Indoco Remedies Limited (INDOCO) Q3 FY23 Earnings Concall Transcript

Indoco Remedies Limited (NSE: INDOCO) Q3 FY23 Earnings Concall dated Jan. 24, 2023

Corporate Participants:

Aditi Panandikar — Managing Director

Sundeep V. Bambolkar — Joint Managing Director

Analysts:

Cyndrella Carvalho — JM Financial — Analyst

Aditya Khemka — InCred Financial Services — Analyst

Sudarshan Padmanabhan — JM Financial PMS — Analyst

Mitesh Shah — Nirmal Bang Securities — Analyst

Aejas Lakhani — Unifi Capital Pvt Ltd. — Analyst

Rashmi Sancheti — Dolat Capital — Analyst

Punit Mittal — Global Core Capital — Analyst

Mit Shah — Prospero Tree — Analyst

Vishal Manchanda — Systematix Group — Analyst

Yogesh Tiwari — Arihant Capital Markets — Analyst

Sajal Kapoor — — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Indoco Remedies Limited Q3 FY ’23 Earnings Conference Call, hosted by JM Financial Institutional Securities Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Ms. Cyndrella Carvalho from JM Financial. Thank you, and over to you.

Cyndrella Carvalho — JM Financial — Analyst

Thanks, Yashashri. Good afternoon, everyone. I, Cyndrella Carvalho, on behalf of JM Financial, welcome you all on the Q3 FY ’23 earnings con call of Indoco Remedies. At outset, I thank the management of Indoco Remedies for giving us this opportunity to host the call, and looking forward to have an insightful interaction on the earnings with the management.

Today from the management team we have with us, Ms. Aditi Panandikar, Managing Director; Mr. Sundeep Bambolkar, Joint Managing Director; Mr. Pramod Ghorpade, Chief Financial Officer.

I now hand over the call to management for the opening remarks. Over to you, Ms. Aditi.

Aditi Panandikar — Managing Director

Good afternoon, Cyndrella, and thank you. Good afternoon, everyone. And considering that we are meeting for the first time this calendar year, here’s wishing all of you a very happy and healthy 2023.

Three quarters of financial year ’23 are behind us. This year was always going to be very challenging for all businesses and for pharma in particular. Both the head and the tailwinds of COVID have defeated [Phonetic], geopolitical events continue to disrupt macroeconomic factors globally and in India inflation and the consequent repercussions of it are having some of the other impact on business. In these very challenging times, it becomes all the more imperative for us to focus on fundamentals.

I’m happy to share good performance by India business this quarter, despite respiratory and anti-infective, which are key segments for our business, which do not contribute in Q3 and have not contributed greatly, we have still delivered a 13% growth in sales. Our sub-chronic segments like stomatologicals, GI, vitamins, minerals and nutrients have all supported as well. New introductions like Noxa, Dropizin, Subitral continue to add value, while Noxa maintains its position as the market leader in the Ozenoxacin segment.

In the international business, a robust growth in U.S. and a good growth in Europe on a Y-to-Y basis has helped the Company record a close to 18% growth in revenues for the third quarter ended December.

Across Indoco, our journey of super transformation continues. Post the SAP S/4HANA implementation in a record time of seven months, digitization and digitalization of the Indian sales function has started, with the field sales officers been given Apple iPads for detailing to doctors. Since time immemorial, doctors have dependent upon medical representatives or field sales officers to stay updated on new treatment options available to them. The digital initiatives will allow our sales persons to provide the most updated information to doctors, as and when they needed. I’m confident that our people will use this advantage to the fullest and help us garner greater market share in India for our product.

Some of you must be aware that the much-awaited FDA audit at Plant 1 was concluded a few days ago in Goa. While we have been issued nine 483, I feel confident that our technical, quality, compliance and operations teams will work closely with the regulators to resolve the issues identified and further improve upon our Quality Management System.

Recently, the senior and second tier management teams at Indoco met for a strategy conclave. I feel very confident now of delivering on the big hairy audacious goal we have set for ourselves over the next five years. It will indeed be a very exciting time for us, and I look forward to sharing small and large success stories with you in times to come.

In the Board meeting concluded this morning, an ESOP, or employee stock option plan, covering several Indoco holding key positions in middle and senior management of the Company has been approved. I feel this will further motivate them to contribute their best and participate in the Company’s success in the years to come.

This is all from me. I now hand over to our Joint MD, Mr. Sundeep Bambolkar, who will share highlights of the financial performance of the quarter with you.

Sundeep V. Bambolkar — Joint Managing Director

Good afternoon all the participants. Hope you and your family members are all safe and healthy.

Let me first begin with the business highlights. Net revenues of the Company grew by 17.8% at INR410.6 crores compared to INR348.6 crores same quarter last year. For the nine-month period ended December ’22, revenues grew by 9.8% at INR1,210.10 crores as against INR1,102.4 crores. EBITDA to net sales for the quarter is 15% at INR61.7 crores compared to 21.1% at INR73.4 crore. EBITDA for the nine-month period is 18.2% at INR220.1 crore compared to 22.4% at INR246.5 crore.

Other operating income includes exchange fluctuation, [Indecipherable] loss, and export incentives. Exchange fluctuation had includes mark-to-market impact. And second, realized — unrealized exchange fluctuation. In Q3, net amount on these two components is a loss of INR14.03 crore. MTM gain has reduced because of substantial swing in foreign exchange rates, particularly the British pound and euro. EBITDA without other operating income for the quarter is 17.9% at INR73.6 crore compared to INR18.4 crore [Phonetic] at INR64.3 crores. EBITDA for the nine-month period with other operating income is 15.8% at INR191.6 crore compared to 19.8% at INR218 crore.

PAT to net sales for the quarter is 6.8% at INR27.9 crore compared to 9.5% at INR33 crore. For the nine-month period, PAT is at 9.6% at INR116 crore compared to 10.4% at INR114 crore.

Earnings per share for the quarter is INR3.03 compared to INR3.58. For the nine-month period, earnings per share is INR12.59 compared to INR12.39.

We continue our super transformation journey and with the adoption of the new technologies, we recently went for Ariba, the electronic platform for procurement and also introduced iPads to our sales force.

Now, on the Indian pharma industry. The Indian pharma market is valued at INR46,840 crores and has registered a growth of 11.6% during the third quarter of FY ’22-’23 against similar third quarter last year. During this quarter, Indoco has registered sales of INR312 crores with a growth of 10.5%.

On the IPM, Indoco ranks at 28th position in the third quarter with a market share of 0.67%. The source for this is AWACS, April to December ’22.

Domestic formulation business. Revenues from domestic formulation business for the quarter grew by 12.2% at INR203.6 crore compared to INR181.5 crore. Major therapeutic segments, namely cardiac, vitamin, mineral, nutrients, and stomatology performed well during the quarter as compared to the previous corresponding quarter for the last financial year. For the nine-month period, revenues grew by 0.3% at INR612 crore as against INR610.2 crore.

On the International business front, revenues from international formulation business witnessed a growth of 30.10% at INR186.10 crore compared to INR143 crore for the same quarter last year. For the nine-month period ended December ’22, revenues grew by 24.7% at INR537.5 crore against INR431 crore.

Revenues from regulated markets for the quarter grew by 39.5% at INR151.7 crore as against INR108.7 crore for the same quarter last year. For the nine-month period ended December ’22, they’ve grown by 28.3% at INR447 crore against INR348.4 crore.

Revenues from U.S. business for the quarter grew by 22.8% at INR60.3 crore against INR49.10 crore. For the nine-month period, revenues grew by 35.9% at INR194.5 crore as against INR143.10 crore.

Revenues from Europe for the quarter grew by 58.5% at INR86 crore as against INR54 crore for the same quarter last year. For the nine-month period, revenues grew by 23.4% at INR238.4 crore as against INR193.10 crore.

Revenues from South Africa, Australia and New Zealand were at INR5.4 crore, flat compared to the same quarter last year. For the nine-month period, they’ve grown by 16.3% at INR14 crore against INR12.10 crore.

Revenues from emerging markets for the quarter were flat at INR34.4 crores. For the nine-month period, revenues grew by 9.5% at INR90.5 crore against INR82.6 crore.

Revenue from API business are at INR16.2 crore against INR19.7 crore. And for the nine-month period, they are at INR47.8 crore compared to INR50.3 crore.

Revenue from AnaCipher CRO, an Indoco Analytical Solution for the quarter grew by 6.4% at INR4.6 crore against INR4.4 crore. And for the nine-month period, they are at 15% at INR12.5 crore against INR10.9 crore.

That’s all about the business highlights for the third quarter. And I now request participants to put up their questions. Thank you.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] We have our first question from the line of Aditya Khemka from InCred Asset Management. Please go ahead.

Aditya Khemka — InCred Financial Services — Analyst

Yeah, hi. Thanks for the opportunity. Aditi ma’am, can you just talk a little bit more about the big hairy audacious goals that you have set for the organization over the next five years? And in that context, the ESOP plan. So about 3 lakh-odd shares to be issued under ESOP plan. So who are the employees who are entitled for the ESOPs? And if you could just lay out a few particulars in that sense? Thanks.

Aditi Panandikar — Managing Director

Yeah. Thanks, Aditya, for that question. Yes, the big hairy audacious goal, as I might have said in the last call towards the ending, the organization is aspiring to get to INR5,000 crore top line number soon. And all activities across the Company from sort of broadening vision of middle management getting their participation, even ESOP is part of that. All of those have started. And we feel very confident, because at Indoco today, we have several verticals, all of which have many potential areas of growth. And based on the strategic initiatives that are planned, I feel very confident we will be able to achieve the numbers we have set out for ourselves.

Coming to the ESOP plan, more than 60 employees at the level of General Manager and above across several functions, and key functions like research, marketing and other important functions in the Company have been identified to receive both for ABTs [Phonetic] and above, which is a very senior level of management and RSU plan, for which 0.5% of the share capital has been reserved. And 1% of the share capital has been reserved for offering ESOP plan that is to employees of GM and above. I feel very confident with this that our people will feel motivated and participate in the growth story of Indoco.

Aditya Khemka — InCred Financial Services — Analyst

Right. So this INR5,000 crore top line plan, the aspiration, is it over the next five years or are you talking FY ’28, ’27, which year you’re talking about?

Aditi Panandikar — Managing Director

Yes. ’27-’28.

Aditya Khemka — InCred Financial Services — Analyst

’27-’28. Okay. The second question that I have is on the export business. So I think Sundeep sir may be able to answer that. Sundeep sir, sequentially in the U.S. business, we have seen a decline in our rupee revenue, whereas we were under the impression that there has been some gain in market share in Brinzolamide and there has been a launch of Combigan. So could you just throw some light as to what has happened there? Exactly why have we seen a decline in U.S. revenues?

Sundeep V. Bambolkar — Joint Managing Director

Yeah, yeah. Aditya, this is nothing to do with any loss of market share. As you know, right from 18 December onwards up to 5th of January, all our front-end partners who have closed for celebration of Christmas and New Year, and every dispatch to regulated markets need their documented okay from the front-end partner. So as a result, some of our dispatches have got delayed. And I think we are well — extremely well in control of the situation and we will bounce back in the fourth quarter.

Aditi Panandikar — Managing Director

Aditya, if I can also comment. Our international business today is a composite of portfolio mix as you are aware. So we have sales, we have milestones, we have profit share and we also have dossier income. So as far as the sales to U.S. are concerned, even on a Q-o-Q basis, we are in a better stage. It is only certain milestones against other dossier incomes which must have not fallen at this point exactly for earnings because of which it appears like this.

Aditya Khemka — InCred Financial Services — Analyst

Okay. So, Sundeep sir, at the beginning of the year, I think the guidance that was given to us for the U.S. revenue was roughly in the ballpark of INR300 crores, if my memory serves me right. And what we have been able to achieve in the first three quarters is less than INR200 crores. So would you like to sort of revise the guidance here? Or do you still think INR300 crores is a doable number?

Sundeep V. Bambolkar — Joint Managing Director

Yeah, yeah. We will go as close to INR300 crores as possible. There have been some challenges. Two of our approvals which was supposed to come during the year have got postponed. One of them is the modified release of cardiac products, that has got postponed. And one more important product has got postponed. So as a result, substantial revenues have got postponed for the next financial year. However, we are not revising the guidance given drastically downwards, but I think I’m confident that we’ll do somewhere between INR280 crores and INR285 crores in spite of these two getting delayed.

Aditya Khemka — InCred Financial Services — Analyst

Okay. Understood. Have the launch of Combigan during the third quarter? Does the product sales in 3Q FY ’23 include revenues from Combigan?

Sundeep V. Bambolkar — Joint Managing Director

We just launched it. We launched it in mid to end of October.

Aditya Khemka — InCred Financial Services — Analyst

Mid to end of October. So it does include a month or two revenue from Combigan sales?

Sundeep V. Bambolkar — Joint Managing Director

Yeah. About six weeks of revenue, not much.

Aditya Khemka — InCred Financial Services — Analyst

All right. All right. And I’m assuming there is no profit share yet coming in this number from Brinzolamide?

Sundeep V. Bambolkar — Joint Managing Director

No, not yet.

Aditya Khemka — InCred Financial Services — Analyst

So Brinzolamide probably, the profit share as you said in the previous calls, the profit share will fall in the fourth quarter?

Sundeep V. Bambolkar — Joint Managing Director

Yes, yes.

Aditya Khemka — InCred Financial Services — Analyst

That is very clear, right. Okay. Okay. And the next question I have is on the cost aspect of it. So when I look at the gross margins and I understand your gross margins gets fairly swayed by the forex income and forex loss that you report above the COGS. So even if I carve out that number, if I just look at your gross profit excluding COGS — excluding forex gains, what I notice is that, our FY ’21 and ’22 — I mean, our FY ’21 gross margin, excluding forex, was actually way higher than what we have done ever in our history. And since then, we have been kind of on a sliding mode where the gross margins are consistently sort of coming off. I mean, if I were to just give you some numbers in my — I’m excluding your forex gain here. So your FY ’21 gross margin was about 71% excluding forex gains, the same number for FY ’22 was roughly 69.5%. And that same number for FY ’23 in nine quarters seems to be about 68%. So from 71% to 69.15% to 68%, so we are losing 150 bps every year for the last two years now, ’22 and ’23. What explains that? And do we ever envisage going back to those margins you were doing in ’21? Or was that an aberration, the ’21 margin?

Aditi Panandikar — Managing Director

Aditya, let me answer this first, maybe Sundeep will add something later. For one thing, this time period which you talked about ’21 onwards has been a very difficult period for us, everybody in the pharma industry, because of the increase in the cost of goods, which you are aware off. So part of the reason for margin to have been lower than earlier is that, a full impact of correction in the cost of goods has not come in, one. B, if you look at the nature of our business, contribution of India business to the top line over the last couple of years is lower than it was before. So now the international business is doing better than before, and their contributions have increased, but U.S. is yet to fire completely for us to get returns on the investments. So this is a typical phase where probably the contract manufacturing businesses of Europe and their contribution to the whole top line is — which doesn’t have a very great margin element attached to it. We are seeing repercussions of that.

Also, like I explained before, the portfolio of — and the business composition you have to think of, because in these two years, our collections against licensing out income and milestones, they have been going down, primarily because we are now keeping the IP for ourselves. From when we used to sell it out to other partners and collect more earlier. I feel this is better for us in the longer run, so you may not see that, because that is also considered a component of sales at Indoco. Okay? So that is the reason.

But coming back to how fast and by when you think we will recover, I know [Phonetic] this quarter the entire profitability which has got impacted by the MTM losses of about INR14 crore has created quite a slide in the numbers and people must have wondered what it is. So I just looked at the YTD performance on that front. And if you look at our YTD performance, if you look at the earnings that has come from an exchange gain on YTD basis, we are now equivalent because this year we have gained INR24 crores as against last year INR26 crores up to nine-month period. You must also remember that the last year’s nine-month included first half year, which made very, very low expenditure for India business. So, quite frankly, I think it is very important for us to stay focused on fundamentals of how we grow our sales, whether any specific cost which are very operationally sort of part of our sales, have we shot up by any — for any reasons on a Q-o-Q basis or a Y-o-Y basis. Those are the areas we should look at to analyze performance, this is what I feel.

Sundeep, do you want to add something?

Sundeep V. Bambolkar — Joint Managing Director

I just wanted to add, Aditya, what we expected about the procurement side, that’s the purchase of API and high consumption packaging material and other costly equipments [Phonetic] have got delayed the benefits accruing out of that. And we are seeing those benefits coming in just now towards the end of December, beginning January. So the effect of it largely will be seen from Q4 ’23 onwards. And that effect, as you know, the material effect of it is quite substantial. So yes, I agree with you that margins were a little downsided, but we should be recovering from Q4 onwards.

Aditya Khemka — InCred Financial Services — Analyst

Sundeep sir, my question is actually — sorry, I just want a clarity on this, can we do that and then I’ll go back in the queue. Thank you. Actually, I understand Aditi ma’am’s explanation, the only cross question I have there is that, I’m looking at margins excluding the forex gain and losses. So therefore, forex gains isn’t really what impacting, actually as you said, what is impacting is the raw material prices and the packaging costs. But what I had expected was that, this year since you were taking price increases in our India portfolio, we would have gained some of the lost margin back. But that just doesn’t seem to be the case that the numbers you’re telling me because the numbers seem to…

Aditi Panandikar — Managing Director

Aditya, we’ve taken around our net-net price growth comes to somewhere between 5% and 6% for India business. And like I said, India business contribution to the top line, this quarter in particular has been the least over the last four quarters.

Aditya Khemka — InCred Financial Services — Analyst

Right, right. Understood. I’ll get back in the queue, ma’am. Thank you.

Operator

Thank you. We have our next question from the line of Sudarshan Padmanabhan from JM Financial PMS. Please go ahead.

Sudarshan Padmanabhan — JM Financial PMS — Analyst

Yeah. Thank you for taking my question. Ma’am, can you please help us understand the other operating income in terms of your hedges? I mean, normally, how much do we hedge and how does this entirely take place on a quarter-to-quarter basis?

Sundeep V. Bambolkar — Joint Managing Director

Yeah. See, the hedging policy is that, we hedge currencies to the extent of 55% to 60%, all the three currencies, U.S., euro and GBP. And our median rate for hedging of U.S. is INR81.79, euro is INR93.09, and GBP is INR105.83. So the policy is very, very clear and largely hedging of these three currencies has stood us in very good light so far.

Sudarshan Padmanabhan — JM Financial PMS — Analyst

And if I look at the previous quarters, I mean, on the other operating income was close to INR28 crores in the previous quarter. So apart from MTM what are the other elements that we book? I mean, if you can take it down, say, for the second quarter and the first quarter this year?

Aditi Panandikar — Managing Director

Yeah. There is a small amount of export incentive which has started trickling in now with the ROE TPT coming back.

Sundeep V. Bambolkar — Joint Managing Director

What is called commonly as RoDTEP. That has been reinstated to the extent of 2.5%.

Aditi Panandikar — Managing Director

But it is largely exchange only.

Sundeep V. Bambolkar — Joint Managing Director

It’s largely exchange only, that’s why we have suffered a loss this quarter, due to the MTM.

Aditi Panandikar — Managing Director

Notional actually.

Sundeep V. Bambolkar — Joint Managing Director

Notional, yeah.

Sudarshan Padmanabhan — JM Financial PMS — Analyst

And sir, I think when you are talking about gathering momentum in the next five years as far as the sales is concerned. One is, as ma’am alluded that the U.S. is still not optimal and there can be operating leverage on account of that. I mean, we are also seeing the extent of other costs not being as comfortable as what one would expect. So, I mean, I’m just not looking, let’s say, next quarter or the next couple of quarters, but assuming three years and five years now, I mean, today, if you are looking at our gross margin, I mean, they’re at anywhere between 68% to 70%, which means that a large part of the COGS is primarily non-gross side. So to that extent, as the sales go up, say, the next year and the next couple of years, can you give some color with respect to how do you see the margin trajectory, say, in the next few years?

Aditi Panandikar — Managing Director

Yeah. So while I may not be able to give you exact numbers on the margin expansion, let me tell you a little bit about what is happening across the organization for better efficiency, which is going to result in margin improvement. Okay? So let me come to the India business first, because that is still the largest single component for us which is close to 55% this quarter. And in India business, as you know, our largest fixed cost is by way of the people and their salaries, incentives in India is, of course, variable. And we have around 2,300 people in the field. Over the last year, various initiatives taken by us, which include call-to-call reporting, which has improved discipline working of — and eased working of the field staff. We have, as I already said, just started with the digital option in field. And going forward, there are several initiatives lined up and several MIs [Phonetic] we are looking at where we can factually measure performance of, not just field staff, but even managers in the field. I feel confident because of this our return per man will really grow from here.

For the YTD period, our PCPM for people on payroll, not the number that we should have on payroll is close to 3.9 that we have done for the long — for a very long time. However, the vacancies and people are not on payroll, they do impact our sales indirectly. So several initiatives in the India business are being taken, because of which the per man return will go up and when that happens, margins on India business will also go up.

Secondly, if you look at the product mix for India, if you look at the performance of the current set of products, around 50% comes from pure acute therapy, another 13% comes from pure chronic and the remaining is sub-chronic. And if you look at how the growths are coming in, last year was a one-off year because acute did very well, but otherwise, the fastest-growing is the sub-chronic followed by chronic and then acute. Now, when this happens, your return subscription also increases that in turn for the PCPM. And all other cost gets spread. So I therefore feel India business will get profitable in the years to come.

In addition to that, several initiatives are being taken to look at the — many of our products which have a very good sort of potential with direct-to-customer and direct-to-consumer kind of potential. And we are looking at various initiatives in the supply chain itself, we’ve done which I feel confident that we will be able to grow this product.

Coming to international business, as we already discussed, as the contribution of U.S. to the entire international business starts going up and coverage of operational cost is happen, we will — you will see a very different picture. Plant 1, which we — which I spoke of earlier, we just had a USFDA audit. As you all know, we were not able to supply additional products to U.S. from that plant for the last, almost four years. And that has meant that the highest margin business which is the U.S. business, a pitiful, I mean, I think, YTD basis we must have done only INR6 crore from that site. So you can imagine while all preparatory work to move business manufacturing and supplying to Europe to Baddi, where batch sizes are much bigger, efficiency is much better, all of that is in place, but we are not executed for want of FDA to allow us to make more products.

So when all of these you look at and the fact that even when it comes to commodity manufacturing, whether it’s for Europe or U.S. or the backward integration that we are doing. Recently we won a tender on Allopurinol with Germany, probably it will come in next quarter when we talk about it, we just got cleared by New Zealand for Allopurinol tender. We are backward integrated on Allopurinol and we are also supplying Allopurinol in U.S. So, there are good kind of collaborative consistencies that are happening across many aspects of the business and I feel very confident on account of all this, the margins will go up.

Sudarshan Padmanabhan — JM Financial PMS — Analyst

And just one final question before I join back is on the India business. We have been taking a lot of strides in terms of keeping our MRs within [Phonetic] the business with the division and several initiatives. I mean, with respect to prescription, I mean, are we seeing incremental prescription changing more towards Indoco versus what we used to, say, three years ago?

Aditi Panandikar — Managing Director

Yes, certainly. If you look at our ranking on prescription perspective, we are ranked 20th in the industry today, and growing faster than the industry on both fronts, the prescribers that is the description base and number of prescriptions. So from a perspective of how many doctors write our product, as well as, how many products or prescriptions are given by each doctor. We are now actually reached a very important milestone of 1 million prescriptions on an annual basis. And that put us at a very high level on the generation of prescription front. Of course, since much of these prescriptions are for acute, 50%. It doesn’t translate into the kind of top line it should, but it’s a very steady and disciplined kind of return for our legacy product.

There were a — there was a — in the second quarter this year, there was a time when Cyclopam which is such an old legacy antispasmodic product, were growing by 60% on prescriptions. I think that is really great achievement for our acute therapy division. And when I say contribution of chronic, sub-chronic sort of almost safe to say, it is simply because acute is also growing as part [Phonetic] for — on that very high base. So the health of India business on prescription front is much better, even our dental portfolio which is least dependent on prescriptions for return, even there we have seen substantial growth. So, that’s the answer. I hope that satisfies you.

Sudarshan Padmanabhan — JM Financial PMS — Analyst

Yes, ma’am. Thanks a lot. I’ll jump back.

Operator

Thank you. We have our next question from the line of Mitesh Shah from Nirmal Bang Securities. Please go ahead.

Mitesh Shah — Nirmal Bang Securities — Analyst

Yeah. Thanks for taking my question. My first question is regarding the EU. EU has shown the strong sequential growth of around 15%. What is the major reason? You said that you were facing some supply constraint because of the client are enjoying their holidays. What is the reason for strong growth of EU?

Sundeep V. Bambolkar — Joint Managing Director

Yeah, yeah. See, all the traditional products, as well as the new products which we have introduced have shown very good demand across Europe, Germany, Spain, UK everywhere. So that’s the reason the business has shown consistent growth. And I clearly remember in the first quarter, this question had come up and I had assured the analysts and fund managers that Europe will do consistently in this year and that is happening now. In fact, like Aditi mentioned earlier, all our high-growth fast-moving and voluminous products we are transferring them to Baddi 1 and Baddi 3, where batch sizes are large, there’s much better control on efficiencies. And in all our plants, we are going in for higher automation to bring down the casual manpower. So you will see international business profitability going up, consequently.

Mitesh Shah — Nirmal Bang Securities — Analyst

Got it. Regarding your aspirational target of INR5,000 crore, can you bifurcate between the geography how much you’re expecting from the domestic or the international market? And do you have factoring the competition going forward in the U.S. market as well in these expectations?

Aditi Panandikar — Managing Director

So I will not give you an exact contribution, while you think, let us surprise you a bit as we go forward. We start calculating EBITDAs right away based on geographies. So we will wait and you’ll be pleasantly surprised. I will only say that.

Coming back to your question on competition in U.S., today, Indoco is at a point that is very good position, I would say, where we have a kind of business in U.S., which is a composition of various kinds of models. So while we sort of contract manufacture, after collecting licensing out dossiers or our ANDAs, we contract manufacture for some very large pharma. We also participate by way of cost and profit share with some very big generic companies. And then there are some products which we have gone on our own, although not with our front-end. So, as we balance all of this, we are somehow, therefore, able to better manage any kind of impact of drop in prices in U.S., as of now.

Added to that, a large part of our sales to U.S. comes from the very difficult to manufacture and develop products in the sterile space, be it injectables, be it ophthalmic, where the kind of price pressure we are looking at is [Indecipherable] has not been there simply because if you open the FDA site at any given time, I think most of the shortages are in this space. So people recognize and understand that it is not possible to expect these products to be supplied at any kind of cost-plus. So we have a very nice leash when it comes to U.S.

And as we go more and more by ourselves, more and more into models where there is cost profit share participation or licensing out products with a certain amount to be given against marketing. And eventually with some kind of a front-end, I feel our journey in U.S., at least for the next five to six years is not threatened by some of the things that you’ve told us.

Mitesh Shah — Nirmal Bang Securities — Analyst

That’s great. Thanks for the answer. Aditi, just bookkeeping questions about what is the MTM loss or gain last year same quarter?

Aditi Panandikar — Managing Director

Last year same quarter, I’ll come back to you. But YTD basis, MTM again last year was around INR26 crore and this year on YTD basis it is INR24 crore. So it changes on a Q-on-Q, so it’s not exactly — okay, this quarter, yeah, for the quarter I can tell you. Last year it was a gain of around close to INR9 crore as against a loss of INR12 crore after impacting for other operational revenue, respectively.

Mitesh Shah — Nirmal Bang Securities — Analyst

Got it.

Aditi Panandikar — Managing Director

So, totally it’s an impact of INR20 crore, if that’s what you’re asking.

Mitesh Shah — Nirmal Bang Securities — Analyst

Yeah. Thanks for the answer. That’s it from my end.

Operator

Thank you. We have our next question from the line of Aejas Lakhani from Unifi Capital. Please go ahead.

Aejas Lakhani — Unifi Capital Pvt Ltd. — Analyst

Yeah, hi. Ma’am, my first question is the following, that Sundeep sir, you alluded [Phonetic] on Brinzolamide when we sell through the partner, typically it’s a two quarter lag and that’s when we get the revenue, so — sorry, the profit share from the agreements that we have. So if you could speak a little bit more on why the delay? Because you seem very confident in the last quarter about the Brinzolamide profit share on this quarter.

And also, is it fair to assume that you now called out the U.S. revenue at round INR280 crores. So given the run rate where we are, whatever incremental that we get, say, to the profit share, a bulk of that, say, 90%, 95% will flow through, right, to the bottom line. Is that broad understanding correct?

And also, as you mentioned the average rate, right, of U.S., euro and GBP earlier, if you see the fluctuation, sir, of all these currencies in the last quarter and compare it to the quantum of the loss versus the revenue realize, it’s almost 9% to 10%. So the INR13 crores, INR14 crores that you’re talking about and the revenues from the regulated markets are whatever INR140 crores, it’s 10% of that and the swings have not been so drastic as the quantum of this 10%. So could you please quantify all of this?

Sundeep V. Bambolkar — Joint Managing Director

Okay. Yeah. Coming to your question specifically on the currency loss, that’s the MTM loss, these figures are given to us by the bankers, the mark-to-market losses. So we have very little say in it. And as Aditi mentioned to you, that in this quarter, last year we had a profit of INR9 crore against the loss of INR12 crore about this year. So INR12 crore plus INR9 crore, INR21 crore is the impact we have had this year. And that primarily happened because of the euro and pound, two currencies. So that is about the MTM part.

And about Brinzolamide, Brinzolamide supplies have now smoothened out totally, and always there is a lag while sending us the profit statement. So for the quarter ended December, the profit statement will come only by end of January or first week of February, and that is when we’ll realize the profit share of Q3.

Aditi Panandikar — Managing Director

Another thing I may want to add, which you might have missed, I explained earlier. Our U.S. business in particular comprises of commercially manufactured product sale and also of services income, which includes sale of dossiers, out-licensing income or collection of certain milestone. Now, that part of the business is actually — has actually shrunk as a percentage of total sales, and this is with the correct intend, because Indoco of couple of years ago, was licensing out everything, Indoco today would prefer to keep the IP for ourselves. So this is a kind of an intended kind of a shrinkage of service income, which, as you know, is having much higher margin than a commercial sales. But over a period of time, we will get much better returns from this portfolio. I hope that acknowledges it.

Aejas Lakhani — Unifi Capital Pvt Ltd. — Analyst

Yes, ma’am. Could you quantify what is this out-licensing income which was there last year around this time and which is absent or even the quantum which is not there?

Aditi Panandikar — Managing Director

Yeah, yeah. Roughly we used to do around INR12 crore every quarter last year, if I’m not mistaken. Yeah, that’s what it, one second, just give me a minute, I’m getting the numbers out.

Aejas Lakhani — Unifi Capital Pvt Ltd. — Analyst

Yes.

Aditi Panandikar — Managing Director

Which has come down this year, so there is definitely a gap of around INR5 crore this year on YTD basis on account of income from dossier sales, yeah.

Aejas Lakhani — Unifi Capital Pvt Ltd. — Analyst

Got it, got it. So, basically you’ve chosen to retain those dossiers, which otherwise you are out-licensing?

Aditi Panandikar — Managing Director

Yes, yes. You will see that eventually come into profit for the organization.

Aejas Lakhani — Unifi Capital Pvt Ltd. — Analyst

Right. No. I got you. Ma’am, could you also quantify what is the capital employed today in the U.S., Europe and India, just these three broad geographies or even if you could give it of India geographies and international geographies?

Aditi Panandikar — Managing Director

Right. So like I said earlier, much of the infra cost go towards the Europe and U.S. business. Again, we have steadily moved, how I — where we use our infrastructure. So the plants in Goa are now slated for use to U.S. So it’s difficult to quantify because they were used for Europe earlier. But the Baddi plants are only used for Europe. The Aurangabad plant is used for emerging markets. Goa, all the three sites will be, we want to use them only for U.S. Once that happens, much of the issues you see today with profitability, etc., will get corrected. So the gross block, if you want to know, Goa 1, 2, 3 together today is around INR440 crore. It’s difficult to put it to any one geography, because it was used much of it for Europe earlier, now it will be used in future for U.S. And the Baddi sites between them is INR120 crore, which will now be used for the European business.

Coming to India business, we make product for ourselves as and when there is capacity available, and if there is a complicated product, which we should make ourselves, but otherwise we outsource manufacturing. So our costs for India business are largely related to the fixed costs associated with the field. And there, as you know, because of inflation and other things, we’ve had to give decent prices in the year, whether our volumes grow or not.

Aejas Lakhani — Unifi Capital Pvt Ltd. — Analyst

Got it. And Sundeep sir didn’t answer that question on the incremental profits from Brinzolamide flowing through to the profit. And just wanted to add one query there that, you seem very confident of this profit share and I understand that it’s a complex situation with the partner and it’s subject to sales. But does that — I mean — does that confidence continue for the profit sharing to come through in 4Q? Or are there is and buts also that could sort of play out in the fourth quarter for the profit share?

Aditi Panandikar — Managing Director

Yeah. I’ll just maybe give some more clarification on Brinzolamide because I think all of you are very eagerly waiting for us to succeed with that product and so are we. So there are various volume fill strength for Brinzolamide as a product. And the largest market is with the product of a fill volume which is yet to get sold in the U.S. market, although we have supplied it. So that is why the lag is coming in. We had some challenges here in the manufacturing plant. I don’t know how many of you are aware, but a lot of ophthalmic products USFDA has now declaring them as medical devices and not as formulations, simply because of the complexity of the container closure system, the complexity of manufacturing. And having had our first warning letter at plant 2 on those issues in sense, we are exceedingly careful when it comes to being on the compliance side and we bend backwards on account of that, both Teva and us have been exceedingly overcareful in supplying product to the U.S. market that has resulted in a delay in supply of a particular strength. And that’s why I think when you look at Brinzolamide, you look at the whole market. When we say the supply and say like started, it is actually in the smaller market. So the real returns are yet to come from both sale, as well as margin.

Sundeep V. Bambolkar — Joint Managing Director

There is another point which I would like to bring to your attention. There was another product in partnership with Teva, which was due to be launched in the month of November end, and that got delayed.

Aejas Lakhani — Unifi Capital Pvt Ltd. — Analyst

So you are talking about Combigan only, right, sir?

Sundeep V. Bambolkar — Joint Managing Director

No, no, no, not Combigan. We haven’t given out the name of that product.

Aejas Lakhani — Unifi Capital Pvt Ltd. — Analyst

Okay. Okay.

Sundeep V. Bambolkar — Joint Managing Director

That has got delayed. So the milestone attached to that product should have easily come in before 31 December of about INR10 crore, that has got delayed into April. So these are dynamic factors which are beyond our control, but we would like to assure the Street that we are firmly in control of the situation as far as the business is concerned.

Aejas Lakhani — Unifi Capital Pvt Ltd. — Analyst

Got it. And sir, could you respond to the incremental profits flowing through to the EBITDA line?

Sundeep V. Bambolkar — Joint Managing Director

On Combigan?

Aejas Lakhani — Unifi Capital Pvt Ltd. — Analyst

No. on Brinzolamide which you expecting in the fourth quarter, the deferral that happened?

Aditi Panandikar — Managing Director

We’ll wait for that to happen. As you might have seen, our past commitment might have put us in a position today where kind of a delay in accruing those may look like an inefficiency for the organization, which is beyond our control really, many external factors. So we will be the — you will be the first one we will share with the moment it starts happening [Speech Overlap] for the next quarter.

Aejas Lakhani — Unifi Capital Pvt Ltd. — Analyst

Got it, ma’am. And the 20% guidance on EBITDA sale?

Operator

I request you to come back in the queue, sir.

Aditi Panandikar — Managing Director

We are — right now, I think I’m very confused with and without operating income. But looks to me like this quarter without the other operating income impact, stand-alone this quarter we did close to 18%. And stand-alone last year for the same quarter we did 18.5%. So actually we are now level, if you ask me, what would have seen like 21% last year was actually 18.4% without the other operating. So if you say consistent performance, we are already delivering what we did last year, but we hope to further improve it. The last quarter is generally a big one for both India business, as well as emerging markets, both are very high margin businesses for us. Let us see if we can improve it, we’ll definitely try.

Sundeep V. Bambolkar — Joint Managing Director

And if you remember, during this first quarter this year itself we had said that we will try and protect the EBITDA. Our words were very, very clear. Of course, we are trying to improve it further. But definitely we will do as good as what we did last year.

Aejas Lakhani — Unifi Capital Pvt Ltd. — Analyst

Got it. Thanks so much, sir. All the best.

Operator

Thank you. We have our next question from the line of Rashmi Sancheti from Dolat Capital. Please go ahead.

Rashmi Sancheti — Dolat Capital — Analyst

Yeah, thanks for the opportunity. One question on Europe, since the tender for German — I mean, German tender for Allopurinol has already got over in December month. How do we see growth for FY ’24 and FY ’25? Are we going to get renewal of the contract? If yes, what would be the size and what could be the sales that we could generate for next two years?

Sundeep V. Bambolkar — Joint Managing Director

Yeah. Rashmi, this way that currently, we are still supplying, right, into January ’23. The supplies are for the old contract. And we’ve just got news in December that we have won the contract again for another two years to the extent of 90.5% of the total market. So that being the case, about INR65 crore to INR70 crore would be the value of Allopurinol Germany per year for the next two years.

Rashmi Sancheti — Dolat Capital — Analyst

Okay. And apart from this, any other tenders that are on the verge of getting renewing this year?

Sundeep V. Bambolkar — Joint Managing Director

We are — we have applied for two more products, but there is no guarantee that we’ll win it. We are, however, very, very optimistic because of our backward integration, the APIs are also manufactured by Indoco, and that is the reason for our optimism.

Rashmi Sancheti — Dolat Capital — Analyst

Okay. So then how do we see the growth from here on? Do you think that we would still continue with that 20% of growth in ’24 and ’25 also?

Aditi Panandikar — Managing Director

Yeah, Rashmi, we are very confident of 20% growth for Europe business. In fact, we are controlling some aspects of what we do for Europe, which are the lowest margin size, possibly a product like paracetamol. But like Sundeep explained earlier, by moving it to a site, then batch size has become 3 times the batch size will go up. And there is a much better control on overheads, etc. I think even that product will do better than it did last year. So various initiatives are being looked at as we prepare for next year’s budget. And I can assure you that 20% is a done thing for Europe to grow.

Rashmi Sancheti — Dolat Capital — Analyst

Okay, ma’am. And in the U.S. business, so for FY ’23, currently, we have not booked any profit share from Brinzolamide till date, right, only in ’23?

Aditi Panandikar — Managing Director

I’m sorry, what was your question?

Rashmi Sancheti — Dolat Capital — Analyst

In FY ’23, YTD, we have — till now we have not booked any profit share from Brinzolamide?

Aditi Panandikar — Managing Director

That’s true.

Rashmi Sancheti — Dolat Capital — Analyst

Okay. So you are saying that the entire profit share would come in quarter four?

Aditi Panandikar — Managing Director

Based on the sales. I explained earlier that there is one particular strength of fill volume, which has gone from our site or is going just now and which will be further sold. I think when you look at the market share of Brinzolamide of Teva, etc., you’re looking at the whole market. Just to tell you that there has been some delay on account of a caution from our and Teva’s side based on certain happenings with the container closure system and it has not just impacted us, it has impacted many people in this industry. So there has been a delay, that is for sure, and we expect profit shares to come in as and when as the sales happen.

Rashmi Sancheti — Dolat Capital — Analyst

And, ma’am, on Combigan, I mean, sales would incur in quarter four, I understand that. But the profit share from Combigan would only come in FY ’24. That is what you are…

Aditi Panandikar — Managing Director

Correct, correct.

Sundeep V. Bambolkar — Joint Managing Director

Perfect, perfect.

Aditi Panandikar — Managing Director

Correct.

Rashmi Sancheti — Dolat Capital — Analyst

So there is a lag of one quarter for that particular product or it is like again two quarters or three quarters lag?

Aditi Panandikar — Managing Director

So like I said, it all depends on how much we sell per quarter, right? So, our transfer is not their sales. It has to be further be sold by them, after which discounts, everything happens, then the profit share gets calculated, then it comes back to us. So, we’ll share it with you as and when it happens, we’ll be most happy to. Yes.

Rashmi Sancheti — Dolat Capital — Analyst

Okay, ma’am. Thank you. That’s it from my side.

Operator

Thank you. We have our next question from the line of Punit Mittal from Global Core Capital HK Limited. Please go ahead.

Punit Mittal — Global Core Capital — Analyst

Hi. Thank you for the opportunity. My first question is with regard to your aspirational target of INR5,000 crore. What would be the capex required for that kind of top line? And what are your internal ROCE targets for these capex?

Aditi Panandikar — Managing Director

Yeah. So that’s a very good question and very interesting one. Already at Indoco several initiatives have been started to increase capacity at various plants. As you know, today we have eight manufacturing sites, of which five have USFDA approval. And we — while there are several solid oral sites for the Company, there is only one sterile unit. So there are couple of things happening here. One, we’re increasing capacity at that site by adding additional packing lines, which is not going to be a very big capex, but it will be a substantially one all the same. And in addition to that, the Company is definitely having on the drawing board a second site for sterile. And we are very confident that these investments will have a good breakeven in the years to come. So they have been planned.

As I said earlier, the lower margin manufacturing of solid orals to Europe on contract, which is one of the smallest, which is still continues to be a substantial business for us. That business, if we move to the Baddi site, so that’s more capacity, our QS [Phonetic] freed in — and Goa is freed for U.S. I don’t expect to add any capacity further for the European business. But definitely for U.S. as and when there is a need, we may expand. This is the plan. And most of this will happen over the next three to four years. So it is not going to be a sudden shock in one year for the Company.

Punit Mittal — Global Core Capital — Analyst

Thanks, ma’am. But can you actually — it will be very helpful if you can quantify in the sense that, currently, if we see that, the gross block turnover is about just over one. Now, naturally some of the capacities — plant capacities are not fully utilized so you will ramp-up those things and optimize those plants. But what would be the capex requirement?

And second, again, what are your — I’m sure you must have ROCE targets on these capex. What are those targets?

Aditi Panandikar — Managing Director

Ideally with the U.S. business kicking in, we expect to do much better on return on capital over a period of time. Roughly, looking at the kind of investments we made in the past and our understanding of what is needed for the future, I think one can expect an investment of close to INR300 crore to happen further to support the increased share coming from U.S.

Today, our ROCE is at 13%. And I think we will be able to raise that anywhere between 10%, 10.5% at the point when we do INR5,000 crore.

Punit Mittal — Global Core Capital — Analyst

Okay. Second [Technical Issues]

Operator

Mr. Mittal, we’ve lost the connection of Mr. Mittal.

We’ll move on to the next question from the line of Aditya Khemka from InCred Asset Management. Please go ahead.

Aditya Khemka — InCred Financial Services — Analyst

Yeah, hi. Thanks for the follow-up. Aditi ma’am, you said, ROCE will be how much by the time you achieve INR5,000 crore? I missed that number.

Aditi Panandikar — Managing Director

Around — today, it is around 13% and we can go up to 15%.

Aditya Khemka — InCred Financial Services — Analyst

15%, okay. All right. And you said, what was the total gross block in the three Goa plants put together?

Aditi Panandikar — Managing Director

Around INR440 crore.

Aditya Khemka — InCred Financial Services — Analyst

Around INR440 crores. And if it is all dedicated to the U.S., then your revenue in U.S. this year is going to be ballpark INR300 crores. So your asset [Phonetic] on the U.S. is like 0.7x as at this point in time…

Aditi Panandikar — Managing Director

Correct, because today it is not entirely for U.S. Yeah.

Aditya Khemka — InCred Financial Services — Analyst

Exactly. But once you shift the production for Europe to Baddi, then this is what you’re left with. So…

Sundeep V. Bambolkar — Joint Managing Director

Aditya, I’ll just come in here, Plant 1, for example, is supplying only glimepiride tablets to the U.S.

Aditya Khemka — InCred Financial Services — Analyst

Yeah.

Aditi Panandikar — Managing Director

So eventually that capacity — full capacity of Plant one is available for U.S.

Sundeep V. Bambolkar — Joint Managing Director

Yeah.

Aditya Khemka — InCred Financial Services — Analyst

Yeah. I get that. What I’m getting to is that, whatever revenue you make from Goa plant, you will shift that revenue to Baddi, because Baddi has that incremental capacity which you can use to cater to the European market. So, we — so the long-term plan is that, all of them Goa 1, 2, 3 mainly for U.S.

Aditi Panandikar — Managing Director

So it is mostly going to be increase in sterile manufacturing capacity. Solid orals, we’re not going to need.

Sundeep V. Bambolkar — Joint Managing Director

Correct.

Aditya Khemka — InCred Financial Services — Analyst

Right. So that’s what my question was. So if in oral solid, let’s say, your revenue today is X. With your current capacity, what revenue can you do in the U.S. for oral solids through the Goa existing infrastructure?

Aditi Panandikar — Managing Director

Total revenues from the gross block, if you go by at 15% today, would works to I think INR1,000 crore, INR1,500 crore, yeah, right, INR1,500 crore.

Aditya Khemka — InCred Financial Services — Analyst

INR1,500 crore, that’s including oral solids and sterile from Goa?

Aditi Panandikar — Managing Director

Yeah.

Aditya Khemka — InCred Financial Services — Analyst

So till the time you reach INR1,500 crore in your U.S. sales, till that point in time, Goa, other than a few packing lines, wouldn’t need any material capex.

Aditi Panandikar — Managing Director

Kind of yes. Possibly a little bit in sterile because it takes time to build a plant, then get it approved. So we may not wait to lose opportunity, okay?

Aditya Khemka — InCred Financial Services — Analyst

I get that. That makes sense. Secondly, on the comment that you made that now USFDA is looking at ophthalmics as a medical device, due to the — obviously, the process of making the product and the dispensing of the products through the containers. Does that change the approval pathway for how FDA treats ophthalmic ANDAs, does it make it tougher, easier? Could you just comment on that?

Aditi Panandikar — Managing Director

Yeah, sure. So, Aditya, fortunately for us at Indoco, because our first brush with FDA, not so favorable kind, happened on latanoprost packing material issue. So at Indoco, as part of remediation action itself, we had got to the level of compliance and sort of creating dossier for our packing materials, etc., as per USFDA expectation. So what we’re seeing now is, whatever we were doing has now become a requirement. So we are well sort of qualified in that manner. We will not need to do much more. We already have work done on almost all our ophthalmic products on the container closure system because we had issues with them. Yeah? So that is all right and I don’t expect — actually this is in the — for the — favorable for manufacturers like us because every time a container closure system manufacturer would make small changes in his material of construction or his mold, and not reported to FDA or to us, it directly or indirectly impacted our product quality. So now he will have to do it through a regulatory pathway. So we stay protected actually, as a consequence of this.

Aditya Khemka — InCred Financial Services — Analyst

Understood. That makes a lot of sense. Just one last question, if I may. On the India business, though, so this year, I think now, Aditi ma’am your budget would be what, around INR800 crore, INR810 crore for FY ’23 on the India business?

Aditi Panandikar — Managing Director

We are already at INR613 crore, Aditya, and we have been consistently doing more than INR200 crore. In fact, our third quarter, we’ve done INR203 crore, which is almost equivalent to what we did in the second quarter, which we never do. And looking at the changing product mix, there is no reason why we cannot still go after close to INR830 crore.

Aditya Khemka — InCred Financial Services — Analyst

INR830 crore. So your fourth quarter, you are saying which is generally seasonally the worst quarter for you. You are saying the fourth quarter could actually do INR220 crores?

Aditi Panandikar — Managing Director

Yeah. The product seasonality has come down and contribution to the wholesale.

Aditya Khemka — InCred Financial Services — Analyst

So you are saying, you can do INR220 crores in the fourth quarter specifically?

Aditi Panandikar — Managing Director

Correct.

Aditya Khemka — InCred Financial Services — Analyst

And that’s going to be for sustainable change in the way you do India business because these product constructions that you’re doing are not one-off introductions, these are sustainable product streams?

Aditi Panandikar — Managing Director

Correct.

Aditya Khemka — InCred Financial Services — Analyst

Right. And for FY ’24, ma’am, with given that you’re not expanding fee force. What sort of growth in India business…

Aditi Panandikar — Managing Director

So, Aditya, we’ll talk about it when the time comes. We’ll surely a part of this big aspiration, you will have to agree that all INR5,000 crore will not going to — when we get to INR5,000 crore India will not stay at INR800 crore. I hope you agree with that. And the contribution of India business may not stay at 50%, but it will definitely go up. So there are plans of some kind of restructuring. there are plans of looking at, as I said, direct-to-customer and there are plans of using these changed model in supply chain to our advantage. So you will see A lot of change in the India business operates, and I’m very confident we’ll do it.

Aditya Khemka — InCred Financial Services — Analyst

Sorry, ma’am. So just to check what you said, so you said when you reach INR5,000 crore eventually, India business will be more than 50% of the top line, is it?

Aditi Panandikar — Managing Director

No, I didn’t say that. I said that it will not stay at INR800 crore.

Aditya Khemka — InCred Financial Services — Analyst

Yeah. But what would the mix be like between exports and India?

Aditi Panandikar — Managing Director

Like I said, let me surprise you.

Aditya Khemka — InCred Financial Services — Analyst

Okay.

Aditi Panandikar — Managing Director

Safe to say that we will ensure that even if India business does not contribute 50% of top line, the other business contributing largely to the top line, which will be U.S., will deliver on similar margins as India or more.

Aditya Khemka — InCred Financial Services — Analyst

Right, right. Okay, ma’am. Thank you. Thanks for the input.

Operator

Thank you. We have our next question from the line of Punit Mittal from Global Core Capital HK Limited. Please go ahead.

Punit Mittal — Global Core Capital — Analyst

That’s fine. My answer — my questions have been answered. Thank you so much.

Operator

Thank you. We have our next question from the line of Mit Shah [Phonetic] from Prospero Tree. Please go ahead.

Mit Shah — Prospero Tree — Analyst

Hello, am I audible?

Operator

Yes. Please go ahead.

Mit Shah — Prospero Tree — Analyst

Yeah. Thanks for the opportunity. I just have a simple question about the inspection that was conducted in the Goa plant. So what is the status as of now? And how would it impact on the supplies and the revenues from that facility?

Aditi Panandikar — Managing Director

So this wasn’t inspection for a site, which we were actually waiting for the auditors to come in. Current supply to U.S. from the site is very small. YTD basis, we must have done around INR6 crore from that site. So dependence on that site for U.S. is not very high. Also, there is — even if we had a warning letter earlier on this site, there was no stoppage of manufacturing supply from that site.

So, as regards the audit or any sort of outcomes of the audit, it is not going to change in anyway the current supply to U.S. What we are actually hoping is, once we are able to resolve this, we will be able to get more approvals in the future, and that’s what we are hoping for. Yeah?

Mit Shah — Prospero Tree — Analyst

Okay, yeah. That was from my side. Thank you.

Operator

Thank you. We have our next question from the line of Vishal Manchanda from Systematix. Please go ahead.

Vishal Manchanda — Systematix Group — Analyst

Hi. Good evening, and thanks for the opportunity. Ma’am, are we expecting an inspection on unit 2 sterile facility anytime now?

Aditi Panandikar — Managing Director

So, typically they come every two years. And from that aspect because of COVID they’ve not coming, so we should expect it. Also, within Plant 2, there is a Plant 3 in the same FCI number, where we have certain tax as in prior approval. So we are expecting them to come for that. So they would come in I guess. It’s part and parcel of our business now.

Vishal Manchanda — Systematix Group — Analyst

But how do we ensure like — because sterile is a much more important facility for us in terms of growth and existing revenues. So, like we have received nine observations at unit 1. And how do we ensure we come out clear out of — come out clear for unit 2 and unit 3?

Aditi Panandikar — Managing Director

Yeah. So, I think it’s best on such calls to not give any assurance that is we come out clear or not. But I can tell you one thing that the way we work at Indoco now, because of the learning of the past is that, there is a lot of overarching done. So whatever improvement issues must have come up in Plant 1 as part of these nine observations, they are rolled out to all our sites. So I don’t expect any of those points to again come at the other site when they walk in. Okay? So that’s how it happens. Also, our Quality Management System, we have been really improving it over the last five years. So consequence of that, it’s not that you will not get observations. But I think what the auditors will be looking for is to see whether the current quality management system is robust enough so that you internally understand whenever there is a glitch and then you attend to it. So the number of [Indecipherable] file, the number of recalls you do, all of that is an expression of a good quality management system. So I feel confident that we are better able to manage quality than before, all the same when the auditors walk in. If there are any improvement issues, I’m sure we’ll have observations, we should not be afraid of it.

Vishal Manchanda — Systematix Group — Analyst

And we have not see any product recalls at the U.S. in the last one year? Is that [Speech Overlap]

Aditi Panandikar — Managing Director

There are on and off. All you have to do is Google us and you’ll see how many recalls because as I said, don’t always happen, because we have done anything wrong. They also happen because of a container closure system manufacturer, defaulted or something happened to a material that went into making the product or a leaching issue in the color of the ink used on the label. So we learn as we go. And I think we know and FDA also understands that manufacturing of sterile is a very difficult job.

Vishal Manchanda — Systematix Group — Analyst

And on Brinzolamide, are we completely sorted in terms of the challenges we had witnessed in the past?

Aditi Panandikar — Managing Director

Yes, yes.

Vishal Manchanda — Systematix Group — Analyst

So supplies should continue normally going forward?

Aditi Panandikar — Managing Director

Yes.

Vishal Manchanda — Systematix Group — Analyst

Okay. Yeah. And any color on the new approval that we have seen in the U.S., in partnership with Teva in terms of the size of the opportunity and the competition in that product?

Aditi Panandikar — Managing Director

I’m not comfortable speaking about it yet, because it’s part of our agreement of non-disclosure.

Vishal Manchanda — Systematix Group — Analyst

Okay. And just one final one on Brinzolamide, for the profit share to come in, is there a cumulative sales benchmark that has been set like profit share shall accrue only after a certain cumulative sales will be realized?

Aditi Panandikar — Managing Director

No, no.

Vishal Manchanda — Systematix Group — Analyst

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

Operator

Thank you. We have our next question from the line of Yogesh Tiwari from Arihant Capital Markets. Please go ahead.

Yogesh Tiwari — Arihant Capital Markets — Analyst

Thank you. My first question is, if you can share some details regarding the pending approvals, if any at the Goa plant and the Baddi plant?

Aditi Panandikar — Managing Director

Baddi is supplying to Europe just now and we are shifting lot of product from Goa there. So we are aware of what is pending, maybe a one-off product in a particular European geography, especially post-Brexit, because you now have to have separate approval authorities coming in. Those kind of decisions might be pending.

But coming back to Goa on pending approvals from Plant 1, we have several products filed from Plant 1 in the past, which will go off-patent after 2026, ’27, ’28 in that time period. And I am confident by then we will resolve issues of Plant 1 for U.S. So we will get our approvals in time. Currently, there is a product which we might have lost out on timing, that we don’t mind sharing with you, it’s [Indecipherable], which is already off-patent and had cleared us two years ago before COVID, we might have been supplying that. So that is the kind of opportunity we must have lost.

Other than that, from the other plant, which is a sterile unit, there are already — let me just come back with the number exactly. We have in total today around 25 products pending approval, of which total, this is across all our sites, for U.S. ANDAs where 10 are our own. Okay? And they are a mix for both sterile, as well as solid orals.

Does that answer your question?

Yogesh Tiwari — Arihant Capital Markets — Analyst

Yeah, sure. And just one last question. So it’s like we had a very good European business and we also supply paracetamol in UK. So just wanted to understand there has been a lot to noise around paracetamol in this quarter. So how is the current demand for this drug as of now in UK?

Sundeep V. Bambolkar — Joint Managing Director

Current demand you are asking about?

Yogesh Tiwari — Arihant Capital Markets — Analyst

Yes, sir.

Sundeep V. Bambolkar — Joint Managing Director

I think demand is consistent.

Aditi Panandikar — Managing Director

There was a certain time I think post-COVID when there was a lot of supply and then stocking, but I think all of that is behind us. Now, we — and we are in excellent relationship with Perrigo [Indecipherable], largest partner we make it for, where a proper six-month rolling plan is with us and I don’t see any concerns there. When I discuss a lot of paracetamol, say that going forward we would like to make less of it if it — if capacity issues come up as per need. Okay?

Yogesh Tiwari — Arihant Capital Markets — Analyst

Yes. So just wanted to understand like there were news of shortages of paracetamol in UK and France for this quarter. So is that still the situation remains the same? Or…

Aditi Panandikar — Managing Director

I think our partners take care of it. That is how our logistic planning works. So when we supply the stock and that is how both — earlier Galpharm, which is now Perrigo, but they acquired them has managed to get such a high market share. It’s because of the partnership and a good relationship and good working of inventory planning between both of us. So the logistics are taken care of. We have any given time of six months sort of knowledge of six-month orders which we need. And there is consistent supply and I don’t see any problem. Let me just check — I think we are okay.

Sundeep V. Bambolkar — Joint Managing Director

Yeah, there is no problem.

Yogesh Tiwari — Arihant Capital Markets — Analyst

Thank you very much. That’s all from my side. Thanks.

Operator

Thank you. We have our last question from the line of Sajal Kapoor [Phonetic], an independent investor. Please go ahead.

Sajal Kapoor — — Analyst

Yeah, hi. Thanks for the opportunity and good afternoon, everyone. Aditi ma’am, a question on our CRO capacity ramp-up, which I think is currently in progress, right? Where does it — when does it complete? And how much external sales can be generated from this, please?

Aditi Panandikar — Managing Director

Yeah. It is — the expansion has actually completed. We have added 48 beds to our earlier capacity of 98-odd. So we are close to 150 beds now. And that allows us to do many more studies. And given that 60% of the entire capacity — the old capacity of 98 beds that we were consuming, we now feel more confident to be able to generate more revenues from this business because we will be able to attend to more external customer.

Does that answer your question?

Sajal Kapoor — — Analyst

That’s helpful. And — yeah, it does. Thank you. And one clarification on this ROCE question, couple of participants earlier have asked, but I’m not too sure if I’m getting the right handle on this because your response was slightly confusing even to, Aditya, you said that from 13% we’ll go to 15% when we get to that aspirational target of INR5,000 crores. I mean, my calculation today says that you are currently above 30% ROCE as on fiscal ’22, the last fiscal if I do your total gross…

Aditi Panandikar — Managing Director

No, no. ROCE as on 31/12 is 13% and same time last year it was 15%.

Sajal Kapoor — — Analyst

All right. So I was looking at the stand-alone, right?

Aditi Panandikar — Managing Director

Yes.

Sajal Kapoor — — Analyst

Right. So from 13% after all the operating leverage and everything has been taken care of we aim to go to 15%, 1-5. Is that correct?

Aditi Panandikar — Managing Director

Yes.

Sajal Kapoor — — Analyst

But, ma’am, that’s way below the industry standard, right? I mean, we are not in a commodity business. We have branded formulations, right, with backward integration into APIs.

Aditi Panandikar — Managing Director

I don’t know which — I mean, it’s difficult to find parity at industry level on such parameters. But if I understand correctly, roughly, today, 11.90%, close to 12% is what industry overall does, unless you are purely in India business where infrastructure investment is not there [Phonetic].

Sajal Kapoor — — Analyst

And would you be open to disclose your India business operational metrics and outside India separately as a line item?

Aditi Panandikar — Managing Director

We don’t do that, no.

Sajal Kapoor — — Analyst

Yeah. Currently you don’t do that, but in future, would you be open to that? Because our India business is at a completely different ROE, ROCE, like just about any other player.

Aditi Panandikar — Managing Director

Yeah. So unless we carve it out as any kind of separate business, I don’t see any reason for us to do that.

Sajal Kapoor — — Analyst

Right. Okay. Thank you, ma’am. Thank you.

Operator

Thank you. As there are no further questions, I now hand the conference over to management for closing comments.

Aditi Panandikar — Managing Director

So thank you everybody for that very, very interactive and interesting one hour 20 minutes, I think the longest call we’ve had for a very long time. Once again wishing all of you a very happy New Year, and looking forward to many more interactions in the future. Thank you.

Operator

[Operator Closing Remarks]