Aurobindo Pharma Ltd (AUROPHARMA) Q3 FY21 Earnings Concall Transcript

Aurobindo Pharma Ltd (NSE:AUROPHARMA) Q3 FY21 earnings concall dated Feb. 10, 2021.

Corporate Participants:

Krishna Kiran — Manager of Investor Relations

Santhanam Subramanian — Chief Financial Officer

N. Govindarajan — Managing Director

Swami Iyer — Chief Financial Officer, Aurobindo Pharma USA

Sanjeev Dani — Chief Operating Officer and Head of Formulations

Analysts:

Neha Manpuria — JP Morgan — Analyst

Girish Bakhru — Bank of America — Analyst

Anubhav Aggarwal — Credit Suisse — Analyst

Cyndrella Carvalho — Centrum Broking Limited — Analyst

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

Shyam Srinivasan — Goldman Sachs — Analyst

Nitin Agarwal — DAM Capital — Analyst

Tarang Agrawal — Old Bridge Capital — Analyst

Sameer Shah — Valuequest — Analyst

Rahul Veera — Abakkus AMC — Analyst

Arpit Kapoor — IDFC Mutual Fund — Analyst

Praful Bohra — Systematix — Analyst

Surya Patra — PhillipCapital — Analyst

Vishal Manchanda — Nirmal Bang — Analyst

Kunal Dhamesha — Emkay Global — Analyst

Presentation:

Operator

Good morning, ladies and gentlemen. Welcome to the Aurobindo Pharma Limited Q3 FY21 Earnings Conference Call. [Operator Instructions] And there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Krishna Kiran. Thank you, and over to you, sir.

Krishna Kiran — Manager of Investor Relations

Thank you. Good morning and a warm welcome to our third quarter FY21 earnings call. I am Krishna Kiran from Aurobindo Pharma Investor Relations. We hope you have received the Q3 financials and the press release that we had sent out yesterday. These are also available on our website.

With me we have our senior management team represented by Mr. N. Govindarajan, Managing Director; Mr. Sanjeev Dani, COO and Head, Formulations; Mr. Santhanam Subramanian, CFO; Mr. Swami Iyer, CFO, Aurobindo Pharma USA. We will begin the call with summary highlights from the management, followed by an interactive Q&A session.

Please note that some of the matters we will discuss today are forward-looking, including and without limitations statements related to the implementation of strategic actions and other information on our future business, business development and commercial performance. While these forward-looking statements exemplify our judgment and future expectations concerning the development of our business, a number of risks, uncertainties and other important factors may cause actual developments and results to differ materially from our expectations. Aurobindo Pharma undertakes no obligation to publicly revise any forward-looking statements to reflect future events or circumstances.

And with that, I will hand over the call to Mr. Santhanam Subramanian for the highlights. Over to you, sir.

Santhanam Subramanian — Chief Financial Officer

Yeah, thank you, Krishna. Good morning, everyone. I hope that all of you and your families are safe and healthy. We will now discuss the results for the third quarter of the financial year 2021 declared by the company.

For the quarter, the company clocked a revenue of INR6,365 crores, an increase of 8% over last year. The EBITDA before ForEx and other income increased by 13% year-on-year, to INR1,369 crores. Reported net profit was at INR2,946 crores against INR705 crores in the corresponding previous year. The net profit after exceptional items, net of tax for the quarter stood at INR837 crores.

In terms of the business breakdown, Formulation business in Q3 FY ’21 witnessed a growth of 11% year-on-year to INR5,682 crores and contributed 89% of the total revenue. API business clocked a revenue of INR682 crores and accounted for 11% of the total revenue. In the Formulation business, the US business posted a growth of 7% year-on-year to INR3,172 crores. On a constant currency basis, US business increased by 3% year-on-year, to around $431 million.

During the quarter under review, we have filed eight ANDAs. Revenue of Aurobindo Pharma USA, the company that’s marketing oral products in USA, has increased by 11% year-on-year for the quarter. Revenue of AuroMedics, the Injectable business decreased by 11% year-on-year to $69 million for the quarter. However, the Injectable business witnessed a healthy growth of 6% sequentially. We have filed a total of 141 injectable ANDAs as on 31st of December 2020, out of which 87 have received final approval and the balance 54 are under review.

European Formulation’s revenue clocked at INR1,671 crores in Q3, 2021, an increase of 13% over last year. In euro terms, the revenues increased by 1% year-on-year. Growth markets revenue increased by 15% year-on-year to INR396 crores in Q3 2021. On a constant currency basis, growth markets reported an increase of 10% year-on-year. ARV Formulations revenues were at INR443 crores, increased by 42% over previous year. On a constant currency basis, ARV revenue witnessed an increase of 36% over previous year. The increased conversion from TLE to TLD across the geographies has led to this growth.

R&D expenditure is at INR390 crores during the quarter, which is 6.1% of the revenue. Net organic capex for the quarter is around $76 million. The closing rupee versus US dollar rate was INR73.07 in December ’20 versus INR73.77 in September 2020. Net cash during — including investments at the end of December ’20 was $117 million, versus net debt of $194 million at the end of September ’20. The cash and short-term investment are at $813 million. The average finance cost is at 1.5% mainly due to availing multiple currencies loans.

This is all from our end and we are happy to take your questions now.

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, we will now begin with the question-and-answer session. [Operator Instructions]

The first question is from the line of Anubhav Agarwal from Credit Suisse. Please go ahead. Mr. Anubhav Agarwal, your line is in the talk mode. Please go ahead. Ladies and gentlemen, we seem to have lost the line for the current participant. We’ll move on to the next participant, that is from the line of Neha Manpuria from JP Morgan. Please go ahead. Neha, your line is in the talk mode. Please go ahead.

Neha Manpuria — JP Morgan — Analyst

Hello?

N. Govindarajan — Managing Director

Go ahead, Neha.

Neha Manpuria — JP Morgan — Analyst

Yeah. Can you hear me?

N. Govindarajan — Managing Director

We are able to hear you, Neha, go ahead.

Neha Manpuria — JP Morgan — Analyst

Okay, sorry. My first question is on the Injectable business. If I remember correctly, you had mentioned that our Global Injectable business is roughly about annualizing $380 million last quarter. And these — if I look at the numbers, you’ve reported this quarter, close to about $435 million or $440 million. The US has seen some improvement quarter-on-quarter, but what’s driving the momentum in the Global Injectable revenue?

N. Govindarajan — Managing Director

So, I think first of all, Neha, as you would appreciate, maybe here like a specific quarter may not give you an answer, because there can be a different mix, suddenly our European Injectables has gone up for that particular quarter, like I think it would reflect differently. As far as our overall Generic Injectable business has been seen significant improvement in the last five years. The current annual run rate as we have mentioned earlier also, like it’s around $380 million and this is expected to reach around $650 million to $700 million over the next three years.

This will be predominantly driven by our new plant in the USA as well as a new plant which is coming up in Vizag, which would be serving the needs of Europe and emerging markets, and our expansion in Unit IV and ramp-up in Eugia. These are the ones which would propel the growth to the numbers, whatever I mentioned, Neha.

Neha Manpuria — JP Morgan — Analyst

So I shouldn’t read the $109 million in this quarter as a sustainable revenue? Is there some one-off element in that? Is that the way to look at it?

N. Govindarajan — Managing Director

No, I’m not saying that — I think it is not one-off, I’m saying, Neha. Like — my request to you is to look at it on an annualized basis rather than on a quarterly basis. That is what I’m suggesting.

Neha Manpuria — JP Morgan — Analyst

Okay. Understood. My second question is on the US business. If I look at our oral solids revenue, we’ve seen a pretty strong momentum quarter-on-quarter. Is there any specific product, etc, that drove this? If you could give some color on that, particularly given we’ve seen fairly muted trends from most of our peers.

N. Govindarajan — Managing Director

Swami?

Swami Iyer — Chief Financial Officer, Aurobindo Pharma USA

Okay. Yes. Good. Thank you. I’ll take this question. Thanks, Neha, for the question. Yes, US has been growing steadily, and this continue to be the story. We have fairly secular growth. I cannot talk about any one item that has particularly grown. On an overall basis, we’ve been doing well. We’ve been increasing the volumes. We — you understand we have a large portfolio, and we have been able to capitalize on some of the opportunities.

Neha Manpuria — JP Morgan — Analyst

Okay. So this is more from existing portfolio?

Swami Iyer — Chief Financial Officer, Aurobindo Pharma USA

That is correct.

Neha Manpuria — JP Morgan — Analyst

Okay. Thank you so much.

Operator

Thank you. The next question is from the line of Girish Bakhru from Bank of America. Please go ahead.

Girish Bakhru — Bank of America — Analyst

Yeah, hi. Thanks for taking the question. Govind, just on PLI scheme, if you could just elaborate what is the investment going to happen in terms of the timeline? And is the USP mainly around the process that Aurobindo will bring on the table? Or what is the main USP for us there?

N. Govindarajan — Managing Director

So first and foremost, I think, as far as PLI is concerned, it’s in the public domain that we have been allotted three products. And we have sought certain queries, Girish, in terms of like specific to those three products. Depending on the answers, I think we may go ahead with three or we may go ahead with two products. In case if we go ahead with three products, you should take the capex as around INR3,000 crores. But that would happen over a period of 30, 32 quarters — sorry, 30, 32 months, Girish.

And as far as the USP is concerned, I’m sure you are aware of the fact that Aurobindo is one of the first company to have gone and started manufacturing PenG. And even the current process, which most of it is practiced even in terms of like, I think, direct crystallization even in PenG was like, I think, was done by Aurobindo way back, I think, when we had set up the shop in China. So we have a tremendous amount of knowledge in these products. And as far as USP is concerned, like, one is like our awareness of the process. There is one more advantage for Aurobindo is because most of these products we are talking about, we ourselves consume almost 40% to 45% of our factory consumption into our own API, which should get into the market.

Girish Bakhru — Bank of America — Analyst

And when you say that you may actually do two or three, is this the case that you will have to have a separate plant for each product, especially for these fermentation-based products?

N. Govindarajan — Managing Director

Obviously, sir, because if you’re doing PenG, that would be an independent plant. And when we are doing 7-APA, that will be an independent plant, just to throw some light in terms of how would it work. It would be independent plants only, Girish.

Girish Bakhru — Bank of America — Analyst

Right. And just on the margins, if you could give some color, I mean back-of-the-envelope calculations for us. Assuming that this business has even an inherent margin of 15%, the API business, should we assume that this is materially margin accretive for you post FY ’24?

N. Govindarajan — Managing Director

Yeah. I think the — what I would say is you should not look at it for the first year whenever we start. I think we should give some time in terms of measuring the margin because the first year would be always used for stabilization. I would say, as far as margins are concerned, our objective is to make the product competitive with or without incentives. So that’s how we need to look at it. And this is one of the reasons we had participated in this.

Girish Bakhru — Bank of America — Analyst

Thank you, I’ll join back the queue.

N. Govindarajan — Managing Director

Thanks, Girish.

Operator

Thank you. The next question is from the line of Anubhav Agarwal from Credit Suisse. Please go ahead.

Anubhav Aggarwal — Credit Suisse — Analyst

Yeah, hi guys. Good morning. Govind sir, one question on the API target that you’ve given in the presentation that you want to double it over the next four to five years. So effectively, adding that next set of $400 million sales, a couple of questions there. One, are you including any benefits from PLI scheme over there? Or that’s only the bulger part, so you’re not including any benefit there? And second for this next set of $400 million is, what kind of capex you will put there to get there?

N. Govindarajan — Managing Director

Yeah. So there are two aspects to it. One is, obviously, it includes the PLI scheme, not necessarily the incentive as well because our objective is, like as I have told you that we would like to be competitive with or without incentive. That is our objective. Partially, that incentive could have been considered but not necessarily fully. What is important is our growth. Again, when we are talking about doubling that is our CFO, which is basically not only based on PLI, but based on like in terms of our own opportunities we are seeing in terms of our existing APIs as well as certain large volume products we would like to do.

The objective is, like, if you remember, like for the past almost around few years, we have been supplying more quantity to our internal consumption, and we have not been aggressively positioning or promoting ourselves as an API manufacturer for our external customers. One of the reason is, obviously, because of the lack of capacity as well. So one is like we would be expanding our existing capacities, including creating some large volume blocks to cater to our customers externally. Second is we are — in terms of existing products, plus we are also planning to invest on a separate unit, which is — which we already have the infrastructure, like, just opposite our existing unit in Vizag. It’s around 90 acres or so, where we are planning to manufacture four large volume products, which are not currently in our portfolio, so which would also, like, I think, help us in terms of achieving this particular goal.

And as far as capex is concerned, apart from the PLI scheme for the current — the expansion of API, it would happen over a period of another two to three years. It could be additional INR800 crores is what I would say, Anubhav.

Anubhav Aggarwal — Credit Suisse — Analyst

So just effectively, incremental capex of almost like $100 million, can you do incremental sales of $400 million?

N. Govindarajan — Managing Director

We also have PLI, as I told you, that we are talking about the INR2,000 crores to INR3,000 crores approximately. That plus this particular incremental would allow us to reach that particular level is our belief, Anubhav.

Anubhav Aggarwal — Credit Suisse — Analyst

So this will be very back-ended because PLI largely will be in fiscal ’24, fiscal ’25. So effectively, this target of doubling sales will largely happen in fiscal ’25. Significantly — I’m saying it will be significantly back-ended, this target achievement of doubling.

N. Govindarajan — Managing Director

It would be significantly back-ended. You are right. I mean, I think, you cannot, like, I think, have it in the next 1 year, 1.5 years to see that particular impact of the situation because it will be significantly back-ended. You are right. But still, we are confident about growing the API, even — I mean it may not be commensurate to reaching this particular target. But definitely, like I think organically, we would still be growing with the existing capacity as well as like internally, also, we are expanding capacity. To give an example, like in Vizag, we already have created cell for some large volume products where we need to fill in equipment and do it. Those would happen in the next 1 year to 1.5 years itself, Anubhav.

Anubhav Aggarwal — Credit Suisse — Analyst

Okay. And second question was on the China market. Can you just talk about how large this business can be for you in, let’s say, two, three years? You already have a good set of filings, but most of the filings are on the oral side. So one, are you looking at injectables as well? And how large this business can become, let’s say, in three years?

N. Govindarajan — Managing Director

Yeah. So to start with, I think China, obviously, is an important geography for us going ahead. We are setting up an oral solid manufacturing facility in China. And we are fairly confident about the performance because we have already filed 28 products, and we expect around eight to 10 products approval in this calendar year, which will also allow us to participate in the tender as we move forward and after we started receiving approvals. I’m not putting a specific number on that at this juncture, but as we move forward, like I think we’ll also be having injectable for China as well.

Anubhav Aggarwal — Credit Suisse — Analyst

But can this be, let’s say, $150 million, $200 million opportunity, let’s say — or let’s say $100 million to $200 million opportunity in, let’s say, three years? I mean just as a very, very broad indication.

N. Govindarajan — Managing Director

Over a period, that opportunity is definitely there, Anubhav. I don’t want to assign a specific timeline for a simple reason because it is also correlatable to the timeline of us receiving approvals as well.

Anubhav Aggarwal — Credit Suisse — Analyst

Okay. And just one last question from my side on the vaccines front. When you look at this business — of course, near term, you guys have benefit from the COVID vaccine. But when you look at this business more sustainably over a three years period, how large this vaccine business could be for you with already the facilities that you have today for it?

N. Govindarajan — Managing Director

So currently, the facility what we have created is for bacterial facility, which will start manufacturing the PCV, pneumococcal vaccine, like, I think, as soon as we receive the approval. And in fact, we have already presented our data to the SEC to — we are awaiting clearance from them in terms of starting the Phase III. And the day we start it, you can take it as approximately nine to 12 months, we’ll complete it. And we’ll target within the same timeline to get approval as well. And then we will start launching the product in India and then move it to the Brazil market. So that is our objective as far as PCV is concerned.

So the revenues will start in the next, let’s say, 1.5 years or so. That is as far as PCV. And the viral vaccine facility currently will be predominantly used for COVID. But there are two objectives why we have created that — rather three objectives why we have created that facility. Short term, rather we advanced creating that facility is for the COVID vaccine because we saw an opportunity. But apart from that facility, we need it because we would like to make a clinical material for Auro Vaccines, which is our US arm, which is developing the viral vaccine both for the future.

So they also like need this particular capacity so that we can optimize our cost of not doing contract manufacturing in the western world. That is the second objective. The third objective is we are also looking at the contract manufacturing opportunities for the viral vaccine facility. And obviously, like I think the bacterial facility also, apart from whatever our needs are there, like I think whatever is the capacity available, we’ll be exploring for both viral and bacterial from contract manufacturing opportunities as well.

Anubhav Aggarwal — Credit Suisse — Analyst

Just to ask a very simple question on this. Can this be $100 million, $200 million opportunity, let’s say, fiscal ’24, both put together pneumococcal and the contract manufacturing opportunity?

N. Govindarajan — Managing Director

Again, Anubhav, you know my answer. Over a period, definitely, like it is — that opportunity is available. I’m not giving a specific timeline because this is subject to again the various approvals we need to receive, Anubhav.

Anubhav Aggarwal — Credit Suisse — Analyst

Okay, thank you, Govind. Have a good day.

N. Govindarajan — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Cyndrella Thomas Carvalho from Centrum Broking Limited. Please go ahead.

Cyndrella Carvalho — Centrum Broking Limited — Analyst

Thanks for the opportunity. Sir, if you could help us understand the current US scenario in terms of injectables, a bit in terms of how the pandemic is still impacting us. Or are we seeing recovery? Sequentially, yes, we are doing but on the current quarter. If you could elaborate a bit.

N. Govindarajan — Managing Director

Madam, your voice was a bit feeble. So I presume your question is like I think in terms of injectable business, is it recovering, is I presume the question. Is it fairly the one which I understood or anything you want to add to that question?

Cyndrella Carvalho — Centrum Broking Limited — Analyst

Yes, sir. No, yes, you’re right, sir.

N. Govindarajan — Managing Director

As I was explaining to Neha also, because this particular one quarter sudden sweep is not because like I think there is a — one-off is happening because, there was slowdown because of COVID, and that is now ramping up. That is one of the reasons we always say that as far as the injectable is also concerned, we measure on an annual basis rather than on a quarterly basis. Yes, the answer is, the business is coming back and both in terms of like, I think, AuroMedics as well as Acrotech Biopharma. Swami, would you like to add something to that?

Swami Iyer — Chief Financial Officer, Aurobindo Pharma USA

Sure. Definitely. Yes. So our business has been growing, and we are doing better definitely, but it would have been far better if it is completely normal. The elective surgeries are not fully back. There are — many states are still having a problem. So looking forward, I think we should do better in terms of injectables.

Cyndrella Carvalho — Centrum Broking Limited — Analyst

In terms of new launches, anything that you could indicate for the US in specific?

Swami Iyer — Chief Financial Officer, Aurobindo Pharma USA

In terms of new launches, are you talking about injectables? Or are you talking about generally?

Cyndrella Carvalho — Centrum Broking Limited — Analyst

No, injectables, sir.

Swami Iyer — Chief Financial Officer, Aurobindo Pharma USA

Yeah. So we have — as you know, we get approvals regularly. We should be launching a few products in this quarter. In fact, we have already launched from the new approvals. I think we are targeting about four products this quarter for launch. And even in the next year, we are hopeful that we would have some more approvals to launch during the first quarter and subsequent quarters.

N. Govindarajan — Managing Director

If we need to be more specific, madam, like I think annually, we will be launching around 12 to 15 products in injectables. This year, we’ve already got approval for 11, and we expect another couple of them before the end of the year. That would the same momentum we would like to maintain for next year also.

Cyndrella Carvalho — Centrum Broking Limited — Analyst

Yes. I just wanted to understand, I think the launch in terms of complexity should go on increasing on an overall basis of the injectables?

N. Govindarajan — Managing Director

Yes. That is true.

Cyndrella Carvalho — Centrum Broking Limited — Analyst

And sir — Govind, sir, if you could help us understand anything that we have heard on the pending US FDA audits because we heard that at least like some have started. Do we have any indication from the regulator?

N. Govindarajan — Managing Director

Not at this juncture, ma’am. I think — so we have already completed the CAPAs in terms of 1, 9, 11 and, to an extent, even 7, and we are awaiting further direction from them, even though, like, I think, we have seen that there are certain inspections which have started for the shortage product. Now that I think the pandemic is, like, I think, coming down and the vaccine rollout has happened, we expect them to start the inspection in the near future. That is our belief.

Cyndrella Carvalho — Centrum Broking Limited — Analyst

And sir, on the vaccine side, from a pure COVID-basis opportunity, how India would be the focus? Like what is the plan for Indian market? Would it be a pure government supplies or private or both?

N. Govindarajan — Managing Director

You’re talking about specific to COVID vaccine or you are talking about general, madam? I’m sorry, I’m not able to hear you clearly.

Cyndrella Carvalho — Centrum Broking Limited — Analyst

So sorry, sir, for the poor line — poor network. I’m asking for COVID vaccine in terms of India.

N. Govindarajan — Managing Director

Yes. COVID vaccine, I think, we’ll be looking at both opportunities, madam. I think whatever institutional need in terms of government, we can — we are open about it, or we can also go to the private market. So both are open for us.

Cyndrella Carvalho — Centrum Broking Limited — Analyst

Okay, that’s helpful, sir. I have more questions, I’ll get back in the queue.

N. Govindarajan — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

Yeah, thanks for the opportunity. I missed the opening remarks. I just would like to know if you have clarified on the impairment taken in the exceptional item?

Santhanam Subramanian — Chief Financial Officer

Yeah, Tushar. We have gone through there, but considering the increased risk on account of continued impact on account of COVID, specific challenges due to slowdown in certain lines of business and overall decrease in actions, we have done the — net discounted cash flows have been reassessed actually. Also, due to the volatile market conditions, the market growth rate as well as the discounting factors have been reassessed in the COVID environment. And the resultant impact of carrying value of the intangibles, including the goodwill, have been provided in a prudent manner. This will be assessed at a later day once the normalcy returns.

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

Got it. So this is not a particular product specific, it is across the…

Santhanam Subramanian — Chief Financial Officer

It’s not particular product, etc, it is mainly due to the market conditions, and we were supposed to — I mean, ideally, since September, we have not done, and we reassessed whether it is improving or not. Since it has not improved, we have taken the call at least from a COVID environment because we need to convince the auditors also.

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

Got it. That was helpful. And on the biosimilars side, particularly GP14 and GP13, where the clinical trials are expected to conclude maybe in Q1 FY ’22 or by early Q2 FY ’22, just would like to understand how many biosimilars are already there for these products in the market.

N. Govindarajan — Managing Director

I think around eight to 10 might be there already, but we are still confident because of our yields and also like our own front-end, we’re still confident of sustaining good market share.

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

Got it. And this is with the focus for new US? Or how to look at it?

N. Govindarajan — Managing Director

It’s now going to — you’re talking about 13 and 14, we’ll start with Europe only. The US can be later because Europe, as you might be aware of it, we have gone with the extended Phase I. So I think that is something, for Europe, we will look at it later, but right now — for US, we’ll consider it later. For Europe, we are going ahead with the clear protocol having been placed by the authority as well.

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

Got it, thanks. That’s helpful.

Operator

Thank you. The next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.

Shyam Srinivasan — Goldman Sachs — Analyst

Hi, good morning. Thank you for taking my question. The first one is on the injectables, generic plus specialty. We are at about $600 million annualized rate, $3.4 billion kind of full year number. So I’m just saying, about 20% now is injectable. But our margins have remained similar. So just want to understand, from a margin perspective, and you’ve talked about the kind of maybe rough doubling of this number, so just want to understand, Govind, when this could reflect in margins. Some of the peers seem to be reporting very high numbers. So I’m just curious when it will translate for us.

N. Govindarajan — Managing Director

Yeah. As far as the injectable, I think, you will start — see, okay, obviously, the injectable margins are definitely better than our orals. There’s no doubt about it. But you have to also remember the fact like Aurobindo has various verticals somewhere, I think, we don’t differentiate because of it these are not clearly seen in terms of those expanded margins of injectable within the total, I would say, presented details. Having said that, I think we are — as we had mentioned that moving from the so-called $380 million to like reaching $650 million to $700 million, definitely, you will start seeing those differentiated numbers as we move forward.

Shyam Srinivasan — Goldman Sachs — Analyst

Got it. So it’s going to be a journey is what you’re saying, right? Govind, you will not see it probably in the next 12 months, but maybe longer? Is that how we should look at it?

N. Govindarajan — Managing Director

I think, see, it all depends on what you’re looking for. So definitely, like, I think, year-on-year, the margins are — when the injectable numbers are increasing, the overall margins of injectable, I mean, would be definitely better compared to year-on-year. That will — but the point what I’m making is in the overall scheme when we are presenting, you may not be able to see that is where you need to look at it.

Because suppose, let me put it this way, if injectable is growing at, let’s say, a certain degree, others are also growing at the same degree, you will not see the difference much. But if injectable is growing — propelling better than like the others or rather the other businesses slow down, you’ll start seeing better injectable number. So that is the reason you’re not able to see it separately, but definitely injectable numbers are coming up year-on-year. It has been improving year-on-year is what I would say, Shyam.

Shyam Srinivasan — Goldman Sachs — Analyst

Okay. That’s helpful, Govind. Second question is on the UB-612, right? So what’s the update? When is the trial data going to be out? What is the timelines there?

N. Govindarajan — Managing Director

So they are going to start — so they are — in fact, I’m sure you might have seen the SEC meeting minutes also. Like, I think clearly, even the Indian government has asked us to submit the protocol after approved by ANVISA. We are expecting that by this month end. And they should start the trial in Brazil for Phase II/III by beginning of next month — rather next month, they’ll start. We still expect our first set of data from Phase II/III by July. And in fact, the conclusion will be by September, but we still think that, I think, we can — we will be still going back with the data, which is available by July, Shyam.

Shyam Srinivasan — Goldman Sachs — Analyst

Yeah. And just from an efficacy perspective, is there any early read or early data readout that is giving us the confidence because this was not one of the top drugs being talked about. So just from your own diligence perspective, is there some comfort that you can share us on the efficacy of the vaccine?

N. Govindarajan — Managing Director

See, as far as efficacy is concerned, the reason there’s not much news about UB-612 is because Phase II and Phase III has not happened. And any efficacy we’ll be talking about after we conclude that only, that is, after we started progressing in that direction only, Shyam. That is number one.

Number two is, like, I think, on the due diligence, our folks were very comfortable with the safety and the immunogenicity data. That’s why we have gone ahead. And there is a fair level of confidence on efficacy as well. In fact, they have designed even the study with a clear intention that they’ll be able to get good efficacy. That’s how they even designed the study.

Shyam Srinivasan — Goldman Sachs — Analyst

Got it. Thank you and all the best.

N. Govindarajan — Managing Director

Thanks, Shyam.

Operator

Thank you. The next question is from the line of Nitin Agarwal from DAM Capital. Please go ahead.

Nitin Agarwal — DAM Capital — Analyst

Hi, thank you for taking the question. Govind, you’ve talked about a fair bit of new investment areas now, especially with this whole API or investments getting a leg-up. Now what kind of — does it mean a meaningful increase in our capex plans over the next two to three years? And what implications do you think it has for the balance sheet? I mean does it lead to any meaningful increase in debt for us over the next two to three years?

N. Govindarajan — Managing Director

Yeah. First and foremost, Nitin, you would appreciate the fact that our — whenever we are talking about this particular investment, these investments are happening over a period of time. So let us talk one at a time. Currently, we are maintaining our capex around $200 million, as you are aware of it, year-on-year, okay? That is on the regular capex we talk about. The second is, what we have mentioned is, we will still continue with around $200 million number. It could be plus or minus something. Around $200 million number in terms of capex over and above — the PLI scheme number would be the top of our additional.

And the reason why we still believe that we’ll be able to handle within the $200 million or — in that range of $200 million, $225 million is because of the fact that for the past few years, our investment in terms of creation of capacity was more focused on the finished dosage. As you are aware of it, we’ve created 10, we’ve created 15, we’re creating the Chinese facility, we have created the US injectables. So all these capex’s have gone — we have gone ahead with more of formulation capacity creation. Now the focus is shifting in terms of — and that particular capacity creation we have done in formulation is enough for us for the foreseeable future.

Now we’re shifting focus in terms of the regular capex to flow more into the API. So we are not expecting — except for the PLI scheme, we are not expecting a tectonic shift in terms of the capex is what I would say, Nitin.

Nitin Agarwal — DAM Capital — Analyst

Okay. So if I were to read it correctly, barring the PLI scheme, you will continue to be the $200 million, $220 million annual capex range and PLI is a onetime expense that will come through over the next two or three years.

N. Govindarajan — Managing Director

Yes. And that one-time — it’s — you have to remember the PLI I had mentioned, around 30, 32 months, you take in terms of the spread also as far as that number is also concerned.

Nitin Agarwal — DAM Capital — Analyst

Got it. Secondly, what are the timelines for our commercialization of our Vizag plant for Europe in ROW injectables?

N. Govindarajan — Managing Director

So it would take 15 months, Nitin.

Nitin Agarwal — DAM Capital — Analyst

From here on?

N. Govindarajan — Managing Director

Yes.

Nitin Agarwal — DAM Capital — Analyst

Okay. And lastly, on vaccine, you talked about exploring contract manufacturing opportunities for both bacterial as well as viral vaccines. I mean given the timeline that you’ve mentioned for our own COVID vaccine, clearly — is it fair to expect that from our — I mean for both bacterial and as a COVID — our own COVID vaccine this year essentially is going to be literally — our revenues are going to be unlikely.

Commercialization approvals are going to be unlikely. So are we going to start utilizing those facilities for contract manufacturing somewhere — sometime this year onwards? Or is this something which is going to happen subsequently for us, given the fact that we have enough capacities available with our — with the plant being ready by June, as you mentioned on the viral side?

N. Govindarajan — Managing Director

Let me qualify your statement. This year is — you’re talking about like I think — until March, nothing is going to happen. But if you’re talking about FY ’22, definitely, like we expect to utilize the facility for COVID vaccine as far as the viral facility is concerned. So when I talk about contract manufacturing, after accounting for whatever our needs, whatever is the available capacity, we’ll explore for the future is what I mentioned.

So according to me, definitely, like I think, we are expecting to submit the data by, let’s say, like July. And then we still expect approval during the next financial year, and we expect still to utilize the facility for manufacturing. And also our own arrangement with COVAXX also allows us to do some contract manufacturing for them for their markets also. So definitely, the facility would be utilized is our confidence, Nitin.

Operator

Thank you. The next question is from the line of Tarang from Old Bridge Capital. Please go ahead.

Tarang Agrawal — Old Bridge Capital — Analyst

Hello, sir. Good morning. I have three questions. One, if I look at each of the last three quarters and compare it to the same quarters of the previous years, your gross margin profile has improved. On a nine-month basis, your gross margin table has moved up by about 300 bps to around 60%. So if you could point out some major factors that are driving this and how sustainable is it?

N. Govindarajan — Managing Director

Subbu, would you like to answer this?

Santhanam Subramanian — Chief Financial Officer

Yeah. Mr. Tarang, if you recollect last quarter also, this question has been raised, and we have explained to that. And one of the factors is, we have been growing overall — the exchange rates have contributed well, and Europe business has contributed well. And these are all the two major reasons. And apart from that, the product profile has been improving overall in all the markets, which we have explained it in the last quarter itself. So if you really see between last quarter and this quarter, there is no major change. Except the impact on account of the MEIS benefits, there is no major change in there.

Tarang Agrawal — Old Bridge Capital — Analyst

Okay, okay. My second question is, despite the second wave of virus and associated impediments in Europe, you seem to be holding fort there. What’s driving this and how should we see this moving forward?

Sanjeev Dani — Chief Operating Officer and Head of Formulations

Tarang, in fact, if you recollect, September to December period or early part of December period, the lockdowns had lifted in Europe. So that’s why we have bounced back and regained the sales trend.

Tarang Agrawal — Old Bridge Capital — Analyst

And how are things looking right now and going forward?

Sanjeev Dani — Chief Operating Officer and Head of Formulations

Yeah. Going forward, I cannot predict. It depends on how the governments act and also how the customers and patients and the hospitals work way around. It depends a lot on that. But of course, late December to January, things have worsened in terms of the patient activity. But I’m hopeful that will be temporary because the vaccination is ongoing.

Tarang Agrawal — Old Bridge Capital — Analyst

Okay, thank you. And the third one, on the ARV business, how has your market share moved? Because as I understand, there are multiple players in the TLD space and some seem to be garnering strong momentum in the space.

N. Govindarajan — Managing Director

As far as ARV, even in South African market, like I think, we are supposed to get, yes, actually, we got additional — more than whatever we have given the initial commitment. So definitely, we are garnering better market share than whatever we had originally budgeted also, I would say.

Tarang Agrawal — Old Bridge Capital — Analyst

Across all geographies, that is, LMIC?

N. Govindarajan — Managing Director

Majority would be still tender. In tender, we are getting better market share. So we didn’t see — so definitely, getting better than whatever we had even planned also. So we don’t have any surprises on that. We have some minor positive surprises only.

Tarang Agrawal — Old Bridge Capital — Analyst

Okay. Thank you.

N. Govindarajan — Managing Director

Thanks, Tarang.

Operator

Thank you. The next question is from the line of Sameer Shah from Valuequest. Please go ahead.

Sameer Shah — Valuequest — Analyst

Yeah, good morning. Thank you for taking my question. Sir, two questions. One is on the capex plan for next year. What is — or the next couple of years. What is the capex envisaged, apart from the PLI?

N. Govindarajan — Managing Director

Apart from the PLI scheme, you should — we should talk about around $200 million to $225 million is at this juncture, whatever visibility we have, Sameer.

Sameer Shah — Valuequest — Analyst

Okay, okay. And this would be in which areas?

N. Govindarajan — Managing Director

So more capex would be flowing into the API in the short term, I would say, like.

Sameer Shah — Valuequest — Analyst

Okay, okay. And second for Subbu sir, bookkeeping question. We have not opted for the new tax rate. Any particular reason for that?

Santhanam Subramanian — Chief Financial Officer

So one is, we have carried a MAC [Phonetic] credit of around INR300 crores as on 1st April, 2020. So fortunately, we have liquidated that during this year and we will be working out how to move to concessional tax regime next year. Probably, we will be able to give that clarity very clearly in the May earnings call.

Sameer Shah — Valuequest — Analyst

Okay, sir. Thank you, thank you.

Operator

Thank you. The next question is from the line of Rahul Veera from Abakkus AMC. Please go ahead.

Rahul Veera — Abakkus AMC — Analyst

Hi, sir. Just wanted a color on the write-offs that we have done of INR400 crores this quarter, because the patents and designs shows INR2,500 crores of intangibles and goodwill is of INR900 crores. So INR400 crores of write-off is close to 12% to 13% this quarter itself.

Santhanam Subramanian — Chief Financial Officer

We are — first of all, we have not written off anything. We have made a provision as per the accounting standards in view of the volatile market conditions and the slowdown in the market. As I explained earlier, we will revisit it once the normalcy returns, probably by March ’22, we will revisit it.

Rahul Veera — Abakkus AMC — Analyst

Okay, okay. Fair point, sir. That’s it from my end, sir. Thank you.

Operator

Thank you. The next question is from the line of Arpit Kapoor from IDFC Mutual Fund. Please go ahead.

Arpit Kapoor — IDFC Mutual Fund — Analyst

Yeah, thanks for taking my questions. Just only one question. On the PLI scheme, we’ve been hearing that there is another PLI scheme for formulations that the government may announce in subsequent months. So are we looking to participate in that as well?

N. Govindarajan — Managing Director

Of course, we’ll participate, sir.

Arpit Kapoor — IDFC Mutual Fund — Analyst

And again, depending upon whatever products we win, there’ll be a commensurate capex for the plant that you would have to do?

N. Govindarajan — Managing Director

We have to observe it, sir, because, first of all, I think we are in the process of creating some capacities as well. Like, I think, if it is aligned with that, I think we may not need an additional capex. It all depends on what sort of portfolio is coming up, we will decide, because even when you are talking about PLI scheme, like I think we need to also study whether we are talking about, like, I think, investment on only greenfield or they are accommodating brownfield. All those have to be studied before we start specifically getting into the capex, Arpit. That’s what I would say.

Arpit Kapoor — IDFC Mutual Fund — Analyst

Okay. So as of now, there is no clarity whether we necessarily have to do a greenfield capex to qualify for a PLI or our existing brownfield capacities may also qualify?

N. Govindarajan — Managing Director

We don’t know because the scheme is yet to be announced as far as the formulations are concerned, Arpit, because in case of, like, PLI scheme for the antibiotics, obviously, we need to create the capacity. Those are not — nobody will have that existing.

Arpit Kapoor — IDFC Mutual Fund — Analyst

Sure, sure. Thanks. Thanks and all the best.

N. Govindarajan — Managing Director

Thanks, Arpit.

Operator

Thank you. The next question is from the line of Praful Bohra from Systematix. Please go ahead.

Praful Bohra — Systematix — Analyst

Yeah, hi, morning. Sir, the fact that our injectable business has now reached a critical stage in almost at $440-odd million annualized, and the way the valuations that some of our peers are trading at, is there any thought process on value unlocking in this business, maybe not immediate, but at a future point of time?

N. Govindarajan — Managing Director

I think, I don’t think we can comment on such things because these are decisions which should be arrived at the Board. So I don’t think that I can comment on that, sir.

Praful Bohra — Systematix — Analyst

Okay. Okay, sure. Fine.

Operator

Thank you. The next question is from the line of Surya Patra from PhillipCapital. Please go ahead.

Surya Patra — PhillipCapital — Analyst

Yeah, thanks for the opportunity, sir. So just wanted to have a sense on the PLI. While the threshold investment limit for the announced product is around INR400-odd crores, what was the thought process behind allocating like INR3,000 crores for the three products? That is one. And on this kind of asset investment, what is the asset on generally that one should really look at? And I believe — what is the current procurement that you would be having for these products from, let’s say, wherever, China or whatever? And how would this investment change our competitive positioning for these products versus Chinese suppliers?

N. Govindarajan — Managing Director

Okay. The first point is — I would request Subbu also to comment on it. I don’t think that like it is INR400 crores vis-a-vis INR3,000 crores because I think it’s very clearly, like even in the document which has been released, they’ve talked about the numbers what you have mentioned. Subbu, do you have any comments on that?

Santhanam Subramanian — Chief Financial Officer

I don’t have any comments.

N. Govindarajan — Managing Director

No, no. So what he’s saying is, he saw INR400 crores against we are talking about INR3,000 crores. Anywhere INR400 crores you have seen from our PLI scheme we have mentioned? Not, right? Not, right? I mean you have not mentioned…

Santhanam Subramanian — Chief Financial Officer

Not sure where he picked up — INR400 crores, where have you picked it up?

Surya Patra — PhillipCapital — Analyst

It was a threshold investment limit to qualify for…

Santhanam Subramanian — Chief Financial Officer

No, if you really see the circular on 29th October, 2020, the INR400 crores threshold has been removed already.

Surya Patra — PhillipCapital — Analyst

Okay. So that means this is the need of the product investment…

N. Govindarajan — Managing Director

Obviously. Obviously, sir, because please understand that when we have created the budget for creating the capacity, we’ve also mentioned that as part of the threshold investment and that is what has been even in the approved document mentioned, sir. So there is no confusion on that. That is one. The second question is like you asked where those products are right now coming from. Currently, it is coming from China. Number three is, like, I think what would that add value to us because — I mean, we — I mean, our own captive consumption is to the extent of almost 45% — 40%, 45%. We’d be consuming these products what we’d be producing against the PLI products is what I had mentioned in terms of specific [Indecipherable], so any other query you have on…

Surya Patra — PhillipCapital — Analyst

Okay. Just an additional point. And this is like, having seen the end-to-end integration — whenever that we have seen end-to-end integration for any API or anything, there is a kind of significant value creation that we have witnessed already for many products. So here also, I think the PLI, the kind of incentive that the government is giving, this can influence the overall margin of the Company. Is that right, sir?

N. Govindarajan — Managing Director

Yeah. So I had mentioned earlier also, sir, our objective is to make the product competitive with or without incentives. So definitely, like, with incentive, it should improve the margin, sir, in terms of the entire portfolio of products.

Surya Patra — PhillipCapital — Analyst

Okay. Sir, my second question is on the European business front. Sir, we are setting up a dedicated facility, injectable facility for Europe. Currently in the global injectable business, what is the share of Europe, sir, in the…

Sanjeev Dani — Chief Operating Officer and Head of Formulations

That would be like, in a nine-month basis, we had about EUR55 million. So I would imagine it would be close to 20%.

Surya Patra — PhillipCapital — Analyst

Okay. So this thought process behind setting a dedicated plant for European means it is to bring in the manufacturing aspect to here or it is to introduce new products or any thought process on that?

Sanjeev Dani — Chief Operating Officer and Head of Formulations

Yeah. Actually, our current injectable plant, the main general injectable plant, Unit IV, is catering exclusively to U.S. It doesn’t have capacity to supply to Europe. So we have something close to 20 products which are filed or approved, but we are not able to capitalize on that. We have been marketing some part of Meropenem demand. But otherwise, we are outsourcing from the Europe. And Piptaz is the one and maybe one more ampicillin-sulbactam. So I guess, once we have this new plant, which is not only for Europe, but Europe plus growth markets, we’ll be able to immediately supply those 20 products which are approved or filed and then we will take total to another 30. So it will add up to 50. It will be a fair size to supply the general injectables.

Surya Patra — PhillipCapital — Analyst

Okay. If I just extend my injectable question, sir. See, with the two capacity, like U.S. capacity addition and this European or growth markets-oriented capacity addition, scope-wise what is the kind of incremental business that it can add to the existing injectable business, global injectable business?

N. Govindarajan — Managing Director

We already mentioned, sir, currently, we are at $380 million, and we’ll be reaching around $650 million to $700 million over the next three years. We have already mentioned that, sir.

Surya Patra — PhillipCapital — Analyst

Okay, thank you, sir. Just last question, if I ask, on the R&D side. So having seen — means having added more financial flexibility after this — achieving the net cash position, so on the R&D side, what — and also seeing the kind of a progression on the multiple specialty product side, what is the R&D spend trajectory that you are witnessing and how that can influence the overall margin?

N. Govindarajan — Managing Director

So currently, like, I think, it’s around 6.2% if I remember it right like in this quarter. Annualized basis, it might be lower. But ultimately, as we had mentioned earlier also, if together two Phase IIIs happen in terms of biologics, biosimilars or any major vaccine trial also together happens, then it can go to around 7.5% is our belief based on our current visibility. So I think — so it’s not a huge shift is what I would say in terms of the numbers.

Surya Patra — PhillipCapital — Analyst

Okay, okay. Yeah, thank you, sir. Thanks a lot.

N. Govindarajan — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Neha Manpuria from JPMorgan. Please go ahead.

Neha Manpuria — JP Morgan — Analyst

Yeah, thank you for taking my questions. One follow-up. Given we are a net cash company, now we’re generating enough cash flow, you’ve mentioned that your capex will still remain in the $200 million plus PLI. How should we look at capital allocation? Would M&A be an option? And if yes, what areas would we be looking at?

N. Govindarajan — Managing Director

I think we are not looking at any large ticket acquisition, Neha, because we are well sufficed in terms of our own pipeline, our own platforms, our own geographic representation, we are well entrenched, and we don’t see the need for it. Having said that, we have clearly articulated our M&A strategy in terms of either the market expansion on new geographies or in terms of like any newer platforms. This is what we’ve said. Even recently, we acquired Profectus and rechristened to Auro Vaccines is because it’s a newer platform. So that’s how our M&A strategy has been clearly articulated. We don’t expect to do any major big ticket acquisition at least for a foreseeable future, say, two, three years.

Neha Manpuria — JP Morgan — Analyst

Understood. And sir, on the capex front, other than the injectable investment, Vizag and U.S., and API, is there anything else that is planned? Because the vaccine will get completed soon. China plant will get completed soon. Is there anything else that is planned? I think there was something that we were also thinking about in Europe, right?

N. Govindarajan — Managing Director

Yeah. That would also happen. But whatever I said, like, I think those would happen over a period and still we believe — as per the current visibility, we still believe we would be able to accommodate within the numbers what we talked about.

Neha Manpuria — JP Morgan — Analyst

Okay, okay. Understood, thank you.

N. Govindarajan — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Vishal Manchanda from Nirmal Bang. Please go ahead.

Vishal Manchanda — Nirmal Bang — Analyst

Thanks for taking my question. On your PLI investments, could you share what kind of an asset turn would be achievable?

N. Govindarajan — Managing Director

Subbu?

Santhanam Subramanian — Chief Financial Officer

Yeah. Vishal, in the PLI, you have to look at it like this. It will be used for captive consumption as well as for external sales also. Even though it must be around 50%, 50%, you can take it, but nearer the date only we’ll see what is the exact percentage depending upon the market condition, depending upon our own captive consumption, etc. So the asset turnover ratio will not really make it look this one. But our [Indeciphearble] typically, we have been doing around the 1.5 times to 2.0 times is the captive — I mean, the asset turnover ratio we have been doing it. And at least we will make an endeavor to ensure that our asset turnover ratio is not deteriorating.

Vishal Manchanda — Nirmal Bang — Analyst

Okay. So just a point here. Assuming all of it is sold to third parties, so would that — in that case, would that be around 1.5 times to 2 times or — because I think this is more of a fixed cost business and requires more upfront investments and less of the variable costs. So is that the right understanding?

Santhanam Subramanian — Chief Financial Officer

No. See, when we say it is 1.5 times to 2 times, it is our existing this one. So you don’t count it now because maybe down the line one year, we will be able to give clarity based on the market conditions and our own captive consumption. Please do not get into that right now. But we made a broad — Govind has made a broad statement. Without the incentive, we will try to make it very — able to reach our numbers, etc. That is what we are working on.

Vishal Manchanda — Nirmal Bang — Analyst

Okay, sir. And just one more. Sir, your operating — net cash flow from operations was negative during the quarter. Could you share some color on that?

Santhanam Subramanian — Chief Financial Officer

Yeah. I’ll give you a very clear this one. If you really see our cash profit from operation during the quarter is around $68 million, right? And we got a net cash from Natrol to the tune of around $434 million. When I said net cash, net of tax, whatever tax we have paid till 31st of December and other things. Against that, we have invested in the capex to the tune of around $76 million. And also, if you know, we have invested in the Eugia, including the debt to the tune of around $105 million and we have paid a dividend of $10 million. So the free cash flow available after everything is around $311 million. And my debt at the beginning of the quarter was $194 million. And after adding this free cash flow of $311 million, I ended with a closing cash of around $117 million. I think this has given the full clarity to you, okay?

Vishal Manchanda — Nirmal Bang — Analyst

Sir, what I mean is in the first half, so closing September ’21, you had a cash flow from business after working capital at $260 million, while for the nine months, it is $223 million. So…

Santhanam Subramanian — Chief Financial Officer

Yeah, this quarter, there is a slight increase in the working capital on account of the inventories and also our creditors have come down this quarter. So that is the reason. And normally, we will incur around $40 million to $50 million as capex on a $200 million base on a quarter $50 million [Phonetic], but we have incurred around $76 million this quarter. So there is increase in that. And as I said, there is a small increase in the — I mean, there is an increase in the working capital. That is the main reason.

Vishal Manchanda — Nirmal Bang — Analyst

Okay, sir. Just one more, if I could. If you look at your European performance, so what I can see is some of the large-cap peers in Europe like STADA and Krka, they’re doing EBITDA margins in the range of 20% to 25%. So what it would take Aurobindo to get there in the same range?

Sanjeev Dani — Chief Operating Officer and Head of Formulations

We are already now crossed into double digits. So our EBITDA in this quarter about 15%. So we are on the way, but we need to increase our market share and need to get more sales from also Eastern Europe, which we just entered with the acquisition of Apotex business. So I guess, once we cross the threshold of $1 billion, we should be seeing a constant upward movement. Secondly, we have not launched Eugia oncology products to a great extent. We have 52 products under development, and they will be launched over next one, 1.5 year. And then you have heard about Vizag injectable plant. So we already have a very good presence in hospitals, but we don’t have products. So we will be launching this general injectable, which gives a better margin. And also, we are expanding, I think, the penem block, so we will be able to launch and source more penem products from there. So all this will lead to improvement in margins.

Vishal Manchanda — Nirmal Bang — Analyst

Got it. Thanks.

Operator

Thank you. The next question is from the line of Kunal Dhamesha from Emkay Global. Please ahead.

Kunal Dhamesha — Emkay Global — Analyst

Thank you for taking my questions. So first is on the PenG PLI application that we have done. So we are the sole applicant. So do we have any clarity from the regulatory authority that we’ll be eligible for the entire pie of the incentive for that policy?

N. Govindarajan — Managing Director

We already received — we have received the letter for the full quantum whatever we had applied for.

Kunal Dhamesha — Emkay Global — Analyst

So because the incentive was to be attained between two players, right? So one player was eligible for like INR120 crore incentive. But now that we are only alone in the PenG, so have we got a clarity that we’ll receive the entire INR240 crores quantum incentive?

N. Govindarajan — Managing Director

That’s my belief, sir. We will get total INR240 crores. That’s my belief, sir. Subbu, do you have any different opinion on that?

Santhanam Subramanian — Chief Financial Officer

Yeah. That is our endeavor to get it, and we have — also, we have raised certain clarifications, etc. And it will take some time for the government to respond.

N. Govindarajan — Managing Director

Subbu, the question is, will be get INR240 crores or we’ll get only INR120 crores is the question, Subbu.

Santhanam Subramanian — Chief Financial Officer

That, on the products where we are the single participant, we will be getting around INR240 crores or the applicable incentive. In case of joining along with another…

N. Govindarajan — Managing Director

Subbu, the question is on PenG, Subbu. We are alone, so we’ll get INR240 crores.

Santhanam Subramanian — Chief Financial Officer

We will get INR240 crores. We are alone, but why this — because I do not understand. INR240 crores, we’ll get it.

Kunal Dhamesha — Emkay Global — Analyst

So my question is, have you got the regulatory clarity that you will get INR240 crores or it is still pending? I mean, you’re still yet to get the clarity on that?

Santhanam Subramanian — Chief Financial Officer

No, no, we’ve got the clarity on the PenG very clearly. There is no ambiguity on that.

Kunal Dhamesha — Emkay Global — Analyst

Okay. And secondly, on the MEIS incentive or export incentive that you mentioned in the presentation, that the growth market had incentive around INR77 crore in the quarter three FY ’20 and this quarter around only INR3 crores. So if I look at the revenue incentive as a percentage of growth markets revenue, the incentive comes out to be around 22% for quarter three FY ’20. So just — as far as I believe, the MEIS incentives were ranging from 3% to 5%. So why is there a big gap? And do we not receive significant incentive on our U.S. and Europe export as well?

N. Govindarajan — Managing Director

Sir, I would like to clarify, which Subbu will also confirm, that it has been shown against the particular growth markets, but actually, it is spread across all the products, sir. That’s how it is.

Santhanam Subramanian — Chief Financial Officer

Yeah. Because the incentive is being received by the Indian — I mean from the stand-alone company, which is coming under the growth markets, so it has been shown. And we have given a very clear note at the bottom of the presentation itself clarifying this point.

Kunal Dhamesha — Emkay Global — Analyst

Okay. Thank you.

Operator

Thank you. Ladies and gentlemen, that is the last question. I now hand the conference over to Mr. Krishna Kiran for his closing comments.

Krishna Kiran — Manager of Investor Relations

Thank you all for joining us on the call. If you have any questions unanswered, please keep in touch with Investor Relations. The transcript of this call will be uploaded on our website, www.aurobindo.com in due course. Thank you.

Operator

[Operator Closing Remarks]