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Solara Active Pharma Sciences Ltd
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Ladies and gentlemen, good day, and welcome to the Solara Active Pharma Sciences Limited. Q4 FY '22 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Abhishek Singhal. Thank you, and over to you.
Thanks, Sanford. A very good afternoon to all of you, and thank you for joining us today for Solara Active Pharma Sciences Earnings Conference Call for the fourth quarter and full year ended financial year 2022. Today, we have with us Arun, Founder and Non-Executive Director; Jitesh, MD; and Hari, ED and 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 the 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 reviewed in relation to risk pertaining to our business. After the end of this call, in case you have any further questions, please feel free to reach out to the Investor Relations team.
I now hand over the call to Arun to make the opening remarks.
Thank you. Thank you, Abhishek, and appreciate everybody's time today. It's been an important day for Solara as we kind of reversed certain corporate actions that we took almost 18 months ago. So at that time when the deal was announced, I was on this call. And today, consequently, with the deal being called off, I thought it was appropriate for me to address the initial part of the conversation to explain the rationale behind it.
So just in terms of full disclosure, as promoters, we also own Aurore, which was a private API company that has been built to scale. And when we announced this transaction, both Aurore and Solara were delivering the highest business performance right in the highest of the API industry, general shortages of APIs and the demand around it. Regulatory, the deal has taken a lot of time to close. And obviously, deal fatigue emerged in terms of a transaction, which takes so much time to close. So while we have spent a lot of time on the strategy and also the integration, in terms of the process, we appointed a first-class international banker, we had a third-party valuation that was done.
And also we have filed our documents with the SEBI. However, there were some issues with a minority shareholder in one of the subsidiaries of Aurore, which resulted in a change of the scheme, took a lot more time. And consequently, we finally received all the necessary approvals from the NCLT, to submit to the NCLT just a couple of months ago.
In the interim period, obviously, Solara's businesses were severely impacted with the headwinds that we faced with the lack of Ibuprofen sales and the challenges around that business and some of the cost corrections that we took several quarters ago. This resulted in a significant drop in Solara's margins, but the same impacts of another type also was impacting the financial performance of Aurore. And while Solara's performance has been depressed, we still do have an EBITDA that is -- that where we can grow from here.
Unfortunately, there's an overdependence on COVID products in the case of Aurore. And with the -- in the recent 6 months, we have seen a lot of demand for the primary tactical products that Aurore was selling, dropping significantly where the economics does not make any more sense for the Solara shareholders to keep the ratios intact and would not be appropriate for us to then recommend to the Board that the -- as promoters, that the merger should go through.
So this is the reason why the merger was called off. We've had significant progress with the strategic intent. There's a lot of value in what the 2 companies were creating and we believe that there are ways and means on an announcement basis that we can benefit from those opportunities. We'll continue to focus on that. But at this time, the most important challenge for the company was to -- for Solara was to rebuild this business, rebuild its confidence with all the stakeholders and customers and its employees, especially. And for that reason today, we decided that it is best that we focus on an organic strategy for Solara, keep aside all the inorganic actions and move forward.
But most importantly, I'm extremely delighted to have Jitesh back to run the company as a CEO. This is an important step for strides, for Solara technologies as Jitesh and Hari, who we announced as a CFO in the last earnings call, to come back to Solara to rebuild the company with the deep insights of the business itself for the fact that they were involved in the company since inception. I'm extremely confident about this team and the leadership capabilities of both Jitesh and Hari to bring this business back on track. And the Board is very supportive of this decision.
So I just -- I will stay through the call to answer any specific questions on the promoter rationale. But having said that and since I have a non-executive role, I'll continue to stay invested and committed to the journey of Solara. I strongly believe that it has got all the right elements to build out into a high-performing company, and we will see that emerging in the near future.
With that, I also apologize to several of you who may have been confused with the recent changes that we have made. But I think all of this, including today's corporate action decision, is behind us. The company can focus on the cost correction journey and build out the business for the future.
With this, I will let Jitesh and Hari to commence their opening remarks, and then I'll stay behind if there are any specific questions or suggestions. Thank you. Thank you, Jitesh.
Thank you, Arun. Good evening, everyone. It is good to be speaking to all of you in this forum after a while. I hope all of you are fine, in the best of health. Both Hari and I are pleased to be back to reset and steer Solara back to growth and profitability. We thank the founders and the Board for reposing their trust and confidence in us. We also like to thank our investors for their confidence reposed in us during our first tenure at Solara.
Since Solara's inception, we have been driving Solara, and our focus will be to review and grow the business on its key pillars, consisting of Ibu and non-Ibu APIs. Our cost -- our continuous improvement programs, including backward integration for our key APIs, new product introductions and CRAMS. These 4 pillars have strengthened our position as a pure-play API company. We are optimistic about the future potential of Solara, mainly with capturing the opportunities in the core business where we see green shoots in the demand and converting inquiries into new business; file at least 6 new products in FY '23; aggressive, continuous improvement programs; and lastly, improving our success rates to secure new CRAMS business.
We had short-term challenges on 2 of our key products with price to revert to normalcy and increase LRM price due to current international situation, and we expect the same to normalize in the second half of this financial year. Whilst this has impacted our gross margins, actions are in place to minimize the impact.
Coming to our Cuddalore API facility, our regulatory track record with various agencies has been exemplary, barring the OAI classification of our Cuddalore API facility due to running some NDMA issues. We firmly believe that with U.S. FDA inspections initiated, we are hoping for reclassification of our OAI status based on all the data points provided to U.S. FDA. Our evidence of work done on Ranitidine resulted in the restoration of our CEP back in July 2021. As of now, there are 10 new approvals pending reclassification of our Cuddalore OAI status. With the belief that the reclassification of our OAI status within the first half of this financial year, we have considered new sales in the second half.
Coming to the under-recovery of our buyback facility, let me recall our justification for our investment. There were 3 main reasons for investment. One, the expansion of capacity of our key products, new product filings and backward integration of key intermediates. While the investments have been made, we expect to trigger the regulatory inspection in this financial year. Clearly, as we focus on the regulatory markets, the gestation period for sales is at least 24 months from when we complete validation batches. However, we are tapping opportunities in markets with no regulatory binding. With new products being introduced in this financial year and some being filed in Vizag, we are confident of minimizing our impact of under-recoveries in Vizag in this financial year.
The rigor in continuous improvement programs have been reintroduced, and we expect to contribute improvement in gross margins from second half of this financial year. With the focus on all of these actions above, we are confident about the future prospects of Solara.
I now hand over to Hari to take us through the financials for the last quarter, the Q4 of FY '22, and the year as a whole. Thank you again.
Thank you, Arun and Jitesh. I thank the Founders and Board for the opportunity given. We are pleased to announce the quarter 4 financials along with the FY '22 consolidated results.
The key highlights are as follows. Our revenue for this Q4 at [indiscernible] which is 90% of our historical run rate, and adjusted EBITDA is INR 50 crores at 13.6% EBITDA rate. Our revenue for FY '22 stood at INR 1,289 crores compared to INR 1,645 crores of the previous year. Our gross margin for the quarter 4 at 44.1% and [indiscernible] at 47.6% as compared with 54.7% in FY '21. We closed out the FY '22 consolidated EBITDA at INR 92 crores compared to the INR 400 crores in FY '21. It remains the fact that we have the work to do to improve our gross margin and EBITDA, which is due to the under-recovery from buyback facility and the delay in the new product introduction.
As Jitesh pointed out, we have identified key focus areas, which will result in the improvement expected from second half of current financial year FY '23. We are conscious of the fact that our net book has increased over 50% as the funds deployed into the buyback. Our immediate priority is to get the buyback of Aurore to maybe achieve a breakeven and profitable growth in the near term, including getting the facility ready for inspection, which was delayed due to COVID.
Our primary focus assumed comfortable net debt-to-EBITDA run rate and improve our cash flow by prudent application of capital. We are pleased to inform you that our credit trade has been retained at A- for long-term and working capital. With the clear focus on the actions to improve profitability, we remain confident about growth prospects of Solara. Thank you.
Sanford, we can take the Q&A, please.
[Operator Instructions] The first question is from Manish Gupta from Solidarity.
Can you walk us through your Slide 27 where you've cut the P&L into core business, R&D-led growth business and the Vizag-led business? So in that, you show, if I take Q4, your revenue of R&D-led growth business is 0 and Vizag-led growth business is 0. And the same thing is also true for the full year. And you have an EBITDA there of minus INR 54 for the R&D-led growth business and minus INR 58 crores for Vizag-led business. So when you have EBITDA of minus INR 54 and minus INR 58, what does that mean? Are you saying that this is the cost that we have apportioned to these businesses, which is earning you no revenue right now?
Yes, Hari here.
Slide 27.
Correct. See, just to clarify that we have bifurcated our current financials in quarter 4 as well as in years ago into 3 buckets. One is the core business that is our main products are being undertaken. And R&D, where the cost incurred, you already said that, we have incurred cost for this R&D facility and R&D activity. And next is the Vizag where there's under-recovery due to the delay in the regulatory approval and the regulated market sales that have taken place and a number of regulatory approval. Due to COVID delays, the delays have taken place for the inspection. So that's the reason that we have to incur the cost.
But the depreciation and interest cost for the project has to be gone through the P&L, that's the impact that we are having in the up-to-date PAT level. And if you look at our core business, that we have made a around INR 367 crores and INR 40 crores of EBITDA, and INR 1,288 crores and INR 200 crores of EBITDA. So we are impacted by the -- leading the new product introduction and the growth business. And the Vizag-led business, which is a cost-led business, and we are not [ content ] with the revenue from that.
As in the Indian accounting standards, we are in charge of the revenue expenditure incurred under Vizag, even though that we have started the operation but could not get the regulatory approval. So that's the reason in the cash balance -- we are showing in our P&L.
I'm sorry, I didn't understand that. If we just take the Vizag-led business as an example, minus the -- so you are saying there is INR 58 crores of fixed cost in Vizag?
Yes.
This is earning no revenue? Because this is EBITDA, right? So this does not include depreciation and interest.
Correct.
So there is a INR 58 crore fixed cost in Vizag, which is earning no revenue?
Correct. Last year. Correct.
And this is INR 53 crores of R&D-led growth business.
Correct.
And therefore, one would have had -- can you give us the same figures like you've packed for fiscal year '22 for fiscal year '21 in these 3 buckets what we can do?
Yes. We have -- at present, I don't have, but we can -- it can be available, we'll provide you, sir.
So Manish, this is Arun. And for the benefit of the new management team, I can just try and put a little more color on your question. Typically, in the API business, when you have an R&D pipeline, you also see new customers for new products. That revenue and margins that we normally make typically sets off the R&D spend. What that deck also says that our R&D flow-through of new products and customer acquisition of new programs was not a great year for us in the last financial year.
So that is for the first time it's happened. So typically, when you do 6 or 7 new products, you see customers in the formulation space, and to a very large extent, your R&D is squared off. This was the first time in the history of Solara that, in the last 12 months, we were not successful on that front. So that is why the revenue from that activity is shown as 0 while the costs have been incurred.
Sorry to just push on this, but it's important for us to understand this. So when you say R&D-led growth business, so last year, you would have had some revenue. So when you say R&D-led growth business, this would be perhaps new products, right, that you are...
Correct.
So this is -- so the way to look at this is that there was no revenue from new products in fiscal year '22. Is that right?
Correct. Correct.
Got it. So this -- and similarly, we say, when you say Vizag-led business, this is your Vizag plant. So revenue from the Vizag plant was 0.
Correct. The Vizag plant is in it, and it has to be qualified by customers and by regulators. None of that happened last year simply because no regulatory inspections are happening. It has now commenced. We expect that site to be inspected during this fiscal year. We can also tell you that part of the investment in that plant was prepaid by a customer for volumes. So it is just a function of inspection and qualification of the site, which we expect to happen in this financial year, considering that audits are now commenced full soon.
Right. And my last question, Arun, is that the -- when you say Vizag-led business, INR 58 crores, so bulk of this cost would be salary costs, right? Because if the plant is non-operational, there is no utility...
Salary this year.
Yes. So that we are getting ready the plant for any time inspection so that -- and the HVAC maintenance, QC equipment maintenance, we have to be ready for inspection. That's the initial path, which we are concerned.
[Operator Instructions] The next question is from [ Rohit ] from Samatva Investments.
So my first question is on the regulated markets. I remember in one of the previous calls, you had indicated that in the regulatory markets, you want to sell directly to the customers and not through channel partners. I just wanted to know how has the transition been? Have you been able to add any customers? In very general terms, if you can just give some idea on that.
This is Jitesh here. Yes, we have seen recoveries in our business in Q4. The bulk of our business has been directly to the customers. And our dependency on channel partners have considerably reduced. And from a regulated market perspective, traditionally, our business has always been direct. I would say 90% to 95% of our business has been direct.
My second question would be on the BSF facility in Germany. They had recently released a press release stating that they may not hold production in their German joint facility due to the gas prices shooting up. So if you could just comment on that and then how the market in general for Ibu in the past 1 or 2 months in general?
So we wouldn't want to comment on the BSF part, but I can definitely talk about the demand for Ibuprofen. So as we know, the last year has been not a good year for the Ibu, but our demand has started coming back from our existing customers, as well as we are getting inquiries from new customers, which we hope to convert them into new business opportunities by supply of validation batches in this financial year.
So as you can see, our revenue growth -- our revenue is coming back to its historical levels. So our key products are starting to do well.
Great. So just one last question. On the CRAMS division, prior to when the merger was going to take place, I remember Aurore had a decent amount of CRAMS business within their portfolio. So now that the merger is not going through, how do you plan to scale up this division? And right now, it's a very small percentage of the total revenues. How do you see that speeding up in the next maybe 2 to 3 years?
So while CRAMS contribute about 7% to 8% of our total revenue, that's still a major focus for our growth. We are adding in new customers, as well as we have also developed some new technologies, which will give us an advantage in terms of securing new business. And as we speak, we are also building our CRAMS organization from a front-end perspective, where we would have a dedicated business development team member for looking after the North America market. So we do have one right now who focus on the Europe, and we are going to hire someone for the North America market.
Great. Sorry, if I could just squeeze in one more question. In the last call, you had indicated that in FY '23, maybe second half, you will get back to your regular run rate of around INR 400 crores. For FY '24 and '25, maybe do you think that we can do around INR 500 crores of quarterly revenues?
So our focus right now, Rohit, is to strengthen the foundation of Solara to get back to its historical run rate. And then that we are seeing it from a revenue perspective. The next focus is in terms of how we improve our EBITDA margins. Our gross margins, which has been traditionally at about 50% to 54%, we see that coming back in second half of this year, and then the continuous improvement programs in terms of improving our EBITDA margin.
So right now, this is the focus for this year. And of course, once we strengthen the foundation and with Vizag facility getting -- we are hoping the Vizag facility being inspected, the Cuddalore reclassification from the FDA point of view as well as the new products, we have a target of filing at least 6 new products in this financial year, which can minimize the impact on the R&D cost of what we have -- what we had last year.
So yes, as with all these growth prospects, we are -- with all these actions, what we are taking, we are looking at building the business. I really will not be able to comment on the FY '24. But you can see that there are the growth pillars clearly being actioned on.
The next question is from Tushar Manudhane from Motilal Oswal Financial Services.
[Technical Difficulty]
Sorry, your voice is not clear. May I request to use a handset, please?
Is it better now?
Yes, we can hear you.
Sir, on Slide 11, there's a mention of increase in net debt on account of increased inventory buildup planned for COVID-related business. Now the outlook for COVID itself is reduced at least as we stand today. So just would like to understand what happens to that inventory.
Yes. Hari here. So the COVID-related products, 2 products we have in inventory, and 1 of the product is getting sold in quarter 1 and quarter 2 of this current financial year. And in other products also, we've got a lot of planned for liquidation. There have not been a loss of sale -- loss of inventory in our COVID products. We have a liquidation plan, and I know we have a customer commitment for the same.
But the realization would have reduced drastically or...
Yes, we have reduced payout and then -- we have in the quarter 1 and quarter 2, it will get reduced. And by FY '20 -- next financial year, it will become more or less at a reasonable level.
I think, Hari, the question is that will your price realization be lower?
No, the price realization will not be lower. We also kept it at kind of that our price indication from the market is not that lower. It will be in better place soon.
Okay. Secondly, on the Vizag facilities. So some amount of business was to get transferred from Pondicherry to Vizag, primarily on account of better cost efficiencies at Vizag facility. So any color on that part?
So that's the plan that we are building capacity for Ibuprofen in Vizag. And due to the regulatory -- delays due to the external reasons of COVID, we could not get inspection. And once the Vizag inspection takes place, and we'll be relocating the capacity of products from Pondicherry to Vizag.
And just lastly on Aurore. While when it had a supernormal business performance, so that time itself, it was very much evident that this is also due to COVID products. So just would like to understand what happened in between. Or rather, even at that time, it was clear that the COVID products might kind of withdrew for maybe a couple of years or 3 years maximum. And still we went ahead with the merger. So what's the...
Tushar, Arun here, I can address that. So the primary reason was that while the tactical margins that Aurore had at the time of the merger was adjusted quite significantly in favor of the multiples for the Solara shareholders because we did do an adjustment on those profits. The key there was the non-COVID portfolio ramp-up that Aurore will achieve with the non-COVID portfolio. While they have filed a lot in those years, it's not translated into the business as yet. It is slowly picking up, but it would take a lot more time for it to achieve its numbers.
And given the fact that there would be a reset of the multiples of the numbers based on now, that is the primary reason. So they're probably also -- Aurore has also been impacted by the fact that their new facility in Hyderabad has also not been inspected, which is also delayed quite significantly some of the larger ramp-up of the non-COVID products.
So all in all, it didn't play out as planned. And as late as September, even though the numbers were not ramping up, we were still fully committed and invested into the process. But then it's been not a great last 6 months in terms of financial performance. So we think Aurore will take at least a year, 1.5 years for it to bounce back, and that would be a distraction for the core business at Solara.
The next question is from Monish from Antique Stockbroking.
So my first question is, if our Vizag site was idle since it wasn't inspected by the FDA, why didn't we use this opportunity to sell products in the non-direct market?
This is Jitesh here. So as Hari had mentioned, the key products which we were looking at transferring to Vizag was Ibu. We had a lower demand in Ibu overall for the last year. And that has really impacted us because when had this situation not happened, that was the plan in terms of selling it to markets where we had no regulatory binding. But overall, the Ibu demand itself for the last year was much lower than we were -- which we even not had forecasted in our plans.
So any forecast that we had for Ibuprofen demand for FY '23 or beyond as it contributed fourth quarter?
Yes. So yes, we do have plans, and Ibuprofen is just not 1 API products. We have multiple Ibuprofen products within the umbrella of the Ibu business. So we are qualifying the other Ibuprofen in the Vizag facility. And we are actively looking out for customers to sell the quantities that we are going to be producing.
The goal for Vizag in this financial year is, again, to minimize the impact or the under recoveries what we have in Vizag. And we do have some plans from second half of this financial year. We are getting some commitment from customers to buy from Vizag.
Okay. But that will be pending the FDA clearance?
No, I'm talking about the markets where we don't have regulatory binding. Because even in the markets where we don't have regulatory binding, we still have to give some documentation in terms of at least the minimal documentation. And once that is completed, we start expecting sales from second half.
Okay. And any non-Ibu products which are going to be potentially good drivers that you'd like to call out?
Yes, we do have the non-Ibu products where the Solara's position is pretty strong. We have products like Gabapentin, Sevelamer Carbonate, Praziquantel. And we are acquiring new customers because, in some products like the Sevelamer Carbonate, we were just focused in the U.S. market just based from the demand perspective. But we have tapped new markets also for Sevelamer Carbonate where we are seeing some opportunities.
The next question is from the line of Mitesh Shah from ICICI Securities.
I'll just start with the macro level. What is the cost inflation right now in the raw material side, our power cost and the freight cost?
The raw material cost due to the current situation of the -- between the international market conflict, there is raw material price, some of the rates have gone nearly 30% to 40%. We can say that given the solar prices, gas prices and then the propylene prices, fuel prices, all the [ costs ] have grown up by more than 40%. And given the metal price has gone up from price -- from related products, so there's an overall increase in the price of the gas-related product and the metal-related products we have seen affecting the input prices of our raw material.
Do you expect that pulling down in the near term or given the...
Yes. Once the situation normalize in the international market, I think it's only temporary. Everybody is just doing their job and have increased the prices. It will come to normal by second quarter, we hope so.
And the freight charges are also in elevated level?
Pardon?
Freight charges is also on an elevated level.
Our transfer rate is mainly by sea only. As you know, it does not impact that much. So at end of last year, we can see the freight charges for that. And most customers are by sea freight only.
And any chances in the future we are looking for Aurore or the merger of Aurore gets completed?
So let me address that. At this time, it is best to say that, that is close. And the company to focus on is organic reset and focus on its balance sheet. It's not that we shy away from doing transactions, but I think the focus for the next several quarters is to get the business back to where it used to be. And that itself is a big plus. So we can't be distracted away from the strategic growth. So that's where we are.
Got it. And my last question would be you have given the 19.7% EBITDA margin adjusting of the inventory changes in the Vizag. You explained about the Vizag, and I thought the inventory adjustment done almost all the part on the Q3. So what is the inventory adjustment in the Q4 right now?
Hari here. In the Q4, the production level is very low. And whatever the inventory we had as of end of December got sold. So due to that, there is a decrease in inventory and which is reflected in our financial figures. And the production level will be normal. This inventory reduction will not be there. So that's what we have just highlighted properly that the inventory reduction, what we stock got sold and much less production activity during Q4.
Got it. So that would be expected to be normalized in 2H, right?
Yes, that's the purpose we have highlighted, sir.
Got it. And what is the Ibuprofen price right now?
Sir, at this point of time, it is anywhere at the average of $11 to $12 a kilo.
The next question is from Thomas Priju from Alchemy Capital.
I had only one specific question for Arun. While the logic for falling of the Aurore deal is well taken, the only giving concern is, from a shareholder perspective, we would have ideally preferred a scenario where your interest is in only 1 listed entity. So how does -- how should we view that, that you would still have a shareholding in the company which is separate and that is the only -- I, really, as a shareholder, would prefer you to have all your ownership in 1 listed entity, right? Is there some way to address that by talking...
There is a way, Thomas, and that is an easy way. I am in the process of exiting my interest in Aurore consequent to this decision. It's a process of 3 to 6 months. And I am very focused on governments and compliance. As you probably know me for too long to discuss this matter, the reason why we brought all the interests together was the 2 companies are doing well. Currently, both companies are not. And we are very, very confident of strongly rebuilding Solara to where it should be. We are very significant stakeholders in Solara, and we intend to do that, including the -- to be more invested. So our interest in the next 6 months will be fully committed and aligned only in Solara.
The next question is from [ Pascal Bukrediwala ] from RK Investments.
The question was on this R&D-led growth business. So where you're sort of showing the EBITDA at INR 54 crores, the question is, so this is all Research and Development expense for new products, right? Because -- and the whole research expenses getting -- nothing is getting capitalized. Everything is basically passed through the P&L. Is that the right thinking?
Hari here. Correct. So nothing is being capitalized. Yes, everything is routed through the P&L.
Okay. So I mean, this INR 54 crores is what is routed through P&L? And beyond this, there is no single rupee that is letting in the balance sheet?
No. No, that is everything in the balance sheet. We are -- normally our accounting policies all routed to the P&L only. That's a consistency being followed. And we have not held back any intangible assets in the financial books pertaining to the product development.
Okay. And going forward -- given this is the expenditure for developing new products going forward from an annual run rate perspective and specifically for FY '23 and '24, what would be the expenditure on new products? Would the same run rate of INR 54 crores, INR 55 crores continue? Or there could be a revisit to this?
We are rationalizing the spend. And judicially, we don't expect more than this. But we are working on how it can be optimized.
Okay. Sure. One question on your non-Ibu business. So if you can help understand both this quarter and otherwise, how has been your non-Ibu business on existing products scaling up? And I'm assuming that once new filings happen next year, that will further help to drive the non-Ibu sales. So if you could give some sense on the existing products which are already approved, which you are selling in some of the products, which would have got -- which are currently small, how are these sort of shaping up in terms of the growth?
This is Jitesh. So on the non-Ibu business, there, too, for our key products, we are seeing the recovery coming back. The last year has also been a little down for products like Sevelamer, Sevelamer hydrochloride. And now as we've set into this financial year, when we look at our numbers, we are seeing demand coming back for the non-Ibu business, especially led by Gabapentin and Sevelamer Carbonate, Praziquantel.
So what we have done, the actions what we have taken in the last 3 to 4 years, all these products where we have a good position from a cost point of view, we've also done market extensions to these products. And those market extensions are now fruitifying in terms of the approvals coming in and new demand coming in from new customers, as well as some new regions.
Okay. Would you be able to give some guidance in terms of next 2, 3 years how do you see this non-Ibu business doing?
So we don't give a revenue split between the Ibu and the non-Ibu. But I can assure you that the non-Ibu business will continue to grow. And in the non-Ibu business, we don't consider the new products. So as Arun had alluded earlier, the new products usually cover the cost of the R&D expenses what we spend because we do validation batches, and those validation batches are sold to the customers for filing purposes.
So the new products, like, for example, the 6 new products we have plans in terms of filing for this financial year, will give us some revenues in this year as well as in the next financial year. So it's more like a rolling as we keep doing or introduce new products.
Okay. Got it. And then just last question. So the API prices, in general, I mean, apart from Ibu demand-related issue, it's been a bit weak. And we're achieving the same in U.S. generic population market. So as the U.S. generic market starts to see some pricing pressure being reduced, do we see the same sort of translating into better API pricing in terms of our ability to then pass on or get better realizations from the formulation players?
So in the past, we had similar situations where the raw material prices have increased. And we had to wait and watch because you just can't pass on the price increase. Even for a formulation player it's not -- it does not happen immediately. We just have to wait because it is temporary or is it going to be 6 months or 1 year. So when we assess the situation and we know that the raw material price is not temporary, then we do discuss with our customers, and then we either pass on or we take, at least we pass on 50% of the cost and then they bear 50% of the cost.
More or less, the pricing has been stable except for Ibu, where there has been a reduction in the price. And we are working on the continuous improvement program for all our products, and that's been one of our adding contributor to the EBITDA margins in the previous financial years.
Got it. And just small last question, if I could squeeze in. What is the CapEx program now that your balance sheet has got some bit of debt and there's a lot of realignment? Any rethink on the organic CapEx plans for next 2 years? What sort of guidance would you like to give there?
In the FY '23, we are to incur INR 100 crores organic CapEx to support the ongoing investments. I invite that -- and other maintenance CapEx. It will be around INR 100 crores into the capital expenditure for FY '23.
And this includes maintenance CapEx as well?
Yes. Yes. Yes.
Ladies and gentlemen, we take the last 2 questions. We take the question from the line of Shikha Mehta from Equitree Capital.
Sir, I just have a follow-up question to one of the participants. I think you mentioned that the revenue from new products was 0. And in our presentation, it says it was 5% on Slide 31. So if you could just clarify that?
Yes. So just to clarify. So we can't break our business into too many buckets, but the new products when we say 5%, these are the new products, which were developed earlier and had a commercial launch in the previous financial year. So that's the revenue which we are talking about is from the 5%. So we have an internal policy where we declassified a new product post 2 years of commercial revenue.
We'll take the last question from the line of Manish Gupta from Solidarity.
Yes. So this is a question for Arun. Rather, there are 2 questions, Arun. Arun, if you can -- last year, when the merger with Aurore was announced, there was a very explicit vision laid out that we needed to be a $1 billion company, which needed to have new products. There was a $250 million or so bridge that would come from acquisitions. Now that things seem to have completely turned on its head, how are -- we are all minority shareholders, but you're at the wheel. So can you help us understand what now in your book based on your vantage point what would be -- how would you define success for Solara over the next, let's say, over the next 5 years?
Great question. So we are, as capital allocators and entrepreneurs in this business for too many years, focused on building scale. Nothing in that book changes in terms of our vision to become an important global player. And nothing is going to stop us from doing this.
We are facing, not only our industry is facing temporary headwinds. Initially, there was an exuberance around COVID for stocking, which finally resulted to irrational exuberance of overstocking that resulted in kind of companies destocking and getting off of inventory, resulting in this rollercoaster ride that most of the industry has gone through.
That's the business environment that we operate in. Is that going to change our views on building this business to scale? The answer is no. Can we do this organically? The answer is also not yet. We have to have an inorganic element to this business. But we need to steady the ship. The headwinds of Ibuprofen, in our view, is temporary. It's a critical product. We have been in the market for 30 years. We have sold only 40% of our annual demand last year. We see business bouncing back. Our focus now is to ensure that we do not have under recovery in Vizag, bring that debt-to-EBITDA to a reasonable level. And we will continue to pursue opportunities which are inorganic in nature.
But I don't think the vision is good. Maybe the timing has shifted. And that would be the same answer you will receive from any other in the space who's got -- who has faced these challenges. These are not unique to us. Of course, we had very significant sort of mini missteps in the last several quarters. But I think we now have got our act together back. We've got the team that we -- the team that built this business or what we call as the team back to run the business. We have a Board which is very supportive. And I'm very, very confident that we will still emerge amongst the top 10 global players.
We probably will take 2 more years, but that has to do with the circumstances in the business environment that we operate in.
And the second part of my question, that let's take a 5-year view. What would be -- how would you define success? What should Solara have reached in about 5 years from now?
Well, I think success can be measured in so many, many ways. I will not put a revenue number to it. I think that to be a preferred API supplier, to be a high-quality player, to have regulated markets as its primary focus, having more portfolio to define, to have different levels, different chemistry capabilities, getting into new areas, building a CRAMS business of scale, if we don't achieve all of these, we would have failed in many subsets of this definition of success.
Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Abhishek Singhal for closing comments.
Thank you all for joining us today.
Thank you.
Thank you.
Thank you.
You all have a good day.
Thank you very much, sir. Ladies and gentlemen, on behalf of Solara Active Pharma Sciences Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.