Divi’s Laboratories Ltd. (NSE: DIVISLAB) Q4 FY22 Earnings Concall dated May 23, 2022
Corporate Participants:
Satish Choudhury — Chief Investor Relations Officer
Murali K. Divi — Managing Director
Nilima Prasad Divi — Whole-Time Director, Commercial
Analysts:
Tushar Manudhane — Motilal Oswal — Analyst
Unidentified Participant — — Analyst
Surya Patra — PhillipCapital — Analyst
Jiten Doshi — ENAM Asset Management — Analyst
Shyam Srinivasan — Goldman Sachs — Analyst
Cyndrella Carvalho — JM Financial — Analyst
Alankar Garude — Kotak Institutional Equities — Analyst
Damayanti Kerai — HSBC Securities — Analyst
Dharmil Shah — Marcellus Investment Managers — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Earnings Conference Call of Divi’s Laboratories Limited for Q4 and Full Year FY 2022. As a reminder, all participant lines will be in the listen-only mode 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. And I’ll hand the conference over to Mr. M. Satish Choudhury. Thank you, and over to you, sir.
Satish Choudhury — Chief Investor Relations Officer
Good afternoon to all of you. I’m M. Satish Choudhury, Company Secretary and Chief Investor Relations Officer of Divi’s Laboratories Limited. I welcome you all to the earnings call of the Company for the quarter and year ended March 31, 2022. From Divi’s Lab, we have with us today, Dr. Murali K. Divi, Managing Director; Ms. Nilima Prasad Divi, Whole-Time Director, Commercial; Mr. L. Kishore Babu, Chief Financial Officer; and Mr. Venkatesa Perumallu, General Manager, Finance and Accounts. During the day, our Board has approved the results for the quarter and year ended March 31, 2022, and we have released the same to the stock exchanges as well as updated the same in our website.
Please note that this conference call is being recorded and a transcript of the same will be made available on the website of the Company. Please also note that this audio call conference is a copyright material of Divi’s Laboratories Limited and cannot be copied, re-broadcasted or attributed in press or media without specific and — written consent of the Company. Let me draw your attention to the fact that on this call, our discussion will include certain forward-looking statements, which are predictions, projections, or other estimates about future events. These estimates reflect management’s current expectations of future performance of the Company. Please note that these estimates involve several risks and uncertainties that could cause our actual results to differ materially from what is expressed or implied. Divi’s Lab or its officials does not undertake any obligation to publicly update any forward-looking statement, whether as a result of future events or otherwise. Now, I hand over the conference to Dr. Murali K. Divi, Managing Director for opening remarks. Over to you, sir.
Murali K. Divi — Managing Director
Good afternoon and thank you everyone for joining us at our Q4 financial year ’22 earnings conference. I hope that all of you, your families, and friends are safe. The current situation of COVID-19 is significantly improving with more people recovering and less hospitalization. We shall appreciate our government body who have made tremendous efforts by conducting mass vaccination drives to tackle COVID-19. Divi’s continues to mitigate the uncertainty tactically and led up to ever-changing customer requirements and business needs. At this moment, I would like to applaud the dedication of all employees across the organization for achieving a milestone revenue of $1 billion with decent profitability despite the hurdles faced during the pandemic.
During the year 2021, apart from creating additional capacities for our pipeline products, as well as new capacity for emerging custom synthesis projects, we have also augmented and upgraded our utility infrastructure which also includes environment management. I would like to inform you that our core investments from the last two years on debottlenecking, capacity expansion, and backward integration have started to help us achieve scale and derisk external supply dependence. Due to the pandemic, there is much more focus on development of oral small molecules for complex therapeutic segments for ease of administration with high competency on handling a wide range of complex chemistry, as well as rapid commercialization capabilities, Divi’s capacities and capabilities to take on the opportunities that lie ahead.
Divi’s is a responsible pharmaceutical firm, has engaged in a number of CSR activities, and has spent about INR42 crores during financial year ’21-’22. Our initiatives are mostly focused in the surrounding communities around our manufacturing units. These include enabling vital services like providing clean drinking water, empowering women, promoting education to children, encouraging skill developments to name a few. I would now ask Nilima Divi to brief on operations and financials. Thank you.
Nilima Prasad Divi — Whole-Time Director, Commercial
Hello, good afternoon. I welcome everyone to Divi’s Laboratories earnings call to discuss the results of our Q4 FY ’22 earnings conference. I hope that each one of you along with your friends and family are safe. Supply and cost challenges on procurement side persist, given the geopolitical tensions and lockdown in China due to COVID-19. We are actively monitoring the developments and managing our inventory based on the product’s criticality. We are making a huge effort in encouraging and developing domestic Indian sources for some of our material requirements.
The risks are mitigated to a large extent, thereby minimizing the impact. Shipping costs and timelines continue to increase. Container shortages, rising oil prices, and port congestion are causing trade disruptions across regions. Our logistics team are proactively planning shipments with timely communication to customers creating a clear supply visibility. Overall, FY ’22 has been quite a challenging year for the pharma industry as a whole.
Supply continuity despite various disruptions across the supply chain speaks volumes about our abilities as reliable supplier.
Globally, pharma companies are diversifying their supply networks, focusing on stable supply partners with sustainable business models and strong supply chain control. Divi’s is ready to capitalize on all these opportunities with ready capacity. Moving on to financial performance for the year 2021-’22, I’m happy to state we have achieved a consolidated total revenue of INR9,074 crores for the year, reflecting a growth of 29% over the corresponding previous year.
Profit before tax for the year amounted to INR3,684 crores, a growth of 38%. We earned a profit after tax of INR2,960 crores during the year, reflecting a growth of 49%. Our EBITDA margin for the year accounted to 44%. We have been able to contain our material consumption in the range of 34% to 35% based on product mix despite supply constraints and price volatility. Product mix for generics to custom synthesis is 41% and 59% for the full year. For the quarter ended 31st March 2022, we have achieved a consolidated total revenue of INR2,571 crores reflecting a growth of 42% over the corresponding quarter of the previous year.
Profit before tax for the quarter amounted to INR1,076 crores with a growth of 61% year on year. We earned a profit after tax of INR897 crores during the quarter, reflecting a growth of 78% year-on-year. Exports for the year accounted to 90%. Exports to Europe and America accounted to 77% of our revenue. Constant currency growth for the quarter has been 39%, while for the year, it has been 34%. Our nutraceutical business for the quarter amounted to INR157 crores and INR629 crores for the year.
We have capitalized assets worth INR172 crores during quarter and [indecipherable] crores during the year. We have a capital work-in-progress of INR470 crores. We have a ForEx gain of INR29 crores for the quarter and for the year, the ForEx gain has been INR38 crores. As of 31st March 2022, we have cash on books of INR2,804 crores, receivables of INR2,570 crores and inventories of INR2,644[Phonetic] crores. Our net worth now is INR11,691 crores. Thank you.
Satish Choudhury — Chief Investor Relations Officer
Thank you, madam. With this, we would request the moderator to open the lines for Q&A.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Tushar Manudhane from Motilal Oswal. Please go ahead.
Tushar Manudhane — Motilal Oswal — Analyst
Yeah. Thanks for the opportunity and hearty congrats for ending FY ’22 on a very strong note of 28% sales growth. Just would like to understand given that we continue to have a steady-state sales growth of 13% to 15%, and against that FY ’21-’22 had been a phenomenal year, so would that growth continue even in FY ’23?
Murali K. Divi — Managing Director
Well, I used to project every year a 5% to 10% growth, year-on-year on the regular business. It is so dynamic situation right now, which we are in and some of the volumes that came from custom-synthesis projects for the innovators is a very unique situation. Lots of dynamic changes in the big segments used to be resilient [phonetic] and quick, will[Phonetic] respond to the dynamic changes. Yes. It’s a wishful thinking that we would like to maintain, but we also have to look at the reality in the dynamic situation. What I can say is we created capacity with multipurpose blocks. We are ready to produce volumes in a short notice. Divi’s model has speed of delivery and I think what we are saying is we are fulfilling all contracts, the future is good, but at the same time, with so many things happening in the world on energy, on various fronts, and pandemic situation, or pandemic how it is going to behave in the coming year, not knowing is very difficult to give projections at this moment.
Tushar Manudhane — Motilal Oswal — Analyst
Eventhough[phonetic] the receivables that have been sharply increased over the past six months, if you could explain that?
Murali K. Divi — Managing Director
There are no bad receivables. All receivables are as per the contract and what is reflecting is the increase in sales that has happened in the fourth quarter. That’s what it is reflecting.
Tushar Manudhane — Motilal Oswal — Analyst
Got it. And just lastly, if I may, just an update on Kakinada’s capex, has it started off?
Murali K. Divi — Managing Director
We are still waiting for the government clearance to go ahead, though we have all the licenses received. And as soon it comes, we will be investing.
Tushar Manudhane — Motilal Oswal — Analyst
Sure, sir. So it’s been almost three months where documentation is very much in place, but clearance is not coming through?
Murali K. Divi — Managing Director
We are waiting for it — expecting it any day to happen.
Tushar Manudhane — Motilal Oswal — Analyst
All right, sir. That’s all. That’s all from my end. Thanks, and all the best.
Murali K. Divi — Managing Director
Thank you.
Operator
Thank you. The next question is from the line of Neha from Bank of America. Please go ahead.
Unidentified Participant — — Analyst
Sir, thank you for taking my question. Just wanted to understand what our current capacity utilization is given the capacity expansion and debottlenecking.
Murali K. Divi — Managing Director
The capacity is around 80% right now, and it varies quarter-on-quarter 80%, 85% but what I want you to understand that the 15% to — of capacity available [technical issue] is quite large volume to accommodate anywhere from 5 to 10 projects in large volume, it can accommodate. We also have two buildings that are ready now to take up new products comforted [phonetic] already.
Unidentified Participant — — Analyst
Sir, the 15% available capacity includes these two new buildings?
Murali K. Divi — Managing Director
The 15% doesn’t include the two new buildings because the equipment has to still going [phonetic] into the two new buildings. Buildings that are running right now, we are operating about 85%.
Unidentified Participant — — Analyst
Understood, understood. And sir, given that Kakinada is yet to start construction and our growth rate, do you see a risk, let’s say in FY ’24-’25 where our growth becomes flattish because of inability to add capacity? Do you run into that risk, not immediately, but let’s say 18 to 24-months down the line?
Murali K. Divi — Managing Director
See, I think I did mention last time that both unit one and unit two at both sides, we have more than 100 acres of land at unit one 200-plus acres and at unit two 150 acres land available with all infrastructure so that we could start construction of additional buildings immediately without waiting to take very large volume products. Whereas to accommodate 5 to 10 projects, we have the buildings and equipment available right now. I don’t see that Kakinada delay has anything to do with we being unable to fulfill any new opportunities that may arise in the coming two to four-years.
Unidentified Participant — — Analyst
Understood, understood. Okay. Thank you so much, sir.
Operator
Thank you. The next question is from the line of Surya Patra from PhillipCapital. Please go ahead.
Surya Patra — PhillipCapital — Analyst
Yeah. Congratulations on the great set of numbers, sir. Sir, three questions. The first question is on the — this antiviral drug opportunity. So, if I remember correct, last quarter that you had mentioned you were working on multiple molecules on this front, so which could be considered as a limited period opportunity, but you were mentioning about one to tier [phonetic] two year of opportunity on those front. And more to that is that this — the calendar ’22 is likely to see a kind of robust supplier for this antiviral drug. The global estimate suggests that $32 billion worth of antiviral drugs will be supplied by three players. And if that is the case, then API supply opportunity possibly will be $1 billion-plus. So given our aggregational track record for Molnupiravir and all that, so how do you see really if this opportunity really panning out throughout calendar ’22 for the industry and Divi’s, particularly in FY ’23?
Murali K. Divi — Managing Director
Yes. The — there are multiple opportunities in the — for the pandemic — for the COVID-19 as you have seen the earlier ones, Favipiravir, Ivermectin, dexamethasone, chloroquine, acyclovir, remdesivir, several of them, people thought they were highly active and with the virus changing its course or changing its activity, I think they became inactive or they’re being less used. Now you mentioned the newer ones with the three big pharma’s coming up, another two or three biopharma, they’re also developing and — but what is this, what is going to be the billion-dollar question or multi-billion dollar question is the how the pandemic behavior is going to be in the next three-months, six-months, nine-months, one-year. What kind of changes that will take place in the body? That is the real issue. What I am saying is we are in touch with every big pharma. Every big pharma knows that. If they want 100,000, 500,000 tonnes of an antiviral drug, usually antivirus drugs are, especially being oral ones, are not just five — 50 milligrams, 100 milligrams, these are in grams per day. So if they need, if the product is successful, they need no less than 100 tonnes to 1,000 tonnes or higher. And there are not many companies that could handle such volumes in a very short notice. We are prepared to do that and we have the equipment, man [phonetic] for trained employees, and analytical equipment available to handle all such. We will not lose any opportunities, what they come to us from these big pharma’s. That much I can tell you, instead of quantifying it’s difficult because it is very, very difficult to quantify.
Surya Patra — PhillipCapital — Analyst
Sure, sir. My second question is on the, at least on the new product additions. So if I see, sir, in the recent past or after a meaningful gap that we have added products like Orlistat, Brilinta, lacosamide. So these are the kind of DMF filings that we have done. So possibly lacosamide is not a possibly much larger product compared to our normal product basket, what used to be. And in case of Orlistat and Brilinta, possibly it is the China replacement strategy that you would be looking for. So sir, what is the thought process in selecting these three products in the recent past for filing with the US FDA? Some sense will give a better clarity, sir?
Murali K. Divi — Managing Director
It’s not just three products. I did mention that there are products going out of patent between ’23 and ’25, about $20 billion worth. These products are our real targets for making the next-gen generics to give us a good volume. And these — for these, I think this is one of the growth engine I have mentioned that feature generic opportunities where the products are developed, samples shipped from pilot studies and validations are under progress. So we are gearing up for supplies of — from — between ’23 and ’25 for these good volume products.
Surya Patra — PhillipCapital — Analyst
Okay. Just last one question, sir from my side. Generally, I wanted to have kind of a big picture view from your side. Sir, see — let’s say what is our aspiration over next five years considering these couple of facts? See we know that this China replacement is a much bigger opportunity for particularly in the APIs and intermediate space that is one. Secondly, the old concern, the old and standing concern of rising cost, which has been a key factor for outsourcing of manufacturing activity. So that is becoming more and more serious only. So and third is that your dominant position in that API and intermediate space for both patented molecule, as well as generic one, India’s favored position in the current timeframe and also your non-presence in the biologic, which is likely to be one of the key growth driver. Considering these four factor, what five-year goal and aspirations that you are having, sir?
Murali K. Divi — Managing Director
Well, it’s unlimited.
Surya Patra — PhillipCapital — Analyst
Great, sir.
Murali K. Divi — Managing Director
Goals are unlimited because sky is the limit. If one wants to dream, I think I always say dream high and — but make sure that your feet are on the ground. I repeat again, aim high, dream high, but keep the feet on the ground, live in reality. The reality is we are a debt-free company. We have INR3,000 crores of cash in the bank and we have a lot of investments done already, at its capacities and we are further investing. Now, in the small molecules, I think we are probably one of the first ones to reach $1 billion sales in the small molecules, APIs and intermediates. And how soon we can grow from there to the next level to become $1 billion company is one thing. Growing from there with — in the area where we have chosen, yes, as you said, is an opportunity, the China replacement and also there are several new molecules coming out, they’re not coming from the big pharmas, they are coming from small biotech companies or small companies, which are being funded. So the big pharma’s are buying these companies when they are in Phase 1, Phase 2, and all of a sudden, they need capacity to manufacture these products in large volumes. We are evaluating some of those or few of those, and we see great opportunity in the coming three to five years in those as big pharma’s don’t own chemical plants anymore. Though you say that make in Europe, make in US, but there are no big API manufacturing facilities. The maximum they can do is maybe take [indecipherable] and finish the APIs for the requirement of only in US or for the Europe. At least, certain quantum [phonetic] to say that it is made in US or made in Europe. So we are ready to take all the opportunities that are arising from these areas.
Surya Patra — PhillipCapital — Analyst
Sure, sir. Yeah. Thank you, sir. Wish you all the best.
Operator
Thank you. The next question is from the line of Jiten Doshi from ENAM Asset Management. Please go ahead.
Jiten Doshi — ENAM Asset Management — Analyst
Many congratulations, Dr. Divi. This is an exceptionally good year with very strong results. So my compliments to you and your entire team for achieving this herculean task in this environment. So it’s really heartwarming to see our results and the value that you have created. Sir, I have just one question. If you look out about four, five-years, where do you believe are the sustainable growth rates and the sustainable margins? I’m not discussing the quarter or two or one-year, the coming year. But let’s say if you look at five years ahead, where do you see sustainable growth rates and sustainable margins?
Murali K. Divi — Managing Director
It’s not an easy question to answer because we are getting the surprises of pandemic, which hit three years straight in terms of several issues. Fortunately, Divi’s did not get impacted. Now looking at the energies, the logistics, I think the main one is the logistics in the world right from containers to transportation to ports being blocked or being into trouble. I’m not talking about the Ukraine, and I’m not talking about Sri Lanka or China ports. So overall, I think there’s a lot of problem in the transportation also. But as a company, making APIs and intermediates, sky is the limit, and we are prepared, we are giving with all the capacity requirements and as you know, the big pharma’s are looking at more and more small molecules because it is easy to administer. When the pandemic came, people tried these remdesivir and few other things as injectable. But again, that will limit to take care of the people. Whereas in the oral form, it is much easier to administer mass of — millions of people. So several companies are looking at APIs, which are administered orally. These are mostly small molecules. And I think we expect a good growth and as you said, not in the next one, two years; five years, I think we can expect good growth.
Jiten Doshi — ENAM Asset Management — Analyst
And sir, can I take 40% as your base margin without which you don’t want to work?
Murali K. Divi — Managing Director
I won’t say that I don’t want to work. We will work towards it. See, somebody is getting 20% or 30% on a product, we know what to do [indecipherable] that the continued improvement in terms of cost savings, improving yields, increasing productivity, recycling solvent, reduce — work on atom efficiency, where people think that to make a 10% margin is difficult, I can say that we’ll make 50% margin in that product. We’re doing that in some of our generics. It’s not that — it’s difficult. We choose a product. We will always choose a product that will grow that will be required for a long time. We are not looking at immediately whether there is a 30% margin, or 60% margin. It doesn’t matter to us. We know we can work on it and we see the opportunity on atom efficiency and we go operate. This is where we have [indecipherable] research who are dedicated to work on.
Jiten Doshi — ENAM Asset Management — Analyst
Sure. So, sir, next five years, you would be spending, what about INR7,000 crores, INR8,000 crores of capex to accomplish your vision?
Murali K. Divi — Managing Director
The plan is about in the next two, three years to spend about INR2,000 crores, INR3,000 crores, but if opportunity requires, we don’t mind spending INR4,000 crores to INR5,000 crores because we do accumulate, our reserves do permit such expansion.
Jiten Doshi — ENAM Asset Management — Analyst
Sure. Sir, wishing you all the very best and thank you so much for the increased transparency. We highly appreciate that. And wishing you all the very best for the coming year and the years ahead. Thank you very much, Dr. Divi.
Murali K. Divi — Managing Director
Thank you.
Jiten Doshi — ENAM Asset Management — Analyst
Thanks.
Operator
Thank you. The next question is from the line of Shyam from Goldman Sachs. Please go ahead.
Shyam Srinivasan — Goldman Sachs — Analyst
Yeah. Good afternoon and thank you for taking my question. Just the first one on custom versus generic versus nutraceutical. So just want to understand, and this is again disclosure you put out in the Annual Report but I’m just preempting it here. What is the largest product and what is the concentration or how much does it contribute to your total sales for fiscal ’22?
Murali K. Divi — Managing Director
We don’t disclose the — by product, by company, or by customer. We have been saying from the beginning that custom synthesis, generic, a ratio of anywhere from 40%-60% or 60%-40%, which keeps changing by quarter-on-quarter or year-on-year. 40%-60%, 60%-40%, generic and custom synthesis. I think right now, it’s called — the exports are about 90%, 94%. And it happened to be this year, it’s about custom synthesis about 94 [phonetic] — sorry, 60% custom synthesis and 40% generic. Again, my wishful thinking is that we maintain 50%-50%. I’ve been saying all the time, but we want to maintain that.
Shyam Srinivasan — Goldman Sachs — Analyst
That’s helpful. Dr. Divi. I’m just referring to your say fiscal ’21 naproxen, you’ve given in your annual report is 20%. I’m not going to push you there, but maybe we will wait for the disclosure in terms of what the largest product is and if it has changed this year versus last year. My second question is, if I were to use the disclosure of 41% generic, which includes nutraceuticals, and 59% for custom for the full year, I’m getting pretty weak numbers for generic API. This is excluding nutraceuticals in — for the fourth quarter, like a 25% decline. Maybe the — some of the numbers are rounded, and I appreciate that. But just the decline in the generic API piece over last year. Clearly, the ratio has moved from 60%-40% to 40%-60%. I get that. But how should we look at it on the go forward? Do we now have either demand visibility or capacity for the new molecules, plus the ’23 to ’25 expiries of patents? How should we look at the genetic KPIs, please? I’m coming from a point where people are worried about like many other participants about sustainability of the revenue momentum. Since we don’t know what some of these products are contributing, we’re trying to strip off and look at what is the base business, excluding, say, any one-time opportunity that may be there. So that’s the context. It’s a long question, but I hope to — I hope you can give us some clarity there.
Murali K. Divi — Managing Director
Well, generics as such is under a lot of price pressures. Generic as such, the customers, because of the pandemic behavior, either they want adjusting time or the way they used to sell directly to the stores now is going to be the big guys are purchasing in mass volume and local distribution centered [phonetic]. Now looking at, yes, generics are going to price pressures, not volume pressures. The volumes are still there. We did not lose a customer. We did not lose volumes to the — to anybody else. In fact, the opportunities are coming based on the pandemic, the therapeutic segment demand have changed some of them. Some of them came down, very few went up.
Everybody looking at that just use what is required for the pandemic. [indecipherable] purchases of the generic whether it is anti-inflammatory or it is anti-infectives or pain killers that are all being, I wouldn’t say neglected, postponed, less consumed. That’s where it starts at the end user. Then it comes to the stores, it comes to the wholesaler and finally, to the formulator who directly buys from us. So the feeling is that once the pandemic settles, I think it’ll come back to normal, as we are seeing now. Many hospitals and many — they have started all therapic[Phonetic] areas treatment, surgeries. So I think it will take another six months to one year to stabilize if the pandemic doesn’t change its course again. Now coming back to the 41-59 and generics, how it’s going to — how Divi’s is going to get benefited? Or are we looking at the future?
If you recall our growth engines what we discussed we have expanded on the existing generics, the contracts are signed, and we don’t see any issue with that. And then we have done a lot of increase in capacities for the existing generics, where we were playing only a 20% role. Now we have increased that by 60% to 80%, and we signed contracts and they were being implemented slowly because they had earlier contracts signed. They cannot overnight [indecipherable] to the other earlier supplier, whether it is China or some other suppliers, and we need to make sure that this switch takes place is taking place. And also I mentioned about Sartan. Sartan’s is a good — one of the good grouping [phonetic] into us where we were strong only in one Sartan, where our nitrosamine impurities are excellent compared to several other companies, which had to close down. Now we are — we have created capacity for the Sartan. We — at least, three Sartan’s, the validations are going on, and we are geared up to take the volumes in the coming years. Then I mentioned about Contrast Media. That is another growth engine. This Contrast Media is now is in very, very important situation because there are not many people, there are only two in the world other than Divi’s and [indecipherable], what used to be $20, $25 is now $65 to $70. So how efficiently you can consume [indecipherable], how you can recover [technical issue] with minimum loss where we are excellent, that’s the winning situation where we can get by — get as much business possible in the Contrast Media. And I think you will see in the next two, three years a good improvement in Contrast Media with good numbers.
Then we also mentioned as one of the growth engines that two large custom synthesis projects. They are progressing well. Qualification, quantity is already supplied. Commercial quantities built is starting in the next one, two years. Again, these are long-term projects. They’re not disappearing molecules, these are growing molecules. The future generics where I said between ’23 and ’25 going out of [technical issue] $20 billion. Again, we have the capacity cost per dollar, samples supplied from the pilot plant and validations on the progress. And as and when patients expire, we are ready to supply. So we don’t see any reason, and we — that we will be having issues in the generic, no. Yes, the custom synthesis opportunities, the unique — where we were in a unique situation in the anti-COVID drugs or other gave us a boost. But that doesn’t mean that we are not doing well in the generics. Yes, the generics are in price pressures and I think we will come out in the next few months to a year.
Shyam Srinivasan — Goldman Sachs — Analyst
Thank you. Dr. Divi, last question, I’ll keep it very brief. If I were to look at when any company does like a big pharma does an expedited capex with your — announces it. let’s take the case of Merck, which where you did a INR400 crore capex, I think a year before. Should we — once this opportunity goes away, how should we look at the turns on that capex? You said in the opening remarks about multi-purpose. Should that be how we should look at it or do you think that is dedicated and it’s — once that opportunity goes away that capex is not productive?
Murali K. Divi — Managing Director
Good question. We never build our plants or blocks dedicated to a product. We build always multi-purpose blocks. If the customer wants it, we can use that block only to make its product. But if customers [technical issue] only now instead of 1,000 tonnes, 500 tonnes. We can use the remaining 50% of the time to make any other products either generic or for any other custom synthesis project. [indecipherable] only 30%, 300 tonnes. We can use it for the next six, seven or eight months for any other products because all these equipments are multi-purpose and can be switched within a matter of 30 to 45 days. [indecipherable] regulatory bodies. What time it takes for the regulatories to get an approval for an additional molecule, that is the only one. Whereas we can switch and manufacture any other product. But one thing I want you to remember, any products, they won’t die. What will happen is, instead of 100%, maybe this stays 70%, 60%, 40%. That is our experience and what seems to be less active may become less active and more active. So the molecules behave differently while the pandemic is taking its own variations — bring its own variations.
Shyam Srinivasan — Goldman Sachs — Analyst
Thank you, Dr. Divi. All the best.
Murali K. Divi — Managing Director
Thank you.
Operator
Thank you. The next question is from the line of Cyndrella from JM Financial. Please go ahead.
Cyndrella Carvalho — JM Financial — Analyst
Thanks for the opportunity. Dr. Divi, if we look at inventory number at INR2,800 crores for the full year, should this be considered as visibility for next year’s growth or is there any raw material inventory built into it?
Nilima Prasad Divi — Whole-Time Director, Commercial
Would you please repeat the question again?
Cyndrella Carvalho — JM Financial — Analyst
If we look at the INR2,800 crore inventory number for the full year — am I audible, ma’am? Nilima, am I audible?
Nilima Prasad Divi — Whole-Time Director, Commercial
Yeah.
Cyndrella Carvalho — JM Financial — Analyst
So INR2,800 crore number, if we look at the inventory number, should we consider this as the visibility for our growth in FY ’23? Or is there any inventory, like risk that we should consider when we’re looking at this number?
Murali K. Divi — Managing Director
No, the inventory related to the actual products we are manufacturing, and there is no risk to the inventory at all. The reason probably the inventory looks whether it is average or medium or high, because the management takes decisions to stock enough product where we may have problems, either the solvents or catalysts or some of the raw materials.
Cyndrella Carvalho — JM Financial — Analyst
Thats helpul, sir. Sir, if we look at the overall scenario on the supply situation on the entire logistical situation, do you think FY ’22 would have some of it impact and if we can quantify the same?
Nilima Prasad Divi — Whole-Time Director, Commercial
I think it would have a similar impact as what it was last year, considering we have some other additional factors that are hitting the market. It could be the port situation that’s happening currently even with the Colombo port, along with the Shanghai port, or it could be the war that’s happening where the effect seems likely in Europe. So it is very difficult to quantify at this point of time considering where the things are going to head and how they’re going to move [phonetic] into. But also, we need to see how the pandemic is going to play. Is it going to — because we’re again listening to cases where it’s increasing across the country and other nations. So it’s quite difficult to quantify. But yes, we would be slightly conservative, and we would think that we need to operate at stringent practices as we did the previous financial year.
Cyndrella Carvalho — JM Financial — Analyst
Okay. Nilima, any risks to the 45% EBITDA margin level that you envisage [technical issue]?
Nilima Prasad Divi — Whole-Time Director, Commercial
Pardon me. Can you repeat that?
Cyndrella Carvalho — JM Financial — Analyst
Any risks to the EBITDA margin of 44% that you envisage in the [technical issue]?
Murali K. Divi — Managing Director
We don’t see any risks on the EBITDA. I think this is where always say, bottom line, that’s where we concentrate not on the topline. The topline automatically happens as we introduce new products, new generics and new custom synthesis opportunities. The bottom line depends on our efficiency and productivity because of our process development work and it varies, but we try to maintain it that what you said 40%.
Cyndrella Carvalho — JM Financial — Analyst
That’s helpful. Dr. Divi, if I may, the last one. We’ve been talking about immense of opportunity for our custom synthesis business. There are a lot of products as per your commentary on the generics side of the business, which will commercialize. So is there any visibility that you can provide? I know I might be asking this question again. But any kind of a broad number that if we will be able to at least maintain the FY ’22 number and grow over it at the topline, if any sense that you could help us would be very helpful.
Murali K. Divi — Managing Director
No. As I mentioned that we are in a peculiar situation, I used to project very well year-on-year. But I think with the current situation in the business, we would like to make sure that it’s better not to project at least and wait and watch the pandemic situation, the war situation, the port congestion situation and also the various molecules coming out their efficiency situation, I think I rather not project.
Cyndrella Carvalho — JM Financial — Analyst
Thank you so much, sir. That’s very helpful.
Operator
Thank you. [Operator Instructions] The next question is from the line of Alankar from Kotak Institutional Equities. Please go ahead.
Alankar Garude — Kotak Institutional Equities — Analyst
Hi, good afternoon, everyone. Sir, my question is on the Constrast Media segment. It’s a pretty consolidated segment with high entry barriers. And you just now alluded to your cost competitiveness given higher iodine recovery and you have, I think, alluded to that in the past as well. Can you elaborate on how has been the early progress in gaining market share in this highly competitive or rather pretty consolidated Contrast Media segment?
Murali K. Divi — Managing Director
See the Contrast Media segment is growing at the rate of 15%, 20% year-on-year. And you’re talking about if there’s 4,000 tonnes of Iopamidol, at 20%, you need another 800 tonnes of Iopamidol. And companies are not geared up to expand immediately to that kind of volume in these unpredicted times. Yes, there are only two or three big players in this Contrast Media if you take the major five products. But the opportunity is very high, entry is difficult, we already entered. So — and we are seeing more and more when iodine $15 or $12, people did not mind without investing into heavy recovery of the Contrast Media. Finally, when it goes as injectable to the end user, the contribution was very less. Today, the iodine at the $65 to $70 a kilogram, I think people need to make sure that they are conserved and recycled, recovered and — to the base. So this is where we are good at. We have already installed plans to recover and doing it, and we’re doing it. So we are seeing good growth in this business.
Alankar Garude — Kotak Institutional Equities — Analyst
Thank you, sir. Sir, just one follow-up on this because most of the key players in the market right now, also control the end consumer channel. I mean, they also are present on the devices front. So to that extent, is that an additional entry barrier for someone like us who is not present into devices?
Murali K. Divi — Managing Director
See, you also want to see the growth of it in every market. The people whom you are referring to probably they’re linking it to the equipment supplier and the same thing is being generalized because people are looking at the less — the price pressure, they’re putting price pressure on the existing suppliers and they finally understood that unless you bring down the price to [indecipherable], we will not be able to sharpen the pencil in what we should be charging to the patient. It’s coming to that, that is the Contrast Media plus whatever is the imaging cost of the equipment in the hospital, the total impact is it 2X number of rupees or X number of dollars, that is fixed. So if the Contrast Media price goes up, we cannot effort that. This is where the generic player now is having a role or requirement and we are seeing the encouragement from the wholesalers and whoever are the companies that are coming into play the generic role.
Alankar Garude — Kotak Institutional Equities — Analyst
Thank you, sir. And just a quick second question. Any possibility of getting into biologics anytime in the near future? Or you would be ruling out that possibility all together?
Murali K. Divi — Managing Director
I think we mentioned again and again, we are not averse to biologics. We looked at it long time ago. But we have looked at peptides. We are very strong in the peptide building block. We look at oligonucleotides. We can make — we made all the building blocks or even the sugar molecules. But we were not in the monoclonal antibodies, and we are not looking at that as an opportunity now because there are good opportunities with the volumes of — we have built with the multi-purpose equipment we created, I think there is still enough opportunities in our field.
Alankar Garude — Kotak Institutional Equities — Analyst
Sure, sir. Thank you and all the best.
Operator
Thank you. The next question is from the line of Damayanti from HSBC Securities. Please go ahead.
Damayanti Kerai — HSBC Securities — Analyst
Hi, thank you for the opportunity. Sir, my question is on generic pricing challenges you mentioned for your customers. So in current inflationary environment where, on one hand, we are seeing higher raw material prices, and at the same time, your customers are also getting squeezed on prices. So as an API supplier, do you have any scope to pass on cost of higher raw material prices to your customers?
Murali K. Divi — Managing Director
Yes. In the long-term contract what we have our even generic customers that they in-built mechanism for the compensation, but of course, there’s also 10%, 15%, 20% business, they just would like to see whatever is the best price they can get, they switch. So there, yes, there is competition and there will be price pressures. But again, they are short-lived. Tomorrow, when the raw material price goes up by another 10%, they’ll be out of business. Whereas people know that whoever wants to be in the dosage front [phonetic], they want an assured supplier, reliable supplier shipping on time. This is where we have a lot of credibility in the products [technical issues] we play. So we are — yes, we are seeing price pressures because of as Nilima mentioned on the transportation costs, energy costs, port congestion [technical issues] the containers not being available and all this is one thing. Second thing, what is the demand by the end-user? That is the patient. So the pandemic we have seen in the last two, three years that certain therapeutic segments, they did suffer, people did not use painkillers, people did not use not life threatening therapies, people spent money on what is required to go through the pandemic. But now we are seeing again lifestyle medicine demand going up. So I think it will be positive in the next one, two years, it should be in line.
Damayanti Kerai — HSBC Securities — Analyst
Okay, sir. Sure. Sir, my second question is you mentioned most of the capacity or all of the capacity which you built is multi-purpose and then the products which we generally target have long shelf life, maybe like COVID-related products might be exception, but just a clarity, are you still supplying Molnupiravir API or [indecipherable] API or these have dried up?
Murali K. Divi — Managing Director
First of all, we are bound by confidentiality agreement, both by the big pharma, neither we can talk about the volumes, nor talk about the product. This product is so happened, the innovator announced are the two products in the anti-COVID. They announced that Divi’s is going to be one of the supplier. We will supply as long as they need, yes. We will manufacture as long as they need the anti-COVID products. I think I mentioned a while ago that it will never become zero. There will be manufacturing and there will be supplies. This is going to be a 20% or is it 100% or 10%? But you are right, what I said was that the equipment where we made these anti-COVID drugs or where we are making the anti-COVID drugs even now are producing multipurpose equipment. And if the campaigning doesn’t need anymore for three months, six months, we will immediately switch to another product, either for the big pharma or for our own generic. Equipment capacity will never be wasted.
Damayanti Kerai — HSBC Securities — Analyst
Okay, sir. That’s helpful. Thank you.
Operator
Thank you. The next question is from the line of Dharmil Shah from Marcellus Investment Managers. Please go ahead.
Dharmil Shah — Marcellus Investment Managers — Analyst
Hi. Thank you for taking my questions. And most of the questions have been answered. I just have one question left on the tax rate. So if you see Y-o-Y, tax rate has come down to around 21% from 25% in FY ’21. So any specific reason for the same, sir?
Nilima Prasad Divi — Whole-Time Director, Commercial
The two new SEZ that have — that we have been expanding has come [phonetic]in operational so the majority of the tax benefit that we’ve seen is from there.
Dharmil Shah — Marcellus Investment Managers — Analyst
Okay. This is mainly because of the incremental sales from these two new SEZ units?
Nilima Prasad Divi — Whole-Time Director, Commercial
Yeah.
Dharmil Shah — Marcellus Investment Managers — Analyst
Okay. Thank you.
Operator
Thank you very much. I now hand the conference over to Mr. M. Satish Choudhury for closing comments.
Satish Choudhury — Chief Investor Relations Officer
Thank you all for joining us today for the earnings call of Divi’s Laboratories Limited. In case you need any further clarifications, please reach out to our Investor Relations. Thank you.
Operator
[Operator Closing Remarks]