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Supriya Lifescience Ltd
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Ladies and gentlemen, good day, and welcome to the Q3 and 9 Months FY '24 Earnings Conference Call of Supriya Lifescience Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Irfan Raeen from Orient Capital. Thank you, and over to you, sir.
Thank you, Manitra. Good morning, everyone. On behalf of Supriya Lifescience Limited, I extend a very warm welcome to all participants on Q3 and 9 months FY '24 financial discussion call. Today on our call, we have Dr. Satish Wagh sir, Chairman and Managing Director; Dr. Satish Wagh, Fulltime Director; and Mr. Krishna Raghunathan, Chief Financial Officer.
I hope everyone had our possibility to go through our investor deck as we have uploaded on exchanges and on the company's website. Before we begin the call, I would like to give a short disclaimer. This call may contain some of the forward-looking statements, which are completely based upon our belief [indiscernible] as of today, these statements are not guarantee of our future performance and involve unfortunate risks and uncertainties. With this, I would like to hand over the call to Satish Wagh for his opening remarks. Over to you, sir. Thank you.
Good morning, and warm welcome to all the participants. Thank you for joining us today to discuss the Q3 financial year '24 results of Supriya Lifescience Limited. To take us through the results and answer to your questions along with me are Dr. Satish Wagh, Whole-Time Director; Mr. Krishna Raghunathan, Chief Financial Officer; and our Investor Relations department, Oriental Capital.
I hope everyone got the opportunity to go through the financial results and investor's presentation, which have been uploaded on the stock exchanges as well as the company website. I'm pleased to announce our manufacturing site in [indiscernible] has received a good manufacturing practice that GMP certification from the regulatory authority of Brazil and [indiscernible]. This covers a maximum 7 to 8 big countries in Latin region. Our -- the success of the rigorous GMP inspection understood Supriya's commitment to the highest quality standards. The clearance of this audit marked the successful registration of 8 APIs with [indiscernible] and will further enables smoother and faster registration, the company for the other APIs and will help us to acquire more customers in the Brazilian pharmaceutical market. These 8 APIs have INR 20 crore sales potential in the next 3 years. In this quarter, we plan to [indiscernible] and 3 U.S. [indiscernible], for anti-[indiscernible] anesthetic, where we are already strong for a couple of years and anti-allergic products. During the quarter, the company aggregate sales increased by 33% compared with the corresponding quarter of the last year on account of the wider marketing footprints.
As you are aware, Supriya is the market leader for supplying some of the anesthetic products and taking advantage of the world market presence and good track record on the regulatory front. Supriya has selected some life-saving drugs in the same therapeutic category. Supriya started to molecules development activity a year back, and now this product is ready for commercial. I would like to give a highlight on the market number in brief. The global market is valued at USD 300 million and is expected to exhibit a CAGR of 4.4% over the forecast period of 2023 to 2030. The growth driver for the sales product are the increasing number of surgeries, increasing the prevalence of the chronic disorders like cancers and proven standards of the surgical care. This product market is spread across the globe with North America, Latin America, Brazil, Argentina, Mexico and the rest of the Latin American region, Europe countries, Asia Pacific and the Middle East and the African market. Currently, the Indian industry depends on China, India, Supriya unit is considered an import substitute to China under the mix in India.
Supriya API manufacturing facilities ready for manufacturing. Also considering the power integration company is in process of setting up the formulation plant with bottling capacity of about 5 million annually. This -- with this capacity, the company aims to have a business in the next 3 years to be around 10% to 12% of the global market with substantial EBITDA between the range of 26% to 30%. As you are aware, we also have our capacity plans made for the last -- next 3 years, and around INR 60 crore has been invested in our CDMO capacity facility. This fertility also have our API and R&D. The site will be operational in the early quarter 1 of financial year '25, and we'll open phase-wise. Another 4 new products are in the pipeline for the financial year '25 launch. These are from the anti-diabetes, anti-anxiety, of course, and anaesthetic categories. With this, I hand over to our CFO, Mr. Krishna Raghunathan, to share the quarter 3 financial year '24 highlights with you. Over to you, Krishna.
Thank you, sir. Hello, everyone, and good morning. I will now share the operational performance of the quarter and following which, we will open the floor for question and answers. Company reported a revenue from operations of INR 140 crores in Q3 FY '24 as against INR [ 105 ] crores in Q3 FY '23. EBITDA in Q3 FY '24 stood at INR 41 crores as against INR 14 crores in Q3 FY '23. And EBITDA margin stood at 29.6% for Q3 FY '24 as against 13.4% in Q3 FY '23. Profit before tax was at INR 40 crores for Q3 FY '24 as against INR 13 crores in Q3 FY '23 and reported a growth of around 217%. Profit after tax stood at INR 30 crores in Q3 FY '24 as against INR 9.5 crores in Q3 FY '23. PAT margins stood at 21.6% compared with 9.1% in Q3 FY '23. Moving to 9 months FY '24 performance. Revenue from operations stood at INR 412 crores in 9 months FY '24 as against INR 319 crores in 9 months FY '23 and reported a growth of around 29% with the previous year. EBITDA In 9 months FY '24 stood at INR 117 crores as against time or INR 74 crores in 9 months FY '23. And EBITDA margin stood at 28% for 9 months FY '24 as against 23% in 9 months FY '23. Profit before tax was at INR 113 crores for 9 months FY '24 as against INR 70 crores in 9 months FY '23, registering a growth of around 60%.
PAT stood at INR 82 crores in 9 months FY '24 as against INR 52 crores in 9 months FY '23. PAT margins stood at 59%. There is a small correction in one of the [ German ] speech that 8 APAs, which he was talking about has a potential sale of INR 200 crores and not INR 20 crores as [indiscernible] by him was what do you call [indiscernible] error. I would like to put it in. Now we can open the floor for question and answer, and thanks to all of you.
First question is from the line of [indiscernible] from Ashika Stock Broking.
Congratulations on the set of numbers. So I have asked 2 questions basically. My first question is, we see a big jump in EBITDA and PAT margins this quarter. So can you attribute this to a better pricing environment? Or is it the seasonality impact as generally, our H2 is better than H1. That's my first question. And if H2 is better, so can we expect a much better growth in the margins or the revenue front on the revenue side for 4Q as well? I will ask the second question then later.
So thanks, Sonali for the question. I'm Dr. Saloni Wagh, and I would like to answer to this question. In the last couple of quarters, we have constantly been telling that our portfolio and our geographic reach has been changing. That is one of the reasons why you will see more stable quarters as opposed to the H1, H2 concentration, what we were seeing earlier. We are getting a lot of penetration into the more regulated market space. Even if you look at this quarter, our Europe sales have increased significantly, from 26% to almost 42%. We have seen a very good traction in anesthetic product. The Anesthetic segment has actually gone up significantly from 21% to 49%.
So the main reason why you're seeing the growth is because of better traction of the existing set of products like anesthetic vitamins in more regulated market space like Europe, North America. And we have always maintained in the last couple of quarters that a sustainable EBITDA margin for us is between 28% to 30%. And that is what we would also like to guide for the future quarters.
Understood. Understood. So basically, my next question was that if you could give a ballpark number in terms of revenue and margins from a 3-year perspective, but as you mentioned that 28% to 30% is a sustainable annualized margin guidance that you are mentioning. But just in simple question, is that on a conjugator side? Should we expect something more?
So there is always because of the product portfolio that we have and because we operate mainly in the regulated market space. There is always a chance and we have in the past also achieved higher numbers, which we have benchmarked ourselves again. So there is always a possibility for getting a higher number. But 28% to 30% in our opinion would be a sustainable number that we can indicate. In terms of revenue growth, we have always maintained that year-on-year. You can expect upwards of 20% growth from our side, and that is still the number that we would like to maintain for the next 3 years.
Understood. So we have a INR 140 crore run rate currently. Calculating that, will we be making something beyond INR 570 crores on a full year FY '24 basis?
Krishna here. Please don't put any words into the numbers. I think that could be a possibility. See, we have guided on our EBITDA, and we have said that we will grow our top by somewhere around 20% to 23%, it could be around that number, but we cannot be specific on any numbers like this.
The next question is from the line of Aashish from InvesQ Investment Advisors Private Limited.
Sir, so margins seem to be recovering. And as you said that around 20-odd percent growth on the top line is probably what we are looking at. So actually, we came down from around INR 550-odd crores a couple of years back to these numbers. So just wanted to understand, there are so many things going on in terms of new geographies, new facilities that we have plus existing portfolio of ours, there has been quite a up and down on the performance of a lot of molecules that we do.
So it would be very helpful if you can take guidance through the path for the next 2 years in terms of where all you see the business getting traction or even the negatives and try to build a scenario how you're taking this business forward. Because earlier, I think we had recently pick targets of around INR 1,000 crores plus of top line. This was 2 years back of the listing. So it will help our investors in gauging how you are planning for the business and how much is doable actually on the ground?
Okay. So definitely, the guidance what we have given in the past, that INR 1,000 crores in the next 3 years still stands. Growth for us will come in 3 buckets. The first 1 is as the top 3 products, which the company sells. Those molecules are also growing year-on-year because of getting repurposed in different therapies. So there is definitely a growth in the top 3 molecules.
Then there is a basket of about 8, 12 molecules, which we have said in the past that we are trying to scale up in the regulated market space, for which we have now started getting the approval. So the recent ANVISA approval where the products are registered, that has a potential of about INR 200 crores in the next 3 years. Similarly, multiple CP, U.S. DMS, Japan BMS are getting registered. So those 8 to 10 products will definitely give a large scale-up, and their contribution to the portfolio in terms of top line as well as bottom line will increase. So this is the second basket. So basically, the API portfolio what we currently have will grow inherently in the next 3 years. Other than this, we have large CMO, CDM opportunities in our hand. Those will also scale up in the next 3 years. So that will be another growth area for us. What we have announced today, the CMO, CDMO opportunity for an anesthetic product, which is our import substitute and which has a very large global market of over USD 300 million. Products like this, which we are now newly adding into the basket. So this year, for next year, we have 4 products planned for the launch. So new products also will add.
So basically, the growth in the existing product basket, the new CDMO opportunities that we have plus the new products that we are launching, all put together will help us to achieve that INR 1,000 crore mark, in fact, higher than INR 1,000 crore mark in the next 3 years or so.
Okay. So the current product basket that you mentioned, especially the 3 top products that we have, the growth rate, can we assume at what rate? I mean, what would be a fair assumption to take out there.
So it is completely product dependent. Certain products in the portfolio are growing at about 8% to 10% while certain products are growing at about 5% to 7%. So it is very, very product specific.
Okay. So that's around 10%. And the rest of the growth is expected from CDMO and CMO products -- the APIs that we are going to. So basically, you're expecting maybe a couple of hundred crores plus of contribution over the next 2, 3 years from these linings that you are opening up. Is that correct?
Yes. In fact, the contribution from the CMO CDM opportunities can be higher. So this announcement that we have made today itself, the anesthetic product, if you look at the global market, and if we even assume conservatively a 10% market share, that itself is a very large number. So you can imagine that the CMO CDM opportunities what we currently have could be even higher? I mean the number what we have said is very conservative.
Okay. And is this pretty competitive or we think that this 30% or 28%, 30% margin that we have, we will be able to get in the newer APIs [indiscernible] the CMOs, I mean, is that possible.
Yes. So whenever we talk about the sustainable 28% to 30% margin that is considered while taking on any new projects made be a CMO made via new product development are made with the existing portfolio. Altogether, blended 28% to 30% is a number that we are extremely confident of maintaining because as a core to Supriya backward integration is a very, very important aspect for any product that we launch, we aim to have a completely backward integrated product, which helps us with the best cost of the product in the market and plus the capacities what we have set up with the new module coming in, we are adding another 300, 350 kl of capacity. So we'll be at 1,000 kl capacities, so sort of doubling the capacity. So the large production scale plus the backward integrated business model ensures that whatever new products also we are taking, we have the best cost available for that product in the market. So all this put together, we are very confident that 28% to 30% we'll be able to maintain.
Okay. Lastly, is there anything to worry because you are largely an export-dependent company. So all these issues on the [indiscernible] and stuff, is that affecting us anywhere? And should we expect any surprises on the numbers in the near term? Or is it all okay right now?
So nothing specific. As such, I would say that is a threat or any negative surprise that you can expect in the next couple of quarters. Nothing like that. I mean, there is always a regulatory challenge, which is there because we operate in a highly regulated environment, but to even counter that we are in a constant CGMP mode. If you look at our last audit, which is the [ Anvisa ] Brazil audit, which is extremely complicated and one of the most difficult audits to pass, we have cleared with zero observations. So that speaks volumes of the company's compliance status. So as such, I wouldn't say that any foreseeable threats or negative surprises.
Okay. So from all the discussions that we've till now, it seems that we are on a recovery path and probably there is some firmness in the way you guys are talking and there is some level of confidence that I can see. So is it fair to assume that we are done with the issues that we had faced. Is the market more I mean more condusive to kind of expecting sustainability and we won't have any jokes right now? I mean the way we saw earlier in '22.
Yes, absolutely. I think we have said it in the past also the company's aim in the last 4, 5 quarters has been to stabilize the product portfolio to reduce dependence on any one particular product or one particular geography to make the product portfolio more robust. And that is what we have been constantly doing in terms of R&D for our new products for the new CMO projects that we are taking for the new therapies that we are including in the basket.
A lot of effort has gone in the last 4, 5 quarters, and those results are being seen. We have had a consistent performance in the last quarters, and that will continue. I think we have worked really hard to sort of diverse any risk what was there in the portfolio. So I think that is now showing and that trend will continue going forward.
Okay. And the CapEx is basically kind of over, I mean no major investments will be there, I guess, and what we at...
I think we have just now announced, no?
We just announced this morning that we anticipate a further INR 60 crore CapEx. So we have a site in [indiscernible], which is a 5,000 square meter plot, which we have had for some time now, and we already have the environment clearance for this particular plot because it is classified under the discharge, we were thinking of multiple CMO CDMO opportunities to do ever. And because we have a lot of strength in the Anesthetic segment we have decided to launch a new anesthetic product. The API will be manufactured at the [indiscernible] site. Currently for the API globally, there is a dependence on China. So we are really boost for that making India kind of a movement and it would be an import substitute. And the same product, there will be a forward integration. So we are setting up a bottling line in [indiscernible] for about 5 million bottles a year. So we will be utilizing the Ambernath side very soon. The site is expected to be operational by quarter 1 of FY '25. So we will need additional CapEx for this activity, which we have assumed at about INR 60-odd crores in the next 2 years. So that is where the CapEx is.
Anything to share on the inventory because we had recently been inventory in terms of the sales that we have. So what is the status now in terms of inventory days? Is it possible to...
Like I had told earlier, I think, see, even in the last quarter, I was saying that there could be charters of us reducing by around another INR 10 crores. So I think that has been already achieved. I think somewhere around the inventory days are also -- what do you call in a very, very controlled number as of now. So I don't see any challenges on inventory building up from now on. Unless and until, there is going to be one more round of COVID or something. I don't think we will be -- our inventory ranges should be somewhere between INR 80 crores to INR 85 crores to around INR 100 crores. I think that is the number which we are looking at, at this stage.
I want to add Krishna, I want to add to the participants. See, people are not to come in a serious way that Latin America. There is a massive change in the regulatory system in Latin America for the last 2 years. Please understand. Last 40 years, China was supplying all over the globe, but this time, the [indiscernible], which is the highest regulatory authority for Latin America for Brazil has come with their own regularity system. They have communicated to the formulators that whoever is supplying currently to Brazil and other countries, should, however, CGMP, GMP certification done by the Avista or the regulatory authorities like U.S. FDA or like that. If the supplier doesn't give any documents, he will be closed by 2024, March, that his ultimatum last. And whoever comes with the audit and the GMP certification before the Anvista, he will continue as the second source and a permanent source. This Is a massive phase now.
Okay. Sir, like the last call also, I think you highlighted at this point that you have extremely...
Yes, Something is very difficult to understand. That's why I have to highlight these for a newcomer is very big way they can come. So India has a very good opportunity now.
So sir, in your talks, I mean, you sense that Supriya actually have been making efforts over there. So what kind of opportunity you see for yourself? And is the shift from China, I mean, that is pretty likely because as you are saying that they won't be as compliant in terms of meeting the standards.
So -- sorry to interrupt, Aashish, can you please rejoin the queue for your question.
The next question is from the line of [indiscernible] Lodha from [indiscernible]
Consultants.
Am I audible. I have got 3 questions, [indiscernible]. One is about the expense on [indiscernible]. We expect this expansion needs to be completed.
So both the expansion. So we are having 2 expansions currently. The low taste side, we are setting up a new module which we call it a module. This is a dedicated production block, which will have around 350 kl of capacity. So this will go on stream early quarter 1 of FY '25. And then in Ambernath, we already had a site like I mentioned before. And this side now we agree furbish for our bottling activity plus we are also setting up an API R&D over there. This will also be operational around the same time, which is quarter 1 of FY '25.
Because a little bit confused because in your presentation, the laterite has been quoted for quarter 3 of FY '24.
Correct.
It has been mentioned, quarter 3 of FY '24. Therefore, there I got be confusion. Quarter 3 [indiscernible] and companies could have notified about the commercial product and the start of the production. But anyway...
Sir, you are right. it is quarter 4 March. It will go into production, but validation batches will start because the pharma industry totally is the regulated industry. You just cannot exercise and go for sale. Three batches were validated and they substantially to go for bigger badges.
My second question is related to that on all our technical tie-up or arrangement with [indiscernible] technology institute. Regarding oral cancer deficiency transit are 2 products -- can tell. Can you put some -- what is the development or whether
See, currently, both the products we are evaluating for the physical trials, what are required both for the commercialization. The clinical trials, et cetera, already are on some products might take some time, but some other products will be commercialized soon by '25 December end or first quarter of '26. So this is the situation because you have to follow the guidelines of the Indian -- the FDA and we have to do certain things and then only we will submit the file to them.
Okay, sir. I agree. But we are on track. We have decided to go for a because that is $48 billion project.
That's why...
That's why the I was wondering I'm working very hard on that.
There why i was wondering the company is doing a very nice in the current operations 1 of the products which is taken, the competitor is selling at INR 32,000 for one single man. I'm trying to give it a very cheaper price to common man and effort. And another product is of a similar way. It is also roughly around about INR 28,000, INR 30,000.
I want to give it at a cheaper price to the Indian community. Of course, export is my major target, but Indian community has to be also safeguarded -- so we are working we are very -- that's why we are very engagement because this much market share of a product. This company can success, then the company and the company can get go a long way pharma industry.
We are already there 39 years, and we will continue forever.
My last question is sir, how much CapEx company is expected to incur this year and as well as a financial FY '25.
Sir, this year, we will close somewhere around INR
105 crores to INR 110 crores. This would be majorly module and some bit of Ambernath and -- next year, we are planning somewhere around the similar number out of which there will be a major part of it will be for refurbishment of module which are all pretty old modules. And of course, the major part for next year would be Ambernath, sir. So that is how the split will also happen.
[Operator Instructions]
The next question is from the line of V. P. Rajesh from Banyan Capital.
And congratulations on the new win that you talked about earlier. My first question is about the revenue target of INR 1,000 crores plus that you were discussing earlier. Is that expected to be reached in fiscal '26 or fiscal '27?
Sorry, Rajesh, couldn't get you. There is some background noise coming from your side. Can you please repeat the question, please?
My question was regarding the revenue target of INR 1,000 crores that you mentioned, will you be likely to be achieved? Is it fiscal '26 or fiscal '27?
Fiscal '27.
Fiscal '27. It's still to be in. SP1 Okay. And then secondly, in the CDMO LMO business that you were talking about, is it fair to assume that you're EBITDA margin will be higher than this 28%, 30% range that you have discussed earlier?
So for the CMO opportunities, yes, while in some projects, the margin range would be slightly higher -- but the guidance, what we are giving is a blended because we already have an API portfolio plus some of the new product launches. And whenever we launch a new product, they will first move into the semi-regulated market. And then eventually, they'll mature to the regulated market. By then, new products will again be infused. So that cycle will be constant keeping that in mind, 28% to 30% is something which will be there on the overall portfolio. While some products, some projects individually might have a higher margin. But on the blended portfolio, it would be about 28% to 30%.
Understood. And my last question is when you think about this INR 1,000 crores revenue, how much of that business will be coming from versus the CDMO CMO business?
So the CMO CDM opportunities also what we currently have are mainly in the API advanced intermediate space. Some of the new opportunities, what we have announced today in the morning, they would be slightly over and above that INR 1,000 crore projection. So if you ask me the INR 1,000 crores, almost 70% to 80% of it would be API and advanced intermediates.
The next question is from the line of Siddhar from Durch Capital.
I just wanted to know that revenues have been relatively flat in the Latin and North American regions from the past year. So is there any particular reason for this as to why they have been flat because major growth has come from I get that.
So one of the reasons you feel it is flat is because like we said, we were in the process of getting the products registered. It is now that the products are registered and the auditor is clear because whenever you put it for [indiscernible] registration, the audit is triggered. So we had the audit in the month of January, and we have cleared that with the observation. So now in the next couple of quarters, you will see that region really picking up. With North America, a lot of the U.S. DMF currently are still under filing, which we expect to happen in the next couple of quarters. So if you look at probably a year down the line, you will see significant contribution coming in from North America and Latin American markets.
Okay. And one follow-up question in the previous quarters, we faced challenges in China. Now that we've diversified where is the additional revenue in the Asia region come from? Because margins have also improved. And like you mentioned, you've only been so the single minimum quantities required from China, and that was your higher margin business, right? Because -- yes. So if you can throw some light as to where is the additional revenue in the Asia region come from? And how have you been able to improve margins in that sort.
So in Asia, our business remains stable. I mean for the new products, of course, yes, you will see good contribution coming in as and when we launch the product because they will be first launched in the semi-regulated market, which is the Asian market. If you look at the major shift, what we have seen is that we are getting better traction in regulated markets in Europe. As I explained earlier also, the Europe sales have shot up from 26% to 42%. And that's one of the reasons, and that's where we are getting the larger revenue from because the existing portfolio, better traction in Anaesthetics segment and Vitamin segments we have seen from the European region.
Okay. And one more question, just the last one. What are the kind of asset terms that you expect from CapEx...
[indiscernible] the asset turns, you would look at somewhere around 2.5x and [indiscernible]. I think that is something which we are targeting in the future.
The next question is from the line of Tushar Bohra from MKVentures.
Congratulations to management for a good set of numbers. So first, I just want to understand what is the status on the existing CMO contracts, one with the DSM province and there was one on the protein side. Where are we in terms of -- in terms of the status on execution. I have a couple of more questions. First on this, please.
So in terms of the CMO, CDM opportunities, specifically the DSM [indiscernible] contract that you mentioned, so the contract we have studied in the past also at its full capacity has about of potential. And we have already done the CP filing, the U.S. DMF filing. We have already received our first commercial order from the SM [indiscernible], and we already have a good forecast available for next financial year as well. So that project is moving really well. In fact, some part of the CapEx, what Krishna mentioned for the refurbishment of the older block, we will also refurbish the vitamin block to accommodate the larger quantities what we are anticipating from them in the next couple of years.
So that one, I would say, is already at the commercial stage, where we have received the first commercial orders. The whey protein one, we recently completed the installation of the equipment at our site. This happened last month, and we have already taken the trial batches and the samples have been supplied to all the large distributors of whey protein across India. We, in fact, are evaluating opportunity for exports also of this particular product in Southeast Asian market. We anticipate that in the next quarter, we will at least be having 20 to 30 metric tons of trial quantities from all the major distributors in India. And then next financial year, definitely, we are anticipating a good volumes. Next financial year, it will commercialize, let's say, quarter 2 of FY '25 is where we will see some significant volumes coming in.
Now what is the addressable tonnage equivalent for us for this product, whey protein?
So for next financial year, the potential could be about 100,000 tons.
100,000 tons.
100 tons, 100,000 [ kgs ], 100 metric tons.
Okay. And what is the size of market now for this product? Just if you have any ballpark?
So in the next 2 to 3 years, we anticipate that we will be able to go to about 800, 900 metric tons.
Great. I'm also on the existing APIs, some of these new products like the [indiscernible], et cetera, if you can just highlight the path to regulated markets where we are vis-a-vis different markets for the 4 or 5 critical opportunities you think outside of the current [indiscernible].
So for a product like the uprate in terms of Europe is one of the largest markets. the CEP is already applied for and it is expected in quarter 1 of FY '25. So very soon, we will get the CP. That will open up the complete Europe market for us. Then other products like Tramadol, Hydropol right, we have applied for the CP in the last quarter. so that we will expect in another 9 to 12 months' time. Again, a very large market in Europe for this particular product. U.S. DMF, we will file in another one month time. Then products like dextromethorphan, we already have with DMF available.
CEP, we will be filing in the quarter 1 of FY '25. [indiscernible], we are filing the CP and the U.S. DMF before the financial year end. So February and is actually when we are planning to file both for the CEP and the U.S. So these are some of the larger opportunities. One more product I would like to mention is [indiscernible] dihydrochloride, for which we have already applied for U.S. DMF, we just received the U.S. DMF number 2 days back, and CEP will be filed end of this month. So this product, again, has a very large market in Europe and U.S. So these are some of the top 4, 5 molecules and the regulatory filing status.
Ma'am, do you have sense on a stable basis, once they are fully scaled up, maybe 2 to 3 years down the line, what kind of potential exists for this basket of 4, 5 products from regulated markets.
So for these 4 or 5 products, I mean, individually, the numbers are very large because these products have a global market, which is very, very large. What I can say is that in the next 3 years, today, the top 3 products, their contribution to the revenue is around 45% to 50%. And the rest of the product contribution is very low. But in the next 3 years, the situation would be that the contribution of the top 3 products would be around somewhere 20%, 25% and the balance contribution would come from the other set of products, including some of the new products.
[Operator Instructions]
The next question is from the line of Aashish from InvesQ Investment Advisors Private Limited.
So as you mentioned, the seasonality in the business and the ups and downs on the quarterly profitability, all these teens are kind of flattening because I think we are moving towards a mix where things could be kind of from quarter-on-quarter better. So Q4 historically has been a very high-margin business for us. I think if I look at last Q4 '23 and '22, these have been the highest margin quarters for us. So would you say that these kind of margins of 40-odd percent EBITDA and the gross margins have been pretty high, that would remain? Or do you think that Q4 also has that product mix change where we will have lower margins?
So if you have been following us for the last more than 4, 5 quarters, we have been indicating that the stabilized sustainable margin for the company is 28% to 30%, which we have sort of maintained in the last 3 quarters as well overall on an annualized basis. the 40% margin, which we were able to achieve the year before that. was because of certain dependency on certain geographies and certain niche business, which we have already indicated, although the volumes have stabilized, there is an erosion in the pricing, which we don't expect to stabilize. So for us, a sustainable margin would be 28% to 30%. You can expect higher revenue in quarter 4. But in terms of margin, even if the margins are slightly better on an annualized basis, 28% to 30% is the only margin indication that we would like to give.
Okay. So you're talking about the China portion that we had that was contributing to the higher margins earlier.
Yes. Correct. So like we have mentioned in the past, also the volume we have gained back, but there is a price erosion. So we have secured ourselves in terms of volume for the next couple of years. We already have a contract in place. and that will go. But because of the price erosion, the margins have been impacted. Like what we are trying to do now is trying to mean the product portfolio more robust and have a more stable margin profile across all quarters.
And have the products spread across more geographies, how the new product can also scale up in the more regulated markets. So we are more focusing on that. We don't anticipate or we are not even expecting that the Chinese business would go back to where it was. I think whatever is the current situation is the long-term situation that it be.
Okay. So the buyer in China that was there, which was giving us much higher margin that the buyers are different now. It's not the same.
So the buyer is still the same. I mean, of course, the agent has changed. The end customers still remain the same because our product is registered in China for many, many years, and we have an NPA certified site. But because of the situation, there slight demand drop of the product plus 1 or 2 local competitors coming in, in that particular product, the price erosion is there on that one.
Got it. One last question on the existing basket. What is the overall run rate except for the new addition that we are doing the product market that was existing until FY '23. What's the potential for those products to grow on their own till when you think? Because I think you mentioned around 10% is a fair assumption on the growth that we can take. But I think the rest have fair market shares on -- in those geographies or for those products. So any idea that you get go -- just trying to understand where are we on that basket and the additions on the can be from new products?
So because we have recently invested a lot in R&D at the Lotte side, plus we are also investing in R&D at the Ambarnath side. In terms of new product addition every year, I think 4 to 5 products is something that we will keep adding into the product basket. Each product because we are now also entering into newer therapies. So of course, we are expanding on the anesthetic line like our Chairman because that's our area of expertise. We are also adding a lot of new therapies like antidiabetic, antianxiety. So it would be very difficult because different therapies, completely different product, completely different global market sizes. It would be difficult to indicate one such lump sum figure that you're looking for. But definitely, all the products that we are looking at are in terms of volume 1,000 metric tons plus globally and which have a very large global volume as well as value. So if we consider even 10% of that on a conservative basis because whenever we start a product, we go in with a complete backward integrated business model and very large capacity. So 10% is actually very conservative. We can definitely achieve much higher than that. But the exact number and all, I think we would be in a better position to give in the coming few quarters when we have formally launched these products.
The next question is from the line of Tushar Bohra from MKVentures.
On this anesthetic product, which has been mentioned, the new opportunity while you've highlighted it a couple of times on the call already. But just to understand, we can't see a filing on the exchange for this. What exactly is the opportunity. Is it a CDMO opportunity or product new product developing? What is this exactly?
So actually, this is a new product development. What it started was on the API front because we have a very strong position in anesthetic API we considered manufacturing the API first. Today, the entire globe is dependent on China for sourcing of this particular API. So we thought of it as an import substitution.
A lot of it is getting imported also in India, with only dependent on China. So we took over the development of the API first. And then we saw that there is a very large opportunity for the bottling of the API also. We reached out to a lot of large multinationals where they were very interested on doing CMO, CDMO [indiscernible] for the finished product, which is the bottle product, and that's why we decided to explore both the opportunities. So currently, we have developed the API. It is put in stability validation batches have been done already. And this API will be manufactured at the Lotte side. And then the bottling, we will be doing it in the Ambarnath side, which we have already refurbished. We have set up a bottling line of around 5 million bottles a year. On the finished formulation front, this product is extremely large. It is the most widely used and aesthetic globally. The current market value of the product is around USD 300 million. And it is growing very, very strongly. It is expected to grow at a 4.4% CAGR year-on-year. So you can imagine how large the market size is going to be.
And because we will have full control of the API with us, we will have an extremely good control at the finished formulation level as well. This will further build on our CMO, CDMO skill it will give us better utilization of the Ambarnath side. And it is a very niche technology where you need a lot of manufacturing expertise, which we have, you need a large capacity, which we will have post the module-e. So all put together, this could be potentially a very large product and a game changer for us.
Second, ma'am, in terms of guidance overall. So just to put some one of the earlier quarters when we -- or the communications, then we had got this product from DSM for the CDMO product I think you had mentioned that it will take a couple of years for commercialization and full scale-up will happen only by FY '27, if I recall correctly. But now what we are able to gather from this call is that we are already have the first commercial order available with us?
So clearly, we are tracking ahead in terms of actual execution to guidance for this project. Is that understanding correct? And second, in light of this and the overall conservative stance of management to maintain 28% to 30% despite a lot of your products moving into regulated markets in the next 2 years, is it fair to say that the EBITDA margin guidance that we are giving, the internal target for companies should be much higher? Or are you going to target 20% to 30% margin in your new projects? Or is it that you're targeting higher but the communication is 28% to 30%. And hopefully, we expect a positive surprise as things as execution matches up [ to ] commentaries.
Also, to answer to your first question on the DSM terminate the numbers what we have indicated, the INR 60 crores, INR 70-odd crores, it would still be -- I mean the full potential would only be reached in '27, athough we have started getting the commercial order, DSM [indiscernible] operates in a highly regulated market for this product.
Their focus is on pharma customers wherein the CP, U.S. DMF and Japan DMF is extremely critical, which we have already applied for some of the trial orders, what they're taking are for their food customers. So the volume actually will increase only post we get the CEP, the USD DMF [indiscernible]. So that is why in the third year, it is in that '26, '27, where we will see the volume sort of jumping and then that full potential will be still achieved in that year on the INR 60 crores, INR 70 crores what we have spoken about. In terms of the margin guidance, like I said earlier also, there are multiple opportunities and products where the margin profile is much higher than 30%. But when we indicate 28%, 30% is on a blended basket of multiple products multiple CMO opportunities, multiple new product infusions into the basket. Of course, there is a potential that we can achieve much higher margins. And of course, the management is always trying to get the maximum possible margins. But this is just a very conservative guidance in terms of the overall blend basket, I would see.
And on the top 3 products, are we seeing any increase in competition or any pricing pressures across the basket of products in any of the major markets No, we are not seeing -- for us, the top 3 products are stable. In fact, 2 of the products are even growing product. because of the niche technology and because of having a complicated process and you need to have a complete backward integration to have a leadership position for the top 3 molecules because of all these things, we still don't see much competition. Of course, the [indiscernible] product in China because of some local manufacturer, that market is impacted. But other than that, all the other markets and all the other geographies still are very stable. We don't see any price erosion happening.
One last question quickly. These formulations in the bottling that we intend to do for this new project, does this open us up for more formulation projects, CMO and even generic formulations business? Or are we going to be more measured about how we build this part of the business? What is the purposes on branching out from your [indiscernible] APIs?
So definitely, once we set up this facility and we move forward, there is always an opportunity which is there for taking on more such CMO, CDMO opportunities in the finished formulation area, because we are already setting up the plant and we operate in a highly regulated environment. So this particular site will eventually have all the regulatory approvals, such as the U.S. FDA, European authorities and [indiscernible] Brazil. So that is what we are aiming at. So yes, we are definitely open for further opportunities in the finished formulation space with the Ambarnath side.
But are we going to actively target in the existing product base on formulations?
So not on our own. We don't want to compete for any of our own products as such. But there are some discussions which we are getting from some customers in the U.S. and Europe, where they are interested in buying certain finished formulations that they were getting manufactured in Europe. But due to the price pressures and all the nonfavorable environment in Europe for production, they want to move it to our site. So some such discussions are going on, but they are at a very, very premature stage.
We will take the last question from [indiscernible] form Lucky Investment Manager Private Limited.
Just a clarification. So currently, the 600 scale that we have is basically at [indiscernible]. And this INR 400 crore block, what is the maximum revenue on this block or what is the capacity utilization that you're running today, either way you want to answer.
As of now, since some multiproduct book, the capacities would be somewhere around 70% to 75%. That would be the utilization ever possible. And see, the plans are on to have the existing INR 1,000 crores from the existing blocks itself. So that is why when we are saying that we are going to expand further into module-e, module-e can even take our revenues around beyond INR 1,000-plus crores also. So that would be the additional advantage, which we will have with module-e.
And the Ambernath unit, which is supposed to come, which is a greenfield is meant for CDM or CMO, right?
Correct.
And this unit, which was supposed to come at the end of quarter 4 FY '24, what is the status there?
So it will now come in quarter 1 FY '25. So just a couple of months and in 1 or 2 months delay in the time line.
And what will be the utilization ramp-up there? Do we have the necessary CDM or CMO orders? And how will this capacity be utilized in?
So currently, we don't have concrete orders, but there are a lot of advanced level discussions which are happening for the working of the anesthetic product that we mentioned before. I think it will take us at least 2 years to have a good utilization because we have to trigger a lot of regulatory inspections. So for the first year, the capacity utilization might not be very high. But I think towards the second and the third year, the capacity utilization would be far, far greater.
[indiscernible], adding to what Dr. Saloni has said, see, we also had -- Chairman has already said in his speech that this plan would be, what do you call, commission phase-wise. So as and when we will have our utilization, we will expand it further. That is how it would be. It will be modular, and it will not be an earlier sort of stuff.
And for the module-e at the [indiscernible] plant, when is this supposed to come? And what is the CapEx that you're putting here?
It would be around Q1 FY '25 and this model would be somewhere around INR 100 crores to INR 120 crores. That would be the CapEx. And these are mostly funded out of our IPO proceeds. The INR 1,000 crore revenue which you mentioned on the current block of module-e, right? INR 1,000 crores revenue for module-e?
So what do you mean? Yes. what do you call some in room facility of module might need to be used here.
That is just the one direction I would like to make while we will not be using the intermediate capacity of module-e, we are going -- I mean, running short on the lean room, the final processing areas. So some part of module-e, the term areas will be needed for achieving this INR 1,000 crore mark.
So this INR 1,000 crore revenue, the question was how many years do you think you should reach the INR 1,000 crores based on whatever products have been pipeline based on the existing , 50%, 60% of your portfolio is 3 products growth from there and the new products. So this INR 1,000 crore revenue potential, what should be the number of years [indiscernible].
So we have always maintained that by FY '27, we should be in a position to achieve this number.
Thank you very much. In interest of time , we'll end the call. I would now like to hand the conference over to Ms. Saloni Wagh for closing comments.
I would like to thank everyone for joining us to discuss Bali development our debt of new products and the impact of revenues derived from successful DMF filings and corresponding product launches should prove supplementary. Besides the launch of our CDMO business should enhance revenues further by laying the ground for an attractively sustainable future that enhances value for all our stakeholders. Thank you, everyone, for joining. Have a good day.
On behalf of Supriya Lifescience Limited, that concludes this conference. Thank you [indiscernible], and you may now disconnect your lines. Thank you.