Caplin Point Laboratories Ltd

NSE:CAPLIPOINT

Earnings Call Transcript 2024-Q4

[Operator]

Ladies and gentlemen, good day, and welcome to Caplin Point Laboratories Q4 FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Tushar Manudhane from Motilal Oswal. Thank you, and over to you, sir.

[Tushar Manudhane, analyst]

Thanks, Manuja. Good evening, everyone. On behalf of Motilal Oswal Financial Services, we welcome you all to the Q4 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, Chairman of the company; Mr. Vivek Partheeban, COO of the company. And we also have with us Dr. Sridhar Ganesan, Managing Director; Mr. D. Muralidharan, CFO; and Mr. Sathya Narayanan, Deputy CFO.

I would now like to hand the conference over to Caplin Point management for the opening remarks. Over to you, sir.

[Partheeban Siddarth, executive]

Thank you. Thank you, Tushar. Hello, and good evening to everyone. Welcome to our earnings call to discuss the results of Q4 and full year 2024.

Please note that a copy of all our disclosures are available on the Investors section of our website as well as on the stock exchanges. And also do note that anything said on this call, which reflects our outlook for future or which could be construed as a forward-looking statement must be reviewed in conjunction with the risks that the company faces.

The conference call is being recorded and the transcript along with the audio will be made available on the company's website as well as the exchanges. Please do note that the audio of this conference call are copyright material of Caplin Point and cannot be copied, rebroadcasted or attributed in press or media without specific written consent of the company.

I would like to now hand over to floor to our Chairman for his opening remarks.

[C. Paarthipan, executive]

Thank you. Good evening, ladies and gentlemen, welcome to our earnings call. At the outset, let me present the data of CapEx and OpEx for the last 4 years.

CapEx of the last 4 years stands at INR 800 crore. OpEx has been at -- our OpEx stands at INR 1,400 crores. Cash and cash equivalents is at -- run rate is INR 900 crores, total is INR 3,100 crores. This is entirely from our internal accruals. Here, I have not even added dividend paid also.

Let us also look at market cap. The market cap in 2001 was INR 1 crore and in 2006 it was INR 10 crores and in 2024, as of now, which is INR 10,000 crores. Let me summarize some of the major developments that happened in '23-'24.

You are aware that top and bottom line, cash flow and liquid assets are significant, which I don't want to repeat. Recently, INVIMA concluded the audit in our CP-I at Pondicherry successfully for Softgel capsules. We will be now in a position to list our products, especially Softgel in Mexico, Chile and other major geographies of Latin America. We are also constructing a tablet and capsule section and remodeling the injectable to go for INVIMA inspection in 1 to 2 years from now.

We have also completed registration of 85 products in Chile. We are sending one of the manager from Guatemala to Chile in June to open a new warehouse, which will also increase our business for the current year. We received 6 marketing authorizations from Mexico. We have filed 23 products, another 10 products are getting translated in Spanish for filing shortly. Out of 21 products filed in Mexico, 12 products are from Chinese companies that are EU and USA approved facilities.

I'll be traveling to China to meet some of the big companies for our future business which aligns with our asset light model for biological products. Here, I would like to submit some of the statistics of our export of 3 products in 2006 as well as now.

We exported 6 lakh capsules of Amoxicillin in 2006 from China to South America whereas we are currently exporting close to 350 million capsules of the same product, which is an increase of 600x. We also exported 5 lakh tablets of paracetamol in 2006. Currently, we have exported 150 million tablets which again is an increase of 300x. We also exported ceftriaxone powder injectable of 50,000 vials in 2006, now it is 5 million, 100x increase.

The purpose of telling this one is not to invest in CapEx, which, of course, it's not easy to get the return on investments, especially for the products where China is very, very competitive. These products are sourced from the top companies such as CSPC and Ryan Pharmaceutical. We also test these products in our own facilities in the form of QAC in China and once again in Guatemala in Central America to make sure that the product is in line with international standards. If the quality is no good, I sure we would not have actually grown in the last 18 years of our presence in Latin America.

Again, these Chinese products are primitive products such as penicillin, cephalosporin, paracetamol and others, which most of the Indian companies import this API. Now my visit to China is to source value-added products such as insulin, biosimilars and peptides, which are only manufactured by the big capital corporations of India.

We outsource primitive products in the earlier stages. Now we are planning to go for biological products, which we are sure that will bring -- add value to the company and we will import these products in bulk and we'll do the fill-finish in India and export it from India to other countries where we are currently operating now.

Some big Indian companies have also followed this methodology initially. Later they've started manufacturing their own biological products from the scratch. This will be a great opportunity for our company to increase the cash flow and profits without investing in the facilities that involves huge CapEx.

Let us look at Caplin Steriles. The sales has increased from INR 200-plus crores to INR 300-plus crores now. We're also getting into automation, digitalization and outsourcing of our ANDA in other refurbished facilities which are more of CMOs and also the front-end presence. And all these details will be presented to you by our COO. We have also completed the tablet and capsules section of our oncology facility called Caplin One Lab.

Further, we are commissioning the injectables, which is in progress now and it will be completed, say, 10 to 12 months from now. Once we complete the injectables, we plan to go for EU audit and subsequently for the U.S. inspection. Our API facility in Vizag and onco API are still work in progress. However, we are sure to complete it in 2025.

We're also automating and digitalizing -- digitizing our existing facilities, which will be future-ready for machine learning and AI. But it is also true that we have some challenges in the form of attracting right talents like any other company that grows faster since there is some delay in the completion of our API projects. However, this will not create any impact and it has not created any impact also in our exports in the past, in the present and future too.

Finally, let me quote the following one: Be uncomfortable for a year or 2 to be comfortable for the rest of the years to come. Thank you. Let me invite our COO to give his presentation.

[Partheeban Siddarth, executive]

Thank you, Chairman. So I would like to take a little -- I would like to brief you a little bit on Caplin Steriles business, which is our regulated market and U.S. focused business. So obviously, like Chairman said, there's been an increase of over 50% in the top line. And the split up in revenue is, once again, on a larger basis, once again around 75% of product revenue and 25% in milestones and profit share.

We feel this is commendable because we do not do any exclusive deals. We do very little CMO as a company. So if we went around talking to other pure-play CMO companies, this gives us validation that we had to endure a few painful years in the early stages because we invested heavily into R&D and we invested heavily into creating assets of our own, but we are starting to slowly see the dividends being paid out for that.

So if you did a little comparison between our numbers compared to any other CMO's numbers, you would see that we are significantly better off with a much better pipeline in the years to come as well. The revenue is also backed by a good growth in overall output. We went from 16 million vials last financial year to around 27 million vials. And we've also had 3 ophthalmic product approvals happen in the last few months. We have already launched the first one, and the next 2 ophthalmic products are going to be launched in the coming quarters.

We're also very shortly going to be launching our first ready-to-use bag injectable product in the U.S., which is a very niche area. We have, as of now, 21 approved products, 21 approved ANDAs in Caplin name with another 14 ANDAs under review. They are a mix of emulsion injections, emulsion ophthalmics, suspension injectables, again, ready-to-use bag and also plastic vial products.

Here, I would like to repeat what Chairman said in terms of outsourcing. Our company has been built on a solid foundation of asset-light business for quite some time. So even in the U.S. unregulated markets, we feel that this is something that can be repeatable.

So we are at early stages of discussing with other CMOs where we can slowly start to transfer some of our high-volume but low-value products so that we can start to focus only on niche molecules inside for in-house manufacturing. So this is the right time probably to discuss about our front end in the U.S. because as a company, we've always been very focused towards having control from the marketing end of things, which is what our entire Latin America business is, right?

So Caplin Steriles USA Inc is making very good progress. At this point, we have already received 27 products -- sorry, 27 state licenses out of 50, and we feel confident that over the next 2 to 3 months, we should be in a place -- a substantially licensed place, close to 50 -- close to all the 50 states.

We have another pipeline of 35 products that are under active development that we will be filing over the next 2 to 3 years. But now we're also starting to focus a little bit more towards developing very niche global dossier kind of molecules, which is something along the lines of GLP-1 products, which are your anti-obesity, anti-diabetes kind of peptide injectables.

And we are also happy to inform that our Line 5, which is an expansion that we've done in Phase II of our plant is running very successfully. In fact, close to 50% of all the output that we're seeing in recent times is coming from this particular line.

We also have Line 6, which is a pre-filled syringe and a cartridge line, and this is the one that is being qualified right now. In the next 1 month, I think all qualifications will be completed. And our new peptide injectable products for global markets will be manufactured out of this line. We are moving towards a higher level of productivity now and we want to make sure that we have the same level of compliance and even higher level of automation at this point.

So from our facility, we are already completely automated on the QC and microbiology side. We've taken on a software partner that will be automating all our manual log books to electronic log books in the next few months. That will be the stepping stone for us as we move towards overall automation, including electronic batch manufacturing and packing records.

Once again, coming to the front end. We are trying to do something a little bit different to the tried-and-tested model of supplying to GPOs and larger wholesalers, et cetera. We want to evaluate an opportunity to go direct to hospitals, direct to clinics, hospital chains, et cetera. And even though this might take a little bit longer, this might result in slower top line growth, we feel that this is a much more sustainable and more value accretive kind of method.

And whoever that we speak to in terms of the team that we are trying to build up over there, they seem very excited by it because people, by and large, in general, are quite tired of the amount of consolidation that has happened at the front end with the GPOs, et cetera.

So early stages, but we feel confident that with a large portfolio that we are building on, we should be quite successful over there. And this is also sort of a repeat in pattern from what we are doing in Latin America as well. So that's about what's happening at CSL. We remain -- at Caplin Steriles, we remain quite excited with the growth prospects. We are already at, I would say, a midsize base. We're no longer a very small, but we still expect the coming years to be quite exciting for the company in general.

Now I would request our CFO to briefly touch upon the financials before we can open up the floor for questions.

[D. Muralidharan, executive]

Thank you, Vivek. Good afternoon, once again, to all the participants who have taken time off to attend this investors' call. This is Muralidharan. The figures are already available with you in the website. And I would say that the revenues have grown by 15.5% and the PAT has grown by 22.4%.

How is that we have achieved is on account of 2 or 3 reasons. One, the contribution margins have gone up by about 3%, and the overall contribution increase is about INR 166 crores and INR 10 crores, there's an increase in other income because of interest income has gone up. So this INR 176 crores we have been very judicious and discrete despite the expansion of the various units and then the investment in new API, investment in new onco facility, all those things.

But still we have been very discrete and the expenses have gone up only by INR 56 crores, meaning that INR 122 crores have directly gone into your -- more than 2/3 of the increase in contribution has gone directly into EBITDA that is sales increase in the PBT as such, all the parameters are very good.

And then the PAT is also at 26.19%, whereas we have been consistently saying that we'll be hovering between 24.5% and 25%, which we have over-short and then the performance has come about as Mr. Vivek said from 3 areas. One, steriles has done a very commendable growth though -- albeit on a lower base, so 51% growth which is about INR 108 crores, they have grown.

And then the new Softgel line, which we've commissioned in the month of April, has facilitated not only increase in the volume of sales but also the increase in contribution margins because this is our lead product and most sought after product, and we're operating at almost 90% to 95% of the enhanced capacity as of today.

And as Chairman has put it, we have also cleared the INVIMA audit for this Softgel line and then opening gates for newer markets, larger regulated markets by which time we will also get enhanced requirement.

And as far as the cash and cash equivalents are concerned, it is about INR 910 crores. And the cash flow from operations is at INR 318 crores, which is almost 60% of the PBT. Last year also, we had about 60%.

The sales is growing. There has been an increase in sale receivables. There has been an increase in inventory. We always believe that inventory closer to the market is our strength and which is being proved time and again. Whenever there is an shortage, whenever there is an opportunity, we quickly cash on to the opportunity.

And then with the inventories and -- though the number of days would have slightly gone up and the quantum would have gone up and resulting in blockage of working capital, we are very conscious about what we are doing. And then this will definitely pave way for better growth in the current year and better margins to flow from the market.

So this is it from my side. And if there are any questions from the audience, so we are more than welcome to take it. Over to you, Mr. Vivek.

[Partheeban Siddarth, executive]

Yes. Thank you, sir. So we can open the floor for questions from the audience, please.

[Operator]

[Operator Instructions] The first question is from the line of CA Garvit Goyal from Nvest Analysis Advisory, LLP.

[CA Garvit Goyal, analyst]

Am I audible, sir?

[Operator]

Yes, sir. Please go ahead.

[CA Garvit Goyal, analyst]

Congrats for a good set of numbers. I have 3 questions, starting with the Mexico side. So we have 6 injectable products approved in Mexico and shortlisted around 25 Softgel products also that we are going to file over the next 24 months. So my question is how do you see the things shaping up in Mexico over the next 2 to 3 years in terms of our market share in the target market of Mexico and Mexico's overall contribution to our top line, sir?

[Partheeban Siddarth, executive]

I request Chairman to take this question.

[C. Paarthipan, executive]

See, we are not going to register actually 20 to 25 products immediately because Softgel capsule, which you mentioned, especially Softgel capsule, it takes time because we'll have to actually go for bio studies. We will start Softgel capsules of OTC to start with. But the product that I mentioned in the form of 21 to 22, they're all actually injectables.

And this is going to create another asset-light model for us actually in Mexico as most of the products have come from China. And we, of course, we are getting business from Mexico. Mexico, now we are concentrating more on the tender business. Once we complete the registration of 25 to 30 products, we start our own warehouse and then we'll get into the private market. Maybe 2 years from now, we'll see -- we are sure to see actually sufficient business coming from Mexico.

[CA Garvit Goyal, analyst]

And sir, can you also comment on the status of U.S. FDA approvals for our facilities? Like that is for all existing facilities, are these approvals in place? Or we do expect any kind of audit from the U.S. FDA for the Softgel capacities that we have commissioned recently?

[C. Paarthipan, executive]

Vivek?

[Partheeban Siddarth, executive]

Yes. So our last FDA inspection for the injectable plant was last year. And obviously, there is no set period for when the FDA would conduct inspections. For example, if you look at EU, it's once in 3 years, if you look at INVIMA, it's once in 3 years, but whereas when it comes to the U.S., it is very much up to their own evaluation of when a facility needs to be audited. But we are always following the policy of being any time ready, right? So a state of compliance throughout -- a state of good manufacturing practices throughout is what is needed.

And when it comes to the Softgel plant, we have just completed the INVIMA inspection, and we are not looking for U.S. FDA for this site. We're focused on Latin America much more from this place. And the question that you were asking in terms of 25 softgels, that will be from this plant into Mexico, but that will happen over a period of time, like Chairman said, it will happen over the next 2 years.

[CA Garvit Goyal, analyst]

Yes, sir. And just last question, like on your long-term strategy, which our Chairman cited in annual report of FY '22 of having presence in most of the regulated markets by FY '28 as a result of which Caplin is aspire to convert top line of FY '22 to bottom line of FY '28. So -- but if I look at last 2 years, we have been able to grow our bottom line at 22% CAGR, which is although a decent performance but falling short of -- from our own estimation.

So my question is like we are doing the substantial CapEx and getting our products approved in the regulated market. So do you believe our growth trajectory will shift from this 20% CAGR that is what we have been doing to kind of 30% or more from this year onwards, driven by your U.S. business start obtaining of consistent approvals of the new products in the new geographies along with these new initiatives like fill-finish concept. So can you please put some color on it?

[C. Paarthipan, executive]

Okay. Let me tell you, like currently, we are doing very well in the existing business of Latin America. And the one which we are focusing for the bigger geographies especially Mexico and other markets, Mexico and the U.S. and as you know well, these markets, of course, the entry barriers are quite high.

The registration also takes a long time. As a asset-light model, we are planning to go for other products in the form, as I told you in course of my actually talking. So that will also it will take its own time because once we import the product and do the fill-finish, you are supposed to the clinical trials, Phase III clinical trials.

So all these things, maybe 2 to 3 years from now we are sure to get actually very good business from the market irrespective of the size of the market, whether it's RoW or the regulated market. Until that time we are sure of continuing actually the performance which has been happening for the last 7, 8 years. Is it okay? You want to ask any other questions, please?

[CA Garvit Goyal, analyst]

No, sir. That's it from my side.

[Operator]

The next question is from the line of [ Karan Singh ] from [ KK Investments ].

[Unknown Analyst]

Sir, I have one question. So we are having lots of cash of more than INR 900 crores in our balance sheet. So how are we planning to utilize this cash in the next 4 to 5 years, once we complete the CapEx of the Caplin Steriles? So can you please help me on that?

[C. Paarthipan, executive]

You know the saying, people always say top line is vanity, bottom line is sanity, cash is king. And we keep the cash actually for future acquisition. If suppose if you come -- in case if you come across a meaningful acquisition, that will definitely increase actually our top line and bottom line and cash flow also. That's one of the reasons we, in fact, whatever cash which we generate in the form of additional cash, it gets accumulated over a period of time.

Side by side, we are also completing the projects. And this is not only used for what we call project completion, but also when we group our various products such as biological products and all, that involves a lot of money in the form of Phase III clinical trials, we'll be using it for that also. On top of it, as I told you, this will be used mainly for the meaningful acquisition at a later date.

[Unknown Analyst]

So are you planning to do acquisition in the next couple of years? Or like how are you...

[C. Paarthipan, executive]

It all depends. No, it can happen after 1 year, maybe after 3 years, which we'll not say. The reason is, the opportunities when it comes, and that if it is a meaningful opportunity, we'll definitely go for that one.

[Unknown Analyst]

Okay, sir. And sir, like we have a good dividend policy. So we -- our company is giving increased dividend here like more than 10 years now. So I'd like to check if maybe is there any possibility of maybe buyback or bonus?

[C. Paarthipan, executive]

So far, we have not taking any decision. Anyway, we'll check with our auditors -- sorry, directors and take a call. Thank you.

[Operator]

The next question is from the line of Chinmaya Bhargava from Badrinath Family Office.

[Chinmaya Bhargava, analyst]

I just have a simple question on Caplin onco. Could you just tell me for FY '24, what the losses were that you're carrying on the balance sheet right now? I know you said it will be profitable in 6 quarters or so. I just wanted to understand what the losses are currently in the numbers?

[Partheeban Siddarth, executive]

I will request the CFO to take this.

[D. Muralidharan, executive]

Yes. As of March '24, we are carrying about INR 2.82 crores as the loss for the financial year '24 -- '23-'24. We commenced operations only on 15th of March, and which definitely it will impact in the coming years.

[Operator]

The next question is from the line of Akshat Vijay from Hem Securities Limited.

[Akshat Vijay, analyst]

Am I audible?

[Partheeban Siddarth, executive]

Yes.

[Operator]

Sir, can you be quite loud?

[Akshat Vijay, analyst]

Congrats for a good set of numbers. The business actually have shown some very good performance over the last few years, right?

[C. Paarthipan, executive]

Could you please be louder? So your voice is inaudible, please.

[Akshat Vijay, analyst]

So I'm saying that in the last few years, the business has shown some really good performance, but now we are slowing down a bit, right? And I do understand that there is some distraction period before we expand into this larger LatAm market and U.S. But if you can just throw some light over what kind of growth we are targeting in the near term, say, for the next 2 years, FY '25 and FY '26, then that will be helpful.

[C. Paarthipan, executive]

We told you actually, earlier, we would continue to actually do the way we have been doing it for the last actually 6, 7 years. Slight dip here and there is likely to be there in any company. And it's more like actually a bend if not an end. So what will happen considering the amount of money which we invest in the projects and also the business model differentiation that we have conveyed to you, we're sure that we would likely be in a position to do very well, say, 2 to 3 years from now, please.

[Operator]

The next question is from the line of [ Dikshant ] from DB Wealth.

[Unknown Analyst]

Congratulations, team, for a great set of numbers. The question is to Chairman. Sir, firstly, thank you so much for the beautiful annual reports that you have written. Our family has been an investor since 2016 ever since you said that our top line will be our bottom line, one of the best annual reports that you have written. The profits have always been better to see.

I have 3 questions, sir. The first one being, sir, when you say a meaningful opportunity for a acquisition that we might get, I understand that we are preparing our war chest right now so that once we see the opportunity, you can strike on it. But could you paint us a picture of what a meaningful opportunity would look like? What is it that we are looking for?

[C. Paarthipan, executive]

Okay. I would like to put it this way. We may not be very keen to acquire a company, would be interested in acquiring a distribution company. The reason is, we are aware that we always actually remove the intermediaries and go for the last mile, be it in the form of pharmacy or be it in the form of hospital.

Suppose if you are in a position to get actually some distribution company in the bigger geographies, that will open up the opportunity to understand who are actually the -- which is the last mile in this part of the world. So that one is actually I feel is a good opportunity for us to go for a meaningful -- that's one of the meaningful opportunity.

Rest, of course, you will have to cross the bridge when we reach there because this is one area which I'm sure because it will be very unique. The rest of it, of course, we'll have to see it and believe -- after that, we'll believe.

[Unknown Analyst]

Understood. So you mean that our forward integration strategy is something like where we are able to get more distribution. So it impacts our sales directly, and we are able to drive more business that way. Is that the thought process?

[C. Paarthipan, executive]

The idea is not to own our own distribution. But when we own our own distribution, the biggest advantage which we will have is the entire set of actually people who buy medicines from the distributors will be known to us. Then we'll be in a position to get the correct market info from those people who have been actually getting the products from the distribution company.

[Unknown Analyst]

Got it, sir. Sir, the other 2 questions are related to most of the journey of you as a founder. One is, do you still take any crazy adventures in life? This is a personal curiosity of mine. It's a personal curiosity. Since you started your business, you used to take a lot of adventures in order to capturing your market share, your stories are very famous amongst small-cap investors. Are you still taking any adventures, sir?

[C. Paarthipan, executive]

No. See, when I didn't have money, I had to go for fiscal excuses. Now we are taking calculated financial risk. So I don't want to be adventurous at the age of 70. Anyway, at the end of the day, I was telling today in the Board meeting, there is an expiry to our medicines but there is no expiry to our dreams and goals. So we will continue to strive for excellence in our business.

[Unknown Analyst]

Certainly, sir. Sir, one last question, if I may ask.

[C. Paarthipan, executive]

Yes, please. Yes.

[Unknown Analyst]

Sir, what's the most recent book recommendation, this is again going to the 2016 annual letter, I've read every single book that you have said there.

[C. Paarthipan, executive]

You're asking me to mention the book, some book actually. Are you talking of it?

[Unknown Analyst]

I'm talking about, you have always recommended your readers books that you are reading at that point of time for your business. Is there any book that you're reading right now?

[C. Paarthipan, executive]

To be very honest with you, the workload has increased. In the past -- off late, what I do is I go for some of the paper cuttings, which are very interesting. One such is actually in front of me, where it states, can you handle the truth? It takes a lot of work to suss it out he says. This comes in -- normally, if you see in Times of India, you'll see some of the important -- some interesting articles.

So like this, I find lot of interesting articles in many magazines like [indiscernible] and these type of stuff, I'll take the -- I always go for these things. And I've not been in a position to read any new books to be very honest with you. I bought some and I have not been able to read it.

Thank you so much for having invested in us and having believed in us. We guarantee you that we believe in making money with respect, and you will continue to be happy actually for having invested in our company and invested your faith in us. Thank you. Thank you very much.

[Operator]

The next question is from the line of Tushar from Motilal Oswal.

[Tushar Manudhane, analyst]

Am I audible?

[Operator]

Yes, sir, please go ahead.

[C. Paarthipan, executive]

Yes.

[Tushar Manudhane, analyst]

Sir, on this OSD facility which is now expected to commercialize sooner or just got commercialized in 4Q. So what kind of OpEx can be expected from this facility in FY '24?

[C. Paarthipan, executive]

Now we decided to do it in 2 ways. You are aware that we have actually a facility of OSD in Pondicherry. Recently, I even told you actually that we have completed our INVIMA inspection for Softgel capsule where we are planning to go for a tablet and capsule facility, which will be used for filing the documents.

As you know well, an OSD involves R&D, then, of course, bio-studies, which takes at least 1 to 2 years of time before we file the dossier. So what we will do, we will build the facility in Pondicherry itself, and we'll use that facility to file the document, mainly to countries like actually Mexico, Chile and the other places. And later we'll think of U.S. market.

And the second one which actually, for which we have bought the land, and we are planning to construct that facility, that will be for the U.S. market. But of course, we'll do it in the second stage. Probably we'll start say 6 months from now. And once we complete the registration in markets where we are very comfortable in the form of Latin America, then we'll move actually to U.S. for OSD.

[Tushar Manudhane, analyst]

Okay. No, I was referring to this oncology facility, which got completed in 4Q FY '24. So OSD facility.

[Partheeban Siddarth, executive]

Yes, Tushar, when it comes to OpEx, we are probably looking at -- after the injectable one is also done, we are probably looking at around INR 1 crores to INR 2 crores maximum at the initial period per month.

[Tushar Manudhane, analyst]

That too after the injectable facility?

[C. Paarthipan, executive]

After the injectable one is completed.

[Tushar Manudhane, analyst]

Sir, just on this, I guess, is the first time you have mentioned about biosimilars per se. So what kind of -- in terms of while we are starting initially with outsourcing products from China and then trying to do the fill-finish. So any particular investment or, let's say, R&D, which is going to be there over and above the...

[C. Paarthipan, executive]

Yes. I would like to give you some inputs on that. See, India is one country, you know very well, it's like a pharmacy of the world, where we export the maximum after review -- actually, the maximum amount of product exporter from India to U.S. market, I think, is we are #2 after U.S. whereas coming to biosimilars, there are only 15 to 16 factory maximum in India. So in China, there are around 100 factories in China.

Now they have overcapacities and under-utilization. These are time actually for us to go for bulk import and then the timelines, of course, it's not easy to predict at this juncture. It may take -- while importing, it take its own time to decide how exactly it has to be imported.

Luckily, we have an injectable facility and we will be in a position to do fill-finish in the same facility. But clinical trials will take time. It depends upon the market where we are entering into. Initially, we'll go for the RoW market, which, of course, we can even do it with the Phase I trials. If you have to get into regulated markets, then you have to think of Phase III, but we will not be in a position to think of actually U.S. because it's a place for actually monopolies and being monopolies.

So we will concentrate on markets where we are comfortable now. We'll also go for to the second level regulated market, something like Mexico, Brazil, South Africa, that kind of stuff. The business is huge, but how long it will take and how much we'll be able to make, it's difficult for us to actually say. Opportunity is there because this is one thing which some of the big companies in India have done before. Today, companies of our size, they, say, I'm sure will not be in a position to think of this one because we at least make INR 500 crores, INR 600 crores to do all this type of business.

[Tushar Manudhane, analyst]

Got you, sir. And on the Caplin Steriles side, we've had a very good traction for FY '24 with -- in fact achieved slightly more than what we had guided for. How to think about the business for FY '25? And before that, if you could also share EBITDA or PAT for Caplin Steriles in FY '24?

[Partheeban Siddarth, executive]

I will request our CFO to give the numbers, and then I will take over.

[M. Narayanan, executive]

This is Sathya Narayanan here. For the year ended 31st March 2024, Caplin Steriles had an EBITDA of INR 61.2 crores with a PAT of INR 18.7 crores.

[Partheeban Siddarth, executive]

Yes. So when it comes to outlook, obviously, we remain very excited about the overall prospects. We expect a few approvals to come through this year. That should augment our business going forward. We should also take into account that some of the products that we are doing are slightly more linked to kind of generic products. So we do expect some amount of reduction in orders for the older products.

So it's important for us to have a wide enough portfolio. There's some new products or some of the products are going to be placed anytime there is a downturn in other ones. Also remember that by end of the year, we will have some sales coming in from the U.S. front end as well. While it might not be very meaningful in the first financial year for us, I think next year onwards, we can start to see something a little bit better from our own label.

[Tushar Manudhane, analyst]

So considering these and considering the current size of the business, the growth momentum will sustain in '25-'26 or there will be some amount of moderation over there?

[Partheeban Siddarth, executive]

So over a longer period, I think whatever that we've given out, we remain confident that we can achieve those numbers. Of course, year-on-year, there might be some dips here and there. But obviously, we've come off a slightly smaller base, right? So we've grown 50%.

If I have to stick my neck out and say, are we going to go another 50%, that's not might be possible immediately. We'll grow well. We will grow well. It's important for us to keep in mind that we want to grow qualitatively also and not just quantitatively, which is very important, especially in sterile injectable business for regulated markets.

[Tushar Manudhane, analyst]

Understood. And just lastly, if you would want to share overall revenue EBITDA margin guidance for '25-'26?

[C. Paarthipan, executive]

We continue to have actually the same growth that we have been having as I told you before. We're sure of actually achieving what we've achieved before.

[Operator]

The next question is from the line of Anupama from RatnaTraya Capital.

[Anupama SureshKumar, analyst]

Am I audible?

[Operator]

Yes, ma'am.

[Anupama SureshKumar, analyst]

Yes. Just wanted to know actually the revenue for the steriles business for FY '24?

[M. Narayanan, executive]

The overall revenue for FY '24 is around INR 316 crores.

[Anupama SureshKumar, analyst]

INR 316 crores. Okay. Yes, actually, you mentioned EBITDA and PAT already. That was my other question.

[Operator]

The next question is from the line of Nitesh Dutt from Burman Capital.

[Nitesh Dutt, analyst]

I have a couple of questions on the LatAm business. Number one, I want to understand the competitive dynamics a bit better. So if you could just let us know who are the major players that you are competing against? What kind of companies, et cetera? And are they following a similar business model or doing something different in terms of distribution?

Second, we have grown the LatAm business at 25%-odd CAGR for the last 10 years and expect high growth rate going forward also. But in my understanding, the market demand itself might not be growing that fast. So what has allowed you to gain -- rapidly gain market share from the competitor?

[C. Paarthipan, executive]

Okay. There are two sets of business actually in most of the markets. One, of course, is brand marketing, other one is generic marketing. Coming to the generics sales, private and institution business are the 2 models which are there in every country, irrespective of the fact whether the size of the country is bigger or smaller.

And coming to our Latin American business, we are mainly into the Central America, as you have rightly said. Coming to the competitors in generic business, which we'll need to be very honest with you, there is no competitor to us because we are there for the last 20, 21 years. In one of the markets we are there for 18 months -- sorry, 18 years.

And recently my eldest son was here for the INVIMA inspection, that time I asked him, can you identify some companies which are prominent at least with some products for the last 10 years? Then he started telling me 1 or 2 products. And is it not possible for you to compete for that 1 or 2 products? He said definitely it's possible. Then he asked me is it worth actually to do that one. I said let me know what is the volume and then I'll tell you whether it's worth actually or not.

In fact, we always try and actually do a business which is more of a qualitative than the quantitative one. That's the reason we are in a smaller geography. Either we are in a smaller geography, we are more like a true monopoly in this smaller geography. We are very unique and there is an entry barrier in the form of like 20 years, 20, 22 years.

Anybody who has used our product, he comes back and buys the product most of the times. And again, this is a business, there are people like if you see the disparity between top companies, most of the multinational companies and us, the disparity in prices is huge. If our product is $2, the same generic which is sold by a multinational company or the big companies from Argentina and other areas are at least 4 to 5x higher than our product.

Most of the brands who used to buy actually these products earlier, they also switched out to our products because we have been there for a long time. If you have any company for that matter if you're there in the market for 20 years, it is going to do good, not actually -- saturation comes, but to handle the saturation we go for variety and novelty.

We started with 20, 30 products. I can even tell you actually this in front of me, in India -- from India, today, we have registrations in the form of 4,485, whereas from China it is 275. And there was a time we used to do 60% of our actually business from China, then it got reduced to 40%, now it is 20%.

Now what we will do once I go to China, when I travel to China, I look for opportunities for the RoW market to start with because there is no entry barrier. If products are unique and is going to be accepted in the market, I'll open up the opportunity by sourcing from that company. So like these we change our strategy to suit the requirements of our customers and market.

This is what actually is taking us to the next level because we started with increased product registration, then hopefully our registration for a normal primitive products to CLI, CVI, diabetes, like various ranges we report, then from tablet, capsule, liquid, oral suspension, ointment, injectables, suppositories, like that we go.

Now we are planning to get into peptide and then go for insulin, go for actually biosimilars, initially for RoW markets where we are currently there. These are the things which will always make us stay afloat and move to the next level. Thank you.

[Nitesh Dutt, analyst]

Sir, do you see this strategy, right, which had been working for you in terms of having more registrations, more varieties, et cetera, and do you think the competitors also might start following similar kind of strategy and the intensity might increase because despite having 75% of the portfolio in generics, we made quite good gross margins.

So would it be increasing -- would it be attracting more competition? Because if I take the example of India, right, in the trade generics segment, people don't make that kind of gross margin. So I just want to understand, if you talk about 5-, 10-year horizon, can competitive intensity increase and thereby erode your margins and growth profile?

[C. Paarthipan, executive]

It's not the generic that counts, it's the business model differentiation. Yes, had I sold actually my generic in India, we won't be talking to each other to be honest with you. That's the reason I tried my best in Africa, especially in the toughest part of Africa, thinking that I won't have any competition.

But our own people who used to stay in English colonies moved actually to the Spanish and sorry -- Portuguese and French colonies. That was the time I went to countries where I didn't see the Indians and Chinese who are into pharmaceutical business. But once you get into that place, if you prolong for 10 years, that was the period actually, the physical risk was there for the family and we subject our family for the physical risk and establish our product.

But people who are used to your product, especially the generic, they don't go to the doctor. They bring the tablet, they bring the strip and show it to the chemist and buy. And while working in the market, I myself have found and I asked a chemist also, given the product that the customer showed it you, why don't you change the product and give it him.

The answer which he told me is if I change the product and give it to the customer, next time, the customer will not come to my shop, he will go to the other shop. So there are so many things which matters in this business. It's not one thing.

As I told you before, if the competitor wanted to actually encroach into our area, they could have done it actually by now. Our business is getting increased year-on-year. If they really encroached into our area, the business would not have increased in the last 20 years.

It all started with actually a small way. But the NPA business, 80% -- 75% to 80% of our business comes only from 6 small geographies of Latin America. So this is -- now that actually there is a Chinese wall in the form of entry barrier. And I will ask myself, that's why I told you once again, I repeat. The purpose of asking is to find out how far they've entrenched themselves into our territory. It's not much. It's not easy also.

Even if I have to go and do business in a country where somebody else is there for the last 20 years in the form of generic business, it's not easy for me to get into it. It's not easy. That's how actually the generic model works. Only issue is you have to ensure good quality, affordable prices, then variety, then novelty, this is how actually you have increase, keep various warehouses next to the customer so that the customer understands there is no logistic issue.

Even if he buys the product, if there is some quality issue, he can return the products to the warehouse. On the contrary, if he want to buy the product, he has to open an LC or even if he goes for some other company, which has got only 10 products, what we'll say if you're buying 10 products from my competitors don't buy actually other products from me, you go and buy from him. Automatically, he'll leave it and come back to us.

[Nitesh Dutt, analyst]

This is really helpful. Just last question from my side, if you can. So out of the LatAm business, which -- can you give the FY '24 geography-wise contribution from your top 3, 4, 5 geographies?

[C. Paarthipan, executive]

Yes. The major business comes from Guatemala. See, that's where my son has become a son-in-law of the soil also. And the next one is Nicaragua and equally good actually is El Salvador, then comes actually Honduras and Dominican Republic, the last one is Ecuador.

[Nitesh Dutt, analyst]

Sir, possible to give what percentage of the LatAm business is coming from Guatemala, Nicaragua and...

[C. Paarthipan, executive]

In fact, I have to check because I've -- we've not -- like off late, I've been actually staying next to the factory which is 60 kilometers from here. I'll ask my finance professional to give the percentage of sales break -- sales mix and I will send it to you. You can ever write to us. It's not an issue. It is there with us. Is there any way you can do it? Mr. Murali, is it available now? Can you give it right now?

[D. Muralidharan, executive]

Right now, it's going to be difficult for us to offhand give. We normally track LatAm as one big basket. We do not go -- though we have figures, it may take a while to formulate and then send the mail.

[Operator]

[Operator Instructions] The next question is from the line of Mahesh Vyas from UTI AMC.

[Mahesh Vyas, analyst]

Congratulations for the good set of numbers. Sir, what would be the CapEx coming in for next 2 years, let's say, for FY '25, '26?

[C. Paarthipan, executive]

I think 50%, 55% of the CapEx is completed, API of course, API also one is actually is not a greenfield. And that is net amount, I would request actually our CFO to give the picture, please.

[D. Muralidharan, executive]

The current WIP is around INR 113 crores. What is pending to be invested is on the new OSD facility and then the API facility, what sir was talking about and then the injection, major equipment -- the injection also, major equipment has already been committed and then paid for. And then residual investment will have happen there. And whatever additional lines in CP-I, what we are planning, we'll have to implement. So those all put together will come to about INR 200 crores to INR 300 crores for the next couple of years.

[C. Paarthipan, executive]

I would like to add more. If I told you about some of the projects in the form of actually biosimilar and insulin, these are things we will be in a position to understand the exact picture after I go to China -- after I travel to China. So now currently, I'm not in the position to give the exact picture of the investments into these areas, please.

[Operator]

The next follow-up question is from the line of Dikshant from DB Wealth.

[Unknown Analyst]

Sir, speaking particularly on Mexico, so there have been recent news for different companies as well that there are a lot of Chinese people, businesses that have entered Mexico because U.S. is having a lot of trade issues. And they have had a lot of trade tariffs on China. So the Chinese strategy has been to go to Mexico, invest in Mexican companies, and there are a lot of subsidies also that they get from Mexico and U.S. trade relations.

My question is that it is -- you always look at people of different geographies coming to your competitive landscape and then taking actions that are necessary. Are you seeing Chinese people coming to Mexico and taking some of our business that we have been working towards? Is there that affect that we have right now?

[C. Paarthipan, executive]

This is true, now it has come in the news that Chinese are moving to Mexico to start some business so that the name Chinese will not appear in their label. But they are not into pharmaceutics, they are not getting into pharmaceutics because off late, our professionals and my son, they go to Mexico quite often to find out what is happening there. The message which I received from them, so far that they are not got into pharmaceuticals. They're into other areas.

China is actually the exporter of key starting material for most of the products for the whole world. So rather than showing that key starting material which comes directly from China, you know about actually what is the situation from the west, how exactly they approach the Chinese. But still they are trying to get into this type of market and disguise themselves and then export, but they are not into pharmaceuticals actually.

[Unknown Analyst]

Okay. So it's not really a threat for your business?

[C. Paarthipan, executive]

Yes. Definitely, it is not going to be a threat. Definitely, it's not going to be a threat. So I must say Chinese, they are very smart in doing private market business, they are good in some technology nowadays, they are good in copying and all those things they are very good at it. But coming to marketing, they have not been that good compared to our Indians.

[Unknown Analyst]

Okay. So if I were to distill down our edge that we have in the business, it really is our customer relationships that we have been able to build over the years, and that's why we are also thinking of entering our distribution system because that's going to be a double [indiscernible] for us. Is that thought process?

[C. Paarthipan, executive]

Can you please come again because it's not audible for me? Sorry.

[Unknown Analyst]

Is it better, sir?

[C. Paarthipan, executive]

Yes, now it's better, please.

[Unknown Analyst]

So sir, coming back to the edge that we have in our business. So we have always been able to have better relationships with the local businessmen and local people that has helped us to scale our businesses even historically. Is that the thought process to have a better distribution channel going forward to improve our edge of marketing and distribution? Plus also sourcing at better prices if I were to like distill down our edge?

[C. Paarthipan, executive]

Correct, correct. What you say is true because the edge is actually started to go for distribution rather than going for actually something in the form of marketing where we have to invest money and do it. But when we go for distribution of a generic, the most important factor is the differentiation in your business model to directly go and actually copy someone who is already there, it's not easy for us to beat him.

If you want to be a numero uno, even if it is a smaller business, you can't run faster than a person in the form of actually is there. You'll have to only run in the opposite direction. That's what we have been doing in most of these countries also.

We are not trying to copy the big boys. We are trying to do something on our own, which we call it as unique and this works and that's what actually the COO also told you when it comes to actually what we are planning to do in U.S. market also. [Technical Difficulty] disposal in the private market, not in the tenders.

[Unknown Analyst]

Okay. Got it, got it. So even in the U.S. injectable business, it's our goal to get private contracts with the same thought process and playbook that we have perfected over the years?

[C. Paarthipan, executive]

Yes.

[Operator]

As there are no further questions, I would now like to hand the conference over to Mr. Vivek Partheeban for closing comments. Over to you, sir.

[Partheeban Siddarth, executive]

Yes. Thank you, everyone, for taking time out and attending the investors con call. We hope to be in touch with you in due course. And once again, thanks to Motilal and Tushar as well for conducting the same. Thank you very much, everyone.

[Operator]

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