Granules India Ltd (NSE: GRANULES) Q3 2025 Earnings Call dated Jan. 24, 2025
Corporate Participants:
Prachi Ambre — Investor Relations Associate
Krishna Prasad Chigurupati — Chairman and Managing Director
K.V.S. Ram Rao — Joint Managing Director and Chief Executive Officer
Mukesh Surana — Chief Financial Officer
Priyanka Chigurupati — Executive Director
Analysts:
Tushar Manudhane — Analyst
Rashmi Shetty — Analyst
Darshil Jhaveri — Analyst
Abhishek Pipariya — Analyst
Sahil Vora — Analyst
Unidentified Participant
Madhav Marda — Analyst
Harith Ahamed — Analyst
Presentation:
Operator
Ladies and gentlemen, you have been connected for Granul India Limited Conference Call. Please stay connected. We will begin shortly. Ladies and gentlemen, you have been connected for Granules India Limited Conference Call, please stay connected will begin shortly Ladies and gentlemen, good day, and welcome to Q3 and Nine Months FY ’25 Earnings Conference Call, Granul India Limited. 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. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Ms Prachi from Orient Capital. Thank you, and over to you, ma’am.
Prachi Ambre — Investor Relations Associate
Thank you, Manu. On behalf of Granul India Limited, I extend a warm welcome to all the participants on Q3 and nine months FY ’25 financial results discussion call. Today on the call, we have Dr Krishna Prasad, Chairman and Managing Director; Dr KVS Ram Rao, joint, Managing Director and Chief Executive Officer; Ms Priyanka, the Executive Director; and Mr Mukesh Surana, Chief Financial Officer. Before we begin the call, I would like to give a short disclaimer. This call may contain some of the forward-looking statements, which are completely based upon our beliefs, opinions, expectations as of today. These statements are not a guarantee of our future performance and involve unfortunate risks and uncertainties. With this, I would like to hand over the call to Dr Prasad for his opening comments. Over to you, sir.
Krishna Prasad Chigurupati — Chairman and Managing Director
Thank you. Thank you, Prati. A very good evening, ladies and gentlemen, and thank you very much for joining us on our Q3 FY ’25 earnings call. We appreciate your continued interest in Granules. We have uploaded a detailed presentation of our quarterly performance on our website and I trust you have had a chance to review it. As many of you know, the US-FDA conducted an inspection of our Gagilapur finished facility from August 26th to September 6, resulting in six Form 483 observation. The FDA has determined the classification of the infection as official action initiated. Granules has undertaken a proactive, voluntary and comprehensive remediation plan to address observations raised by the USFDA. Following the inspection, we voluntarily paused manufacturing and distribution in September to conduct a thorough risk assessment, ensuring that no product contamination or there are no product contamination or patient safety concerns. Operations and dispatches have since resumed in October following this assurance while maintaining full transparency with the FDA throughout the process. Our voluntary remediation plan encompasses comprehensive corrective and preventive actions, independent third-party oversight, ongoing product testing for risk assessment and regular monthly progress updates to the US-FDA. The plan is structured around three key focus areas. First, demonstrating a thorough understanding of identified issues by implementing appropriate; second, ensuring the effectiveness of closed through rigorous metrics — metrics-based evaluations. And third, mitigating risks by implementing interim controls for all ongoing activities related to open. To date, 90% of CAPAs have been completed with the remaining ones on-track for closure by March ’25. To help us with this process, we have engaged multiple third-party consultants and experts who are working closely with our team on-the-ground. We are in constant touch and engaged with the US-FDA to present our progress on the corrective measures and request a potential reinspection. Following our initial response to the FDA on 28th September, we have shared three monthly status report update reports with the agency on 28th October, 26th November and 26th December, communicating the progress on implementation of corrective measures that we have put in-place. Our fourth monthly update will go out before the end of January. We are also making a systemic change in the quality and compliance culture across the organization, including at Gagilapur. These are directed towards infrastructure improvements, capability building, automation, process changes and inculcating a quality mindset that is in sync with the ever-involving regulatory expectations. We are maintaining continuous communication with our customers and have had several visits and on-site meetings with our top customers. These interactions have been highly positive, enabling us to transparently share our progress on collective actions being taken at the site. As part of our ongoing efforts to strengthen leadership in quality and manufacturing. The quality function and leadership, Dr Rajesh Kapoor has been appointed as Global Head of Quality at Granules. He was earlier Head of Quality for our North American operations. On the manufacturing side, Ramraj has joined us back as new Head of Formulation Operations for India Sites. Ramraj in his previous stint was head of plant. The OAI classification does not impact the ongoing manufacturing distribution or sale of existing products from the site. However, it may impact review of pending submissions for approval of new products and the changes is resolved. Granul’s growth trajectory remains robust and diversified, underscoring that our strategy is not solely dependent on new product approval from the side. Key drivers include new launches from our GPI facility in the US, growth from large-volume products in the US and Europe, capacity addition and commercialization of greenfield formulation facility at Genome Valley, value chain advancements in Europe and our expanding oncology pipeline from Unit 5 in. We are looking ahead — as we look-ahead, our near-term growth will be driven by new product launches from our GPI side for the US markets, especially the CMS ADHD segment. During the last quarter, we had received US-FDA approval for amphitamine chewable tablets and few other exciting products are under approval, which we expect to come through in the near-future. Our new formulations facility at Valley under Granules Life Sciences is progressing well. Phase-1 with a capacity of 2.5 billion doses has been commissioned and commercial dispatches of monograft products have commenced. We are targeting prescription product commercialization for Europe in March or April. Phase-2 with an additional 7.5 billion dose capacity is expected to be commissioned by Q4 of FY ’25 with validation activity slated to begin in Q1 — Q1 FY ’26. To summarize, we are prioritizing the enhancement of quality and compliance across the organization, while actively pursuing our growth objectives. These include new launches from our GPI facility, expanding our formulations capacity at GLS and investing in R&D to support our portfolio expansion in the long-term. I request Dr Ramrag to provide further insights on some of these initiatives.
K.V.S. Ram Rao — Joint Managing Director and Chief Executive Officer
Thank you, Chairman. Good evening, ladies and gentlemen. Building a robust and a diverse product portfolio has been a focus for Granules, forming the cornerstone of the company’s growth strategy in the last couple of years. We have been steadily advancing towards our R&D objectives. Each passing quarter, we have been consistently growing our product portfolio. Todak Granules has 83 ANDAs in the US with 15 ANDAs awaiting approval, 12 applications in Europe with four awaiting approval and 15 applications in rest of the world with eight awaiting approval. Additionally, we have received approval for two of our formulation products in the US in the last quarter. We are actively expanding our therapeutic and product portfolio by submitting new filings in areas such as CNS, oncology and anti-diabetic segments while also pursuing market expansion for our existing products. This past quarter, Granul’s R&D spend was close to INR67 crores, another testament to our commitment to continuous innovation. On the following of the areas of primary focus for growth in the portfolio, ADHD built-out of facility in the USA, we are developing medicines to address one of the fastest-growing therapeutic segments and health concerns in the US and world today. The global ADHD market is projected to grow from 15.8 billion in ’23 to INR24.6 billion in 2032. Increasing ADHD diagnosis advancement in diagnostic tools and the continuous development of innovative treatments is driving this growth. Despite being rapidly-growing therapeutic segment, patients in the US frequently face shortages of ADHD medications. A combination of the factors make ADHD an attractive therapeutic area for graduates. We have been developing a very robust ADHC portfolio with 10 products in pipeline for development, which includes first file day 1 IT1 and regular opportunities. We also have five to six ADHD products commercialized in the US and have obtained approval for list examin tablets in December 2024. Overall, Granules ADHD portfolio is designed to address majority of the US ADSD market. Oncology therapy is another focus area for and we are making substantial strides into our oncology portfolio. We continue to expand our oncology portfolio with seven to eight products currently under development, which includes NCE opportunities and the day-one opportunity products. Our state-of-the-art infrastructure for both API and finished dosage form in oncology combined with strategically curated portfolio in the near-term larger products that have high market entry barriers positions us to become a significant player in this segment. Diabetes treatment is another cornerstone of our portfolio. We are currently working on eight to nine diabetics medication portfolio and anticipate submitting several of them for approval in the upcoming quarters. Is a focus area for our R&D. We are developing a couple of products using this technology, process validation of the first API with this technology is set to be completed in the current financial year, followed by two more products in the subsequent quarters. We continue to develop these products with an eye on sustainability and global cost. It’s great to report that we are still consistently benefited to executing our R&D strategy and building a strong portfolio for the future. Thank you all, and over to you,.
Mukesh Surana — Chief Financial Officer
Thank you, CMD and JMD. Let me take you all through the top financial parameters now. Revenue. The 3rd-quarter revenue were INR11,377 million as compared to INR11,556 million in Q3 FY ’24, with a decline of 2% and revenue improved by 18% as compared to Q2 FY ’25. The sales breakup as per business division, geographic region are presented in our investor presentation, which is available on the website. Gross margin. Our gross margin as a percentage of sales for Q3 FY ’25 was 61.7% as compared to 57% in Q3 FY ’24. Gross margin as compared to Q3 FY ’24 is up by 474 basis-points achieved on account of profitable sales growth of finished dosages. Gross margin as a percentage of sales for Q3 FY ’25 is down by-20 basis-points from Q2 FY ’25. We sustained higher sales quarter-on-quarter and prioritized sales of higher-margin within the finished dosages. EBITDA and EBITDA margin, EBITDA for the quarter was INR2,303 million, that is 20.2% of sales as compared to INR2,505 million, that is 21.7% of sales in Q3 FY ’24, a decrease of 144 basis-points from Q3 FY ’24. EBITDA as a percentage of sales for Q3 FY ’25 is down by 80 basis-points from Q2 FY ’25 on account of higher price, failure to supply and professional expenses that have gone up on account of the recent US-FDA inspection at the facility. R&D, our R&D spend for the quarter was INR568 million as compared to INR468 million in Q3 FY ’24 and INR524 million in Q2 FY ’25. Net-debt, our net-debt was INR8,289 million as compared to INR7,973 million in Q2 FY ’25. Our net-debt was INR8,421 million at the end of March ’24. Cash-to-cash cycle, our cash-to-cash cycle was 213 days in the current quarter, which is same as Q2 FY ’25. Cash-flow from operations. Cash-flow from operations for the quarter was INR1,315 million as compared to INR1,880 million in Q3 FY ’24 and INR2007 million in Q2 FY ’25. With the sequential-quarter sales growth, receivables have gone up. Our DSO remained at 76 days as compared to Q2 FY ’25 of 73 days. Capex. Capex spend during the quarter was INR1,335 million as primarily invested in granular licenses of INR940 million. At a YTD level, we spent INR4,102 million for capex, primarily invested in granular life science of INR2,425 million. ROC. ROCE for Q3 FY ’25 is 16.4% as compared to 16.9% in Q2 FY ’25 and 15.3% in Q3 FY ’24. With this, I open the floor for questions
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. Anyone who wish to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen we’ll wait for a moment while the question queue assembles we have a first question from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go-ahead.
Tushar Manudhane
Thanks for the opportunity. Sir, with almost 90% remediation work implemented and new approvals or launches expected, could you just guide us in terms of where you would end FY ’25 in terms of revenue growth and EBITDA margin?
Krishna Prasad Chigurupati
Should that the remediation is going on, like I said, in my opening remarks, we have voluntarily taken a lot of steps remediation. We have consultants looking at last two years reports of investigations and all just to give confidence to ourselves and the FDA that everything has been good in the organization and even ongoing investigations also they will be taken care of. So much work is happening and now it all depends. If everything is status quo and it is OAI, we will not get approvals till that is cleared, new approval. So the growth has to come from existing products, increase in-market in Europe and other places and mainly from the US operations and production from GLS. So we — we cannot put a number today or but definitely when you see CAGR, we will continue to maintain it even though there are blips. CAGR will definitely be around 20% plus. So that’s all I can guide on the growth today.
Tushar Manudhane
Understood. And for the quarter, there has been a sharp uptick for Europe sales. Anything you would want to comment on that?
Krishna Prasad Chigurupati
Is it uptick, did you say that?
Tushar Manudhane
Quarter-on-quarter there has been sharp jump-in the Europe sales.
Krishna Prasad Chigurupati
The quarter-on-quarter there has been a term, but because the reason is last quarter was actually a dip. So if you see Europe on a continuing basis, Europe is not doing that great. It’s also a factor of capacity. Our capacity is not infinite until we have the new GLS plant running, this will continue and we continue to allocate most of our capacity to US. So if you see the US growth rate and the growth in Europe, you can see the connection. Overall and great growth in Europe, that’s all I can tell you.
Tushar Manudhane
And lastly on like while this has slightly impacted the EBITDA margin for the quarter, but if you would like to call-out what kind of cost has gone in terms of remediation measures, which is sort of not recurring in future.
Krishna Prasad Chigurupati
Look, cost has not only gone up on remediation,. There was a lot of due to disruption of supply, there was a lot of material that has to be airlifted, that has drastically added to the cost. And of course, remediation cost has been there. And few other expenses, which are not a regular line have happened in this quarter. And I won’t say this is one-off for this quarter. Some of these things will happen in next quarter too, though they will be at a much reduced level.
Tushar Manudhane
Understood, sir. Thank you.
Operator
Thank you. A reminder to all participants, you may press star and want to ask questions. The next question is from the line of Rashmi Shetti from Dolat Capital. Please go-ahead.
Rashmi Shetty
Yeah. Thank you for the opportunity. So just a follow-up from the earlier participant. You mentioned in your presentation that your expenses during the quarter has gone up due to the professional fees and related to the remediation activity and some FTS expenses also. So if you can quantify that number, what was the cost-related to the failure to supply and that penalty is going to recur in next two, 3/4 or you feel this is one-off in 3rd-quarter only? And remediation cost, how much you know, is something which is recurring in nature in the in the next subsequent quarters?
K.V.S. Ram Rao
Sure,. So we have incurred consultancy fees failure to supply and also there were increase in ad right. Some we could recover from customers, some we could not. All put together, I would say it would be close to $3 million and some of this may not repeat fully in-quarter four, there is a reduction in this number in-quarter four.
Rashmi Shetty
Okay. Okay. So out of $3 million, which you are saying that which has been expended in this quarter, how much is you know something which would be record? I mean, is it like 25%, 50% of this amount would record in the quarter-four to model in our numbers, we would want to know that.
K.V.S. Ram Rao
Okay. So it would be a little above 50%, I would say it’s a judgment as of now.
Rashmi Shetty
Okay. Understood. That’s really helpful. And on the US-FDA inspection part, when you’re communicating with the agency, anything which you can gauge that you know the inspection can happen soon or you feel that currently only the timely updates will happen anything which you can gauge from them?
Krishna Prasad Chigurupati
We are updating them, Rashmi, regularly on the work that is happening here and which is very positive.
Rashmi Shetty
Okay.
Krishna Prasad Chigurupati
But we are planning to request them for a reinspection. We don’t know when they’ll give us an appointment and when they will come back, it all depends. So as of today, we cannot put any dates on that.
Rashmi Shetty
Okay. So the four to five product launches which were expected in FY ’25 second-half, will that happen from other facility or we — or we believe that probably now that will get delayed to next year or till the time it is settled?
Krishna Prasad Chigurupati
So this could get delayed to last quarter or 3rd-quarter? But definitely these products shifting to other sides, if we start filing those from the other side, it could take into first-quarter of next fiscal. I mean, I’m talking of ’27.
Rashmi Shetty
Okay. So net-net to say that at least two quarters time,
Krishna Prasad Chigurupati
There would be some loss in sales because from the new launches.
Priyanka Chigurupati
No,, to complete that answer, we have still about four to five launches from the GPI sites that are planned for Q4, which will go on as planned. And from that about two products are new approvals, one is which we’ve already received and three products are from old products that we’ve already received approvals for, but we’ll be launching officially in Q4.
Rashmi Shetty
Understood. So those 45 products will go on?
Priyanka Chigurupati
Yes.
Rashmi Shetty
Okay. And related to your API business, what is the update over there? You know we were seeing some sort of price erosion, even the demand scenario was weak because of the inventory level at the customer. But we expected that probably prices will recover in second-half and also there would be some sort of inventory which would get over. So API could — API growth could improve. So what is the update on that for this end of year? Also, if you can update related to FY ’26.
Krishna Prasad Chigurupati
You, want to take that? Or shall I?
Priyanka Chigurupati
Sure. Now I’ll take one-half of the question for sure. So the API prices, I’m assuming you’re referring to hot prices, they — and in general, they have certainly gone up a little bit, but — and have stabilized right now at a new base. And going-forward, I do expect it to go up from here. And regarding the Russia API prices, I wouldn’t necessarily say there’s any — there’s too much of a change either way in any of the cycles overall. In terms of inventory, so again, all other inventory situation is fine, but with paracetanol, there still is a situation of a high stockage because they — I mean stocking because they did — customers did take some additional product because of the wet see issues on-top of the cost inventory that they were sitting on. So again, right now, we see it — we see projections for FY ’26 to be a pretty good, but Q4 FY ’25 will still be pretty flat. But FY ’26 looks good for now.
Rashmi Shetty
Okay. Got it, got it. Thank you. That’s it from my side.
Operator
Thank you. And we have our next question from the line of from Crown Capital. Please go-ahead.
Darshil Jhaveri
Hello. Good evening. Thank you so much for taking my question. Some of my questions have been answered. So I don’t — I think the first participant asked about the growth and I think, sir said we are targeting a CAGR of 20% plus. So is that fair like for FY ’26, is that — have I heard that correctly, sir?
Krishna Prasad Chigurupati
No, no, not well. You want to answer that.
Mukesh Surana
Yeah. So in the long-run is what you was trying to say, not quarter-on-quarter. In the long-run, we are expecting to achieve 20% plus in the long-run.
Darshil Jhaveri
So, okay, okay, fair enough, fair enough. And so in the short-term, like how do we see FY ’26 planning out for in terms of like our revenue because we have some issues, we can’t launch fully that all the products that we own. So how much we’ll be able to maintain the current pace like quarterly run-rate or how would it go out?
Krishna Prasad Chigurupati
So ’26 will definitely be a lot better than ’25, because this will be aided by GLS where we are likely to have a European inspection early next — very early next fiscal. So that will help us to start the European business and the business will go on. We expect very positive growth in next year. And maybe we are looking at something like a 20% growth next year.
Darshil Jhaveri
Okay. That helps a lot, sir. And sir, margins like we had like some, you know non-recurring expenses as you’ve said, so a 20% 22% margin range, that’s also a fair assumption, sir?
Krishna Prasad Chigurupati
Yes. Yes, definitely very much. If you see our gross margins are only improving or — but some of these one-off expenses have been eating into that.
Darshil Jhaveri
Yeah, correct, correct, correct, sir. And sir, just wanted to know like any potential implications of the Trump presidency that we can expect like even like we have some facilities in US also. So any like — so what do you see as the political some — is there like an something that can maybe hart us or can it be a gain for us? You know anything on that sort of?
Krishna Prasad Chigurupati
This administration could be a little but overall this administration is industry friendly. So we — I personally think there could be a lot of positivity that can happen to the pharma industry from this administration and we having a facility in US also definitely will help.
Darshil Jhaveri
Yeah. Okay, fair enough, sir. And sir, just last on my end, sir. So FDA, we are continuously updating them. So any rough timeline, nothing that we can hold-on to you, but in your experience how much like timeline like it can be maybe a few months or maybe a quarter or two, like what do you feel, sir? Can you know, when will they come back for an inspection and how would it go on, sir? Just any timeline that you could like to give, sir. Nothing specific. Range will also do.
Krishna Prasad Chigurupati
So it’s very difficult to affect the timeline, but we are planning to — we are requesting — we are going to request them for a meeting anytime from next month onwards. And let’s see what happens. Maybe, maybe within a quarter I am sure they would definitely visit us.
Darshil Jhaveri
Ohh, okay, okay, fair enough, sir. Yeah, that’s it from my side. So all the best. Thank you.
Operator
Thank you. A reminder to all participants, you may press star and want to ask questions. The next question is from the line of Abhishek Piparia from ICICI Bank. Please go-ahead.
Abhishek Pipariya
This is in relation to
Operator
Interrupt, sir. Can you please use your handset and be a little louder?
Abhishek Pipariya
Hello. This is in relation to the capex expenses and the — which is expected in FY ’26. So can we just know what is the capex we are planning in FY ’26 and
K.V.S. Ram Rao
See, some of the capex has — there is some carry-forward also of the current year plan. So we are estimating as of now, we have not yet done the budgeting excellence, but anywhere between INR500 odd crores.
Abhishek Pipariya
Okay. And so in recent past, there has been a US-FDA observation. So what — what would have been the contribution from the Gadillapur plant, which has been affected and what is the decline we are expecting in the current year from this plan?
Krishna Prasad Chigurupati
We expect that revenues will not decline anymore. This quarter they could have declined because we took a pause in-production.
Abhishek Pipariya
Yes.
Krishna Prasad Chigurupati
We expect that we will continue with Q1 numbers from this site and possibly improve a little bit because some of the new launches are taking off their sales are improving.
Abhishek Pipariya
And sir, what is the kind of overall contribution in the top-line from the plant in financial year?
K.V.S. Ram Rao
Or sorry, come
Krishna Prasad Chigurupati
On-top line trends of that in a in percentage.
K.V.S. Ram Rao
Yeah, it is in the range of 60 plus percentage 60% to 65 percentage on overall total consol sales.
Abhishek Pipariya
Okay, sir. Okay, sir. Thank you for it.
Operator
Thank you. As a reminder to all participants, if you wish to ask a question, you may press star and one. We have our next question from the line of Sahil Vora from MNS Assets. Please go-ahead.
Sahil Vora
Hello, good afternoon.
Krishna Prasad Chigurupati
Good afternoon.
Sahil Vora
Am I audible?
Krishna Prasad Chigurupati
Yes, sir, Ms Vora. You are.
Sahil Vora
Yeah. My first question is, is Granules planning to participate in the GLP1 market giving its growing significance in the pharmaceutical landscape?
Krishna Prasad Chigurupati
Yes, Mr, this is — this is a market which no company should neglect such a huge opportunity and everybody should aim for a piece of that big pie, we are definitely looking at it and possibly you will hear from us in the future quarters on what we are doing.
Sahil Vora
Okay. Thank you for the update. My next question is, with the finished dosages contributing 76% of revenues, what is the outlook for this segment? And are there plans to diversify revenue streams further.
Krishna Prasad Chigurupati
Has always been the ultimate target and one — the reason we make even though we were selling a lot of APIs and PFIs, our target was to convert the PFI business into FDs. So that we have been achieving and focus will be totally on FDs. While we need the APIs and PFIs to feed into our FDs, so all these will be for in-house consumption. So we do make a lot of APIs today, but they all go into internal consumption. And regarding the diversification, if I got your question right, we are looking at various new APIs, again based on the FTs which we have filed and also we possibly will be — you will be hearing from us about our foray into a few different dosage forms in the coming quarters.
Sahil Vora
Got it, sir. Thank you and all the very best.
Krishna Prasad Chigurupati
Thank you
Operator
We have our next question from the line of Srishankar Radhakrishnan from EIP. Please go-ahead.
Unidentified Participant
Yeah. Got two quick questions. The first one is, even in Q2 in your investor presentation, I couldn’t see a balance sheet there. If you can give a balance sheet, that will be great. You don’t need to give it on the 3rd-quarter, etc., but it will be greatly helpful. That’s the first one. Second is, every year, I mean, you just mentioned that you probably have around closer to INR500 crores capex in FY ’23. Did I hear right?
Krishna Prasad Chigurupati
Yeah.
Unidentified Participant
Yeah. That’s the case. If you have been doing your investment, the capex also has been increasing rather on the higher side at every point of time. Good. But my question really is, when do you start to see your cash flows going to keep funding your capex and your debt continues to reduce.
Mukesh Surana
Yeah, I would like to clarify our investor presentation has all the balance sheet key parameters in slide number 8, where we cover the fixed asset turn, net-debt, TCC days, cash-flow, CapEx and ROCE. So probably you can refer that and also detailed balance sheet is anyway uploaded. With respect to the capex, as I have clarified, it is — as of now, I’m just giving an estimate because the budgetary exercise is still under process. And the third question is with respect to cash-flow generation, if you see with the a significant increase in capex, we have our net-debt has still not gone up and we are building this capex. One important capex which we are building is on the granual license, which is additional 10 billion capacity, which is — which has already started the commercialization to the extent of INR2.5 billion, a run-rate of INR2.5 billion, we will see it soon. And also the next billion also will happen. So it’s a matter of two, three years. So the capex, whatever we have spent is going to give returns in next two, three years. So if the cash-flow as such is managed well. We are not taking additional borrowings.
Unidentified Participant
No, I appreciate that point. My only point was, yes, you are generating cash, you are generating, but when are we going to see rundown in your net-debt? That was the only question. Now I take your point on Slide 8, I can see that, but it would have been much easier if that entire balance sheet also is given. So you’ve got a P&L, you’ve got a lot of those things that are given. So that was the suggestion. That’s it. Thank you.
Operator
Thank you. We have our next question from the line of Madhav from Fidelity. Please go-ahead.
Madhav Marda
Yeah, hi, good evening. Thank you so much for your time once again. I just had one question. Basically for our Gazilapur site, it has an OI classification. Just wanted to check my just very basic understanding that generally OAI is followed by either a debtor or an import alert. So do we expect that final classification to come in very soon or is it already — I don’t know-how does it usually work? Am I missing something that — or is it like stay is it OAI without either of these coming out or how does that work?
Krishna Prasad Chigurupati
At the worst-case, I mean OI, of course is import alert, but intermittent is the warning letter. We definitely — we are pretty, pretty confident based on our conversations with our consultants that is a very, very remote possibility and warning letter is a possibility though we feel and they feel confident that it may not happen. And the best-case scenario is to keep it as OAI, come back and inspect us. And that I answered a little while ago, it could happen in a quarter or so possibly.
Madhav Marda
Okay. So basically — so, just again a basic question. So it can just stay at an OAI without going into either wanting letter import loads or it can get dissolved there itself like
Krishna Prasad Chigurupati
Yes. They may want to come back for an inspection and there is an letter they give. I don’t know the exact name of the letter. That letter will say we will come and inspect you. So that could happen.
Madhav Marda
Okay, okay. And given that our — the inspection was in September, August or September. So generally the reinspection, what’s the earliest from sort of — is it like one year that they come back or it could be even faster than that? Any sense that there would be
Krishna Prasad Chigurupati
So it depends. Like if our responses are good and if APA is convinced that we are doing a good job, they’ll definitely come back earlier.
Madhav Marda
Okay. Got it. Okay. Thank you so much.
Krishna Prasad Chigurupati
Thank you.
Operator
Thank you. We have our next question from the line of Rashmi from Dolat Capital. Please go-ahead.
Rashmi Shetty
Yeah. Thanks for the opportunity again. Just one question. If you can call-out your total gross borrowings, not net total gross borrowings and your cost of average cost of debt.
Mukesh Surana
See the gross debt is INR1,025 crores okay and the cost of borrowing as a mix of PCFC term-loan and also different banks. So if I have to say largely we borrow in PCFC and USD borrowing. So the spread ranges from 0.2 to 0.7% range for working capital. And for long-term loan, it is also 100 to 150 basis-point kind of a range. And then obviously, there will be a IFRS accounting of you know INR equivalent cost which goes into the interest cost because it’s a foreign currency borrowing
Rashmi Shetty
Understood okay. Thank you.
Operator
Thank you. A reminder to all participants, if you wish to ask a question, you may press star and one. We have our next question from the line of Mamta Agarwal from ABS Investments. Please go-ahead.
Unidentified Participant
Hello. Thank you for the opportunity. Am I audible?
Krishna Prasad Chigurupati
Yes, from sir, you are.
Unidentified Participant
Sir, my question is, can you share details about the greenfield formulation expansion at the GLS and elaborate more on contribution to future revenue growth.
Krishna Prasad Chigurupati
This capacity, is going to be about 10 billion capacity, 2.5 billion is already online in one phase. And since we do not have an FDA inspection or a European inspection so-far, we are producing US monograph products for the US and they’re shaping them out today. And we are expecting a European inspection late March or early-April. And after that inspection within a few months, we expect to start shipping for Europe that — and later on, Europe doesn’t need any filings, it can be separate process. And US inspection, we have already done some filings and we expect — we don’t know, it could be six months, nine months, whatever. We are trying to push them. We’ll see what happens. But meanwhile, European sales and US monograph sales will continue to happen from that side.
Unidentified Participant
Okay. Okay. Fair enough. Sir, my follow-up question is, what is the company’s focus on launching new products or entering therapeutic areas in the near-term.
Krishna Prasad Chigurupati
Untapped our untapped from granules side, different dosage forms we are working on and therapeutic areas, as you know, everybody now is into diabetes, weight-loss segments, the LP1s so we will definitely be looking at that. And like I said, you will hear from us in the next few quarters. Of course, in the therapeutic segment, we are focusing on diabetes like the, CNS segments, some of the segments we are focusing on. But beyond that, you are looking at different things.
Unidentified Participant
Okay, okay. Okay. Thank you, sir.
Krishna Prasad Chigurupati
Thank you.
Operator
Thank you. We have our next question from the line of Harshit from Avendus Spark. Please go-ahead.
Harith Ahamed
Thanks for the opportunity. What was the R&D spend for the quarter? I don’t find it in the presentation.
Mukesh Surana
Yeah. So I had called it out, it was INR568 million for the current quarter.
Harith Ahamed
Okay. And you mentioned there was an increase in receivables during the quarter. So if you could share the current debtor days and this increase was related to which market, if you can throw some color on that.
Mukesh Surana
The DSO days that also has up in my CFO speech, it is you know in the same level. Currently it is 76 days and last quarter it was 73 days. So it is largely because of increase in sales in the Q3 sequentially Q2 to Q3.
Harith Ahamed
Okay. That’s all from my side. Thank you.
Operator
Thank you. As there are no further questions, I would now like to hand the conference over to the management for closing comments. Over to you, sir.
Krishna Prasad Chigurupati
Once again, thank you very much, ladies and gentlemen for attending this call and your continued interest in India. So I just wish you a great weekend and a happy Republic day. Thank you very much.
Operator
Thank you. On behalf of Orient Capital, that concludes this call. Thank you for joining us and you may now disconnect your lines.