Divi's Laboratories Ltd
NSE:DIVISLAB
| US |
|
Fubotv Inc
NYSE:FUBO
|
Media
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
| US |
|
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
| CN |
|
NIO Inc
NYSE:NIO
|
Automobiles
|
| US |
|
Fluor Corp
NYSE:FLR
|
Construction
|
| US |
|
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
| US |
|
TopBuild Corp
NYSE:BLD
|
Consumer products
|
| US |
|
Abbott Laboratories
NYSE:ABT
|
Health Care
|
| US |
|
Chevron Corp
NYSE:CVX
|
Energy
|
| US |
|
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
| US |
|
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
| US |
|
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
| US |
|
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
| US |
|
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
3 367.85
6 214.85
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Fubotv Inc
NYSE:FUBO
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
C
|
C3.ai Inc
NYSE:AI
|
US |
|
|
Uber Technologies Inc
NYSE:UBER
|
US |
|
|
NIO Inc
NYSE:NIO
|
CN |
|
|
Fluor Corp
NYSE:FLR
|
US |
|
|
Jacobs Engineering Group Inc
NYSE:J
|
US |
|
|
TopBuild Corp
NYSE:BLD
|
US |
|
|
Abbott Laboratories
NYSE:ABT
|
US |
|
|
Chevron Corp
NYSE:CVX
|
US |
|
|
Occidental Petroleum Corp
NYSE:OXY
|
US |
|
|
Matrix Service Co
NASDAQ:MTRX
|
US |
|
|
Automatic Data Processing Inc
NASDAQ:ADP
|
US |
|
|
Qualcomm Inc
NASDAQ:QCOM
|
US |
|
|
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Divi's Laboratories Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the Earnings Conference Call of Divi's Laboratories for the Quarter 2 of Financial Year 2021. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. M. Satish Choudhury. Thank you, and over to you, sir.
Good afternoon to you all. I am M. Satish Choudhury, company Secretary and Chief Investor Relations Officer of Divi's Laboratories Limited. I welcome you all to the earnings call for the quarter ended 30th September 2020. From Divi's Labs, we have with us today Dr. Murali K. Divi, Managing Director; Ms. Nilima Motaparti, Whole-Time Director, Commercial; Mr. L. Kishore Babu, Chief Financial Officer; and Mr. Venkatesa Perumallu, General Manager, Finance and Accounts. During the day, our Board has approved the results for the quarter, and we have released the same to the stock exchanges as well as updated the same in our website. Please note that this conference call is being recorded and a transcript of the same will be available on the website of the company, divislab.com. Please also note that the audio of the conference call is the copyright material of Divi's Laboratories Limited, and cannot be copied, rebroadcasted or attributed in press or media without specific and written consent of the company. Let me draw your attention to the fact that on this call, our discussion will include certain forward-looking statements, which are predictions, projections or other estimates about future events. These estimates reflect management's current expectations of the future performance of the company. Please note that these estimates involve several risks and uncertainties that could cause our actual results to differ materially from what is expressed or implied. Divi's Labs or its officials does not undertake any obligation to publicly update any forward-looking statements, whether as a result of future events or otherwise. Now I hand over the conference to Dr. Murali K. Divi, Managing Director of the company for opening remarks. Over to you, sir.
Good afternoon to all of you. I welcome you all for the earnings call of Divi's Laboratories. Hope you are all doing well. First, let me update you on global scenario on pharma and COVID-19 pandemic. COVID-19 has severely impacted several industries, small, medium and large. Pharma industry as such is less impacted because of need for life-saving medicines. This also creates a responsibility for discovery and manufacturing new APIs, antivirals and vaccine. Development of APIs hydroxychloroquine, favipiravir and remdesivir have added only marginal medical benefit and not become life-saving drugs as none of them can be used as prophylactic drugs. A new drug is required which can prevent the infection, whereby it can be used [indiscernible] contracting the virus. The new drug is also expected to reduce the viral load quickly, so that patients will not have the reality of infection. There are few drug [indiscernible] promising, which may give hope to the whole world. How soon vaccines will be launched is still a big question mark. I’ll cover CSR activities at the corporate and the [indiscernible] continuing helping 98 villages around our factory. Several programs have been taken up by the company of sanitization in lieu of COVID, COVID-proposed activities, safe drinking water, promoting education, rural development, livelihood enhancement, empowering women, environmental sustainability, Swachh Bharat initiative. On CapEx programs, our projects feel though delayed due to migrant works in Q1. Now they are functioning fully and have completed some of the important projects. INR 614 crore has been capitalized during the quarter. Several debottlenecking projects were completed. The remaining projects will be completed before end of the financial year. All the backward integration projects were completed. And this not only gives us the assurance of supply, but also brings us savings by reducing cost of material. Few new blocks are planned for new major custom competitor opportunities are under construction and [indiscernible] this investment of CapEx is to the tune of INR 400 crores. This new CapEx is in addition to the INR 1,800 crores CapEx.The majority of the utility expansion [indiscernible] INR 500 crores of CWIP projects are expected to be completed before the end of the financial year. Now I ask Nilima to brief on operations. Thank you.
Hello, and welcome, everyone, to Divi's Labs earnings call to discuss the unaudited results for the second quarter ended 30th September 2020. I hope that each one of you, along with your friends, families are safe, considering continued existence of COVID-19 pandemic and the sudden increase in range witnessed recently in several parts of the country. Although COVID-19 crisis continues, we have improved in terms of adapting to it in our everyday lives and businesses during this quarter when compared to Q1. At Divi's, we are closely monitoring the constantly changing and evolving situations relating to this pandemic as we continue to strive and sustain our operations at a normal pace. Challenges like fluctuation in cost and availability of raw materials and supply chain issues have reduced compared to the last quarter, and we are optimistic in ensuring the uninterrupted supply of our APIs. Our response to the straining COVID-19 at workplace, stay constant and consistent with our main agenda being the safety and well-being of our employees. All protocols like thermal scanning and sanitization, social distancing and safe transport facilities continues to be implemented and shall remain so until further guidelines from WHO, CDC and local governments are given. The company has put in place several measures to keep up the business continuity and also sustaining steady supply chain network and servicing to our customers.Moving on to our Q2 FY 2021 financial performance. As you all are aware, we are implementing a large CapEx program during the current half year. We have capitalized assets of INR 830 crore. Of this, the new SEZ accounted INR 224 crores and INR 132 crores is for wastewater treatment facility and utility expansion at [indiscernible]. We have also CapEx assets at other units for augmenting capacities as well as utility infrastructure. We have capital work in progress of INR 499 crore as of 30th September. On operations, I'm happy to state that we have achieved the consolidated sales revenue of INR 1,749 crores during the quarter, reflecting a growth of 21% over the corresponding quarter of the previous year. Profit before tax for the quarter amounted to INR 693 crores, a growth of 42%. We earned a profit after tax of INR 520 crores during the quarter, reflecting the growth of 46% year-on-year. Exports accounted to 87%. We continue to have normal business distribution across regions, and Europe and U.S. accounted for 71% of our revenue. Product mix for generics to custom synthesis is 60% and 40% of the revenue, respectively. Constant currency growth for the quarter has been 18%. Our Nutraceuticals business amounted to INR 167 crores for the quarter and INR 294 crores for the half year. Thank you.
Thank you, ma'am. With this, we'd like to request the moderator to open the lines for Q&A.
[Operator Instructions] The first question is from the line of Vishal Biraia from Aviva Insurance.
Sir, what led to the urgent need for expansion of the CCS capacity, the custom centric capacity? That is the first question.
I'm sorry, can you please repeat?
The expansion of custom centric capacity. So what led to this decision? And how soon do you plan to complete it? So is this because of a movement from China to India or some other factors? Could you elaborate a bit more on this, please?
So historically, I think you all have a good experience at Divi's Labs. We do not invest just because the funds would not expand because we did have funds. When we foresee opportunities, we start investing. But this time, in the last 2 quarters, more in last 1 quarter, we have seen from the very big pharma of international, Europe and the U.S., we have received some very fast tracked projects with a lot of incentivization and these projects will have very high returns. And we need to finish them on a lot put basis, and these projects have been -- we have been doing -- this is the one we are planning for [ INR 400 crores ] And before we have to complete in the next 6 to 9 months.
Okay. And the next question is on the contribution of COVID portfolio to revenue and EBITDA.
Can you please repeat your question again?
Sorry. The contribution of the COVID portfolio, COVID-related drugs or to revenue and to EBITDA, please?
So the -- in the second quarter, what we are reviewing right now, so there's 0, I think I remember a few lag, whether it's involved. Otherwise, we had no income from the COVID.
The next question is from the line of Prakash from Axis Capital.
Congratulations on good numbers. Sir, if you could help us understand the gross margin expansion. So both so Y-o-Y and Q-on-Q, so sales mix, if I see custom synthesis to generate more or less similar, so not much change there. So in terms of product mix, what has changed? And given the supply disruption, pricing is healthier, if there is some commentary there?
I think we have been saying always that it's very difficult to grow by quarter-on-quarter between custom synthesis and generics. Definitely, the investment of the 18 [indiscernible] plus the INR 400 crores. As we are completing them, we have already completed the debottlenecking project, as I mentioned a few minutes ago. And we have also completed the some of the expansion plans. And what we are looking at now is the -- after validation, there's a gestation period of anywhere from 6 months to 1.5 year for the regulatory to clear the products. And also the customers validating depressed products at their facilities. I'll recap and you will see the incremental costs in the quarter.
Okay. But I just wanted to understand what would be the sustainable levels, actually? I mean I understand quarterly fluctuations would be there. But with this debottlenecking and all say 64% to 65% is sustainable or we should model in 62%, 63%?
62%, 63% of?
Gross margins.
So people concentrate on how to pay tax money and people concentrate on other things, but I think the majority of the expenditure is on the raw material. The majority line is on [ overhead plant expenses ]. I think if you look at the several balance sheets, we have been able to hold down to around 55% to 60% quarter-on-quarter, while -- that's why we are able to retain good profit. And I think, going forward, yes, we should be able to do 50% that makes it much better. Now you commented that integration and other projects being complete. Definitely, yes [indiscernible] not only gave us assurance of supply, but also definitely, with the new technologies we introduced. This [indiscernible] and high productivity, our costs now come down, our material costs now come down. I think it's the combination of all these, what you are seeing the numbers. Don't go by quarter-on-quarter, but I think it's -- we cannot maintain -- continue what we are doing.
Okay. Understood. And my second question is on the CapEx. So 4 billion exclusively for custom synthesis. But for the 18 billion that we announced some 18 months back, so of that 18 billion, I understand 3 billion is for debottlenecking and 6 billion for each of these Unit 1 and Unit 2. So I wanted to understand on that 12 billion, what portion or what percentage is attributed towards custom synthesis capacity?
So I think it is again the blocks are not meant just for custom synthesis or for generic. The buildings are all multi-purpose. They can produce either a generic product or a custom synthesis product, depending upon the need and the campaign. Some buildings are yes, dedicated to generic products or dedicated to synthetic products, depending upon demand. But on overall, whatever we have completed, we are able to decline between the [indiscernible] in the backward integration, we are able to use some them fully. In the generic, we are able to qualify and start producing and some products we have been able to export. It was waiting for the total regulatory authorities. Clearly, some of them, they are waiting and customs in place debottlenecking projects. They are yielding some of the...
[Operator Instructions] The next question is from the line of Bharat Shah from ASK Investment Managers.
Yes. I wanted to know. There was this casing in the -- which is going on. So it has now been closed. So what is the status of the company stance on this?
Can you please repeat?
There was a case against the company officials in SEBI recently, that has been closed now. I want to know what is the status in terms of the stance of the company about those individuals.
The people who were involved have settled the issue with SEBI. The company has always been compliant to the core of conduct and the business excellence, assuring compliance as well.
Yes, I have not understood. What exactly you say?
I think you mentioned that if there were the others who helped settle the issue with SEBI. The company has always been compliant [indiscernible] and so we'll ensure compliance as well.
Well, Divi, can you speak without speakerphone because your voice is not clear at all.
I think everybody is hearing my voice clearly. I don't know why you aren't able to get.
No, I'm not talking about the company being compliant or not. I'm asking there were these cases. Now I believe there has been compromise right there and there has been a compensation paid by the individuals concerns. What is company planning to do about it is what I'm asking. If you can formally clarify that, it will be helpful.
I think company has nothing to say.
The next question is from the line of Shyam Srinivasan from Goldman Sachs.
My first one is on the generic API segment. It has grown faster than the 21% that has called out based on the numbers that you shared on the call. So just want to know what are some of the building blocks. How much is price? Is it largely volume-led? Or have there been new products that have been introduced? If you can help us give some color.
We are [indiscernible] that the debottlenecking and capacity expansion projects we have done in naproxen, for example, 5,000 tonnes; gabapentin, 2,500 tonnes, [indiscernible]. All these products, we have [indiscernible] capacity substantially, and we are able to start selling the product without compromising on price. And I think this is what you are seeing, the increase in sales. And going forward, without -- yes, we did [indiscernible] and some of the expansions, which we have done are in totally new blocks that needed to get some regulatory clearances because when we upgrade, add new blocks, we always [indiscernible] technologies, new ways of [indiscernible] so that the productivity goes up and also the metal costs come down, minimizing the waste. So all these will sometimes be viewed as a change, 2, 3 smaller changes become a median change, which we are waiting for customers clearing. So as and when they come, you will also see some more increase in sales in the generic products.
Got it. Sir, my second question is on the custom synthesis. Could you actually talk us a little bit about the qualitatively in terms of the number of projects that we have actually started doing? Are they linked in some form or shape to COVID? Or this is in general non-COVID portfolio as well? I thought you said Phase III, I think I couldn't pick up that comment clearly as well. So if you could share some comments around the custom synthesis business. And also linking to the point about the INR 400 crore additional -- you talked about more footing. So just trying to piece together the entire custom synthesis segment, sir.
We have always -- we never -- we have never been giving details on how many in Phase II, how many in Phase III. And the [indiscernible] project because the existence if [ company charity ] agreement company is highly confidential, number one. That's why I we're trying to explain how many projects with companies and what we do. But therapy segment, I'm willing to talk. Yes, it's good. Some of these extend themselves for the -- some of the discovery of COVID, while some of these are for some other therapy segment. It's a combination of -- see, the committee does not know whether it's for a COVID drug or a cancer drug or a drug for something else. What we know is [indiscernible] organic synthesis reaction. So the combination of [indiscernible] COVID drug, anti-COVID drug or can produce anticancer or NPE, also our NPE business as well.So yes, we are involved in the combination of these therapeutic segments in the custom synthesis. That's why we have received some very fast-tracked projects and there's a lot of incentivization, and we have to currently do them. This is where the additional new INR 400 crores is going.
The next question is from the line of Girish Bakhru from Bank of America.
Sir, great set of numbers. Last quarter, you mentioned that there is a possibility of new units starting production and same products and same technologies you could have launched from those facilities without inspection. Can you update on that if that has happened? And similarly, any color on when inspection can happen of these 2 units?
Yes. When I mentioned in the last con call, the Unit 1 and Unit 2 are situated in 500 acre-feet sites. These are 2 sites with 500 acre-feet, where at Unit 2, we call it new BCV as we get that unit in about 60 acres of land. So this unit is taken -- proprietaries already cleared by U.S. FDA. So the new blocks, new units we have built usually did not require it by using the same technology and it is for the same product. I can start exporting immediately by keeping some back up of everything. If I am making a new product, utilizing possibly a new technology in this block, then, of course, I need to wait for the clearance of the -- whether [indiscernible] or others. So what I would say is that Unit 1 also where BPSD, where we are investing INR 600 crores plus again, the same -- the total specialty, its uses being such as the new block reconstructing this [indiscernible], where some equities better integration, some of the deep for the new products which we would be able to utilize smart production and where we need claims from the U.S., we have to wait.
And the second question was on the mix. I realized this new investment in custom synthesis is meaningful from a near-term opportunity, but can you give some possibility, some color on how generic versus custom synthesis mix will change over 2 years, if that's possible, that will be very helpful.
The ratio on this, we would like to maintain 50 to 50. We would like to maintain 50 to 50, I think. However, the customers in generic and the customers in synthesis projects decides whether which should be, whether it would be 60 or 40. So maybe for a few years, custom synthesis will take a lead, and again, generic may catch up.
The next question is from the line of Surya Patra from PhillipCapital.
Yes. Congratulations on the great set of numbers, sir. Sir, with regards to CapEx, that the cumulative collection CapEx of INR 1,800 crores that we had done. So given the kind of enhanced productivity or improved profitability, what we are seeing in the last couple of quarters. So is there a kind of -- or is it fair to believe the asset turn of this newly added CapEx would be higher than the asset turn that all our old assets are currently getting? See, the older assets seems to have been generating a revenue, let's say, is something like 1.5. For new, we added CapEx -- is it fair to believe slightly better than the historical trend?
The CapEx, we discussed [indiscernible] between 2 sites. Some of it was debottlenecking, which we completed, some of which are backward integration, upgrading utility infrastructure and the modern wastewater treatment plants at both sites. Again, all these are looking at 5 years, 10 years, 15 years overall preparing for new regulations just would come. In addition to increasing capacity, the INR 400 crores, what we are talking about is purely on custom synthesis which contract being in other world the assurance and agreements being in place. It's not that we are looking at for anticipating business building, which used to be the case, whereas now the [indiscernible] is in place and how the public before growth projects quickly to get -- for the business to happen.
Okay. Sir, just wanted to have a sense on the CapEx on the same question, so having seen kind of a strong phase of CapEx over last to current year and last year, which is still continuing. So after this, is it fair to believe that the CapEx momentum will see a kind of a -- some kind of stagnation there before we identify a new site because [indiscernible] is also not seeing any progress from the administrative side. So is it fair to believe that we might not see any major CapEx going ahead in the near future, and possibly a couple of years down the line once we see an optimal utilization level for these 2 months? Till that time, it would be a kind of moderated CapEx sales for the company?
Based on the opportunities we have. The existing sites, probably we will not require [indiscernible]. These 2 units, we have been planning to construct for a long time. Premier Kakinada, the government has almost planned everything, and we hope to start somewhere in December, January, the construction activity. The CapEx could be to the tune of around INR 600 crores from that.
The next question is from the line of Damayanti Kerai from HSBC.
Sir, a clarification on the CapEx for custom synthesis business. So did you mention you expect to complete that project in another 6 to 9 months? And after that, you can start executing orders, which you have received?
Can you please repeat the question?
Sir, I was looking to clarify. Did you mention the new CapEx for custom synthesis business that you are aiming to complete in next 6 to 9 months? And then completion of -- after completion of projects, you can immediately execute the projects which you have received from customers, right? That's what you mentioned earlier?
Yes, that's what I mentioned. These projects [indiscernible] fast track, yes. And on completion, they would immediately go into production. Yes.
Okay. And sir, on the Kakinada plant, I missed your comment. So you mentioned you got permits from government, right? And then you can start work there?
Yes. We were waiting for the final clearance [indiscernible] and we hope to start in December or January, the Kakinada plant construction activities.
Sir, I didn't hear that number.
No, no. I said we would start in December or January of Kakinada plant.
Sir, any CapEx plan for that?
The CapEx is about 600 -- INR 600 crores.
The next question is from the line of Alankar Garude from Macquarie.
Congrats on the strong performance. Sir, my first question is, in the last few years, we have seen the U.S. contribution to overall sales coming down for us, while that from Europe has been increasing. Now this is even applicable in the last 2, 2.5 years, when the direct impact of the import alert shouldn't have been much. So any particular reason, sir, which you would like to highlight for this? And how should we look at the U.S. contribution going ahead?
It's very difficult to say that what we ship to U.S. or what we ship to Europe or what we sell in India or what we sell into the Far East because the big pharmas have relocated several of their manufacturing facilities or outsourcing the dosage forms to either European companies or tax havens in Ireland or Singapore or elsewhere. So that is the reason our reporting is exactly on to where we are shipping the product, then whether the company is headed in U.S. or Europe or where it is. So the focus, I think, change, I think is the geographically is different because several of the big pharmas have closed their plants and move them to either Europe or elsewhere, that's why you are seeing the reporting that way. I think what we need here in India, for example, some of the contracts manufacturing of formulation sees happening by the big pharma from U.S. and Europe, we have to ship on behalf of the big pharma to some company in India, whereby they export the dosage pump. So I think our U.S. business did not go down. In fact, I think it's in good shape.
That's helpful, sir. Sir, my second question is, if you look at the top 5 customers for us, those account for about 35%, 36%. Yes, that number has been coming down over the past few years. But generally, in terms of client concentration, it's a bit higher than most of our global peers. So I just wanted to understand whether there are any conscious efforts to add more new clients and improve winning among some of these relatively newer clients?
There is no plan like that as such, probably it's happening because we've been growing at a faster rate and adding more customers and more products because when you add more products, you will have more customers. That's what is happening. When you increase the capacity, you always will have more customers. There's no plan that we want to add more customers. But definitely, we want to add more products and more capacity.
The next question is from the line of Cyndrella Carvalho from Centrum Broking.
Congratulations on great stuff numbers. Dr. Divi, if you could help us understand, out of the INR 1,800 crores CapEx that has been announced so far, how much has been able to utilize so far because we have plays most of it and some of it is still remaining? And if you could help us understand, out of the custom synthesis program that you have announced and the Kakinada that you specified would be around INR 600 crores. So custom synthesis, I understand, that will be available from next year onwards itself? And by when can we expect Kakinada as it's a greenfield that you would be starting?
The -- I'm sorry, I lost your first question. Can you please repeat?
Sir, out of the INR 1,800 crores CapEx earlier. How much has been -- is available presently? How much of it is available for this year? And I understand that we will complete, some of it is left, which we will complete by end of the fiscal, is what we have said already.
I think I mentioned that the B-model making program whereby some of the capacity would go up and have been completed, and we are seeing some of that benefit one. So some of the capacity expansions, some of the generic products, that also has started developing the fruits. There remains some projects where for the capitalized API, we validated, and we are waiting for the customer as well as the agency clearances. As we get the clearance, they will go into the production. Coming to the Kakinada investment, what it would take about a year or 1.5 years to complete the project, then it goes through the validation and qualification. So that investment would take time to give us returns, maybe more than, I would say, investment project construction about 1 year, 1.5 years. And sales start-up, another 1.5 year, 2 to 3 years.
And sir, I mean, on the brownfield CapEx on the 1,200, I understand that we have completed the backward integration as well as the EOU-related CapEx, but on the brownfield, how much we are able to utilize as of now?
On the brown field, the brown field, also there were backward integration projects from the brownfield as well as the new the backward integration already, we are able to use about 25% of the capacity, meaning of the buildings, we are waiting for the -- the regulatory and other to clear the utilization.
The next question is from the line of Nitin Agarwal from IDFC Securities.
Sir, on the question on the Nutraceutical business, how should we -- I mean what opportunities do you see in the Nutraceutical business going forward? I mean this year has been a pretty good year from a growth perspective for this business.
The Nutraceutical business is growing about 10% plus, that is the growth rate right now, maybe 10% to 15%. About INR 600 crores is the expected this year. And going forward, we are looking at 15% to 18% as we are reaching more and more markets. I think the trend in the industry is to go for more nutraceutical. And I think there may be a slightly isevens with this Panama, but definitely the COIs that it will be more neutral typical usage in the coming years. And we have given us to take all advantage by having backward integration of API as well as the formulation.
Sir, secondly, on the casement ESIS project that you talked about. So I just want to clarify, is this a single project, it's a combination of projects for which you're putting the CapEx for?
It's a combinate project from several big pharmas. It's not 1 project or 2 projects.
The next question is from the line of Ankush Agrawal from Stallion Asset.
My question is on the CFM business. Can you help me understand a little bit on the business mix that we typically have in terms of project that we undertake during the development phase of a molecule versus project we take during the commercial phase of the molecule that are in the second supplier, if you can highlight something on this?
I think it's a little more clarity because we are not in the clinical trial. We are not in the gram scale. We are not in the few kilogram scale. When it passed through Phase I, that's when it would enter into in Phase II. That is when the Q3 will get locked up. So we enter not in the in the chemistry in the Mesan stage, we enter on the committee to be robust to produce in terms of quantities, just when we enter phase II/III, so the [indiscernible] profile can be controlled and the productivity can be -- can happen, and the best technology can be used. So our enrollment is on Phase II/III. And then be in the launch, then travel [indiscernible]. That is our -- we are not joining a second supplier for any innovative product, no. That used to be the case, I'm talking about 10, 15 years ago. But now the majority of -- are new entering in phase II/III. And just see in some cases, if the big pharma wants to close several hundred tonnes of feet only, all of that said and several hundred sub. There are not many companies that can handle with resources and technology this assurance of supply to capito the needs of these big furnas with Ingenia requirement, stringent quality requirements, regulatory requirements. This is where we are strong at.
Okay. So just to be clear, for the most part, in the sales business, we entered during the Phase II?
We entered in the Phase II, Phase III, yes.
Yes. Okay. And secondly, sir, typically, in the CSM business, we do batch manufacturing and not the continuous manufacturing, which is what my understanding. Is it right?
That's right. The -- most of the -- not most, 90% plus or 92% plus APIs are produced on a batch process basis. We are developing some technologies for a continuous processing, but I think there are some limitations, but we can -- we are able to implement continuous processing of at least certain stages or certain operations. Not where we need to really control either a purity or safety, we are able to implement. But as a product totally, it's not the Q4 raw materials on one hand and the product would come out at the other hand continuously, no. There's no such possibility in an API.
The next question is from the line of Lakshmi Narayanan from ICICI Mutual Fund.
Sir, on the custom synthesis business, approximately how many clients we have? What kind of repeat business we get on the CS business? And it's also mentioned that top 3 products contribute 47% of revenues. Does it have any custom synthesis product when you talk about these upside? The next question is that in terms of reactors, we have commissioned UPV and we have put up some reactors. From the efficiency of reactors, what you commissioned earlier to now, how you improve the versatility and the size of reactors? So these are my 2 questions.
I think your first question is the 5 products in the custom synthesis are how many companies we have when the customs [indiscernible]. The relationship, the existence of the relationship will be frozen, number one. But definitely, we have many big pharmas as our clients. And we do get repeat businesses because of the good business we do with them and good service. We give them both supply on time, all the time and quality product with no rejections. These are the minimum expectations. And not only the best cost, best quality and with all the HF requirements and quality requirements and regulatory excellence.
My question is among the top 5 products which you called out at 47% of your revenues, anything is in the CS business or everything is in the non-CF business?
Most is in the long synthesis business because we do enter address to 3, but of as 2 3, they go to launch quickly. So we don't do the Titoli Ule in minor little sales and radio molecules in clinical don't do that because the killing date or derate or, whatever you call it, falling reads, very, very high there. It's high risk. High reward, I don't know. But definitely, we are not in that business. We have been saying that from the beginning.
Sir, on the -- the second question is asked.
Yes. We don't -- the traditional reactors, what we were using is totally different from what we use now. From the personal -- we have changed from designs to our own designs from whatever is available in the market, designed to our own designs, both from the point of view of material of construction to the way which is the way it can be multipurpose to use, to arrive at the right particle size and right quality as made now because we're just using it in part today. You have produced the right form and right to particle size. So essentially, the quality of re-entries totally is design of the reactor is very important play, and it have changed a lot from the time we started.
The next question is from the line of [ Mitesh Apur ] from Nippon India Mutual Fund.
Yes, sir. In the custom synthesis business, are you seeing inquiry strong additional inquiries from clients but are not committing to them because you will wait for this current capacity buildup to happen? And the progress on that you will wait and watch? And then eventually, we will commit to those kind of inquiries?
I'm in a fortunate set with all my discipline in holding on to money instead of venturing into other activities. What I meant is that the 2,000 would be 1,800 crores of cash we help. Or INR 1,000 crores of catch at any given time in my hand to invest some project expansion and come up this capacity. We haven't turned down -- we have not turned down any project big farmer based on not having capacity, not being able to build capacity. We must [indiscernible] down big projects where these are not available with us, like monoclonal antibodies or fermentation or steroids or hormones or the rights persist so much on the therapeutic segment that we were not interested in the project. But looking at normal capacity segments, a good product, there is no way we would leave an opportunity. With all the capability and capacity to create somewhat accommodate because all our plants are multiples. All our buildings are multipurpose. So we could always make a product without an issue.
And sir, my second question would be how supportive is the Indian government, both state and in terms of your CapEx execution? And have you seen any major change in times from their support?
Fortunately, I think for all the exports we do with the big pharmas with all the ones we have in-house, it's only regulatory clearances we need from the Polish control board and various other segmental bodies. And we resume excellent support from either the state or we can tap. We have no issue, and we get a lot of engagement.
My question was more post the recent PLI scheme, are they more incrementally more supportive in terms of clearance of approvals?
I think we did mention even in the last con call that the PLS scheme is not beneficial to us because the products that are involved in the PLS team are majority of them are antibiotics and others. We are not in those products. And it's only [ INR 3.5 crores ], they would use our product per applicant and the investment we are doing INR 3.5 crores would not make any dent.
The next question is from the line of [ Charulata Gathani from Dalan Broca ].
So congratulations on the good set of numbers. My question is about the gross profit margin. There is a multiple increase over the last 3 quarters. Can we assume it as a new base going forward? If you could give a range of margins?
Well, the intense need to have a better margin is always there. Every company wants to be -- wants to have better margins, we aim to change. But the CapEx is not only for increasing the margin. As I mentioned that capacity to have this factories what we have, be ready to face all the regulatory challenges that are being -- going to be posed in the next 5, 10, 15 years from enrollment to legislatures to quality regulations internationally. In addition to creating Meyer capacity with new technologies. While doing this backward integration and new technologies and new products, definitely, the margins should improve.
Okay. And so we can assume around 65 -- 63% to 65% range for gross margin going forward?
I would -- I have been very conservative from day 1 since '95, since I started the company. I used to say 50% now I have graduated to say that you see percent. I think my understanding, I promised you, 70. I don't know. In future, when I retire and Hyundai take over fully, but right now, I am very confident to say 60% definite is my -- I think, saying. And I always say, the product mix is the problem. It's not -- I want to drive it 70%. But what happens, the product means 1 product goes down, 1 project goes up. The economics of these products makes it -- and some competition from all of a sudden comes from Norway, to Chile, product in some decline, around 20% less price available should we sell, not sell. When our marketing team faces such challenges, and sometimes they do, and now to agree with the customer and reduce the price sometimes. So I think it's fair to say that 60% can be maintained.
Okay. And pertaining to the expanded capacity, by when do you expect regulatory clearances?
Are you talking about the continental plant and the -- is that the one?
Yes, and the assume synthesis.
No. The catalytic for product expansion should start yielding from the very next year, as we complete the blocks they didn't produce. The continent up line. It will take about 3 years because 1.5 years will go if we see greenfield projects, about 1.5 years and qualification batches and new addition and on about 3 years.
The next question is from the line of [ Naresh Suta ] from SBI Life Insurance.
Sir, my question is regarding this quarter's [indiscernible] numbers. So many of your peers have talked about the clients stocking the API for ensuring the continuity of their supply. And hence, the preponement of some of their orders. So have you also seen similar trends? And that's why the second half would be similar or a little lower than the first half?
I would like to see, it is always that people, for some time, they want just-in-time. That means they don't want any stock. They want stock as needed. They say insurance of supply, please keep at a discount. So I think it is the management plus which keeps changing at the customer end time to time. However, I think all quarters cannot be same, and we don't control anything, neither purchase orders nor shipments. So our aim is to continue selling whatever we produce. But being -- you take, for example, the quarter 3, almost every year, that everybody who closes their financial year in December, they would say, no, no, we don't want any stock. Please, postpone to the January. Don't ship us from December 10 or December 30, no. So we don't manage any of that. It just happens. So please, please, my request is do not judge us, do not go by quarter-on-quarter, look at year-on-year, as of overall, I think that will be a better way of looking at it.
Ladies and gentlemen, due to time constraint, we take the last question from the line of S Mukherjee from Nomura.
Sir, just wanted some color on the API generic business. Now you mentioned about debottlenecking and you mentioned the kind of one that you're seeing in some of the older products like naproxen, gabapentin, et cetera. I would assume that these are very strong molecules and growing slowly. What's your expectation of growth here? Will you be able to take more market share? And sir, just going forward, what would be the key driver, whether it's the older basket of products or new APIs that would drive us, if you can give some color, sir.
Yes. I think that was a good question. I think the problem is that my grandparents did not live more than 50 or 60 years, but my father lived 93. I'm dreaming about whether I can reach 100. So when people are living longer, they need more life-saving drug support as long as they live. Most of the generic products, the naproxens, the gabapentin, the sartans, the [indiscernible]. All these are lifestyle drugs. And as we live longer, you have to use them until the end. So as a result, the growth may look smaller when you say 8% growth year-on-year, 10% growth or 6%. But when you look at the product [indiscernible] growing at 10%, say 8%, you know it end up 650 tonnes a year in 1 year. There is nobody to invest here, 200 crores, 300 crores per 1,000 tonne plant. We are ready to invest when -- once we built it out, it's sold out. Once we expand it, it's sold out. So my marketing man, Mr. Prakash, Vice President, comes to me, what's next step? Sorry, you mean to say you want me to build 1 more networking block for another 2,000 tonnes, that's where we are in discussion already. The same thing goes for the few other generic products. This is like, I think, aspirin, paracetamol growth and we still need, and they are still expanding. It's getting a better process and more profitability should be made by designing more newer crop set.
Okay. And sir, just one more question. Actually two, actually, if I can. So one, in the last call, you talked about -- you are developing some of these COVID drugs like remdesivir, intermediates and API maybe. But you mentioned there is no sale yet, so I just wanted to get that clarification. And also, sir, on -- you mentioned about net load units. Any time line on CapEx there and the quantum of CapEx?
I think, yes, when we developed the project hydroxychloroquine, [indiscernible] API and also the alone intermediates for tenders with. The intention was that this would save the world, if this would save a life. We wanted to make sure there's no shortage. But fortunately, it seems that there's no shortage of the drug. At the same time, they're not fully being -- I don't want to comment on the efficacy, but I think they're -- it's not that they are able to prevent the death totally. So we have not made any further batches after initial production and whatever it is there probably, the shells were there. That's why I made a statement saying there is no significant sale in this quarter [indiscernible]. Going forward on the [indiscernible] site, yes, we have the 200 acres of land, the wall being contact and waiting for all the clearances. And first, I think we would construct the [indiscernible] plant, and then we would go into the...
I now hand the conference over to Mr. M. Satish Choudhury for closing comments.
Thank you all for joining us today for the earnings call of Divi's Laboratories Limited. In case you need any further clarification, please reach out to our Investor Relations. Thank you.
Thank you. Ladies and gentlemen, on behalf of Divi's Laboratories Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.