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Solara Active Pharma Sciences Ltd
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Solara Active Pharma Sciences Earnings Conference Call for the Second Quarter and Half Year Ended Financial Year 2021. Today, we have with us Mr. Bharath Sesha, Solara's MD and CEO; Mr. Hariharan, Executive Director of Finance; and Mr. Subhash Anand, CFO, to share the highlights of the business and financials for the quarter. I hope you've gone through our results release and the quarterly investor presentation, which have been uploaded on our website as well as stock exchange website. The transcript of this call will be available in a week's time on the company's website. Please note that today's discussion may be forward-looking in nature and must be viewed in relation to the risk pertaining to our business. After the end of this call, in case you have any further questions, please feel free to reach out the investor relations team. I now hand over the call to Bharath to make the opening remarks. Bharath?
Thank you so much, Abhishek. Good afternoon, everyone. Thank you for joining this call today. Many of us are learning to live in the new normal. And on behalf of the entire team here at Solara, I would like to wish good health to all of you on your near and dear ones. I'm very proud and delighted to share that the momentum that we have generated over the last few months continues unabated. And Solara has delivered its best-ever quarterly financial performance. The macros, which I have been alluding to over the last couple of quarterly calls, namely customers de-risking their supply chains and thereby providing immense opportunities for companies like Solara, continues to be strong and widespread. Our employees continue to do a splendid job of balancing health and wellness with our commitment to customers and to society at large. I want to call out some of the highlights of the quarter that just went by. We've delivered the highest ever quarterly EBITDA, EBITDA percentage and PAT in the history of the company. Our EBITDA stands at INR 1,006 million at a margin -- EBITDA margin of 24.9%, leading to a PAT of INR 567 million. Our core strategy which is led by strong customer partnerships, a very diverse product mix, engaged in committed employees and a world-class compliance framework, is working really, really well. We see continued positive demand for our products, and we are continuously gaining share of wallet at our existing customers. The Solara differentiation is paying off. And we expect this will only deepen and strengthen. Let me talk about some of the underlying performance drivers to the results I just shared with you. We see a continued strong and sustained demand for our base products. And as I said earlier, we continue to increase our share of wallet with our key customers. Our portfolio maximization at all our facilities in terms of allocating capacity to high-margin and in-demand products is also a good driver behind the performance. Our regulated market sales continues to be strong and growing, we have a higher share of wallet in many of our customers in the regulated markets than we had last quarter, and we continue to win new business. Our CIP delivery is going from strength to strength. The efficiency machine that we have built at Solara continues to deliver excellent cost improvements. We've also significantly increased our speed of market extensions. In the quarter, we filed 10 new extensions, mainly in the Asia Pacific region. We've also filed 2 new DMS in the U.S. market, and we are on track to increase the filing speed in the second half of this year. Let me also share with you a couple of updates on our CRAMS business. As I said earlier, this is an incubation business for us, and we see this tracking really well to plan. In the quarter, we have added multiple new customers, including some very large pharma companies. The diversity in our customer base for our CRAMS business, our continued traction with new customers, both augur really well for our future. Let me also dwell on our -- a couple of minutes on our buyback facility update. I want to reemphasize that despite the challenges of COVID, we have built a multipurpose facility, which is state of the art at Vizag in record time. The site is coming along as planned, we've completed validation activities, and we started commercial activities this quarter, that is quarter 3, as planned. We will see revenue from the site in the second half, and things are tracking well with regards to customer commitments and securing business at the site. Vizag is well on track to be our flagship facility, given that we have room there for future expansions. Let me also quickly update you on the latest status with regards to the Cuddalore inspection. As you are aware, the U.S. FDA had classified our facility at Cuddalore as OAI. Since then, we have submitted all [indiscernible] on time and of high-quality in consultation with internal and external experts. I want to reemphasize that Solara is committed to the highest level of quality and compliance and quality systems that we have are robust. The observations do not have any impact on other APIs between manufacture or supply to other markets or to the U.S. Let me talk about some of the growth drivers for the second half of the year. Given that we have grown our first half year-on-year around 10%, we expect the following points to help accelerate our growth in the second half of the year.The growth in the second half to be primarily anchored by Vizag coming onstream and contributing significantly. Our base products are also going to see continued momentum, and we see that we will continue to maintain the increased share of wallet that we have gained over the last 6 months. We also see continued traction on new products where the demand remains quite strong. Let me also take a minute to update you on our progress with regards to our strategic agenda. As you can see, our core strategy continues to deliver the financial outcomes, which are trending in the right direction. We have continued to augment our infrastructure and with a view on future growth, we have acquired land joining our Mysore facility, and we have a multiyear plan to upgrade our Mysore facility to world-class quality standards. We are also evaluating investments based on the PLI scheme announced by the government. We continue to develop new technology platforms that will enable Solara to differentiate our offerings in both the generic APIs and in the CRAMS space. And we also continue to scout for the right inorganic place to lead from our API CRAMS growth trajectory. Based on good progress on our strategic objectives and also strong performance in the first half of the year and good visibility of demand in the second half and the ramp-up of VIzag, pleased to increase our revenue growth guidance to 30-plus percent year-on-year and our EBITDA growth guidance to 40-plus percent year-on-year. With that, I would request Hari to share some details on the balance sheet and the key ratios. Thank you.
Thanks, Bharath. As for known financials, our financials rates have continued to improve on back of our good record performance. Further infusion of equity capital of INR 288 crores by a subscription to [indiscernible] from [indiscernible] Investors Promoter Group and TPG was received in quarter 2. The share capital of the company has been increased from 26.8 million shares to 35.8 million cash post [indiscernible] conversion. Our net debt as of 30th September stood at INR 283 crores after adjusting the cash and end up INR 408 crores. While our net debt to EBITDA ratio is comfortable at less than 1, our annualized ROC is on the high teens. We are pleased to note that CRISIL ratings have upgraded with credit ratings some BBB positive to BA- stable. Increase in working capital cycle days we have seen in this quarter due to recent delays of GST and exports incentives receivable from the government authorities due to the cash [indiscernible]. And we hope that the same will be normalized within this Q3 and Q4. With a healthy balance sheet and the further increase of share capital and abundant opportunities, Solara is poised to successfully well do in the future. Thank you so much.
Lisan, we can take the question.
[Operator Instructions] The first question is from the line of Alankar Garude from Macquarie Group.
So congrats on the strong performance and the guidance raise. Firstly, on that itself, if you could talk in detail about what essentially is driving this raise of guidance, both on the top line as well as EBITDA? And then maybe I can check for further questions.
Thank you, Alankar. So as I said, the demand picture that we see in terms of our base products continues to be strong. We have visibility that says that we will see this continued picture for the coming months. That has kind of driven us to do -- increase our guidance when it comes to revenue. On the EBITDA margins level -- EBITDA level, sorry, we continue to see our cost efficiency programs leading benefits. And with the increased leverage we will get from the revenue growth, we expect also EBITDA to be higher than what we had originally guided. Hence, we've increased our guidance on both of these factors, Alankar.
Understood, sir. Sir, so on that, if you could just comment on how sustainable some of these trends are both on the top line as well as margins? And also in that context, if you could comment on our medium-term guidance, the one which we had shared till FY '23. So how will the raised FY '21 guidance reflect as far as the medium-term guidance is concerned?
So we -- our medium-term guidance that we've given was till '21. We will review and give a new guidance for FY '23 in the coming days. And the first question in terms of what do we see driving these factors -- and as I said, we are still confident and we see the picture very clearly in terms of both demand our ability to develop -- I mean, deliver cost efficiency. So that's kind of what is driving this, Alankar.
Okay. And just to -- yes, sorry, go ahead.
Just to add, Bharath, is that it's a sustainable performance, what we see. It's not -- that's what we are [indiscernible].
Absolutely.
Understood. Sir, my second question is, if I look at the other market revenues, it's just about up 3% in the second quarter, just 2% in the first half. And we have a stated strategy of expanding our presence beyond the regulated markets. I know we have increased our pace of filings in the newer market, but broadly, any particular reason which you would like to highlight as far as the slower growth in the first half is concerned?
So we were consciously allocating some of our sales capacities to the regulated markets in the second half. Having said that, as you very rightly pointed out, the filing speed has increased significantly in the rest of the world markets. And we see that's a good leading indicator for us to continue to grow faster even in those markets. So we see this as something that will happen in the coming quarter, Alankar.
Understood, sir. And on U.S., 2 filings in the first half, are we on track for 8 to 10 filings in FY '21?
Yes, we are on track for 8 to 10.
[Operator Instructions] The next question is from the line of Tushar Manudhane from Motilal Oswal.
Sir, so congrats on a good set of numbers. Just to like to understand the rise of flow by -- in this next 6 months, what kind of capacity...
Sorry, Mr. Tushar. Tushar, we are not able to hear you clearly.
Yes. Am I audible now?
Much better.
Okay. So just would like to understand with Vizag, what's the capacity utilization we'll be able to have in, say, by FY '21 -- end of FY '21?
So we are ramping up as we speak in Vizag. We had already announced that it was roughly around 3,600 tonnes per annum is the capacity at Vizag. We expect that it will be fully ramped up in 4 quarters. Having said that, as we progress on the ramp-up, we will update further in the next quarterly call in terms of how we are doing according to that plan. The full capacity we expect will be reached within 4 quarters.
Got you. Sir -- so we are looking INR 100 crores kind of an EBITDA in 2Q and then INR 83 crores, INR 84 crores in 1Q. So if I said on the back of the envelope calculation from your guidance, you are hinting at about INR 380 crore, INR 390 crore EBITDA, which we are -- if I assume for just a second, we are already there without Vizag. So am I missing out here, or are we too conservative on this?
No. So let me share it like this. So as we ramp up Vizag, we'll have to take positions in the market. So we would expect some pricing pressure from Vizag in the short term, in the very short term. It will normalize over a period of time. So we've guided based on those factors as we have currently in terms of both EBITDA growth and on revenue growth.
Okay. So incremental operational expenses, what...
Yes, exactly.
The next question is from the line of Anmol Ganjoo from JM Financial.
A couple of my questions have been answered already, but I just wanted to understand a bit better when you alluded to fairly strong demand environment, and the fixed investments that you're putting. So I can understand demand environment being better, but what are your thoughts on the sustainability of this demand? And -- because we always run the risk of overextending the balance sheet at the peak of the cycle. How sustainable do you think the trends in the demand market are and how well we are positioned? Plus also, if you would like to highlight some capital discipline parameters that you are employing, whether it's in the form of asset terms, et cetera, as you commit to new investments? Any thoughts around this would be helpful.
So let me address the demand part, and maybe Hari can jump in on the asset turns and our targets towards that. So 2 ways to look at that. And first, the demand picture on some of our products, we don't see that weakening anytime soon these are products that we've got increasing share of wallet or very dominant market players, strong market players. And we're confident that this picture will remain in the coming quarters. Secondly, given that we have 40-plus active products, it is normal that 1 or 2 products will see some weakening of the demand and 1 or 2 will see a strengthening of the demand. The natural edge we have in our product portfolio with regards to overall demand for the company and the sales growth, hence, it still remains very robust and strong. So that's kind of what is leading us to say that we see the sustenance of this demand and sustenance of growth in the coming quarters to come. Maybe, Hari, you can add on the asset turns and how we look at that?
Okay. If current asset turn is 1.7x of this investment in our fixed assets, and we expect that to the range of 1.7x to 1.8x in the coming period. And our debt equity is currently at less than 0.8 based on the cash in hand and adjusting for the net debt. At any point in time as a guidance, we don't want to go more than 3x of the EBITDA to the net debt. And so that any acquisition opportunities also, we are working towards that with available cash.
We'll move on to the next question, that is from the line of Cyndrella Carvalho from Centrum Broking.
And congratulations on a good set of numbers. First question was just to understand how is the environment, is there any change in terms of pricing? And how is the API industry behaving from our market perspective? And the second question is, we have alluded that most of the growth is on the volume base, so if you could help us understand how is the volume growth is a soft products versus the new products?
So on the pricing, pricing is stable and positive, has been so far this year. And with, as I said, with the continued strong demand picture, I see that continuing, that trend continuing. We don't see in some of our key products, any deviation from that trend, particularly the newer products that we have launched over the last couple of years. On the base products, pricing will fluctuate that we are -- that is a given. But again, just simply because of the breadth of our product portfolio, we don't see that having any big impact to us in terms of performance -- financial performance. As of now, it's -- the pricing picture is stable and positive. And to your question on the volume driven growth, we've seen that, as I said, we gained share of wallet with customers, which obviously then dictates that there would be an increase in volume. And that's kind of what has led to a strong performance in terms of revenue growth also this quarter. So that's where a lot of the volume growth is coming from where we have existing customers and we have deepened our share of wallet there.
Coming to one of our larger products, do you see the...
Sorry to interrupt Miss Carvalho, we're not able to hear you.
Coming to our -- one of our larger products, do you see any capacity disruption going ahead in the market to continue or do you see some supplies to come back? Do you see any de culture [indiscernible]?
You need to repeat that question again, Cyndrella, sorry, I missed the last part. It was not very clear.
Sorry for a bad network. I'm asking, based on our large volume products, do you anticipate any change around the supply disruptions in the market to continue or you expect them to come back in terms of supply side, on the capacities and the efficiencies.
Okay. So we are very strong in our position when it comes to some of our higher volume products. We have long-term agreements typically with customers. Customers and us have worked for years together. So supply demand change doesn't dramatically impact our business because simply because of the fact that we have been with those customers for years, and we have longer-term agreements with them. So I don't see that having much of an impact with regards to us.
The next question is from the line of Vinay Bafna from ICICI Securities.
I had one particular question. So did you dismiss any particular impact from the export incentives roles, which was implemented last month in this particular quarter? And what would the possible impact that you would expect in the second half of this year?
Yes. Good -- that there is a cap of INR 2 crores of the export incentives for each unit, starting from September to December. Yes, we are affected by that. And that actually -- so we are affected by that. However, we are putting a de-risking strategy to mitigate the same by way of various methods we are working on to bridge a gap. Yes, we are impacted by that.
So could there be a particular reason why our raw material cost is substantially higher in this particular quarter? So I mean it is up around 16% for 1 quarter. And that is the reason why our gross margin is hit?
So gross margin is -- there's not much increase in our RM prices. It's only to the product mix, increasing the volume, there's an increase in the RM consumption. And there's not anything to do with the increase in the raw material prices.
Understood. So just to hop on it a bit more. Can we expect this level of gross margin to continue in the second quarter -- in the second half as well? Basically, you're saying that you already have a risk mitigating strategy for the affording [indiscernible]?
So we've always said that we're looking at kind of the mid- 50s, plus/minus 2%, as threshold that we look for in gross margin. We continue to kind of look at that as our threshold to continue. So you can definitely say that we will see gross margins in that mid- 50s level, plus/minus 2%, depending on the product, our mix in that quarter, allocation and other factors that play a role.
And we also expect that data on the new incentive schemes to be effective from January 1 as the government has announced. We'll wait for further details on that.
Understood, sir. And just one last clarification. So in the presentation, you've said that your growth on the new product has been particularly low in this quarter. And that this contributed 5%, which should normalize going ahead. If I see the trend that has been quite volatile at 7%, 11%. So what would be a normal level for the contribution from this product?
So we are looking at anywhere in the 10% to 12%. That is kind of the levels that we are going for. As you would imagine, these are products that have been introduced in the last couple of years. So for them to gain traction, it takes some time and the ordering patterns change. Sometimes customer takes product in a quarter, and then they wait for a couple more quarters before they take another batch of it, et cetera. This is a normal ordering pattern, but we expect it to run at 10% to 12%. That's kind of what we expect as normal level.
[Operator Instructions] The next question is from the line of Nitin Agarwal from IDFC Securities.
Bharath, on the Vizag facility, from a capability perspective, what capabilities does the Vizag facility bring to add to Solara as a business?
So as of now, the first phase, as we said, it was an expansion of our ibuprofen capacity. So that is really what we are bringing to the table in the Phase 1 of Vizag. Phase 2 will be a multipurpose facility, so we can do multiple products in Phase II. And that is what we are working on currently in terms of implementing the Phase II project. We expect that Phase 2 will be commissioned in somewhere in late quarter 4 this year, our financial year '21 and will be operational early next year. So those are the 2, Phase I and Phase II in Vizag. Just talking about our plant in Vizag, I mean, it brings in -- of course, because we've built it ground up. It has quite some latest technologies that we have implemented in terms of manufacturing, automation, et cetera. But purely from a capability perspective, Phase 1 is expanding our ibuprofen capacity. Phase 2 will give us capability to do multiple products.
Okay. And secondly, there is obviously a fairly renewed interest in the whole API sort of segment over the last few quarters. And there are obviously multiple players operating out of India, catering to various segments. I mean, in your own assessment, what differentiates Solara from a broader pack as far as API business is concerned? And what would be our competitive advantages in this business?
It's a fantastic question. And see, when you have to look at it from our customers' perspective, they are looking for basically 3 things from a supplier. So first, they want sustainability. In other words, will this supplier be here for the long-term because de-risking essentially means I need to go to a less risky option. And so they look for credibility and long-term sustainability. The second we look for is peace of mind when it comes to quality systems. So is the supplier going to give me product that we me peace of mind in terms of repeatable, consistent quality. And the third thing they look for is diversity of product portfolio and the long-term approach when it comes to the supplier. So when we are talking to customers, these are the 3 things we hear back from them in terms of what they are looking at. And I think -- and I'm very confident Solara fits that build perfectly well. We are able to give them the confidence when it comes to sustainability, longevity. We're able to give them the confidence when it comes to our quality systems and the robustness of our quality systems. And of course, we have shown that track record of being long-term in our orientation towards our customers. We're ad hoc in our approach. We're not opportunistic in our approach. We've always believed in partnerships and longer-term partnerships. And the proof of the pudding is the share of wallet increase that we've seen over the last 6 months, consistently month after month. So I think that's what differentiates Solara. And I alluded to it in my opening remarks, I see that differentiation getting strengthened and deepened as we go forward.
And secondly, from a product portfolio perspective, in how many products would be, say, probably amongst the top 2, 3 most competitive top players in how many of our products? And what proportion of business would that be for us?
So we're inherently competitive. I mean, we are doing so well in all our products. We're competitive in all our products, right? So I mean, I wouldn't like to comment specifically on 1 or 2 products. I would say that our position is quite strong. Our top 10 products currently constitute about 77% of our sales. And we're competitive and strong in all of those products. That's why we're doing well in them.
The next question is from the line of Ranvir Singh from Sunesis Securities.
Sir, my question is around the warrant issued. So far, what we have received in cash is INR 288 crore, and last year we had INR 57 crore. What portion of warrant remains to be converted? And when is possible? And what is the -- how we are going to utilize the cash coming out of this conversion of warrant?
Sir, just to clarify, sir, the total issue is INR 460 crores, and we have received during the last financial year, 25% of the same. And the balanced -- total amount of balance INR 288 crores has been received now. So totally, the entire INR 460 crores has been subscribed by the promoter and TPG Group and received all the money. And as of now, we have spent it -- some portion of this thing, for our expression activities and Vizag. And balance around INR 400 crores is kept in our fixed deposit for our future use. And in future use, as Bharath indicated, we are looking for some inorganic opportunities in the CRAMS sector so that fund will be utilized properly to increase our business volumes and also the EBITDA.
Just one more point to add to what Hari said. I think we're also currently, as I said in my opening remarks, looking for new tech platforms. New technology platforms that would enable us to differentiate. There would be CapEx required when we are going into those new technology areas, and we will also be using some of these proceeds towards those CapEx investments. [indiscernible] value addition activity.
Yes. Yes. Sir, now we have cash in hand. And I think at 6 months now or last year, in fact, we received was [indiscernible]. So have you seen any such inorganic opportunity? Or how long it will take because by then, the cash would be there in balance sheet. So what exactly -- how we are going to go about it?
So on the inorganic -- first of all, the second tranche of warrants came in September this year. So that's where the majority of the warrants came in. But your question is valid. So I mean, we're very clear on what we will acquire. We're looking at two axis, either science, which means it brings capabilities or technologies that we will complement what we have, or scale or both. So we are currently, as you know, very difficult to predict inorganic in terms of time lines, exactly when way it will happen. All I can say is that we are actively involved and engaged in looking at the right opportunities, and we do that on a continual basis. When we find the right opportunity, we will definitely share at the appropriate time with all of you.
The next question is from the line of Kunal Randeria from Edelweiss.
Just more of a clarification, Bharath, in your opening remarks, did you mention something that within 4 quarters, Vizag facility will run at optimum utilization?
I answered a question to that effect, saying that we are ramping up, and we expect within 4 quarters, it will be at optimal utilization.
Right. So then -- then what would your plans be? I mean, then again, it'll probably be very short of capacity. How do you actually -- how should we look forward for the next 2 to 3 years in terms of capacity expansion?
That's a good question. So as I shared earlier, we are also building a Phase II in Vizag, which is a multipurpose facility, where we can do multiple products on a campaign basis. That's going to stay augment our capacity. I also said about acquiring land next to our Mysore facility, adjoining our Mysore facility, where we will, again, upgrade and -- our quality systems in Mysore. And we will also look at making suitable investments there to expand capacity. I don't see us having any issues with regards to getting capacity available to support growth. That we are very clear on, and we have a plan towards achieving the same. We are also doing -- I mean, in our regular CapEx, we do regular de-bottlenecking every year. That significantly adds also to our capacities. And we do that on an ongoing basis across all our facilities. So that will also contribute incremental capacity in addition to the 2 points that I mentioned in terms of additional of infrastructure for more capacities to come in the coming years.
Right. And I think in one of the previous calls, you had mentioned that the cross block for the Vizag facility would be around INR 200 crores. So would it be fair to assume that maybe in a year, 1.5 years time, Vizag itself would be generating around INR 350 crores kind of revenue?
Yes.
That's what we are hoping, sir, correct.
Fair enough. And the second question is on the gross margin. See, I mean, last couple of years, your margin has expanded very sharply. And you have said that it's not the price, the gross product mix which has driven it. Don't you think there is a risk that exists maybe a couple of years down the line that the gross margins could again come under pressure as the product mix changes?
So we are continuously working on making sure we can mitigate that risk, and that's why we introduced margin profile of new products at a different level. We continue to work on our -- what I call the Solara efficiency machine that continues to deliver cost efficiencies and cost improvements. So we're acutely aware of such a risk and that's there in every business, not just for us. And we are constantly on the ball when it comes to planning for such an eventuality and mitigating it before it comes. So that's on our radar, and we do that on a continual basis.
Right. And one more question, if I can squeeze in. Have you only seen any kind of pressure on KSM prices?
So they are -- I mean, again, on a general basis, they are stable. On and off, we see some variations in some particular KSMs. But on a general basis, they are stable.
But on the solvents in the domestic market, we have seen some uprise increase in the price, in the...
Okay. So because the gross margin was fairly resilient, so I was just wondering whether I mean the impact is yet to be seen? Or you've already cushioned the impact?
So we've taken that -- I mean, we've mitigated it wherever we can with improved use and efficiencies at the plant operating level. So that's what we do on a continual basis. So that's factored in.
The next question is from the line of Ankush Mahajan from Axis Securities.
So congrats for a good set of numbers. Sir, we see that we have one of the highest gross margin in the industry. So just trying to understand, sir, what are the reasons behind it. And in the Q quarter, if you see the other API players, I can say the industry, and most of them, their gross margin has shrunk basically. That is on the lower side. So what is -- how we can say that there -- and according to them, that in the first quarter, there was a surge in API prices, but it is now stable in the second quarter. So just trying to understand, sir, why our gross margins are very sustainable, and what is the reason they are the highest in the industry.
Yes. So I mean, our -- as I said, the 2 drivers are basically the efficiency machine that we have continues to work on cost improvements, new products, existing products, base products. Our mindset is one of looking at cost efficiency on a daily basis. That continues to be benefit. The second is that our growth has been through very good utilization of our capacities by allocating them to more in demand and higher-margin products we see that also as a contributing factor. So stable positive pricing environment, good allocation of capacities to products that are higher margins and in-demand coupled with our efficiency machine, all 3 together is why we continue to see very strong gross margin performance.
And also, our negotiation with the suppliers that for the -- especially the intermediates or KSMs, we're able to achieve price reduction also in our KSMs.
Okay. So sir, we are guiding now 25% to 30%. That's growth for this year. But in the first half, the average growth is 10%. So can we achieve more than 30% growth, I mean that what kind of growth in the second half that we are looking?
So our guidance of 30-plus percent on revenue, we are quite comfortable to say that, that's what we are going to deliver...
But sir, still in the -- sir, first half, we have achieved only 10% of growth.
Yes. Yes. So as I said in my opening remarks, I think the growth will come from 3 factors. Vizag coming onstream will contribute significantly. Base products, we see continued momentum, and we've increased our share of wallet with customers. That will remain the same. And new products will start -- as I said, there are some demand patterns that we saw lower sale of new products in terms of percentage of revenue in quarter 2, that will normalize. So all 3 factors will enable us to deliver what we have guided, which is 30-plus percent revenue growth year-on-year.
So can you throw some light on the Ranitidine? And what are the new products that we have launched in the last quarter -- the first half?
So on Ranitidine, I mean, as you're all aware that we work with the authorities they have issued new guidelines on nitrosodimethylamines as a general basis, which we are adopting and following. Ranitidine is -- currently, we don't sell for the U.S. market. There are a couple of other markets that still have opportunity for us to sell Ranitidine, which we do in consultation with our customers, taking all the quality precautions in place. So that's the answer on Ranitidine. In terms of other products, other drivers that we have done in terms of -- that continues to be what I guided earlier. We see good demand picture for that also going forward.
So how many new products that we had launched in the last -- in the first half, sir?
So 2 DMF we have filed in the first half. That's the 2 new DMF that we have filed. When you say product launches, I'm trying to understand what you mean by that.
So, I mean, sir, new products that we have launched in the last 6 months.
Yes. So continuously, we enter new markets with existing products, and we continuously do that. In terms of new, new filings, we've done 2 new filings and 2 new products, we've done validation sales in the first half. So that's kind of what we have done in the first half.
So can I get a name of these, sir, these new products?
We specifically don't mention product names here. So apologies for that.
Okay. Sir, last question. How is the prices for the ibuprofen, sir, last quarter -- the last 6 months?
As I said, right, I don't want to get into specific product details. But again, our ibu business is strong based on our long-term agreements with customers, a good cost position, 3 decades of experience that we have in this product. So we're positive about the ibu business.
So sir, [ IUN ] and Granules, their gross margin has really shrinked in ibuprofen. I think they also have of the ibuprofen revenue composition. So any specific reason, sir, our gross margins are higher and their gross margins are on the lower side?
I would appreciate -- I mean, I'm sure you would appreciate that we can't comment on other company's performance or results. So I can only talk about our business model, which I've shared with you in terms of outlook.
The next question is from the line of [ Ashish Thakkar ] from Motilal Oswal.
Since the last 6 to 8 months during this COVID times, did we see any tectonic shift in the region-wide business that is coming to us?
So I'm -- tectonic is a big word, so let me not use that word. But yes, we've seen a shift in business. And I mean, part of our growth in the regulated market space comes also from supply chain derisking of our customers. And put it in context, we don't need a tectonic shift necessarily out of China or another country for us to grow the API business. Incremental shifts are sufficient because we offer something in terms of reliability, long-term sustainability, credibility, peace of mind that I think is sufficient for us to grow our business significantly. So we're not seeing -- technology is stronger, as I said. But from our perspective, we see a healthy shift, and it's increasing, and it's strong and widespread.
Okay. And your ventures, like you are putting more things or like you also have said that you want to expand deeper into the CRAMS part of your business. So at any point in time, since you have a strong backward integration on the API side, would you be also comfortable going into the agrochemical side of it?
No, that is not in the scope currently. So we're not considering that.
Okay. Fair enough. So just one last question. Again, on ibuprofen. So obviously, Vizag, a new Phase I one, the new capacity is coming up. So is it for an incrementally for a new customer? Or these are for the current client engagement?
Both. So we will be able to support increased volumes from our current customers, which has been a long-standing demand from them that they need more capacity from us. So we will be able to fulfill that. And we also are going to target quite some new customers, and we're already successful in the first few markets where we have addressed these opportunities. So both.
So sir, what is happening in this market because almost all 3, 4 players based out of India, they all are expanding their capacities. So is someone moving out of the market -- in the global markets? Or what's happening really?
I mean, as I said, on the -- I assume you're asking for ibuprofen. So let me not get into who's leaving or who's entering. We're strong with our position. We are very clear about where we will grow and who we will grow with. And we are secure about that, and we are positive about doing that in the coming years.
So you're positive that your capacity will be sold out, right?
Yes, that's the plan.
The next question is from the line of Saket Mehrotra from Beta to Alpha.
Bharath, great side of numbers. My first question has more to do with the CDMO and CRAMS space. See, while I understand that Solara is focused on CRAMS and your parent side is more towards CDMO. So do we see any potential conflict in the business? Or will it be more to do with sale of synergies between the 2 companies?
We don't see any conflict in business models with Strides and us. We are doing the trans business, and we don't see any conflict there.
Okay. In terms of the DMF filing, right, so I saw that one of the DMFs that we filed in H1 is related to renal care. So are we seeing like a lot of interest globally? Or do we plan to commercialize this in the domestic market as well?
Sorry, can you say the name of the product again? I missed it.
Yes. So in terms of the DMF filing that you've done in H1, one of the products that I can see is sucroferric oxyhydroxide, which I believe has an application in renal care, right? So are we seeing a lot of interest globally? Or do we plan to commercialize this in terms of -- what I basically want to know is what is the sense between, say, the domestic and the global market.
I mean, it's a strong product globally. In the regulated markets, it's a very strong product, and that's what made us choose that product in our pipeline. So we're bullish about the demand that our product will generate in the coming years.
Okay. And in terms of the domestic demand, do you see any potential application here?
I think that's a question best answered by our formulation customers. But from our perspective, we see a strong demand for it, particularly in the regulated markets. And we have had discussions with our customers where there is interest to take this to the market.
Okay. While I've seen -- like you've answered this question earlier on the potential inorganic targets. But given the whole uncertainty right now, we are seeing a lot of businesses fold. We're also seeing a lot of API businesses really stepping the pedal in terms of increasing their market share. So like is there a time line that, okay, within the end of this year or maybe early next year, we'll be able to do that because