Relations team. Once again, thank you for joining us today.
Thank you, everybody.
Thank you.
Thank you. On behalf of Ajanta Pharma, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.