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Granules India Ltd
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Ladies and gentlemen, good day, and welcome to Granules India Limited Q4 FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Irfan Raeen from Orient Capital. Thank you, and over to you, sir.
Thank you, [ Steve ] On behalf of Granules India Limited, I extend a very warm welcome to all participants on Q4 and FY '24 financial results discussion call. Today on the call, we have Dr. Krishna Prasad, sir, Chairman and Managing Director; Dr. KVS Ram Rao, Joint Managing Director and Chief Executive Officer; Ms. Priyanka Chigurupati, ma'am, Executive Director; Mr. Mukesh Surana, sir, Chief Financial Officer.
Before we begin the call, I would like give you a short disclaimer. This call may contain some of the forward-looking statements, which are completely based upon our beliefs, opinion, expectation as of today. These statements are not a guarantee of our future performance and involve unfortunate risks and uncertainties.
And with this, I would like to hand over the call to Krishna sir. Over to you, sir. Thank you.
Thank you, Irfan. A very good evening to all of you, ladies and gentlemen. And thank you very much for attending our Q4 earnings call today. A detailed presentation of our Q4 and full year FY '24 performance has been uploaded to our website, and I'm sure all of you would have gone through it by now.
We had a strong performance in Q4, with continued growth in the formulation share of the business. This was driven by new products manufactured in India and mainly in the U.S. and also sales to new geographies. While the year wasn't as per our expectations due to several reasons, including the cyber attack and changing marketing dynamics for some of our products, mainly paracetamol, we are very excited to see our strategic initiatives take shape.
Our FD segment has grown by 41% in Q4 FY '24 compared to Q4 FY '23 and contributed 65% of our revenue in FY '24. The sales of new products other than our legacy 5 products have been growing well and now contributes 25% of our revenue versus 15% one year ago. We continue to prioritize investment in building R&D capabilities and improve the quality of our product pipeline.
We have exciting product pipeline in oncology, anti-diabetic segment, large volume molecules and select nonroyalty form. Dr. Ram Rao will elaborate on this for the industry.
We have made good progress on products being developed on innovation and technology platforms, such as Bio-Catalysis and Continuous Manufacturing. The pilot plant validation for 2 API products has now been completed, and we are gearing to build commercial scale manufacturing capacity at Unit 5 in Vizag. We have approved ANDAs for the finished products, finished dosage forms of these APIs, and with this backward integration enabled by the differentiated technology platform, we are aiming to reach the leadership position in these molecules.
We expect the formulation segment to drive the growth going forward with API and KSMs supporting this growth. We are gearing our FD capacity to cater to this incremental demand.
The construction and capacity ramp-up of the new combination facility at Genome Valley as part of Granules Life Sciences is progressing well. This plant will add 8 billion dosages to our finished business capacity. The plant successfully commenced operations in the month of March, and the capacity is being ramped up progressively.
On the sustainability front, we have committed to achieving Net Zero by 2050 aligned to SBTi's 1.5-degree pathway. We have conducted one of the most comprehensive assessments of our Scope 3 emissions in the pharma industry. Our Net Zero road map has been finalized, and action plans have been initiated on efficiency measures, adoption of biofuels, renewable energy, sustainable supplier sustainability programs and green molecules platform.
At CZRO, our Green Pharma initiative, we are focused on strengthening our core business for backward integration of paracetamol and metformin in a sustainable manner. We commenced operations for DCDA at the newly built pilot plant in Vizag during March '24. The pilot DCDA plant has a capacity of 108 tonnes per annum. Plans are being worked out for a larger commercial facility at Kakinada.
To summarize, we are excited about the various venues for growth, including advancing our core products up the value chain, introducing differentiated new product lines and expanding and deepening our presence into new geographical markets.
With this, I hand over the call to Dr. Ram Rao.
Thank you, Chairman, and good evening, everyone. We have been communicating for some time about our strategy and transformation journey at Granules. After several quarters of focus and hard work, I'm happy to share that our strategy is strengthening the core, focus on R&D, technology and innovation and strong focus on quality or bring change of [indiscernible] in the markets. Or in other words, we have a strategy in action.
Following our examples, which I will -- of transformation of our strategic thinking and execution into tangible business results. Our first strategy of strengthening the core, we have proven the strategy for 2 components of our portfolio, regular commercial products and new product launches. Our approach is through commercial excellence, innovation in R&D and technology and manufacturing experts.
For commercial products, our program is focused on market share expansion in the chosen geography, resulting in moving up the value chain from API to finished dosages. Expansion of business in geographies outside the U.S., a sustainable and healthy [indiscernible]. Following the key reasons is strategies are actions, the finished dosage business is now contributing 65% of the revenue, while our API and CFI businesses are around 35% in FY '24. Comparatively in FY '23, the finished dosage business stood at 50% of the revenue. This is a significant shift in our business model, driven by strong focus on North America, Europe and chosen geographies of rest of the world. This is an outcome of our strategy of strengthening the core.
Another important guiding [Technical Difficulty] is the revenue and the market share growth of our core molecules in North America. We have grown more than 20% in the last couple of [Technical Difficulty], very tough generic competition in this geography. This growth is led by products where we have achieved and has continued to remain between the 2 top players over several years. We continue to maintain the dominant position in these molecules.
Our finished dose business revenue has also gone up significantly in Europe and some of the chosen regulated markets. The revenue has gone up from INR 248 crores in FY '23 to INR 327 crores in FY '24, an increase of 32%. Purpose of strengthening the core, which has also made us build a packaging facility in the U.S. has grown our OTC business by around 25% in FY '24. This move has made us one of the key players in the private label OTC space and the only integrated player right from raw materials to dosage.
New product launches, we have received 16 dossier approvals from various ratings in FY '24, on account of the excellent work from our R&D and regulatory teams. Several of these molecules have been launched in U.S. We continue to gain momentum on products we launched in quarter 3 and quarter 4 of FY '24, primarily in the U.S. Majority of these molecules have been filed in Europe and some of the chosen ROW markets. We have already received some approvals from Europe and expect most of the approvals in Europe and other geographies in the next couple of quarters. Some of these molecules will become a part of the existing core molecules and our approach of strengthening the core will enable the molecules to makes us market leaders in our chosen geographies. We are not only strengthening the core, but we are also expanding the core.
Through these achievements of strategy in action, I wish to state that our first pillar of strategy has been a successfully executed, and the results are clearly visible through market share increase, revenue growth and geography expansion, along with healthy and sustainable bottom line. Coupling this with our backward integration strategy and green chemistry, we wish to build a robust and an expansive core for the organization.
The second strategy of R&D, technology and innovation through our efforts in portfolio management, R&D and continued innovation in new molecules, we have successfully created 4 major platforms for the organization. The first platform, CNS, specifically in ADHD, is a growing therapeutic category in U.S. and in other parts of the world. Our R&D infrastructure at our Chantilly facility in Virginia is focused on development and manufacturing of CNS medication with special focus on ADHD products. Our strict policies and management around manufacturing and commercialization of these products have allowed us to gain momentum in the U.S. Our R&D in Chantilly also focuses on complex products, some of which have been launched at a brand level for several years without competition going to the complexity and development. The composition of this portfolio includes a [ ParaFor ParaFor-181 plus 25 and para-3 products ]. With this well-balanced portfolio of immediate launches and IP-driven [indiscernible] launches in the next couple of years, we see a lot of excitement in this category.
Oncology platforms, leveraging our excellent's infrastructure in APIs and combination of oncology agreement [indiscernible], we started developing our oncology portfolio of [indiscernible] launch, ParaFor and ParaFor-181 and [ Parafor81 ] products in the U.S. and Europe. This portfolio will also extend through the rest of the world, including India. These products will be developed for the global markets, and we expect to launch them from FY '26 onwards. A lot of commercial work in this direction was already taken, and we expect to play a very significant role in the overall solid oncology business across the globe in the coming years.
And then in manufacturing technology platform, we have been communicating for the last 4 quarters on our progress on this platform. 5 projects are significantly advanced and almost at the stage of completion of optimization. One of the projects has been tried at the plant scaled successfully. We are focused on creating manufacturing technology infrastructure and start validation of at least 3 molecules in quarter 3 FY '25. This platform is expected to bring a global cost leadership, manufacturing technology excellence and help us lead towards our journey on sustainability. The progress of this platform in a short period of 4 quarters demonstrates our commitment towards transforming the organization through science and technology.
As it's clear from the above Granules is fully focused on building world-class product platforms through science and technology and drive business growth through bottom line sustainability and living the purpose and vision of the organization. To achieve this transformation, spend in R&D has also been increased to around 4.5% of the sales.
Strong focus on quality, I wish to share our happiness with all of you on the [ 04HC ] outcome of our Unit 5 facility at U.S. FDA in April this year. Quality everywhere is the value of the organization, and we wish to percolate the quality concern across all areas of the organization. Several initiatives focused on behaviors, technology, systems and processes drive excellence in quality. We will continue to have strategic focus on quality, and we make this a formidable strength of Granules.
Thank you, and over to you, Mukesh.
Thank you, CMD and the MD. Let me take you all to the top financial parameters now, revenue. The fourth quarter revenue were INR 11,758 million as compared to INR 11,955 million in Q4 FY '23, with a decline of 2%. Formulation growth, including GPI-manufactured products, offset by decline in Para API sales volume or price erosion, revenue grew by 2% as compared to Q3 FY '24, in line with our strategic focus, continued FD sales growth, including GPI-manufactured products, offset by decline in Para API sales volume and price erosion. The full year FY '24 revenue were INR 45,064 million as compared to INR 45,119 million in FY '23. Despite the cyber incident and decline in para API volume and price erosion, turning our main focus into formulations, including GPI-manufactured products enable the company to sustain the similar turnover year-on-year.
The sales breakup as for business division, geographic regions are presented in our investor presentation, which is available on the website.
Value-added. Our value added as a percentage of sales for Q4 FY '24 was 60.1% as compared to 47.8% in Q4 FY '23. Value added as compared to Q4 FY '23 is up by 12.2 percentage points, primarily on account of higher FD sales, including GPI-manufactured products and lower material costs. Value added as a percentage of sales from Q4 FY '24 is up by 3.1 percent point from Q3 FY '24, primarily on account of higher FD sales. Our value added as a percentage of sales for FY '24 was 55.1% as compared to 48.9% in FY '23.
Value added as compared to FY '23 is up by 6.3% points, primarily on account of higher FD sales including GPI-manufactured products and lower material costs.
EBITDA and EBITDA margin. EBITDA for the quarter was INR 2,557 million, that is 21.7% of sales, as compared as to INR 2,281 million. That is 19.1% of sales in Q4 FY '23, an increase of 12% in value terms over the previous year, mainly on account of improved VA percentage. EBITDA for the year was INR 8,560 million as compared to INR 9,138 million FY '23, a decline of 6% over the previous year, mainly on account of increase in R&D spend for R&D pipelines.
R&D. Our R&D spend for the quarter was INR 609 million as compared to INR 369 million in Q4 FY '23 and INR 468 million in Q3 FY '24. R&D spend for the year was INR 1,986 million. We are going to continue to spend on R&D in the coming quarters as well.
Freight costs. Freight expenses increased by INR 128 million compared to Q3 FY '24, mainly on account of Red Sea subcharge issues. Out of this, an amount of INR 75 million is inventorized on the dispatches made to U.S.A. subsidiary.
Net debt. Our net debt was INR 8,421 million as compared to INR 7,671 million at the beginning of the year. The net debt has increased only by INR 750 million.
Cash-to-cash cycle. Our cash-to-cash cycle was 161 days in the current quarter as compared to 132 days at the beginning of the year. New launches and Red Sea issues impacted both inventory days and [ overall 350 ] days.
Cash flow from operations. Cash flow from operations for the quarter was healthy INR 2,150 million as compared to INR 1,794 million in Q4 FY '23. And for the year was INR 4,394 million as compared to INR 7,387 million in FY '23. Cash flow from operations for the year has decreased due to reduction in EBITDA and an increase in inventory days.
CapEx. CapEx spend during the quarter was INR 1,006 million, primarily invested in Granules Life Science and Granules CZRO. During the year, we spent INR 3,823 million, primarily invested in Granules Life Science, amounted to INR 1,560 million and Granules CZRO, INR 565 million.
ROC for FY '24 is 16.5% as compared to 31.2% in FY '23. The decline is primarily on account of decrease in EBIT, investments in Granules Life Sciences and Granules CZRO and increase in inventory days.
With this, I open the floor for questions.
[Operator Instructions] The first question is from the line of [ Ashish Sony ], an individual investor.
This is regarding the new capacity you've build. So when do you think optimally it can be used, within this year or maybe next financial year?
Yes. I think you are referring to the formulation capacity. Assuming it's that, I think from July, the ramp-up will happen. By August, we should be touching about something like INR 100 million per month. And over the next 8 months from then, maybe into April, May of next fiscal, we should be able to touch at least INR 4 billion to INR 5 billion, annualized capacity.
And regarding this new product approval, so how much it can contribute to our revenues going forward this year, next year?
Priyanka, do you want to answer that?
Sure. Good evening, everyone. Going forward, we are looking for new products to contribute about 7% to 10%, if everything goes well off next year's revenues.
Okay. And what -- how is our progress on the DCDA, the green chemistry what we are planning to do? So how is the progress right now looking like?
We started pilot plant production in March. We commercialized production from the pilot plant. And a lot of trials and valuations are happening. We are also streamlining and picking the process. This process is first time in the world, anybody has done it. It's our own proprietary patent technology. It makes a lot of refinement.
So going on in the right direction, everything is planned and once it's finalized, we should be -- we are already making arrangements for commercial production in Kakinada. So things are going well on that front.
The next question is from the line of Darshil Zaveri from Crown Capital.
Just wanted to ask right now sir, seeing improvement in our gross margins right now then. So what kind of margin trajectory would you see in FY '25? Will we be able to see bettering margins as quarters go by?
Yes. Thanks for the question, Darshil. We have achieved 48% gross margin in F '24 and F '23, in F '24 we have achieved 55%. Last 2 quarters, we are in the range of 57% to 60%. That is also because of higher FD sales, and we continue to see that the higher FD sales will be there in the next year as well. And the raw material cost also has helped us in the current year. So depending on the raw material costs and our product-mix, you'll see the sustainability in the range of 55% to 58%.
Okay. So sir, how much would that translate to as an EBITDA? So can we see around like a broad range will be 24% to 26% EBITDA. Is that possible, sir, if you could help in that, sir?
I would be very conservatively say something, around 22%, 23% is possible. That's what we have been maintaining throughout, and they are trying for more, but let's see what happens.
Okay. Perfect. Perfect. And sir, with regards to our higher interest cost, so what would be the trajectory that you would see, maybe, that would that this run rate would continue for a year or 2? Or how would we look at our higher interest costs, sir?
That would all depend on the U.S. Fed but I would let Mukesh answer that in details.
Yes, Thank you, CMD, for referencing that rightly. So yes, it is largely dependent on our SOFR rate. If you see, our net debt has not gone up despite investments in CapEx, so it does largely depend on Fed rate. And based on the current conditions, we see the Fed rate is not going to come down in coming 6 months also. So in the coming -- upcoming quarters, we see the similar interest cost of Q4.
Okay. So that helps a lot sir. And just like, sir, one last question. In terms of revenue, would we like to guide something that how much better could we do within FY '25, sir? Any quantitative, qualitative guidance that can we grow at a certain rate? That would be very helpful, sir.
Definitely to better the revenue. And how much better, I don't want to mention anything. Like I said before, we have taken a decision not to bring any guidance.
Okay. Perfect, sir. And just last one last question, sir, in terms of our demand environment, do we see any -- how has the demand environment currently going? Is it buoyant right now? Or what do you see around, sir?
The demand for all our products is quite good as we add new geography, the sales are also increasing. And there is a fairly good demand and very healthy demand for all our products. Except, of course, is the exception of paracetamol, where we have had some challenges in the last few -- last quarter.
The next question is from the line of Nirali Shah from Ashika Stock Broking.
Sir my first question is that paracetamol sales have been declining and is witnessing price erosion. So where do you see this stabilizing now?
Actually, this demand is also partly because of overstocking by some of the large brand leaders in the world. And that actually should start stabilizing from Q3. And also there's also an issue of excess capacity that was built up after COVID. So there is are a lot of competition, and that is causing the price erosion.
I think this year, most of this thing may continue next year onwards FY '25 -- things should stabilize. But even during this year, quarter-on-quarter, I see some increase and improvement.
Understood. And my second question is on our debt profile, where do we see a comfortable net debt number, say, over the next 2 to 3 years?
So internally, we want to manage net debt to EBITDA at 1 level, 1, 1.1, we are comfortable.
Hope that answers your question.
[Operator Instructions] The next question is from the line of [ Aditya Sen ] from RoboCapital.
Sir, this new formulation capacity that we have installed, how much revenue do we foresee from this plant itself in this fiscal and in the coming year?
The new capacity will be [ annualizing ] -- so CMD has already answered that, INR 100 million per month, we are expecting July '24 onwards. And next fiscal year we are looking at INR 4 billion to INR 5 billion.
Revenues will depend on the product also we are trying to finalize, which products to commercialize there. It will depend on that.
The next question is from the line of Nirali Shah from Ashika Stock Broking.
So I just have one more question that we see that the product mix over the next 2 years, I say, it has changed from [ 25% ] legacy product. So when do you expect the shift in the margin with this product mix?
Yes. So as I've already pointed out that we have a product mix change from API to niche product. And as CFO has already explained, we already moved up our margins because of the shift in the business model. All the new products, which we have -- we are launching now and we are going to get approvals in the next 2 years also will add to this shift in the business model more towards the FD. And also in other regions also, we have the formulations coming from the finished dose.
So overall, I think the movement will be quite positive on the finished dose side, and that should help us to have much better than the sustainable margin of bottom line.
The next question is from the line of Madhav from Fidelity.
My question is if you look at our employee cost and other expenses this year, they've grown up by almost 20%, 25%. And I think some of it seems to be that we are kind of investing ahead of the curve in new plants, and I think we have the new packaging facility in Virginia as well. So is it the right understanding that in the coming couple of years as revenue scales up, some of these cost line items should kind of grow lesser than revenue? Basically, is there like scope for upgraded levels to kick in given how the business is kind of positioned right now?
Yes, Madhav, you have been perfectly right saying that the new facilities and expansions that have led to increase in manpower cost, it's R&D, too. R&D [ chip ] plant facility in U.S. and also most importantly, we are investing in building a future-ready organization. In the U.S., not only the packaging price there's been a lot of investment on the marketing team and also building up capacity in the U.S. manufacturing. So both these things also have taken up a lot of manpower.
And so -- and also, we have invested a lot on the global marketing team. We have built up a new organization to serve customers in a better way. And we have people of very high caliber and a lot of people have been added to various services. They have customer-specific representatives. There's a big change happening in the organization. This cost increase has happened. But going forward, it will not be at this rate definitely. This is a big shift that has happened this year. So it will be in control.
Okay. Okay. Understood. And then the second question which I had was like we were -- I think in the presentation you have highlighted in the -- I think this is the second part of that slide, which is the portfolio expansion slide, Slide #7. You have spoken about the CNS ADHD products and the MUPS products. And I think you have also mentioned about getting approval for Metoprolol and, I think, some of the products which is [indiscernible]. To understand that some of these products will start contributing in a healthy way from Q1 FY '25, is that how we should think about it?
They did not contribute heavily from Q1, but as we go by, these are very big products for us. We are banking heavily on these products. And the margins and the revenues from these products are going to really put on the growth of revenue.
Okay. Sir, could you share a bit more on the time line? Like when do we expect more material ramp-up from these newer products?
In this year itself, FY '25 will be a good contribution from these products and the good growth due to these products. But '26 should be the year where we will see a very marked difference.
Okay. Okay. And I think once I was referring to -- I was just saying that I think in the earlier comments, you mentioned that 7% to 10% of contribution to come from new products in FY '25. So did I get that right, 7% to 10% of FY '24 revenue basically should be like new products in FY '25? Is that right?
I think so. What we are looking at right now when the question was asked was on the 7% to 10% was the contribution coming from new products. But as we see the number of approvals and the launches that we are doing in the U.S., this percentage of the new products is definitely will go up. And it continues to grow as we go from FY '25 to '26 and '27. This is expected to grow much now.
I just want to add a clarification in the presentation at which we have circulated, it is a history of 10 years. So, history of 10 years, if you see the 5 products were the last [indiscernible] everything else was new product. What CMD just clarified is in addition to that, another 5%, 7% contribution from more new products.
That's the growth of new products introduced already, but the products have been baked [indiscernible].
Understood, sir. Have Metoprolol being launched in the U.S. or that is going to happen going ahead? And ibuprofen...
Mostly U.S., but it's happening in other countries also. So nowadays, whatever the new filings to do, it well across the global filing. But most probably, the launch in U.S. and Europe and other countries will be in the next phase.
Okay, okay. And just a last question, what's our CapEx expectation for FY '25.
FY '25 CapEx, we are estimating about INR 6,000 million, INR 600 crores. So half of that will be Granules Life Sciences expansion. Other half will be for other projects as well as maintenance CapEx.
Just got to elaborate a little bit on that, Madhav, we have decided to go a little slow on [ 30 ], take a very cautious approach. And only [indiscernible] we are investing.
The next question is from the line of Foram Parekh from Sharekhan.
Sir, my first question is, you mentioned that value-added products now contribute 65% of the sales. So may I ask what is the percentage contribution do we envisage? I mean what percentage, I mean, do we want to grow?
I'll just clarify your question, the value added, the -- we call it as gross margin as value add, which is 55% for the year. And if you are asking about formulation quarter 4, we were 73%. Overall year, we were 65%.
So the 65% is expected to reach to what number? I mean how much do we envisage?
We are looking at around 70% moving forward.
It could be a little more too, but we will see as we go back. We expect some API sales also to keep increasing. We don't want to cannibalize that totally.
Okay. So this 75% is expected like in 1 year's time, or it will be spreaded over a period of 2 years?
It will next year, 1 year's time.
Okay. Sir, then my second question is, you mentioned that EBITDA margin is expected to reach to 22%, 23%. So again, this would be like over a period of 2 years. Are we seeing this coming -- being executed next year?
If you see in the past few years, also, we were around 21%, 23% EBITDA margin. So we expect that to be restored as early as next year possibly. But going forward, we say that this is what we will maintain, but the possibility of doing better is always there.
Okay. And sir, in the presentation, I see on the Slide 22, geographically, all the geographies are not -- have not performed in FY '24. So could you just elaborate? I mean, why are we not able to grow in all the regions like Europe, LatAm, India, ROW?
In these markets, like LatAm and ROW especially these 2 markets and in Europe, our sales were mostly propelled by paracetamol API and PFI. So we have an issue on the paracetamol, API, PFI due to market demand coming down and also the price erosion. So just to give you an example, the prices have come down from something like INR 600, INR 650 to INR 250 or INR 300 as low as that. So that, of course, has contributed to the decline in sales in this region.
Okay, so sir...
European sales have gone up in Europe, that compensated to some extent.
Okay. But sir, in ibuprofen, we see that prices have come down and probably we do not see it going back to the COVID days. So how do you see the demand? I mean, is there demand? And with this kind of prices, how do you see ibuprofen sales ramping up in the next years?
Ibuprofen sales will have to ramp up only by volume increase. It is not going to be driven by value. I think the value is hit at lowest, and it will continue for a while. The market for these products like paracetamol and ibuprofen don't grow too much. They grow by single digit or possibly 2 digits. And the only thing we have been growing is to get increase our market share and then very crudely put it cannibalized on other people's market share. We have done it successfully in the past. And even for ibuprofen going forward, we expect to improve our market share mainly in the U.S.
But the good news is we have some European approval, and we already have tie-ups and sales contracts with some customers there. The ibuprofen will only grow by cannibalizing on others.
Okay. And sir, can you just give us the number what would be the market share for ibuprofen in the European market?
They are different from OTC, Rx, a little difficult to estimate. But we do not have a presence today, but we will be getting a decent market share as we go forward in Europe.
The next question is from the line of [ KVKS Choudhary ], an individual investor.
My first question is with regard to MUPS block Can you give us an idea about the current capacity utilization in the product from that line?
MUPS block, is contributing quite well to the growing revenue and profitability, but actually, MUPS block will also do a little bit of granulation and other CapEx completion too, and they are packaging line, but actually going to just MUPS products. We are doing around 40% to 50% capacity utilization. And by the end of this year, we expect it to go up to 70%.
My second question is with regard to Granules Incorporated, GI Incorporated. We have had some [indiscernible] this approval as well as ADHD. But the ramp-up doesn't seem to be commensurate with the number of approvals. What is the current investment and asset turnover EBITDA in Granules?
Can we come back on that question?
Asset turnover. Let's talk about asset turnover for GPI asset turnover.
GPI asset turnover, we have invested there in the intangible assets as well as fixed assets. Fixed assets turnover significantly better. So it is in excess of [ INR 5 million ]. And now GPI manufactured products is also going up. Some of the launches that you rightly said, which will get launched in the next couple of years. So we will get a good return on the intangible assets also.
The content is not under patent. If it is possible for you to launch them immediately?
We have other controlled substances being sold from GPI from our U.S. facility already. And that facility has been set up only for -- mainly to concentrate on these products, and we have more products coming up and into selling one of these products.
Okay. What's your ADHD line?
Pardon?
What are our products made up in -- for the ADHD?
We have many products lined up but I don't think they should talk about...
Hello?
Yes, we can message out you. I don't think we can give you the names of products.
[Operator Instructions] The next question is from the line of [ Neeraj Prasad ] from Motilal Oswal.
Am I audible?
Yes, you are Neeraj
Tushar here, Sir, on Metoprolol and subsequent to that, how do we see good any potential product for '25, 26, if you would put some, right?
It's got -- yes, go ahead. Anything else?
Yes. Maybe if you could answer this and then...
Tushar, Metoprolol has a very good potential and things are looking very, very positive. And we are ramping up production for the U.S. market. We are very happy with the progress there. And the good news is Europe also, we've got approval that went for national stage. And this year, we will start sales of Metoprolol in Europe also. So 2 regions we'll be selling, and we are also planning to take this product into LatAm and other countries as the outlook looks quite low.
Sir, anything on the price erosion on Metoprolol per se with -- in terms of the competition?
Not a great price erosion. There's normally -- whenever a newcomer come, there will be a fight, so prices will go down a bit, but it's nothing drastic.
Okay. Okay. And sir, any other like this interesting product in the portfolio which can come up for approval in '25?
Yes, they're quite interesting Tushar, and as we get the approvals, you will know about them. And maybe later on, possibly, we could look at how they're doing. But we have many exciting products there in the pipeline.
And just to add to that, we have a total of about 16 to 17 launches coming up this fiscal year, out of which 14 products will be new and remaining will be extensions of the launches -- ramp-up of the launches that we've already made in Q4.
14 new launches, right?
Yes. Yes.
Interesting. So that should further build up at least as far as the U.S. market is concerned.
It's not just the U.S. market. It's both -- sorry, U.S. and rest of the world markets.
And mainly Europe, Tushar.
Okay. So the 16 to 18 launches is combining of U.S. and Europe market largely.
Yes.
Correct.
That's right. It's a big challenge for us and the excitement -- exciting period this is the first time in Granules, we'll be launching so many products in 1 year.
Yes, that could help grow the sales at a healthy level in '25, '26, right?
Yes, that definitely yes, right. We are working towards that.
And so if I connect this comment with the EBITDA margin also moving up to 22%, 23% for FY '25, so effectively and subsequently, the cash flow generation and considering the CapEx, the net debt level to what it will come down to maybe by end of FY '25?
Net debt will not -- possibly may not come down, Tushar. The only thing is we are looking at maintaining our net debt-to-EBITDA at less than 1, and if at all, we can get great opportunities to, we may not want to grow if the net EBITDA has grown more than 1, but we are not trying to make it zero debt, bring it down totally. We want to have a healthy net debt to EBITDA.
Understood. So no, I didn't mean 0 net debt, but will there be any reduction in net debt, INR 1,500 crores?
Not expected, Tushar. We are not in INR 1,500 crores. We are INR 840 crores. So get to EBITDA -- sorry.
No. I mean INR [ 50 ] crores to INR 100 crores reduction is what can be expected?
Not really so, because the growth there is the investment in working capital and also Granules Life Sciences capacity expansions are planned. So we would possibly manage the net debt to EBITDA ratios is not worsening it is improving.
Just to clarify, this were INR 840 crores is the net debt as of year-end. And I don't think we are not planning to bring it down that way. Maybe there could be a small change, plus or minus there.
Got it. And lastly, because I joined late, so I would have missed it. Just if you could elaborate on the paracetamol situation, what has happened exactly because of which there has been significant price reduction? Is there any new competition that has come out or existing players have lowered the prices significantly?
So Tushar, there are 3 components to this issue. The first one is many players who are end customers of paracetamol have actually got a lot of inventory stores. And as explained by Chairman earlier, it will take a couple of quarters to actually get to the position of liquidating their inventories, and therefore, the paracetamol situation is expected to not to go back to the original levels, but definitely go back to some higher levels by quarter 3 or quarter 4 of this year. That is the first reason.
The second reason because the offtake is now and the capacities which have come up thanks to COVID was high. So there is an excess supply to the demand. And some of the organizations are looking at lowering the prices to actually survive the capacity utilization. So therefore, the price has been significantly down at the numbers shown by Chairman just a few minutes ago. So I think that's the second.
And the third one, we actually did -- and as I told in my communication that we are moving towards the finished dose of paracetamol and therefore, we will be in a position to look at overall balancing at paracetamol in the next couple of quarters. But suffice it to say that this situation will continue for the next 2, 3 quarters.
Just want to clarify, Tushar, just except this for Granules India, is we are a paracetamol manufacturer, is a single product company. And the fact -- and if they don't sell enough, they'll be [ dead ]. So they are desperate. And at this point in time, I don't think we should go and fight for that market with no margin. We would stick to our regular customers. And once their inventories are rationalized, we would get back into business.
Got it, sir. And this is more specific to paracetamol, right? We are not seeing such situation in either metformin or ibu or metoprolol?
No, no. It's only paracetamol.
The next question is from the line of Harith Ahamed from Avendus Spark.
Sir, can you break-out the [ freight ] from our GPI subsidiary for FY '24 and in Granules Pharmaceuticals Inc. for U.S. subsidiary?
Did you say revenue, Harith?
Yes, yes.
So GPI full year turnover INR 1,619 crores, Harith, and for the quarter is INR 477 crores.
Okay. So when I look at FY '24, we've had very strong growth in the FD segment, more than 25%. So when I think of FY '25, should we extrapolate a similar growth? Will we be able to maintain a similar momentum for the segment? And you can also share the number of launches that we are targeting in -- particularly in the U.S.?
Harith, all the growth going forward is only going to come mainly coming from FD. So if you look at the overall growth, obviously, the FD growth has to be very decent, very healthy. Definitely there will be a very healthy growth and possibly a little better than last year's growth.
Okay. So when I look at the filings, data that you've given in one of the slides, we have some both GPI and GIL. Together, we have about 13 ANDAs pending approval. For the side of our FD business in the U.S., it appears to be slightly the lower side. So we expect a further step-up in R&D spend going forward and if you can share the spend you're anticipating in FY '25 on the [indiscernible]?
So we already communicated that our R&D spend has gone up and it continues to remain around that and we go up in the coming years because we have a very good pipeline and the delivery of the pipeline in the various categories, as I mentioned before. So we expect the R&D spend to be [ first ]
So Harith, we have -- when Ram Rao said that we are working on a lot of -- to file 181 days in all these 3,4 launches. So there's a lot of work going on, especially in the core area. There could be a slight increase, but overall, I don't anticipate there is a great increase in R&D. Already we have provided further growth, and we are already there.
Got it, sir. And then last one, when I look at our expenses for the quarter, there has been a sharp increase of around INR 50 crores quarter-on-quarter. I understand so that is probably because of the quarter-on-quarter increase in the R&D spend, but it still seems to be on the higher side. Any one-off that's there in the numbers, the other space's number?
Yes, Harith, as we have explained, one is the R&D expense, which has gone up. Second is the freight cost, which has also gone up because of Red Sea issues. In addition to that, there are a few one-off costs, consultancy costs and quality audit costs, which also have gone up, which was specific to quarter 4.
So we should expect some normalization in event of the...
Yes. So going forward, R&D, there will be a similar expenses quarter-on-quarter onwards. Other expenses should come down.
Ladies and gentlemen, in the interest of time, this was our last question. I would now like to hand the conference over to Mr. Krishna Prasad, for closing remarks.
Ladies and gentlemen, once again, thank you very much for attending our call. In spite of your very busy schedules today between the earnings season. So once again, thank you very much, and we look forward to meeting you all in the next investor call with better news.
On behalf of Granules India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.