Divi's Laboratories Ltd

NSE:DIVISLAB

Earnings Call Transcript 2022-Q3

[Operator]

Ladies and gentlemen, good day, and welcome to the earnings conference call of Divi's Laboratories Limited for the Q3 of financial year 2022. [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.

[M. Satish Choudhury, Company Secretary & Compliance Officer]

Good afternoon to all of you. I'm 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 December 31, 2021. From Divi's Labs, we have with us today Dr. Murali K. Divi, Managing Director; Ms. Nilima Prasad Divi, 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 9 months ended December 31, 2021, 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 made available on the website of the company. Please also note that this audio call -- 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 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 statement, whether as a result of future events or otherwise. Now I hand over the conference to Dr. Murali K. Divi, Managing Director, for opening remarks. Over to you, sir.

[Murali Krishna Prasad Divi, MD & Executive Director]

Good afternoon, and thank you, everyone, for joining us at our quarter 3 financial year '22 earnings conference. I hope that all of you, your families and friends are safe during this pandemic. The world is witnessing a new wave with the spread of highly transmittable Omicron variant. Although Omicron is more infectious, the rate of hospitalization is likely to be lower while our government bodies continue to take swift actions to combat the situation by providing the first 2 doses as well as the precautionary dose of the vaccine during the uncertain time of this pandemic. Even the fully vaccinated individuals who are witnessing the COVID impact is a sign to be more cautious and continue to practice COVID-appropriate behavior. At Divi's, we are highly committed to protecting the health and well-being of our employees and their families. We are implementing rigorous safety measures across all the manufacturing units, and we'll continue to do so until further guidelines from WHO, CDC and local governments. All our employees, along with their families, are fully vaccinated at both the units and at the corporate office. The company has put in place several measures to ensure business continuity completed all the expansions to create a steady supply platform. Even during this uncertain time, we continue to adhere to the delivery time lines of our customers, thereby signifying the commitment that Divi's has towards its customers and the ability to supply. We [ are adapting ] and react expeditiously with the market. Backward integration in which we have started to invest is yielding positive output, thereby securing the supply chain. We continue to be committed to maintaining strong business continuity and adhering to our supply time lines. There's an increase in sales from DC-SEZ and DCV-SEZ. Now looking at CapEx. We have capitalized INR 196 crores during third quarter, and we anticipate another INR 100 crores CapEx before end of financial year '22. Being a responsible pharmaceutical company, Divi's has taken up several CSR activities within the community surrounding the manufacturing units, delivering the needful services that benefited hundreds of local living in the community. Some of these initiatives include distribution of laptops to visually challenged students at Nethra Vidyalaya supporting the local government schools in developing infrastructure, such as building classrooms, providing dual desk benches, books, school bags, stationery benefiting more than 20,000 students; installed 150 RO plants in the 61 government schools to ensure adequate safe drinking water to students in the schools. I will now ask Nilima to brief on operations and financials. Thank you.

[Nilima Prasad Divi, Whole]

Good afternoon, and welcome, everyone, to Divi's Laboratories Limited earnings call to discuss the results of our third quarter for the year-ended '22. I hope that each one of you, along with your friends, family are safe considering the continued existence of COVID-19 pandemic and the anticipated third wave. I would like to update the scenario with Divi's. On the manufacturing front, we are currently operating at 80% to 85% production capacity while following all safety protocols. On the procurement side, there was a significant increase in the prices of some of the raw materials due to energy crisis in China. We were able to mitigate some of these cost pressures due to geographical diversification of procurement, along with existing long-term contracts with the key suppliers. Backward integration on key products and limited product offering has allowed us to be focused and react quickly to the changes in the market. I'm delighted to mention that the CapEx program for debottlenecking, backward integration and upgrading of utilities taken up during the last 2 years are resulting in minimizing supply risks and production disruptions, achieving in more improved financial performance. The logistical challenges attributed to the cancellation of flights, condition at the ports, limited availability of the containers and manpower at the ports caused a huge slowdown, thereby impacting the incoming raw materials and the outbound shipments. We are committed to serving our customers despite all these headwinds. Our operational teams continue to be diligent and closely monitor the ever-changing situation so that we can swiftly act and ensure an intact supply chain. Coming to operations. I'm happy to state that we have achieved a consolidated total income of INR 2,510 crores during the third quarter, reflecting a growth of 46% year-on-year. Profit before tax for the quarter amounted to INR 1,034 crores, a growth of 61% year-on-year and profit after tax to INR 902 crores, reflecting a growth of 92% year-on-year. For the 9-month period ended December 31, 2021, the company has earned a consolidated total income of INR 6,503 crores, higher by 25% year-on-year, with an EBITDA of 44%. Profit before tax of INR 2,608 crores, reflecting a growth of 31% year-on-year, and the profit of after tax of INR 2,066 crores, higher by 39% year-on-year. During the 9-month period, exports accounted to 90% of the sales revenue, while exports for the quarter constituted 92%. During the current quarter, Europe and U.S. contributed 79% of our revenue, while for the 9-month period the contribution from these regions was 77%. Product mix for generics and to custom synthesis for the period is 43% and 57% of revenue, respectively, for the 9-month period. During the current quarter, CS business was about 60%. Constant currency growth for the quarter is 59%, while for the 9-month period, it is 32%. Our nutraceutical business for the quarter accounted to INR 166 crores and INR 471 crores for the 9-month period. We have a ForEx loss of INR 3 crores for the current quarter and a gain of INR 9 crores for the 9-month period. We have cash on books of INR 2,323 crores. As of 31st December, receivables amounted to INR 2,209 crores and inventories, INR 2,830 crores. We have capitalized assets of INR 196 crores during the quarter and INR 762 crores for the 9 months. For this, the new SEZ accounted to about INR 368 crores. We have a capital work in progress of about INR 450 crores as of 31st December, of which a major part is CapEx at DCV-SEZ. Thank you.

[M. Satish Choudhury, Company Secretary & Compliance Officer]

Thank you, madam. With this, we would request the moderator to open the line for Q&A.

[Operator]

[Operator Instructions] The first question is from the line of Tushar Manudhane from Motilal Oswal Financial Services.

[Tushar Manudhane, Research Analyst]

So sequentially, we have seen a sharp jump up on the sales. So would you like to call out if there is any one-off into this quarter?

[Murali Krishna Prasad Divi, MD & Executive Director]

It's not one-off with our several projects we have been working on, and yes, one of the projects has taken a little faster. But it is a combination of several projects announced a lumpiness in our business which cannot be said quarter-to-quarter. It's more on year-to-year is more reasonable.

[Tushar Manudhane, Research Analyst]

Right. But from INR 2,000 crores the sales for the past 2 quarters, now it is INR 2,500 crores. So can that be now kind of a base to look for from hereon?

[Murali Krishna Prasad Divi, MD & Executive Director]

I would say that we would like to maintain that. Now it also varies on these projects we are working on. While our generic products are very stable, but the custom synthesis projects we are working on it more depends on the customers' product movement than reproducing and offering.

[Tushar Manudhane, Research Analyst]

Okay. And just secondly, we have been working on COVID products like molnupiravir, but any further development even on, let's say, the Pfizer drug, which is PAXLOVID?

[Murali Krishna Prasad Divi, MD & Executive Director]

I think we should not be discussing products. We should not be discussing names of the company, at least I should not. You have the freedom. Me, the directors, we are bound by confidentiality agreement. We cannot discuss on the specifics of the products. But yes, we are involved in anti-COVID drug. We are the largest manufacturer of active ingredients. We have the largest capacity. Out of the 1,700 reactors, the occupancy is 80%, 85%. That means you still have about 300 reactors that can accommodate any requirement of any of the APIs. So if somebody needs volumes, we are the place. Now coming back to your specific question on anti-COVID drug. It's not just these 2 drugs only. If you are seeing, they are now saying that the combination drug is much better than the single drug, number one. There is a new variant coming, NeoCov, which, again, needs a different modification of the drug. So several big pharmas are now coming up with a variant in chemistry, more or less concentrating the nucleotides. I think we are very -- following very closely to see what kind of new technologies, new synthetic chemistries are required to quickly develop and manufacture and supply. When I say quickly develop, supply and manufacture, there is a reason. Because you don't know what was in demand 3 months ago, 6 months ago, there may be no use 6 months from now as we have seen with the earlier drug, favipiravir, then prior to that hydroxychloroquine and a few others. So the variants demand newer COVID drugs and newer probably mechanism of action. But the chemistry is same. If you are good in technology, good in newer chemistries, we can make them.

[Tushar Manudhane, Research Analyst]

Sure, sir. That helps. And just, lastly, on the raw material side, while the backward integration has helped us in terms of maintaining or improving the gross margins per se, do you see this to be sustaining even for the upcoming over near to medium term?

[Murali Krishna Prasad Divi, MD & Executive Director]

Yes. The raw material backward integration is a strategy not only just for the sake of saving some cost, but also from the point of assurance of supply, both from the generic as well as from the custom synthesis.

[Operator]

[Operator Instructions] The next question is from the line of Alankar Garude from Kotak (Institutional Equities).

[Alankar Garude, Research Analyst]

Sir, given the big COVID upside in FY '22 numbers, how should we look at growth in custom synthesis over the next couple of years? Maybe if you can throw some light on the order book, that would be really helpful.

[Murali Krishna Prasad Divi, MD & Executive Director]

The -- I think I was just explaining about the COVID drugs. They may be short-lived or they may die soon, and the new requirement of the newer one is probably coming much faster to work on the variant. So I think it's not the order book, but it's not -- it is how quickly you can accommodate a new product, how quickly you can scale up and supply is the part of the day today. That's where we are very strong. Now yes, we wish to maintain the speed, we wish to maintain the sales, profitability. I wouldn't say just custom synthesis because our generic portfolio is very strong. Our future generic portfolio is very, very strong. So I think it should be balanced because it's not just custom synthesis alone, a balance of custom synthesis and generic will be [indiscernible]. If you just concentrate on one, you can be in trouble if that all of a sudden stops.

[Alankar Garude, Research Analyst]

Okay, sir. Yes. Sorry, sir, go ahead.

[Murali Krishna Prasad Divi, MD & Executive Director]

No, please go ahead.

[Alankar Garude, Research Analyst]

Okay. Sir, my second question was in terms of capacity, how are we placed over the next few years? And any update on Kakinada? And are there any backup options if there's any further delay in Kakinada?

[Murali Krishna Prasad Divi, MD & Executive Director]

On the capacity, we never had an issue because always we invested ahead of time. We have been investing for the last 3 years about INR 2,500 crores, and probably what we had is close to INR 3,000 crores. Always keeping 2 or 3 blocks ready to take product because we don't build product-specific buildings. We build always multi-product, multi-purpose blocks. That means any product could be produced in those blocks and for very specific technologies they would go to different blocks. That's the concept from day 1 we have been doing. So I was explaining for the first question that out of the 1,500-plus reactors we have, 80% occupancy, it still leaves 200, 300 reactors available. These are all very large volumes, which can accommodate 1, 2, 3 anti-COVID drugs coming, it should be able to. And also the new -- additional sartans we are coming into, also the other new custom synthesis projects and the new generics that would go out, the [ APIs ] that will go out of patent in the next 2, 3 years, I said $20 billion worth of patents between '23 and '25 we're geared up to get the business.

[Alankar Garude, Research Analyst]

And on Kakinada, any update?

[Murali Krishna Prasad Divi, MD & Executive Director]

Kakinada, it has moved quite a bit in terms that the APIIC finally agreed and they will be handing over the 500 acres of land to us in this shortly.

[Operator]

The next question is from the line of Shyam Srinivasan from Goldman Sachs.

[Shyam Srinivasan, Equity Analyst]

Sir, when you give your disclosure in the annual report, you give your largest product, it was 20% approximately last year. This year, certainly, you may -- you will call it out, let's assume, it's molnupiravir. So what is the kind of number that you think is -- are we doing specifically on molnupiravir?

[Murali Krishna Prasad Divi, MD & Executive Director]

I did mention in the earlier answer that we cannot talk about a product or big pharma. It's highly confidential, and I'm sorry, I cannot disclose. The reason even this name came out, Divi and the product, is because the big pharma did the voluntary licensing scheme. That's how the name came out. So...

[Shyam Srinivasan, Equity Analyst]

Okay, sir. Helpful, sir. Let me ask this question differently. Your partner, Merck, has said, we have done 10 million treatment courses in the calendar year 2021 and this is going to 20 million courses-plus next year. So should we assume that we are tied to the hip in terms of how that movement calendar year 2022 or fiscal '23 for us relative to the last 9 months at least?

[Murali Krishna Prasad Divi, MD & Executive Director]

What I would say is, again, we are ready to produce whatever they need with respect to our -- whether it is company A, company B, company C, company D, their requirements will be made. As I said that it's a very dynamic situation. It can be 50, it can be 100, it can be 0. It can take 3 months, 6 months, 1 year. It's very dynamic because nobody could predict this pandemic, how quickly it will come, how it will disappear, how you should dress up and how should you dress down. So it's a very, very difficult situation. But what I am saying is that we are ready to take all the opportunities. We can meet the capacity requirements and we will produce and supply. There's no question of any shortage. We'll make sure that.

[Shyam Srinivasan, Equity Analyst]

Got it, sir. And my last question, I'll quickly ask it, is on the generic API. If I were to use the 43:57 ratio for the 9 months and back out the generic API, and I'm also reducing nutraceuticals here, generic API pace is still declining, 10% Y-o-Y, at least what math I could do, correct me if I'm wrong. But do you see that the pain in the generic API is probably over in terms of inventory drawdowns? Do you think fourth quarter or next fiscal you will likely see growth back again?

[Murali Krishna Prasad Divi, MD & Executive Director]

I would not say that generics have declined. We did not lose a single customer. We did not lose volumes. The generic business and the custom synthesis, I have been asked same from the beginning, 40-60, 60-40. Now it may become 57. It may become 57 on the generic side -- on the custom synthesis side. It's not our intention to drive towards that. It so happened in the lumpiness, it so happened that it is now 57 or 60 or maybe 63. That does not mean that we lost some business in the generics, no. Yes, competition is there in generic, we'll be there. We just have to be agile. We just have to try more green chemistry and see how we can improve our margins all the time and face the challenges of the raw materials and work on it.

[Operator]

The next question is from the line of Surya Patra from PhillipCapital.

[Surya Narayan Patra, VP & Pharma Analyst]

Congratulations on the great set of numbers. I think the best ever numbers that we have reported, although influenced by [indiscernible]. But sir, I just wanted to understand your view. Going ahead, do you think this -- the growth in the custom synthesis will be higher than the generic growth? Because at least this year, we are seeing almost like over 50% kind of growth in the custom synthesis in the 9-month period, whereas, obviously, on a high base of last year, generic is looking relative softer. So your view on that?

[Murali Krishna Prasad Divi, MD & Executive Director]

I have been saying for several quarters that we wish it take to 50-50. Because generics, we decide want to produce, how much to produce, when to produce. Custom synthesis, the customer demands, you produce this, you produce this much quantity, you produce -- you supply at this time. So the combination of these 2 gives us flexibility, productivity and highest rewards. That is our wishful thinking. But on a quarter-on-quarter basis, we should not get confused. We should see more on a year-on-year basis, whereby this lumpiness of quarter-on-quarter should not be.Now I think I said that $20 billion then API is going out of patent between '23 and '25. And we are aiming at them, that's when we will see the generics again growing faster. We are launching the additional sartans. We are launching the original -- the contrast media, which I already explained in the last quarter. They are our growth engines and also the new generic growth engines. I think one should not get carried away about one product or one COVID division. But I think we need to see what is the overall and is the company geared up to be able to handle multi-product tasks, I think that's where we are experts in doing it.

[Surya Narayan Patra, VP & Pharma Analyst]

Sure, sir. Sir, slightly differently, let's say, over 3 or next 3-year period, a couple of things that I wanted to understand your view. So in the over next 3-year period, what is the growth that you are expecting, let's say, in the custom synthesis as well as the generic business? You may not give -- required to give that number, but I think directionally if you can share some idea. And also, what is the CapEx that you are planning over next 3 years? I'm asking these 2 questions because there is a kind of, I would say, new wave of opportunity for manufacturers, particularly Indian manufacturers and to be specific a player like Divi's, that the supply chain replacement from the China -- or derisking supply chain from China, what the global world is looking for. And so considering that and that is a kind of the strongest wave for Indian manufacturers, so what is the kind of growth momentum that you are looking at your custom synthesis opportunity as well as the generic opportunity? And what CapEx that you are anticipating over the next 3-year period?

[Murali Krishna Prasad Divi, MD & Executive Director]

Okay. It's a quite complicated question, but I would like to bring clarity. As an investment, there's no problem investing because the results -- the funds are available in the bank, we don't need to borrow. INR 2,300 crores in the bank in the fixed deposits. We never invest for the sake of investments. I mentioned that always we keep 2 or 3 multi-purpose blocks, getting ready, equipment installed, ready for validation, ready for erection of equipment. Equipment order received, maybe about 50, 100 reactors and several of the other equipment to see which starts to go so that when we give the go, is it for a generic product or for custom synthesis project. We need not look for the land, we need not look for buildings, we need not look for -- what we need to look for only chemistry and technology. We typically work on them. The reason I mentioned is that we still have 200-plus acres at Unit-I. We still have 150 acres land at Unit-II. So we could quickly, if required, more block we can install in those facilities. Now coming to Kakinada. Yes, once the Kakinada or the Krishnapatnam, they are cleared where -- when we start, yes, there will be huge investment, at least INR 500 crores to INR 600 crores at each place. Whereas at the current, I think, in the next 1, 2 years, we can see an investment of about INR 1,000 crores at the current places, current places both Unit-I, Unit-II, and the new project to start and probably to be much higher. But again, it's all from internal accruals.

[Surya Narayan Patra, VP & Pharma Analyst]

Yes, sir. Okay. And just on the opportunity from the China supply chain replacement, particularly on the custom synthesis side or the intermediate for the innovative molecules, that business opportunity, if you can throw some light, sir.

[Murali Krishna Prasad Divi, MD & Executive Director]

You must be reading quite a bit about reaction from the United States recently in the last 1 week from the FDA both on vaccines as well as API, putting a red list on some of the companies, which really making the big pharmas as well as other companies to worry about how they can source from China. Yes, it's an opportunity. And since several companies have been sourcing from China, they are looking at an alternate source, either Europe or in U.S. or in India. Definitely, it costs 10x in Europe, U.S. and also it takes a minimum of 5 years to bring a new plant. [ Further about ] expansion, if they are close to the towns with landlocked in small areas. So India has lots to gain in the next 5 years in the API industry. So -- and we are geared up to take all the opportunities, both from the big pharma side as well as the generics side.

[Operator]

The next question is from the line of Prakash from Axis Capital.

[Prakash Agarwal, Executive Director of Pharmaceuticals]

Just wanted to understand, I mean, obviously, we've done a good job, great job. And you've mentioned that these opportunities will keep on coming, given the chemistry business that we have. But from a number perspective, there is a big step-up function that we have seen in this quarter. Would you suggest that this number will continue this way for the next couple of quarters also? And can we grow on this base for next year or so? Would that be correct understanding trend-wise?

[Murali Krishna Prasad Divi, MD & Executive Director]

I think I just answered that in greater detail. It all depends upon the customer's product performance in the market. It's not one product, it's not one project. With our few projects lumped up, that lumpiness is what you're seeing. So yes, so far, so good. We anticipate next quarter, definitely, we should be doing good. But what happened here from now is, especially the COVID drug is very dynamic, even not COVID drugs are also getting dynamic because, during COVID, we have seen several therapy segments the demand went down. Like nobody was using antibiotics, nobody was using a few other compounds. People are just concentrating on vitamin D, vitamin C and few other compounds. So I think this dynamic situation will be there at least for another 1, 2 years until the COVID variants, the new variants which are going to come out in the very near future, I think that will determine whether the current COVID drugs work, [indiscernible] work or the combi would work. That means a compound A from X company has to be mixed with compound B of Y company. And the new combo drug will do better than a single drug that's currently available or future invented. Because there are at least handful of more [indiscernible] with anti-COVID drugs that are coming out with new structures and they may all of a sudden show up to be very, very promising on the new COVID variant. So it's how vigilant we are, how quickly we can develop the structure, how quickly we can validate and supply to the customer is the challenge. Because somebody is supplying 20 tons or 100 tons in 3 months or 1 year doesn't mean anything because it may be 0 is the requirement in the next 6 months because on the variants it may not work just like with [ molnupiravir, favipiravir ] or something else. So I cannot -- I don't want to comment on that. But we are a manufacturer, we own technology to handle various types of chemistry, and we are ready to take the challenges and do it.

[Prakash Agarwal, Executive Director of Pharmaceuticals]

And sir, I was just trying to understand even we have order book kind of system, so we would have some visibility for the next 3, 6 months. That's what I was trying to get some color. But I hear you. My second question was on the input cost and many companies have talked about this freight cost, et cetera, since we have large exports. And the generics business in exports would require all these and obviously custom synthesis also. Would you like to call that out that the costs in general have gone up significantly? I mean because of custom synthesis, it might be looking small. But business as usual, is there a substantial jump in input prices as well as freight cost? And has the trend started to come down?

[Murali Krishna Prasad Divi, MD & Executive Director]

Yes. We have not done anything 6 months ago, 1 year ago, 2 years ago we would have been in the mess. Because we anticipated this from China. We started working on backward integration, making our own starting material, investing on them 2 years ago. That's why our impact and our [ alternatives ] are much less compared to several other companies. And we think we can be -- industry cannot pay these higher prices for a longer time or always people will find alternatives instead of those [indiscernible] instead of those compounds, instead of those derivatives. So what I am saying is that the impact on us is much, much less because we were prepared, backward integrated. And purchase of raw materials, Nilima's team have planned and anticipated, probably we have purchased some of them 6 months, 9 months, 1 year top. Now will this continue? Can people -- other generic companies, will they be able to bear? I doubt about that. But we are prepared.

[Operator]

The next question is from the line of Chirag Dagli from DSP Mutual Fund.

[Chirag Dagli]

Sir, in your opening remarks, did you mention that the custom synthesis contribution for the third quarter is 50%, 5-0?

[Murali Krishna Prasad Divi, MD & Executive Director]

I did mention that we would like to maintain 50-50, that is my wishful thinking. But the custom synthesis is, I think, 57% and the generics is 43%, that's how it was. But it's not our intention to either put 60-40 or 40-60. It varies quarter-on-quarter because of the lumpiness of the custom synthesis projects. So I would prefer 50-50. This is what I said.

[Chirag Dagli]

So I think Nilima mentioned 50, sir. I just wanted to double-check on that number. Did I hear it correctly?

[Murali Krishna Prasad Divi, MD & Executive Director]

No. I think it is 57% custom synthesis, 43% for generics.

[Nilima Prasad Divi, Whole]

I did mention that for the current quarter, custom synthesis business is about 60%.

[Chirag Dagli]

6-0. Okay. Sorry, sir. So you mentioned 60. Okay, okay. That is it. The other thing is ex of the COVID business, how would the custom synthesis business have grown in the last 9 months? I understand we don't look at it quarter-on-quarter, but when you look at the first 9 months of the year, ex of the COVID business, how has this performed, sir?

[Murali Krishna Prasad Divi, MD & Executive Director]

We don't reveal or we don't disclose segment-wise business. We -- only from the beginning, we only have been revealing -- disclosing what is generics, what is custom synthesis. As I said that we maintain highest confidentiality, both customer, product, numbers and that's how we are respected by the big pharmas and we would like to stay that way.

[Chirag Dagli]

Understood, sir. And the last question, sir, on the custom synthesis business. Was that -- typically, the fourth quarter is very strong, seasonally the strongest for us. This year also, do you see similar seasonality?

[Murali Krishna Prasad Divi, MD & Executive Director]

We don't see any reason for not -- it is not our -- but last quarter, we want to ship more, no. Probably it so happens that I don't even monitor that way. But I think it looks good. Opportunities are good. Validations of several of our projects are underway, both in the custom synthesis, in the contrast media, in the fast-track projects as well as our new generics. All things are happening for good, and let's hope for the best.

[Operator]

The next question is from the line of Damayanti Kerai from HSBC Securities and Capital Markets.

[Damayanti Kerai, Analyst, Healthcare and Hospitals]

My first question is on generic API segment. So here, obviously, you mentioned about volatility in commodity prices, supply disruption, et cetera. So in some of your contracts with customers, do you have headroom to pass on some costs?

[Murali Krishna Prasad Divi, MD & Executive Director]

Yes. In most of the contracts, the long -- when I say contracts, not order book quarter-on-quarter, year-on-year. We usually have contracts for about 5 years. And these contracts, we will have some built-in system whereby neither of our customer will have issue. Now we will have an issue when the prices go either too high or too low. There is a built-in system whereby we can pass on some of these extra costs, yes.

[Damayanti Kerai, Analyst, Healthcare and Hospitals]

Okay. Sir, so it's applicable for some contracts, but -- you mentioned like 5-year or longer contracts. But do you have similar leeway in shorter-term contracts? Like something is 1 or 2 years and then you can pass on cost there, too?

[Murali Krishna Prasad Divi, MD & Executive Director]

What I meant is that most of our contracts are multiyear and they are all covered under that. But some of our newer generics, some of our development products, recent in the last 6 months, 1 year, 2 years, this will take time before we enter into the longer contracts. This is what I meant.

[Damayanti Kerai, Analyst, Healthcare and Hospitals]

Okay, okay, sir. Understood. And sir, can you call out your CapEx plan budgeted for next 2 years?

[Murali Krishna Prasad Divi, MD & Executive Director]

I have mentioned just a few minutes ago that it may be anywhere from INR 1,000 crores to INR 2,000 crores in the next 2, 3 years based on our investments into the greenfield projects and also our brownfield projects.

[Damayanti Kerai, Analyst, Healthcare and Hospitals]

Last question, how much is maintenance CapEx for you per year approximately?

[Murali Krishna Prasad Divi, MD & Executive Director]

It's about INR 100 crores.

[Operator]

The next question is from the line of Bharat Sheth from Quest Investment Advisors.

[Bharat Sheth, Co]

Congratulations on good set of numbers. Sir, in view of this performance, so we were earlier talking of -- sorry, but first, let me take that, we were setting up several new technology of microprocessors we have done, so that which can give a much better -- higher asset turn than the -- I mean on the old. So what is the status of that? And how do we see that as a -- when we are talking of new technology?

[Nilima Prasad Divi, Whole]

Can you repeat your question again, please?

[Bharat Sheth, Co]

I mean -- hello, am I audible?

[Murali Krishna Prasad Divi, MD & Executive Director]

Yes.

[Bharat Sheth, Co]

We were working on, I mean, in setting up several microprocess -- I mean, reactor, so which can give -- where the turnaround time is faster and it can give you a better asset turnover than the existing one. So what is the status of that project?

[Murali Krishna Prasad Divi, MD & Executive Director]

It's not project, it's a process development capability, our technical development capability. We have -- number one, most of the products are made by that process. So we are playing continuous projects, number one. Two, we are also bringing automation into process. Three, yes, microreactors or microcell production. So it is in the laboratory stage. There are advantages. When you look at highly analytic reactions, the microreactors are very helpful because whatever is the quantity of a highly reactive compound, you have small quantities available at a given situation. So it's an advantage for such reactions. Yes, we are involved in those. They are still in the laboratory or in the scale-up, they have not gone into the plant. Not only this has anywhere, maybe for some [ receptacle ] manufacturer they may be using. For the commercial still, it is on the bench.

[Bharat Sheth, Co]

Okay. Sir, and in terms of this good stellar performance, we would like to revise our full year FY '22 and '23 growth number? Approximately some kind of a ballpark, that range, if you can give.

[Murali Krishna Prasad Divi, MD & Executive Director]

I think some of the dreams I have to do and some of the dreams you need to do. We don't give -- we have been giving only guidance in the past of 15% year-on-year. And we would like to maintain that there will be lumpiness, there will be project delay and projects coming forward. And I think -- we don't give any futuristic guidelines.

[Operator]

The next question is from the line of Sonia Lalwani from Stratford House Advisors.

[Sonia Lalwani]

Congratulations on a very good set of numbers, sir. My questions have been answered. Thank you.

[Operator]

The next question is from the line of Abhishek Sharma from Jefferies.

[Abhishek Sharma, Equity Analyst]

Sir, just trying to understand why there is so much uncertainty around Kakinada expansion, that we are finding it difficult to come in to CapEx over a 2-year period despite land handover in near future.

[Murali Krishna Prasad Divi, MD & Executive Director]

It's not the difficulty from our side. I think it's the regulatory bodies, the APIIC, with whatever is the situation with the farmers and the government, that is where it is. We have already fully paid, we have consecutive walled around this part of the land and we are ready to go with our blueprints and drawings and the whole thing contracted. So it is the government, APIIC, needs to hand over the land. As I mentioned that we have about 200 acres of land at Unit-I and 150 acres of land at Unit-II. We can invest based on the opportunities and we will never lose an opportunity.

[Abhishek Sharma, Equity Analyst]

No. That's fair enough, sir. But if I heard you correctly, early on in the call you said that APIIC was close to handing over the land to you. So what is still holding it back?

[Murali Krishna Prasad Divi, MD & Executive Director]

There were farmers who raised questions to the government that they're paid less or whatever is to the government, APIIC, paying to the farmers. We have paid extra, they went to the court. Court dismissed the -- that's why APIIC is able to now probably handing over the land to us.

[Abhishek Sharma, Equity Analyst]

Okay. And is there some uncertainty around the time frame here that's making you a little tentative on when to start the project?

[Murali Krishna Prasad Divi, MD & Executive Director]

We don't have any -- we only can say that what we have been told by the APIIC. But once it is handed over, our time line is clear. We will start work right away.

[Operator]

Next question is from the line of Amar Maurya from AlfAccurate Advisors.

[Amar Amarbahadur Maurya, Director]

Sir, first question, like we all are trying to understand, I think, the same thing. I mean as you indicated that there is a customer lumpiness, and lumpiness can be both on the positive side and the negative side. So I believe this quarter was more of a positive lumpiness for us and that kind of momentum is not likely to sustain, let's say, after 1 quarter, that is what you are indicating? Or how should we read this kind of lumpiness in the number?

[Murali Krishna Prasad Divi, MD & Executive Director]

I did not say anything about -- I said lumpiness is common in the API manufacturing industry when somebody is making both generic and custom synthesis, number one. Two, the lumpiness happened. It's like the curve. It can go a little higher than normal lumpiness because there could be a combination of a few projects. And also, I mentioned -- as you say, will it continue in the next quarter or the following quarter? I made it clear that it's not what we decide. It is what our customers' compounds, sales performance that decide. But we are -- what I said was, we are not looking at one project, we have many projects going on with many customers. I think in contrast media, in sartans, in the COVID drugs, in our own generic drugs that would go out of patent in -- between '23 and '25, $100 billion of products. So these are the various combination of projects that are going on.

[Amar Amarbahadur Maurya, Director]

Okay, okay. So basically, is it like despite -- I mean, you also indicated that you would like to continue this run rate going forward. So are you indicating that we have various such projects lined up so that this kind of step-up in the revenue, which we have seen is likely to continue going forward?

[Murali Krishna Prasad Divi, MD & Executive Director]

I don't think anybody will wish that the business will go down. No promoter will wish that it will go down. Every promoter will wish that he will at least maintain where he is now and even maybe he will do better. That is my wish. Now what happens decides on -- is decided by how is this COVID -- how is the COVID variants are going to work and what kind of new drugs are required? Can they be supplied faster? At the same time, I don't want to only look at COVID drugs. We have a number of projects going on both in custom synthesis as well as our own generics and new generics. That is what I would like to see that.

[Operator]

Ladies and gentlemen, due to paucity of time, we will take one last question from the line of Priya Harwani from Perpetuity Ventures.

[Priya Harwani]

So I just wanted to know the net cash as on 31st December.

[Murali Krishna Prasad Divi, MD & Executive Director]

Can you please repeat? I could not hear it.

[Priya Harwani]

What's the net cash as on 31st December?

[Nilima Prasad Divi, Whole]

About INR 2,323 crores.

[Operator]

Thank you. Ladies and gentlemen, we will take that as a last question. I would now like to hand the conference over to Mr. M. Satish Choudhury for closing comments.

[M. Satish Choudhury, Company Secretary & Compliance Officer]

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.

[Operator]

Thank you. Ladies and gentlemen, on behalf of Divi's Laboratories Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.