IPCA Laboratories Ltd
NSE:IPCALAB
| US |
|
Fubotv Inc
NYSE:FUBO
|
Media
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
| US |
|
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
| CN |
|
NIO Inc
NYSE:NIO
|
Automobiles
|
| US |
|
Fluor Corp
NYSE:FLR
|
Construction
|
| US |
|
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
| US |
|
TopBuild Corp
NYSE:BLD
|
Consumer products
|
| US |
|
Abbott Laboratories
NYSE:ABT
|
Health Care
|
| US |
|
Chevron Corp
NYSE:CVX
|
Energy
|
| US |
|
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
| US |
|
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
| US |
|
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
| US |
|
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
| US |
|
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
1 058.6
1 703.25
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Fubotv Inc
NYSE:FUBO
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
C
|
C3.ai Inc
NYSE:AI
|
US |
|
|
Uber Technologies Inc
NYSE:UBER
|
US |
|
|
NIO Inc
NYSE:NIO
|
CN |
|
|
Fluor Corp
NYSE:FLR
|
US |
|
|
Jacobs Engineering Group Inc
NYSE:J
|
US |
|
|
TopBuild Corp
NYSE:BLD
|
US |
|
|
Abbott Laboratories
NYSE:ABT
|
US |
|
|
Chevron Corp
NYSE:CVX
|
US |
|
|
Occidental Petroleum Corp
NYSE:OXY
|
US |
|
|
Matrix Service Co
NASDAQ:MTRX
|
US |
|
|
Automatic Data Processing Inc
NASDAQ:ADP
|
US |
|
|
Qualcomm Inc
NASDAQ:QCOM
|
US |
|
|
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
IPCA Laboratories Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the Ipca Laboratories Q1 FY '24 Earnings Conference Call, hosted by DAM Capital Advisors Limited. [Operator Instructions] Please note that this conference is being recorded.
I would now like to hand the conference over to Mr. Nitin Agarwal from DAM Capital Advisors. Thank you, and over to you, sir.
Thank you. Good afternoon, everyone, and a very warm welcome to Ipca Lab's Q1 FY '24 Earnings Call, hosted by DAM Capital Advisors Limited.
On the call today, we have representing Ipca Lab's management, Mr. A.K. Jain, Managing Director; and Mr. Harish Kamath, Corporate Counsel and Company Secretary.
I will hand over the call to the Ipca management team to make the opening comments, and then we'll open the floor for questions. Please go ahead, sir.
Thanks, Nitin, and DAM Capital for organizing this call. Good afternoon to all participants. Thank you for taking out time and joining us for Q1 FY '24 earnings call.
Today's earnings call and discussions and answers given may include some forward-looking statements based on our current business expectation that must be viewed in conjunction with risks that pharmaceutical business faces. Our actual and future financial performance may differ from what is projected and perceived. You may take your own judgment on the information provided during the call.
Domestic formulation business has delivered a growth of almost around 14% for the Q1 FY '24. The impact of Elenium product price reduction in Q4 FY '23 of around 16% on the price control segment was partially offset with the VIP-based price increase taken in Q1 FY '24. With two ranks gain over FY '23, Ipca's rank in chronic segment, and we have maintained 15th rank in acute segment as per IQVIA in this particular period.
And IQVIA TSE audit back in June '23, Ipca has achieved a growth of around 13% as against the industry growth of around 11% as per IQVIA data.
Export formulation business, more particularly our branded formulation business, in Q1 has delivered a growth of around 23% for the quarter from INR 93 crores to around INR 114 crores for Q1 FY '24. Our generic business, excluding institutional business, has delivered a growth of 11% in Q1 FY '24 from INR 212 crores to around INR 235 crores. Institutional anti-material business declined from INR 97 crores in Q1 FY '23 to INR 48 crores. The business is impacted largely due to lower business volumes from artemether/lumefantrine and artesunate/amodiaquine formulations. There was lower procurement by the global agencies.
And lower business of artesunate injectable due to planned shutdown for upgradations of sterile artesunate API section, which now is operational, and it may take around one more month to get its approval from WHO, and business will resume, but we have already started the production of injectables here.
API business in Q1 FY '24 declined by around 23% from INR 384 crores to INR 295 crores for the quarter, mainly due to significant decline in anti-malarial API business for the quarter from INR 63 crores to INR 19 crores, a decline of almost around INR 44 crores due to poor demand of all antimalarial APIs. The price decline on certain APIs is due to significant decline in KSM prices in the market has also impacted overall value of the businesses.
Overall business guidelines for FY '24. Domestic business, we expect that industry will grow around 10%, and our growth may remain around 12% to 14% for the domestic business. That's our guideline. International branded promotional business, we expect a growth of around 12% to 14%. The lower business growth is projected due to depreciation in ruble. Ruble has already touched almost around 96, 97 level, and there will be some impact on foreign currency realizations on that.
Our generic business is expected to grow by around 7% to 8% in this particular year. Institutional generic antimalarial business is likely to decline by around 15% due to lower demand and also due to the antimalarial injectable, particularly artesunate injectables because plant was closed in the first quarter of the current year.
In API business, we see a decline of around 10% to 12% in the business due to lower realizations of APIs due to softer KSM pricing and also because of some decline in demand of antimalarial APIs. For FY '24, our overall growth forecast, because of all these factors, more particularly decline of institutional antimalarial business and also likely decline of API business, will be likely to be around single digit, maybe around 6% to 8% for the year.
On business margin front, we expect our material cost to sales ratio to improve from around 35.5% in FY '23 to around in the range of around 31.5% to 32%. This will deliver an improvement of around 3.5% to 4% for the year. It's mainly due to business margin improvement on formulation business with lower input costs and overall improvement in productivity of the field force. Further cost optimization drive in API production.
And overall, we expect that EBITDA margin for FY '24, our expectation is around 19% to 19.5% for the year as against 16.22% in FY '23.
Having given the broad numbers, now I request participants to ask the questions.
[Operator Instructions] The first question is from the line of Kunal Dhamesha from Macquarie.
So the first one on the EBITDA margin guidance of around 19% to 19.5%. This you had said on the base of 16.5% is what we said. So the base also includes other income and the guidance also...
We have excluded other income from both places now. Now our guidance will be excluding other income.
But if I exclude other income from last year reported number, I mean, I get some around INR 926 crores, INR 927 crores EBITDA with a 15% margin.
Yes, it's around 16.2%, excluding other income, yes.
Okay. Okay. Sure. I'll check my number then. So basically, the entire, let's say, 300 basis point margin improvement we are expecting from more or less gross margin improvement is what we are suggesting? Is it the right way to understand?
Yes, it's a gross margin improvement. Yes.
Okay. Okay. And may I know -- let's say, probably because of the lower realization this time around, API business is declining. But let's say, beyond FY '25, what is the growth trajectory that we are aiming for this business?
Overall, we should be -- I think this year, by and large this antimalarial business is facing some problem because of lower demand from WHO business also, and also our domestic business of API, we have seen a significant decline in first quarter. And API export has also declined in this particular quarter.
So we really see that antimalarial demand may be lower in the current financial year. But as far as WHO business is concerned, now we have started receiving good orders. And injectables business is largely impacted because of our plant was closed in the first quarter. And we do almost around INR 90 crores worth of antimalarial injectables exports, artesunate injectable exports to all these global agencies. So that business is impacted. But on a normalized basis, I think next year we should be able to deliver much better growth of around 10% to 12%.
Sure. And on this plant closure for the injectable artesunate, any particular reason that we have closed that plant? And when is it expected to come back online?
That was -- basically, we wanted to upgrade our sterile artesunate API section. That work is already completed and product is validated and we have filed with WHO all the validation data. So normally, it takes 60 days’ time to get an approval. So almost around 30 days are over. So maybe in a month's time, we will get approval.
But in the meantime, we've already started the production. Yes. So maybe I think up to September, there -- even August and September will also get impacted because the shipment will start happening only after the approval from WHO will be received and then we can start.
Sure. And you said INR 90 crores is what the annual run rate is for this shipment?
Yes. Injectable business is around INR 90 crores.
Annually?
Annually, yes.
[Operator Instructions] The next question is from the line of Surya Patra from PhillipCapital.
Sir, first question is on the gross margin front. So is it fair to believe that last 4 quarters, where the gross margin levels were like 63%, 64%, in that range. So that was kind of the phase of aggression. And now we have come back to normalcy. And if yes, what is driving this?
So like the challenges of the APIs is -- that is how we have to think for the cost optimization scene or the input prices are corrected to such a significant level. So hence, the benefits that we've driven. So could you give some more color to this, sir?
I think that the formulation business improvement is good, so that is also driving. Then input costs are also lower, that's also helping. And normally, the current year also, your API business is lower. API margins are normally lower than the formulation business.
So overall on mix also, margins are improving. And plus on the API side, we are also taking furthermore the cost optimizations and other drives. So that is also resulting in better margins on API. So overall, all these factors will result into almost around 3.5% to 4% kind of improvement in the gross margin here.
And this is a sustainable one?
This is a sustainable one. Yes.
Sir, the second thing is about the Unichem acquisition. So what is the way forward, sir. In fact, the first part of the trade with it has happened? And so as you were mentioning that once the majority stake, controlling stake that you acquire, then you'll start integrating because of the management control that you'll be having. So could you throw some light to that acquisition?
I think our open offer is opening on 28th of August, and which will close maybe around by 8th September or so. And all the payments will be made by around 20th of September. So practically, by maybe September end the whole process of integration and all will start.
But we have already started working on which are the products on which the market extensions are possible and we have started interacting with some of their teams, but practically, on ground, the actions will start only after completely we are in the management. Yes.
So that number integration or the integration of the financials will only happen after the complete...
No, it will start from September end. Because hopefully, everything should be over by September 20, and we should be having management control over that company. So second quarter results, consolidation will happen from the date we got those controls.
Maybe I think few days' consolidation would happen. But I think the major part will start happening from the third quarter onwards.
And sir, coming back to the domestic formulation business of Ipca. So positive surprise with the 20% plus kind of growth and all that. So any one-off kind of the contribution that you have witnessed? Or how is it, sir?
No, we have done, I think, a business growth of around 14% in domestic formulation this year. And that is on the back of, let's say, our most of the therapies are doing well. In fact, if you look at the business growth that we have in the -- let's say, pain management has delivered around 15% kind of growth. Cardiovascular and antibacterial is more or less around close to 10% kind of business growth on that. Then your CNS business has grown by around 21%. Derma business has grown by around 24%. Our urology business has grown by almost around 26%, ophthalmology by 15%.
And neutraceuticals, we have a small business, which has declined by around 11%. And cough and cold business has delivered around 11% kind of growth. Only segment where we have not received good growth is antibacterial, which the business growth was only around 5% in this quarter, on the first quarter, yes.
So rest all businesses have done well in the quarter. And both on the acute and chronic, we are beating the market. In fact, on chronic, we have had a 2 rank jump in this particular period. But on the acute side, we have maintained the rank, which is 15th in the overall -- as per IQVIA.
Okay. So sir, is it right that in the previous quarter, we had seen some kind of a pressure for our key brand like Zerodol and all. And now it is normalized. Is that the right understanding? And also about the field force addition that you had in the recent past, whether it is fully captured and you have started seeing a kind of -- at least expected level of kind of contribution from that sales force expansion?
Yes, field force expansion is also resulting in much better now -- and that is also helping us, like say, your CNS business growth because we have started one more division. So business growth is much better. In fact, on our rheumatoid arthritis division, the second division has become -- in very first year, it has become productive and started delivering very good growth and margin also.
And in cardiovascular, that one division which we have launched, which is Cardinova, and it has reached to breakeven in very first year. And another division which we have added, it may take one more year to get to the breakeven.
As far as the pain segment and more particularly on the Zerodol side, in that division also, we have added almost around 300 people. And there also, we are seeing that overall good traction. But overall, pain market itself, the growth has come down. And therefore, earlier we used to have around 19% kind of growth on pain segment. This quarter, we had a growth of around 15% on pain segment.
The next question is from the line of Vaibhav Badjatya from Honesty & Integrity.
Yes. Sorry, there will be some disturbance. So I will come back in the question queue later.
The next question is from the line of Rohan Vora from Purnartha Investment.
So my question was that when would we start seeing operating leverage flowing in from new field force that we hired in the last 1 year and the freight costs that have normalized? So when would that start flowing into EBITDA margins?
Let's say, freight cost has already normalized. And therefore, you have seen that our other inc -- and energy cost is also somewhat stabilized. And therefore, in this quarter, if you see, your manufacturing and other expenses has just moved by around 3% or so.
So there is not much of increase in other expenditure. And as far as productivity is concerned, let's say, the major people who are added, one is in the cardiovascular, rheumatoid arthritis, and also in the division where we are marketing Zerodol. As I have already said that almost around 300 people are added, close to that number in our rheumatoid arthritis second division what we have started that has become productive in very first year.
On cardiovascular, we have started two divisions more. So one division has already received breakeven in very first year. Second division will receive breakeven, I think, reach to the breakeven level in the next financial year. On Zerodol range where we have added people, that is also resulting in the overall productivity increase. But overall, on pain side, if you look at, we were growing almost around 19% or so.
This quarter, the growth is lower because pain market itself growth has little come down. And another area where we added the people was on one in CNS segment, and very first year that division is also becoming productive and above breakeven.
So overall, the addition of the people, only division where the people will take a little more time to become productive is the ophthalmic division, where it will take almost around 3 years for people to become productive and start delivering breakeven. So it has been, let's say, good additions, and we have already started gaining the productivity.
The next question is from the line of Harsh Bhatia from Bandhan AMC.
Sir, I wanted to clarify one of the earlier statements that you made in terms of the guidance, 10% to 12% decline in the API business. So there is one element of the malaria API pricing taking a hit. Is there anything incremental that's happening on the non-malaria API side?
Let's say, the major impact has come of malaria. And also the impact has also come because all KSM prices are soft. And because KSM prices are soft, API pricings are also soft. And more particularly on sartans, the starting material used to be around $18 to $20, has come down to almost around $6 now, $6.50.
So it's a significant decline on the KSM prices, which is redirecting in the -- let's say, almost around -- price of losartan in the market used to be around $100 to $120, now it's come to maybe around close to the level of $55, $60 level also.
So even though you have similar kind of volume, because of price decline, your revenues are declining. So that is also resulting in overall lower numbers for the API business.
Okay. So it has more to do with the pricing aspect and very limited to do with the volume aspect?
I think on KSM level, significant price decline has happened. And that is resulting in -- and practically, the KSM manufacturers are losing money now in that level. So it's not that these things will continue for very long. It may be a matter of 6 months, the KSM prices will again start rising.
Okay. And this shift in the KSM prices, is it happening from the domestic manufacturing side? Or is it happening from the import aspect?
Because import it is more and the domestic producers are also -- they have to match the prices, otherwise, they will not be able to do the business. But it is more driven by your import side and domestic people are matching the pricing.
Sure, sir, that's helpful. And the margin guidance, this time we are giving ex of other income, the 19%, 19.5%. This is purely from the base business aspect, right? That does not include any aspect of the Unichem consolidation for the entire year?
There is no Unichem right now in our -- because Unichem has not become still our -- we are not in management right now. So once the open offer gets completed and everything, then only consolidations and everything will start.
Sure, sir. And if it is possible, can you help us with the productivity of the Zerodol division? If it's possible, the PCPM number?
Normally, we don't give the division-wise productivity number. But overall, let's say, our company as a whole on a field-force size of almost around 6,180 people, overall monthly productivity is around 4.22 lakhs, which last year same period it was 4.08 lakhs.
The next question is from the line of Naresh Suthar from SBI Life Insurance.
Sir, your guidance on this year's margin, 19%, 19.5%. This includes the favorable mix in terms of higher India and lower API and other export markets. So next year when the product mix normalizes, will you see some part of benefit reversing and in FY '25 the margins being similar to FY '24 level? Or do you see more improvement from FY '24 level?
The margins will definitely improve because our formulation business is rising faster.
Okay. So the reversal in terms of the product mix...
So productivity of people will also go up.
Okay. So can you quantify how much product mix led margin expansion you are seeing in FY '24?
We have done the working on overall basis. So I have not done the working each element wise? Maybe I think the next time we have next quarter call, I think I will get those numbers also ready.
The next question is from the line of Kunal Dhamesha from Macquarie.
Sorry to hop back on this topic, but somehow when I rechecked my number, without other income, we were at around 15% margin. So I'm not sure where the discrepancy is coming from, for the last year I'm seeing, on a consolidated basis? And if I include other income last year, it would be 16.5%...
We are speaking all numbers on stand-alone basis, and I think you are going for consolidated.
Okay. Okay. Sure. Sure. And sir, this quarter then, any drag from some of our other subsidiaries like Onyx, Pisgah. If you can share some color there would be helpful.
The drag is only around INR 3 crores writing in overall level, and things are improving there. On a consolidation basis, if you look at my numbers, on stand-alone, we have profit after taxes around INR 166.58 crores, and for giving the impact of consolidation, your PAT number is around INR 162.82 crores. So it's around INR 3.76 crores. Yes.
Sure. And sir, any details on our CapEx plans? And I don't know, any update in the existing work for the plans that is going on?
Overall CapEx in current year is likely to be around INR 300 crores. Major additions is due to the one biotech plant which we are building in MP.
And then what would be the CapEx investment there and bioreactor capacity?
It will be almost around INR 150 crores.
And the bioreactor capacity for that?
I think it's at 1,500 liters or I think 2,000 liters. That's the kind of reactors that are there, and one 500 liters or something of that size, yes.
Okay. And this would be focusing more on the India and emerging markets?
No, it's a developed market also. We have taken opinion on our clinical protocols from Europe, U.K., and I think U.S. regulators also. So our clinical designs are all based on kind of taking those inputs. So filing will be for global market, yes.
Sure. Sure. And then last one on the KSM pricing, you alluded that KSM prices would again probably start going up. So to that extent, we would also be able to take the API price hikes. Is that a fair assumption?
Yes, it's a fair assumption. Yes.
Okay. So we'll have those contracts in which there will be escalation clauses based on KSM prices?
Normally, we don't sign long-term contracts for API side. It's only with MNCs or some kind of those customers, it may be around 6-6 months kind of contract.
But then the prices -- and in past also, we have been addressing the prices. So there are no issues as far as passing on those kind of costs.
The next question is from the line of Rahul Jeewani from IIFL Institutional Equities.
Sir, our consol EBITDA margins last year were 100 basis points lower than the stand-alone EBITDA margins. So do you think a similar drag would be there in FY '24 as well from the various subsidiaries of ours? Or do you think this drag will come down?
The drag is already coming down. Practically, this quarter, it's around INR 3.5 crores. And things are improving. So drag will come down.
Sir, that INR 3.5 crores drag is at a PAT level. So what would be the drag at the EBITDA level for 1Q?
There is not much difference between -- see, most of those companies, there is no finance cost and only some depreciation, that's all, not much.
It's around 0.5% point, yes.
Okay. Sure, sir. And sir, after the acquisition of 33%, 34% stake in Unichem for INR 950 crores, what is our cash balance as of now? And after the open offer also losing, do you think that we will have -- as in, we will have some sort of a higher interest expense going forward?
Interest cost is -- let's say, overall, our borrowing level will remain around INR 1,000 crores or so, so net borrowing. And since the interest rate has moved up, both on Indian rupee and your foreign currency loans, earlier all the foreign currency loans were very, very cheap. Now the interest rate is almost around 7%, 7.5% kind of interest rate. So at that level, your overall finance cost may be around INR 100 crores to INR 120 crores for the year.
After factoring in whatever you need to pay for Unichem acquisition?
Yes. Yes.
The next question is from the line of Surya Patra from PhillipCapital.
Sir, if you can just update us about your U.S. FDA facility inspection for the plant in December? And what is the kind of expectation on that U.S. business front so far as our portfolio is concerned?
Let's say, we have -- all the three sites are inspected and we have already replied. There are no issues as far as -- there are no repeat observations. And also there are not any kind of data integrity kind of issues. So we hope that, hopefully, we should get cleared, and I think it's only a matter of time because I think somewhere -- Ratlam inspection was closed in mid of June, so probably 90 days thereafter or so, I think, hopefully, things should -- we should hear from regulators.
Okay. So then, sir, hypothetically, if we assume that, okay, as you said, hopefully things are getting resolved by the second quarter or the third quarter. So what would be our business model there in the U.S.? So our focus would be API to start with, with the old API product and the old file has to be activated? What will really happen, and what time frame that you anticipate to see some supply happening from your Indian facilities? And how would that be complemented or not impacted by, let's say, Unichem acquisition? If you can say something about that.
Let's say -- I think Unichem has a much bigger platform of U.S. sales. So we would like to integrate those kind of platforms. So maybe that will become our front end. So we will definitely look at that. Right now, it will not be right on my part to comment on that part. And we don't know how long it will take because sometimes the import alert listing may take some time. So right now, we cannot say that when the business would start. So we will take a call around that time, but our focus is likely to be more on formulations, not on API. Yes.
Okay. Okay. Okay. Fine. And about the formulation exports, when you were talking about the formulation business growth is looking strong. So could you talk something about the formulation exports, which has been subdued a bit since some time, and whether challenges what you have been facing in Europe, and particularly in U.K., all those things got resolved? And what is the current outlook in the key markets that you are having for the formulation exports?
I think Europe has delivered very good growth. The U.K. has started coming back. I think Europe, which includes U.K. also, last year first quarter, the business was INR 73 crores. This year first quarter, it's around INR 119 crores. So there is almost around 63% growth.
And this trend is continuing. I think for whole of the year, U.K. delivered almost around INR 130 crores to INR 140 crores kind of business as against INR 64 crores what we had in last financial year. So overall, we are seeing good traction from European markets. And other markets like Australia, New Zealand -- except South Africa, where we may see some kind of decline because some of the tenders we have lost there, and your Canada business may remain somewhat muted, but Australia, New Zealand and European business will do very well. So overall, looking at that, we have given the guidelines that in the current year or on generic formulation side, we should have around 7% to 8% kind of growth.
First quarter, we have seen a growth of around 11%. And on institutional generics, because of your first quarter -- up to second quarter, the business impact on injectables. So that will also result in lower growth. In first quarter, your antimalarial WHO prequalified formulation business was lower. Of course, the orders have now started coming in, and good orders are there in hand. But that will definitely impact -- not only first quarter it has impacted and some impact will be there of these two factors in the second quarter. But on third and fourth quarters, there would be good recovery.
Okay. Okay. So just one last question, sir, about the facilities. So when Unichem was not there inside, so we had a plan of having an end-to-end integrated operation by activating that Noble Explo in Nagpur. And hence, KSM dedicated facilities in the Nagpur site and all. Now with Unichem facilities getting added post acquisition, what thought process that we are currently having about capacity buildup and for the integrated operation what we have been thinking long back?
We already have good amount of integrations from API to formulations. Close to almost around 54%, 55% of our formulations are based on our own APIs, overall, on the company as a whole.
But I was talking about the KSM integration, sir?
KSM integration part, we are already working. We have set up our first plant on continuous process. And I think that plan should start operating from maybe around October or November. The site is under installation right now. And once the validations and all start, I think from that side, first product for your furosemide, one raw material we'll start producing in-house through continuous process. And we have around two, three more candidates in pipeline on which we are currently working. And so far, we've not placed orders. We will learn from this particular product and thereafter we will place the order for the -- and the plant cost is very small. It's not very large. This continuous process plant for one of the KSMs which we have set up, maybe around INR 25 crores, INR 30 crores. So plant cost on continuous process is not going to be very high. But overall, it will result in much better throughput and also lower overhead cost.
And if you can update about the Dewas site commissioning and execution and utilization, sir?
Dewas site is so far not inspected by any agency. We have started filing -- I think four products are validated from there and filed in various markets. Furthermore, validations are happening from that site. So maybe I think by year-end or so, we may have some kind of domestic business or some small business coming in from the markets where no such inspections are required.
But probably, I think in the second half of the current financial year, some inspections would start happening from European authorities and others. And thereafter the business will scale up.
So for 1 year -- we have already discussed it earlier also that this is a cycle one has to follow, that you follow validation of the batches, generate three batches and thereafter file with regulators. And once they approve -- inspect the plant, then only the business and approval comes, then only all this export business will start. So I think current year also, this plant will continue to have losses. Yes.
Okay. Yes. One more...
We have to do the validation of products. Continuously establishment and validation of products we'll do and generate stability data and filing work is currently happening.
Just last one, sir, on sartans, which is the key product for our API portfolio. We are seeing some impurity challenges along with the industry last year. And we have been trying to have new modified process approved from the regulators in the U.S. So that possibly we have already done.
And also in the recent past, we have seen enhanced competition from the domestic leading large players also so far as the API is concerned. So now having seen all these impurity challenges in the recent past and enhanced competition, what's your outlook that you are having for your key portfolio that is sartans?
I think impurity challenges which were more particularly on nitrosamine and azido impurities and now, let's say, whole industry is working for the last 1.5, 2 years. And most of the issues are now addressed. So this is all thing of past.
Somewhere the processes are filed, somewhere process filings are happening on the newer APIs and all. But recently, regulators, both U.S. and Europe, both have come out with the guidelines for that, and we don't foresee any reason on any of our APIs not meeting those kind of guidelines. So now we don't have any kind of those challenges.
And how do you address the competition, sir, enhanced competition for sartans?
So basically it's cost reductions and on continuous basis working on to reduce the cost and process optimization. That's the only answer. And building the higher volumes, yes.
Okay. So that means we can say that sartan portfolio is kind of normalized after seeing whatever the hiccups in the recent past.
Yes. It is in the process of normalization because some of the processes -- reduced cost processes, which we have filed, I think some markets we have received approvals, but let's say, LatAm, Brazil and others, those approvals are still to come.
So somewhere the costs are still on a higher side. Because as we have discussed earlier that our first focus was to come out with a process. So we have filed initially the process which has a little higher cost. And thereafter, we have come out with a much better process where the cost is much, much lower. And that process filings has happened, but some market approvals are still pending.
The next question is from the line of Vaibhav Badjatya from Honesty & Integrity.
Sir, just trying to understand from a longer-term perspective, post the acquisition of Unichem, I think we can make use of our Bayshore platform, which we were earlier not probably able to optimize. So what's your thought on that? And can it contribute significantly to Ipca's profitability on a consolidated basis going forward?
Let's say, Unichem is much bigger platform than Bayshore. And for our future U.S. business, we would like to use the Unichem platform rather than using the Bayshore platform. So Bayshore, we'll try to integrate with that of Unichem portfolio. And we will integrate the entire team and other things so that more cost reductions on operating side would happen. So that's the thinking. But it all will start happening once we are there in the management.
Yes. But I think Unichem doesn't have any front end, which our Bayshore has. So Bayshore will continue to be...
No, no, no. Unichem has a much bigger front end. They are almost around more than 30 people, very good team, and very good U.S. business. Yes.
Okay. Got it. Understand. And when you provided your overall number, obviously, on a stand-alone basis you provided, and we know some of the other existing subsidiaries that you have. From September onwards, for 6 months, the drag will also come from Unichem on a PAT or PBT basis. So just wanted to understand your thoughts on it. Will there be any drag that will be significant? How much that would be? I don't want exact number, but a broad quantitative commentary would be helpful.
I think Unichem is also improving their performance. And we will only be able to provide you once we are there in the management. Right now, it will not be right on my part to talk of that, yes.
[Operator Instructions] Ladies and gentlemen, that was the last question for today. I would now like to hand the conference back to the management for their closing comments. Thank you, and over to you all.
Yes. Thank you. Thank you for participating in Q1 FY '24 conference call of Ipca. Thank you all the participants. Thank you.
Thank you. On behalf of DAM Capital Advisors Limited, we conclude today's conference. Thank you for joining. You may now disconnect your lines.