Marksans Pharma Ltd
NSE:MARKSANS
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Estee Lauder Companies Inc
NYSE:EL
|
Consumer products
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Church & Dwight Co Inc
NYSE:CHD
|
Consumer products
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
American Express Co
NYSE:AXP
|
Financial Services
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Target Corp
NYSE:TGT
|
Retail
|
| US |
|
Walt Disney Co
NYSE:DIS
|
Media
|
| US |
|
Mueller Industries Inc
NYSE:MLI
|
Machinery
|
| US |
|
PayPal Holdings Inc
NASDAQ:PYPL
|
Technology
|
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 |
132.95
318.35
|
| 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.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Estee Lauder Companies Inc
NYSE:EL
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Church & Dwight Co Inc
NYSE:CHD
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
American Express Co
NYSE:AXP
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Target Corp
NYSE:TGT
|
US |
|
|
Walt Disney Co
NYSE:DIS
|
US |
|
|
Mueller Industries Inc
NYSE:MLI
|
US |
|
|
PayPal Holdings Inc
NASDAQ:PYPL
|
US |
This alert will be permanently deleted.
Marksans Pharma Ltd
Earnings Call Analysis
Q3-2024 Analysis
Marksans Pharma Ltd
Marksans Pharma's performance last quarter is a testament to the company's strategic initiatives and operational proficiency. With a commendable 22% year-on-year increase in revenue, driven largely by market expansion and the introduction of new products, the company has demonstrated its ability to navigate the complex pharmaceutical landscape. Furthermore, a notable rise in EBITDA margin to 22.7% for the third quarter, fueled by operating leverage gains, cost optimization efforts, and a welcomed reduction in raw material costs, underlines effective management execution. These factors, combined with a net operating cash flow of INR 169 crores across nine months, highlight the strengthened financial backbone of Marksans Pharma.
The company's infrastructure is scaling up robustly with the new Teva plant acquisition. Their phased approach targets an impressive annual production capacity of over 3.6 billion units in the near term and aspires to exceed 6 billion tablets per annum by the end of next financial year. This strategic investment is designed to meet growing demand across various regions, emphasizing Marksans Pharma's commitment to long-term growth and market presence enhancement.
Marksans Pharma shows dedication to innovation and self-reliance with the initiation of their first Drug Master File (DMF), planning a second filing within the same quarter. This move not only strengthens their product pipeline but also marks a strategic leap towards backward integration, ensuring greater control over their manufacturing processes and cost efficiencies.
The third quarter of FY '24 saw the company's operating revenue rise to INR 586 crores, up by a significant 22% from last year. This growth encompasses notable expansions across major markets, including an 18% increase in the U.S. and North America, and a remarkable 34% growth in the UK and EU markets. The gains are largely attributed to new product rollouts and growing market shares in these regions. The gross profit mirrored these upward trends, ascending by 30.4% year-on-year, thereby propelling the gross margin up by 336 basis points to 53.5%. For the same quarter, EBITDA reached INR 133 crores, showcasing the fruitful outcome of cost reduction and optimization strategies.
Profit after tax registered at INR 83 crores, with an annual surge of 33.2% and a marginal quarterly dip due to foreign exchange provisions impacting other income. Despite this slight quarter-on-quarter decrease, the earnings per share (EPS) for the nine months stood at an encouraging INR 5.2. The cumulative nine-month period further underscores the company's strong financial health, revealing an 18.4% revenue growth to INR 1,617 crores and an increased EBITDA margin of 21.6%, reflecting a superior value generation for shareholders.
Strategic investments amounting to INR 160.6 crores were judiciously directed towards scaling manufacturing capabilities, particularly at the newly integrated Teva plant, setting the stage for future revenue streams. The company evidently values innovation, as evidenced by its R&D expenditure of INR 29.4 crores or 1.8% of sales. Remaining debt-free with a cash reserve of INR 688 crores as of the end of December 2023, Marksans Pharma exemplifies a financially robust entity equipped with substantial liquidity to pursue further growth initiatives.
Management's forward-looking statements articulate a vision that extends beyond the immediate financial year. While investments in the Teva plant will continue into the next fiscal period, the company has already surpassed its initial goal of INR 2,000 crores in revenue, now targeting an ambitious INR 3,000 crores within the following two years. This reflects a confident and calculated roadmap, laying the foundations for consistent and sustainable enterprise expansion.
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to Marksans Pharma 3Q FY '24 Conference Call hosted by Elara Securities Private Limited. [Operator Instructions]. Please note that this conference is being recorded.
I now hand the conference over to Mr. Bino Pathiparampil from Elara Securities Private Limited. Thank you, and over to you, sir.
All right. Thank you, Aditya. Very good afternoon to all of you. This is Dr. Bino Pathiparampil from Elara Securities, I welcome you all to the quarter 3 FY '24 Earnings Conference Call of Marksans Pharma.
Today we have with us on the call, Mark Saldanha, Founder and Managing Director; and Jitendra Sharma, Chief Financial Officer. I hand over the call to the management for opening remarks. After that, we will have a Q&A session.
Over to you, Mark and Jitendra.
Thank you, Dr. Bino. Welcome, everyone, and thank you for joining us in our Q3 and 9-month FY '24 Earnings Conference Call. We appreciate your continuous interest and support for the company.
I'm delighted to announce yet another robust quarter, reflecting our dedication to consistently deliver superior performance and create value for all our stakeholders.
Our revenue expanded by 22% year-on-year, primarily driven by the market share expansion and new product launches. We saw consistent improvement in margin profile with an EBITDA margin of 22.7% in Q3, led by operating leverage, consistent cost optimization initiatives, and a reduction in raw material costs. Our net operating cash flow for 9 months stood at INR 169 crores, driven by an improved EBITDA margin of better collection.
Moving on to operational environment. During the quarter, we saw improved volume growth across all our key markets, especially from the U.S. A moderate price erosion of our Rx products were observed. Reduction in a few key raw materials prices continued compared to the last year, thereby improving our gross margin. However, we experienced a surge in freight expenses due to recent sea route disruptions. We are taking initiatives to ensure that our supply chain remains intact and on track.
Talking about our strategic initiatives. The infrastructure expansion from our newly acquired Teva plant is in progress and going at a good pace. We basically had broken this into 2 phases.
Phase I was to try to achieve over 3.6 billion units per annum. And we believe by next month, March, we will be trending towards that objective. Obviously, Phase II, we anticipate towards the middle or end of our next financial year, where we will be targeting over 6 billion tablets per annum. We expect the scale capacity from Teva, our new facility to cater to the incremental opportunities we see in different geographies.
Building on our momentum and in continuation to our last conference call discussion, we have initiated the filing of our first DMF, and we plan to file a second DMF within this quarter, which is a step towards backward integration as we continue to strengthen our pipeline.
Looking ahead, our priorities remain focused on driving sustainable growth, maintaining balance sheet discipline and pursuing strategic opportunities that align with our long-term vision.
With this, I'd like to turn it over to Jitendra, who will update you on the financials and then we can start our Q&A.
Thank you, sir. For Q3 of FY '24, our operating revenue was at INR 586 crores, an increase of 22% compared to INR 479 crores in the same quarter last year. The U.S. and North America was at INR 257 crores, representing an 18% increase year-on-year. U.K. and EU formulation markets grew by 34% year-on-year to INR 251 crores.
On account of new launches and incremental market share. Australia and New Zealand formulation market recorded revenue of INR 48.6 crores. And the rest of the world recorded sales of INR 29.1 crores in Q3 of FY '24.
Gross profit was at INR 313 crores, up 30.4% year-on-year. Gross margin increased by 336 basis points, from 50.1% to 53.5% in Q3 of FY '24.
EBITDA for the quarter was at INR 133 crores, an increase of 73.6% year-on-year and an increase of 16.8% on a quarter-on-quarter basis. EBITDA margin for the quarter was at 22.7%. Improvements in margin is majorly led by reduction in raw material prices compared to last year, operating leverage and cost optimization initiatives.
Profit after tax was at INR 83 crores, an increase of 33.2% year-on-year and decrease of 1.1% on a quarter-on-quarter basis. The decrease in quarter-on-quarter PAT is primarily due to decrease in other income, which is led by the provision of M-to-M loss in foreign exchange.
The EPS for the quarter was at INR 1.84. Talking about 9 months financial performance for the 9 months of FY '24, our operating revenue was at INR 1,670 (sic) [ 1,617 ] crores an increase of 18.4% compared with INR 1,366 crores in the same period last year.
The U.S. and North America was at INR 673 crores representing 15.8% increase year-on-year basis. U.K. and EU formulation market grew by 26.5% year-on-year to INR 710 crores. Australia and New Zealand formulation market recorded revenue of INR 155 crores, an increase of 6.4%. The rest of the world recorded sales of INR 78.5 crores in the 9 months of FY '24.
The gross profit for the period was INR 849 crores, up 23.3% year-on-year. Gross margin increased by 209 basis points from 50.4% to 52.5% in 9 months of FY '24.
EBITDA for the period was at INR 348.9 crores, an increase of 51.9% year-on-year. EBITDA margins stood at 21.6%. Profit after tax was at INR 237.3 crores compared to INR 182.6 crores in 9 months of FY '23, a growth of 29.9%.
Growth is attributed to improved EBITDA. However, there is an increase in tax rate in U.K. from 19% last year to 25% in the current year. EPS for the 9 months was at INR 5.2.
In 9 months of FY '24, the net cash from operation is at INR 169 crores, and the free cash flow is at INR 8.4 crores. The CapEx incurred during the period was INR 160.6 crores.
The investment is in line with our plans for scaling the acquired manufacturing units from Teva Pharma in Goa, which will drive our future growth. We spent INR 29.4 crores in R&D which amounts to 1.8% of the sales. We continue to remain debt free and had a total of INR 688 crores of cash as of 31 December 2023.
With this, I would like to open the floor to question and answers. Thank you very much.
[Operator Instructions]. Our first question is from the line of Viraj from MoneyGrow India.
Mark, Jitendra congratulations. Congratulations. Fantastic outcome for the quarter. I had a question regarding the SBA facility status of the Goa plant based on the last observation. And also whether all investments for the Teva plants are now complete.
So obviously, based on our last observation, which we already have our EIR status. We received the EIR report on that. So that audit was closed. And with regards to the CapEx for Teva, we have not completed the full CapEx yet, and it will spill over to next financial year, the CapEx.
Okay. My second question is it looks like you will do INR 2,200-odd crores of top line for FY '24. Can you guide us towards, what is likely to be the targeted top line for FY '25 given ramp-up -- full ramp-up of Teva Plant?
So I would like to give a slightly longer outlook than just 12 months. But obviously, our first target was to cross INR 2,000 crores, which you rightly said we are trending way above that target of INR 2,000 crores.
We have set out a target to come very close to the next -- our next target is INR 3,000 crores within the next 2 years. So we are working towards trying to achieve that objective.
Our next question is from the line of Akshay from Green Portfolio. Please go ahead.
Hello, Akshay, sir? The line from Akshay sir has been disconnected. Our next question is from the line of Harshit Sharma from MNP Investments.
Congratulations on a good set of results for the quarter, sir. My question is what is the likely utilization of net cash? And how much is expected to be spent for R&D and CapEx in the coming years?
So the -- I think our R&D will trend slightly -- will probably touch 2 and probably cross slightly over 2. In CapEx, obviously, we -- like I mentioned, we have to complete the CapEx of what we spoke of INR 200-odd crores for the Teva plant, and we have not yet infused that part of the CapEx to complete our projects. But we have achieved our first objective.
And by March, like I said, we should be -- we should be able to achieve nearly very close to 300 million tablets, which is, with the run rate of that is nearly 3.6 billion tablets per annum. So that was our first target that we had set out when we acquired the plant and we started infusing the CapEx for that plant.
So we still have a fair amount of CapEx to be done in our Teva Plant to get it to the second phase. With regards to your first question...
Yes, basically the utilization of cash. So see definitely we are looking at expanding our presence geographically. We are looking at spreading our business in EU. So we have earmarked some amount for that and definitely, the CapEx will continue in the next year also. So far as Teva manufacturing facility is concerned, we do plan to have some CapEx in our U.S. and U.K. facilities also. So broadly, the amount will be utilized in growth-related avenues in coming years.
My other question is on the top line with respect to the U.S. region. Just wanted to understand the drivers for the double-digit increase in sale from the U.S. region. So if you could just help us with that sir?
Yes. Sorry, you wanted to know about the U.S. sales?
So I just wanted to understand the drivers behind the double-digit increase seen from the U.S. region in terms of sales. So, yes.
Well, it's obviously some new product launches. It is getting a bigger market share, penetrating into the market, getting some new clients on board. So our product portfolio, besides expanding our product portfolio, we are also getting traction onto our core strength of products, which historically are maturing and growing and getting bigger market share in some retailers. So that's our growth driver in the U.S.
Our U.S. market is huge. This is just the tip of the iceberg. So I think double digits on a low base is the least we could do.
Our next question is from the line of Tarang Agrawal from Old Bridge Asset Management. Please go ahead.
Good evening, am I audible?
Yes, you're audible.
Congrats on extremely strong set of number. Just a couple of questions. One, the gross margin levels that we're seeing in Q3, in your view, are they sustainable? Or there are some one-off advantages that you have right now?
Second, if I look at the 9 months that have gone by, Europe, on a constant currency basis has done exceedingly well. So is there any specific that's working in your favor in U.K.? Or it's just a function of market dynamics?
Well in U.K., basically, it's a product portfolio, product mix and new product launches, which are driving growth of [indiscernible] out there. It's a mature for us. So obviously, with new product launches, it's relatively easier for us to get market share and market penetration into various accounts.
In the gross numbers, I do believe the sustainability is a huge possibility. I do believe there is a one-off, so I do believe we should be able to maintain that gross margin part of it.
Okay. And sorry to bring it up again, but I mean, what is the CapEx number that we are looking at [indiscernible] FY '24 and fast forwarding to FY '25?
Tarang, this is Jitendra here. We have invested INR 160 crores already in the first 9 months. And I think by the end of March, we should be crossing INR 200 crores in terms of CapEx. And this includes the Teva acquisition costs also.
We are doing a lot of CapEx in our other manufacturing facilities also. So I think over a period of 2 years, current year and next year, our overall CapEx will be between INR 250 crores to INR 300 crores.
You mean FY '24 and FY '25 together, correct?
Yes.
Our next question is from the line of Nitin Agrawal from DAM Capital.
Mark, just so going back to your same -- earlier question, around what has really worked for us in Europe this year. Is it largely new product launches or just increased market shares? Or something -- we have almost like a 30% CAGR growth, 30% Y-o-Y growth in Europe, in the U.K. this quarter -- this year? And how do you see -- are we growing from this base in the U.K. going forward?
So I see a growth being quite robust, Nitin. It will continue being robust in the U.K. for the next couple of years. Again, sheer strength of our product pipeline and product launches that have been planned. We've been filing them for quite some time. So we've been investing on all the filings, everything of that stuff. So obviously, product launches are happening on a quarter-to-quarter basis, and we are able to penetrate.
But it's also the product mix, which is basically also giving that growth in terms of that specific market. And products that were not able to penetrate into certain accounts have been actually broken into those accounts.
So it's a bit of [indiscernible] over time, you mature to the level where your service defines your capabilities and you get better traction into certain accounts with a larger product portfolio than historically what you are holding.
So it's a combination of both, which is seeing us gain that market share as well as the revenue generation and the percentage of growth. I do believe in the coming years also, we should be able to grow at a very healthy pace, double digits in U.K. because of, again, sheer strength of product pipeline.
Mark, on the product pipeline aspect, I mean the products that we are launching now, if you can qualitatively give us a sense on -- I mean what is the qualitatively -- I mean, are these guys -- are these more profitable products, more complex products? Any nature, difference in the nature of products that you're looking to file or launch in the coming years versus what you've done in the past?
Yes. I mean these products are a little niche products or high-value products, great bottom lines. They are not -- they will not be driving the top line. But as a basket collectively, the top line will basically -- will go. We are planning only 34 product -- new filings in the next 2 years in U.K. itself. And these are all products where you will see amazing bottom line to be generated.
So you will see while the cycle -- the life cycle of every product is limited, while you may see a price erosion on A product, you will see gains on a B product or on a new product that has just got approved based on -- and we have to foresee that. And hence, we have gone into molecules which can basically -- is more focused on bottom line than top line.
But as a basket, I do believe the top line will grow because of the sheer number of products approvals that we're expecting next year and the year after that.
And Mark, if you could just remind us what is the OTC versus prescription split in U.K. and in the U.S. right now?
So in U.K., our split spread is around 60-40. So 60 is OTC and 40 is Rx. And our U.S. is about 75-25.
Okay. And in the U.S., I mean, earlier, we were very strong in pain and cold and cough. Are there any segments where we're looking to incrementally add meaningfully to our portfolio on the OTC side in the U.S.?
Presently it is on to these -- it is basically digestives that we are focusing a lot on. So pain, we are quite -- we are exhaustively covering the pain. So we are launching a few products in the pain too. But our portfolio expansion is happening more on digestive and cough and cold and allergy. So these are the 3 segments we are still focusing on. And parallelly, obviously, we are working on the prescription front, which is almost slightly different trajectory. But overall, as you can see, the ratio, we are more tilted towards OTC versus prescription.
And in this OTC market, three therapy that you're targeting on a going-forward basis. I mean, how much more space do you have to cover from -- in terms of reaching your target addressable market?
I think we've got a long way for that. So the market size is huge. And I think we are -- it's just a tip of the iceberg for us. And so we are working towards taking larger market share. And we are getting there. We are very confident, we are getting there.
And if I can take one last one, Mark, on the OTC side in the U.S., I mean, if you can give us some sense on if there have been any meaningful changes in the competitive dynamics in that market? I mean some of the pricing pressure, which you've seen in the prescription side has eased out. I mean how high has the dynamics -- competitive dynamics, been on the OTC side of the business in U.S. in particular?
It's quite a mature product pipeline. So technically, it does not go through that volatility that you see in the Rx front where, obviously, Rx is highly volatile based on demand and supply situation. The OTC is more contract driven for a longer gestation and longer period of time. So we don't experience that. That said and done, we're not immune to it, but we don't experience that type of volatility in the OTC at least.
And in terms of competitive dynamics, have you seen...
No, we have not seen any changes out there.
Our next question is from the line of [ Ridhi Agarwal ] from [indiscernible] Asian Capital.
Congratulations on a great set of numbers sir. So I wanted to understand, how was the price erosion for Q3? And how is the current market scenario shaping?
So price erosion, like I mentioned, in our starting discussion, we have seen some price erosion in the Rx front of it and that's sheer, like I said, the dynamics from the nature of the beast, where demand and supply situation arises.
So we are seeing the Rx having price erosion. But overall, there has been a bit of stability on the overall basket. So the dynamics is still very healthy. And obviously, we are expecting U.S. to be our growth driver in the coming couple of years.
Okay. I also wanted to understand what could be the incremental revenue potential from the acquired Teva Pharma unit in FY '25 and FY '26 primarily?
So FY '25 will be obviously much larger because FY' 24, 3/4 of the year -- I mean, pretty much a year has really come to an end and we have still to get -- we have still to hit our objectives. So I think we would see a decent amount of revenue coming in FY '25.
I think we are looking at very close to INR 600-odd crores of revenue -- additional revenue coming in from that facility.
Our next question is from the line of Dr. Bino from Elara Securities Private Limited.
A couple of them. Mark, Australia growth was a little muted this quarter. What's happened there?
Yes, it is muted. And it's just the timing of approvals and market dynamics out there. So we do plan to be on track in the next financial year. But this year has been a bit subdued where again, it's just been -- it's just coming out of COVID and you have a distribution channel, which is pretty much flooded. So it's just something of that stuff that the season, in comparison to the historic seasons were not as inducive, so that's where they're pretty much flat or subdued, as you would say.
But I believe they'll be back in growth. It is a very small market. So growing is relatively always going to be in single digits where the Australian market is concerned.
Okay. And coming to EBITDA margins, we have seen a huge expansion, which a lot of that, I believe, has come from operating leverage as well. Now that the Teva plant is also started and other plants also have ramped up, is the operating leverage kind of reaching its maximum? Or do we have further room to expand margins out of your operating leverage?
Operating leverage, obviously, like you rightly said that Teva is not even started to break even per se onto that. So once we start in next financial year, with the revenue. there's a very visible revenue generation will happen from the Teva plant, and I think operating leases will get better.
Again, so I do believe as and when the plant reaches an X amount of production or output, you will see that operating leverage kicking in much better than what we have seen historically.
But for the rest of the plants that we have, I think we are seeing a good amount of operating leverage kicking out of there.
Understood. And finally, Jitendra, we have seen a step up in depreciation -- depreciation-amortization charges over the last 2 quarters. Is it primarily because of the Teva plant? And is this the new base or do you think it will further go up?
Yes. It will be a new base now. So we have started depreciating Teva plant also. So that has resulted in incremental depreciation charge. We have also taken one new -- like warehouse on lease in U.S. So there also some additional depreciation charges coming. So I think this INR 22 crores will become a kind of benchmark for coming quarters also. These amounts will remain.
Our next question is from the line of [ Manoj Matthew ] from Business.
Hello. Mark, congratulations. Jitendra, congratulations. The freight rates have gone up, understood. But this is also the time when rates are negotiated to your customers for the next year. I mean, you're end customer. Am I right? Question #1.
Question #2, I think the -- as per your previous comments, you said that the fourth quarter of this year will be the best -- will give the maximum results of this year in the Teva plant. So we can expect a better turnover in the fourth quarter.
And can you also -- correct me if I heard that you have taken a new store -- I mean cold store space in US, just added a new cold store space in US recently. Is that correct?
Yes, that's correct.
Okay. So the first question, can you answer the first question? That means the freight rates have gone up, but this is also a season of negotiating new contracts with your end customers, January to April.
Yes. So basically, contracts, obviously, no one predicts -- no one predicted this freight to go up overnight. And some of these contracts that are being negotiated, they don't happen in on a calendar year in the month of Jan. Some of them have concluded in December, November, some are happening in Feb. And the impact is not yet seen because this freight disruption is happening is it's quite fluid to put it right way.
So people anticipate that this will go off, people anticipate that it will come down. So lot of -- nobody is giving a lot of weightage to it. And obviously, we are not seeing the freight prices going up to historic highs that we saw maybe a year back. So it has gone up. It has probably doubled than what it had come down. It had come around way below historic lows. So it has gone up from that angle.
But we do anticipate that it will get better , it's not probably going to get worse. Even the Maersk's, even the Maersk Line CEO, was on the news on CNN, and he has also said that the prices are not going to go up. And he'll be surprised that if we can maintain those prices, and it may even start tapering down.
So again, once a bit of normalcy comes in, and even if it does not come in, I think this new routing that has just started -- if it is successful, it will be slightly higher, but it will not be -- we won't see those hikes. Hopefully, we won't see those hikes that were historic what the industry witnessed.
Mark, the next question is, from the Teva plant, can we expect INR 1000 crores turnover for FY '25? Approx?
You are saying INR 1,000 crores turnover?
Yes, from the Teva plant alone?
Yes, that will -- we'll probably see it in '26, '27 INR 1000 crores but we would, like I said, I think we are aiming for INR 600-odd crores next year, in next financial year. But INR 1000 cores -- so we've 2 phases that we are -- like I mentioned, we are talking of I think in March, we'll be hitting an all-time high, but that's not a great achievement compared to what historically Teva was doing.
But in terms of numbers, it shows that we are moving in the forward direction and we are getting closer to objectives.
So for us to hit INR 1,000 crores. Obviously, we need to be doing 6-plus billion tablets, maybe 6 billion or 7 billion tablets per annum. We are still 1 year, 1.5 years away from that.
Okay. And Mark, another question to you is, are we still suppliers of Teva? Are we going to continue supply to Teva in FY '25? Or do we end it with FY '24.
I think we won't be continuing moving forward in FY '25. But again, our contract basically expires, I think, in April of '24. So we have on our plans. Right now, we have not shown any plans, although they are looking for an extension, but we are not inclined to accept that extension because we have our own objectives to achieve.
Okay. Okay. And you said you are going in for CapEx in your other plants also. So will that CapEx enhance more productivity? Or is it -- when you -- renewal of CapEx to maintain the machines?
Well, we always put CapEx, one, is to maintain CGMP, the plant status. But we also put CapEx for optimization to get better output out. To meet our growing demand in each of countries, we need to invest money to, like I said, to automize and to basically get a bit more efficient performance from the line to hit objectives out there. So this CapEx into every plant is going to be an ongoing basis.
But today, our maximum CapEx has been drawn towards Teva to hit INR 600 million plus -- [indiscernible] tablets in the quarter.
So you've added a new cold store in U.S. recently?
Yes, I mean, a warehouse basically.
Our next question is from the line of Hiral from Kalpvruksh Capital. Please go ahead.
Mark and Jitendra congratulations for the great set of numbers and consistency which I am seeing for the last 2 years, which we are maintaining quarter-on-quarter basis. I had a couple of questions. Some of them have already answered earlier. Just further couple of clarity, under Red Sea costing perspective, as you mentioned that it has, in some of the contracts, it has already been covered. But just to understand the impact on the margin perspective, will it be a kind of 50 or 100 basis point impact on the margin or even less than that?
It will be very less than that. It's very less than that. And it's not covered in any contracts because this is something which is war related or something which is beyond everyone's control. So I mean, it is there today, it may not be there tomorrow. So I think -- but we don't anticipate that impact like what we historically saw maybe a year back or two years back. We don't anticipate that.
Great. And on the PAT margin, where we got some impact due to ForEx. I think that was the one of a kind, for that specific quarter or it can spill over to 1 or 2 more quarters?
No, that is one-off only. It won't to -- over to -- yes, see it is difficult to comment. It is foreign exchange at the end of the day. It may keep fluctuating, but we don't think it will be -- it is -- this is a one-off kind of number.
Great. Just one thing, as an investor would like to mention that, if possible, we would like to attend the plant visit for the Goa plant when it's ready for FY '24.
Okay, we'll do.
Our next question is from the line of Akshay from Green Portfolio.
So my question was related to new product launches and whether they were in the pain management segment or any other segments?
They are in all the segments that -- some of them are in -- I mean, mainly in digestive, mainly in cold, very few in pain, some in prescription, and other in anti-depressant categories. So it's a wide portfolio. It's a large portfolio.
Our next question is from the line of Viraj from MoneyGrow India.
Mark, Viraj here again. You had mentioned about a year ago regarding free cash flow allocation. saying 1/3 you had a board policy, 1/3 to be allocated between dividends and buybacks. I mean, assuming you haven't done a buyback or you may not do a buyback, can we at least see a higher dividend this year?
Again, we have to take a call whether there may be a buyback or a dividend or it's going to be split into this. But -- like I said, 25% of our free cash flow will be divided into dividend. It may be fully dividend, it maybe 3/4 dividends, 25% buyback, or maybe 100% dividend. Or we have to just take a call on that.
Okay. And any update on your new acquisition and where you are on that?
Well, it's still in progress, and we are still in dialogue, but nothing concrete. So we would not -- would not want to mention anything much today because we still are far away from pen to paper.
Our next question is from the line of [ Shanmugam ], an individual investor.
Yes. Am I audible?
Yes. You're audible.
I have a couple of questions. Sir, first if I touch upon our EBITDA I can't understand from some of the earlier questions. Is it possible to split that 2% improvement from raw material and operating levels?
I could not get you. It is all jarring.
Your voice is not clear.
Hello. Am I audible?
Yes, you're audible.
I'll repeat my question, sir. It's regarding EBITDA. EBITDA question. There is an improvement -- good improvement from 21% to 23%. Can you split that into how much comes from raw material reduction and how much from operating leverage?
The substantial part of it has come from the raw material side of it. So I can say almost 2/3 is coming from the raw material side of it, and the balance is coming from the operating leverage.
Great. So I hope that raw material reduction is going to have an impact positively. Considering the strike loss increment. Am I right, sir?
Sorry I can't understand anything of that. We can get bits and pieces, but we can't understand the question.
I will repeat, sir. I hope that raw material reduction will continue in the coming quarters?
We all hope so. As we always continue for better pricing. We're always seeking for better pricing. And it is looking much more stable and there may be a possibility, but it's too early to say that.
Thank you, sir and finally, if you look at the consistency for the past 2, 3 years, the final quarter will be a challenged one. The revenue will be flat more or less. So, not considering Teva Plant, do we see growth in this -- final quarter in this year sir?
Yes. we are going. So I think the numbers speak for ourselves. So we are growing and will continue to grow. So if I look at it from a long-term outlook more than on a daily basis.
So the Teva plant has been commenced or it will commence in this quarter.
No, no, it has commenced, but the growth of volume -- the volume growth has yet to translate. And we'll probably see March being the first month where we hit -- we'll come close to hitting our first phase of objectives. And then obviously, we have to keep pushing towards reaching our main objectives.
So since it's a new plant, do we see any impact on EBITDA sir?
These have all been factored in our performance presently. So I don't see that much of a difference.
Last, if I touch upon that one question on other income. I understand that there is a entry regarding the ForEx, [indiscernible] entry. Do we see any reverse in going forward? It's onetime, it's permanent?
See, we believe this is -- this should be a onetime kind of situation here.
One time? Is it going to be reversal, sir? Or is it a permanent entry?
It depends on the foreign exchange levels, which will be there now as on 31st March. So difficult to comment. But I don't see any incremental mark-to-market. Let's see what happens is as on 31st March. So it will get revalued again as on 31st March. We will come to know at that time only [indiscernible], but then in Q3, the MTM loss should be a one-off kind of thing.
We don't see that kind of volatility in foreign exchange. See, the GBP, basically, it has come from the GBP side, where in between September to December, GBP fluctuated between INR 101 to INR 106. Now it has become stabilized between INR 104 and INR 105. So we don't see any more volatility here. But anyway, it will depend on the levels which are there at 31st of March.
[Operator Instructions]. Our next question is from the line of Anant, an individual investor.
Mark, congratulations on a good set of numbers. This question has been answered probably, but I want a slightly different perspective on this. Was -- my understanding of the Teva facility was, a total of INR 200 crores will be spent on this. This includes the upfront payment, the acquisition cost and the upgradation to basically double the capacity from $8 billion to $15 billion, $16 billion. Now out of this INR 200 crore INR 160 has been spent.
So am I right in saying that we need to spend additional INR 40 crores to reach that capacity of double?
No. So I'll just like to clarify that one. So INR 160 crores has been spent for globally -- for all our plants. It's not spent on Teva Plant. So I think our Teva acquisition plant -- for the Teva, we must have spent around INR 85 crores to INR 90 crores.
Right.
So we still have some amount of CapEx to be spent out there, number one. Number two, I don't think I've ever mentioned 15 billion tablets because that's not possible from -- overall, okay. But from our single plant, from Teva plant, it's not going to happen 16 billion. Yes. 8 billion tablets is what we are targeting from the Teva Plant. And today, like I mentioned in the opening statement that we should be trending at -- from March, we should be trending on our first phase to trending at 3.6 billion. And hopefully, next financial year, we will get closer to the 8 billion target -- by the end of next year.
Thanks for the clarification, Mark. Just to follow up on this. The product coming out of the Teva facility, will this command a similar level of premium and margins compared to our existing facility? Are these approved for sale in U.S. or no?
Yes, it will. Because it's again -- we supply all to regulated markets. So it will have the same premium that -- but it's important to understand that you will see a better -- it's not about -- obviously, rooming numbers is very critical because with numbers, you have operating leverage kicking in. So basically, we are working hard towards -- trying to do -- trying to hit those objectives as fast as possible.
Right. And one last question. Can you give some color regarding our overall margins in -- on our business in U.S. compared to the U.K.?
U.K. is a much more mature market in terms of -- we've been in the U.K. market since 2008. So the operating leverage, the amount of product portfolio is huge. The operating leverage is already there. Market penetration is there. For us, U.S. market is relatively very new we've been there, I mean actively from 2017, although we acquired the company towards mid and late of 2015. But we've actively been promoting our products only from 2017.
So it's not even 5 years. So we've got a long way to go. And as and when our revenue keeps rising, the operating leverage will kick in and profitability will be much better and visible during the coming years. As you can see, this year is better than the previous year and next year will be better than this year.
Our next question is from the line of Nirali Shah from Ashika Stock Broking.
Majority of my questions have been answered, but just a quick question on, we were venturing into complex molecules like adult dual action. So if can you give some color on that, how are we progressing on that? Or do we expect a meaningful contribution or maybe some color on the margin? So what kind of expectations can we have from these complex molecules?
So dual action is only one of the many molecules that we filed in. We are still expecting many more approvals to come in on similar grounds, which are more complex in terms of extended release or bi-layered or MOPS technology type of molecule. So we do see those getting -- cumulatively, it will be much better than all the products come in.
From a dual action, we have not seen any price erosion per se, but we are working towards getting contracts on growing these molecules. So it's too early. We've just been not even a year with this molecule in the market right now.
Understood. And one book-keeping question. Last year, we had an effective tax rate of around 21%. And this year, I guess, we are looking at around 27% or 26%. So going forward, do we expect it to be in the same range? 25% 26%?
Yes, it will remain at 25% because the tax rates in the U.K. has gone up from 19% to 25%. So now I think going forward, our effective tax rate should be in the range of 24%, 25%.
Our next question is from the line of Rohan from Prad Capital.
Congrats on a good set of numbers. So my question is on Teva. You said that next year we are targeting around INR 600 crores of revenue. Is that incremental revenue on our base or is that -- that we are applying on from other sources and we would give that to the Teva facility?
Yes. So Rohan, this will be mainly incremental. It may not be fully implemented, but mainly incremental growth that will come in from there. Because obviously, it will cater to a larger product basket and various geographies. So I would assume it will be mainly incremental growth coming from there.
Okay. In terms of utilizing that facility. Our facility would come up say March, April. But a lot of your contracts are signed end of the year for the next year. So can you expect the ramp up immediately as the facility is operational or we'll have to wait for some time and sign contracts and really see the utilization in say calendar year '25?
Again, a very good question, but we will basically -- see, we can't take contracts without having that capacity in hand. So when we are taking contracts right now, we are taking contracts worth -- you can see a visibility of 3.6 billion units coming in. When we scale it up to 8 billion in 600 million or 8 billion trending to 8 billion units. We have to obviously expand and get contracts in place support that.
There will be some spillover in terms of optimization and that's why we are not saying that we will do INR 1,000 crores -- INR 800 crores or INR 1,000 crores next year, we don't believe in the following year, we will be hitting those objectives.
So the contract you've already signed, you assume this capacity to come up and based on that you sign contracts. So you already have that visibility. Is that understanding correct?
Yes, that's understandable. That's accurate. And basically, we only take contracts what we can deliver. We don't to [indiscernible].
[Operator Instructions]. And there are no further questions from the participants. And now I hand the conference over to management for the closing comments.
I'd like to thank all of you all for participating in this call. Have a great evening and be safe. Thank you very much.
Thank you very much.
On behalf of Elara Securities Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.