Caplin Point Laboratories Ltd
NSE:CAPLIPOINT
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Caplin Point Laboratories Ltd
Earnings Call Analysis
Q3-2024 Analysis
Caplin Point Laboratories Ltd
The company is poised for growth with expectations of FDA approval for around 14 products within the next 12 months. Additionally, within 8 months, it plans to secure licenses for distributing these products in all 50 U.S. states under its own label.
The company looks forward to launching 6 to 7 products in the first year, leveraging its expanded U.S. market presence. Sales have been strong, matching the full year of FY 2022 within just the first 9 months of FY 2024.
The financial performance remained solid with a gross margin of 57.1% over the last 9 months with hopes to maintain a profit after tax (PAT) margin of around 26% in future quarters, slightly above the anticipated 25%.
Sales have seen a healthy increase of 15%, translating to approximately INR 150 crores, but the spotlight shines on the remarkable profit before tax, which is expected to increase by INR 90 crores.
The subsidiary has performed well, meeting its set targets and generating about INR 210 crores. Despite some uncertainty regarding the availability of a particular raw material, the company remains confident about achieving its Q4 target, aiming close to the INR 300 crore mark.
The company’s capital expenditure plans, particularly in general APIs, oncology APIs, and the oral solid dosage (OSD) facility have faced delays. However, these delays appear to be strategic, as the company has found opportunities to add more niche products. Plans for oncology APIs and OSDs are being shifted to a new location at the Thervoy industrial estate. The projects at this site are expected to be completed within the next 9 to 10 months.
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Ladies and gentlemen, good day, and welcome to Caplin Point Laboratories Limited Q3 FY '24 Earnings Conference Call hosted by Dolat Capital.
[Operator Instructions]
Please note that this conference is being recorded. I now hand the conference over to Mr. Kapil Yadav from Dolat Capital. Thank you, and over to you, sir.
Thank you. Good afternoon, everyone. On behalf of Dolat Capital, we welcome you all to the Q3 FY '24 Conference Call of Caplin Point Laboratories Limited.
I take this opportunity to welcome the management of Caplin Point Labs represented by Mr. C.C. Paarthipan, who is Chairman of the company; and Mr. Vivek Partheeban, who is the CEO of the company; and also we have today with us Dr. Sridhar Ganesan, Managing Director; Mr. D. Muralidharan, CFO; and Mr. Sathya Narayanan, Deputy CFO. And now I would like to hand the conference over to Caplin Point management to take the proceeding forward. Over to you, sir.
Thank you, Kapil, and Dolat Capital. Hello, and good evening to everyone. Welcome to our earnings call to discuss the results of the Third Quarter and 9 months for financial year 2024. Please note that a copy of all our disclosures are available on the Investors Section of our website and as well as the stock exchanges. And do note that anything said on this call, which reflects our outlook for the future or which could be construed as a forward-looking statement must be reviewed in conjunction with the risks that the company faces.
Conference call is being recorded, and the transcript along with the audio of the link will be made available on the company's website as well as the exchanges. Also do note that the audio of this conference call are corporate material of Caplin and cannot be copied, rebroadcasted or attributed in the press or media without specific written consent of the company. I would like to now hand over the floor to our Chairman for his opening remarks.
Thank you. Good evening, ladies and gentlemen. Welcome to our Investor Call. [ Whatever ] that Caplin discovered new cost rates in the [ road less traveled ]. We also learned that if we are unwilling to risk the unusual, we have to separate from the ordinary. The smaller geographies that are considered insignificant by the major companies have become the center of gravity for our core business. The current cash flow and profits are mainly from the smaller markets of Central America in addition to U.S. now.
We are entering into markets such as U.S., Mexico, Chile and others. The U.S. story will be made up by the COO, and I will talk now on Mexico. Mexico is the second largest market in Latin America, and Mexico's advantage is a geographical proximity and cultural compatibility to both South and North America. We have already filed 24 products in Mexico and received the registration of 5 in the recent past. We are sure of increasing our filing to at least 60 to 70 before the end of 2024. We already started outsourcing [indiscernible] from some recruited companies from China. We are also aware that we have been exporting quality products directly from China to Latin America, especially to the smaller market.
Now we are moving to the next level of business in the form of outsourcing from China companies for the regulated market. Here, we are using our advantages and the experience of catering to the market such as U.S. which helps us to the bigger companies in China for our [ second meaning ] in the larger markets of Latin America. We also understand that there are some big companies in India, which imports insulin and other biological products from China in bulk and do the fill and finish before they export to the regulated market after conducting the necessary clinical trials.
We do have plans to identify some good companies to do the same as you also have the necessary -- where it does in the form of CRO, which has been approved by USFDA where we can send the clinical trials before we market the products. This will be an asset-light model where we did not have to invest huge money to manufacture the biological products from the scratch. We're also getting into business of manufacturing Dual-Chamber Syringe line for the Central American market shortly. The machinery will be installed either in March or April and the registration may take 6 to 9 months before we hit the market.
Here, the volume of business may not be high, but the profitability will be very good, and there is only one competitor that too is a multinational company. We'll also be starting one more warehouse in Guatemala border, which is closer to Mexico and many of our customers feel that it's very difficult and expensive for them to come to the capital of Guatemala. This will also increase our profitability and cash flow in the coming years.
You are aware that we had a sale in CPHI Barcelona and the response is really good. Since we are planning to go for more and more of these type of starts and various exports to reach to the B2B customers too. The COO will also brief you about the participation of the exports and reinstate to understand the uninsured and underinsured customers of the U.S. market. We will continue to focus on the bottom of the pyramid and also the bottom of the business pyramid where the traffic or competition is always lesser.
Now let me share a few words about the step-up of our facilities. We have completed Phase II in our CSL and the commercial production of the line started in the mid-October of 2023. That's one of the reason of 9-month sales of CSL which is 40% higher than the previous year. We also have done some work in Phase III where we still defer -- not decided anything in terms of actually starting something, and we are verifying the technical suitability and commercial viability of fill and finish shops, biological products, which includes insulin.
Caplin one is Aramco facility, where we are all set for the Indian inspection on the cost and total cost this month for the tablet and capsule. We also have under Aramco registration in Latin American markets where we are very confident of doing business in the initial stage itself unlike Caplin's tariff. Our injectable and API for Aramco facilities will also be completed in 9 to 10 months from now. We are sure of doing profitable business in future after the completion of our injectable division and the restoration.
Also true that we have been delaying the general API facility in Vizag as we are looking for some niche products other than our own injectable API for active consumption. Finally, we are appointed an API expert, who file 10 BMS for some niche products and he has joined this team recently. He will now focus on the completion of Vizag API at the earliest.
Now let me come to the important area of my focus for the last 2, 2.5 years of managing the CSL facility to make it very unique. My stake in the factory initially and the subsequent states are closer to the factory made me to understand the importance of perfection for integrity, quality and safety in addition to improvements in productivity. I personally went to the shop floor areas many times in the day and night to find out some deformity in [ minds ] whom I removed them later.
I want to start this factory next to my village only to help the poor not to become more poor. I also learned the bottom-up approach which helps the company to reduce the deviations and [ OAS ], which are very important for any pharmaceutical company and needless to say, we expect [indiscernible] FDA facility.
Further, we have also digitized many areas except the 3 important areas, such as Logbook, [ VMR and VCR ]. Our e-Logbook will be completed by May or June. The remaining 2, [ VMR and VCR ] will also be digitized before the end of 2024.
In addition to this, we also installed cameras and biometric access control to monitor and review the activities of people in various areas while ensuring empathetic world to our employees, we also felt that the revenue, monitor and control are mandatory for ensuring integrity, quality, safety, and productivity. The last but not least is that we are constructing a free hospital, mainly for cancer and [indiscernible] and also prevention and rehabilitation of patients with stroke, which -- for which there is no hospital in the entire districts.
Finally, our business is all about chance encounters and how to translate into choice architecture. Our choice and choice architecture will make us to reach our dream destination in the years to come. Thank you. Thank you very much. Now I will hand over actually to Vivek.
Thank you. I'd like to give a little update on the Caplin Steriles business, which is much more focused towards the U.S. We've had another encouraging quarter for Caplin Steriles. As you would have seen, we've matched the previous year's full year sales within the first 3 quarters of this year. And with the rate that with the current quarter is heading in, we feel comfortable that we should finish in a fairly strong position for this year.
In addition to the expansion of capacities, we've also managed to put those capacities to use quickly, which is important, we feel because we were running on 2 commercial lines and then we were getting quite a lot of approvals, which neither the third line as well to ease the pressure from the first 2 lines and we've been able to successfully manage that in the last quarter and continues on in this quarter also.
More importantly, we have not lost track of our filings, which is important for our future growth potential. We are happy to inform you that we have around 14 products that are under active review with FDA and we expect most of these to be approved within the next 12 months.
Some of these are ophthalmic products, which we have a line that is largely underutilized at the facility. So we will be aiming at launching these products as close to the approval date as possible. The rest of the products under review are all under active development are a healthy combination of injectables and vials, ready-to-use injectable bags, inventory suspensions and medicines, and also ophthalmics. We will also shortly be working on a pipeline of pre-fulfilling product as well. So you can imagine that we are trying to cover a broad spectrum of products that are used in hospital and clinical settings. This will certainly be augmented when some of our oncology injectable start to feature in the coming years onwards.
We are also pleased to inform you that our front end in the U.S., CSL USA Inc., is making good progress on the state licensing activities front. In the next 8 months, we will have licenses to distribute our products in our own label in all 50 states in the U.S. We hope to launch around 6 to 7 products in the initial period within the first year itself. And as Chairman was saying, we are going to be attending more and more exports in the U.S. trying to identify the underinsured and uninsured population, which we believe is anywhere between 30% to 35% at this point. And these pretty much belong to the Tier 2, Tier 3 cities and also Tier 2, Tier 3 buyers of the U.S., which is what our focus will always be on, including in Latin America.
This also will not have any impact on our current business partnerships in the U.S., which is more of a B2B model because our partners are much larger in size and they are much more focused towards the GPO-related business. We have also filed several products in Mexico, Canada, South Africa, Australia, et cetera, and we can start to see some non-U.S.-based revenue within the coming 18 months.
So overall, we are making good progress on the U.S. side and with prices stabilizing and also injectable shortages continuing, we feel that our laser-sharp focus on digitalization and quality and supply continuity and Caplin Sterile will certainly augment the company's progress in the years going forward. I would like to request our CFO to throw a little light on the numbers before we can open up the floor for questions.
Thank you, Vivek. Good evening to all of you, who have joined us on the call, welcome you all once again. This is Muralidharan, CFO. One more quarter with attractive results. The 9-months have been pretty good as we have already reached FY '22 sales in the 9 months of FY '24, CSL, our subsidiary has also reached I'll entail FY '22 results in 9 months of FY '24, which is a commendable achievement.
And also, as we have been talking about excellence of contribution margins on the PAT level, we are way above what we have promised to the market. We said we'll be around 55% average, we are at 57.1% for the 9 months, and we hope that we'll be able to maintain on 26% for the coming quarters as well.
And as far as the PAT is concerned, we are 26.4% as against the 25% what we said we would be able to sustain. So in the one-off quarters will have higher margins and higher profitability. And what is [ fastening ] here is the sales have grown by 15% which is about INR 150 crores in terms of numbers, but the profit of the -- profit before tax will go by INR 90 crores, meaning the balance of it being closed increase in contribution, 75% of it is directly for TPV.
Since we have been really discrete in handling our expenses, but a couple of years back, when we took over the channel partners and then brought them into our fold, there was some concern about the expenses going up or not because bearing fruit now and the company is not recruiting. And then we have been able to contain the expenses at a manageable level and that has shown in the flow of 75% and increase in contribution margin to the PBT directly. And as far as the other numbers are concerned, they are already with you for a while now. And I will not take much of your time. And if there are any questions to be asked, we will be more than glad to take those.
We can now open up the floor for questions, please.
[Operator Instructions]
We have our first question from the line of Rohit Singh from [indiscernible].
Congrats on a good set of numbers. My question is on towards the -- like do you see any kind of near- to medium-term risk either due to Red Sea crisis or any other specific reason to maintain our growth trajectory going ahead? Because like you mentioned in your presentation as well due to Red Sea crisis, we have been shifted to CIF model from FOB model. So can you please put some color on that? What is the situation right now and how it is going to be in upcoming quarters?
Red Sea issues will not have any major impact to us, the reason being we have our stocks next to the customer. If you look at our stock actually, we always keep our stocks -- sufficient stocks next to the customer in our warehouses.
We also have stocks in transit. In addition to that, as we also actually have some of our consumers or most of our consumers have not [indiscernible]. There is one issue in the format that the slight delays, like no soon to come, delays and also a slight increase in what we call no freights.
These 2 things can be handled very swiftly by way of increasing the prices. So the product that already reached to the warehouse, we are now in a position to increase the price because of this issue. So it's going to actually help us in terms of profit in the future. So far, we don't have any major issues. And on top of it, I would like to tell you 1 thing which is very important in the form of liquid assets of the company. Today, your liquid assets to the tune of INR 1,550 crores. There, our total revenue is only INR 1,290 crores. I'm sure this will clearly show you that we have a very sensitive actually now balance sheet.
That seems good. And sir, like you mentioned about the biologics importing into India and then doing some clinical trials, can you put some more color like what kind of opportunity do you see here? Or whether it will be done via Caplin Steriles or we are looking for a new facility there on?
This customer, we can either be there or a new facility depending upon the viability. Whatever for mentioned sites with some actually consultants, and I also met a couple of people who are actually -- who have been doing this by importing from actually China, some good companies and then what they do is, as I told you in course of my speech, they'll do the fill and finish, and they'll do the clinical trials depending upon the country. If you want to launch in India, then you have to do clinical trials in Indian people, for which our CRO will be very useful.
If you are to launch in other countries then of course you'll have to do clinical trials in that particular country before we launch the product. But not many companies of our size will be in a position to think of actually getting into this business. The reason being we have exposure to China market, which are, a, that we have been doing business for the last 15, 16 years; b, we're also aware that our cash flow is very comfortable to import and then do the clinical trials and also to any country wherever there is an opportunity.
We will take the next question from the line of [ Sam Sharma from Nano ] Financial Services Limited.
Sir, I have 1 question. Like in presentation, you have mentioned that you are converting from FOB to CIF, is that will be like margin-dilutive or what is the issue with this?
I'll request my CFO to give you the reply to it, please.
This last piece, it is only to address actually, there's no really impact on the margin assets. There are 2 things we are trying to achieve by way of converting them into CIF from FOB, one, being a corporate group, we are able to mobilize the -- optimize this race car and available to pull the goods and then our container forming will happen possibly in earlier, right? And the availability of ships also will be faster. And then we will be able to reach the goods earlier to be at the port.
Actually, as we have mentioned in the past, we have a warehouse in Guatemala. The other countries can be serviced from there. Once the goods reach to Guatemala, there are some of the countries, it goes by road, one country, it can go by ship. The each country [indiscernible], other countries, it can go by a maximum of 2 pp days. When you are able to -- won't take goods but Guatemala, we're able to get earlier containment, earlier ship availability and then also freight advantage. This is the [indiscernible].
Yes, sir. But I think like it will be more efficient. But on margin side, other expenses will increase or it will be like stagnant?
Just nothing to worry about on the margin side as the fact we were telling earlier will be slightly incurring lesser only.
I would like to add 1 more thing. Except 2 countries, most of the countries are connected by road, Guatemala to Honduras, and Guatemala to El Salvador, Guatemala to actually Nicaragua, Guatemala to Panama, Guatemala to actually all these countries, they are connected by road, except Dominican Republic and Ecuador as you rightly said.
Okay, sir. And like you have told earlier that we will have INR 300 crores revenue from Caplin Steriles. So we will be able to achieve in FY '24, INR 300 crores?
Now we all said actually in the form of achieving something, either it's closer to that one, or maybe this reason, the only issue, sometimes there is a supply chain problems, which are also over. We have orders, we have enough capacity to actually manufacture.
We're very honest with you, there is 1 API, which we are expecting now. We may get it, 99% we will get it. If we get it, yes, we will be able to achieve something closer to what we have committed or exactly what we are committed. If that is not available because you know very well, especially for the U.S. market, it's not like other countries where it can use actually API, which has been actually what I call the mention in the base year. We cannot -- we are not allowed. And even if you want to change the API that takes actually sweet time. So this is the only issue which we have now. One other thing depends upon maybe a week to 10 days' time, I don't know will come to. [indiscernible].
Q3 number for Caplin Steriles, Q3 numbers?
So we're at about INR 210 crores. We've, in fact, completed whatever target that we set to achieve for ourselves. In fact, we are confident that Q4 also will be able to achieve. But like Chairman said there's 1 particular raw material that we are expecting but so far so good. We don't want to project a negative picture or anything like that. But even if not, we'll go very close to that 300 number.
We have a next question from the line of CA Garvit Goyal from [ NVEST Analysis Advisory ].
I'm audible?
Yes. You're audible.
My question is on the delays happening on the our CapEx plans, particularly on the general APIs and oncology API and the OSD facility. So is there any specific reason like in this particular quarter, we have changed our presentation and I think there is a delay of 2 quarters as compared to the last presentation. So can you please put some color on the delays happening on this ground?
Yes, I would like to tell you, as I told you in course of my speech, in general API, we wanted to complete it for the Caplin consumption. Later we have found out that there is an opportunity for us actually to add some more. And that we were looking for a niche actually in [indiscernible] products, which, of course, we have found a person, as I told you before. So now that actually it will be speeded up. And this [indiscernible] was delayed by the reason, I've mentioned in course of my actually speech also.
Coming to Onco, we start up doing it actually in the existing facility. And we have been told by actually our head of project that we could be there. But later, we felt it cannot be that viable in the sense, this is a product API, you need more labs. When you expand that the later date will not be in a portion to up kind of a bit the API there. So now what we have got [indiscernible] we have got land at the [indiscernible] in the industrial estate [indiscernible]. That's why we have decided to start it, and we are going to start it now and we will be able to complete it in the next 9 to 10 months' time from now.
So we are completely shifting our oncology plan that's what you are saying?
We're not shifting the oncology. We never started. We are starting our oncology tablet, capsules, as I told you, the commercials will start by actually March before that. And injectables will take 8 to 9 months [ probationaries ] are on the way. We will install the [indiscernible] the station [indiscernible].
While you reconnect, I will just explain what Chairman was saying. So as Chairman was saying when it comes to oncology plan, the initial aim was to have it as close as possible to the formulations plant, the initial formulation plant as well. But now what we decided because as we expand into oral solid dosages also into oncology, this might require an expansion of capacity. So we've decided to put this project into Thervoy industrial estate, where we are going to start those -- our OSD plant also. So in the next 9 to 10 months, we will see most of the project being completed in that.
So that's what I was saying, like, is it the same place or the same land where we are expanding on or the place has been changed?
No, it's a different place, different place. It's the one that we are -- we have already completed the OSD, the oral solid Onco facility and also where the injectable is going to come from. That's called Kakkalur and this is a different place to the one that we are going to start our Onco API one, that's called Thervoy.
[indiscernible] we see that our head of the projects was actually interested in doing it in the form of a pilot plant in the existing facility where we are starting our tablet, capsule and injection. But later, we said the pilot plant may not be enough and we expand actually our operations to various countries. That's why we stopped at that facility that is Kakkalur. Now we are moving to Thervoy industrial estate.
Understood, sir. And sir, I think I was not able to hear you properly. You mentioned about the reason for shifting from FOB to CIS. So can you please give some highlight on that?
That I will request my CFO to give you this one.
So what I said was that FOB to CIS for two reasons. One, as there has been some disruption in the larger cities of [indiscernible] has been growing up as compared to the previous time. We thought it will make prudent idea to call these consignment to all the consignment and then shift it to Guatemala on FOB basis -- CIS basis, so that they reach them and then get redistributed by road. As [indiscernible] was saying it's about 2 days, 3 days transit time from Guatemala to these countries by road.
Only 2 markets which are Dominican Republic and [indiscernible] are taking longer time than Guatemala, we'll address that. So we'll shift 2 things: one, optimization of freight and also making sure that we could be faster. As Chairman has been mentioning very often, our strength have been that having the inventory closer to the customer. Even today, when we say that we are not disturbed or affected in the near system because of the Red Sea issue is that, that we have enough goods available in our own warehouses in the market such that the sales would not suffer.
So you are saying via this route, we will be able to take the products faster as compared to the sea? That's what you were saying?
Route doesn't change, route doesn't change. There are 2 things, if you were to make a former consignment only for 1 market, it takes a longer time. And availability of ships are that much limited. When they're pulling all the puts and selling to 1 particular [indiscernible], these will be available that I will be able to form containers faster than earlier and the immediate available ship [indiscernible]. I am not changing the route. That is all possible also.
I just have 2 points here. See, the note that around 30%, 32% of our containers go from China, which actually takes a different route. And even from India, the 1 which used to take the Red Sea route, now the transit time has increased by about 10 days as Chairman said because they avoid that route and they go across the horn of Africa. So that's also a reason. So the consignment is not at risk, but it is delayed by about 10 days. So rather than shipping into each and every country, we pull it and then ship it to 1 country and move it by road from there. That's basically what we are trying to achieve.
We have a next question from the line of Alisha Mahawla from Envision Capital.
Yes. I just wanted to understand on the LatAm business, last couple of quarters, it looks like the growth has moderated quite significantly. But at the start of the year, we had spoken of [indiscernible] products that we will be starting Softgel, et cetera. There was also a 4 million onco products that I think is supposed to start on H2, but we're not seeing any pickup. Is there anything more specific that's happening in the LatAm market for us currently?
Are you able to hear properly, because I...
I was also not able to hear very well. I think the line is...
Sir, I wanted to understand the LatAm business, the growth has moderated to a very large extent versus what we used to do earlier which was 20% plus. Now we're in low double digits. At the start of the year, we have said that multiple initiated new products like with starting Softgel, there was a [ 4 million ] onco product that was supposed to start from H2. But we're not seeing any significant pickup. So I just wanted to understand are there any other challenges or what is happening in a LatAm core geography right now?
Let me answer to these questions briefly, because we have been telling to actually our investors, our's is actually a company which is driven by the profit and cash flow. We are not very keen to increase the top line. You know very well top line is [indiscernible], bottom line is [indiscernible]. Cash is actually cash in the bank is [indiscernible]. If you want to increase the business, you could have in place and what has been happening actually, even the form of like strengthening the bottom line. That's the reason I mentioned to another investor that our liquid asset is in the form of INR 1,550 crores, which is much more than actually the revenue of 9 months.
So it is, I'm sorry to differ with you that we have saturated in Central America, Latin America. But again, definitely, we will now -- will do well once we enter into the bigger geographies of South America, like Mexico, Brazil, Chile, Colombia, and all. But these countries, as you know well, it takes time to complete the registration. And then these are countries where we will not be in a position to do big business with the 10 total products. We have to have different buckets in 1 big basket, which is going to happen actually say, 1 year or 2 years from now. That's the time we will do, again, extraordinarily good business the way you ask. But [indiscernible], I also feel sincerely, but our bottom line and cash flow is very, very comfortable.
Understood, sir. And while I do understand that you've always been more careful of the profitability of the business that we do. Just wanted to understand where the next [indiscernible] will come from, which you have explained will be once we enter the new geographies for which the work is ongoing?
My second question is on the gross margin, which sequentially has declined. We did about 60% in Q2, which has come down to 56%. Could the CFO sir, please explain this?
Yes. I'll just answer your first question, and then come to the second question. Actually, the growth has been about close to [ 11% ] of the conventional business. You have to have the 2 factors in the [indiscernible]. One on to base effect, okay? So on the larger volume, we are growing at 11%, on the lower volume was growing at about 17%, 18% in the past, right? That is one thing.
Secondly, on the gross margin, if you have attended our con call last quarter, we already addressed that. Last quarter, we have been only promising around 55% as sustainable gross margin. Last quarter, at a boom, the 60% we could get because of some good orders on some institutional business on oncology area and the 60% was really that we said we cannot expect that to be repeated going forward. So that is the reason why we said and then if you see 9 months, we're at 57% and 55% is what we promised and 56% was achieved. As far as the past is concerned, we promise 25%, we have achieved for more than that. So...
Let me also add some more points actually to your question because as you mentioned what is the path forward. See the status as of now to actually 5 years from now, I would put it this way. See, like 1 year, 2 years, 3 years, 4 years, 5 years is a period where we sincerely say that will be in actually a very, very, very comfortable equation in the form of sustainability and scalability. The reason is we have an asset-light model, and we also have the asset right in the form of vertically integrated company, where we'll be manufacturing intermediates, API, formulations of all sorts of formulation starting from OSD, onco, then we'll have liquid oral suspension 9 months and all that, including various kinds of injectables.
Then we are also moving from smaller geographies to larger geographies actually of markets, which means the volume of business is always high. For example, the population of all these countries put together in Central America is 10% to 20% of actually Mexico, which means Mexican market is 10x higher than what we are doing currently there. It may not happen, you know very well that these cannot happen overnight, it takes a lot of time. So which means that's the reason I'm telling for. So let me also tell you, in the next 2 to 3 years, we will have all the facilities.
And then second, maximum registrations will be completed in the majority of the countries in the next 3 to 5 years. And then the facilities will not be actually manual, it will be digitalized, and it will also be integrated with CCTV cameras and other things where it becomes easy for us to review, monitor and control everything. In addition to this one, as I told you we will also pick up going for an asset-light model for products, which are biologicals, which is biosimilar, RNA or what you call insulin. These are things, even the big companies initially [indiscernible] to import and pick their orders and they all went for their own actually manufacturing. Of course, they are all companies which have deep pockets. We also will be in a position to do it after we take the waters with actually intaking of insulin and other things, for which we have the necessary [indiscernible], which I told you in the course of actually my speech.
Then the surplus cash. Today, we have around INR 800 crores, even if you spend INR 300 crore, INR 400 crore, INR 500 crores in the next 3 years will have INR 1,000 crores. That's the time we think of acquisition of brands, acquisition of actually companies for domestic business. And in addition to that, we always look for something unique in the form of acquisition of distribution companies, which will make us understand where we have to sell our generics, because generic is a business, there is nothing in the form of marketing.
Generic business is based on supply and demand. You only need to understand how many products we have, what is the cost at which you will be able to supply, and the quality wise, once it is supported by U.S. FDA, everybody thinks the quality will not be an issue. It's true also. So what is important is the distribution channel and places where this can reach by avoiding the intermediaries.
Then coming back to one more thing in the form of LatAm, I'm sure in 5 to 6 years from now, we will be the #1 company in all [indiscernible] I can claim that we can do the recent being in the smaller geographies where all these 6 countries put together population is U.S. and Tamil Nadu, we have been close to INR 1,000 crores, INR 2,300 crores. Once we get into the bigger geographies, as I told you in the years to come, we will be the best of the best business, and we are sure of becoming #1 also in these countries. These are the few things I would like to convey to prove that we are approached to reckon with in the years to come.
[Operator Instructions] We have our next question from the line of Sachin Kasera from Svan Investments.
Congratulations on a good set of numbers. I had a first questions on Caplin Steriles. So what would be the current capacity utilization at Caplin Steriles?
Yes. With the addition of this new line, we are at a good shape right now. See, the thing is we don't do much CMO business at all. In fact, what we have signed in 2017, '18 periods, we do a little bit of CMO. But the rest of the capacity, I would say, more than 70%, 80% of our usable capacity, we are actually using for our own. Now with Line 5 that's come into place, we actually have expanded the capacity by more than double. So we are actually good till about, I would say, next 4 to 5 years at least. We don't need any further expansion. .
But of course, we will have to see as and when the business comes in and then at the open point, we feel that there are some good opportunities that can really strengthen the bottom line and top line as well when it comes to CMO, we might look at further expansion, which is why we have a Phase III where we have completed the shell, and we've lifted -- or basically, we've slowed down a little bit just to understand how well we'll be able to utilize the existing capacity before we can move there.
And once this Line 6 is completed, what is the peak revenue we can do in Caplin Steriles? Can you do like $120 million, $150 million in the next 3, 4 years?
We never get into numbers on these, right? So obviously, especially in the formulation facility where we have a multiproduct [ Q&A ], it's very difficult to predict what the peak capacity is going to be. And obviously, as you know, the U.S. is a very dynamic space, right? So what is that tend to be is that 15 tomorrow or 7 the next day. So we don't want to restrict ourselves to a certain number or something like that.
What we see is that with the pipeline that we have in terms of R&D with the pipeline that we have in terms of what is under review by FDA. We are fairly well covered till about '27, '28 at least, 2027 and '28. But peak revenue, we've given a number out in public domain, we feel fairly confident that we can get to that number within that period or probably 1 year after that.
I'd like to add 1 more thing here. Since we are planning to go for our own front end, we will follow the policy of pick and choose, not necessarily relate actually manufacture all and fund these. We will go for products where the profitability is good. That's how we'll choose also once we establish our 10% in U.S. which is in the initial stages, which is in the [indiscernible] stage now.
Sure. And sir, you mentioned that this year, we could be closer to INR 300 crores, somewhere there. Any sense you could give us how is the next year looking like for Caplin Steriles? I believe we have some private equity investors there now that has become very profitable. Are we looking to buy them out? Are we going to go for IPO, if you could give us some sense on that on Caplin Steriles?
It's too early to take a decision on that. They are comfortable. We are comfortable. We are only focusing on actually business now. We are not thinking of actually who will, who are actually and how to go for public issue, please.
Sure. And can you get some sense on financial next year, how is it looking for Caplin Steriles?
As COO said, it's a very dynamic business, especially the U.S. one as you said, what is important actually is to increase actually the buckets, various buckets in the form of liquid injectables and then now we have -- we started getting approvals for ophthalmic products. We'll be getting some more products in the pharma bag and then we also will go for actually our onco injectables later there.
So all these buckets will form on that, but in North LatAm, the situation is totally change. The U.S. market actually is companies, who can do variety and actually novelty to the customer. And now it's changing. Some of the big guys, in fact, actually approach sense and Vivek will be able to tell us about this. One of these 3 companies, which is [indiscernible] you have already know tied with them is -- I think you can tell about our material...
Yes. Yes. So see, of course, we are very confident that next year is going to be quite a reasonable growth as well, right? But we don't want to put a number to it or we don't want to put a percentage to it. We know that we have a very decent pipeline, of which multiple products will start to get approved over the next few quarters. Of course, some of that is not in our hands. What we expect to receive, let's say, in April might end up getting approval in June or something like that. So which is why we don't want to give out a certain number or anything like that. We are very confident about where the company is going. And then another 1 year ahead, I think we will have a very decent basket of products.
Now with all of these approvals coming through, we are starting to get more and more visible in the U.S., which is why I think it is a very good time for us to launch our own label in the U.S. and 1 of the 3 largest distributors in the U.S. has already tied up with us on about 5 products now, and we are in active discussions to create a private label for them for another 4 to 5 products also. So it is, again, in the nascent stages, and we see that there is a certain level of disruption that is happening in the U.S. also with companies such as [ Civica ] and all of them coming and then making deals directly with manufacturers and stuff.
So we think that there's going to be more opportunities in that direction. We don't want to confine also to the GPO space or the CMO space or anything like that. We want to be open to all ideas. And so far, so good. We'll be patient and will be cautious about what we want to do in the U.S.
So the next question is from the line of Shrinjana Mittal from RatnaTraya Capital.
Just a small question from my side. So can you help me with the EBITDA number for the Caplin Steriles business for this quarter?
I'll request CFO to -- did you hear the question?
Yes. Sure. Thank you. This is Sathya Narayanan here. See, the EBITDA for Caplin Steriles for this quarter ended '23, it's INR 11.7 crores.
And just a small follow-up to that. So if we exclude this Steriles business [indiscernible] Steriles, so the EBITDA margin for the 9 months is somewhere around 36% 37%. So is it fair to assume that our core business like [indiscernible] Steriles margins are going back to the pre-COVID range? So for '23, 35%, 36%...
Yes. So as our CFO had explained, I think it would be difficult to look at the company on a quarter-to-quarter basis. So the base number that we are comfortable giving out is that our gross margins are always between 55%, 57%. And our EBITDA, PAT and everything has been very similar, 35%, 36% and then PAT has always been around -- hovering around the 25%. We are today a global company, right? And whatever small size we are still, we are still a global company. I don't think you can net off this and stop that, because that might not present the right picture. Are we growing in the right direction on all levers of growth filing up in the right areas, that's what we have to look at. So we have a consolidated -- we are consolidating our positions in all the areas where we are operating in.
Sir, one more thing I would like to say here about this Caplin Steriles, see our profitability is fluctuating because of the fact of the filing, the [ file ] increase today is $240,000 per product. We are in the process of increasing our filing. We are also increasing our R&D. Most of the companies of our size, they do only CMO. They are not actually companies who are going for their own products. We are not the CMO. We're companies, which are similar to the really big companies. Maybe we don't have that kind of actual reach now, but we are sure of actually reaching to that level, maybe say 2 to 3 years from now.
That was the last question. I would now like to hand the conference over to Mr. Kapil Yadav, for closing comments.
Thank you, everyone. Thank you, all the participants. Thank you management for taking out time for this Q3 Earnings Call. You have answered all the questions. Thanks for that, sir.
Thank you so much.
Thank you.
Thank you for joining Dolat Capital.
On behalf of Dolat Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.