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IOL Chemicals and Pharmaceuticals Ltd
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Ladies and gentlemen, good day, and welcome to Q3 and 9 Months FY '23 Earnings Conference Call of IOL Chemicals and Pharmaceuticals Limited. From the management, we have Dr. Sanjay Chaturvedi, Executive Director and CEO; Mr. Pardeep Khanna, Chief Financial Officer; and Mr. Abhay Raj Singh, Vice President and Company Secretary. We also have Investor Relations team from a factors. [Operator Instructions]. I now hand the conference over to Dr. Chaturvedi for his opening remarks. Thank you, and over to you sir.
Thank you, Jackson. Good afternoon, everyone, we are very pleased to welcome you all to our third quarter nine months that ended financial year 2023 earnings call. I am sure you all must have gone through our quarterly results numbers and the investor presentation, which is available on the exchanges as well as on our website. Before we move on to the company's quarter performance, I'd like to dwell a little bit on where the global markets are how they are developing and how the Indian market is performing. My colleague, Mr.Ă‚Â Pardeep Khanna, our CFO, will then take you through the performance, post which we will open up the forum for the Q&A session. So businesses across the world had a tough ride in 2022 as there was persistent high inflation, continued geopolitical conflict, surge in commodity prices and overall a tightened monetary policy by most of the central banks that have put pressure on the growth trajectory for most organizations. Towards the end of the year, in 2022, some resurgent COVID cases in China and the subsequent disruptions in supply chains have further impacted the global trade and overall investor sentiment. However, there is positive news for the business as the World Bank expects inflation to fall to moderate levels through the next 2 years, it is expected to remain above pre-pandemic levels.Ă‚Â In the Indian context, however, the situation is a little more optimistic. For FY '23, the GDP growth for India is projected at 6.9% against 6.5%, that was a number given in October of 2022. The report from the World Bank says that India's economy has demonstrated resilience and despite this challenging environment. We believe that the country's resilience comes from the robust revival in consumer spending with the retail business is growing strong, particularly in the third quarter of FY '23 on the back of activities. This momentum has continued since then and as is evident from various categories like apparel, cosmetics, footwear and FMCG product growth across the country. For the businesses that your company is in despite on uncertainties, the business in Quarter 3 improved versus Quarter 2. The Chemicals business had a muted performance, whereas the pharma business outperformed better both in the ibuprofen and the non-ibuprofen portfolio. As you are all aware, the company is building capacity for molecules such as paracetamol, metformin, clopidogrel and fenofibrate, and this will overall reduce the dependence on ibuprofen.Ă‚Â In the Specialty Chemicals segment, the raw material prices for certain products have stabilized, but some are yet to stabilize. We do believe that the worst is over for this segment as the margins have bottomed out for most product lines. We are likely to see some improvement in margins in this segment going forward. As we work on increasing our capacity in specialty chemicals, we expect the challenges to have been taken care of by the industry players with the demand expected to revise from Q4 and the next financial year onwards. We would get an edge in terms of operational efficiency and higher margins with increased production. During the quarter, your company was also granted a patent for an improved safe process for preparation of certain drugs or formula-- by Indian patent office that includes valsartan, losartan, irbesartan, olmesartan, candesartan, and other sartan drugs, which is a class of medicine known as angiotensin II receptor blockers, which is used to treat high blood pressure and heart failure. The company also recently released EU-GMP certification from the National Institute of Pharmacy and Nutrition Hungary. This will help the company in better penetration in European markets for our products. With this, I would now like to hand over to Mr. Pardeep Khanna, our CFO, who will be sharing financial details with you. Over to you, Mr. Pardeep.
Thank you, Dr. Sanjay. Good afternoon, everyone, and thank you for joining us today to discuss our performance for the third quarter ended 23rd December '22. I mentioned to you improve financial highlights for the first quarter. The total income of the company in quarter 3 of 10 year 2018 stood at 530 as against564 in the quarter of financial year '22 and INR 5.46 in previous quarter ended September '22. EBITDA for the quarter was INR 49.7 as against INR 58.1 in the post quarter of financial year '22 and INR 36.7 in second half financial year '23. BITDA margin for the quarter improved to 9.4% as against 6.8% in the previous quarter. The net profit in the third quarter was INR 24 as against INR 40 Cr in the core quarter of the last year and 15.7 Cr in the last quarter ended 30th December '22. Exports for the 9-month period grew 26% to INR 431 Cr as compared to INR 360 if we are in the corresponding period of the last year. With this, we open the call for question and answer session. Thank you very much.
Thank you very much. We will now begin the question and answer session [Operator Instructions]. Ladies and gentlemen, we will wait for a moment to all the questions to you will send us. [Operator Instructions] The first question is from the line of Robert Suresh from Samata Investments, please go ahead.
Good afternoon, sir, thank you for the opportunity. A couple of questions on the ibuprofen part -- so could you just give us some data in terms of the pricing of ibuprofen in this quarter? And secondly, there was an article stating that there were some supply shortages due to excess demand of ibuprofen, especially in China. So what is the current supply demand scenario right now? And how do you see it moving forward? And has this resulted in us increasing our exports considering the global shortages?
Okay, so the first part of your question regarding the pricing of ibuprofen. Ibuprofen continues to be very stable between $11 and $12 in the export market. India prices are slightly lower than that. But this pricing is very stable. We don't anticipate it going down at all. Coming back to your question about some supply chain disruption, yes, we've seen those reports. The demand increase that we see worldwide is it's too early to tell whether this is a real revival or this is marginal increase. There has been a marginal increase, though. And regarding the disruptions in China because we are currently not approved for exports to China, we have not been a beneficiary of the supply constraint situation there yet.Ă‚Â So that's it from my side, thank you.
Thank you. Ladies and gentlemen. [Operator instructions]. The next question is from the line of Nia Panjabi from Ventures, please go ahead.
Thank you all for the opportunity. So first, my first question is a follow-up of the previous participant question on ibuprofen. Also, what would be our capacity utilization of ibuprofen during the quarter? And what would be our average volumes that we would have sold for ibuprofen?
So we are currently running at an average asset utilization that is north of 80%. And going forward, we expect this number to improve.
So sir, you have mentioned in the previous call that we want to take this utilization to 95% at peak. So by then do we expect to reach that kind of level?
If I take another few quarters to get there, but we are on our path there. Demand seems to be picking up, and last quarter versus this quarter, demand has been substantially up, and we expect that to further go up in Q4 and beyond.
Got it. That's helpful. Next on the non-ibuprofen API sales. So I see that on a Q-o-Q basis, this revenue has come down in Q3 versus Q2 FY '23. What are the difference for the sale, if you can highlight?
Yes, so in this quarter, we have come down a little bit, and that was we were in the midst of expanding capacity for one of our products. So we had to take some downtime to put more equipment there and stabilize the process at higher capacity. But if you look at it on a year-by-year basis, the non-ibuprofen business has already delivered in 9 months what it delivered in the entire financial year last year. So we are on a very, very good growth part for the non-ibuprofen portfolio.
Got it. And sir, had we not taken the plant shutdown for obligation, what would have been our state? How much would it be higher in this case of a bit of directional sense?
So this year, we expect our non-ibuprofen business to touch something in the range of maybe INR 500 crores. So I think most of the increase that you will see will happen in Q4 now that the plant has been stabilized. So obviously, next year, we will expect a higher number than INR 500 crores.
Got it. Okay, and then actually, sir, in the medium term, are we confident of doing this 502 days at 20%, 25% going forward?
I don't want to give a number, whether it will grow at 20% or 25%, but needless to say, we expect a lot of our growth in our API -- in our pharma portfolio to come from the non-ibuprofen APIs. On the ibuprofen part, we are focused more on improving the quality of the business, as you can understand, if we are already running well above 80% asset utilization growing even 10%, 12% up 15%, up can only add marginally to the business. The real growth is going to come from the non-ibuprofen portfolio.
Got it. Okay, and sir, what would be our capacity utilization on the non-ibuprofen portfolio, currently?
So that's a very hard number to answer because a lot of the plants are multiproduct plants. So asset utilization makes sense when you have purely dedicated plants. But when you share products in a plant, sharing any data on asset utilization can be very misleading.
Got it. Sir, last quarter, you had mentioned that our non-ibuprofen API portfolio is not making profits currently. Are we still there? And when do we expect the profitability to improve for the non-ibuprofen?
So the unabsorbed cost is going down every quarter. And I think in the next coming quarters, the entire segment will turn profitable.
Thank you. Ladies and gentlemen, [Operator Instructions]. Next question is from the line of Sajal Kapoor Peninvestor, please go ahead.
Yeah, thanks for taking a question. Hello, Dr. Chaturvedi. I have tracked the chemicals in API space for almost 2 decades now. This industry in the past has been badly bruised by various unfair practices originating from China, right? And I also know that it takes several years to innovate a new cost-effective synthesis route and commercialize those filings, especially in the regulated markets like the Europe and the U.S. And we have all sorts of regulatory compliance restrictions as well. So in summary, chemicals API is not an easy business. And so my question to you, Dr. Chaturved is, what are those changes that you designed and implemented since you joined IOL and what are those changes where management is still focusing on working on that are not yet visible in the reported numbers?
First of all, thank you for your insightful comments, Sajal. I will say that our specialty chemicals and an API business is a lot like an iceberg. The financial numbers that you see don't quite articulate the holds of employees and other stakeholders that actually enable these numbers. So you're absolutely right in your assessment. But I think it would be unfair for me to say what are the changes that I have brought about because IOL is an evolving organization, and we are not a personality dependent organization. What we do is collective decision-making, consensus building based on the management team members. And the path that we've taken last couple of years is to grow the pharma business, focus on quantity and quality of the non-ibuprofen portfolio and focused mostly on the quality of the ibuprofen portfolio. So we keep adding more and more products. If you see historically, we had only 1 or 2 products approved for regulated markets, but we are filing about 4 DMFs every year over the last 2 years. So as these products pick up in regulated markets, of course, the CEP approvals are also coming in, we will be pushing a lot more into the regulated markets. So you will see our exports growth. And you will see a derisking in the entire portfolio as we have more and more products. And now we are going to be doing that on the chemical side as well.
Right, and what sort of execution risk is any do you foresee Dr. Chaturvedi in terms of actually putting the strategy that the team is working on over the next, let's say, 3 years, and we all could see the benefits out of it. What are those top 2, 3 risks that can potentially jeopardize the execution and the results that we all expect?
So I would say the 2 top level risks that I see from an execution standpoint, and these are, again, not unique to all for any player in the API industry, the #1 risk, of course, is you could have a situation like related where kind of overnight the market right away. We have a list of products where each of the -- any of those products were hit by something like that, that's kind of one risk. But we operate in that environment just like any other API player. The second risk that I think about is because we don't have hundreds of products in our portfolio, we have -- we do a few things not able to scale up and get the right quality of the product. That could be a hurdle. And therefore, what we do is we work on the product very diligently in our R&D and then our pilot and on multiple trials before we take it for manufacturing. So we have a risk mitigation strategy there. But is there a risk in we'll take a business to shoot product certainly. But I think the first risk that I talked about, which is completely externally, there's not much anyone can do about it. But the second risk that I highlighted, we have risk mitigation strategies in place, and we are very confident of mitigating those.
That's very thoughtful and helpful Dr. Chaturvedi . I've got one more question, the last one, I promise. You have -- clearly, private equity has been very active in the API space in the recent years. And our competitors are also on a CapEx it, so to speak, and expanding both the capabilities and the capacity is right. So both these combinations of the private equity is so very active. So perhaps they see some opportunity? That's the reason they are deploying so much capital into this industry and our competitors are also expanding. What do you think it means for the industry as a whole and particularly for IOL?
So there are 2 questions embedded there. What is on the private equity fees the second is on the CapEx piece. See, when private equity goes into an industry and tries to fees as they've been talking about API platforms, I think it's a very positive development because overall, the sense opportunity and growth in this particular segment.Ă‚Â -- now when I look at CapEx, yes, a lot of our competition has been declining CapEx, and we've been deploying CapEx to on an average, we do about INR 150 crores of CapEx every year, and we do that mostly through accrual. So we've not had to take on any debt for that. And currently, we have certain spare capacity, and we don't feel the need to deploy more capital right away. In fact, some of the CapEx that we've deployed this year have actually been on, what I call, nonproduction-related assets like ETP environment, where discharge. We are building a new warehouse, we put money into R&D and so forth. So all of those things are really helpful in supporting and creating and building the business, but we don't directly go into production.Ă‚Â Right. That's very helpful Dr.Ă‚Â Chaturvedi.Ă‚Â I'll fall back in the queue, thank you.
Thank you. Ladies and gentlemen [Operator Instructions]. Next question is from the line of Erica Micras Investments.
So my question is regarding the chemical divisions. I just want to understand now what the size is selling now. And I believe in last quarter, you said that prices are moving positively and -- but still we have done loss on an EBIT level. So can you just give some clarity...
I didn't catch your question, Erika, can you please repeat your question?
So this is regarding the Chemical division. So last quarter, I believe you had said that prices are moving positively for us and Quarter 3 should be better than Quarter 2. But even then in Chemical division, we have done a loss on EBIT level. So I just want to understand how is the demand and pricing right now and also pricing for retirees as moving...
Okay, so the demand is fairly stable. We don't expect volatility in the demand. Coming on to the pricing, obviously, we are not back to the profit levels that we would like to be, but Q3 has certainly been better than Q2. And we're confident that Q4 will be better than Q3. Regarding the pricing, what is more important than pricing is the delta, the pricing of both entire assets as well as acetic assets, the kind of move in sync, although there is some kind of a sale lag. So we are currently at a situation where acetic asset prices are holding stable around INR 84 per kg . And high asset prices are stable at INR 83, INR 84 per kg level today. And that should be -- this gives us comfort that the quality of the business and the profitability will improve.
So the like middle of quarter 4. So how do you think -- will we be able to kind of at least do profit and EBIT level or still it's something we are planning to leave say coming financial year?
Well, we will certainly do better. And historically, we've made money in this business, but there is a reason for us not to be profitable.
Okay, and now I want to understand something on inventory. So are you holding any higher price inventory as of now on the books? And how many days of inventory do you have on a book?
So on the flip goods, on the chemical side, we hardly hold any inventory. We run kind of full capacity, and we don't hold any got inventory. We do hold some inventory of raw materials that is reported. And that's typically a few months, so it's pretty manageable.
Are how many months of into raw material?
A few months.
Okay, and on the pharma side, how much of inventory we have in numbers? Monthwise.
1 to 2 months... 1 month in metric is what we carry typically.
Okay, and update on the CapEx, how much have you spent on the CapEx as of now because it was around, I think, INR 300-odd crores this year or something. And the CapEx of all the CapEx that is going on, on our Western India side and all so...
We have spent close to INR 150 crores this year, and that's what we typically do in a year.
And like what is the -- so we were planning to do some Western India, some expansion. So what is the status of that and also on its high capacity expansion. So are we on track to complete it by Quarter 4 by tile expansion?
No, we are not doing any high rapid expansion as of now. Instead, we are changing the product mix on the chemical side. And you'll be hearing more about it at our next meeting--next quarterly meeting.
Okay, and on farmer side, what kind of capacity utilization are we having as of now?
So as I said, I answered this question earlier. Asset utilization makes sense when we've got dedicated plants. So in terms of ibuprofen, we are going to grow well above 80% asset utilization. But the other plants are multipurpose multiproduct or asset utilization is perhaps not as useful a metric...
Okay, so this multipurpose are we talking on the chemical side? Ibuprofen I got to 80%. What about the other chemicals?
Plant you're talking on the pharma side. Okay. And on the chemical side, a... Dedicated... And the capacity utilization and those would be? We are running well above 95%.
Okay. That's okay. And also the last question from my side would be on -- I think last quarter, we had some patent process patent on and this time, we had something on important. So what kind of benefit do we expect from these states? So anything on the top line? Or I just want to understand the benefit of getting these statements all out.
So the benefit of patent is it prevents someone else from doing it. It does not give you the right to do it. that's a simple way to understand it. And in terms of the commercial benefit, the commercial benefit for the charters will be when we offer the product that has lower impurity levels than competition. And on the leptin side, the benefit that we will offer is an environmental benefit because we will be using slightly less raw material and that will give you some benefit in your cost as well.
Okay. That was it from my side. Thank you.
Thank you.Ă‚Â Next question is from the line of Surya Patra from Philip Capital, please go ahead.
Thanks for the opportunity, sir. My first question is on the market mix of your APIs currently than in terms of the advanced market versus the emerging market, -- and as an extension to that, I just wanted to understand, see, I think you have taken a couple of [ iliciatives ] to enhance your positioning in the advanced market. So and also acquired or kind of invested from strategic stake acquisition that you have done in one of the U.S. company. So how all these are like connected to each other. And what is your advanced marketing inciting coal going ahead, if you can elaborate a bit?
So I'll break down the question into 2 parts. There are 2, I think, over answering question that you have is what's our plan to grow in the regulated markets. That's one. Your second question that you've asked is we will do our investment in the U.S. company, how that's going to help us in the regulated markets.
Yes. And also the market mix currently in terms of revenue...
Yes. So if I look at overall our market mix, I would say, broadly 30% of my revenue comes from exports. -- about 26 points something, 27% comes from exports. APIs only look? This is overall -- everything all put together.
No, in fact, for API, is it possible...
API only this number would be slightly perhaps slightly higher. It could be 30% or higher, 35%, maybe. And in that, if I look at my split between emerging markets and regulated markets, most of my exports are actually in emerging markets right now. And that's understandable because if you look at my entire product portfolio, I have approval for like 2 products for the U.S. market and the other CEPs have started to get in the last few quarters. And as you are well aware, Sure, in this industry, after you get the CEP approval, that's when the game of promoting these products to customers where it begins. So it will take a few more quarters, but our goal is really to improve our market share in the regulated markets. And we are well on track for that. The second part that you talked about our investment, that investment is in an organization that has essentially a technology platform. And at this point, we don't anticipate that giving us revenue regulated markets right away. We've taken a minority position. And we are doing an in-depth study to figure out what we should -- how we can monetize that technology. So it will take a little bit of time before we can answer that question. But that investment is not going to help me sell more APIs into the regulated market. That's not the intent.
Okay. My second question is on the -- about API industry EBIT. See, in the current time frame, in fact, we are retracing underperformance across the world by API place or even the intermediate pace. So what should be attributable to this kind of underperformance -- whether it is the rationalization of inventory post the COVID period? Or it is the energy crisis, what we have witnessed in Europe who are generally believed to be one of the key lead market for all those APIs and intermediate -- or it is given the units that has been prevailing in the market. So what is really the real concerning fact that led to this kind of underperformance by almost everybody. And how sustainable this underperformance or these challenges are likely to be for the API and intermediate play?
Okay. So first of all, let me preface my answer by saying what you are calling under performance depends what are you comparing it with. So if you go back to the performance of the API industry 4 years ago, it is not under performance... If you I'm just trying to yes. If you compare it to 1.5 years ago, it is underperformance -- so clearly, what happened during the COVID period was not just getting COVID-related products but overstocking of products in general. So overall, there was a third in the performance of the API industry. So if you look at some of the leading API players as the COVID products have got away, they've taken a massive hit in the profitability. I think the framework I would like to use is that at equilibrium, we leave COVID aside, -- this is an industry that will run at an average EBITDA of 12% to 15%. Some companies will give you maybe 20, 25 and then there are others that will give you closer to 8 or 10. So that's kind of where this industry is, and that's where it has been historically as well. So an EBITDA number of 15% is an average performance that you should expect from this industry.
Okay. So largely, it is a retaliation post... So yes, sorry to interrupt you what the voice is breaking. We question to come in a better reception area? Yes. Okay. Yes. So yes, I hear you. Okay. Inventory rationalize in post the COVID period that has been the one key reason for the kind of sequential decline in the industry performance that you can say, right, sir?
Yes... Yes, absolutely. And in this industry, sure, business improvement happens in years, not in quarters. So you ran along with a lot of our credible peers. We've made giant strides in improving our product portfolio, putting up capacity for that going after regulatory approvals. So you will see the impact of all these things in the coming few quarters.
Okay. Sir, second point is that, see, while we have witnessed the volume decline, alongside margin has been a concern. So it is obviously, the input cost and all that would be one concerning fact. But alongside, I think API industry is, to some extent, energy intensive as well as the bulk of the activities that would be happening. So hence, the rate cost, which had gone up quite significantly, that would also be a kind of a relevant cost concern for the period. So may now put together energy cost as well as the freight would be what proportion of the total revenues at the current time frame?
So I don't have that number on the top of head, sure, there has been easing of pricing both on the logistics front as well as the energy front. So that will certainly help boost margins. But you talked about the decline in volumes. There has actually been for IOL, we've not declined in volume. In fact, if you look at our business, 3 months -- 3 quarters of this year, we've given pretty much the same kind of performance that we gave last year. And this is a backdrop where for -- on the chemical side, our flagship product, as ideas, the prices dropped by more than 30%. On paracetamol, the prices have dropped again by a similar number, 30%. In metformin, the prices have dropped about 20%, 25%. Ibuprofen has seen a very modest line or maybe a flat. So it actually our volumes have gone up to deliver that level of performance. And it's the input costs that have put pressure on the margins.
Okay. Okay. And just last point from my side, sir. See, in fact, various the recent articles, the recent data points indicate that there is a kind of a certain surge in the demand for, let's say, all the pain management products like, let's say,-- and all that, again, acute segment like ibuprofen, paracetamol, metformin. And certainly, the prices of the those have gone up. And with China opening up also is not helping that whether it is creating a condition where the prices are really moving up. So do you think this price recovery is a kind of a normalizing or it is a kind of -- even if it is happening, it is a one-off thing?
I think it's a one-off thing, sure, because there is no fundamental underlying reason why there should be a sudden surge in demand for these kind of products or increase in prices. So it's a one-off thing, and it will stabilize.
Okay, okay. Sure...
Thank you.Ă‚Â Ladies and gentlemen, you will just start on one to ask a question. Next question is from the line of Shek Norman, Individual Investor. Please go ahead.
Hello, good afternoon, thank you for--My question is what's your next quarter guidance means actually from the last 3 to 4 quarters, I'm seeing that we are coming into double-digit margin, but a motile to see. So what's your next total guidance, sir?
So if you -- what I would say is I will repeat that, yes, we will be going into the double-digit area. And we are almost at 10% now, which is significantly better than where we were in Q2. So directory, I don't want to speculate and draw a trend line between 2 data points, but all the indications based on our portfolio, what our customers are telling us, our order book and everything indicates that the worse is behind us and things are improving now.
So my second question is regarding the investment in the West on India. I think we were thought I'm asking the same question. First, you talk a little about this coming in next few quarters, in a few weeks, but still there is no update on the nature or anything you are in the Weston side investment?
So see, we are in the process of saying that it's correctly -- the situation right now, as you can imagine, is current macroeconomic and tenant is -- we feel that we are better off postponing the investment a little bit and making the right call. And in terms of CapEx, we have enough investment that we are making in our current facility that can help manage the growth for at least the next year or so.
Okay. Sir, another question is I think we have so many approvals in last 2 to 3 quarters. I think including for enterprise and then patent for the GM certification than Korean FDA approval, Spain authority. And in so April will go -- when we will get the benefits from all these approvals because I think still we are making behind the margins what we are going in the 2021...
Yes. So let's say, begin by saying that in the API business, the regulatory approvals is the first step towards establishing our business in regulated markets. So if you look at -- yes, we've got the CEP approval. We just got the EU GMP certificate from the Hungarian authority last month. Now our ability and front-end teams are aggressively working with customers. And clearly, even after you give the API, you give your exhibit batches, it will take some time for stability testing. So you can expect a lag of a few quarters. And this is not something that is specific to IOL. This is just how the industry is -- but the good news is that we've got the right tools to play with. We've got the right products. We've got the right approvals. We've got the right team who's talked to the right set of customers. And now it's a question of time before you start to see the commercial benefit of all this.
Thank you. Next follow-up is from the line of Neelam Punjabi from Poe Ventures.
Time for the follow up.Ă‚Â So my question is that given we are looking at cetera market fully for our API business, are on our API units approved from U.S. FDA? Or are you expecting any inspection any time soon?
So when I talk about regulated markets, it's a mix of European market as well as U.S. markets. So if I look at from a European standpoint, all my facilities are currently approved. When I look at the U.S. market, all of them are not approved it yet, got approvals for --. And the other -- we are expecting that at some point, the U.S. FDA auditors will review our facility, but we don't have any official integration from the yet.
Got it, sir. So for our rent regulated markets, is our target more towards Europe or even we are targeting U.S. markets?
So clearly, regulated markets, we will target both U.S. and Europe. And it's a question of time once we get the U.S. FDA approval for some of the other products. But until then, we've got the CEPs in place and the European business is certainly very soon.
Got it. Okay. Secondly, for our Med comment, you mentioned that the prices have connected by 20%, 25%. Could you please also give an update on the input price DCG, are the prices right now? And has the profitability improved for this product?
So DCG continues to be a pretty volatile product. I think in the last 1 year, I have seen prices of DCG are ranging from $3,500, $3,600 a tonne all the way to $2,200 a tonne. So it's really a question of having your right sourcing strategy in place with the right partners to be able to manage your profitability in metformin. And we are well on track for that.
Okay. Next on ,you had mentioned that we'll be looking to launch this product soon. So have you launched it? And any -- do we look at it as a sizable opportunity for us?
So we've not commercially launched the product yet. The product is under pilot. So technically, it is under development, and we started to work with customers. And depending on -- we are not -- as you can imagine, this is a product that is being offered by several of our peers and competition as well. It's too early for us to say what kind of market share we will get and whether it will beside them.
Okay. Okay. Next, sir, on our CapEx targets for FY '24 and '25, if you can give that number? And what would be the key areas of capital investments going forward?
So our investment areas going forward will be -- our typical numbers would be around INR 150 crores a year. And they would go into a mix of both pharma and a little bit into chemicals as well.
Okay. Now sir, if you can just highlight what would be the -- our net cash as on December?
Net cash... Around INR 300 crores.
Okay. Great, thank you so much.
Thank you.Ă‚Â Next question is from the line of Mahesh from U.K. [ Hasenmanagement ].
Just one question from my end. How are you looking upon this Paracetamol -- you expanded the capacity from 8 minutes to 35 days.Ă‚Â I would like to have your commentary on entire exercising the volume, what are your expectations? The time coming ahead, thanks.
So you know,Ă‚Â paracetamol we've expanded our capacity. And as you rightly said, we will be -- we are at a capacity of really 600 tonnes. So this is not just the installed capacity, but for sales and everything has been stabilized. And in the coming months, that's the kind of capacity that we will be running the plant at -- and in terms of pricing, in the domestic market, the prices range from INR 530 to INR 550. And this is a kind of a product where the prices change on a frequent basis. So I'm only talking about the India prices. Of course, the export prices are slightly higher. So this is typically the price. And if you look at it last year, the same product was selling at north of INR 700. So there is a fair amount of volatility but that volatility attracts the volatility in the raw material prices and one needs to manage that.
Okay. So sir, what capacity utilization you expect 1 year down the line on paracetamol?
Roughly well north of 90%.
90%. Okay. And sir, just one more question. On in chemical area, what are you planning to apart from-- what are the segments we are trying to enter into.
I think most of them are -- I don't call them segments, I call them derivatives or chemistry related to what we already do. Yes, yes. In, we've got asset in florid. We've got MC one of the elastic assets, we've got time asset. So we'll be working around these chemistries.
Thank you. Next question is from the line of Yogesh Tiwari from Marian Capital. Please go ahead.
Am I audible? Yes. Sir, my first question was, is there any seasonality around looking like Q3 is a little soft and then it increases around January, February. So is there any seasonality around on...
No, not really. We don't see any seasonality in ibuprofen.
And sir, I just wanted to understand what are the demand drivers for ibuprofen in both markets like Europe and Southeast Asia?
You said Europe and Southeast Asia.
Yes, sir. Yes sir.
The European markets in terms of size are much bigger than Southeast Asia. And in terms of demand drivers, I think we are back to what it was at co-level now. So it's a fairly stable demand when the growth rates are single digits.
And sir, are you seeing any increase in demand and volumes in the current quarter compared to ultimately in both ibuprofen in terms of volume?
So our volumes at a last are very flat. We'll be running at pretty high asset utilization. So there is no change there. Yes, there has been a bit of a demand increase on ibuprofen, and we have the capacity created to that.
And sir, lastly, with exposure in the exports market like we have some exposure to Turkey as well. So are we seeing any surprises to discussion in fact because of the current... About your voice is coming very Murano keep the mic away from your mouth. Yes. Am I okay now? Okay. So just to understand that given the current scenario in Turkey and we have some exposure in Turkey as well. So is there any supply disruption for our product in Turkey?
It's too early -- I suppose you're talking in the backdrop of the earth trade that happened at Turkey recently. Yes, sir. Yes. So it's too early for us to make a comment on that, but we don't expect there to be much disruption in supply chain.
Sure. Thank you sir. That's all from my side. Thanks.
Thank you next question is from the line of Vihang from Systematics. Please go ahead.-- side or with the question, please.
Am I audible now? Yes. Yes. So with respect to the regulated market opportunity, I wanted to understand whether you are currently supplying to India-based customers, who in turn sell formulations to the U.S.? So like in case of ibuprofen, a large part of the U.S. formulation demand is being catered by Indian players. So are those customers, your customers currently?
Yes, Vishal. Absolutely. You're absolutely spot on. One is to cater to the regulated market by supplying the API directly to our regulated markets. The other is to supply the API to Indian manufacturers who make the finish formulation in India and supply that formulation to the regulated markets, we cater to both customers.
And you -- so you're already supplying to the India-based names? Yes. Okay. And is there a pricing advantage that you get when you supply to supply to say rabidly supplying ibuprofen to the U.S. market. So is the price higher versus other domestic customers?
So what I would say is that the price depends really on the quality of the product. A USD product that has a better intuit profile than an IP product, you are going to get a premium on that, whether you're supplying that product in India, you supply that product directly.
But your -- so currently, your average realization for ibuprofen. So when you compare it to competitor average realization, it appears to be lower, significantly lower. Any reason for that based on the export data.
I'm not sure that's necessarily true. And what I'd like you to do is take a look at not just the price realization, but the profit realization because I think the question to be asked is if my peers and competitors are selling at a higher price, why are they not more profitable?
Right. Yes, that's also true... Correct.
Thank you. Next question is from the line of Gautam Gosar from Popuri Ventures. Please go ahead.
-- So my question is on the chemical business. So given that the tile asset class have been flat quarter-on-quarter, and you mentioned that the demand has been largely stable. So sir, what led to the growth in the business on a sequential basis?
Can you repeat your question for a moment?
So sir, my question is, given the tile asset prices were flat on a quarter-on-quarter basis, and you mentioned that the demand has been stable for the business. So what led to the de-growth on a sequential basis for business?
So actually... Yes, I think a slightly lower volume and also the pricing was not completely flat. The pricing was slightly lower in Q3 versus Q2.
Okay. And sir, given that in Q2, we had some high-cost inventory as well. So we are behind that...