Lupin Ltd (LUPNY) Q4 2023 Earnings Call Transcript

Lupin Ltd (OTC:LUPNY) Q4 2023 Earnings Conference Call May 10, 2023 6:30 AM ET

Company Participants

Vinita Gupta - CEO & Executive Director

Ramesh Swaminathan - Global CFO, Head Corporate Affairs & Executive Director

Nilesh Gupta - MD & Executive Director

Conference Call Participants

Damayanti Kerai - HSBC

Kunal Dhamesha - Macquarie Research

Krishnendu Saha - Quantum Asset Management Company

Madhav Marda - Fidelity Investments

Cyndrella Carvalho - JM Financial Limited

Surya Patra - PhillipCapital

Sameer Baisiwala - Morgan Stanley

Neha Manpuria - Bank of America Merrill Lynch

Kunal Randeria - Nuvama Wealth Management Limited

Prakash Agarwal - Axis Capital Limited

Chirag Dagli - HDFC Asset Management Company Limited

Operator

So good evening, and welcome to Lupin Limited Q4 FY '23 Earnings Conference Call. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to the management. Thank you, and over to you.

Vinita Gupta

Hi, everyone. This is Vinita here. Very pleased to welcome you to our Q4 earnings call. I have with me are MD, Nilesh; as well as our CFO, Ramesh. We are very pleased to close the fiscal year with continued improvement in operating margins. Our team has had a sharp focus, as you know, on getting our India business back to double-digit growth and quarter-after-quarter improvement in U.S. margins as well. This focus, along with growth in other areas like API, EMEA and APAC enabled us to deliver margin improvement as planned.

We are committed to sustaining this positive momentum into the new fiscal year and driving strong growth across all our regions, in particular in India based on our recent sales force expansion and the U.S., aided by material new product launches. Our India business, as you would have noted, recorded an 11% plus growth per IQVIA ex the diabetes portfolio, growth was 15% plus, in line with the market growth.

In Q4, we made a significant investment to expand our sales force in India and enhance our reach. We're very pleased that overall, we delivered margin improvement for the organization despite this material investment. In the U.S., we improved our margins for a third quarter in a row through portfolio optimization, maximizing the high-value products and continued cost optimization efforts. We were able to improve our margins despite increase in R&D spend quarter-over-quarter. Overall, when you look at it for the year, the R&D spend for the U.S. stood at $100 million with an increasing proportion of complex generics, in particular, inhalation and injectables.

Apart from India getting to double-digit growth and U.S. business improvement, our API business recovered in the quarter with demand growth in our core products. Our EMEA business grew driven by South Africa quarter-over-quarter and Fostair Luforbec in Europe year-over-year. In APAC, our Philippines subsidiary, performed very well.

Switching to R&D we continue to drive the shift to complex generics with a focus on respiratory and injectable products. We filed 19 products in the U.S. and 10 ex U.S. Of the U.S. filings, we had 4 injectables, 3 nasal sprays, and we made progress on Respimat and ELLIPTA products on both platforms. Apart from generics, on the R&D front, we optimized the new chemical entity R&D spend in Q3 to focus on our -- on 2 of our oncology pipeline programs, significantly reducing the discovery spend.

Switching to compliance. Compliance front, as you know, we have made progress, in part, with positive outcomes on the Ankleshwar, Nagur injectables and Somerset sites. We've also made substantial progress on our remediation efforts in Tarapur, Mandideep and Pithampur Unit 2. We are committed to ensure that we get all our sites to a consistent and sustainable level of compliance. I'm sure we'll see more progress on this front in fiscal year '24.

On the M&A front, our recent acquisitions have performed well with Anglo-French, Southern Cross, Xopenex, Brovana in the U.S. and Paloma in Brazil, all delivering per plan. Our recent acquisition of Medisol in France enables us to accelerate our injectables franchise in Europe. We are very pleased to be able to close that.

We have come a long way in fiscal year '23 and are excited about the prospects in fiscal year '24 as we launch products like Tiotropium, darunavir and others in the U.S. and drive consistent double-digit growth in our India business. We remain focused on driving operating margin improvement as we grow our business.

With this, I will hand it over to Ramesh for a deeper analysis of our performance.

Ramesh Swaminathan

Thank you, Vinita. Friends, welcome to a refreshing set of numbers. We are hopeful that it sets a stage for better numbers here on. Sales for quarter 3 -- quarter 4 FY '23 are at INR 4,330 crores as compared to INR 4,264 crores in Q3 FY '23, which is a growth of 2% quarter-on-quarter. On a year-on-year basis, the company registered a 12% growth over Q4 FY '22 sales. In the U.S., during the quarter, the U.S. business registered a small degrowth of 1.3% in local terms, total currency terms, on a sequential basis. The sales have gone down -- come down from $177 million to $174 million in Q4.

During the quarter, albuterol sales came down marginally due to a seasonality factor, India region. India branded formulations business declined by 3.1% in Q4 FY '23 vis-à-vis Q3 FY '23 whilst on a year-on-year basis, the sales grew by 8.9%. FY '23 and year-on-year, the growth was 3.3%. Overall market growth during Q4 '23 was 14.9% and whilst Lupin grew by 11.3%. Lupin witnessed highest growth in Q4 as compared to the earlier quarters. Q1 was 1%, Q2 was 6.2% and Q3 was 7.5%.

Adjusted for diabetes, we are close to market growth rates, which is 14.9% vis-à-vis 15.2%. Loss of exclusivity and genericization of the anti-diabetes business has impacted our growth rate as patented portfolio is a large chunk of our diabetes portfolio. We do well, apart from the top tiers Lupin in gynecology and GI.

API business. API business sales grew by 14.6% on a quarter-on-quarter basis as core cephalosporins, API sales continued the path to recovery from higher sales in Cefaclor and 7 ACCA. On a year-on-year basis, sales was -- growth was 46.4%. EMEA, sales for EMEA region grew by 19.3% year-on-year was 11.4%. South Africa, quarter growth of 35.3% in local currency terms, led by higher sales in babies' products. U.K., the degrowth was 6%, but the higher sales over the last quarter is primarily driven by Fostair. Germany, quarter-on-quarter degrowth of 12% was an outcome of Q3 being higher for Germany -- for the market due to competition stock-out reasons.

Growth markets. Sales of growth markets grew by 4.7% quarter-on-quarter. Philippines, traditionally, Q4 is a strong quarter for Philippines. Nearly all divisions performed well in comparison to last year. The growth was 14%. Australia, quarter-on-quarter and year-on-year growth was led by higher sales in our new acquisition, Southern Cross. Q3 was lower due to shipments getting deferred to Q4.

Grin, quarter-on-quarter degrowth was 23.6%, led by stock-out of certain products due to plant shutdown. Brazil, quarter-on-quarter growth of 9.4% was led by acquired products from Paloma. Gross margins, this is an important year. Q4 FY '24, gross margins is 59.7%; as compared to Q3 FY '23, gross margins of 59.8%. The sales mix, especially India region, split apart in the slight lowering of the gross margins.

Friends, at the beginning of this year, we spoke about optimization initiatives on various fronts. I'm glad to state that we did achieve good progress on some elements of the program. As in the case of our sales returns, airfreight and so on, both elements of which get folded into this line. Secular inflation of over 5% in improved prices has, however, eroded into the gains, marring visible progress here. We continue to work on write-offs and other initiatives including launch of meaningful products that would make a difference in the gross margins and, hence, to the bottom line.

The employee benefits line, Q4 FY '23 is INR 773 crores versus INR 764 crores in Q3 FY '22 and INR 703 crores in FY '22, Q4 FY '22. Quarter-on-quarter increase is mainly due to field force expansion in the India region, higher bonus accruals, ESOP in the U.S., et cetera. On an ongoing basis, we expect employee cost around 19%. Despite the lower growth on the top line, the year-on-year increase has been only 3%, reflecting the initiatives on the workforce reduction that we carried on at various functions. This also capped as a negative impact of FX translation resulting from a depreciating rupee.

Manufacturing, other expenses, Q4 FY '23 is INR 1,033 crores vis-à-vis INR 1,333 crores in Q3 FY '23 and INR 1,321 crores in Q4 FY '22. The quarter-on-quarter savings is a result of reduction in business settlements and other expenses of onetime in nature. Year-on-year savings is on account of a reclassification done in travel in Q4 last year from employee benefits.

Friends, whilst there are savings as a result of optimization measures, the translation impact of outside-India expenses as well as an increase in sales promotion spends in India, along with minor investments in adjacent businesses, offset the gains made. EBITDA front. Operating EBITDA, excluding ForEx and other income is at 13.9% for the current quarter, reflecting an improvement of 170 basis points in comparison to the previous quarter. The improvement in EBITDA is primarily driven by optimization endeavors, lower other expenses and PLI benefits. With launch of newer products and sharper focus on cost, we expect material continued optimization of EBITDA across quarters over the next year.

R&D. R&D is 7% of sales at INR 305 crores in the current quarter as compared to INR 289 crores at 6.8% of sales in Q4 FY '22 and 8.9% in Q4 FY '22. We continue to pivot to more -- INR 289 crores was actually Q3 FY '22. We continue to pivot to more complex products and platforms while continuing to focus on cost and outcomes. Year-to-date, ETR is 36.9% for the quarter. The ETR for the current quarter in only 5.9%. The lower ETR in the current quarter was mainly due to higher profit in the U.S., apart from normalization of accounting for the effective tax rate.

Other operating income. Quarter-on-quarter, there is an increase in other operating income on account of inclusion of PLI benefits, somewhat reduced by other settlement income, other milestones and the like. ForEx gains is at about INR 26 crores in Q4, a gain in FY '23 was -- Q3 FY '23 was INR 16.6 crores. So with that, I would like to open the field for discussions.

Question-and-Answer Session

Operator

[Operator Instructions]. So the first question is from Damayanti Kerai.

Damayanti Kerai

I hope I'm audible.

Ramesh Swaminathan

Yes.

Damayanti Kerai

Okay. So my first question is, can you update us on the status of your Tiotropium filing? Because you had earlier given 2 TAD dates, 1 in April and 1 in June, so if you can, a bit, talk about it.

Vinita Gupta

Yes. So we've been in active dialogue with the agency back-and-forth on information requests over the last 2 months on Tiotropium. The TAD date right now is, on paper, July and August, so -- instead of April and August. And we hope that we will actually get approval sooner. We've had communication on a monthly basis with the agency on the application. Just last week, they cleared a drug master file for the product, which is a very positive sign. So we hope that we should be able to get approval in the next month or 2 on the outer side by July, August.

Damayanti Kerai

Ma'am, why 2 TAD dates? Is it similar like plant and without plant inspection?

Vinita Gupta

Yes. That's the 2 TAD dates. But the extension of the TAD dates is based on the information request that the agency is making. And when we respond to the information request, they have an automatic 90-day from the response that they give us as a TAD date. So we've been trying to work with the agency to figure out how we can avoid that. So some of them are just clarifications that they're asking of us.

Damayanti Kerai

Okay. My second question is on R&D. So now you are down to, say, INR 3 billion a quarter. So -- but at the same time, you are progressing in some of the complex generic products you talked about ELLIPTA, Respimat, et cetera. So my first question is, how should we look at R&D expense from here on? And if you can split R&D into your complex generic spend and NCE spend, that will be helpful.

Vinita Gupta

So Ramesh, you want to take that? The R&D spend?

Ramesh Swaminathan

Like, to answer the first part, we are pivoting to more…

Vinita Gupta

Yes. Yes. So overall, strategically, we've been pivoting to more of the complex generic platforms and continue to do so. So when you look at our generic R&D spend, at this point, the percentage oral solids versus complex platform, stimulation and injectables has changed in favor of inhalation and injectables. And we continue to drive that shift towards complex platforms. I mean, the NCE spend that you asked about is very small. In the scheme of things, it's less than 5% at this point, right?

Ramesh Swaminathan

10% really, but it's actually coming down to about less than 5%, in fact, being proposed of this current fiscal. We are pivoting more towards in the complex generics. So the resilience of the own audits is actually coming down. That used to be well above 45%. It's coming to much lower figures. And the spends for injectables and inhalations are certainly going up in the course of this fiscal and certainly would be the way forward is there.

Damayanti Kerai

Just to clarify, so OSD, you said earlier, it used to be 45% of the generic spend. It is coming down and more is going for the inhalation and...

Ramesh Swaminathan

Inhalations and injectables for sure.

Damayanti Kerai

Okay. And my last, like your fourth quarter number includes costs for the MR addition in India. Does it reflect fully? Or, like, more to come in coming quarters?

Ramesh Swaminathan

Yes. A huge chunk of it is actually captured in Q4, but there's, of course, the annualization impact of that because these were recruited in the fourth quarter. The annualization impact will certainly be captured along the full -- the entire year next year. This fiscal -- the current fiscal that is.

Operator

The next question is from Kunal Dhamesha.

Kunal Dhamesha

This is Kunal from Macquarie. First question, again, on Spiriva, would you be able to share the nature of the information requests that we are getting from FDA? And secondly, on the same, the next Spiriva, would we have clarity as to whether we will require plant inspection or not by now? And if yes, hypothetically, let's say, if you require, what is our preparedness? Have we done any more inspection? Have we proactively employed consultants, et cetera?

Vinita Gupta

So I'll take the second question first, that we have always been inspection-ready in the Unit 3 for FDA in case they come to inspect the site for Spiriva. At the same time, we don't know for certain, but we believe that at this point, we are pretty far along with the agency, the information requests that we're getting beyond the last CRL that we responded to was, really, clarification on the testing method, sample size and the like, the rationale for it.

And what is giving us comfort is the fact that they started clearing parts of the application. We've already informed that the PD/PK was cleared a while ago. And the fact that the DMF has been cleared last week, and we continue to get minor queries at this point gives us the comfort that we are pretty close.

Kunal Dhamesha

Sure and so -- we are still sticking to a September time line or second half time line per month? Second half of FY '24?

Vinita Gupta

We're hoping first half.

Kunal Dhamesha

Okay. Because last time, I think we said September launch for September '23 launch.

Vinita Gupta

Well, so I think August was the outside TAD date. So we hope that we'll be able to get approval before that and be getting launch ready.

Kunal Dhamesha

Sure. And secondly, I think, Ramesh, one for you. Whatever cost savings that we have done that is getting offset by some of the line items, which have seen increase, like sales and marketing, et cetera. But still, would it be possible for you to quantify, in terms of our target of INR 550 crore cost savings, which we said at the start of FY '23? Where would we be right now? And what's the runway left for us for FY '24?

Ramesh Swaminathan

Yes. We have been able to achieve well over INR 325 crores to INR 350 crores across at least 3 of the 4 levers that we have progressed along. There is, of course -- so most team left in so far as the inventory write-offs is concerned. And we believe on the idle time as well, which will -- it is not a "switch on, switch off," kind of a thing. So it has to be over a period of time. So we will exercise those levers and potentially see gains over the next several quarters.

Kunal Dhamesha

Sure. And I think last year, we had a failure to supply penalty roughly around $26 million, $27 million. Would you be able to share the number for this year?

Ramesh Swaminathan

Yes. Well, I don't want to actually make that explicit, but has come down dramatically. It's, in fact, in high single-digit numbers right now.

Kunal Dhamesha

Sure. And lastly, on the profitability expectation for next year, would you be able to share any form of guidance or range?

Ramesh Swaminathan

We believe that the momentum would be sustained. And so going forward, we'd like to see that Q2, Q3, Q4 will see successive improvements. For sure, after the launch of Spiriva and other products that we're speaking about, darunavir and others in America. And of course, there is expansion of Fostair in Europe and the like.

So with the cache of products that we're launching across various markets, and that's actually -- you would see the top line lifting up to double-digit growth rates for the entire year. And of course, with the tight leash on costs, you would expect EBITDA margins also to go up. We do think that towards the end of this current fiscal, you would find a substantial increase closer to impact of where we think we should be, upward of 18%.

Kunal Dhamesha

Within that question, exit run rate.

Unidentified Company Representative

Exit run rate, yes.

Ramesh Swaminathan

Exit run rate, that's what I meant. And for the full year, we could talk about at least upward of 15%.

Kunal Dhamesha

Krishnendu?

Operator

Yes. Thank you very much, Kunal. The text, we'll take from Krishnendu Saha.

Krishnendu Saha

Can you hear me?

Ramesh Swaminathan

Yes, Krishnendu.

Krishnendu Saha

Just wanted to get a hang of the U.S. numbers for the quarter. It is flat. So just trying to understand, we had one extra month of Xopenex and Brovana. We had -- I think, so we had an AG also in the mid of December and we relaunched. So is this $175 million sustainable? What were the misses and what was the plus, additional spur, which gets to this $175 million. I'm trying to understand that part.

Vinita Gupta

So the difference was $177 million versus $175 million, $2 million. And there is a good amount of seasonality that you see in Q3, especially with flu products as well as albuterol. So albuterol, while the share remained the same, the volume came down a little bit in Q4. And but otherwise, Suprep was very strong and offset some of that actually, as well as we had our in-line products, so fairly stable, I would say.

Krishnendu Saha

I see. So Suprep, we still have 2-player market, right?

Vinita Gupta

That's right. It's the authorized generic and ourselves so far.

Krishnendu Saha

So most -- financially, it is -- we see this -- how long do you think that this can continue? Any guess there? Right? I'm not an expert. I'm just trying to understand your view on this.

Vinita Gupta

Is hard to predict. So far, we don't see any new entrant imminent.

Krishnendu Saha

And last thing, on the last approval, which we launched about that, again, over the , well-made the -- the 2-player market, have we launched it? Is it -- could it be meaningful?

Vinita Gupta

Which one are you talking about? I didn't catch that.

Krishnendu Saha

[Indiscernible].

Vinita Gupta

I don't recall having launched it in the U.S.

Krishnendu Saha

We haven't. Oh, okay. Sorry, my mistake. I thought with 31st March, we launched that.

Operator

Thank you very much, Krishnendu. So the next question is from Neha Manpuria.

Neha Manpuria

Vinita, on Spiriva, you don't see a scenario of FDA giving us a possible CRL when the TAD date comes, right, based on the queries that we're getting? Or is that still a risk?

Vinita Gupta

That will be highly surprising. I mean, it's hard to predict the agency at any point in time. But just based on where we are, we feel like we are close to the finish line here.

Neha Manpuria

Okay. Got it. And second, Ramesh, if -- given Spiriva launch, et cetera, it's still tough to predict, and there's also the market share that we end up ramping up to, if there is any delay in Spiriva, then how should we look at the margins from the 13% that we are doing? Could there be legs to the margin? Or all of that margin guidance that we've given is dependent on the new launches?

Ramesh Swaminathan

I don't, and besides, this situation where by Spiriva is going to be in doubt. But in the unfortunate event it does happen to be something like that, the base is set with the current levels, and we expect, in fact, better numbers to come in from our India business, and we have products across others also. So I would certainly say that there will be margin improvement. But of course, the more -- the needle really move sharply when Spiriva has really launched.

Vinita Gupta

I would just add to that, other than Spiriva, which of course, will be the largest opportunity, as we see it right now. I mean, we also have darunavir in June. We have cyanocobalamin that we hope to launch out of Somerset in August. We have diazepam gel that we hope to launch in July. We have Varenicline that we hope to launch, we have a TAD date of October for that product, and we have bromfenac, the ophthalmic product, we're the exclusive first to file. That is at the tail end, March.

So while we have Spiriva as a major new product opportunity, we also have a few others that will help us grow the business. Needless to say, I mean, the margin guidance that we just spoke about, there will be some impact, if hypothetically, Spiriva was not -- would not come through. But again, we've looked hard. We worked hard on cost optimization, and we'll continue to do that to make sure that we continue to drive our margins forward.

Neha Manpuria

Understood. And Vinita, one other question on the U.S. business. I think you mentioned in the television interview about price erosion being, if I heard correctly, low single digit, mid-single digit, just wanted to understand, are you seeing, let's say, things improve on the pricing erosion front or let's say, at least customers not coming back to you with repeated request for -- ties revision on the baseline products given what's happening with the plants for competitors?

Vinita Gupta

We're starting to see that. And I think I said mid- to high single digit, Neha, on the interview because that's a normalized level that we saw in previous years. We've -- given the supply chain challenges that companies have had, our customers have become, again, very, very focused on reliability of supply and are again engaging in more longer-term relationships, contracts or at least the commitments, which gives us comfort that they are prioritizing reliability of supply over price.

I mean, of course, we always like to get the best price. But they've struggled a lot this past year with the flu season products. So the flu season products, in particular, we are finding that they're engaging with us in a more strategic dialogue on how do we really ensure that we meet the market demand. How do we partner to meet the market demand. So the partnering dialogue is gaining momentum over the transactional model of business with our channel partners.

Operator

So the next question is from Prakash Agarwal.

Prakash Agarwal

Am I audible?

Ramesh Swaminathan

Yes Prakash.

Prakash Agarwal

Just on the India business, we talked about we expect double-digit growth. When we see April data, I mean, the month is pretty flat. Volumes are down 5%. So first question is what is the strategy that we are following? I did hear you have added some MRs. If you could explain how much you have added with therapies and what is the strategy despite a very soft start for the industry?

Nilesh Gupta

We've added close to 1,000 representatives, and we've done 5 new divisions out of that. There's a sixth division that will come up in this first quarter as well. We're seeing growth across the board coming back. We're seeing growth on respiratory. We're seeing growth in cardiac, we're seeing some normalization of growth in diabetes even, and the intent would be for that to continue. Good growth in areas, like gynecology, for example.

So I think the mood is extremely upbeat. Our own internal numbers on April look higher than whatever estimates we originally had, so I do think we are moving in the right direction. I don't think -- I think that 2 of these -- of the divisions that we've added that have started giving us some returns. The others that we've just set them up in Jan, Feb, March, so that will really come in the quarters to come.

Prakash Agarwal

Okay. And what's the final count as on the March for -- after 1,000 MRs getting added?

Nilesh Gupta

About 7,000 and about 9,300 all-inclusive for the sales team.

Prakash Agarwal

7,000 is the MR with the managers and supervisors? Or?

Nilesh Gupta

I believe it's 7,000 and 9,300, right?

Ramesh Swaminathan

Yes.

Nilesh Gupta

The number -- so 7,000 MRs and 9,300 including the total sales team.

Prakash Agarwal

Understood. Fair enough. Secondly, on the facilities issues that we are having across the U.S. FDA issues. Just wanted to have a flavor in terms of what is the remediation expenses we are incurring currently across. And as and when, which ones would be the first one that could get out of the FDA scanner and by when? I mean, if you could just very ballpark what is the thought currently?

Nilesh Gupta

Sure. We can talk about the remediation, I think. I think when they'll get cleared is a little bit of crystal ball gazing. I think the spend is definitely higher at this point of time. For example, there's a considerable amount of spend being done on nitrosamines and the like. Part of it would be for the industry as well, but certainly for us, bases some of the observations we had in Tarapur.

So we've made great progress. I think we're close to remediation of that site. We are close to remediation of Mandideep as well. Pithampur, we're hoping, with the next update, we close out all the observations that we had. And the next step, August would be to engage with FDA and get feedback. So I think there is definitely additional spend at this point on the compliance front which we would hope to see normalize in the second half.

Prakash Agarwal

That would be to the extent of what, a couple of million dollars? Or it's a larger number to look at?

Nilesh Gupta

No, it is larger than that.

Ramesh Swaminathan

Yes. We spent a really large amounts on consultants itself.

Prakash Agarwal

Okay. So about $10 million, something like that? I mean, some ballpark number?

Vinita Gupta

Times 2.

Prakash Agarwal

Okay. And this is annual, right?

Vinita Gupta

That's right.

Nilesh Gupta

Meaning there was a certain number in the base also. All of this is not incremental, but there is definitely room to optimize here.

Vinita Gupta

Yes.

Prakash Agarwal

Okay. And at best, it would be, what, 6, 12 months, while we see, like, a clean slate? Or it could be long run as well?

Nilesh Gupta

So a large part, we expect to complete in the first half. So definitely, there would be optimization that we would expect to get in thereafter. And some of it will flow into the next half as well.

Prakash Agarwal

Got it. Got it. And just last one here on looking at past notes, we had talked about products, 1 more for injectable tie-up. Just wondering if there's any update. We had 2 tie-ups, if I'm not wrong, 2 injectables.

Vinita Gupta

That's right.

Prakash Agarwal

Is that plan still on? Or where are we on that?

Vinita Gupta

Yes. So they filed doxycycline. I think we have TAD date pretty soon. It's a product that we intend to launch in the next 12 months.

Prakash Agarwal

And the other one?

Vinita Gupta

AmBisome is still in development.

Prakash Agarwal

Okay. And it is limited to 2 products? Are we planning more?

Vinita Gupta

For those partnerships were the two products.

Prakash Agarwal

And are we doing more such types or…

Vinita Gupta

Yes. Yes. On the injectable front, we have a pretty active effort ongoing to partner as well as acquire injectable products that can accelerate our build of the injectable franchise.

Nilesh Gupta

You would have seen the approval that we had with some of the capital points as well.

Vinita Gupta

Yes. So we have, I think, 5 or 6 capital point products that we intend to launch in the next 12 months.

Operator

We'll take our next question from [indiscernible].

Unidentified Analyst

We had a couple of questions. One, pegfilgrastim, what's the update. I thought that was also expected this fiscal?

Vinita Gupta

Yes. So we're just waiting to hear back from the agency on pegfilgrastim. We have -- after the inspection of the Pune site, we have responded to all of the queries that the agency had and believe that we should be getting that approval if they have no objection. But we're just waiting to get that approval to really determine next steps with the product.

Unidentified Analyst

Understood. Could you please repeat the product you said, the ophthalmic product you said could get launched in March.

Vinita Gupta

Bromfenac? Prolensa?

Ramesh Swaminathan

Prolensa.

Unidentified Analyst

Okay. And the list of products that you mentioned for launch this fiscal, do any of them depend on clearance of these FDA issues at the facilities? Are all de-risked?

Vinita Gupta

Actually, bromfenac does.

Nilesh Gupta

Only Prolensa.

Vinita Gupta

Yes. Prolensa is Pithampur Unit 2, which we hope to clear.

Unidentified Analyst

Okay. Great. And finally, Ramesh, this year, we had a very high tax rate going forward for the next couple of years. What do you expect the reported tax rate to be?

Ramesh Swaminathan

No. As you can imagine, the tax rate has been high only because back, again, the last picking subsidiaries across. But since then, actually, Brazil has turned around. America is expected to, of course, do well next year. So I expect the rates to come back to normalized to around 30% next year. It could be a little lower than that also.

Operator

So the next question is from Surya Patra.

Surya Patra

Sir, first question on the general overall cost. See, in fact, thanks for improved funds in the quarter, but still generally, the margins are below par versus the industry trend. We know the kind of the challenges, what we have been facing. But having seen the kind of cost containment measures and all that, so we have started seeing some kind of sign of improvement.

But could you give some sense that, okay, which are the key cost element that we are targeting currently and where that we can see some improvement, because that will give some kind of confidence about it, because we have been under a -- under the sub-15% kind of margins in long.

And one of our big revenue-driving market that has been under loss, so could you give some key cost line items that you are targeting to really control? And also, what is the update on that hiving of the discovery research division, what we have been talking about to improvise our overall margins. So let's say, over next 2- to 3-year kind of origin, what are the kind of margin progression that we can see? And for that, what cost line items or cost items that we are really considering in this?

Ramesh Swaminathan

I'll start with the easiest. Starting with NCE, we have actually ramped down the overall infrastructure associated with that. So INR 150 crores spend is actually coming down to much lower numbers. That's the first. So essentially, we'll say close to about INR 70 crores to INR 80 crores on that. On the cost lines, yes, we do realize whilst there has been considerable savings and progress along with these initiators.

And I spoke about, about INR 350 crores, INR 325 crores to INR 350 crores kind of savings, we still believe that there is a good INR 250 crores that is possible across lines like inventory write-offs, which still remain high because of products that we're adopting. Impurities nitrosamines and the like is impact in those as well. And that would, of course, come down. It's not as if it's going to be a situation continuing for long.

We're taking active measures in terms of looking at the inventory control. And the evidence of that is really seen in the working capital optimization measures that we're taking -- which is actually bearing fruit even this particular quarter. There is a base below which it is impossible to go below, when it comes to impact cost threshold, so to speak.

So there is a minimum infrastructure that we need to maintain in terms of staff across various functions. But for sure, we do believe that there is still some scope, when it comes to, for example, facilities on the infrastructure, for example, on the R&D or solid dosages front and so on, because we cannot keep it lower.

And potentially there is scope for product optimizing. If the volumes are what they are, then potentially, there is scope for footprint reduction across manufacturing lines and the like. So it is going to be a continuous process. But it's not as though it is going to be something which can be achieved within a period of 2 quarters or 3 quarters.

It is going to be over an elongated run, possibly over the 18 to 24 months period. The only thing that we can actually assure you is that the focus is going to be constant. It is going to be -- it's going to be razor sharp in that sense. And we will show you results over time.

Nilesh Gupta

Ramesh, if I can just add. I think first of all, in the gross margin line, I think you guys did a bunch of efforts around that. We did a bunch of efforts around that. A very large portion of that was wipeout by inflationary process we discussed.

Same way on the SG&A front, there's a significant increase. The majority of that increases towards India and the related adjacencies that we have. In fact, we've optimized expenses and earned a bunch elsewhere. So there is an optimization plan in the U.S. That is actually what's helping getting the numbers to a better level at this point of time. But there's also an investment plan in markets like India that is resulting in an increase in some of these lines as well.

So it's not going to look linear from that perspective. It's going to be different strokes in different markets, but U.S. is, clearly, moving down the optimization path. Clearly, the focus on new product launches as well. In markets like India, we're obviously investing. Like, we said, we added the sales force. There's a cost that ties to it.

That's just started, so there's going to be additional selling promotion spend that will come around that as well. But that obviously is with a clear visibility of return that we will give literally within 12 months, starting within 12 months from the time that we get the sales force on the ground, so. So I think the margin will obviously improve, but there are these forces moving things up and down a little bit, too.

Ramesh Swaminathan

Actually, you mentioned a lot of that at the start of the session itself in terms of my opening remarks.

Surya Patra

Yes, sure, sir. Sir, my second question is on the, let's say, all your effort towards the injectable, ramping of your injectable base. So the acquisition of the Medisol, this one recently that we have done. See, this is a very small company, although it is not very influential one to the overall size and this thing. But see, whether it is having any capability apart from the products, that is one.

And secondly, on the injectable front, for our existing key market, what is the kind of core strategy that -- or when are we expecting to see kind of a meaningful contribution from the injectable portfolio is second. That is my second question.

Vinita Gupta

Yes. So your 2-part question on the injectables. The first, Medisol just gives us access to France. France is a market where we've had very little exposure right now. In Europe, we're really in Germany, U.K. directly and then France, with the NaMuscla. But this small toehold, so to say, just gives us entry into the hospitals in France.

And it allows us to really take our injectable pipeline that we have put in place for the U.S. as well as other developed markets and bring it into France to -- the hospital segment in France is actually pretty attractive for the portfolio that we have invested in. So it gives us an access point.

It doesn't give us a material infrastructure or sales force or -- it really gives us access to the market. And it's a very accretive deal. It's a small asset but accretive, which our focus has been on all our acquisitions, to really buy accretive assets that don't dilute our earnings.

So on the contribution from injectables, I'd say that fiscal year '25 onwards, I mean, so we have been building a pipeline. We have a good number of products filed. Even in fiscal year '23, we filed liraglutide. We filed glucagon -- we filed -- and the captain products we filed. So we'll see 6 or so injectable products coming to market in fiscal year ' 23. They'll be -- '24 rather.

They'll be the smaller products. The larger products, whether it's glucagon or RISPERDAL CONSTA, we expect in fiscal year '25. So that will be our -- hopefully, a big ramp-up year for injectables. And then we are trying to figure out ways and means that we can accelerate that with products that we can partner, products that we can acquire. The team -- the U.S. generic team is actively working on it to figure out how we can accelerate the injectable build.

Surya Patra

Okay. Just a last question, if I may. On the domestic formulation business, say, how should we see --because, see, having seen this segment really contributing meaningfully to everybody's growth who were present during the difficult time of the last 2 years, so hence, everybody is now kind of trying to enhance, expand or whatever in the domestic business.

So it is nothing but just enhancing the competition. So while the growth of the industry or growth of the base is kind of a known and the trend is kind of getting followed on this. So is it because of the incremental competition and everybody trying to have their share in that, so whether the profitability is likely to be compromised going ahead?

Nilesh Gupta

I couldn't help but smile when you were saying the message. I think there's a massive opportunity in India. There is a massive need in India as well. For example, the sixth division that we're going to launch is an extra urban division where we will go to doctors in geography that we don't even cover at this point of time. So I don't think it is competition with each other.

Definitely, when you launch products, obviously, you compete against other companies. But I don't think it's that and I don't think it's going to have a reflection on pricing. There is an opportunity. In the bigger scheme of things, I think it's the GDP, the amount of spend on health care out of GDP, the affordability, the ability for people to pay, to people to be diagnosed, they're tested.

That is the bigger story in India. And I think anybody who's really focused on India is driven towards that story. Certainly, we are. So I don't see this as a limiting opportunity going forward. I actually see this hopefully as something that should accelerate in the next few years.

Operator

Thank you very much, Mr. Patra. Now may I request Sameer, Mr. Sameer Baisiwala to go ahead with his question.

Sameer Baisiwala

Just quickly, how many complex injectables and inhalers have been filed? And what's the approval visibility over the next couple of years?

Vinita Gupta

So on the injectable front, we have a few. I mean, glucagon that I mentioned, I think 4 or 5 products, the liraglutide, glucagon, ganirelix and then for those product, even your doxycycline. On the inhalation front, it's been the products you know so far, in terms, Spiriva and Dulera, but we've been -- like, this year, we have filed a couple of nasal -- 3 nasal sprays as well. So by smaller opportunities, but still meaningfully add to the respiratory portfolio.

And I'd say that the ELLIPTA filing as well as Respimat should really happen in the next fiscal year. I mean, we are making good progress on these products, but in terms of the development cycle, based on where we are, there will really be fiscal year '25 filing.

Sameer Baisiwala

Okay. Excellent. And -- and just talking about albuterol, what's the outlook for the current year fiscal '24, both in terms of pricing? And is there a room for market share gains over here?

Vinita Gupta

If there are any market disruptions, they certainly will be ready to take share. I mean, so far, the market has been fairly stable. And we've got this 20% plus share, and we hope to be able to sustain it at current pricing or as close as possible. So, I mean, I think if there are any disruptions, certainly, we'll have the opportunity to gain share. But it's turned out to be a really nice product for us.

Sameer Baisiwala

And you said you expect the pricing to be stable for the foreseeable future.

Vinita Gupta

Yes, we think so.

Sameer Baisiwala

Okay. Great. And just one final on India. For the full year fiscal '23, I see you have grown at 1% or so. Whereas the price increases, I would imagine, have been more like 7%, 8%. So does that mean there has been a quite big volume erosion in India? That's one. And second, what's the pricing outlook for fiscal '24 for India?

Nilesh Gupta

Yes. So I think the bigger story we impacted on diabetes, and definitely, we're deeper on that, right? So -- and from a value perspective. So that certainly happened. As far as the pricing outlook, so obviously, the WPI was 12.2% for the likes, for the scheduled products. For the most part, we would have taken that increase.

We typically don't take it on anti-infective, for example. And then obviously, we optimize other products and take an annual increase as well. There have been input material increases as well last year, so I think we definitely wanted to take more of the increase.

Typically, I think in the nonscheduled portion, 5%, 6% is the price increase that you end up sticking to. So I think the pricing -- last year, if you take out diabetes, it's a growth story. EBIT diabetes is actually degrowth. So from that perspective, obviously, there's significant room to move. That diabetes part is starting to stabilize.

Diabetes is about 20% of what we do in India. So there is a direct impact on the overall India number when we do it. But we're starting to see all of that starting to even out. Irrespective, it was slow to start right, but now that's growing nicely. Cardiac is starting to get to the double-digit number as well. We basically see everything. And diabetes will not, but I think other than diabetes, everything else will be in double digits.

Sameer Baisiwala

And then just to conclude on this, after a 7%, 8% price increase last year, 5%, 6% this year, I mean, 14% put together. I mean, you think markets, doctors are quite okay to absorb this kind of pricing? I can't remember when last we had such high price inflation in the drug industry there from us.

Nilesh Gupta

Yes. So as far as these controlled products, as you know, there was an additional NLEM list. So net-net, there's actually a negative impact on that portfolio from what happened in November, December. So on that list of products, which was there, obviously, there is an impact. I'm not sure we're you're getting the 7% to 8% from, That certainly was not our price increase last year either. But...

Sameer Baisiwala

That's the number you get if you see industry-wide volume versus value growth for the industry as a whole in most companies, and that's where it's coming.

Nilesh Gupta

No, I think that would also be the portfolio that they're shaping. If there's going to be more oncology, then the value will go up and everything. But I can't comment on that. You can comment on that better. From our perspective, I think, obviously, we look at products very closely from affordability as well.

Certainly, with our peer set as well. We would not be priced at the lowest product. We would certainly not be priced as the most expensive product as well. And there have been significant cost increases which have happened over the last couple of years, right?

If you look at the base product, look at anti-infectives, look at vitamins, look at some of the starting materials out of China, massive inflationary cost. It is the same thing that we're explaining on the gross margin line. You can directly pass them on in India. I think you only get an opportunity once a year to go and address that. And you would address it where it's possible to do. Where you feel that it's not, you don't.

Operator

The next question is from Mr. Madhav Marda, please.

Madhav Marda

I just had a few questions. Just wanted to understand on the R&D side. We're at about 7% of sales in Q4, and about, I think, INR 300 crores on an absolute basis. I'm not sure if you gave some guidance in terms of where we could be as a percent of sales on an absolute basis, if we should be, like, annualize our Q4 number? Or can this go up?

Ramesh Swaminathan

No. So essentially -- so they would be, actually, pivoting to more complex, but its magnitude will be around the same vicinity, between INR 1,300 crores to INR 1,400 crores max.

Madhav Marda

INR 1,300 crores to INR 1,400 crores R&D. Okay. Okay. And the second question was on the India business. By when does the diabetes portfolio generalization impact come through in the base? Like, is it Q1 FY '24, where it's fully in the base and then sort of we can start growing at a faster pace?

Nilesh Gupta

No, no, it goes into -- I think it goes into '25 as well, I think, as some products go, right? So I think there is definitely -- if you look at what's happened -- so there are 2 things here, right? Products that we would have in-licensed. where competition comes in or we reduce pricing in line with competition or other products which are getting genericized. Both of these things are the 2 elements eating away diabetes, right?

So you would have seen, in the DPP-4s, one by one, each of them has been going off patent. In the SGLT2s, same way. That's been happening as well. That keeps impacting the market over time, because certain prescription behavior is fitting when a higher-priced product remains, but a lower priced in the same category is available as well. I think that will go on till 2025.

From India region perspective, while that's a top line story, it's not a bottom line story because in the in-license portfolio, obviously, you make a lower margin profile versus products that you make yourself. But I think we obviously enjoy the wave of the increase in the entire diabetes sales over the years as these new products were brought to market by us.

But on the flip side, we are seeing this as well. I think it's part of life, it's going to pan out in the next 2 years. But until then, the growth, I think, on diabetes will remain possibly -- in my opinion, possibly high single digit, not to get into that double-digit category.

Madhav Marda

Got it. And just one clarification. You mentioned about INR 250 crore cost impact from the nitrosamines. Could you just clarify what that was? Like, that's a savings which can come to...

Ramesh Swaminathan

INR 250 crore or anything like that, we said about $20 million…

Nilesh Gupta

We said $20 million on consultant spend with regards…

Ramesh Swaminathan

Well, total…

Nilesh Gupta

Total, anything in particular yes.

Madhav Marda

Facilities, amortization, okay. Okay.

Operator

Can I request Mr. Chirag Dagli to go ahead with this question, please. Thank you.

Chirag Dagli

So we spent INR 1,500 crores CapEx, organic CapEx in FY '23. Can we have some details on what this CapEx is on? Any much larger question…

Ramesh Swaminathan

To the acquisitions. No, no. So essentially, a chunk of that CapEx is far lower, in fact, less than half of what you're mentioning. A huge chunk of it is actually for M&A, and it was spread across in fact, what we bought in India, what we bought in Australia and what we bought in America.

Chirag Dagli

So there is a separate line item, Ramesh, which says payment for acquisition of business. That's INR 291 crores at separate. There's also another one on capital expenditure property plant.

Nilesh Gupta

So what you're seeing there on the acquisition, that's only for 1 piece, which hasn't happened. All the other acquisitions, whether it was with the Sunovion, for Xopenex, Brovana or the Paloma acquisition in Brazil, those are all getting accounted in the line, which is where you see the capital expenditure. And both this acquisitions, specifically the Sunovion one was a significant one from an acquisition perspective, which we did, yes.

Chirag Dagli

These line Items is property, plant, equipment…

Vinita Gupta

Do you want me to clarify it?

Ramesh Swaminathan

It's intangibles actually. You know what we bought into brands and so on. So that's becoming as part of that.

Nilesh Gupta

But I think like you said, the CapEx is basically of the order of INR 600 crores, INR 700 crores. That's global. And about half of that would be really going towards maintenance kind of spend and the other part would be for newer capabilities.

Ramesh Swaminathan

So both lines together is INR 1,700-odd crores is what you see overall.

Chirag Dagli

And we hope to maintain this kind of branded INR 700 crores, INR 600 crores organic CapEx.

Ramesh Swaminathan

The CapEx would be around the vicinity, even it's INR 600 crores to INR 700 crores. So potentially M&A is really going to be based on the proposition, the presence itself.

Chirag Dagli

Understood. Understood. And this M&A, we keep doing these small, small bolt-on deals. My question is, really, how do you -- is there an internal hurdle IRR payback period, return on capital? How are you thinking about -- how do you value…

Ramesh Swaminathan

Of course, we do have that. It really varies, for example, we take the Medisol thing, it is actually very strategic. So of course, the payback period is -- it's very reasonable from our perspective. So it really is dependent on the proposition and what does it do to our overall portfolio. In the respiratory space, for example, we found an opportunity with Brovana and Xopenex. And also, essentially, Paloma, for example, helps in actually stabilizing the overall portfolio in Brazil. So it is actually a bit of strategy and of course, the kind of returns associated with it.

Vinita Gupta

For a long time, our focus has been on big payback and high IRR and EBITDA multiple.

Ramesh Swaminathan

And being EBITDA-accretive as well, as much as possible in the very first year.

Chirag Dagli

So we've spent about INR 1,000 crores on these acquisitions, right? INR 1,700 crores of overall CapEx like you're saying…

Ramesh Swaminathan

Yes, that is correct. Everything put together.

Chirag Dagli

So this -- so my question is this INR 1,000 crores. If you can just give us a sense of -- how are you thinking about payback periods, IRRs or whichever way you're slicing. This seems like a fairly large amount. I would have been surprised if you would have told me 12 months back that you would spend about INR 1,000 crores. With a single-digit ROIC, you would spend about INR 1,000 crores on, I mean. I'd be surprised. And that's the question that how have you evaluated from...

Ramesh Swaminathan

No, our threshold limits -- as I said, it is pretty high. So I would say anything north of 19% to 20% on an IRR basis, which includes, in fact, the terminal value of that. So even without that, it will be well above 16%. So from our perspective, it actually adds value -- economic value to us. Our cost of funds is about 11.3% or -- and thereabouts. So to that extent, all these propositions as well as the -- well above those limits, it makes sense to us.

Chirag Dagli

Understood. And just the last question is on the tax rate. At what point do we become a normalized tax rate company?

Ramesh Swaminathan

So in the recent past, we have been limited by, in fact, losses in various subsidiaries. And that included Brazil and America. And of course, we will still have our entity, R&D; pinned entity and I mean in Netherlands. That would potentially be because it's more R&D spend.

But we do expect the other business subsidiaries to start making money for us as was the case in America until very recently. So effective tax rates would actually normalize around the 28% to 30% from next year onwards, though if you -- I think in India itself, it's much lower than that.

Chirag Dagli

So FY '25, you're saying, 28% to 30%.

Ramesh Swaminathan

In FY '24. The current year, we will take it down to about 28% to 30%.

Chirag Dagli

Understood. But a normalized rate should be '25, Ramesh.

Ramesh Swaminathan

It could be, but that -- so you could expect that out of India, because it is possible if I would move to Regime 2, a large regime. But of course, we still have tax breaks in India. So that's why we are still shaking on to that. But if you talk about other parts of the globe, incremental tax rates are in the vicinity of 30% in most parts really. It is really a function of those.

In America, for example, you still also have federal -- apart from federal taxes, you have state taxes as well, to begin with. And if you -- so there then, I know it. So potentially, you won't be actually making any -- paying any payments…

Vinita Gupta

Yes, federal tax.

Ramesh Swaminathan

Spend some federal tax out there.

Vinita Gupta

Take tax.

Ramesh Swaminathan

Take tax out there.

Nilesh Gupta

I know we're at the hour, but maybe last 2 questions?

Operator

Next is Ms. Cyndrella Carvalho, please. Next question.

Cyndrella Carvalho

If I can understand, if you are looking at the coming quarter in U.S., it will be seasonally weak quarter, right, if I follow our general trend. Do you see our quarterly run rate of $175 million sustaining? Or should we assume it more towards the seasonality that we always consider?

Plus, with the U.S. base, can you help us understand how Suprep is expected to pan out for the coming entire fiscal FY '24? Along with albuterol, do you think these both products will continue at the same level for us today? Or you see that they will see some competition, though you highlighted earlier that you do not see meaningful entry into prep yet. But any further thoughts will be helpful. That's the first question.

Vinita Gupta

Yes. So we definitely will see a seasonality impact in the first quarter for the U.S. business, all the anti-infectives, cephalosporins and azithromycin, oseltamivir, all of that portfolio will be down. So there will be an impact on revenues. But we have some upside also.

We have darunavir launch, and we'll see when we can launch Spiriva, June or July based on FDA approval. We have some launches as well to offset it. But for us, once we launched Spiriva, that's where revenues pick up in a major way in the U.S. But otherwise, the seasonality will have an impact in the first quarter.

Cyndrella Carvalho

And on albuterol?

Vinita Gupta

Yes. So albuterol is already a multi-competitor market. And we believe that it's stable from the standpoint of competitive and from a share perspective for the competitors. We don't see any near-term entrant in neutral in albuterol in the next 12 months.

On Suprep it's hard to tell. We don't believe that there is any imminent approval right now based on what we understand of the supply chain. But it's hard to tell how long it will remain exclusive. It -- we think the next 3 to 6 months, it should. It could be beyond that as well.

Cyndrella Carvalho

Okay. Okay. And if I have to understand the overall scenario, ex these new launches, like, if we keep Suprep aside, do you see the price erosion at the mid- to high single-digit run rate only? Or do you think it is higher than that?

Vinita Gupta

We think that it's gotten to that high single-digit run rate, but for the new products like Suprep.

Cyndrella Carvalho

Excluding new products, right?

Vinita Gupta

Yes. Yes.

Cyndrella Carvalho

That's right. And if I may understand, Ramesh, how should we look at the hedging rates for us. Can you give us some idea around the coming quarters, where are we…

Ramesh Swaminathan

There is this philosophy that we should not hedge fully. The current -- the current -- at least, trends kind of indicated to they're going to stagnate around the 82 mark. But given the volatility around the economic front, it's good to be actually open, at least for a huge chunk of our portfolio. And that's what we have actually done. We have booked some things for the future and those are well into very acceptable rates at this juncture. But a fairly large chunk of our overall exposure is still unhedged.

Cyndrella Carvalho

Okay. And if I may ask one more question on the API side, what is keeping this kind of growth in the API? Do you think there is some seasonality to this? Or do you think this is sustainable? And what were the key drivers for the API segment to out-book all? Can you please highlight and help us understand? Any more granularity will be helpful.

Nilesh Gupta

Okay. So, we'll have to wipe out -- we'll have to wrap up. It is -- we're already 5 minutes over time. As far as the API business is concerned, we were basically doing very low in the first 3 quarters. And there's really been a successive build, all the quarters on the API business.

Every quarter, the business grew. And in Q4, obviously, we've seen a lot more normalization in products like 7 ACCA and Cefaclor. That's really what's driving it. We expect it to continue. We don't expect this growth to continue, but we would expect it to kind of continue more or less at this kind of levels. Last question, please.

Operator

Can I request Mr. Kunal Randeria to -- Kunal, are you there? Hello?

Vinita Gupta

No. Certainly, we can wrap up.

Nilesh Gupta

It's okay. We can wrap up then.

Kunal Randeria

Am I audible?

Vinita Gupta

Yes.

Nilesh Gupta

You are.

Kunal Randeria

It just a couple around Spiriva now is my understanding correct, that Spiriva volumes have been shrinking. And even within that, Respimat share has been rising. So -- which means HandiHaler has been maybe going down in double digits in the last 5 years?

Vinita Gupta

That's right.

Kunal Randeria

So what -- so just -- what is your expectation once the handy -- the generic comes in the market? Do you expect some share back from Respimat to HandiHaler?

Vinita Gupta

We haven't assumed that, but hopefully, that happens from a pricing perspective, that the retail has a -- retailers have the incentive to shift some.

Kunal Randeria

Right. Right. And what would be the market size today at the manufacturing level?

Vinita Gupta

It's -- I think a gross level is still $1 billion plus at the gross sales level.

Kunal Randeria

Okay. The net level may be $500 million-odd, would that be a correct understanding?

Vinita Gupta

I would think so. But from a pricing perspective, it's really the gross level that is important. Do we have another question? Or can we wrap up?

Operator

Yes, I think that pretty much concludes our Q&A session. I now hand the conference over to the management for closing comments, please.

Vinita Gupta

Okay. Great. Well, thank you, everyone. Hopefully, we've been able to respond to all of your questions. If not, I'm sure you'll be following up with Ramesh. But as we mentioned at the outset, we are very pleased with the progress we have made through the year, through fiscal year '23, closing the year on a positive note in terms of margin improvement.

And we continue to be very focused on driving profitability as well as growing our business into fiscal year '24 with our new product launches as well as the basic business, India business as well as other parts of our business. So look forward to a successful fiscal year '24, and we'll look forward to speaking with you again in the next quarter. Thank you.

Ramesh Swaminathan

Thank you.

Operator

Thank you so much to the management team and the panelists. On behalf of Lupin Limited, that concludes this conference. Thank you for joining us. And you may now disconnect your lines and exit the webinar. Thank you so much.