Alembic Pharmaceuticals Limited (APLLTD) Q4 FY23 Earnings Concall Transcript

Alembic Pharmaceuticals Limited (NSE:APLLTD) Q4 FY23 Earnings Concall dated May. 05, 2023.

Corporate Participants:

Raj Kumar Baheti — Director, Finance & Chief Financial Officer

Shaunak Amin — Managing Director

Pranav Amin — Managing Director

Mitanshu Shah — Senior Vice President, Finance & Investor Relations

Analysts:

Damayanti Kerai — HSBC — Analyst

Ankush Mahajan — Axis Securities — Analyst

Bharat Celly — Equirus — Analyst

Tushar Manudhane — Motilal Oswal — Analyst

Darshil Jhaveri — Crown Capital — Analyst

Bino Pathiparampil — Elara Capital — Analyst

Tarang Agarwal — Old Bridge Capital — Analyst

Resham Jain — DSP Mutual Fund — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Alembic Pharmaceuticals Limited Conference Call on discussion on company’s Q4 and Annual FY ’23 Audited Financial Results. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. R.K. Baheti, Director, Finance and CFO. Thank you, and over to you, sir.

Raj Kumar Baheti — Director, Finance & Chief Financial Officer

Thank you. Good evening, everyone. Thank you all for joining the fourth quarter and annual results conference call. Let me start with the financials and there are few non-recurring or one-offs, which I’ll try to explain, and then, of course, we’ll take your questions.

Some financials first. During the quarter, the total revenue is INR1,406 crores, EBITDA is INR205 crores, net profit is INR153 crores, EBITDA margin for the quarter is 14.55%. For the full year FY ’23, revenue is INR5,653 crores, I repeat INR5,653 crores, EBITDA is INR680 crores and net profit is INR342 crores.

The company, like in previous few quarters, continued to expense out previously amortized R&D expense in erstwhile Aleor amounting to INR11 crores in the current quarter and INR155 crores for financial year — full financial year 2023. The company’s profit before tax and after tax would have been higher by INR11 crores in the quarter and INR155 crores in FY ’23 without this amortization. Now, of course, the entire amount has been expensed out and there is no residual intangible books in the — intangible assets in the books.

Second item. As intimated to stock exchanges earlier, the company’s Board has decided to recognize the impairment of INR1,150.43 crores, I repeat 1,150.43 crores in respect of capital work in progress, largely consisting of pre-operative expenses of three new manufacturing facilities. Out of above, INR676.87 crores had been written-off in current financial year, that is ’22-’23 and for the balance amount of INR473.56 crores provision for impairment has been created. The rationale for this bifurcation has been given in detail in our notes to accounts.

Simultaneously, INR1,025.66 crores [Technical Issues] net of deferred tax asset of INR124.77 crores has been withdrawn from general reserves of the company. Hence, there is no impact on profit for the year on this account. The company is not required to make any provision for income tax during the year. The provision for taxation made up to Q3 FY ’23 had been reversed in Q4 FY ’23.

With effect from 1st of January 2023, the company has decided to stop all further capitalization of pre-operative expenses of all the new facilities and charge their entire expenses to P&L account. As compared to the previous quarters, the company debited additional rupees, approximately INR65 crores in Q4 under various heads on this account.

During the quarter/financial year, PLI benefit of INR21 crores was received from the Government of India. EPS for the quarter before non-recurring item, particularly of Aleor is at INR8.33 per share versus INR8.47, while for FY ’23 full year it is INR25.29 per share versus INR33.85 per share in the previous year.

Borrowings. The gross borrowing at the consolidated level is INR636 crores versus INR630 crores in March 2022, and the company has INR75 crores of cash as on — cash on hand as on 31st March 2023 versus INR61 crores for March 2022. Net debt to equity stands comfortably at 0.13. So you would see that from cash flow point of view, the company’s borrowing remains the same, almost the same as of March ’22. So there is no incremental borrowing in March ’23 versus March ’22. Company had met its entire capex as well as the dividend payment of almost INR200 crores out of its internal accruals. So cash flow for the company continues to remain strong.

I will now request Shaunak to take you through India Branded Business.

Shaunak Amin — Managing Director

Yes. Thank you, Mr. Baheti. Good evening, everyone. I think for the fourth quarter, I think, the India Branded Business saw a 9% growth with a topline of INR490 crores. There was a COVID impact in the base of Azithromycin [Indecipherable] products in the previous years and Ex of Azithromycin growth, the India — Ex of Azithromycin growth, the India business performance and grew at 12%.

As per IMS in Q4 industry grew by 15% whereas Alembic reflected a growth of 16% in line with our objective of outgrowing the industry, matching our outgrowing the industry by a few points.

In quarter four, on Specialty segments, the company performance was 13% versus 12% for the industry, mainly driven by the therapies in gynecology, anti-diabetic, ophthalmology and orthopedics.

In the Acute segment, the company performance was 23% growth and Ex of Azithral, it was 38% growth, which is better than the industry by 28% — better than the industry which was at 28%.

In respiratory, the company grew by 38% whereas industry grew by 28%. The Animal Health business continues to maintain its strong run of growth momentum and recorded a growth of 15% over the previous year.

For the financial year ’23, the India Branded Business gave a 7% growth with the topline of INR2,063 crores. Ex of Azithral and Alcibute, the India Branded growth was at 13% for the year. As per IMS, the industry grew by 8% whereas Alembic reflected a growth of 9%.

For Specialty segment, the company performance was 15% versus industry growth of 11%. Majority of it is driven through therapies like gynecology, anti-diabetic, ophthalmology, and orthopedics.

The Acute segment, the company performance Ex of Azithral was 10% versus the industry growth of 6% for the year. And in respiratory the company grew by 11% whereas industry grew by 3%.

The Animal Health Care recorded a business growth of 21% over previous year. And as one of the highlights for last year was we have a brand called ISOFIT which has been the second best launch in the industry by IMS amongst 3,072 new launches in the industry for the 12 months for the IPM. ISOFIT recorded a growth of INR28 crores in the first year of launch. And majority of our focus brands in the current year have gained market share over the previous year.

Three of our large therapy areas, cardiology, gastroenterology and urology have underperformed in the year ’23. Operational strategic interventions were taken in the previous year which kind of led to this underperformance, but the idea was to outperform the markets, akin to some of our other high growth segments on a sustainable basis and we expect this kind of growth to start kicking in this year.

I’ll hand over the discussion to Pranav for his presentation on the international business.

Pranav Amin — Managing Director

Thank you. The U.S. business continues to remain challenging on account of the competitive intensity. Though it was a tough year in the U.S., we did manage to grow our volume as well over the previous year. Our focus is on improving efficiencies and execution in the midterm. The U.S. generics revenue was INR350 crores during the quarter. The number is not comparable to the same quarter last year as Q4 of last year had high sales as we had transitioned to our new [Indecipherable] we have done overstocking in that quarter.

The ex-U.S. market continues to perform well and it grew 33% for the quarter and 10% for the year. The API business also is on a strong footing and it performed very well. It grew 20 — it grew 41% for the quarter and 24% for the year. Importantly, the ex-U.S. formulation and the API have both come off a high base over the last couple of years. So we are confident of continued good performance in both these verticals.

Our R&D expense was INR136 crores, which includes INR11 crores of one-time non-cash Aleor write off. Taking this out, it’s INR125 crores, which is about 9% of sales. While for the full year, the total R&D expense was INR722 crores. Ex of Aleor, it is INR567 crores, which is 10% of sales. This is a conscious effort that we’ve been making to get R&D as a percentage and as an absolute amount we wanted to try controlling it moving forward.

We will continue our efforts to optimize R&D expense, particularly on the oral solid dosages in the coming years. We filed four ANDAs during the quarter. We also received seven approvals in the quarter and we commercialized F2 and F3 brands during the quarter and the first set of products were dispatched. We launched six products in the quarter. And in Q1, we hope to launch up to 10 products at least and 20 products in the entire year.

The US FDA conducted an inspection at our F3 facility in March and issued two observations. We have received three final approvals from the site till date. The US FDA also conducted an inspection of our derm facility in March with zero 483 observations. An EIR was issued for our Onco facility F2 during the quarter. We have received five final approvals from the site, including the Onco OSD till date. The US FDA also inspected our new oral solid dosage facility F4 in December and issued five observations. We have received approval of two products from this facility till date.

In terms of the numbers, the U.S. generics was at INR354 crores for the quarter and INR1,572 crores for the financial year. The ex-U.S. generics, as I mentioned, had a good year and it grew by 33% to INR249 crores in the quarter and by 10% to INR852 crores for the year. The API business had a fantastic year. It grew by 41% in the quarter to INR313 crores and by 24% to INR1,166 crores for the financial year.

I would like to open this floor for Q&A [Indecipherable] on the queue.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] We have our first question from the line of Damayanti Kerai from HSBC. Please go ahead.

Damayanti Kerai — HSBC — Analyst

Hi. Thank you for the opportunity. My first question is to Pranav regarding the U.S. business. So now we are sub INR45 million sales in the fourth quarter. And what we have heard from some of the players that prices — price erosion in the U.S. have stabilized, but your commentary seems I’ll say more cautious. So can you share a bit more detail like where are key challenges from your business perspective and how should we look at this business in coming years?

Pranav Amin — Managing Director

So there is still price erosion in the U.S. market. Has it slowed down? Yes, compared to about a year back, it has slowed down. One of the reasons could be because of people are placing less priority in the U.S. business. We’ve seen some of our peers prioritize U.S. business little lesser. Number two is that there have been inspections, quite a few inspections. So there have been some regulatory issues that some companies have faced. But we do continue to see pricing pressure in the market. I think as the basket, some of our peers among that have done well. I’ve got a few handful of approvals, which have offset those difference for them, it’s little lesser. But there is still pricing pressure in the market. It’s lesser than a year before, but it’s still there.

Raj Kumar Baheti — Director, Finance & Chief Financial Officer

Also Damayanti, this as Pranav said in his opening statement, this quarter four number is not really comparable because previous year Q4 of March, ’22, we had an exceptionally great quarter because of — not a heavy quarter because of our transition to 3PL where we had asked our distributors to stock up and this was intimated at that time during the Q4 ’22 investor call.

Damayanti Kerai — HSBC — Analyst

Sure, sir. So, in terms of erosion level, are you still facing say like double-digits. If you can like give some indication where it stands from your…

Pranav Amin — Managing Director

Yes. I think, it really — it really depends product to product. But yes, I think, it’s still in the double-digits.

Damayanti Kerai — HSBC — Analyst

And in say next two quarters to three quarters down from here, how do you see like pricing to pan out? Any relief, any sign like you see that we will be seeing better pricing in coming quarters?

Pranav Amin — Managing Director

I think, what happens is, as I mentioned before, right, and historically in the calls, I’ve said, if we see the Sartans opportunity and the kind of prices that we were setting for Sartans that is, you could — it comes on. Once it gets beaten down to the ground, then there’s not much. How much lower can you keep going, right. So at some point, hopefully, this will start. We’ve already seen that erosion has become less. There have been more supply challenges in the market for everyone. So hopefully prices also should stabilize. I believe there will continue to be erosion because fundamentally there is just a lot more capacity for the U.S. market from India than as warranted and that’s what’s causing this.

Damayanti Kerai — HSBC — Analyst

Sure. My second question in R&D. So it seems like you are tracking in line with what you guided, like it will come down substantially. So now say if I annualize fourth quarter R&D number, we are somewhere like INR500 crore, INR525 crore kind of R&D expense for next year. So that’s what like we should be working with?

Pranav Amin — Managing Director

Yes. I think that’s a good number for you guys to work with. Of course, internally, there will be a little balance. We’ll switch the balance internally as I mentioned in my opening statement that we may reduce some of the OSD spend and we may increase injectable, we may reduce some fixed costs, but yes INR500 crore and INR525 crore is a good number to work with.

Damayanti Kerai — HSBC — Analyst

And how would you’re filing — like you target with this kind of lower R&D expense, obviously a better quality but…

Pranav Amin — Managing Director

I think we will still target about 15 to 20 filings.

Damayanti Kerai — HSBC — Analyst

Okay. And my last question is for — my last question is for Baheti, sir. Sir, I missed your comment. You said like you won’t be capitalizing any pre-operating cost now and everything will be moving to the P&L. If you can explain that a bit, that will be helpful?

Raj Kumar Baheti — Director, Finance & Chief Financial Officer

So, yes, Damayanti, you heard it right. So, up to 31st of December 2022, we were capitalizing all pre-operative expenses of facility F2, F3 and F4. Effective from 1st of — while we are charging off the impairment to P&L, there is no rationale for me to keep further capitalizing. So from effective 1st of January 2023, we have — the Board has decided that all expenses will be charged off to P&L. And that’s how this quarter, quarter of March ’23, be as an additional expense of INR65 crores in its P&L as compared to the previous quarters.

Damayanti Kerai — HSBC — Analyst

Okay. And fourth quarter numbers are now like — should be fair representation of cost we should be seeing in coming quarters without any capitalization?

Raj Kumar Baheti — Director, Finance & Chief Financial Officer

Yes, that’s right. Other than that INR11 crores which is a residual expense which we have done out of those [Indecipherable] R&D amortization. There also now it is cleaned up. So, we won’t find that in next quarters.

Damayanti Kerai — HSBC — Analyst

Okay, sir. That’s helpful. Thank you. I’ll get back in the queue.

Raj Kumar Baheti — Director, Finance & Chief Financial Officer

Thanks.

Operator

Thank you. [Operator Instructions] We have a next question from the line of Ankush Mahajan from Axis Securities. Please go ahead.

Ankush Mahajan — Axis Securities — Analyst

Yes. Thank you, sir, for providing me the opportunity. Sir, my question is related to the U.S. business first. Sir, how many molecules that — new molecules that we are expecting to launch this year in the U.S. market for FY ’24?

Pranav Amin — Managing Director

[Speech Overlap] Sorry go ahead.

Ankush Mahajan — Axis Securities — Analyst

And sir, we have done a very good numbers in API business. Just trying to understand sort of how is the demand for the API and across the geographies? Just put some thought on it.

Pranav Amin — Managing Director

Yes. So in terms of the U.S. market, as I mentioned earlier, that we will launch about 20 odd products in the financial year, in FY ’24 in the U.S. market. And yes, quarter one will be a little more, but total about 20, 25 is what we should look out for the U.S. Q4 was good for the API business, very good. For the year, we would expect API to grow about 10%. It was a good market. I think we had some opportunities, we have some more long-term contracts, we could free up some capacities as well, so that’s what led to an increase in the API business.

Ankush Mahajan — Axis Securities — Analyst

So earlier, sir, these API prices were falling down. So can we say these are stabilized now?

Pranav Amin — Managing Director

It depends, you know, it’s tough to say API prices are falling. I think it really depends, who you are supplying to and what. I think, we’re still seeing some erosion in API prices. There were lot of supply constraints over the last two years [Indecipherable] China or intermediate, or COVID related. But I think you will see pricing pressure in API prices and I think lot of the growth is not due to pricing, it is due to volume growth.

Ankush Mahajan — Axis Securities — Analyst

So we can say that the volume growth — that uptick is there in terms of volume?

Pranav Amin — Managing Director

Yes, yes, yes.

Ankush Mahajan — Axis Securities — Analyst

And sir, what — we are launching now these 20, 25 products in the U.S. market. So can — could you throw some more light that in which therapies or segments that we are looking?

Pranav Amin — Managing Director

So we don’t — for U.S. generics, we don’t get therapy wise segment. Probably what will happen as you see when the…

Ankush Mahajan — Axis Securities — Analyst

I mean for — in terms of injectables, how many injectables are there?

Pranav Amin — Managing Director

Yes. So what will happen is in terms of injectables, out of 20 odd approvals, I’m assuming about 10 to 12 will be oral solid dosage and the rest would be ophthalmic injectables and derm.

Ankush Mahajan — Axis Securities — Analyst

And sir, pricing scenario in injectables at this moment?

Pranav Amin — Managing Director

It’s too early for us. We’ve just started launching. So, it’s still early — early days for us on the injectables. Maybe next quarter, we’ll have a better track record to say.

Ankush Mahajan — Axis Securities — Analyst

Thank you, sir. Thank you very much.

Operator

Thank you. We have a next question from the line of Bharat from Equirus. Please go ahead.

Bharat Celly — Equirus — Analyst

Yes, hi, thanks for the opportunity, and good evening, everyone. So, sir, just wanted to understand on the opex part. So when we look at opex sequentially ex for R&D, it is declining, despite the fact that we have seen new facilities getting commercialized and all the pre-operating expenses are hitting the P&L. So what is leading to this lower expense sequentially, if you could explain that?

Shaunak Amin — Managing Director

So, Bharat, if you see this we…

Operator

Sir, I’m sorry to interrupt. You’re sounding distant

Shaunak Amin — Managing Director

Okay.

Raj Kumar Baheti — Director, Finance & Chief Financial Officer

[Indecipherable]

Shaunak Amin — Managing Director

Yes. So Bharat, if you see this and if you are comparing it with the last year, we had one-time impact of INR100 odd crores that for the Aleor actually, right. So if you’re comparing with that, obviously it will look low, I mean, otherwise it is generally a flow of…

Bharat Celly — Equirus — Analyst

Actually, I’m comparing over third quarter of FY ’23. So if I look at it sequentially, it is also down.

Shaunak Amin — Managing Director

Yes. So, yes, I was coming to that actually. So if you see the last year it was with Aleor and this time it will be impacted largely on account of the marketing spend and all those things actually. So there has — and bit of the R&D as well is low actually and all of that culminates down to a lower spend. So that’s precisely the reason, yes.

Bharat Celly — Equirus — Analyst

But sir, still, if I look at right, in first quarter, we were doing around INR330 crores, second quarter it was INR340 crore around. And if I just talk from that perspective, now what is happening is in third quarter, we are still sitting at around similar number, I would say, INR330 crore, which includes the operating expense of around INR65 crores. So that means that overall expenses has gone down, underlying expenses have gone down far lower. So, I can’t get it, because that will mean that we are around INR265 crore ex of INR65 crore, which we are referring to.

Raj Kumar Baheti — Director, Finance & Chief Financial Officer

So you are comparing this with December number of INR513 odd crores with INR460 odd crores, right? That’s what you are comparing?

Bharat Celly — Equirus — Analyst

Right. After excluding first R&D expenses.

Raj Kumar Baheti — Director, Finance & Chief Financial Officer

Exactly, that’s what I am telling you that you will see some of those promo spends and you know all the other expenditures actually, those kind of — you will always see a bit of a variation there. I mean, there will be some quarters which are bumped up quarters and then there would be quarters where it is — the spend is little lower actually. So this was one such quarter where we had lower spend.

Bharat Celly — Equirus — Analyst

Okay. So is it safe to assume that it will be again going back to the normal levels, which we have seen historically?

Raj Kumar Baheti — Director, Finance & Chief Financial Officer

Yes. So if you look at the full year number, right? So your full year number is at close to INR2,000 crores, right?

Bharat Celly — Equirus — Analyst

Right.

Raj Kumar Baheti — Director, Finance & Chief Financial Officer

Yes. So on that number, you could — and considering that we had INR60 odd crores of additional expenditure in Q4 for new plants, you can safely consider that there would be around 10% increase in that number for next year, if you ask.

Bharat Celly — Equirus — Analyst

Yes. That’s helpful.

Shaunak Amin — Managing Director

And INR1,066 crore [Phonetic] also includes Mitanshu that INR155 crores that is not…

Mitanshu Shah — Senior Vice President, Finance & Investor Relations

No [Speech Overlap].

Bharat Celly — Equirus — Analyst

Right. The Aleor expense will not be repetitive, I get that, but largely, we are saying that ex of Aleor we will be seeing a growth and another INR60 crores — INR240 crores of expenses will be also — sorry INR180 crores sort of expenses will also be hitting other expenses considering because of new plants expense, right?

Raj Kumar Baheti — Director, Finance & Chief Financial Officer

Correct.

Bharat Celly — Equirus — Analyst

That’s helpful. And on the U.S. market, we have been referring that we will be launching a couple of new drugs. Could you tell us that how many new injectable products have been filed till date out of all the facilities, which we have?

Raj Kumar Baheti — Director, Finance & Chief Financial Officer

Bharat, you want to know the filings actually, right?

Bharat Celly — Equirus — Analyst

Total number of injectable filings?

Pranav Amin — Managing Director

Yes, both the plants put together is close to 15 filings.

Bharat Celly — Equirus — Analyst

1-5 or 5-0?

Raj Kumar Baheti — Director, Finance & Chief Financial Officer

Yes.

Pranav Amin — Managing Director

1-5, 1-5.

Bharat Celly — Equirus — Analyst

Okay, well, 15 injectables are filed till date. So, overall, pending approvals are around 40, 45 for us at this moment?

Pranav Amin — Managing Director

No, overall spending approvals are almost 90 actually, around 90 if I’m not mistaken.

Bharat Celly — Equirus — Analyst

Pending ones, right?

Pranav Amin — Managing Director

Pending, yes.

Bharat Celly — Equirus — Analyst

That’s helpful. Thanks a lot, sir. I will get back to the queue.

Operator

Thank you. [Operator Instructions] We have our next question from the line of Tushar Manudhane from Motilal Oswal. Please go ahead.

Tushar Manudhane — Motilal Oswal — Analyst

Thanks for the opportunity. Sir, considering these number of launches comprising both oral solids as well as injectables, what kind of sales can we expect in the U.S. for FY ’24 from current $196 million, $200 million.

Pranav Amin — Managing Director

You know, Tushar, we don’t give forward guidance, and for the U.S., it is very tough. And I’ll tell you why? Let’s see how the launches happen. It’s early days for us on the injectables. We would like to grow the business. But the other side, what I answered earlier to Damayanti is that there is lot of erosion as well, right. So it’s very tough for me to predict and that’s why we don’t give a guidance for U.S. sales.

Tushar Manudhane — Motilal Oswal — Analyst

Got it. While price erosions are there, but at the same time compliance issues for competitors or somebody shutting — literally shutting down the plant. So we don’t see the opportunity…

Pranav Amin — Managing Director

I believe there are opportunities in the U.S. market and you’ll continue to get opportunities and you have to be nimble player, but to put a number on it is tough. So I wouldn’t like to give a forward guidance.

Tushar Manudhane — Motilal Oswal — Analyst

All right. Got it. And in particularly in API just one more question. Why you address that, it is — most of the growth is volume-led there. INR300 crore sort of a run rate is very much possible or there is further scope on account of this moving volume uptick?

Pranav Amin — Managing Director

Yes, no, that’s — the API business is a good business and they will continue to grow. I expect API and ex-U.S., rest of the world generics, I think both should grow by 10% at least this year.

Tushar Manudhane — Motilal Oswal — Analyst

Okay, sir. Thank you.

Pranav Amin — Managing Director

Yes. Thanks.

Operator

Thank you. We have a next question from the line of Darshil Jhaveri from Crown Capital. Please go ahead.

Darshil Jhaveri — Crown Capital — Analyst

Hello. Good evening, sir, and thank you so much for taking my question. So, I just wanted to ask about what do we feel our margins will be around going forward for the next year?

Raj Kumar Baheti — Director, Finance & Chief Financial Officer

So, Darshil, like margins, of course, would be in bit of a pressure considering that we would have all the new plants now commercialized actually. The run rate of that is close to INR60 odd crores every quarter actually. So that would have and — but you know again, you will have sales coming in from this. So it’s going to play out, I mean, over the quarters, but if we have to take a guess, I would say that a number around 15% would be a right number to go with.

Operator

Mr. Jhaveri?

Darshil Jhaveri — Crown Capital — Analyst

Yes, sorry. Sorry, there was a network issue. I missed the last part, sorry, apologies.

Raj Kumar Baheti — Director, Finance & Chief Financial Officer

So, Darshil, in interest of everybody, we can take that offline, I mean, you know, we’ll discuss.

Darshil Jhaveri — Crown Capital — Analyst

Okay. And sir without — sorry, and one more question. So, I understand U.S. sales would be difficult to guide on. But overall, how much do we — could — a range of revenue growth that we could expect in the upcoming few years? Maybe nothing specific but some kind of color, that would be helpful?

Raj Kumar Baheti — Director, Finance & Chief Financial Officer

So, see like, domestic, we said that, you know, not giving the number, but we will outsmart the industry growth rate. As far as international generic is concerned, U.S. is — we would have very good launches coming in actually and so there would be growth as far as U.S. territory is concerned. Ex of U.S. other generics, we should grow at around 10%, 12%. API business, 10%, 12% of growth is possible.

Darshil Jhaveri — Crown Capital — Analyst

Okay. Thank you so much, sir. That’s helpful and all the best for the next quarter.

Raj Kumar Baheti — Director, Finance & Chief Financial Officer

Thanks, Darshil.

Operator

Thank you. [Operator Instructions] We have a question from the line of Bino Pathiparampil from Elara Capital. Please go ahead.

Bino Pathiparampil — Elara Capital — Analyst

Hi. Good afternoon. You had mentioned that you have taken a write-back of tax in Q4…

Operator

I’m sorry, can you use your handset please. Your voice is not clear.

Bino Pathiparampil — Elara Capital — Analyst

Hello? Hello, is it better?

Operator

Please go ahead.

Bino Pathiparampil — Elara Capital — Analyst

Yes. Good evening. You had mentioned that you have taken a write-back of tax in Q4. Is that related to the write-off of assets?

Raj Kumar Baheti — Director, Finance & Chief Financial Officer

Yes. Yes, that’s true. Yes. So, whatever provision which was done in the first three quarters, that’s written back in the quarter four.

Bino Pathiparampil — Elara Capital — Analyst

Okay. And are there any more deferred tax assets related to this that you are carrying forward into FY ’24?

Shaunak Amin — Managing Director

So, balance of INR470 odd crores of impairment for which the provision has been done depending on how the generic market behaves and how the impairment valuation will be at that time. If required, will be written off in ’24, then those plants take part of the facilities gets operational.

Bino Pathiparampil — Elara Capital — Analyst

Understood. Okay.

Shaunak Amin — Managing Director

Out of total impairment of INR1,150 crore, as I explained INR670 odd crores have been charged off in the current year — written off in the current year. We have made full provision. So that no further hit comes on P&L of subsequent years.

Bino Pathiparampil — Elara Capital — Analyst

Understood. So, basically, if the remaining write-off also happens in FY ’24, then that tax benefit could come in FY ’24. So FY ’24 tax rate could also be very low?

Shaunak Amin — Managing Director

Yes.

Bino Pathiparampil — Elara Capital — Analyst

Okay. And FY ’25 onwards, what sort of reported tax rate should be — should we come to, should — will we go back to around 25%?

Shaunak Amin — Managing Director

I’m not getting the…

Raj Kumar Baheti — Director, Finance & Chief Financial Officer

We will continue. See, before this we were in MAT, so you can safely assume for your calculation purposes, that we will be in MAT which is 17.5%.

Bino Pathiparampil — Elara Capital — Analyst

Okay, got it. Thank you.

Operator

Thank you. We have our next question from the line of Tarang Agarwal from Old Bridge Capital. Please go ahead.

Tarang Agarwal — Old Bridge Capital — Analyst

Hi. Just wanted to check a couple of things. One, how should we look at your capex from FY ’24 onwards? And second, given that INR65 crores is the additional quarterly hit that we see. So would it imply about INR240 crores to INR250 crores of additional annual hit on the P&L because of the new facilities?

Raj Kumar Baheti — Director, Finance & Chief Financial Officer

So, as we have been sharing with investors, most of the capex — most of the new projects are now — are completed and we are rationalizing it. The capex in ’23, ’24 largely it is debottlenecking or little bit of expanding of API capacity. We are also investing in some solar power, so that electricity cost goes down because in Gujarat it’s pretty high. And there’ll be some investments in new facility for India branded business which is at initial stage. But having said all this, I think the capex — and of course there will be no pre-op capitalization. So having said all this, I think the capex will be fairly, I mean, it will be less than — the total capex should be less than INR250 crores.

Tarang Agarwal — Old Bridge Capital — Analyst

Okay. And to my second question?

Raj Kumar Baheti — Director, Finance & Chief Financial Officer

What is that?

Tarang Agarwal — Old Bridge Capital — Analyst

Would we see additional hit of about INR250 crores to INR260 crores?

Raj Kumar Baheti — Director, Finance & Chief Financial Officer

Yes, that’s right. I mean, that’s not [Technical Issues] normal routine expenses which will get charged to P&L.

Tarang Agarwal — Old Bridge Capital — Analyst

Okay, that’s it. Thank you.

Operator

Thank you. We have a next question from the line of Bharat from Equirus. Please go ahead.

Bharat Celly — Equirus — Analyst

Thanks for the follow-up. Sir, Baheti, sir, actually during the last quarter we were referring that there is total INR400 crores expense, INR200 crores above EBITDA and INR200 crores below EBITDA. Now since we are relaxing INR65 crore above EBITDA that translates to almost like INR250 crores, INR260 crores. So is there any incremental cost which we have realized now, so because earlier we were guiding for almost like INR180 crores to INR200 crores above EBITDA?

Raj Kumar Baheti — Director, Finance & Chief Financial Officer

So, as these facilities gets operational, I think obviously the operating expenses also goes up, as we get into commercial production. So earlier these facilities were being used only for taking exhibit batches and for taking those filings. Now they are being used for regular commercial production.

Bharat Celly — Equirus — Analyst

So from here on whatever the increase would be, that will be largely the inflationary one, or there will be some — another INR600 crores, which is sitting as CWIP. So there could be any additional increase also which can happen over and above, once those are commercialized?

Raj Kumar Baheti — Director, Finance & Chief Financial Officer

No, I didn’t get you.

Shaunak Amin — Managing Director

No. So that would be very incremental small capex, which is just a balancing equipment. So that number stays there actually.

Pranav Amin — Managing Director

Bharat, what will happen is as we start commercializing, so you’re not doing any major capexs or big [Indecipherable]. I think just in the line the rebalancing maybe higher equipment size and [Indecipherable] commercial, that’s about it.

Bharat Celly — Equirus — Analyst

Okay, I get that. And since we were referring that there will be another INR200 crores, which will be coming below EBITDA, so new impairment, which we have done, what sort of extra number that will be now?

Pranav Amin — Managing Director

Yes. So, Bharat the number would be like — cash would be around INR200 crores, INR220 crores and depreciation will be another INR75 odd crores actually. So all put together would be around — between INR280 crores to INR290 crores for these new plants.

Bharat Celly — Equirus — Analyst

Can I beg a pardon. So you said INR200 crore…

Pranav Amin — Managing Director

I’ll repeat again.

Bharat Celly — Equirus — Analyst

Sure.

Pranav Amin — Managing Director

Cash expense would be between INR200 crores to INR220 crores and there would be additional depreciation of around INR75 crores. That would take the total number between INR280 crores to INR290 crores.

Bharat Celly — Equirus — Analyst

Okay. So, but my belief was, we were already doing INR65 crores during this quarter. That was above EBITDA or that is across the line item?

Pranav Amin — Managing Director

So, Bharat, that is exactly what has happened. This, I mean, arrangement that we have done with CWIP takes care of the depreciation on the pre-operative and that’s like a INR100 crores off the depreciation every year.

Bharat Celly — Equirus — Analyst

I get that. What I’m asking is, the INR65 crores, which we have charged to the P&L during this quarter, is it a spread across above EBITDA and as well as below EBITDA or it is…

Pranav Amin — Managing Director

So that is the depreciation portion into it, yes.

Bharat Celly — Equirus — Analyst

It has depreciation. Okay, that’s helpful. Thank you. Thanks a lot.

Operator

Thank you. We have our next question from the line of Resham Jain from DSP Mutual Fund. Please go ahead.

Resham Jain — DSP Mutual Fund — Analyst

Yes, hi, good evening. Sir, just one question on the margins. You mentioned 15% margin for the full year. Is that right?

Raj Kumar Baheti — Director, Finance & Chief Financial Officer

Yes, that’s what, yes, ballpark number.

Resham Jain — DSP Mutual Fund — Analyst

And how will this trajectory be because you have multiple launches maybe in the first half and they will scale up in second half. So do you feel or what you expect the exit run rate would be?

Raj Kumar Baheti — Director, Finance & Chief Financial Officer

No, you were not very clear. Can you repeat that?

Resham Jain — DSP Mutual Fund — Analyst

Yes. Am I audible now.

Raj Kumar Baheti — Director, Finance & Chief Financial Officer

Yes.

Resham Jain — DSP Mutual Fund — Analyst

Yes. What I was asking is that 15% is a full year margin. So how the margin trajectory will be, because first half, you will have multiple launches and they will scale up as the year progresses. So how will be exit run rate of margins be?

Raj Kumar Baheti — Director, Finance & Chief Financial Officer

So here we are talking about, I was talking about year as a whole. I mean, not bisecting that into quarters, actually. It’s overall. And again, I mean, it’s just giving a flavor for the year.

Resham Jain — DSP Mutual Fund — Analyst

Okay. Because if you look at before your Sartan benefits the kind of margin you were making and now once the plant scales up, so that was the context that even after scale up, you don’t see the exit run rate would be better than what you would be doing, let’s say, first half. That was the context in which I was asking this?

Mitanshu Shah — Senior Vice President, Finance & Investor Relations

So, see that’s exactly, because we — you will not be completely putting an entire — because you’ve got — so, I mean, if you look at the grid and the approval of the products and things like that, you are going to partially keep using the plant and it will — gradual scale up is going to happen, right. So you will have five, seven products, then in second half, you will scale it up to 10 products, FY ’25 you will have 25 products, like that. So that’s how…

Pranav Amin — Managing Director

So, while Mitanshu was right. One thing is the plant while we’ve said using them, they’re not fully optimally utilized, right. It will take a year or two till all new approvals come. Second thing is even before the Sartans, and you know what, Sartan is the fundamental U.S. business that we had, that the margins have come down in that, right, and that has impacted. So even before the Sartans the margin from the U.S. business for the [Indecipherable] were much higher, continually shortages and we had very high margin in the U.S. business that time as well. So that’s the fundamental part that has changed. The rest of the business, India is growing, ROW, API are growing. It is just the U.S. that’s dragged down the margins.

Resham Jain — DSP Mutual Fund — Analyst

Okay. Okay. Thank you.

Operator

Thank you. We have a next question from the line of Damayanti Kerai from HSBC. Please go ahead.

Damayanti Kerai — HSBC — Analyst

Hi. Thank you for the follow-up. So I have two questions on India business. So you mentioned that you would continue to outperform the market. Sir, can you talk a bit about the growth drivers like what are your expectations in terms of volume or price contribution from the new product introduction, etc., so comments around that?

Shaunak Amin — Managing Director

Yes. I don’t have a split off-hand, but I mean, like I said, I think what we maintain is that if the market grows, whatever the market growth is we aspire to grow a couple of points higher than the market growth numbers and which will be a composite of all of new launches, some price increases, some high volume, would be a bulk of that. So — but like I said, it also is depending on the profile of the market growth. But yes, anywhere from matching market growth to maybe going up 4 points, 5 points higher than the market growth. I mean, that is what we wish to — which we are working towards.

Damayanti Kerai — HSBC — Analyst

Sure. So if I understand correctly volume part will be obviously following the market trends, etc., but should we assume like pricing contribution around 5%, 7% which we generally see. That will [Speech Overlap].

Shaunak Amin — Managing Director

Yes. Like I said, I don’t have the exact breakup off-hand, but Ajay can share that with you. But I think volume would be a bulk of the growth numbers, and there would be smaller components of pricing in this [Indecipherable].

Damayanti Kerai — HSBC — Analyst

Okay. And…

Pranav Amin — Managing Director

But just so that we’re clear, I think on the DPCO product, I think, there will be no pricing increase versus last year. So if you had to take that as, which is a decent chunk of our portfolio, if we keep that as flat, I think ex of that there would be some price increase. But there would be some price cuts also as a part of that. But yes, I mean, it would be largely volume and there will be a smaller component of pricing on that.

Damayanti Kerai — HSBC — Analyst

Okay. So just to clarify, you don’t assume any pricing change in the DPCO part of your portfolio although it is small around 15%, 16%?

Pranav Amin — Managing Director

Yes, because if you see over last year versus this year, I think prices are the same, if I were to factor in the [Indecipherable] which we had to take last year as well as opportunity as per the WPI. I think they both — it was [Indecipherable] even, I don’t think there will be an increase over the previous financial year, at the start of the financial year.

Damayanti Kerai — HSBC — Analyst

Okay. And my last question is on your observation. This is for the broader business. So your observation on the input cost pressure, which we like few quarters back, all those have normalized the input cost pressure on raw materials or freight, etc.?

Pranav Amin — Managing Director

Yes. So I think — I think some of the pressure still stays on the packing, on the RM/PM side of things. But I mean honestly with the price in oil coming down, we expect some easing above this hopefully going forward. On the API side, there is some marginal increase but not material.

Damayanti Kerai — HSBC — Analyst

Okay. And are there like energy or freight cost, etc.

Raj Kumar Baheti — Director, Finance & Chief Financial Officer

No. We don’t have large component to India business on that side.

Damayanti Kerai — HSBC — Analyst

Okay. Not to India business but from overall business maybe…

Raj Kumar Baheti — Director, Finance & Chief Financial Officer

That [Indecipherable] Mitanshu will..

Mitanshu Shah — Senior Vice President, Finance & Investor Relations

Yes. Sure. So like other energy cost would be increasing A, because of rate hikes by the state electricity boards and B, because of increased unit consumption with the operations of additional facility. And I mentioned in my notes that we will be investing into solar projects for compensating for — so there will be one time capex but then there’ll be a significant amount of savings over next 20 years or so.

Damayanti Kerai — HSBC — Analyst

Okay. So this benefit of solar energy investment will come from this year itself or it will take some time?

Mitanshu Shah — Senior Vice President, Finance & Investor Relations

Yes, I think it will come from H2 of this year.

Damayanti Kerai — HSBC — Analyst

Okay, thank you.

Operator

Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to management for closing comments.

Mitanshu Shah — Senior Vice President, Finance & Investor Relations

Yes, thanks. So thank you everyone for being patiently with us on a weekend. I think it was a heavy board and the meeting extended right up to 4:30 or so. So thank you very much for being with us till late in the evening and wish you a happy weekend. And we’ll keep interacting individually and of course after the — in the new financial year. Wish you all the best.

Operator

[Operator Closing Remarks]